While nearly two-thirds of the newly adopted $787 billion economic stimulus package represents spending programs, the other third (about $288 billion) offers tax breaks for individuals and businesses. According to CBIZ (www.cbiz.com), a major accounting firm and business-services provider, small firms received some of the biggest benefits under the new law.
Some tax goodies extended popular incentives that recently expired. Others will expand tax write-offs for losses – which will generate quick cash for many business owners. Here’s a rundown of key business tax benefits included in the stimulus bill:
• Longer operating loss carry-backs: If your small business had a “net operating loss” (NOL) in 2008, this provision could be a terrific way to generate cash by claiming refunds now of taxes paid in previous years when profits were flowing. Instead of the current two-year carry-back period, eligible businesses (those averaging less than $15 million in gross receipts) can now carry back 2008 losses to 2003, 2004 or 2005. And you do not have to be a corporation or LLC. Even sole proprietors can qualify.
If your business had a loss last year, CBIZ suggests filing your 2008 return early so you can then file amended returns for prior years and reclaim your cash.
• Bonus depreciation extended: In a bid to boost new equipment purchases (computers, machinery, vehicles) “Bonus Depreciation” – a juicy tax tidbit that expired in 2008 – has been extended through 2009 for most property, and 2010 for longer-lived assets. Basically, this is a 50 percent “bonus” write-off for the cost of new equipment a business buys and starts using this year.
• Bigger expensing write-offs for depreciable property: Higher expensing limits for depreciable property that expired in 2008 have also been extended through 2009. This lets your business immediately write off up to $250,000 of tangible personal property placed in service this year.
• Estimated tax relief: If you report income from a small business on your personal tax return, you will get a small break on the amount of estimated taxes required to avoid underpayment penalties. If at least 50 percent of your adjusted gross income is from the business, you will only need to cover 90 percent of your prior year’s taxes to avoid penalty, beginning with the 2009 tax year. Previously this was 100 percent to 110 percent, depending on your income. •
Daniel Kehrer can be reached at
editor@business.com.
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