Loss accounting: The IRS currently allows businesses to carry back net operating losses for two years to offset past taxable income. The stimulus plan allows “qualified small businesses” to carry back losses for five years. (A qualified small business is one with gross receipts of less than $15 million, based on trailing average of annual gross receipts.) This means that your business can re-file prior tax returns and get a refund from the IRS by applying 2008 net operating losses against prior tax payments. Think of it as an interest-free loan from Uncle Sam. For more details see this explanation by the Tax Policy Center.
Equipment expense deductions: If you buy new equipment, you can offset next year’s taxes with it. The 2008 stimulus bill increases the Section 179 expense deduction from $128,000 to $250,000 and offers a 50 percent bonus depreciation. The 2009 stimulus bill extends this policy through the end of the year. What does this mean? Purchase a vehicle, machine or computer for your business and you can offset any taxes you might owe in 2009. Some fine print: partial deduction can be taken for purchases between $250,000 and $800,000 and a fading deduction up to $1.05 million.
Hiring incentives: Businesses that hire unemployed veterans or high-school dropouts can earn up to a $2,400 per worker credit on their taxes. The existing Work Opportunity Tax Credit lets businesses claim a tax credit of 40 percent of the first $6,000 of wages paid to certain types of employees who fall into one of nine target groups. Unemployed veterans qualify if they were discharged or released from active duty during 2008, 2009 or 2010 and received unemployment compensation for more than four weeks during the year before being hired. High school drop-outs or “disconnected youth” are young men and women between the ages of 16 and 25 who have not been regularly employed or attended school in the past six months.
- Refinance existing loans backed by fixed assets.
- Raise its loan guarantee to 90 percent, encouraging banks to extend more capital to small businesses. This means you may qualify for a larger loan than previously.
- Offer deferred-payment loans of up to $35,000 to small businesses that need money to make payments on an existing, qualifying loan for up to six months. Repayment is required 12 months after the loan is fully disbursed.
The SBA does not lend money directly. SBA loans can be obtained through most banks, and they typically require the borrower to come up with 20-30 percent of the loan value. For more information find your local SBA office here or call the SBA “answer desk” at 800-827-5722.
Extension of monetization of accumulated AMT and R&D credits: The new law extends a provision contained in the Foreclosure Prevention Act of 2008 that allows Alternative Minimum Tax (AMT) and loss taxpayers in 2009 to receive 20 percent of the value of their old AMT or research and development credits if such taxpayers invest in assets that qualify for bonus depreciation. Ask your accountant for more information if you think you qualify.
The stimulus plan’s handouts and tax breaks can come at a cost. The bill imposes new safeguards against fraud, waste and abuse. Employers that receive certain funds from the bill will have to comply with new “whistleblower” laws. The stimulus bill “includes whistleblower protections that are deeper and different from those that are familiar to many employers,” says Allen Roberts of the law firm Epstein Becker & Green, P.C.. For more information on these provisions see this article: Stimulus Package Brings Sweeping Whistleblower Protections or contact your legal team.
More unemployment compensation, less taxes on it: Weekly unemployment checks will increase by $25. Unemployment recipients will not have to pay income taxes next year on the first $2,400 of unemployment benefits received in 2009.
Tax breaks for middle-income earners
Homeowners and buyers
Credit for first-time home buyers: A tax credit of up to $8,000 is available for first-time home buyers purchasing homes on or after January 1, 2009 and before December 1, 2009. The credit is subject to phase-out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 for joint filers).
Tax credits for home Energy-Efficient improvements: For those who want to upgrade their homes, many types of energy-efficient products could qualify for a 30 percent tax credit, up to $1,500 per project. The credit covers windows, doors, roofs, insulation, heating and air-conditioning systems and hot-water heaters, to name a few. See a list of those credits here.
Computers as an education expense: Computers and computer technology can qualify as education expenses in Section 529 education plans in 2009 and 2010.
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The JK Consultants Team
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