from-alwaystiltingblogspotcomWe talked about my boy ‘Bama last week and what the stimulus he and his buddies passed did for individuals.  Now we are going to hit on the topic of business – and the benefits your business can expect to receive from the new stimulus bill.

Yo, check it:

1.  Special Depreciation (Bonus Depreciation).  A provision entered in to law last year has been extended with the new stimulus bill whereby businesses can immediately realize the benefit  of investing in large pieces of equipment.  This “special depreciation” allows a business to write off 50% of certain large pieces of equipment (like solar panels, computers, tractors, equipment, etc.) immediately in the year purchased instead of having to depreciate them over time.  To qualify, this equipment has to be brand spanking new, and you have to buy it before 2010.

2.  Extended Depreciation Write-off Through Sect. 179.  Section 179 of the tax code allows for expensing large pieces of equipment through a business instead of depreciating them over time.  Not to be confused with provision #1 (which allows you to write off half of the brand new equipment), this provision in the law allows a business to write off the whole piece of equipment, and it can be used equipment at that.  As originally increased in a prior year law, the new stimulus bill extends the benefits to businesses to write off up to $250,000 of equipment purchased before the end of 2009.

3.  5 Year Carryback of Net Operating Losses for Small Businesses.  If you generate a loss on your tax return for 2008, you can now go back 5 years looking for more profitable tax returns (where you paid taxes) to offset against the loss.  Who cares?  Well, for example, if you lose $10k this year, and had a $20k profit back in 2004 (and paid taxes back then), you can now apply this $10k loss to the $20k profit and get a refund on some of the taxes paid back in 2004.  Carrying back losses is an immediate way to generate some yummy cash.  If you had more than $15 Million in revenues, then you DON’T get to participate in this carryback (which means you can only carryback your losses two years).  If you are interested, you had better hurry.  You’ve got 60 days after the signing of the bill into law (February 17, 2009) to make the election to carryback your losses 5 years.

4.  Increased Target Groups to Qualify for the Work Opportunity Credit.  The Work Opportunity Credit allows a business to claim a credit of up to 40% of the first $6,000 wages paid to employees in special target groups of individuals.  Those groups have been expanded with the passage of this new stimulus bill.  Now, unemployed veterans (who have been released from active duty in the past 5 years) and disconnected youth (ages 16 to 24 who have not been in school or employed in the past 6 months) may allow for new credits to be applied for.

5.  Liberalized Estimated Tax Payment Requirements on Those Receiving Income from Small Businesses.  If you receive income from a small business (those that employ less than 500 people), then you may have to make estimated tax payments.  And to avoid a penalty each year, you need to make estimated payments of at least 100% of your last year’s tax liability or 90% of the current year’s liability (could be higher requirements if you have a higher income) – that’s under current law.  But the stimulus bill will allow you to make less payments and still avoid the penalty.  You only have to pay in 90% of your prior year’s tax liability (or 90% of your current tax year’s liability, whichever is lower) now to avoid the penalties.

So, go buy some new equipment so you can expense half of it (#1) and then write the rest of it off through Sect. 179 deductions (#2) while hiring some disconnected youths (#4) to generate some losses in your business you can carry way back to 2003 (#3) to avoid paying penalties on income you never made (#5).  Huh?

Good luck.

Thanks, Jason M. Blumer

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that (i) any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code; (ii) any such tax advice is written in connection with the promotion or marketing of the matters addressed; and (iii) if you are not the original addressee of this communication, you should seek advice based on your particular circumstances from an independent advisor.

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