In February 2009, the American Recovery and Reinvestment Act (ARRA) extended some special tax breaks to small businesses. Businesses need to act fast to take advantage of several of the tax breaks. The bonus depreciation and increased section 179 deduction are valid through the end of 2009. The bonus depreciation is 50% of the cost of new capital expenditures; which allows for faster expense recovery. The section 179 deduction was increased to $250,000 and enables a small business to deduct the cost of machinery, qualifying vehicles, furniture, and computer equipment. If you have been holding off making purchases of new equipment, now is the time to do so!
The second provision that can benefit small businesses involves the net operating loss carryback. The carryback has been expanded to five years from two years for small businesses. The deadline for this special provision is September 15, 2009, for small corporations with a calendar tax year and October 15, 2009, for individuals. It can pay to have a tax expert review your situation and see if tax refunds may be retrieved from prior years by carrying back a 2008 loss.
The third provision is the exclusion of a gain on the sale of certain small business stocks. An exclusion of 75 percent of the gain upon the sale of qualified small business stock is available. The exclusion only applies to qualified stocks purchased between February 17, 2009, and January 1, 2011. The stock must be held for five years to be eligible.
A fourth provision modifies the required estimated tax payments that small business owners may need to make. The estimated tax payments can equal 90 percent of either their 2009 or 2008 tax (whichever is smaller).
Another provision involves COBRA insurance. Employers that provide 65 percent of the COBRA premium to eligible former employees may claim a credit on the 941 quarterly payroll reports.
Other provisions involve discharge of business indebtedness, acceleration of certain corporate business credits, and the holding period for S corporation built-in gains.
Please see your tax professional to determine if you are eligible for any of these provisions and jump start your economic situation.
(Information obtained from the Internal Revenue Service Website)