IRS urges small businesses to use tax breaks
The "American Recovery and Reinvestment Act," the economic stimulus law passed earlier this year, included a number of tax-saving opportunities for businesses. Because some of these tax breaks are available for a short time only, the IRS is urging small businesses to act now to benefit from the provisions.
* Equipment purchases. The $250,000 limit for immediately expensing qualified equipment purchases was extended through 2009. The deduction is gradually reduced once annual equipment acquisitions exceed $800,000. Both new and used equipment qualify for this tax break. Sport utility vehicles are still subject to the $25,000 expensing limit.
In addition to the expensing option, purchases of new equipment, software, and qualified leasehold improvements can qualify for 50% first-year bonus depreciation through the end of 2009.
* Expanded net operating loss carryback. The 2009 law extended the carryback period for 2008 net operating losses from two years to as many as five years. To be eligible for the extended period, a business's average annual gross receipts for the last three years must be $15 million or less.
This option is available to eligible taxpayers for a limited time. A corporation that operates on a calendar-year basis, for example, must file a claim by September 15, 2009, while eligible individuals (sole proprietors, partners in a business partnership, and S corporation shareholders) have an October 15, 2009, deadline.
* COBRA credit. Employers providing the 65% COBRA health insurance premium for former employees claim credit for this subsidy on their quarterly or annual employment tax returns. According to the IRS, businesses can ease cash flow problems by reducing their employment tax deposits by the amount of the credit.
For guidance in identifying and utilizing both new and old tax breaks for your business, give us a call now.
Before you invest in any business, it's always a good idea to discuss the proposed venture with your advisors. If you would like assistance with evaluating a business opportunity or with legitimate tax planning, please call our office.