written by Buzz
2009 has come to an end and taxes for the year are coming due. Have you taken advantage of the tax breaks provided to you by the American Recovery and Reinvestment Act of 2009
If not, you would be wise to use the next few weeks to claim your share of the tax break initiative.
A private survey shows that about 71% of small businesses have taken at least one tax break from the provisions outlined in the 2009 economic relief bill. The government wants to urge small businesses to use these tax breaks because they are not likely to be renewed in 2010.
Best Tax Benefits of 2009
One of the biggest tax breaks is the 50 percent bonus deduction on depreciation on the acquisition of eligible assets. An eligible asset might be equipment over $1,000 purchased this year. This additional expensing of depreciation in the first year can be a tremendous help in reducing the tax burden on small businesses, and it is intended to stimulate the purchase of equipment and assets in 2009.
For instance, say you purchased a new piece of manufacturing equipment for $5,000. Normal depreciation of the equipment would be spread out and take place over a period of 5 to 7 years. However, you can deduct $2,500 in depreciation this year, even if you purchase the equipment on December 31, 2009.
And the 50% tax deduction is not all. You can still take advantage of other incentives, such as work opportunity tax credits for hiring unemployed veterans or “disconnected youth.”
Pre-Pay Your Taxes and Save
If your business pays estimated taxes, you only need to pay 90% of previous tax year liability instead of 100%. If your small business is research-based, you could take a basic 20% credit for increased research expenditures. Or invest in economically distressed areas for new market tax credit.
The credits offered for small businesses in the relief bill of 2009 are likely an once-in-a-lifetime opportunity. Be sure to take the next few weeks to analyze and consider where you can benefit from additional tax breaks.
The Treasury Department is planning on asking Congress for legislation to relax rules governing the Troubled Asset Relief Program, or TARP. This new legislation would be used to help small business get loans from smaller banks. The Treasury wants to be able to use about $30 billion to $40 billion of the TARP for small business lending and it may be part of a new jobs package next year.
The Evolution of TARP
Last year Congress approved TARP fund, initially with the purpose of buying toxic assets from banks that were hurt by the financial collapse. It later transformed into a fund that provided direct capital injections into these banks. One year later, most of the TARP has been repaid with interest but the jobs market still looks very bleak.
Help Not Wanted
Many of these smaller banks may not want any assistance for two main reasons. The first is that there may be restrictions that come along with TARP. This can be in the form of compensation restrictions as was seen in the bigger banks’ bailout packages. In addition to that, if they take any aid it may be seen as a bad sign by the general public, and consumers may stay away from that bank. It is a tricky situation for small banks, but hopefully a resolution will come about soon as the economy recovers.
Dallas Small Business Examiner Ivy Carter
$30 billion dollars is expected to come from the White House as the Obama administration is planning to set aside these funds for a lending program for the economic recovery of small businesses. This plan is slated to expire in October 2010 and the Treasury Department has laid out plans on how the $30 billion will be spent which includes lending programs to support small businesses. Unfortunately, the plan itself has yet to be approved by the key members of Congress.
Though the $30 billion boost for small business owners is still in its initial planning phases, small business owners can expect to receive loans, small and large, for maintaining their business. What does the plan mean for small business owners in the North Texas area?
1. More loans from financial lenders. The financial lenders have tightened its lending practices with the downfall of the housing and auto markets. With the expected relief for small businesses lenders will have the financial backing of $6 billion to secure loans to small business owners.
2. Relaxed credit scoring. When the housing market tighten so did the credit scoring. Lenders refused to issue loans to consumers and small business owners but with the new financial boost lenders will have a 4 million loan goal to meet.
3. Ability to remain viable. More capital means more viability for small business owners; therefore the $30 billion will enable small business owners to update their marketing and business plans for future gains.
4. Pay employees. At some point in time small business owners were doubtful in their ability to pay their employees for time worked. Fortunately the new plan will enable small business owners to maintain a strong payroll system.
5. Increase inventory. Small business owners who have been operating with the minimal supplies will soon be able to maintain an inventory level for their clients.
As soon as the Obama administration and Congress reach a consensus on the details of the small business bailout initiative, small business owners will be able to perform the primary functions of their business and survive or revitalize their operation.
