IRS Extends Tax Breaks for Small Businesses

The IRS said there are tax-saving opportunities available to small businesses under the American Recovery and Reinvestment Act.Among them are faster write-offs for certain capital expenditures. Many small businesses that invest in new property and equipment will be able to write off most or all of these purchases on their 2009 returns. The section 179 deduction enables small businesses to deduct up to $250,000 of the cost of machinery, equipment, vehicles, furniture and other qualifying property placed in service during 2009. Without the new law, the limit would have dropped to $133,000, the IRS said.Employers that provide the 65% COBRA premium subsidy under ARRA to eligible former employees can claim credit for this subsidy on their quarterly or annual employment tax returns.Many small businesses that had expenses exceeding their incomes for 2008 can choose to carry those losses back for up to five years, instead of the usual two, the IRS said. For small businesses that were profitable in the past but lost money in 2008, this could mean a special tax refund. The option is available for a small business that has no more than an average of $15 million in gross receipts over a three-year period. A corporation that operates on a calendar-year basis, for example, must file a claim by Sept. 15, 2009. For eligible individuals, the deadline is Oct. 15, 2009.The new law also provides an extra incentive for individuals who invest in small businesses. Investors in qualified small business stock can exclude 75% of the gain upon sale of the stock. This increased exclusion applies only if the qualified small business stock is acquired after Feb. 17, 2009 and before Jan. 1, 2011, and held for more than five years. For previously acquired stock, the exclusion rate remains at 50% in most cases, the IRS said.The agency said because some of these changes such as the increased section 179 deduction, for example are only available this year, eligible businesses only have a few months to take action.For more details on ARRA small businesses tax breaks, see IRS issue number IR-2009-051 (May 20, 2009).–[email protected]