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![]() Recovering with New Tax Breaks for Your Sign & Graphics Business
By Mark E Battersby
The American Recovery and Reinvestment Act of 2009, a nearly $800 billion stimulus package includes nearly $300 billion in potential tax savings. Every sign professional and business can share in over $75 billion in tax benefits for 2009 and 2010.
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The Recovery Act extends helps ease the out-of-pocket cost for new equipment. So-called “bonus” depreciation is available for another year and the larger, Section 179 first-year write-off for newly acquired equipment have been given another year. Two new groups have been added to those whose first-year wages are partially underwritten thanks to the work-opportunity tax credit. The business-related tax breaks also include tax-deferred debt forgiveness income. There is also a five-year, rather than two-year carryback of net operating losses (NOLs) that may return taxes paid in earlier years to the coffers of many sign businesses.
Cash infusions from losses The Recovery Act gives sign professionals and businesses the choice to carry NOLs from the 2008 tax year back three, four or five years generating a refund of taxes paid in those earlier years. Obviously, the extended NOL carryback provision has the potential for providing an immediate cash infusion to many troubled businesses.
Faster, larger write-offs continued
A write-off bonus The new rules extend for another year 50% bonus depreciation allowed for property with a recovery period of 10 years, or longer. Unlike Code Section 179, expensing that is available for new or used property; bonus depreciation is available only for new property or equipment.
Higher caps on vehicle write-offs Remember, however, as with any accelerated depreciation write-off, a large current depreciation deduction will result in smaller future deductions. Two situations in which a taxpayer might for a tax year, consider making an election-out (opt-out) are when the sign business: (a) has about-to-expire NOLs or (b) anticipates being in a higher tax bracket in future years.
Discounted wage payments for some new workers
Qualified small business stock
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The Recovery Act makes small business stock more attractive by increasing the amount of gain from the sale of small business stock held for five years or more that may be excluded from 50% to 75% for stock issued after the date of enactment of this legislation and before 2011.
Temporary small business estimated tax payment relief The “Making Work Pay” tax credit included in the Recovery Act increased the take home pay of workers and required employers to use new payroll tax withholding tables. Self-employed sign professionals who are not subject to wage withholding, can receive the credit in advance by reducing the amount of their estimated tax payments. Remember, however, that it is easy to overshoot the mark and become liable for underpaying estimated tax penalties.
Cancelled debt = income now deferred Some sign professionals and businesses would be allowed to recognize so-called “cancelation of debt income” (CODI) over 10 years (defer tax on CODI for the first four or five years and recognize this income ratably over the following five taxable years) for specified types of business debt repurchased by the business after December 31, 2008 and before January 1, 2011.
The built-in gains of S-Corporations The built-in gains tax prevents an incorporated sign business from avoiding corporate level tax on the disposition of appreciated assets it acquired while a regular corporation by first converting to S status. However, it also discourages S conversions in situations in which the business may not otherwise survive under regular corporation rules. The new law will give shareholders more flexibility during the current economic crises.
Energized investment credits Last fall’s “bailout” bill made wind energy property eligible for the tax credit. This is property that uses a qualifying small wind turbine (with a nameplate capacity of not more than 100 kilowatts) to generate electricity. The Recovery Act eliminates the former $4,000 cap on the tax credit for qualified small wind energy property.
Something for us as well The 2009 AMT patch raises exemption amounts slightly above the 2008 patch levels. The 2009 AMT exemption amounts are: $70,950 for joint filers and surviving spouses (up from $69,950 in 2008); and $46,700 for singles and heads of households (up from $46,200). This massive stimulus bill, the American Recovery and Reinvestment Act of 2009 provides immediate relief to both individuals and businesses with most of the tax incentives retroactive to January 1, 2009. Most of the $280 billion in tax relief is concentrated within the next two years. While the overall size of the new law is massive, some provisions have either been pared back, or eliminated during the course of the political debate that raged. For the owner or manager of any sign business, professional advice is almost a necessity to ensure the operation will profit from the new Recovery Act.
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