How the Stimulus Plan can Benefit your Business
Posted by Merrin Muxlow on March 5, 2009 in Business News [ 2 Comments ]
According to recent data from the U.S. census, small businesses create 98% of new jobs. Businesses with less than 100 employees generate more than 50% of the nation’s GDP. So it’s with good reason that President Obama promised help for small businesses as part of the Economic Recovery and Reinvestment Act of 2009, the “stimulus plan” for short. So what help does the plan give to small businesses? How can you take advantage of changes to tax rules and lending restrictions?
The stimulus plan provides several different provisions that can save small companies money on taxes, increase access to loans, and provide grants for certain small businesses. For applicable information about any of the tax provisions, consult your tax preparer. Here are a few of the ways you can take advantage of the stimulus plan:
What the plan does: Extends last year’s expanded §179 deduction, allowing a business to deduct up to $250,000 in capital expenditures.
What this means: If you purchased business equipment last year (and haven’t filed your taxes yet) or plan to make a purchase this year, you can “write off” more of the cost. If you’ve got the available budget, now is a good time to make big purchases like copiers or pos systems.
What the plan does: Extends last year’s increased 1st year depreciation deduction, allowing businesses with less than $15 million in receipts to deduct 50% of the value of property placed in service in 2008 or 2009.
What this means: If you haven’t filed a 2008 tax return and made some big purchases last year on machinery, equipment, or other business assets such as phone systems, you can claim a depreciation deduction of 50% of the cost. If you’ve been holding off on purchasing new equipment, buying it this year can net some big savings in the form of lower taxes.
What the plan does: Expands the carryback of net operating losses from 2 years to 5 years for businesses with less than $15 million in gross receipts. This provision also applies to the 2008 tax year.
What this means: If you had a bad year last year, or are on track to post a net operating loss for 2009, you can “carry back” the loss for up to 5 years, applying it to prior returns. This means that ’08 and ’09 losses can be used to offset tax amounts from more profitable prior years.
What the plan does: Provides a tax credit of 40% of the first $6,000 wages paid to members of 2 new groups: unemployed veterans and disconnected youth.
What this means: Unemployed veterans are service members discharged from 2008-2010 who received unemployment benefits for 4 weeks or more in the year before your business hired them. “Disconnected youth” are workers aged 16-25 who have not attended school or had regular employment for 6 months. These groups can be great hiring pools. Military veterans have often received expert training, and younger workers are in plentiful supply. The work opportunity tax credit applies to other groups, as well. Ask your tax preparer for more information if you think you might qualify.
What the plan does: Allocates $730 million to the Small Business Association. Here’s where some of the money goes:
• Reduces or eliminates fees on certain SBA loans
• Increases the loan amount the SBA will guarantee, up to 90% for some loans
• Creates a new loan program that helps businesses meet existing debt obligations
• Expands the SBA’s microloan program
• Expands amounts for technical assistance grants to microlenders
What this means: You’ve heard of big companies getting bailouts, right? These loans and grants are designed to help small businesses in the same way, by providing immediate funds to help smaller businesses stay in operation. For more specific information, visit www.sba.gov.
The stimulus plan also provides loans, grants, and other methods of financial assistance to companies in certain industries, specifically alternative energy and renewable resources, among others. You can visit www.grants.gov, www.govbenefits.gov, or www.cdfa.gov for more information. Make sure you get your information from a reliable source, and that you don’t pay for applications, CD-ROMs, or other forms of information. Information about government programs is always free- make sure you never give up your own financial information, credit card number, or bank account number over the internet to learn more about government grants.
The information contained in this article is for educational purposes only, and is not intended for use as tax or legal advice. For information about the tax provisions specified here, please consult your attorney or tax preparer.