Valley businesses stand to gain from new tax code changes

By Nicole Lucht

Friday, March 27, 2009 | 2 a.m.

Businesses could benefit from a few changes to tax codes this year.

One of the biggest changes is a tweak to bonus depreciation, said Beth Mercier, managing principal with Lentz & Bledsoe CPAs.

What the change allows business owners to do is take an accelerated depreciation of 50 percent right upfront in the year they purchase new equipment and no recapture (or gain) taken.

There’s another code that allows 100 percent (in accounting terms called Section 179) of up to $250,000 in 2008, but it has to be recaptured when businesses get rid of the equipment or purchase, Mercier said.

In 2009 and 2010, the cap reverts back to $125,000.

“What a lot of the business owners don’t realize ... is to take that bonus depreciation first, and then take Section 179 of whatever is left,” she said.

Mercier cautioned business owners eager to take advantage of bonus depreciation: “Don’t just buy it to buy it. Only buy it if you need it. Don’t create an expense if you don’t need one.”

The Internal Revenue Service also expanded the net operating loss carryback for small businesses for the past five years. The carryback used to be for two years. Small businesses with deductions exceeding their 2008 income can use a new net operating loss tax provision to get a refund of taxes paid in prior years.

“The new net operating loss provisions could throw a lifeline to struggling businesses, providing them with a quick infusion of cash,” IRS Commissioner Doug Shulman said in a statement. “We want to make it as easy as possible for small businesses to take advantage of these key tax benefits.”

Businesses are also eligible for the Heroes Act tax credit if they employ military reservist or National Guard workers and if, while deployed, the company pays differential wages. Deployed servicemembers who are, during times of peace, typically weekend warriors, most often take a hit in pay when they deploy.

The credit is good for 20 percent of up to $20,000 of the worker’s differential pay.

And for employees, they will soon see a tad bit more cash in their paychecks, as the federal government infuses stimulus money to workers by adjusting federal withholding through the Make Work Pay Credit, up to $400 per person gradually through the year, Mercier said.

If businesses are doing their own payroll, they need to make sure they download the new tables from the IRS by April 1, she said.