The American Recovery and Reinvestment Act (ARRA) of 2009 includes legislation allowing qualifying businesses to reduce their estimated payments to 90 percent of the previous year's taxes, rather than 110 percent. To qualify, a business must meet the following criteria in 2008: have an average of fewer than 500 employees, receive more than 50 percent of gross income from small business and have an AGI less than $500,000 ($250,000 if married filing separate).
The ARRA also includes a capital gains tax break for those holding stock investments for more than five years. Up to a 75 percent gain can be excluded on 2009 individual returns, but limited to the greater of 10 times the taxpayer's basis in the stock, or a $10 million gain from stock in the small business corporation. More information about the ARRA can be found at www.irs.gov and www.taxact.com/recovery-act.
The ARRA also includes new rules for Net Operating Losses (NOLs). Qualified taxpayers can carry back applicable 2008 losses for up to five years (normally two years), with the fifth year limited to 50 percent of taxable income. The Worker, Homeownership, and Business Assistance Act (WHBAA) of 2009 also gave almost all taxpayers the option to carry back business losses incurred in one year (ending after 2007 and beginning before 2010) for up to five years. Unlike ARRA legislation, taxpayers electing a five-year carryback will be limited in the carryback amount under WHBAA legislation.
Complete details about NOL rules can be found by searching for "Form 1045" at www.irs.gov and www.taxact.com/tsupport. Small businesses filing Form 1040 can also call the IRS at 1-800-829-1040 with NOL questions. Corporations should call 1-800-829-4933.
A break not associated with the ARRA or WHBAA is the expanded section 179 deduction that allows you to deduct costs of certain long-term tangible assets in one year. The asset must be used for business purposes over half of the time. The maximum deduction is $250,000 ($285,000 for qualified enterprise zone and renewal community property) and is reduced by the cost of section 179 property placed in service during the tax year that exceeds $800,000.
Finally, consider using do-it-yourself tax preparation software like TaxACT Home & Business Bundles that cost under $55. Each Bundle includes TaxACT Deluxe and State, and your choice of 1065, 1120S or 1120C software. Answer simple questions, and TaxACT will help identify all the credits and deductions you qualify for, do the math, and complete the correct forms for you. Visit www.taxact.com