There’s new legislation about to be signed in Washington that gives businesses a GREAT tax-savings opportunity. And while Washington and Congress are talking about the unemployment and homeowner tax breaks, it’s the business opportunity that caught our attention!
The bill is numbered H.R. 3548, and is called The Worker, Homeownership and Business Assistance Act of 2009. The parts you’ve probably heard about call for an increase in unemployment benefits, and an expansion + extension to the first-time home owners tax credit.
What no-one’s really talking about yet is the plum for business owners: an extension of the 5-year Net Operating Loss Carryback period to the 2009 fiscal year.
When Congress bailed out the banks last year, they threw a bone to business owners, by allowing you to offset your losses in 2008 against profits earned during the previous 5 years (instead of 2 years).
The carryback was a one-year only deal, meaning that only 2008 income qualified. This created huge benefits for some of our clients, especially those who’d received big profits from the real estate boom years (and who’d paid big taxes to boot). Allowing these business owners to take their 2008 losses back against the previous 5 years worth of income meant some big tax refunds (and much needed working capital!)
The new legislation extends this to 2009 earnings as well, as long as your business didn’t receive any TARP assistance. And, because most business owners have already filed their 2008 tax returns, you’ll have the opportunity to file refund claims almost immediately.
You will have to choose though. If your business lost money in 2008 and 2009, you’ll only be able to carry the losses back for one of the two years. And, there are some limits to how much you can take back. For example, if you’re going back the 5th year (which could be as far back as 2003 or 2004, depending on which year’s loss you’re using), you’ll only be able to take 50% of your 2008 or 2009 loss.
Late-Return Filers Beware
Another little “gotcha” in this bill is an increase in the late-filing penalty for partnership and S Corporation returns. Currently for every month these are late you’re assessed a penalty of $90 per partner or owner. However, beginning with your 2010 returns, that fee will increase to $195 per month, per partner/owner. That one’s going to add up fast!
We’re waiting to see the final text of this bill. As of this morning there were a couple of amendments not available to view. But if these portions of the bill make it to the President’s desk, make SURE you talk to your CPA or tax professional about how your business can benefit.
And, if you are looking for a CPA or tax professional who understands business issues and how to save you the most amount of taxes, come and see us over at US TaxAid Services.