Small Business Tax Tips for Your 2009 Federal Return

April 14, 2010 –

Unless you have too many write-offs or your small business lost money last year, filing your 2009 federal return might be more pleasant this year.

True, tax returns are increasingly complicated, but published reports indicate more taxpayers are doing their own taxes. Self-prepared returns filed electronically through April 2 are 6.7 percent higher than in 2009. On the other hand, professionally prepared e-filings have decreased by 1.9 percent.

Reasons for taxpayers to go-it-alone include: Concerns about privacy, lack of trust, and money savings by not paying a professional tax preparer.

Many small businesses are finding it easier because they are benefiting from The American Recovery and Reinvestment Act of 2009.

Some tips to investigate that might benefit you, include:

  • Under the amended Sec. 179, the investment of equipment normally recouped via depreciation over five years or so, can be expensed as much as $250,000 toward the cost right now.
  • If you purchased equipment for more than a quarter of a million dollars, you might be able to combine expensing with the bonus depreciation for a nice write-off. If you lost money, this wouldn’t be applicable.
  • If any of your debts were forgiven in 2009, the amounts are included as taxable income. The new law will allow you, however, to amortize the forgiven amount over five years. Looking ahead for your 2010 return, amounts forgiven this year can only be amortized for four years.
  • As for the Work Opportunity Tax Credit, small businesses can benefit by hiring certain employees – “target groups who have consistently faced significant barriers to employment.” For both 2009 and 2010, The Recovery Act has added unemployed veterans and certain minors.
  • If over the past three years your company grossed $15 million or less, you can carry back your net operating losses for three, four or five years (the former limit was two years).
  • If your income was less than $500,000 and more than half was from your small business, it’s possible to defer your taxes to 90 percent of the liability.

If cash flow is an issue, you can get 30 to 120 days to pay your tax liability by calling (800) 829-1040. The IRS terms for this are more lenient than if you get an installment agreement that would a take longer period of time.

Avoid paying your taxes by credit card. The IRS is happy to accept payment via plastic. However, depending on your credit card company, it will hurt you. Paying taxes by credit card are usually considered a bad practice. Card companies are likely to lower your limit and it will hurt your credit score.

Good luck!

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Seattle business consultant Terry Corbell provides high-performance management services and strategies.