Posted by Eric Hubbs on Fri, Nov 20, 2009 @ 09:23 AM
We would like to welcome Certified Public Accountant Laura Krueger of Wong and Krueger as our guest blogger with her advice to business owners for preparing their 2009 taxes.If you have any questions about what she has to say, contact her!
TAX PLANNING 2009
November and December is a great time to meet with your accountant.
Use this meeting to:
- Review your company's performance year to date
- Estimate income for the rest of the year
- Establish projections for 2010.
In 2009 it's especially important to plan your tax strategy. Even so, there are exceptional challenges in doing so. Most of us have been dealing with economic and market challenges for many months now. Usual tax planning strategies of prior years may not work in this environment. In addition, we are unsure of what 2010 will mean for the health of the economy and for new tax legislation.
Inform your accountant of any changes in your business and personal life. Were you married or divorced in 2009? Did you have a child? Did your business structure change or did you have new investors? These types of changes may have a significant effect on your 2009 taxes.
Next, review the deductions you and your business took in the prior year and determine whether they will still apply to your current year situation. Take a look at new tax law and see what effect it will have - are there deductions you no longer qualify for? Are there new deductions you can take advantage of?
Following are some specific strategies to discuss with your accountant:
Net operating loss carryback: In November the president signed into law the Worker, Homeownership, and Business Assistance Act of 2009. This legislation will help companies that experience a loss to stabilize their businesses and be in a prime position when the economy enters recovery. The net operating loss carryback provision is expanded to allow companies of every size to carry back losses incurred in either 2008 or 2009 against income earned in any of the five prior years. Offsetting previously paid taxes results in a tax refund from the IRS. This provides companies with much needed cash in the near term. Take advantage of this as early in 2010 as possible.
Bonus depreciation: The stimulus bill extended the first-year 50% depreciation of the cost of new equipment purchased and put into service this year. The "bonus" is in addition to normal depreciation and deductions available under Section 179. It applies to purchases of tangible personal property used in a business. If you are planning to purchase equipment in the near-term you may want to consider completing your purchase in 2009 to take advantage of this provision.
Section 179 Depreciation Deduction: The Section 179 deduction has been increased to $250,000 for qualifying property placed in service in this year. This deduction allows you to depreciate an asset in total in 2009.
Future tax increases: Tax rates are likely to increase when the Bush tax cuts expire. The top two individual income tax rates, currently 33% and 35%, will likely roll back to their 2000 levels of 36% and 39.6%. In addition, the top capital gains rate will likely rise from 15% to 20%. If your income level places you in one of the top brackets you may consider accelerating income into the current year instead of deferring it.
Have a talk now with your accountant to set a course for managing your tax planning for 2009 and beyond.
CPA Laura Krueger can be reached by clicking here.
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