Entrepreneur’s Journal: What the stimulus bill means to your business

04 03 2008

Entrepreneur’s Journal: What the stimulus bill means to your business

Posted by: in Small Business

It’s still not clear whether we’ll have a recession or not. But the Federal Reserve, Congress, and the president are definitely concerned — and are taking quick action.

In fact, Congress and the president are pushing for some tax breaks for small businesses. “The features are similar to the incentive tax provisions of the Reagan era’s 1981 Economic Recovery Tax Act, which provided business investment incentives,” stated Mary Canning, the Dean of the Schools of Taxation and Accounting at Golden Gate University.

So, what does this all mean? What can you do?

Let’s take a look:

The proposal: The stimulus plan doubles the amount small businesses can write off for investments in 2008 — from $125,000 to $250,000. What’s more, the bill expands the cap for eligibility; that is, businesses making as much as $800,000 (the prior cap was $500,000).

The proposed bill also grants for accelerated depreciation on plant and equipment. Basically, you can write off as much as 50% of such investments in 2008.

What to do? OK, it’s not a good idea to make business decisions solely based on taxes. But, if you are wavering on something, then the tax benefit can be a key tipping point. In the case of the new tax bill, you should definitely think about the implications of buying equipment, such as personal, furniture, machines and so on.

Of course, it’s important to seek out your tax professional. “Business owners should plan out their 2008 finances in collaboration with their tax adviser and see if there will be opportunities to take advantage of the higher depreciation and Section 179 expensing opportunities,” said William Perez, who is a licensed tax professional in private practice and writes the tax section of About.com. “Profitable businesses might consider purchasing additional equipment, but they’ll need to review their current tax situation to make sure they’ll be eligible to take full advantage of these tax incentives.”

Record Keeping: Oh yea, make sure you keep a file for paid bills, canceled checks and other business items (and keep them in a safe place).

“At a minimum, put receipts in the proper categories throughout the year so it will be easier to total them up at tax time,” stated Fred Melton, who is a tax expert and an owner/operator of a TimePlus payroll processing service. “You are not required to keep records in a formal ’set of books’; however, you need to find the ideal record keeping system that works for you. Take record keeping seriously.”

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar On the internet Guide to Decoding Financial Statements. He also operates DealProfiles.com.