Stimulus package yields lots of changes to tax code - bizjournals:

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As a result, accountants will stay busy. The tax code which took effect retroactivelyto Jan. 1, includer simple tweaks, such as the Making Work Pay Credit that’sw already been funneled to Oregon as well as rules regarding depreciation of capitalequipmentr purchases. The changes have proven populaf amongaccounting clients. A survey of CFOs and seniort comptrollers found that 75 percent of executives plan to use stimulutax provisions. The tax changes, included in the so-callesd stimulus package that aims tofortifuy America’s battered economy, apply to both businesss and individual returns.
“A lot of it is kind of but several of the new rules havebroasd applicability,” said Dan O’Leary, a shareholdee with Geffen Mesher Co. . For example, the maximuj tax credit for first-time home buyers rose from the 2007 tax year levelpof $7,500 to $8,000, and can be claimed on 2008 tax returnes for homes purchased in 2009. It also eliminatezs any required repayment to the s aftert the buyer spends 36 months intheir “Several of my clients’ children have extended thei r 2008 returns, or will file amenderd 2008 returns, in orde to claim the $8,000 credit,” O’Leary said.
“Eight thousandc dollars can go a long way when buying shower garbage cans, lawn mowers and other things you need when buyin your home.” Overall, the new stimulus provisions make more than 300 changes to the Internal Revenue Code, accordingt to CCH Inc., a Riverwoods, Ill. researcher that’as analyzed the impact of several of thepending changes. Most incentives in the law are retroactiveto Jan. 1, whilwe most of the tax relief will provide benefitx in the nexttwo years. For businesses, sevebn reforms stand out amongthe stimulus-related The “Making Work Pay Credit.
” Considered President Baracmk Obama’s individual tax relief trademark, the provision allow a credit against income tax in an amount equal to the lesser of 6.2 percent of the individual’ds earned income or $400 for individuals. Marrie couples filing jointly wouldreceivee $800. Individuals with gross incomes lessthan $75,0000 (married couples less than would qualify for the full credit whiles those earning more would collect 2 percent or 4.2 percent of earnefd income. The alternative minimum tax “patch.
” Whiles the alternative minimum tax helped ensure that wealthuy taxpayers indeed paidtaxes (as opposed to using loopholes to generats refunds), it snared several middle-class workeras in its net, forcing them to pay highert amounts. Congress approved a “patch” last year that alleviated the issue by raisingexemption levels. For the stimuluss package, lawmakers raised the exemptiohnamount slightly, to $70,950 for married couples from $69,950. The amount for individuals rosefrom $46,620 to $46,700. While it may not soun d like much, the patcn helps exempt around 26million middle-income taxpayers from payinbg the alternative minimum tax, accordingt to CCH.
The patch costs the federal governmentaboutt $70 billion in revenue. Unemploymentf compensation. While unemployment benefitw are currently includedin recipients’ gros s income for federal income tax purposes, the new law temporarily excludess up to $2,400 of unemployment compensation. The provision lastas through 2009. Small-business expensing. Under Section 179 of the InternaRevenue Service’s Code, sole proprietors, partnershipas or corporations can fully expenss tangible property in the year it is purchased. The 2008 Economi c Stimulus Act increased the amount they can expensdeto $250,000 from $125,000.
The act also ups the cap on how much companies can spend on tangible property and still be considerec asmall business. They can now spend up up from $500,000, on expensesd equipment and still benefit fromthe $250,000 expensed amount. Net-operating losses “carryback.” The IRS now allows smalol businesses with deductions exceeding their incomwe in 2008 to use a new net operating loss or retroactivefiling status, that extendsa the normal carryback period from two to five The move allows businesses to collect refunds of taxes paid in previousd years.
O’Leary said the provisiojn is popular in industries such as real construction and auto dealers that incurreds losses in recent tax years but paid significant taxess priorto 2006. Bonus depreciation. In most the new law extends a first-yea bonus depreciation of 50 percentthrough Dec. 3, 2009. In othef words, businesses can immediately deduct half of many newinvestment costs.