Masonry Magazine April 2009 Page. 43
Welfare Recipients, the Disabled, Etc.
Under current law, businesses can claim a WOTC equal to 40 percent of the first $6,000 of wages paid to employees of one of nine targeted groups. The Recovery Act extends the WOTC to include two new targeted groups: (1) unemployed veterans, and (2) disconnected youth.
Qualified Small Business Stock
Ordinary deduction treatment is available to individual investors on the sale of stock or the bankruptcy of a company. Under the old rules, an individual investor could exclude 50 percent of any gain realized upon the sale or exchange of "qualified small business stock" held for more than five years. That means an incorporated masonry contracting business could create a unique type/class of stock, called Section 1244 stock, using as an incentive the fact that only part of the eventual gain would be taxed to the investor.
The Recovery Act makes small business stock more attractive by increasing the amount of gain from the sale of small business stock held for five years or more that may be excluded from 50 percent to 75 percent for stock issued after the date of enactment of this legislation and before 2011.
Temporary Estimated Tax Payment Relief
Not exactly a financing incentive, but it will allow small businesses to keep more money in their pockets. The Recovery Act decreases estimated tax payments for individuals whose incomes primarily come from a small business in 2009. Rather than being required to make quarterly estimated tax payments based on 100 percent of their 2008 returns, the new law allows computations based on 90 percent.
The "Making Work Pay" tax credit included in the Recovery Act increased the take home pay of workers and required employers to use new payroll tax withholding tables. Self-employed masonry contractors who are not subject to wage withholding can receive the credit in advance by reducing the amount of their estimated tax payments.
Remember, however, that it is easy to overshoot the mark and become liable for underpaying estimated tax penalties.
Cancelled Debt = Income Now Deferred
When debt is forgiven, taxable income usually results, unless the masonry contractor or business is insolvent or in bankruptcy. The new law allows some masonry contractors to choose to recognize taxable income resulting from the cancellation of indebtedness over a five-year period, beginning in 2014. Although all the debt discharge income will eventually be recognized, the taxpayer benefits from the deferral of tax to later years.
Some masonry contractors and businesses would be allowed to recognize so-called "cancelation of debt income" (CODI) over 10 years (defer tax on CODI for the first four or five years and recognize this income ratably over the following five taxable years) for specified types of business debt repurchased by the business after Dec. 31, 2008, and before Jan. 1, 2011.
Something for Us as Well
The Recovery Act includes an alternative minimum tax (AMT) patch for 2009. The patch was designed to insulate about 26 million middle-income taxpayers from the reach of the AMT. The AMT patch will save taxpayers about $70 billion.
The 2009 AMT patch raises exemption amounts slightly above the 2008 patch levels. The 2009 AMT exemption amounts are: $70,950 for joint filers and surviving spouses (up from $69,950 in 2008); and $46,700 for singles and heads of households (up from $46,200).
This massive stimulus bill, the American Recovery and Reinvestment Act of 2009, provides immediate relief to both individuals and businesses with most of the tax incentives retroactive to Jan. 1, 2009. Most of the $280 billion in tax relief is concentrated within the next two years. For masonry contractors, however, professional advice is almost a necessity to ensure their operation will profit from the new Recovery Act. IMAS
You can contact Mark Battersby at 610-789-2480 or MEBatt12@Earthlink.net.
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READER SERVICE #127 April 2009 MASONRY 41