We have all heard of him: the American Recovery and Reinvestment Act of 2009, also known as ARRA. But what exactly is it, and how can it help your small business? For starters, ARRA is essentially a $787 billion dollar bill passed in February 2009 by President Obama to provide various investment and tax relief opportunities. More specifically, the full title text of ARRA is as follows:
An act that makes supplemental appropriations for job preservation and creation, infrastructure investment, energy efficiency and science, unemployment assistance, and state and local fiscal stabilization, for the fiscal year ending September 30, 2009, and for other purposes .
While many of the ARRA benefits are available for small businesses and individuals to use, it is important to note that the benefits are not automatic; In other words, they require you, as a small business or individual, to be proactive in applying benefits and fully utilizing them to help you put more money in your pocket (or at least spend less!) With that said, let’s take a look. Just a small sample of the benefits ARRA 2009 has to offer small businesses:
1. Using current losses to offset gains: Typically, when a business incurs losses, they can be used to offset taxes on the earnings for the last two years. However, this ARRA provision allows companies to use losses to offset profits over three, four, or even five years, depending on the circumstances. Given the financial hardship that the current economic situation has inflicted on many small businesses, this provision may provide much-needed financial assistance to small businesses in need.
2. Higher depreciation: You may remember the Economic Stimulus Act of 2008 as the Act that provided individual taxpayers with a one-time tax refund of between $300 and $1,200. Another aspect of this law included a “50% bonus depreciation provision for ‘qualified’ property purchased, manufactured, built, or produced in 2008.” The 2009 ARRA provision essentially provides for a carry-over of this depreciation benefit to 2009, primarily providing an accelerated depreciation schedule for fixed asset purchases. Thus, this provides an incentive for companies to make purchases of needed or desired assets such as equipment and computers, as companies can now use this benefit in 2009.
3. Work Opportunity Credit: Employers will have the opportunity to take advantage of a credit in the amount of up to 40% of the first $6,000 in wages paid to certain new hires. The catch is, these hires must come from one of nine specific “target groups,” including ex-offenders, disabled veterans, “disconnected” youth, and food stamp recipients. The great part about this is that the benefit is available in 2009 and 2010.
Another area of business opportunity is partially included in the “Work Opportunity Credit” discussed above and is a program I have recently had the privilege of using. My local county (San Bernardino) has been allocated ARRA funds to provide youth to work for businesses of all types and in various capacities. As long as your business has room for an entry-level employee where they’re allowed to hone a skill or learn a general business practice, this program covers wages and workers’ compensation insurance for youth ages 18-21 for up to 180 hours. This is a summer program, but will also be moving to a year-round opportunity. While the details of this program may vary by county or municipality, please visit the Career Institute at http://www.careerinstitute1.org/ for information on this program in San Bernardino County. The friendly staff can help you find young people to hire (for free!) or locate an equally suitable organization for your company.
While there are many areas of support for small businesses, ARRA also focuses on helping people with some very exciting programs. Although the focus of this article is on small businesses, since we are all individuals, let’s also take a quick look at some of these benefits:
1. Payroll Tax Credit (the “Making Work Pay” credit): Similar to the Economic Stimulus Act described above, this credit will provide $800 for joint filers and $400 for individuals. This credit will be phased out for individuals earning an AGI of more than $75,000 and for couples with an AGI of more than $150,000. Unlike last year’s check payment, however, this credit will come in the form of a reduction in tax withholding.
2. Credit for new homebuyers: This credit will provide first-time homebuyers with an $8,000 credit for home purchases made between January 1 and December 1, 2009.
3. Home Energy Credit: Homeowners who make financial out of pocket to increase the energy efficiency of their homes in 2009 and 2010 may receive up to a 30 percent (or up to $1,500) credit for such purchases.
Clearly, there are many other areas of benefit that the American Recovery and Reinvestment Act of 2009 has benefits reserved for both small businesses and individuals. A great place to start exploring these opportunities further is the official ARRA site, www.recovery.gov. From there, you can research various aspects of ARRA, including information about the unprecedented level of accountability and transparency included in the Act. Also, since a large portion of ARRA funds go directly to individual states, you can use the state, local, tribal and territorial information portal site to find more detailed information on programs available in your area. I personally encourage you to explore the ARRA-related Wikipedia entry, and more specifically a breakdown of the Act’s provisions, by clicking here. While Wikipedia is by no means a source of academic information, this page gives a great (read: simple) breakdown of the Act and where you will focus and spend your money, giving you a great springboard to conduct your own research and to benefit areas to discuss with your business and personal accountants.
In general, however, one of the best ways you can prepare to take full advantage of ARRA is to arm yourself with an understanding of the benefits the Act has to offer, and to take this information with you when you consult with your accountant or advisor. financial. plan. Since he/she is intimately familiar with you and your business, press this person on the subject of ARRA and encourage them to do their due diligence to discover how the many benefits of ARRA can help you and your organization.
