We’ve 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, the ARRA is essentially a $ 787 billion bill passed in February 2009 by President Obama to provide various investment opportunities and tax relief. More specifically, the full text of the ARRA title is as follows:
A law that makes supplemental appropriations for the preservation and creation of jobs, investment in infrastructure, energy efficiency and science, assistance to the unemployed, 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 use by small businesses and individuals, 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 the benefits and fully utilizing them to help you put more money in your pocket (or at least have to shell out less!) That said, Let’s take a look at a small sample of the benefits ARRA 2009 has to offer small businesses:
1. Using current losses to offset gains: Generally, when a business incurs losses, they can be used to offset taxes on profits for the last two years. However, this provision of the ARRA allows companies to use losses to offset gains over three, four, or even five years, depending on the circumstances. Given the financial difficulties that the current economic situation has inflicted on many small businesses, this provision can 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 Act included a “50% bonus depreciation provision for ‘qualified’ property purchased, manufactured, constructed or produced in 2008.” The 2009 ARRA provision essentially foresees a carry-over of this depreciation benefit to 2009, primarily providing an accelerated depreciation schedule for purchases of fixed assets. Therefore, 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. Job 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 problem 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 of this is that the benefit is available in 2009 and 2010.
Another area of business opportunity is partially included in the “Job Opportunity Credit” mentioned above and is a program that I have recently had the privilege of using. My local county (San Bernardino) has been allocated ARRA funds for youth to work in businesses of all types and in various capacities. As long as your company has room for an entry-level employee to hone a skill or learn a general business practice, this program covers both wages and worker’s compensation insurance for youth ages 18-21 for up to 180 hours. This is a summer program, but it will also become a year-round opportunity. While the details of this program may vary by county or municipality, visit the Career Institute at http://www.careerinstitute1.org/ for information on this program in San Bernardino County. The helpful staff there can help you find young people to hire (for free!) Or locate an organization equally appropriate for your business.
While there are many areas of assistance for small businesses, ARRA is also focused on helping individuals with some very cool 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 “Make Work Pay” credit): Similar to the Economic Stimulus Act described above, this credit will provide $ 800 for joint taxpayers 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. However, unlike last year’s check payment, this credit will come in the form of a reduction in withholding tax.
2. New Home Buyers Credit: This credit will provide first-time home buyers with an $ 8,000 credit for home purchases made between January 1 and December 1, 2009.
3. Home Energy Credit: Homeowners spending money to increase the energy efficiency of their homes in 2009 and 2010 could receive up to 30 percent (or up to $ 1,500) of credit for those purchases.
Clearly, there are many other areas of benefit than the American Recovery and Reinvestment Act of 2009 has in store, benefits for both small businesses and individuals. A great place to start exploring these opportunities further is the official ARRA website, www.recovery.gov. From there, you can research various aspects of the ARRA, including information about the unprecedented level of accountability and transparency included in the law. Additionally, since a large portion of ARRA funds go directly to individual states, you can use the site’s state, local, tribal, and territorial information portal to find more detailed information about the programs available in your area. Personally, I encourage you to explore the Wikipedia entry related to the ARRA, and more specifically a breakdown of the provisions of the Act, by clicking here. While Wikipedia is by no means an academic source of information, this page provides an excellent (read: simple) breakdown of the Act and where you will focus and spend your money, giving you a great stepping stone to further pursue your own research and for profit 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 the ARRA is to arm yourself with an understanding of the benefits the Act has to offer and carry this information with you when consulting with your accountant or financial advisor. planner. Since he / she is intimately familiar with you and your business, lobby this person on the subject of ARRA and encourage him / her to do their due diligence to find out how the many benefits of ARRA can help both you and your organization.
