With 2009 drawing to a close, many business owners may be looking at their bottom line and pondering additional ways to save money for the upcoming 2010 year. While skimping on paying payroll taxes may get you in deep IRS trouble, educating yourself on acceptable ways to save financial resources will help your business survive and thrive.

The most effective way to go about this is to understand the tax incentives that work in your favor–generous tax deductions on asset purchases is one area that is worthy of consideration.

CCH (http://tax.cchgroup.com) reports:

The economic downturn has taken a toll on many businesses, both small and large, but Congress acted to curb the financial strain with legislation aimed at stimulating business investment. The Economic Stimulus Act of 2008, Emergency Economic Stabilization Act of 2008, and American Recovery and Reinvestment Act of 2009 all provide tax incentives for businesses, including additional 50 percent bonus depreciation, higher limits for first-year expensing, and shorter recovery periods for asset depreciation.

If you have been contemplating the purchase of business equipment, and have the cash and credit score to do so, you may want to consider taking advantage of these tax provisions in order maximize their potential tax savings before they expire at the end of the year. Taking advantage of these tax benefits has the potential to reduce your current taxable income and increase your cash flow.

Vehicle depreciation. The limits on depreciation of “luxury” automobiles have been raised through 2009. The first-year depreciation limit would have been $3,060, but the cap has been raised to $11,060 (an $8,000 increase) through the end of the year on new vehicle purchases. The limit is higher for vans and trucks. To qualify, the vehicle must be used more than 50 percent for business. Again, these enhanced amounts apply only for 2009.

Bonus depreciation. Bonus depreciation and Code Sec. 179 expensing are the primary business incentives set to expire at the end of 2009. Congress extended 50 percent additional first-year bonus depreciation through December 31, 2009 in the 2009 Recovery Act. You deduct 50 percent of the property’s basis in the first year, before reducing the basis for normal depreciation computed over the property’s recovery period, including the first year. However, you can “elect out” of bonus depreciation, but the election is irrevocable.

You can claim bonus depreciation for property with a depreciation (recovery) period of 20 years or less, water utility property, off-the-shelf computer software, and qualified leasehold property (farming equipment also qualifies for bonus deprecation, as well as first-year expensing). The property must be new. You must purchase and place the property in service before December 31, 2009.

First-year expensing. In lieu of bonus depreciation, you can elect to write off part, or all, of the cost of one or more assets, up to the limit on expensing. The limit is $250,000 through 2009. Unlike bonus depreciation, first-year expensing applies to tax years beginning in 2009. Therefore, if you are a fiscal-year taxpayer you are not faced with a December 31, 2009 deadline for acquiring property and placing it into service. First-year expensing can be claimed on used as well as new property, unlike bonus depreciation.

The amount that you can expense must be reduced dollar-for-dollar by the amount of the Code Section 179 property placed in service during the year exceeds a specified threshold. The threshold for 2009 is $800,000. The benefit does not fully phase out until investment reaches $1.05 million.

Shorter recovery period. Congress also reduced the recovery period from 39 years to 15 years for leasehold improvements, restaurant property and retail improvement property placed in service by December 31, 2009. Leasehold improvements also qualify for bonus depreciation as well.

Investing in assets for your business is not just about taxes, so when considering whether to buy business assets this year, you need to ensure that such a move makes financial sense. However, if you are considering investing in your business in the near future, action before the end of 2009 rather than even a few months after may mean a significant savings to your bottom line, thanks to the tax incentive now available.

If you owe the IRS back taxes due to 2009’s slumped economy, you do not have to default to bankruptcy. There are tax resolution options that you can consider which will save your business and your financial well-being. In many cases, a tax attorney can negotiate an affordable IRS payment plan or settle an IRS penalty abatement for you.

You can get expert tax help from a tax attorney or CPA by calling Tax Resolution Services today at 1-866-477-7762 for a free tax resolution consultation or visit www.taxresolution.com.

More Tax Help, IRS News and Tax Relief Tips:

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4. Retire Your IRS Back Taxes Forever: How Tax Resolution Services Helped Save a Taxpayer $130,000
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Tags: Back Taxes, IRS debt, IRS payment plan, IRS payroll tax problems, IRS penalty abatement, Payroll Taxes, tax attorney, tax expert, tax help, tax resolution, tax settlement

This entry was posted on Wednesday, December 23rd, 2009 at 10:35 am and is filed under Back Taxes, Expert Help From Tax Attorney, IRS Installment Agreements, IRS help, Payroll Tax Problems, Penalty Abatement, Seeking Professional Tax Help, Tax Relief News, Working with the IRS, income tax relief. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.