Stimulus Benefits Ready To Roll

Although many feel that the recession relief supplied in President Obama’s American Recovery and Reinvestment Act is not coming quickly enough, other financial experts are saying that relief for small business owners is already here. Sacramento Business Journal writer Michael Shaw wrote a great piece on which benefits are ready to roll, and how taxpayers know if they should take advantage of them. Check out part of his article below, or you can read the full text here.

Those are the benefits promised to small-business owners in the 2009 American Recovery and Reinvestment Act, better known as the $787 billion stimulus package passed by Congress and signed by President Obama in February.

“The government is trying to provide a comprehensive approach to helping small businesses by focusing on these three separate areas,” said Barry Goggin, president of the Better Business Bureau’s Northeast California office. Although not a government agency, the Better Business Bureau is actively publicizing the advantages for small businesses under the stimulus plan.

Goggin said the job opportunities have been slow to arrive as funds flow gradually to hundreds of agencies, departments and governments. But the tax benefits and loan programs have been made immediately available.

Jim Leet, a certified specialist in taxation in California for the past 20 years who practices at law firm McDonough Holland & Allen, explains that there are several write-offs, deductions and credits designed to allow businesses to keep more of their profits.

For several years, small businesses have been able to immediately write off the purchase of some fixed assets, such as vehicles used for work, deducting the full amount of a $25,000 truck, for example, as opposed to a smaller amount over many years for the vehicle’s depreciation. But the overall limit has been greatly increased under the stimulus plan, Leet said, from $125,000 to $250,0000.

First $2,400 of Unemployment Benefits Tax Free for 2009

According to a recent IRS press release, “all or part of unemployment benefits received in 2009 will be tax free for many unemployed workers.”

“This morning we learned that a record 5.6 million people were receiving unemployment benefits in the middle of March. This underscores the need for the relief provided by the American Recovery and Reinvestment Act, which includes making the first $2,400 of unemployment insurance exempt from tax,” said IRS Commissioner Doug Shulman. “I urge all unemployed workers to take this special tax break into account as they plan their tax withholding and quarterly estimated tax payments for the year. This change offers a helping hand to millions of Americans who are out of work and struggling to make ends meet.”

Under the American Recovery and Reinvestment Act, enacted last month, every person who receives unemployment benefits during 2009 is eligible to exclude the first $2,400 of these benefits when they file their tax return next year. For a married couple, the exclusion applies to each spouse, separately. Thus, if both spouses receive unemployment benefits during 2009, each may exclude from income the first $2,400 of benefits they receive.

The new law doesn’t affect the return taxpayers are filling out now. Unemployment benefits received in 2008 and prior years remain fully taxable.

Unemployed workers can choose to have income tax withheld from their unemployment benefit payments. Withholding on these payments is voluntary. However, choosing this option may help avoid a surprise year-end tax bill or a possible penalty for having paid too little tax during the year. Those who choose this option will have a flat 10 percent tax withheld from their benefits.

Unemployed workers who expect to receive more than $2,400 in benefits this year should consider having tax withheld from their benefit payments in excess of that amount. Those unemployed workers who have already chosen to have tax taken out of their benefits, should consider the $2,400 exclusion in determining whether to continue to have tax withheld.