WASHINGTON, DC — Time is running out for many small businesses wishing to take advantage of the expanded business loss carryback option included in this year’s recovery law, the Internal Revenue Service said today. Eligible individuals have until Oct. 15 to choose this expanded carryback option. Eligible calendar-year corporations have until Sept. 15.

Eligible individuals have until Oct. 15 to choose this expanded business loss carryback option. Eligible calendar-year corporations have until Sept. 15.

This carryback provision offers small businesses that lost money in 2008 an excellent way to quickly get some much needed cash if they were profitable in previous years. This option is only available for a limited time, so small businesses should consider it carefully and act before it’s too late.

Under the American Recovery and Reinvestment Act (ARRA), enacted in February, many small businesses that had expenses exceeding their income for 2008 can choose to carry the resulting loss back for up to five years, instead of the usual two. This means that a business that had a net operating loss (NOL) in 2008 could carry that loss as far back as tax-year 2003, rather than the usual 2006. Not only could this mean a special tax refund, but the refund could be larger, because the loss is being spread over as many as five tax years, rather than just two.

This option may be particularly helpful to any eligible small business with a large loss in 2008. A small business that chooses this option can benefit by:

• Offsetting the loss against income earned in up to five prior tax years,
• Getting a refund of taxes paid up to five years ago,
• Using up part or all of the loss now, rather than waiting to claim it on future tax returns.

Under ARRA, eligible taxpayers can choose to carry back a NOL arising in a taxable year beginning or ending in 2008 for three, four or five years instead of two. The option is available for an eligible small business (ESB) that has no more than an average of $15 million in gross receipts over a three-year period ending with the tax year of the NOL. This choice may be made for only one tax year.

Most taxpayers still have time to choose this special carryback and get a refund. A calendar-year corporation that qualifies as an ESB must file a claim by Sept. 15, 2009. For individuals, the deadline is Oct. 15, 2009. This includes a sole proprietor that qualifies as an ESB, an individual partner in a partnership that qualifies as an ESB and a shareholder in an S corporation that qualifies as an ESB. Deadlines vary for fiscal-year taxpayers, depending upon when their fiscal year ends and whether they are making the choice for the tax year that ends or begins in 2008.

Individuals can accelerate a refund by filing Form 1045, Application for Tentative Refund. Similarly, corporations with NOLs may also accelerate a refund by using Form 1139, Corporation Application for Tentative Refund. Normally, refunds are issued within 45 days. These forms, along with answers to frequently-asked questions about this special carryback, and other details can be found on the IRS Web site.

WASHINGTON, DC — With 2009 now half over, the Internal Revenue Service reminds taxpayers to take advantage of the numerous tax breaks made available earlier this year in the American Recovery and Reinvestment Act (ARRA).

The recovery law provides tax incentives for first-time homebuyers, people purchasing new cars, those interested in making their homes more energy efficient and parents and students paying for college. But all of these incentives have expiration dates so taxpayers should take advantage of them while they can.

First-Time Homebuyer Credit

The Recovery Act extended and expanded the first-time homebuyer tax credit for 2009.

Taxpayers who didn’t own a principal residence during the past three years and purchase a home this year before Dec. 1 can receive a credit of up to $8,000 on either an original or amended 2008 tax return, or a 2009 return. But the purchase must close before Dec. 1, 2009, and an eligible taxpayer cannot claim the credit until after the closing date. This credit phases out at higher income levels, and different rules apply to home purchases made in 2008.

New Vehicle Purchase Incentive

ARRA also provides a tax break to taxpayers who make qualified new vehicle purchases after Feb. 16, 2009, and before Jan. 1, 2010.

Qualifying taxpayers can deduct the state and local sales and excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles. There is no limit on the number of vehicles that may be purchased, and you may claim the deduction for taxes paid on multiple purchases. But the deduction per vehicle is limited to the tax on up to $49,500 of the purchase price of each qualifying vehicle and phases out for taxpayers at higher income levels. This deduction is available regardless of whether a taxpayer itemizes deductions on Schedule A.

Energy-Efficient Home Improvements

The Recovery Act also encourages homeowners to make their homes more energy efficient. The credit for nonbusiness energy property is increased for homeowners who make qualified energy-efficient improvements to existing homes. The law increases the rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to a total of $1,500 for improvements placed in service in 2009 and 2010.

Qualifying improvements include the addition of insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.

Tax Credit for First Four Years of College

The American opportunity credit is designed to help parents and students pay part of the cost of the first four years of college. The new credit modifies the existing Hope credit for tax years 2009 and 2010, making it available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. Tuition, related fees, books and other required course materials generally qualify. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.

Certain Computer Technology Purchases Allowed for 529 Plans

ARRA adds computer technology to the list of college expenses (tuition, books, etc.) that can be paid for by a qualified tuition program (QTP), commonly referred to as a 529 plan. For 2009 and 2010, the law expands the definition of qualified higher education expenses to include expenses for computer technology and equipment or Internet access and related services to be used by the designated beneficiary of the QTP while enrolled at an eligible educational institution. Software designed for sports, games or hobbies does not qualify, unless it is predominantly educational in nature.

Making Work Pay and Withholding

The Making Work Pay Credit lowered tax withholding rates this year for 120 million American households. However, particular taxpayers who fall into any of the following groups should review their tax withholding rates to ensure enough tax is withheld, including multiple job holders, families in which both spouses work, workers who can be claimed as dependents by other taxpayers and pensioners. Failure to adjust your withholding could result in potentially smaller refunds or in limited instances may cause you to owe tax rather than receive a refund next year. So far in 2009, the average refund amount is $2,675, and 79 percent of all returns received a refund.

INDIANAPOLIS, Ind. — State Sen. Ron Alting (R-Lafayette) announced today that Lafayette qualifies for a $750,000 federal grant to move forward with wastewater system updates.

Alting said the grant monies were made available from the American Recovery and Reinvestment Act of 2009 and he has supported the wastewater improvement projects for several years.

This is one of the state’s first stimulus water projects to be announced.

“These stimulus funds will save residents from having to assume the financial burden and pay higher fees to fund necessary infrastructure improvements,” Alting said. “Not only will this investment in water infrastructure help to serve current residents by improving water quality, it will also prepare the community of Lafayette for future economic development opportunities.”

Alting said the recovery act will distribute about $125 million in funds to the Indiana State Revolving Fund (SRF), a program managed by the Indiana Finance Authority (IFA) that provides loans and grants to communities for wastewater and drinking water projects.

For more information about the SRF Loan Program, visit the IFA Web site at www.in.gov/srf.

INDIANAPOLIS, Ind. — State Sen. Brandt Hershman (R-Wheatfield) announced today that Rensselaer qualifies for a $1.5 million federal grant to move forward with wastewater system updates.

Hershman said the grant monies were made available from the American Recovery and Reinvestment Act of 2009 and he has supported the wastewater improvement projects for several years.

This is one of the state’s first stimulus water projects to be announced.

“These stimulus funds will save residents from having to assume the financial burden and pay higher fees to fund necessary infrastructure improvements,” Hershman said. “This investment in water infrastructure will help not only to serve current residents by improving water quality, but also to prepare Rensselaer for future economic development opportunities.”

Hershman said the recovery act will distribute about $125 million in funds to the Indiana State Revolving Fund, an existing program managed by the Indiana Finance Authority which makes loans to communities for wastewater and drinking water projects.

For more information about the SRF Loan Program, visit the IFA Web site at www.in.gov/srf.

WASHINGTON, DC — All or part of unemployment benefits received in 2009 will be tax free for many unemployed workers, according to the Internal Revenue Service.

“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.

Use Form W-4V, Voluntary Withholding Request, or the equivalent form provided by the payer to request withholding to begin or end. Form W-4V is also available on IRS.gov or by calling the IRS toll-free at 1-800-TAX-FORM (829-3676).