Small-Business Owners Await New Tax Breaks

NYTimes.com

By CONRAD DE AENLLE

Published: February 7, 2009

...A provision would allow businesses that had a loss last year to offset it against profits earned as far back as five years. Businesses could immediately recoup tax paid on the profits that the 2008 loss wiped away.

“Ordinarily when a business suffers a net operating loss, it can carry back the loss two years,” Barbara Weltman, a lawyer and author of “J. K. Lasser’s Small Business Taxes," explained. Lawmakers “want to extend that to five years, so if you have a very big loss, you’re going to be able to get a refund now. They’re trying to let businesses get some money back so they can use it to survive.”

The amount that can be carried back is limited to 90 percent of the loss; the rest is forfeited. This piece of the provision is known as “Rangel’s wrinkle,” she said, a reference to Representative Charles B. Rangel, the New York Democrat who is chairman of the House Ways and Means Committee, the panel that oversees budget matters.

Deductions and accounting devices won’t prevent some businesses from being unable to pay their full tax bill. As with individual taxpayers, the Internal Revenue Service is willing to show businesses some leeway, a spokeswoman for the agency said. Debt collections may be postponed if matters have gone that far, and leniency may be granted when payments are missed under installment agreements. ...

IT is not as though business owners have nothing else to occupy their thoughts. The complexities of taxation and a concentration on other aspects of running a business may mean that new tax breaks are not as beneficial as these owners hope. ...