Tips for Tax Time

Posted by: Rod Kurtz on December 1, 2009

In this economic climate, many companies are concerned about their cash tax rates. These planning considerations may reduce your corporate tax bill:

1. Review new expensing rules for capital expenditures. The maximum deduction is $250,000 in 2009. The amount of the deduction is reduced dollar for dollar by the cost of qualified property placed in service during the tax year over the $800,000 investment limitation. The amount of the deduction cannot exceed taxable income.

2. Review tax accounting methods. The number of accounting methods a taxpayer may change without prior IRS approval ("automatic method changes") has been expanded. Taxpayers may have an opportunity to deduct previously capitalized costs for repairs and maintenance or supplies, among others. Taxpayers may accelerate deductions or defer income by optimizing tax accounting methods.

3. Review opportunities to claim the Credit for Increasing Research Activities. Effective for tax years ending after Dec. 31, 2006, the Alternative Simplified Credit calculation has eased some of the technical burdens of the "regular credit" and increased the benefit to many companies. The credit reduces your federal tax liability dollar for dollar, and many states provide a similar credit against your state tax liability.

4. Review net operating loss carryback opportunities. Small businesses with less than $15 million average annual gross receipts over a three year period may carryback net operating losses from the 2008 tax year five years. Business exceeding the $15 million gross receipts test generally may carryback net operating losses 2 years and forward 20 years. If a taxpayer expects to record a net operating loss for the current tax year and would like to accelerate a refund of previously paid taxes, you may file Form 1139, Corporation Application for Tentative Refund.

Ken Esch
Partner
PricewaterhouseCoopers Private Company Services
Chicago

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