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NFIB Talking Points: Stimulus Update - Taxes

February 18, 2009

On Feb. 17, 2009, the president signed H.R. 1, the American Recovery and Reinvestment Act of 2009, into law.

Below is a summary of the tax provisions included in the new law. Some could have an impact on small business owners. And although they could be beneficial, NFIB has raised serious concerns that the tax provisions included do not provide immediate relief to small business owners--especially during the current difficult and uncertain economic times.

When taking into account the overall effects of H.R. 1, small business tax relief still only accounts for a very small percentage of the total bill.

  • The final version of H.R. 1 bill includes a provision adjusting the amount of quarterly estimated taxes that a small business owner is required to pay.
    • Small business owner is defined as receiving 50 percent of their income from a business with fewer than 500 employees. 
    • Currently, the business owner (depending on income limits) pays 110 percent of their previous year’s adjusted gross income in quarterly estimated taxes.
      • They then adjust the amounts (either up or down) on their annual return.
      • The provision changes the 110 percent to 90 percent of their pervious year's adjusted gross income. 
    • This provision helps small businesses experiencing a cash flow problem by reducing their quarterly tax payments by 20 percent. 
  • The final bill also includes a one-year patch to protect middle income taxpayers from the Alternative Minimum Tax protecting many small business owners from facing a higher tax rate and losing important tax deductions.
  • Small business expensing for qualifying investments in the business is increased from $130,000 to $250,000 for 2009.  Bonus depreciation--providing a deduction of 50 percent of the value of business investments in the year the investment is made--is extended through 2009.
  • The bill allows businesses with an 3-year gross revenue average of $15 million to apply losses in this year against taxes paid in any of the past 5 year rather than 2 years under current law.
  • The bill includes a number of changes to individual tax provisions by increasing eligibility for credit such as the child tax credit and the earned income tax credit.
  • The Making Work Pay tax credit will provide $400 and $800 to individuals making less the $70,000 and joint filers making less than $150,000 respectively by adjusting their tax withholding.
    • Small business owners should be prepared for additional guidance on changes in withholding and how to make changes in their employee's regular pay checks. Check NFIB.com for additional information as it becomes available.
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