Q: I am considering making a major capital investment this year. The liberal amounts allowed under Section 179 and Bonus Depreciation have expired as of December 31, 2008. What are or will be the new Bonus Depreciation and Section 179 expensing amounts for 2009?
A: According to many outlets, Congress and the Office of the President are working on the first of multiple stimulus packages. This should include new amounts for Section 179 expensing and Bonus Depreciation. As of yet, Section 179 expense is limited to $133,000 for 2009. For 2010, the deduction will be inflation adjusted; however, in 2011, the deduction drops back to Pre-Bush Tax Policy – $25,000. Barring any further action from Congress and the President, the amount will stay at that level, as it is not inflation adjusted.
Q: I am in business and have been for 10 years. Recently I have noticed that payments from clients to my company have slowed considerably and I am experiencing defaults. Currently I am on the accrual method of accounting and I am recording revenue that I am not receiving and paying taxes accordingly. Is there some other method of accounting which I could use that would not show revenue that is not received?
A: In hard times, often clients and customers will slow down payments or default all together. The result is a tax liability on revenue that is not received. One way to combat the problem is to switch to cash accounting. Under this method, revenue is booked when received, not when all events have been satisfied to receive the revenue, resulting in a more appropriate tax liability.
By: Basi & Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors