American Recovery & Reinvestment Act Provides Tax Benefits for Some Employers

Employers may benefit from the Economic Stimulus Package.  So far, this blog’s posts on the $787 billion Stimulus Package (formally known as the American Recovery & Reinvestment Act (ARRA)) have focused on the burdens placed upon employers that result from new laws on issues like extended COBRA coverage and unemployment insurance modernization. Notwithstanding the additional responsibilities, the Stimulus Package does have some tax perks for companies, particularly small businesses. In fact, President Obama alluded to the importance of ARRA’s tax provisions in his presentation to Congress last night. Below are some of the federal tax issues employers should raise with their tax advisors:

Net Operating Loss Carryback. Tax law under ARRA will extend the “carryback” period for net operating losses generated by small companies from two years to five years. From some employers, this means if you lost money in 2008, but paid taxes on profits in the last five years, you may be eligible to apply last years’ loss to prior-year taxes.

Equipment Deductions and Depreciation. Current tax law allows small businesses to immediately expense new equipment or machinery. The 2009 deduction will be $250,000.

Making Work Pay Tax Credit. This is a tax cut which refunds a maximum of $400 to single filers making less than $75,000 and $800 to married couples making less than $150,000. Taxpayers who qualify will see the amount deducted from their paychecks. Self-employed owners, find out if the can apply to you. This tax cut will be accomplished by adjusting federal income tax withholding tables, and the revisions will be integrated with employers’ payroll systems.

Work Opportunity Tax Credit. The WOTC is a voluntary program by which employers earn a tax credit for hiring individuals from one or more specific groups- i.e., unemployed Veterans and disconnected youths (someone who is between 16 and 25 years old and who is not regularly attending school or regularly employed for a six-month period prior to their date of hire).


For more information on the impact the Stimulus Package will have on employers, see:

Governors Reject Stimulus Funds Marked for Expanding Unemployment Benefits

More Employer Compliance Issues from Stimulus Package

Stimulus’ COBRA Premium Subsidy Puts Burden on Employers

One thought on “American Recovery & Reinvestment Act Provides Tax Benefits for Some Employers

  1. I had written NELP with a concern over Indiana’s unemployment for the long term unemployed. My benefits ran out on April 6th 2009. The extended benefits were only allowed for people with an end date of 3/21/2009.This policy left out all of the long term unemployed. Does anyone know if this over sight will be fixed to alow for the long term unemployed?


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