Don?t Forget Deduction

Several local public accountants, including John Ervin of Fayetteville, say they’ve been swamped with calls from companies that will amend their 2001 tax returns following President Bush’s $38.7 billion worth of new tax incentives.

The Job Creation & Worker Assistance Act of 2002, passed by Congress and signed into law by the president on March 9, includes a 30 percent bonus depreciation on qualified assets acquired after Sept. 10. The break is retroactive for all taxpayers for all tax periods — both fiscal and the calendar year — that ended following the terrorist attacks of Sept. 11.

Ervin, who owns Ervin & Co. CPAs P.A., said one example might be a company that bought a $100,000 piece of five-year machinery. Previously, the company would have been entitled to a depreciation rate of 20 percent for the first year. But with the bonus deduction, the company gets the $30,000 deduction and then the additional 20 percent of the $70,000 difference ($14,000) for a total of $44,000.

There are even greater possibilities for those who used Code 179 deductions, and companies with net operating losses. We’ll defer to certified public accountants and financial services gurus for further explanation.