Will Tax Laws Benefit Pizzerias in 2010?

Savvy pizza restaurateurs know that several tax breaks extended for small businesses in 2009 benefited smaller, struggling restaurateurs. However, some of the best tax breaks for small business restaurateurs are also the most at risk of being discontinued. The expanded depreciation and employer tax laws will undoubtedly help owners with their 2009 tax returns, but many worry whether or not they will be able to utilize them again next year.

Augmented tax breaks for 2009 included: 

* Qualified Restaurant Improvements - to help cash flow and allow restaurateurs to claim more rapid depreciation on buildings.

* Bonus Depreciation - allows restaurateurs to recapture 50 percent of costs in first-year write-offs and depreciate remaining balances of kitchen equipment.

* Work Opportunity Tax Credit - allows restaurateurs a 40% credit for the first $6,000 of wages for employees in less-employed groups

* Extension of Claimable Net Operating Losses: - allows restaurateurs to claim losses from five years back, instead of the two years previously allowed.

Some industry leaders are concerned that many of the tax cuts established in 2001 are set to expire this year and may not be renewed. If the individual tax rate climbs from 35% to 39% as some predict, it could negatively affect franchisees that pay tax at the same level as owner’s do. If the current the corporate tax level is reduced from 35% to 25%, many businesses might have to change into corporations in order to stay afloat.

The IRS has also recently proposed new rules that would require restaurant businesses with over $10 million in assets, like most pizza franchises, to categorize deductions in a manner that would flag any less-than-solid calculations and provide the IRS with a road map to an audit. Industry analysts have stated that while there is not much hope for the passage of new tax legislation favorable to small businesses, most restaurateurs are happy they did not have to cut any current jobs to afford taxes this year.