Newsletter

The Job Creation and Worker Assistance Act of 2002 Made Significant Changes to Several Areas Affecting Business

Depreciation: 30% additional first-year depreciation--Revised 2001 tax forms relating to depreciation, which reflect law changes made by the recently enacted Job Creation and Worker Assistance Act of 2002 (P.L. 107-147), are now available on the IRS’s website at www.irs.gov. Taxpayers that acquired new depreciable property after September 10, 2001, may be able to claim additional first-year depreciation of 30 percent of the basis of the property. The Act also raised the limitation on first-year depreciation for automobiles by $4,600 for new cars placed in service after September 10, 2001. Taxpayers may choose not to use the increased deductions for qualifying property. Eligible taxpayers should use revised Form 4562, Depreciation and Amortization, or revised Form 2106, Employee Business Expenses, as appropriate, with their tax returns. Taxpayers that have already filed their 2001 returns can file amended returns using Form 1040-X or 1120-X, together with the newly revised forms, to obtain the tax benefits available under the Act. Taxpayers that claim depreciation, but that did not acquire new property after September 10, 2001, may use the earlier versions of the 2001 forms with their returns. 

Taxpayers that acquired new depreciable property after Sept. 10, 2001, may be able to claim additional first year depreciation of 30 percent of the basis of the property. The law also raised the limitation on first-year depreciation for automobiles by $4,600 for new cars placed in service after Sept. 10, 2001. Taxpayers may also choose not to use the increased deductions for qualifying property.

Taxpayers qualifying for the additional depreciation should use the revised Form 4562, “Depreciation and Amortization,” or the revised Form 2106, “Employee Business Expenses,” as appropriate, with their tax returns. Those that have already filed their 2001 returns may file amended returns using Form 1040-X or 1120-X and the revised forms to get these tax benefits. Taxpayers that claim depreciation but did not acquire new property after Sept. 10, 2001, may use the earlier versions of the 2001 forms with their returns.


Net operating losses: Extension of carryback period to five years--Revised 2001 tax forms relating to depreciation, which reflect law changes made by the recently enacted Job Creation and Worker Assistance Act of 2002 (P.L. 107-147), are now available on the IRS’s website at www.irs.gov. The IRS plans to add new instructions for claiming net operating losses (NOLs) in the near future. The Act provides a five-year carryback period for NOLs arising in a tax year ending in 2001 or 2002. For purposes of the alternative minimum tax, any NOL carryback from those years, or carryforwards to those years, may offset the full alternative minimum taxable income, not just 90 percent of it. The IRS is revising the instructions for various forms that relate to NOLs and will post the revisions to its website. 

The new law also provides a five-year carryback period for a net operating loss (NOL) arising in a tax year ending in 2001 or 2002. For purposes of the alternative minimum tax, any NOL carryback from those years, or carryforwards to those years, may offset the full alternative minimum taxable income, not just 90 percent of it.  The IRS is revising the instructions for various forms that relate to NOLs and will post the revisions to its Web site. It is also developing other materials related to the new law. A home page link to “New Law May Cut Your 2001 Tax” gives details.