Tax Updates & Deadlines

 

  • Economic Nexus – New laws that can make your out-of-state sales taxable!

    For a taxing jurisdiction to require an out-of-state company to collect and remit sales tax, the company must have some kind of connection with the taxing jurisdiction (state). This connection we call “Nexus”. When it comes to sales tax, the most common nexus principle requires the out-of-state company to have some physical connection with the state to make their sales taxable.

    Economic nexus is a new way to determine if an out-of-state company has to collect and remit sales tax. What is economic nexus then? Not only does the usual physical presence (such as a location, employee or inventory), but now an economic presence in a state create sales tax nexus. An example, in South Dakota, out-of-state companies with annual sales over $100,000 or with 200 separate sales transactions in the state are required to collect and remit sales tax. These two factors determine if the company has nexus in the state even though they do not have any physical presence there. The sales volume and transaction amount are different from state to state but the concept is the same.

    A lot of states have adopted the new economic nexus rules, mainly because of the high amount of online sellers in different states. A total of 33 states have adopted economic nexus as of Nov 26. 2018. For more information, please contact us at Westmusa, Inc.

  • Trump’s Tax Reform – 4 benefits for business owners

    President Trump signed and approved the ”Tax Cuts and Jobs Act” tax reform in December 2017. What does the biggest change to tax laws in 31 years mean for business owners?

    Here are four federal tax changes for small to medium-sized business owners.

    1. A major corporate tax rate reduction!

      Before the TCJA changes, C corporation paid federal income-tax rates of 15%, 25% and all the way up to 39%. Businesses with tax years beginning after 31st of December, 2017 the new flat corporate rate of 21% will be applied. This means that the top tax rate has been permanently reduced by 40%.

    2. Pass-through businesses have a new deduction
      Before the TCJA changes, net taxable income from pass-through business entities was passed through to owners, which was then taxed at the owners’ standard rates. This means that the business owner pays the business taxes on their personal tax return.

      For the tax year beginning in 2018 through 2025, the new tax reform has established a new deduction based on a non-corporate owner’s business income (QBI).

      The 20% Qualified Business Income Deduction is explained as following: For individuals with a taxable income less than $157,000 (married taxpayers $315,000) the deduction is 20% of the net income of your business.

      Example. Taxable income of $100,000 → 20% deduction means you will have to pay taxes on the remaining $80,000

    3. Pass your wealth tax-free to the next generation

      The Estate Tax can play a big role in the legacy you will leave to the next generation. For 2018, the federal estate tax exclusion amount is doubled to 11.9 million per individuals or $22.36 million for married couples. The exclusion amount in 2017 was $5.49 million.

      For small or medium-sized business owners, whose estate is valued under those exclusion amounts, will now be able to pass on their businesses and financial legacy tax-free. However, the exclusion amount is set to return to $5 million in 2025.

    4. 100% Bonus Depreciation

      What is bonus depreciation? Bonus depreciation is a concept to speed up the process and get your tax savings faster. It allows you to deduct a huge percentage of the depreciation in the first year. The deductible percentage was originally at 30% but was increased in 2015 to 50%. With the new tax reform, the percentage is increased to a whopping 100% and will stay that way until 2023.

      Real estate does not qualify for this, but personal property like cars, equipment, computer, and more qualify.

      The Tax Cuts and Jobs Act will have some major changes and it will most likely take a couple of years to get all the rules and laws figured out.

      *Be aware that the tax reform does not apply to state and local taxes. Please contact us at Westmusa, Inc. with any questions you might have.*

  • Tax deadlines for your 2018 return!

    C-corporation income tax returns – Form 1120

    • The deadline is April 15, 2019 for C corporations that operate on a calendar year.
    • Extended deadline is October 15, 2019.
    • The deadline for C corp returns is the 15th day of the fourth month following the end of the corporation’s fiscal year if the corporation is on a fiscal rather than a calendar year.
    • One exemption, if the corporation’s fiscal year ends June 30th, the deadline is September 16, 2019.

    S-corporation returns – Form 1120-S

    • Deadline is March 15, 2019 for corporations on a calendar year.
    • Extended deadline is September, 16, 2019.
    • The deadline for S corp and partnership returns is the 15th day of the third month following the end of the fiscal year if they are on a fiscal year rather than a calendar year.

    Partnership returns – Form 1065

    • Deadline is March 15, 2019.
    • Extended deadline is September, 16, 2019.

    Non-Profit organization returns – Form 990, 990EZ or 990-PF

    • Deadline is May 15, 2019 for Non-profit organizations on a calendar year.
    • The deadline is 15th day of the fifth month following the end of the organization’s fiscal year if the organization is on a fiscal rather than a calendar year.
    • Extended deadline is November 15,2019.

    Trust and estate income tax returns – Form 1041

    • Deadline is April 15, 2019.
    • Extended deadline is September 30, 2019

    Foreign bank account reports – FinCen Form 114

    • April 15, 2019
    • Extended deadline is October 15, 2019.

    Individual tax return – Form 1040

    • Deadline to file individual tax returns is April 15, 2019 for the year 2018.
    • You can request an automatic extension by April 15, 2019.
    • Extended deadline October 15, 2019.

“I missed the deadline – What should I do?”

If you happen to miss the deadline, the IRS says you should file your return and pay your taxes as soon as possible to avoid penalties and extra interest charges. We here at Westmusa are always ready to help you with any questions you might have.