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Swapped: Partnership Tax returns and Corporate (C) Tax returns.
Tax returns to be filed in 2016 have new due dates that will impact nearly all filers, either because the due falls on the weekend and the observation of Emancipation Day in DC or because of changes related to legislation Congress passed at the end of 2015.
Several bills passed by Congress late in 2015 contained provisions that affect items that are not related to the main bill. The “Surface Transportation and Veteran’s Health Care Choice Improvement Act of 2015” is one such bill. Primarily passed as a stopgap extension of the Highway Trust Fund, this bill also included tax provisions that impact the due dates of a number of returns and other required filings.
The due date changes with the most impact will likely be those changes for Partnership tax returns (Form 1065) and C Corporation tax returns (Form 1120). Essentially the due dates have swapped, with Partnership returns due March 15th and C Corporation returns due April 18th. The significant reorganization of due dates is intended to assist individuals involved in pass-through entities in receiving information required to prepare their individual returns in a more timely fashion.
IRS Warns of 2017 Tax Refund Delays
It’s better to owe taxes in April than to get a refund, and for the 2017 tax filing season, it’s especially important. The Internal Revenue Service today issued a warning of 2017 tax refund delays for certain taxpayers, urging folks to adjust their tax withholding now. We’re talking about your 2016 taxes that are due April 15, 2017. There’s good reason to pay attention—at least there’s something you can do about it.
So what’s the solution if you don’t like the idea of a tax refund delay? Adjust your tax withholding for the rest of 2016, so you get more take-home money now and a smaller refund.
You can read about the IRS notice by following this link.
(New) Business Structures.
What are the different business structures?
People often ask what the differences are between the various business structures and what model they should go with. Let’s break each of them down:
Sole Proprietors: A sole proprietor is someone who owns an unincorporated business by himself or herself. However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation.
Partnerships: A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.
Corporations (C): In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation’s capital stock. A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. A corporation can also take special deductions. For federal income tax purposes, a C corporation is recognized as a separate taxpaying entity. A corporation conducts business, realizes net income or loss, pays taxes and distributes profits to shareholders.
Corporations (S): S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.
Limited Liability Companies (LLC): A Limited Liability Company (LLC) is a business structure allowed by state statute. Each state may use different regulations, and you should check with your state if you are interested in starting a Limited Liability Company. Owners of an LLC are called members. Most states do not restrict ownership, and so members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single-member” LLCs, those having only one owner.
Check with us if you need assistance determining the most appropriate structure for your new business.
2016 Standard Mileage Rates for Business
The Internal Revenue Service announced the revised mileage rates for 2016.
Due to the decreasing oil prices this past year, the IRS felt that a reduction in the mileage rates to calculate the deductible cost of operating a vehicle for business was in order. The standard rates for 2016 are now $0.54 per mile, compared the $0.575 during 2015. This translates into a 6% reduction over the current allowable mileage rates. To read the entire publication, please click here.
NC Sales Tax Provision Amendment
Sales Tax to be collected on Repair, Maintenance and Installation Services.
The North Carolina Department of Revenue amended NC General Stat § 105-164.3(33d) going into effect 03.16.2016. This Statue details the provision that companies providing Repair, Maintenance and/or Installation Services are to collect sales tax on the gross receipts of services where the services are to keep or attempt to keep tangible personal property in working condition.
For more details on this, you can go here or contact us.
New Accounting Software offering
Xero: Beautiful Accounting Software
We are very excited being able to offer our clients a new option in accounting software; Xero. Over 500,000 subscribers choose Xero and you can find out here why. Contact our office for more information! Xero Certified!
Affordable Care Act Tax Provisions for Individuals and Families
Reconcile Advance Credit Payments of the Premium Tax Credit
You must file a tax return to reconcile any advance credit payments you received in 2014 and to maintain your eligibility for future premium assistance. If you do not file, you will not be eligible for advance payments of the premium tax credit in 2016.
The IRS is currently sending Letters 5591, 5591A, and 5596 to taxpayers who received 2014 advance payments, but have not yet filed their tax return, to remind them of the importance of filing their 2014 federal tax return along with Form 8962, Premium Tax Credit. The letter encourages taxpayers to file within 30 days of the date of the letter to substantially increase their chances of avoiding a gap in receiving assistance with paying Marketplace health insurance coverage in 2016. For more information, see Understanding Your Letter 5591, 5591A, and 5596.
The Affordable Care Act includes the individual shared responsibility provision and the premium tax credit that may affect your tax return. The individual shared responsibility provision requires you, your spouse, and your dependents to have qualifying health insurance for the entire year, report a health coverage exemption, or make a payment when you file. In addition, you may be eligible for the premium tax credit if you purchased health coverage through the Health Insurance Marketplace.
How to Avoid a Sales Tax Audit
One word strikes more confusion and alarm in the minds of small business owners than most others: taxes. With the growth of e-commerce and the related regulations, sales taxes are especially vexing for today’s small business owner.
Tracking your sales tax obligations manually is a gamble. Not fully complying with changing regulations in your city, county, state and beyond could leave you open to scrutiny from auditors. How can you avoid a sales tax audit—or at least minimize the headache should you receive an audit notice?
Here are a few pointers:
Equip yourself: Make sure your company has the software necessary to compile and calculate accurate data on your sales tax obligations. Tracking this data by hand in a spreadsheet is not a fool-proof substitute for a comprehensive, automated tool.
Digitize documents: Automated sales tax record-keeping makes it easy for your company to provide documentation of compliance. Well-kept electronic records, especially when it comes to exemption certificates, will help you stay on top of your obligations. Scan relevant documents and maintain them in automated sales tax software.
Stay on top of changes: As a business owner, you’re responsible for keeping track of due dates, rate changes and boundary shifts in the jurisdictions in which you sell goods or services. This becomes difficult if you’re making sales in multiple states. In general, you are responsible for collecting sales tax in states where you have a substantial physical presence. However, the definition of this “nexus” varies between states, and can change if you sell through affiliates, at trade shows, or even have employees in other states. Be smart: There’s no shame in automating or outsourcing this taxing task.
By keeping your company in compliance, you minimize the risk of a damaging audit. Save your business time and money: Stay proactive in your sales tax management!
September 29, 2015 Manta (Thank you Manta for that helpful information!)