With the Tax Cuts and Jobs Act a new tax deduction for pass-through business income was created (LLC, S Corp, Partnership and Sole Proprietorship income). The deduction allows for a 20% deduction of qualified business income. There are a few limitations, but in general this means that 20% of business net income can be a deduction on the owner’s personal tax return. *
Before the Tax Cut and Jobs Act a C Corporation had a range of tax rates between 15% and 35%. After the Tax Cuts and Jobs Act the corporate rate is now a flat 21%. For most large corporations this is a win with a lower tax bracket, but if you were operating as a C Corporation with net profits less than $50,000 this is an increase of 6%.
For this reason we are seeing:
An increase in the formation of LLCs (Liability protection; lower state fees overall; less paperwork)
An increase in new Corporations electing S Corp status
Existing Corporations making elections from C Corp to S Corp status with the IRS
Sole Proprietorships are not recommended in an asset protection strategy. With a Sole Proprietorship there is no protection for personal or business assets. A Sole Proprietorship has no Charging Order protection or “corporate veil protection”.
Nevada currently is the only state that has a Charging Order provision for closely held corporations.
* PLEASE NOTE: There are a few limitations to the Qualified Business Income deduction such as W-2 wage limitation; Service business limitation and higher income level limitation. Please seek advice from YOUR tax professional for your specific situation/goals.
Some information contributed by Elite Bookkeeping & Tax Services.
Per notification from the Nevada Department of Taxation:
The filing requirement for the Nevada Commerce Tax has been changed. If the Nevada gross revenue of your business from July 1, 2018 through June 30, 2019 was $4,000,000 (FOUR MILLION) or less, your business is no longer required to file a Commerce Tax return and your Commerce Tax Account will be automatically closed.
If the Nevada gross revenue for your business form July 1, 2019 through June 30, 2019 was over $4,000,000, your business is still required to file a Commerce Tax return on or before August 14, 2019.
In the event that your Nevada gross revenue exceeds the $4,000,000 threshold in a future year, it is your responsibility to file a return for the year. Failure to do so may result in the assessment of penalty and interest.
If you have already filed the return, please disregard the informational message.
For more information about Commerce Tax, including the filing requirements, please visit the State of Nevada Department of Taxation’s website: https://tax.nv.gov/WelcometoCOM/
The following is a summary of important tax developments that occurred in October, November and December of 2018 that may affect you, your family your investments, and your livelihood. Please call your tax adviser form more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.
Trading one product or service for another has become increasingly popular in recent years. If you barter, you should know that the value of products or services from bartering is taxable income. This is true even if you are not in business.
Here are some things you should know about bartering per the IRS:
Bartering income. Both parties must report the fair market value of the product or service they get as income on their tax return.
Barter exchanges. A barter exchange is an organized marketplace where members barter products or services. Some operate out of an office and others over the internet. All barter exchanges are required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions. Exchanges must give a copy of the form to its members who barter each year. They must also file a copy with the IRS.
Trade Dollars. Exchanges trade barter or trade dollars as their unit of exchange in most cases. Barter and trade dollars are the same as U.S. currency for tax purposes. If you earn trade and barter dollars, you must report the amount you earn on your tax return.
Tax implications. Bartering is taxable in the year it occurs. The tax rules may vary based on the type of bartering that takes place. Barterers may owe income taxes, self-employment taxes, employment taxes or excise taxes on their bartering income.
Reporting rules. How you report bartering on a tax return varies. If you are in a trade or business, you normally report it on Form 1040, Schedule C, Profit or Loss from Business.
For questions about bookkeeping or taxes contact Elite Bookkeeping & Services directly at (800) 416-3820. Visit their web site at https://www.elitebookkeeping.biz
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At American Corporate Enterprises, Inc., we have the expertise to handle all your incorporation needs! Contact us