TaxEsqBlog -by Ronald J. Cappuccio, J.D., LL.M.(Tax)

Choosing the best business entity structure post-TCJA For tax years beginning in 2018 and beyond, the Tax Cuts and Jobs Act (TCJA) created a flat 21% federal income tax rate for C corporations. Under prior law, C corporations were taxed at rates as high as 35%. The TCJA also reduced individual income tax rates, which apply to sole proprietorships and pass-through entities, including partnerships, S corporations, and, typically, limited liability companies (LLCs). The top rate, however, dropped only slightly, from 39.6% to 37%. On the surface, that may make choosing C corporation structure seem like a no-brainer. But there are many other considerations involved. Conventional wisdom Under prior tax law, conventional wisdom was that most small businesses should be set up as sole proprietorships or pass-through entities to avoid the double taxation of C corporations: A C corporation pays entity-level income tax and then shareholders pay tax on dividends — and on capital

Supreme Court issues an Opinion Allowing States to Force online US Retailers to Collect Sales Tax What a disaster for US online businesses! In SD v. Wayfair, the US Supreme Court slapped online retailers the burden of collecting Sales Tax on sales out-of-state. This means small businesses must comply with thousands of state and local sales tax rates and the different laws of each jurisdiction. This was backed by the big online companies such as Amazon, Apple, Walmart, as well as the big storefront retailers. Compliance will be next to impossible with expensive services and will drive small US online companies out of business, jacking-up prices for consumers. The large online companies and non-US companies will have a big advantage.  Starting a new online business means many people will choose a foreign entity and complicated ownership structures to remain competitive. Poor decision! The full case: https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf

2018 Q3 tax calendar: Key deadlines for businesses and other employers Here are some of the key tax-related deadlines affecting businesses and other employers during the second quarter of 2018. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements. July 31 Report income tax withholding and FICA taxes for second quarter 2018 (Form 941), and pay any tax due. (See the exception below, under “August 10.”) File a 2017 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or request an extension. August 10 Report income tax withholding and FICA taxes for second quarter 2018 (Form 941), if you deposited on time and in full all of the associated taxes due. September 17 If a calendar-year C corporation, pay the third installment of 2018 estimated income taxes. If a calendar-year S corporation or partnership th

Tax Law changes that may affect your business’s 401(k) plan When you think about recent tax law changes and your business, you’re probably thinking about the new 20% pass-through deduction for qualified business income or the enhancements to depreciation-related breaks. Or you may be contemplating the reduction or elimination of certain business expense deductions. But there are also a couple of recent tax law changes that you need to be aware of if your business sponsors a 401(k) plan. 1. Plan loan repayment extension The Tax Cuts and Jobs Act (TCJA) gives a break to 401(k) plan participants with outstanding loan balances when they leave their employers. While plan sponsors aren’t required to allow loans, many do. Before 2018, if an employee with an outstanding plan loan left the company sponsoring the plan, he or she would have to repay the loan (or contribute the outstanding balance to an IRA or his or her new employer’s plan) within 60 days to avoid having the loan bal

Putting your child on your business’s payroll for the summer may make more tax sense than ever If you own a business and have a child in high school or college, hiring him or her for the summer can provide a multitude of benefits, including tax savings. And hiring your child may make more sense than ever due to changes under the Tax Cuts and Jobs Act (TCJA). How it works By shifting some of your business earnings to a child as wages for services performed, you can turn some of your high-taxed income into tax-free or low-taxed income. For your business to deduct the wages as a business expense, the work done must be legitimate and the child’s wages must be reasonable. Here’s an example: A sole proprietor is in the 37% tax bracket. He hires his 20-year-old daughter, who’s majoring in marketing, to work as a marketing coordinator full-time during the summer. She earns $12,000 and doesn’t have any other earnings. The father saves $4,440 (37% of $12,000) in income taxes at

What businesses need to know about the tax treatment of bitcoin and other virtual currencies Over the last several years, virtual currency has become increasingly popular. Bitcoin is the most widely recognized form of virtual currency, also commonly referred to as digital, electronic or crypto currency. While most smaller businesses aren’t yet accepting bitcoin or other virtual currency payments from their customers, some larger businesses are. And the trend may trickle down to smaller businesses. Businesses also can pay employees or independent contractors with virtual currency. But what are the tax consequences of these transactions? Bitcoin 101 Bitcoin has an equivalent value in real currency and can be digitally traded between users. It also can be purchased with real currencies or exchanged for real currencies. Bitcoin is most commonly obtained through virtual currency ATMs or online exchanges. Goods or services can be paid for using “bitcoin wallet” software. When a

The Australian government is attacking its own citizens with a new sales tax designed to harm international sales. The Australian government has the equivalent of a sales tax, known as the Goods and Services Tax, on international online sales of less than $1000. The purpose of this tax is to prevent Australians from purchasing a wider range of goods at cheaper prices from online services such as Amazon. As part of its protectionist policy to boost local retailers, Australia is imposing this unwieldy tariff. As a result, Amazon had no choice but to block sales to Australia from its main site. Australians will have less choice, and pay more for it, to subsidize local business. This is another way of hurting the consumer and limiting free choice. Here is a good article from Thompson-Reuters on the issue: Amazon geoblocks Australia from US site as tax change kicks in By Stephen Coates and Byron Kaye SYDNEY (Reuters) - Amazon.com Inc said on Thursday it will force Australians t