Business tax quick guide: tax year 2018.
C CORPORATION INCOME TAX
* Taxable income of a C corporation: Taxed at a flat rate of 21%.
QUALIFIED PERSONAL SERVICE CORPORATION TAX
* Taxable income of a qualified personal service corporation is no longer subject to tax at a flat rate of 35%, but is taxed at the regular corporate tax rate of 21%.
ACCUMULATED EARNINGS TAX
* 20% of accumulated taxable income (in addition to regular corporate income tax).
PERSONAL HOLDING COMPANY TAX
* 20% penalty on undistributed personal holding company income.
* No foreign tax credit allowed against personal holding company tax.
* Tax rate: 15.3% (12.4% OASDI tax plus 2.9% Medicare tax).
* Surtax: 0.9% Medicare surtax on self-employment income in excess of $200,000 (single), $250,000 (married filing jointly), or $125,000 (married filing separately).
* Wage base: $128,400 of self-employment income for OASDI (maximum OASDI tax of $15,921.60; no ceiling on Medicare tax).
SOCIAL SECURITY TAX
* Tax rate: 7.65%, imposed on both employer and employee (6.2% OASDI tax plus 1.45% Medicare tax).
* Wage base: $128,400 of wages for OASDI (maximum OASDI tax of $15,921.60; no ceiling on Medicare tax).
* Tax rate: Employers pay 6% on first $7,000 of wages paid to each employee.
* Credit: Maximum amount of 5.4% for contributions paid to state unemployment insurance funds.
* Corporations owing $500 or more in income tax for the tax year must make estimated tax payments equaling the lesser of 100% of the prior-year or current-year tax liability. Large corporations must base the last three payments on the current-year tax liability.
* Due on the 15th day of the fourth, sixth, ninth, and 12th months of the corporation's tax year (April 15, June 15, Sept. 15, and Dec. 15 for calendar-year corporations).
CORPORATE ALTERNATIVE MINIMUM TAX (AMT)
* Starting in 2018, the AMT no longer applies to corporations.
NONRESIDENT AND FOREIGN CORPORATIONS
* Taxed on U.S.-source investment income at 30% (or lower under treaty).
* Net income effectively connected with a U.S. trade or business taxed at regular U.S. tax rates.
* Accumulated earnings tax of 20% of accumulated taxable income.
* Branch profits tax of 30% on dividend equivalent amount.
* 4% tax on U.S.-source gross transportation income that is not effectively connected with a U.S. trade or business.
* Form 1120, U.S. Corporation Income Tax Return: April 15 for calendar-year corporations (extension to Oct. 15 available (Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns)); 15th day of the fourth month following the close of the corporation's tax year for fiscal years ending other than June 30 (six-month extension available); Sept. 15 for corporations with a June 30 fiscal year end (extension to April 15,2020, available).
* Form 1065, U.S. Return of Partnership Income: 15th day of the third month following the close of the partnership's tax year (six-month extension available (Form 7004)).
* Form 1065, Schedule K-1, Partner's Share of Income, Deductions, Credits, etc.: Due to partners on or before the date the partnership files Form 1065.
* Form 1120S, U.S. Income Tax Return for an S Corporation: 15th day of the third month following the close of the corporation's tax year (six-month extension available (Form 7004)).
* Form 1120S, Schedule K-1, Shareholder's Share of Income, Deductions, Credits, etc.: Due to shareholders on or before the date the S corporation files Form 1120S.
STANDARD MILEAGE RATE
* For business use of auto: 54.5 cents per mile (note that unreimbursed employee business expenses are no longer deductible as a miscellaneous itemized deduction).
* Deemed depreciation: 25 cents per mile.
GLOBAL INTANGIBLE LOW-TAXED INCOME
* U.S. persons owning 10% or more of the stock (by vote or value) of a controlled foreign corporation must include in currently taxable income "global intangible low-taxed income" (GILTI), effective with the CFC's first tax year beginning after Dec. 31,2017, regardless of whether any amount is distributed to the shareholder.
* Corporations may claim a deduction of 50% of GILTI.
* U.S. persons owning 10% or more of the stock (by vote or value) of a "deferred foreign income corporation" must increase the foreign corporation's Subpart F income for the last tax year of the foreign corporation that begins prior to Jan. 1,2018, by an amount equal to its "accumulated post-1986 deferred foreign income." Taxpayers generally may elect to pay the tax resulting from the inclusion in eight annual installments.
FOREIGN DERIVED INTANGIBLE INCOME
* Domestic corporations (other than regulated investment companies and real estate investment trusts) can deduct 37.5% of the corporation's "foreign derived intangible income."
BUSINESS INTEREST DEDUCTIONS
* Business interest deductions are limited to the sum of (1) business interest income; (2) 30% of the taxpayer's adjusted taxable income for the tax year; and (3) the taxpayer's floor plan financing interest for the tax year.
* Any disallowed business interest deduction can be carried forward indefinitely (with certain restrictions for partnerships).
NET OPERATING LOSSES
* Limited to 80% of taxable income.
* Can be carried forward indefinitely; cannot be carried back (except for farming businesses).
* Limited to real property not primarily held for sale.
TRAVEL PER-DIEM RATES
* High-low method: $284 per day ($68 for meals) through Sept. 30, $287 per day ($71 for meals) after Sept. 30, for high-cost localities; $191 per day ($57 for meals) through Sept. 30, $ 195 per day ($60 for meals) after Sept. 30, for other localities in the continental United States (CONUS).
* Transportation industry meals and incidentals: $63 per day through Sept. 30, $66 per day after Sept. 30 (CONUS); $68 per day through Sept. 30, $71 per day after Sept. 30 (outside CONUS).
SEC. 179 AND BONUS DEPRECIATION
* Sec. 179 expense deduction: $1,000,000 with $2,500,000 threshold limit.
* Bonus depreciation: 100% of the cost of eligible property placed in service in 2018.
* From a domestic corporation: 50%.
* From a corporation owned 20% or more: 65%.
* From a member of an affiliated group filing a separate return: 100%.
* From a qualified 10%-owned foreign corporation: 50% of the U.S.-source portion; 100% of the foreign-source portion.
* Built-in gains tax: Corporate tax rate times net recognized built-in gain (imposed during the recognition period on S corporations that were formerly C corporations).
* Excess net passive income tax: Imposed if an S corporation has accumulated earnings and profits at the end of the tax year and its passive investment income exceeds 25% of the corporation's gross receipts. Corporate tax rate times excess net passive income.
* LIFO recapture amount: Excess (if any) of the inventory amount under FIFO over the inventory amount under LIFO at the close of the S corporation's last C corporation tax year must be included in the corporation's gross income.
Business auto depreciation limits For vehicles placed in service during 2018. Year 1 Year 2 Year 3 Years 4-6 Passenger automobiles $10,000 $16,000 $9,600 $5,760 Passenger automobiles with bonus depreciation $18,000* $16,000 $9,600 $5,760 Trucks and vans $10,000 $16,000 $9,600 $5,760 Trucks and vans with bonus depreciation $18,000* $16,000 $9,600 $5,760 * $16,400 if acquired before Sept. 28, 2017.
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|Publication:||Journal of Accountancy|
|Date:||Dec 1, 2018|
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