Let’s Talk About Business Taxes for the 2018 tax year

C CORPORATION INCOME
TAX

  • § Taxable income of a C corporation: taxed 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.

SELF-EMPLOYMENT 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).

FEDERAL UNEMPLOYMENT
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.

ESTIMATED TAX

  • § 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 15thday of the fourth,
    sixth, ninth, and 12thmonths 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 CORPORATION

  • § 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.

FILING DEADLINES

  • § From 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)); 15thday 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); Sep. 15 for corporations
    with a June 30 fiscal year end (extension to April 15, 2020, available).
  • § Form 1065, U.S. Return of Partnership Income: 15thday of the third month following the close of 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: 15thday 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 cent 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 corporation (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.
  • § Any disallowed business interest deduction can
    be carried forward indefinitely (with certain restriction for partnerships).

NET OPERATING LOSSES

  • § Limited to 80% of taxable income.
  • § Can be carried forward indefinitely; cannot be
    carried back (except for farming business).

Business auto depreciation limits

For vehicles placed in service during 2018

Year
1

Year
2

Year
3

Year
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

LIKE-KIND EXCHANGE

  • § 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

DIVIDENDS-RECEIVED
DEDUCTION

  • § 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.

S CORPORATION

  • § Built-in gains tax: Corporate tax rate times net
    recognized built-in gain (imposed during the recognition period on S
    corporation that were formerly C corporation).
  • § 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.

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