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States Seeking to Fill their Coffers Quickly Adopt New Economic Nexus Laws by Michael Hirsch, JD, LLM

Posted on November 08, 2018 by Michael Hirsch,

Several U.S. states have officially adopted new economic nexus laws in response to the Supreme Court’s June ruling in South Dakota v. Wayfair, which eliminated the physical presence test for determining when states could impose sales tax collection obligations on remote and online sellers located outside their borders.

Effective Oct. 1, 2018, the following 10 states now require online and out-of-state retailers to collect and remit sales tax when their sales of goods or services into those jurisdictions exceed specific sales volume thresholds: Alabama, Illinois, Indiana, Kentucky, Maryland, Michigan, Minnesota, North Dakota, Washington and Wisconsin. Other states will roll out their own post-Wayfair economic nexus sales tax laws over the next 12 months if they have not done so already.

All businesses that conduct sales across state lines, including, but not limited to, online retailers, should review their annual sales histories on a state-by-state basis to determine if the dollar volume and number of transactions they complete in each state exceed the new economic nexus thresholds. Complicating this process is the fact that the annual sales caps that would require sellers to collect tax vary from one state to the next. For example, the lowest transaction threshold is $10,000 per year for out-of-state retail sales into Minnesota, whereas the highest gross receipts/ transaction volume threshold of $100,000 / 200 separate transactions is in effect in states including Illinois, Indiana and South Dakota.

Should retailers identify that they do in fact have sales tax collection obligations in a number of states, they must first register separately with the Department of Revenue in each state and receive sales tax licenses in order to collect, file and pay sales tax in those jurisdictions. It is recommended that taxpayers work with their advisors and accountants to guide them through this potentially complex and time-consuming process. As more states adopt the new sales thresholds for establishing economic nexus, businesses that can get a head start will be better prepared to meet the challenge of compliance in the long run.

About the Author: Michael Hirsch, JD, LLM, is a senior manager of Tax Services with Berkowitz Pollack Brant’s state and local tax (SALT) practice, where he helps individual and business to meet their corporate, state and local tax reporting requirements. He can be reached at the CPA firm’s Fort Lauderdale, Fla., office at (954) 712-7000, or via email at info@bpbcpa.com.

Information contained in this article is subject to change based on further interpretation of tax laws and subsequent guidance issued by the Internal Revenue Service.

 

IRS Updates Federal Income Tax Return Form for 2018 by Angie Adames, CPA

Posted on November 06, 2018 by Angie Adames

The IRS recently released a revised draft of Form 1040 that it expects taxpayers to use in 2019 to file their federal income tax returns for the 2018 tax year. The most significant change taxpayers will notice is the smaller size of the form. However, despite the new postcard-size 1040, taxpayers will need to attach to their annual filings six new schedules in addition to the existing Schedule A for itemized deductions, Schedule B for interest and dividends, Schedule C for business profit and loss, Schedule D for capital gains and losses and other forms. These new schedules, many of which, require additional worksheets for taxpayers to attach to their returns, include the following:

Schedule 1 – Additional Income and Adjustments to Income

Schedule 2 – Tax

Schedule 3 – Non-Refundable Credits

Schedule 4 – Other Taxes

Schedule 5 – Other Payments and Refundable Credits

Schedule 6 – Foreign Address and Third-Party Designee

It is true that certain provisions of the Tax Cuts and Jobs Act will make it easier for millions of taxpayers to figure out their income taxes and reduce the amount of income subject to tax by simply taking advantage of the expanded standard deduction of $12,000 for individuals or $24,000 for married taxpayers filing jointly in 2018. This will save many taxpayers a considerable amount of time that they previously spent itemizing deductions, many of which disappear under the new tax law or have reduced benefits.

As a result of the tax-return revamp, taxpayers may spend less time completing their 1040s. However, the time they save, likely, will instead be spent completing the additional forms. In light of tax reform and the changes to tax reporting and filing requirements, taxpayers should engage the counsel of experienced accountants and tax advisors to ensure they remain tax compliant and maximize the opportunities the new law provides.

About the Author: Angie Adames, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant, where she provides tax and consulting services to real estate companies, manufacturers and closely held business. She can be reached at the firm’s Miami office at (305) 379-7000 or via email at info@bpbcpa.com.

 

Information contained in this article is subject to change based on further interpretation of tax laws and subsequent guidance issued by the Internal Revenue Service.

 

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