Does your company do business across state lines? If so, it’s a good idea to reexamine your sales tax obligations.
In its 2018 decision in South Dakota v. Wayfair, the U.S. Supreme Court upheld South Dakota’s “economic nexus” statute, expanding the power of states to collect sales tax from remote sellers.
Today, nearly every state with a sales tax has enacted a similar law, which makes it prudent for companies doing business across state lines to review their tax obligations.
South Dakota’s economic nexus statute was upheld, but what’s nexus? A state is constitutionally prohibited from taxing business activities unless those activities have a substantial “nexus,” or connection, with the state.
Before Wayfair, simply selling to customers in a state wasn’t enough to establish nexus. The business also had to have a physical presence in the state, such as offices, retail stores, manufacturing or distribution facilities, or sales reps.
In Wayfair, the Supreme Court ruled that a business could establish nexus through economic or virtual contacts with a state, even if it didn’t have a physical presence.
The Court didn’t create a bright-line test for determining whether contacts are “substantial,” but found that the thresholds established by South Dakota’s law are sufficient.
Out-of-state businesses must collect and remit South Dakota sales taxes if, in the current or previous calendar year, they have
The vast majority of states now have economic nexus laws, although the specifics vary. Many states adopted the same sales and transaction thresholds accepted in Wayfair, but a number of states apply different thresholds.
And some chose not to impose transaction thresholds, which many view as unfair to smaller sellers (an example of a threshold might be 200 sales of $5 each would create nexus).
In Illinois, Public Acts 101-0009 and 101-0604 “expanded nexus to include marketplace facilitators that meet certain thresholds effective Jan. 1, 2020.”
According to state officials, marketplace facilitators who meet state nexus thresholds are required to register to collect and remit Illinois Use Tax for sales made through their marketplace.
Marketplace sellers selling through the marketplace are not responsible for collecting and remitting Illinois Use Tax on these sales.
If your business makes online, telephone or mail-order sales in states where it lacks a physical presence, it’s critical to find out whether those states have economic nexus laws and determine whether your activities are sufficient to trigger them.
If you have nexus with a state, you’ll need to register with the state and collect state and applicable local taxes on your taxable sales there. Even if some or all of your sales are tax-exempt, you’ll need to secure exemption certifications for each jurisdiction where you do business.
Alternatively, you might decide to reduce or eliminate your activities in a state if the benefits don’t justify the compliance costs.
If you make sales through a “marketplace facilitator,” such as Amazon or Ebay, be aware that an increasing number of states have passed laws that require such providers to collect taxes on sales they facilitate for vendors using their platforms.
If you need assistance in setting up processes to collect sales tax or you have questions about your responsibilities, call David Mills, CPA, LLC. Our experts can help answer all your small business tax questions.
Contact David Mills, CPA LLC’s Morton or East Peoria offices today.
Video conference options mean meeting with the professionals at David Mills CPA, LLC is as easy as looking at your phone.
We utilize the Zoom software to host video conference meetings with clients. It’s an easy-to-use program, where no account or password is created.
Because most laptops, tablets and cell phones have built-in cameras, there’s no additional hardware to purchase.
We understand individuals and business owners lead busy lives. Finding time to come to either our Morton or East Peoria location can be difficult.
With video meetings, you can have a meeting wherever you are. We will send you a link to directly connect to your tax preparer. It’s the ideal solution for those out of town or with busy schedules.
Contact David Mills CPA, LLC today to learn more about video conferencing or to set up an appointment.
Don’t let the holiday rush keep you from taking some important steps to reduce your 2019 tax liability.
You still have time to execute a few strategies, including:
Thinking about purchasing new or used heavy vehicles, heavy equipment, machinery or office equipment in the new year? Buy it and place it in service by December 31, and you can deduct 100% of the cost as bonus depreciation.
Although “qualified improvement property” (QIP) — generally, interior improvements to nonresidential real property — doesn’t qualify for bonus depreciation, it’s eligible for Sec. 179 immediate expensing. And QIP now includes roofs, HVAC, fire protection systems, alarm systems and security systems placed in service after the building was placed in service.
You can deduct as much as $1.02 million for QIP and other qualified assets placed in service before January 1, not to exceed your amount of taxable income from business activity.
Once you place in service more than $2.55 million in qualifying property, the Sec. 179 deduction begins phasing out on a dollar-for-dollar basis. Additional limitations may apply.
If you don’t already have a retirement plan, you still have time to establish a new plan, such as a SEP IRA, 401(k) or profit-sharing plans (the deadline for setting up a SIMPLE IRA to make contributions for 2019 tax purposes was October 1, unless your business started after that date).
If your circumstances, such as your number of employees, have changed significantly, you also should consider starting a new plan before January 1.
Although retirement plans generally must be started before year-end, you usually can deduct any contributions you make for yourself and your employees until the due date of your tax return. You also might qualify for a tax credit to offset the costs of starting a plan.
If your business operates on a cash basis, you can significantly affect your amount of taxable income by accelerating your deductions into 2019 and deferring income into 2020 (assuming you expect to be taxed at the same or a lower rate next year).
For example, you could put recurring expenses normally paid early in the year on your credit card before January 1 — that way, you can claim the deduction for 2019 even though you don’t pay the credit card bill until 2020.
In certain circumstances, you also can prepay some expenses, such as rent or insurance and claim them in 2019.
As for income, wait until close to year-end to send out invoices to customers with reliable payment histories. Accrual-basis businesses can take a similar approach, holding off on the delivery of goods and services until next year.
Proceed with caution
Bear in mind that some of these tactics could adversely impact other factors affecting your tax liability, such as the qualified business income deduction. For more information about small business tax liability or other business advisement services, contact the experts at David Mills CPA, LLC.
© 2019
While you were celebrating the holidays, you may not have noticed that Congress passed a law with a grab bag of provisions that provide tax relief to businesses and employers.
The Further Consolidated Appropriations Act, 2020 was signed into law on December 20, 2019. It makes many changes to the tax code, including an extension (generally through 2020) of more than 30 provisions that were set to expire or already expired.
Two other laws were passed as part of the law (The Taxpayer Certainty and Disaster Tax Relief Act of 2019 and the Setting Every Community Up for Retirement Enhancement Act – SECURE).
Here are five highlights:
Under current law, employers generally can exclude part-time employees (those who work less than 1,000 hours per year) when providing a 401(k) plan to their employees.
A qualified retirement plan can generally delay participation in the plan based on an employee attaining a certain age or completing a certain number of years of service but not beyond the later of completion of one year of service (that is, a 12-month period with at least 1,000 hours of service) or reaching age 21.
Qualified retirement plans are subject to various other requirements involving who can participate.
For plan years beginning after Dec. 31, 2020, the new law requires a 401(k) plan to allow an employee to make elective deferrals if the employee has worked with the employer for at least 500 hours per year for at least three consecutive years and has met the age-21 requirement by the end of the three-consecutive-year period.
There are a number of other rules involved that will determine whether a part-time employee qualifies to participate in a 401(k) plan.
Tax law provides an employer credit for paid family and medical leave. It permits eligible employers to claim an elective general business credit based on eligible wages paid to qualifying employees with respect to family and medical leave.
The credit is equal to 12.5% of eligible wages if the rate of payment is 50% of such wages and is increased by 0.25 percentage points (but not above 25%) for each percentage point that the rate of payment exceeds 50%. The maximum leave amount that can be taken into account for a qualifying employee is 12 weeks per year.
The credit was set to expire on Dec. 31, 2019. The new law extends it through 2020.
Under the WOTC, an elective general business credit is provided to employers hiring individuals who are members of one or more of 10 targeted groups. The new law extends this credit through 2020.
The Affordable Care Act (ACA) contained a provision that required that the sale of a taxable medical device by the manufacturer, producer or importer is subject to a tax equal to 2.3% of the price for which it is sold.
This medical device excise tax originally applied to sales of taxable medical devices after Dec. 31, 2012.
The new law repeals the excise tax for sales occurring after December 31, 2019.
The ACA also added a nondeductible excise tax on insurers when the aggregate value of employer-sponsored health insurance coverage for an employee, former employee, surviving spouse or other primary insured individual exceeded a threshold amount.
This tax is commonly referred to as the tax on “Cadillac” plans.The new law repeals the Cadillac tax for tax years beginning after December 31, 2019.
These are only some of the provisions of the new law. We will be covering them in the coming weeks. If you have questions about your situation, don’t hesitate to contact us at David Mills CPA, LLC.
© 2019
Are you a QuickBooks user who just needs a little help? Does your business bookkeeper need a resource for her QuickBook questions? The QuickBooks-certified ProAdvisors at David Mills, CPA, LLC, are your central Illinois QuickBooks help experts.
No matter what your needs are – from beginner to advanced QuickBooks – we’re here to help.
At David Mills, CPA, LLC, we offer one-on-one in-person training. We can also answer your QuickBook questions over the phone.
If you require us to come to your business to provide on-site Quickbooks support, we’re more than willing to accommodate your needs.
We also can remotely login to your computer and talk you through an issue step-by-step.
Searching for answers to your QuickBook questions online can be time-consuming and frustrating. Finding the answer to your specific question or situation may be nearly impossible.
To become a QuickBooks ProAdvisor, our staff members had to study and pass an intensive exam. Earning the certification ensures they know the QuickBooks program and can answer any questions you may have.
We understand small-business bookkeepers often find themselves in a department of one. Having a resource they can reach out to for help is ideal.
If you need QuickBooks assistance for your business, contact us to see how we can help. David Mills, CPA, LLC, has offices in both Morton and East Peoria.
Is your desk a mess? Piles of papers and bill stacked precariously, Post-it notes covering every available surface and scraps of papers with mysterious names, numbers, and figures? Perhaps you know you need QuickBooks, but where to start?
The professional staff at David Mills, CPA, LLC are QuickBooks-certified ProAdvisor experts. Their QuickBooks training is geared toward helping small-business owners and staff use and utilize QuickBooks.
The key to business success is organization. Not every business owner is an accounting expert, but the QuickBooks software is designed to keep everything organized and in one place.
QuickBooks offers desktop and cloud-based online versions, and the QuickBooks ProAdvisors at David Mills, CPA, LLC, know and understand both and can make sure you have the correct program for your business.
Using QuickBooks, businesses can manage and pay bills, accept business payments, track employee time, and organize payroll functions.
Make 2020 the year you get your business finances in order. Schedule your QuickBooks training with David Mills, CPA, LLC.
David Mills CPA provides one-on-one QuickBooks training or training with multiple members of your staff. We travel to your location and can help install the software. Our in-person QuickBooks training is geared toward you.
Our ProAdvisors will help design and set up the chart of accounts as well as set up payroll, receivables, payables, inventory and other features needed by your business.
We use your actual data, not generic information, so you can be sure the QuickBooks training your receive appropriately fits your business.
David Mills’ QuickBook ProAdvisors can answer your specific questions and needs.
Give your business a clear vision for 2020. Start the new year with QuickBooks set up and training from David Mills, CPA, LLC.
Contact us today for more information. David Mills, CPA, LLC, has offices in both Morton and East Peoria.
Starting a new business is an exciting venture, but with so many business structures, deciding the legal structure of your company can seem overwhelming. Will it be a sole proprietorship? A corporation? Is it an LLC?
Trying to figure out the various business legal structures can seem complex. However, the experts at David Mills, CPA, LLC have the experience and knowledge to provide expert advice and guidance.
The Internal Revenue Service (IRS) says there are five primary types of business structures. Which one you chose will affect which income tax return form you have to file.
The five most common business legal structures are:
In a sole proprietorship, the individual who owns the business is an unincorporated business by themselves.
This type of business structure is sometimes known as the sole trader, individual entrepreneurship or proprietorship. There is no legal distinction between the owner and the business entity.
According to the U.S. Small Business Administration, a sole proprietorship is “the simplest and most common structure chosen to start a business.”
A partnership is when two or more individuals join together to create a business. According to the IRS, in a partnership “each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.”
Within a partnership, there are two common types: limited partnerships (LP) and limited liability partnerships (LLP).
The U.S. Small Business Administration notes a limited partnership has one partner with unlimited liability and all others with limited liability.
In a limited partnership, the partners with limited liability tend to have limited control over the company. Profits are passed through to personal tax returns, and the general partner — the partner without limited liability — must also pay self-employment taxes.
A limited liability partnership (LLP) gives limited liability to every owner. This structure protects each partner from debts against the partnership.
When a corporation is formed, prospective shareholders exchange money, property or both, for the corporation’s capital stock.
Sometimes called a “C-corp” a corporation is a legal entity separate from its owners.
The Small Business Administration notes corporations offer “the strongest protection to its owners from personal liability” but “the cost to form a corporation is higher than other structures.”
Operating a corporation requires more extensive record-keeping and reporting.
The IRS says S Corporations “are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.”
Becoming an S Corporation requires a business to meet certain qualifications including being a domestic corporation and having no more than 100 shareholders.
Businesses must file with the IRS to earn S Corporation status.
A limited liability company, more commonly referred to as an “LLC” combines the advantages of both the corporation and partnership business structures.
An LLC can protect an individual from personal liability in most instances.
Owners of an LLC are known as “members” and the members can be individuals, corporations, other LLCs or foreign entities. Most states, including Illinois, permit “single-member” LLCs, in which there is only one owner.
The professionals at David Mills, CPA, LLC, have offices in both Morton and East Peoria. They work with business clients in the Tri-County (Peoria, Woodford and Tazewell) area as well as beyond.
When establishing a business, contact David Mills, CPA, LLC to ensure the legal entity you select best matches your professional goals.
On payday, your employees expect their paychecks to be correct. Errors or oversights on a paycheck can anger and unnecessarily stress an employee. Save the hassle and outsource your payroll.
Ensuring your employee payroll is accurate is vitally important, yet for many small business owners in the Peoria and Central Illinois area, the process is laborious, stressful and never-ending.
When you outsource payroll responsibilities to the experts at David Mills CPA LLC, you get more time to concentrate on your core business. You will have peace of mind knowing your payroll operations are being handled correctly and professionally.
Pay period follows pay period. Accurately completing your company’s payroll requires time and attention.
By outsourcing payroll responsibilities, you can be assured that all special deductions, such as wage garnishments, savings, and health deductions are properly calculated.
Do you know the updated payroll regulations for 2020? With outsourced payroll services, the experts at David Mills CPA LLC ensure your firm is compliant with all current payroll laws.
At David Mills CPA LLC, payroll tax deposits are electronically filed and quarterly payroll tax forms are prepared and filed. They also complete year-end W-2 and 1099 forms as well as worker’s comp audits and any requests for payroll information.
Hiring experts to complete your company’s payroll helps avoid IRS mistakes and penalties.
When you work with David Mills CPA LLC, you are able to establish a direct deposit option for your employees. Direct deposit saves employees a trip to the bank to cash their paycheck and has become a convenience employees expect.
Outsourcing your payroll eliminates the need to train or cross-train employees to handle payroll. When payroll is handled in-house, a burden is placed on the company every time the person responsible for payroll goes on vacation, takes a leave of absence or quits the company.
When the payroll employee leaves or retires, they walk out with valuable knowledge that can be hard to regain.
Outsourcing your payroll responsibilities means a knowledgeable team is in place to seamlessly handle your company’s needs.
Contact the professionals at David Mills CPA LLC today to see how their payroll service can meet the needs of your business. David Mills CPA LLC has offices in both Morton and East Peoria.
Small businesses need budgets, but too often, they don’t have one. The staff at David Mills CPA, LLC can assist with your budgeting needs.
Creating a business budget can seem overwhelming. One survey found as many as two-thirds of all small businesses don’t have a budget.
Without a budget, though, your company’s financial health is at risk. Small businesses face challenges every day. A budget helps mitigate those difficulties.
The experts at David Mills CPA will show you how budgeting can grow your profits. Interpreting the numbers is key, but we understand making sense of those figures can feel overwhelming.
We can help you answer the critical questions:
A smartly planned budget will include flexibility to help you navigate any troubled waters your business may face.
A budget should be more than just a yearly chore. It’s a tool to help you tackle short-term obstacles while planning for the long-term future.
We will teach you the questions to ask when looking at your budget versus actual numbers. In this way, your budget becomes a valuable tool to manage cash flow and build your business.
Budgets help make your business more efficient. They can help keep your company out of debt while developing a roadmap for future growth or expansion.
Planning your business budget will make it more efficient to operate your company.
Let the staff at David Mills CPA assist you with all your business budgeting needs. Contact us today for more information.
You’re the CEO of your business and an expert in your industry, but does that expertise expand to the financial side of your business plan? If phrases like “projected profitability” and “cash flow” make you cringe, it’s time to call the experts at David Mills, CPA, LLC.
Chances are you didn’t get into business because the idea of managing financial statements appealed to you, yet your company’s success is directly related to the quality of your financial statements and the CFO (chief financial officer)/Controller Services overseeing them.
A head-in-the-sand approach to your business finances is a disaster waiting to happen. Just like ignoring your car’s check engine light can leave you stranded, not paying attention to finances can cripple your business.
More than 28% of bankrupt businesses cite problems with the financial structure of their company as a primary reason for failure.
Businesses fail because they forget about the basics. Have you taken the time to create a budget? If you have, do you regularly analyze the results? Is your business making a profit, yet you never seem to have money in the bank?
Hiring an outsourced controller/CFO is the smart way to keep your finger on the financial pulse of your business plan.
If financial statements make no sense to you, you won’t use them. You need controller services you can trust to interpret the statements for you.
Just because you may not have the budget for a full-time CFO doesn’t mean you don’t have alternatives.
With our Morton and East Peoria offices, our firm can provide CFO services on an “as-needed” basis to companies in the Tri-County area.
We can take full responsibility for the financial side of your business, work part-time, or train your staff. Our services are available on a monthly, quarterly or a specific-project basis.
You’ll gain greater control over your business plan when the numbers make sense.
Having the staff at David Mills, CPA, LLC be your financial experts allows you to excel at the business you do best.
Contact us today about our CFO consulting and outsourced controller services.