Category: Tax

IL & WI Will Require Sales Tax Collection by Internet Sellers

Illinois and Wisconsin, along with 28 other states are acting to pass laws or regulations to require sales tax collection by remote sellers now or in the immediate future.

Wisconsin Department of Revenue has announced that it will require sales tax collection by internet sellers with sales of at least $100,000 or more than 200 transactions annually, effective October 1, 2018.

Illinois adopts a $100,000 or 200-transaction threshold (determined at the end of each March, June, September, and December for the previous 12 months), with an effective date of October 1, 2018. 

On June 21, 2018, the U.S. Supreme Court ruled in South Dakota v. Wayfair that South Dakota can require collection of its sales tax on sales to its residents by out-of-state internet retailers. The new rule, articulated in Wayfair, is that a state sales tax can be constitutionally collected so long as it does not discriminate against or place excessive burdens on those engaging in interstate commerce.

The Court provided a checklist of factors present in South Dakota law that strongly suggested why it would be constitutional under this standard:

  1. Safe harbor: Exclude “those who transact only limited business” in the state. (South Dakota’s is $100,000 in sales or 200 transactions.)
  2. No retroactive collection.
  3. Single state-level administration of all sales taxes in the state.
  4. Uniform definitions of products and services.
  5. Simplified tax rate structure. (South Dakota requires the same tax base between state and local sales tax, has only three sales tax rates, and limited exemptions from the tax.)
  6. Software: access to sales tax administration software provided by the state.
  7. Immunity: sellers who use the software are not liable for errors derived from relying on it.

Since the decision, states have begun considering actions that they might need to take to collect sales tax on internet transactions while adhering to the Wayfair decision.  Legislators may make several policy choices when complying with the Wayfair checklist:

  • Adopt the same threshold as South Dakota ($100,000 in sales or 200 transactions) or a more generous one to account for larger population size or larger economy.
  • Decide when the threshold period is measured.
  • Setting an enforcement start date.
  • Consider repealing click-through nexus and notice-and-reporting laws.
  • Decide how to collect local sales taxes.
  • Decide use of the revenue.

For further information please refer to Post-Wayfair Options for States or contact us today!

Wisconsin Sales Tax Holiday – August 1-5, 2018

WHAT IS A SALES TAX HOLIDAY?

A sales tax holiday is a temporary exemption period where sales of certain items are exempt from Wisconsin sales and use tax.

The five-day temporary exemption period will begin on Wednesday, August 1, 2018, and continue through Sunday, August 5, 2018.

During the sales tax holiday, the following items are not taxable:

  • Clothing, if the sales price of any single item is $75 or less
  • A computer purchased by a consumer for the consumer’s personal use, if the sales price of the computer is $750 or less
  • School computer supplies purchased by the consumer for the consumer’s personal use, if the sales price of any single item is $250 or less
  • School supplies, if the sales price of any single item is $75 or less

Answers to common questions and printable lists for exempt and taxable items during the sales tax holiday can be found on the Wisconsin Department of Revenue’s website located here.

Child Sales Tax Rebate

The Wisconsin Department of Revenue is offering a $100 (per child) sales tax rebate for dependent children.

Sound fiscal management and a strong economy have resulted in a state budget surplus of almost $400 million for the state of Wisconsin. Recently, a law passed to return some of that surplus to taxpayers in the form of a Child Sales Tax Rebate. If you’re eligible, you can claim it between May 15 and July 2. 

What is the Child Sales Tax Rebate?

It is a $100 rebate for sales and use tax paid on purchases made for raising a dependent child in 2017. You may claim $100 for each qualified child.

Who can claim the Child Sales Tax rebate?

If you have a qualified child, you’re likely eligible. A child may only be claimed by one individual.

A qualified child must be:

  • Under age 18 on December 31, 2017
  • A dependent of the claimant for tax year 2017
  • A Wisconsin resident on December 31, 2017
  • A United States citizen

How do I claim my $100 (per child) Child Sales Tax Rebate?

The fastest and most convenient way is to go to Child Sales Tax Rebate where you will find more details, frequently asked questions and information. You can apply for the Child Sales Tax Rebate online 24/7, May 15 – July 2.

If after trying the website above, you still have questions, please feel free to contact us.

IRS Warns on ‘Dirty Dozen’ Tax Scams

With just over two weeks away until Tax Day,  the Internal Revenue Service (IRS) is encouraging taxpayers to remain vigilant about the aggressive and evolving tax scams seen throughout the year.

The IRS has issued its annual “Dirty Dozen” list of tax scams highlighting a variety of schemes, many of which peak during tax-filing season. The IRS warns that taxpayers need to guard against ploys to steal their personal information and they should be wary of shady promoters trying to scam them out of money or talk them into engaging in questionable tax schemes. Knowing about the scams can help you take steps to protect your personal and financial information.

Here is the list of this year’s “Dirty Dozen” scams:

Phishing: Taxpayers should be alert to potential fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers via email about a bill or tax refund. Don’t click on one claiming to be from the IRS. Be wary of emails and websites that may be nothing more than scams to steal personal information. (IR-2018-39)

Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent years as con artists threaten taxpayers with police arrest, deportation and license revocation, among other things. (IR-2018-40)

Identity Theft: Taxpayers should be alert to tactics aimed at stealing their identities, not just during the tax filing season, but all year long. The IRS, working in the Security Summit partnership with the states and the tax industry, has made major improvements in detecting tax return related identity theft during the last two years. But the agency reminds taxpayers that they can help in preventing this crime. The IRS continues to aggressively pursue criminals that file fraudulent tax returns using someone else’s Social Security number. (IR-2018-42)

Return Preparer Fraud: Be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest, high-quality service. There are some dishonest preparers who operate each filing season to scam clients, perpetuating refund fraud, identity theft and other scams that hurt taxpayers. (IR-2018-45)

Fake Charities: Groups masquerading as charitable organizations solicit donations from unsuspecting contributors. Be wary of charities with names similar to familiar or nationally-known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations. (IR-2018-47)

Inflated Refund Claims: Taxpayers should take note of anyone promising inflated tax refunds. Those preparers who ask clients to sign a blank return, promise a big refund before looking at taxpayer records or charge fees based on a percentage of the refund are probably up to no good. To find victims, fraudsters may use flyers, phony storefronts or word of mouth via community groups where trust is high. (IR-2018-48)

Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers. The credit is usually limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims often involve failures to participate in or substantiate qualified research activities or satisfy the requirements related to qualified research expenses. (IR-2018-49)

Falsely Padding Deductions on Returns: Taxpayers should avoid the temptation to falsely inflate deductions or expenses on their tax returns to pay less than what they owe or potentially receive larger refunds. Think twice before overstating deductions, such as charitable contributions and business expenses, or improperly claiming credits, such as the Earned Income Tax Credit or Child Tax Credit. (IR-2018-54)

Falsifying Income to Claim Credits: Con artists may convince unsuspecting taxpayers to invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers should file the most accurate tax return possible because they are legally responsible for what is on their return. This scam can lead to taxpayers facing large bills to pay back taxes, interest and penalties. (IR-2018-55)

Frivolous Tax Arguments: Frivolous tax arguments may be used to avoid paying tax. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims about the legality of paying taxes despite being repeatedly thrown out in court. The penalty for filing a frivolous tax return is $5,000. (IR-2018-58)

Abusive Tax Shelters: Abusive tax structures are sometimes used to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered. (IR-2018-62)

Offshore Tax Avoidance: Successful enforcement actions against offshore cheating show it’s a bad bet to hide money and income offshore. People involved in offshore tax avoidance are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities. (IR-2018-64)

IRS Launches New W-4 & Withholding Calculator

By now employers should be using the updated income-tax withholding tables for 2018 which reflects changes made by the tax reform legislation. The marital status chosen on the W-4 will determine how much income tax will be withheld. Personal exemptions are no longer relevant.

On February 28, 2018, the Internal Revenue Service released the new version of Form W-4 as well as an updated Withholding Calculator which gives employees the information they need to fill out the new Form W-4 should changes need to be made.

The new tax law does not affect 2017 tax returns, however, we encourage all employees to review their personal tax situation to see if they need to make any changes to determine their proper withholding for 2018 to avoid any issues when they file next year.

 

Meals and Entertainment Changes Under Tax Reform

 

The Tax Cuts and Job Act (TCJA) enacted extensive changes to the deductibility of meals and entertainment expenses for companies. If you are in the business of entertaining your clients and customers, you will want to know about these changes!

Prior to the TCJA, taxpayers generally could deduct 50% of expenses for business-related meals and entertainment. Further, meals provided to an employee for the convenience of the employer on the employer’s business premises were 100% deductible by the employer and tax-free to the recipient employee. Various other employer-provided fringe benefits were also deductible by the employer and tax-free to the recipient employee.

Under the new law, entertainment expenses paid or incurred after December 31, 2017 are no longer deductible. Employer-provided meals and meals provided for the convenience of the employer are limited to a 50% deduction. After 2025, the cost of meals provided on the employer’s premises will be nondeductible.

Summary of the changes made under the TCJA from 2017 to 2018

2017 Expenses (Old Rules) 2018 Expenses (New Rules)
Office Holiday Parties Summer Office Picnic 100% deductible 100% deductible
Entertaining Clients ~50% deductible ~ Even tickets, 50% deductible for face value of ticket; anything above face value is non-deductible ~ Tickets to qualified charitable events are 100% deductible ~ Meals - 50% deductible ~ No deduction for entertainment expenses
Employee Travel Meals 50% deductible 50% deductible
Meals Provided for Convenience of Employer 100% deductible provided they are excludible from employees’ gross income as de minimis fringe benefits; otherwise, 50% deductible 50% deductible (nondeductible after 2025)
Fringe Benefits ~ Business could deduct the cost of employee parking, transit passes and bike commuting reimbursements, and employees could exclude the benefit from income. ~ Employee achievement awards could consist of anything within a dollar limit of $400 per award and $1,600 for all awards to the employee for the year. ~ Businesses can no longer deduct the cost of employee parking and transit passes (bike commuting reimbursements are still deductible), but employees can still exclude the benefit from income, except bike commuting reimbursements. ~ Employees achievement awards must be tangible personal property and not cash, gift cards, coupons or certificates, nor tickets, meals, vacations, lodging or stocks and bonds. The dollar limits remain unchanged.

 

Updated 2018 Withholding Tables – Taxpayers Could See Paycheck Changes by February

The Internal Revenue Service released Notice 1036 on January 11, 2018. The notice updated the income-tax withholding tables for 2018 which reflects changes made by the tax reform legislation enacted last month. This is a first in a series of steps that the IRS will take to help improve the accuracy of withholding following major changes made by the new tax law.

Employers should begin using the 2018 withholding tables as soon as possible, but not later than February 15, 2018. The tables are designed to work with the existing W4s your employees have already filled out. The marital status chosen on the W4 will determine how much income tax will be withheld. Personal exemptions are no longer relevant. The IRS is working on a new W4 form which is scheduled to be released near the end of February. We will send out a notice when they are available.

Many employees will notice a change in their take home pay. Once the IRS releases the new W4, we encourage all employees to review their personal tax situation to see if they need to make any changes.

The IRS has posted a list of frequently asked questions to help explain the new withholding tables. Those FAQs can be accessed by clicking here.

Lake County Victims May Qualify for a Flood Tax Credit

Many home and business owners are still struggling to restore their property after suffering through the historic flooding in summer of 2017. Fortunately, there is some relief on the way. Homeowners and small businesses in Lake and 17 other counties impacted by the historic flooding in July may be eligible for a state tax credit up to $750.

The flooding that occurred this summer caused thousands of dollars in property damage to Lake County homes and businesses. This tax credit will provide relief to flood victims who are still trying to pick up the pieces, and rebuild their homes and businesses.

In order to qualify for the grant, homeowners must have reported the damage in July to the Lake County Emergency Management agency. In addition, homeowners who received the Natural Disaster Reassessment are not eligible.

Homeowners seeking the credit must attach a letter from their township assessor’s office to the tax form.

In addition to the tax credit, the Small Business Administration will provide low interest loans to homeowners and business owners in Lake County. More information about the loan program can be found by contacting SBA’s Disaster Assistance Customer Service Center at (800) 659-2955 or going online to sba.gov/disaster.

Newly Revised Employment Verification Form

In December of 2016 we learned the United States Citizenship and Immigration Services (“USCIS”) announced the release of a newly revised Employment Verification Form, Form 1-9. Employers were asked to begin using the newly revised Form I-9 as of January 22, 2017. See previous blog post New Form I-9 for 2017.

On JULY 7th, the USCIS released another revision of Form I-9. Either the December or the July version can be used for the next few weeks. On September 18, 2017, employers MUST use only the newly-revised July form. The old and new versions can be identified by looking at the date at the bottom left side of any page of the document (NOT THE EXPIRATION DATE AT THE TOP RIGHT SIDE OF EACH PAGE). The old version says “Form I-9 12/14/2016N”. The new version says “Form I-9 7/7/17 N”.

Revisions that were made are related to the Instructions and to the list of Acceptable Documents.  For detailed information please visit USCIS.gov.

To download the newly revised Form I-9 click here or you can access it among other forms on our Tax Forms page of our website.

 

Tax Payment Options to the IRS

If you owe taxes to the IRS, your payment must be received by the due date, even if you apply for more time to file.  Failure to pay on-time will result in penalties and interest.  This year, the tax deadline to file personal tax returns falls on April 18, 2017 and the extended deadline is October 16, 2017.  Estimated tax payments (Form 1040ES) are due:

  • April 18, 2017
  • June 15, 2017
  • September 15, 2017
  • October 16, 2017

Thankfully, the IRS offers easy electronic payment options so you never have to miss a deadline.  Paying electronically is convenient and secure.  The IRS uses the latest encryption technology and does not store your banking information.  You can make electronic payments online, by phone or from a mobile device.  When you use any of the IRS ePay options, it puts you in control of paying  your tax bill and gives you peace of mind.  You determine the payment date, plus you’ll receive an immediate confirmation from the IRS.  It’s much quicker than mailing a check or money order.  For more information, visit IRS.gov/payments.