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Calculating Corporate Estimated Tax

The next quarterly estimated tax payment deadline is June 15 for individuals and businesses so it’s a good time to review the rules for computing corporate federal estimated payments. You want your business to pay the minimum amount of estimated taxes without triggering the penalty for underpayment of estimated tax.

Four methods

The required installment of estimated tax that a corporation must pay to avoid a penalty is the lowest amount determined under each of the following four methods:

Under the current year method, a corporation can avoid the estimated tax underpayment penalty by paying 25% of the tax shown on the current tax year’s return (or, if no return is filed, 25% of the tax for the current year) by each of four installment due dates. The due dates are generally April 15, June 15, September 15 and January 15 of the following year.
Under the preceding year method, a corporation can avoid the estimated tax underpayment penalty by paying 25% of the tax shown on the return for the preceding tax year by each of four installment due dates. (Note, however, that for 2022, certain corporations can only use the preceding year method […]

By Linkenheimer LLP|2022-06-10T20:37:48+00:00June 10th, 2022|estimated tax payments|0 Comments

Possible Tax Consequences of Guaranteeing a Loan to Your Corporation

What if you decide to, or are asked to, guarantee a loan to your corporation? Before agreeing to act as a guarantor, endorser or indemnitor of a debt obligation of your closely held corporation, be aware of the possible tax consequences. If your corporation defaults on the loan and you’re required to pay principal or interest under the guarantee agreement, you don’t want to be blindsided.

Business vs. nonbusiness

If you’re compelled to make good on the obligation, the payment of principal or interest in discharge of the obligation generally results in a bad debt deduction. This may be either a business or a nonbusiness bad debt deduction. If it’s a business bad debt, it’s deductible against ordinary income. A business bad debt can be either totally or partly worthless. If it’s a nonbusiness bad debt, it’s deductible as a short-term capital loss, which is subject to certain limitations on deductions of capital losses. A nonbusiness bad debt is deductible only if it’s totally worthless.

In order to be treated as a business bad debt, the guarantee must be closely related to your trade or business. If the reason for guaranteeing the corporation loan is […]

By Linkenheimer LLP|2021-08-18T21:50:02+00:00August 18th, 2021|business, liability, tax implications, tax planning|0 Comments

Many Parents will Receive Advance Tax Credit Payments Beginning July 15

Eligible parents will soon begin receiving payments from the federal government. The IRS announced that the 2021 advance child tax credit (CTC) payments, which were created in the American Rescue Plan Act (ARPA), will begin being made on July 15, 2021.

How have child tax credits changed?

The ARPA temporarily expanded and made CTCs refundable for 2021. The law increased the maximum CTC — for 2021 only — to $3,600 for each qualifying child under age 6 and to $3,000 per child for children ages 6 to 17, provided their parents’ income is below a certain threshold.

Advance payments will receive up to $300 monthly for each child under 6, and up to $250 monthly for each child 6 and older. The increased credit amount will be reduced or phased out, for households with modified adjusted gross income above the following thresholds:

$150,000 for married taxpayers filing jointly and qualifying widows and widowers;
$112,500 for heads of household; and
$75,000 for other taxpayers.

Under prior law, the maximum annual CTC for 2018 through 2025 was $2,000 per qualifying child but the income thresholds were higher and some of the qualification rules were different.

Important: If your income is […]

By Linkenheimer LLP|2021-06-15T16:20:59+00:00June 15th, 2021|credit, tax credit|0 Comments

New Things Taxpayers Should Consider As They Get Ready To File Taxes In 2021

When people get ready to file their federal tax return there are new things to consider when it comes to which credits to claim and what deductions to take. These things can affect the size of any refund the taxpayer may receive.

Here are some new key things people should consider when filing their 2020 tax return.

Recovery rebate credit
Taxpayers may be able to claim the recovery rebate credit if they met the eligibility requirements in 2020 and one of the following applies to them:
• They didn’t receive an Economic Impact Payment in 2020.
• They are single and their payment was less than $1,200.
• They are married, filed jointly for 2018 or 2019 and their payment was less than $2,400.
• They didn’t receive $500 for each qualifying child.

Refund interest payment
People who received a federal tax refund in 2020 may have been paid interest. The IRS sent interest payments to individual taxpayers who timely filed their 2019 federal income tax returns and received refunds. Most interest payments were received separately from tax refunds. Interest payments are taxable and must be reported on 2020 federal income tax returns. In January 2021, the […]

By Linkenheimer LLP|2020-12-17T21:48:38+00:00December 17th, 2020|irs, tax, tax planning|0 Comments

IRS FAQs Address 90-day Filing and Payment Extension

The IRS has released a set of Frequently Asked Questions (FAQs) that clarifies certain aspects of the 90-day filing and payment extension provided in Notice 2020-18. Among other things, the FAQs explain that Notice 2020-18 postpones the filing and payment of federal income taxes reported on Form 1040, Form 1041 , Form 1120, Form 8960, Form 8991 , and Form 990-T (if that form is due to be filed on 4/15/20). The due date has not been postponed for Form 1065, Form 1065-B , Form 1066, Form 1120-S, payroll taxes, excise taxes, estate and gift taxes, and Form 990-T (if that form is due 5/15/20). The FAQs also provide that the deadline for making contributions to an IRA, HSA, or Archer MSA for 2019 has been extended to 7/15/20. The IRS continues to consider additional guidance on these issues and cautions taxpayers that FAQs are not citable as legal authority. The FAQs can be accessed at www.irs.gov/newsroom/filing-and-payment-deadlines-questions-and-answers If you have questions about how these changes may effect you and your business, please contact your Linkenheimer CPA.

By Linkenheimer LLP|2020-09-03T20:03:13+00:00March 26th, 2020|business, CA tax, irs, New Tax Laws, tax deadlines, tax implications|0 Comments