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 15^thday of the fourth,
  sixth, ninth, and 12^thmonths 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)); 15^thday 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: 15^thday 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: 15^thday 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

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.