Business Tax Guide

PERSONAL HOLDING COMPANY TAX

20% tax 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: $137,700 of self-employment income for OASDI (maximum OASDI tax of $17,074.80; 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: $137,700 of wages for OASDI (maximum OASDI tax of $17,074.80; 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 15th day of the fourth, sixth, ninth, and 12th months of the corporation’s tax year (April 15, June 15, Sept. 15, and Dec. 15 for calendar-year corporations).

CORPORATE ALTERNATIVE MINIMUM TAX (AMT)

AMT no longer applies to corporations.

NONRESIDENT AND FOREIGN CORPORATIONS

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

Form 1120, U.S. Corporation Income Tax Return: April 15 for calendar-year corporations (extension to Oct. 15 avail-able (Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns); 15th day 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); Sept. 15 for corporations with a June 30 fiscal year end (extension to April 15 available).

Form 1065, U.S. Return of Partnership Income: 15th day of the third month following the close of the 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 1120-S, U.S. Income Tax Return for an S Corporation: 15th day of the third month following the close of the corporation’s tax year (six-month extension available (Form 7004).

Form 1120-S, Schedule K-1, Shareholder’s Share of Income, Deductions, Credits, etc. Due to shareholders on or before the date the S corporation files Form 1120-S.

STANDARD MILEAGE RATE

For business use of auto: 56 center per mile for 2021 & 57.5 cents per mile for 2020

Deemed depreciation: 27 cents per mile.

Note that unreimbursed employee business expenses are no longer deductible as a miscellaneous itemized deduction.

BUSINESS INTEREST DEDUCTIONS

For 2019 and 2020, business interest deductions are limited to the sum of:

(1) business interest income;

(2) 50% of the taxpayer’s adjusted taxable income (ATI) for the tax year (30% if the taxpayer elects out of the 50% limitation); and

(3) the taxpayer’s floor plan financing interest for the tax year.

A taxpayer can elect to use its 2019 ATI instead of its 2020 ATI to calculate its 2020 limitation.

Any disallowed business interest deduction can be carried forward indefinitely (with certain restrictions for partnerships).

NET OPERATING LOSSES

80% of taxable income limitation on NOLs has been suspended for 2020.

NOLs incurred in 2018, 2019, or 2020 must be carried back five years unless the carryback period is waived.

NOL not used can be carried forward indefinitely.

LIKE-KIND EXCHANGES

Limited to real property held for productive use in a trade or business or for investment.

TRAVEL PER DIEM RATES

High-low method: $297 per day ($71 for meals) through Sept. 30, $292 per day ($71 for meals) after Sept. 30, for high-cost localities; $200 per day ($60 for meals) through Sept. 30, $198 per day ($60 for meals) after Sept. 30, for other localities in the continental United States (CONUS).

Transportation industry meals and incidentals: $66 per day through Sept. 30, $66 per day after Sept. 30 (CONUS); $71 per day through Sept. 30, $71 per day after Sept. 30 (outside CONUS).

SEC. 179 AND BONUS DEPRECIATION

Sec. 179 expense deduction: $1,040,000 with $2,590,000 threshold limit.

Bonus depreciation: 100% of the cost of eligible property placed in service in 2021. (Also available for tax years 2019-2022)

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 CORPORATIONS

Built-in gains tax: Corporate tax rate times net recognized built-in gain (imposed during the recognition period on S corporations that were formerly C corporations).

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.

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