Monday, September 16, 2019

How to Avoid Tax Audits by Incorporting Your Business

Updating my 10-year old post, How to Avoid an IRS Tax Audit: Incorporate Your Small Business, the IRS' own most recently available data (for tax year 2017), show that, for a taxpayer with $100,000 or more in gross revenue, the chances of being subjected to an audit vary substantially based on whether the business was operating as a sole proprietorship reporting taxable income on Schedule C of the owner's personal income tax return (1040) or an incorporated business reporting income on a corporate tax return (1120 for C corporations, 1120S for S corporations), with unincorporated sole proprietors being 12 times more likely to be audited by the IRS:
Sole proprietor:  2.40%

Corporation:  0.20%

Tuesday, January 8, 2019

Out-of-state Online Retailers Now Required to Collect California Sales Tax

As a result of the U.S. Supreme Court's Wayfair decision, starting 2019, California will require remote sellers with no presence in the state to register and collect and pay over to the state sales taxes (technically, "use tax") on sales made to California consumers. This requirement will apply if the seller has made 200 or more transactions, or $100,000 or more in sales, into California in the preceding calendar year.

Other states are also rolling out similar requirements, so California businesses selling tangible goods to consumers in others states will need to be aware of any out-of-state filing requirements.