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Business Tax Quick Guide: Tax Year 2021-2022

Published: Thursday, January 6, 2022

We bring to your attention this quick guide to use during tax season.

BUSINESS TAX QUICK GUIDE: YEAR 2021-2022

 


We bring to your attention this quick guide to use during tax season:

 

 

C CORPORATION INCOME TAX

■  Taxable income of a C corporation: Taxed at a flat rate of 21%.


QUALIFIED PERSONAL SERVICE CORPORATION TAX

■  Taxable income of a qualified personal service corporation 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: $142,800 of self-employment income for OASDI (maximum OASDI tax of $17,707.20; 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: $142,800 of wages for OASDI (maximum OASDI tax of $17,707.20; 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 available (Form 7004, Application for Automatic Exten- sion of Time to File Certain Business Income Tax, Informa- tion, 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, 2023, 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 cents per mile (note that unreimbursed employee business expenses are no longer deductible as a miscellaneous itemized deduction).

■  Deemed depreciation: 26 cents 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 (CFC) 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 corporations (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; and 3. The taxpayer’s floor plan financing interest for the tax year.

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


NET OPERATING LOSSES

■  Limited to 80% of taxable income.

■  Can be carried forward indefinitely; cannot be carried back (except for farming businesses).

 

LIKE-KIND EXCHANGES

■  Limited to real property not primarily held for sale.


TRAVEL PER DIEM RATES

■  High-low method: $292 per day ($71 for meals) through Sept. 30, $296 per day ($74 for meals) after Sept. 30, for high-cost localities; $198 per day ($60 for meals) through Sept. 30, $202 per day ($64 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, $69 per day after Sept. 30 (CONUS); $71 per day through Sept. 30, $74 per day after Sept. 30 (outside CONUS).


SEC. 179 AND BONUS DEPRECIATION

■  Sec. 179 expense deduction: $1,050,000 with $2,620,000 threshold limit.

■  Bonus depreciation: 100% of the cost of eligible property placed in service in 2021.


DIVIDENDS-RECEIVED DEDUCTION

■  From a domestic corporation: 50%.

■  From a domestic 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 an S corporation’s last C corporation tax year must be included in the corporation’s gross income in the last C corporation tax year.

 

 

BUSINESS AUTO DEPRECIATION LIMITS 

For vehicles placed in service during 2021.

 

 

Year 1

Year 2

Year 3

Years 4–6

Passenger automobiles*

$10,200

$16,400

$9,800

$5,860

Passenger automobiles* 

with bonus depreciation

 

$18,200†

 

$16,400

 

$9,800

 

$5,860


* Including trucks and vans.

† No bonus depreciation is available if vehicle was acquired before Sept. 28, 2017, and placed in service after 2019.

 


Source: Journal Of Accountancy 

 

Ruben Flores
FGA Attorneys & Advisors
Country:
Texas, USA
Practice Area:
Corporate
Phone Number:
(210) 340-3800
Fax:
(210) 340-5200
FGA Attorneys & Advisors is dedicated to providing comprehensive corporate, tax, and immigration services to individuals and companies doing business in the U.S. and Mexico. Our firm is able to meet the diverse legal and tax needs of local, national, and international clients because we have an experienced team of attorneys and advisors with extensive experience in corporate, tax law, and cross border transactions. We are an international oriented firm with multilingual capabilites including English, Spanish, and Italian.

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