This is the location in which we will publish tax news and updates from IRS or the State of Texas, as they become available.
TEXAS MARGIN TAX
Effective January 1, 2008, the Texas Franchise tax became the "Margin Tax".
The new tax focuses on the gross income of the business entity, rather than the stated capital, as in the past.
MARGIN CALCULATION
Taxable entities include S-Corporations, LLC's, and Partnerships in which one or more of the partners is an organization and not a natural person. Partnerships between individuals are exempt from the tax, but not the reporting.
Unless a taxable entity qualifies and elects to file using the E-Z calculation, the revised tax base is the taxable entity's "Margin" and is computed in one of the following ways:
1. TOTAL REVENUE TIMES 70%.
Subtract the 70% from total revenue and multiply the remaining 30% by the appropriate tax rate.
2. TOTAL REVENUE LESS COST OF GOOS SOLD.
Total revenue less cost of goods sold. Multiply the remainder by the appropriate tax rate.
3. TOTAL REVENUE LESS TOTAL COMPENSATION.
Multiply the remainder by the appropriate tax rate.
TAX RATES:
1. 1% (.01) for most entities.
2. .05% (.005) for qualifying wholesalers and retailers.
3. .0575% (.00575) for those entities with $10 million or less in total revenues (annualized 12 month period on which the report is based) who elect the E-Z method.
MINIMUM MARGIN TAX AMOUNT
There is no minimum tax rquirement under the franchise tax provisions. However, any entity that calculates an amount of tax due that is less than $1,000.00 or that has total revenue (annualized per 12 month period is based) less than or equal to $1,000,000.00 is not required to pay tax. The entity, however, must submit all required reports to satisfy their filing requirements.
For complete instructions on the Texas Margin Tax go to:
http://www.window.state.tx.us/taxinfo/franchise/
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YOUR QUESTIONS:
CAN THE IRS REALLY FILE A TAX RETURN FOR ME IF I FAILED TO FILE ONE ON MY OWN?
The answer is yes!
The IRS Nonfiler Initiatives allow the revenue service to file a tax return for you, if you have failed to timely file one on your own.
The program is under the auspices of IRS as a part of the more aggressive tax compliance program. IRS Code Section 6020 (b) allows the service to use a Substitute For Return (SFR) to file tax returns on behalf of non-compliant taxpayers. The program is aimed at increasing compliance among traditional nonfilers and increasing revenues.
HOW DOES IT WORK?
As a part of the accelerated tax collection initiation, the IRS files a SFR, using available information sent by employers and companies, in the form of W-2s and 1099s. The SFR is filed under the filing status of "Single, no dependants" (the highest tax rate by the way) and does not allow for deductions other than the standard deductions and exemption for the filing status.
Following the filing, the service will send a "30 day letter" to the taxpayer at his/her last known address. If the service has had no response at the end of the 30-day allowable period, the SFR becomes the official or assessed tax return for the taxpayer and he or she is billed, with penalty and interest, for any tax due.
It then becomes the taxpayers responsibility to "prove" maritial status and other dependants in the household.
WHEN DOES THIS PROGRAM GO INTO AFFECT?
The IRS has had the power to implement this program for some time, however, given the current governmental revenue needs and the perceived noncompliance to tax laws, it is believed that 2005 filers may begin to see their returns filed via SFR in early 2007.
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