The entire Team at Insogna CPA is excited to announce we helped our clients grow their revenues totaling $215,464,385 in 2021.
A special thank you to all of our valued clients. We are excited to continue working with you, year-over-year, and looking forward to a successful 2022!!Uncategorized
Senior Care Costs and Financial Resources for Texas
Insogna CPA Amongst Top 18 Best Accountants in Austin for 2021
The Buzz About QSB Stock
With so many promising companies in the early stages of development, QSB stock gives everyday investors the chance to support the businesses they believe will be the next successful venture. With the attractive business tax benefits of qualified small business stock (QSBS) adding to the allure of investing in startups, QSBS is fast becoming a popular option for private shareholders looking to invest in shares with low minimum investment requirements.
For those who are not yet familiar with QSBS, it is helpful to understand what it is and what QSBS offers so you, too, can reap the benefits.
Breaking Down QSB Stock
Qualified small business stock (QSBS) refers to shares of stocks from qualified small businesses in the United States as defined under 1202 of the Internal Revenue Code. It is stock purchased from qualified small businesses after August 10, 1993. QSBS comes from any active domestic C corporation with assets valued at its original cost not exceeding $50 million soon after the stock issuance.
Qualified Small Business Eligibility Provisions
Qualified small businesses that may sell QSB stocks can include organizations in industries such as retail, manufacturing, and technology. It excludes hospitality, professional services (law, healthcare, architecture), agriculture, mining, and finance (banking and insurance). The companies, to be eligible, must use at least 80 percent of their assets actively in one or more of the qualified businesses and remain as a C corporation for the investor’s withholding period of the QSB.
QSB Tax Benefits
People who invest in QSBS can enjoy the following benefits:
- 100-percent exclusion from U.S. federal capital gains tax
- 100-percent exclusion from the AMT (alternative minimum tax)
- 100-percent exclusion from the 3.8 percent NIIT (net investment income tax)
However, for QSB stock issued before September 28, 2010, section 1202 gives a lower percentage tax exclusion, usually 50 or 75 percent. There is also a 28 percent tax rate for gain not excluded and subject to the NIIT.
Gain Exclusion Limitation
The tax savings under Section 1202 provide a generous limitation to the amount of gain from QSBS each taxpayer and issuer can exclude Section 1202 limits savings from business taxes of individuals to greater than:
- $10 million, or $5 million for married couples who are filing separately.
- Ten times the taxpayer’s combined basis in the amount of QSBS sold during the taxable year.
QSB Tax Exemption Eligibility Requirements
For individuals to claim the business tax benefits from a QSBS, they must meet the following requirements.
- The investor should be an individual, not a corporation.
- The investor should be US citizens or non-United States citizens living in the US.
- The investor must have purchased the stock directly from the company and not in a secondary market such as the New York Stock Exchange (NYSE) or NASDAQ.
- The investor must hold the QSBS for at least five years before selling and must have purchased the stock with either property, cash, or as a payment for service rendered. However, if the investor wants to sell the QSB stock before the required five-year holding period, the investor may avoid paying tax by investing the profit from the sale into another QSB stock granting the investor has held the QSB stock traded for over six months. If the QSBS meets these requirements, the investor has 60 days to complete the rollover into another QSB stock.
- The C corporation that issued the stock must use 80 percent of its assets in qualified trades of businesses.
Insogna CPA will ensure that you get maximum benefits from your QSB stock. Contact our team of wealth building experts today to get started!
INSOGNA CPA Ranks No. 126 on Inc. Magazine’s List of the Fastest-Growing Private Companies in Texas
A Guide to Sales Tax for Online Sellers
Sales tax is not a cut and dry subject; on the contrary, it has a lot of moving parts. When it comes to sales tax for online sellers, however, things can get even more complicated.
Different states require a different tax on different items, and policies are always changing and adapting. Furthermore, within a state, there may be regions where sales tax rules vary from one state to another. Not taking the time to understand this can have serious repercussions, and potentially unnecessary cash out of your pocket.
Know Your State’s Laws
One of the tricky things about sales tax is the fact that individual states are permitted to set their own—there is no such thing as a national sales tax. This means that states are allowed to select which items to tax and how much tax to charge.
Furthermore, many states allow local areas to set their sales tax independent of the state. While it’s impossible to list each of the sales tax jurisdictions differing sales tax regulations, the main takeaway is that it’s important to research your state and region’s sales tax rules as there may be a considerable variation that you aren’t already familiar with.
Know Your Company’s Obligations
Online Sellers and local retailers in the USA are only required to collect sales tax when they have ‘Nexus’ in that state. A Nexus means a significant presence and refers to factors such as a physical location, personnel, affiliates, or other business activities.
You also need to know what items are taxable and which ones aren’t. While most states tax items such as clothing, textbooks, and groceries, others do not. This means that online Sellers and local retailers in different states or in different state localities can have different combinations of sales tax requirements.
Understand Filing Frequency
After you determine whether or not you have Nexus in a state you will need to register for a sales tax permit. When you do this, your state will inform you of your filing frequency. This means the frequency for filing your tax returns.
Typically the filing frequency will be monthly, quarterly, semi-annually, or annually. The frequency will be determined by the size of your Nexus and state’s rules. The more tax revenue you generate in a state, the more frequently it will be collected, as a general rule. The money is used for local infrastructure, so states would prefer that it be active instead of sitting in an account.
Avoid Fines and Penalties
Due to the variation in state sales tax, it can be easy to make an honest mistake. The two most common mistakes businesses make are not collecting sales tax when they should be, and not paying these taxes ontime. Once you realize how complex the process is, it’s not surprising why these mistakes are made.
Sales tax is due in some states on the 20th of the month. In other states, it’s due on the 15th, or the 23rd. Depending on your state it’s easy to get the dates mixed up. It’s also easy to confuse the amount of sales tax to pay as an online seller.
Mistakes like these can result in penalties and extra interest. However, if something falls through the cracks it’s always worth discussing this with your state’s tax authority as some are willing to waive innocent mistakes.
Know the Standards and Guidelines
Sales tax policy is always changing, so you need to stay up-to-date. In some cases, the sales tax rate changes, at other times, it’s the filing frequency. Sometimes a state will start taxing an item it didn’t tax before or reduce the number of items taxed.
When it comes to online sales tax, the policy is even more varied. Current guidelines say that sales tax should be paid at the point of sale, which means the buyer/end user. At present, this is the case, but it is subject to change at any point.
Hire a CPA
Outsourcing these complex tasks to a Certified Public Accountant (CPAs), especially when utilizing technology to streamline the calculation of your sales tax and whether Nexus is applicable or not, will save you time and money so you can focus on growing your business.
A CPA has the professional experience needed to organize your sales tax and ensure you pay the right amount at the right times. With so many moving parts when it comes to selling online, it is worth investing a little in a CPA to ensure you’re compliant and avoid penalties. Having professional help will ensure you are collecting from your customer and remitting the correct sales tax to the State, and avoid this money coming out of your own pocket.
Sales tax got you scratching your head? Avoid paying sales taxes out of your own pocket. Contact Insogna CPA today for ongoing accounting advisory.