The IRS recently advised truckers and other owners of heavy highway vehicles that the due date of their next highway use tax return has been extended.   This return which is usually due August 31^st. will now be due on November 30, 2011.  Payments, and returns should not be filed before Nov. 1, 2011.

The highway use tax is scheduled to expire on Sept. 30, 2011.  This is the reason for the extension.  The IRS hopes that this extension will alleviate any confusion or multiple filings that could occur if Congress decides to modify or reinstate the tax after that date.

Last year the IRS received highway use tax payments of about $886 million from about 650,000 forms.

If you are acquiring and registering a new or used vehicle during the July-November period, new regulations require a state to register the vehicle without the use tax being paid.  The person registering the vehicle must provide a bill of sale showing that the vehicle was purchased in the last 150 days.

For more information on highway use tax, please contact the IRS directly or visit www.irs.gov

Before you even make your first sale, California Franchise Tax Board says that all corporations and LLCs are required to pay at least an $800 franchise tax if they:

• Incorporated or organized in California.
• Qualified or registered to do business in California.
• Doing business in California, whether or not incorporated, organized, qualified, or registered under California law.

Furthermore, entities are required to pay the minimum franchise tax whether they are active, inactive, or operating at a loss.

Okay, but that still doesn’t define “doing business” in California.  Through 2010, doing business in California was broadly defined as “actively engaging in any transaction for the purpose of financial gain or profit.”  It was a pretty vague definition to say the least.

Starting this 2011 tax year, an entity is considered to be doing business in California if it meets one of the following tests:

• The entity is actively engaging in any transaction for the purpose of financial gain or profit.
• The entity is organized or commercially domiciled in this state. To be commercially domiciled in this state generally means that this state is the principal place from which the trade or business of the entity is directed or managed.
• The entity’s California sales exceed either $500,000 (annually adjusted for inflation) or 25 percent of their total sales. Sales include sales made by an agent or independent contractor of the entity.
• The entity’s California real property and tangible personal property exceeds either $50,000 (annually adjusted for inflation) or 25 percent of their total real property and tangible personal property.
• The entity’s California compensation exceeds either $50,000 (annually adjusted for inflation) or 25 percent of the total compensation paid by the entity.

Though the new definition was written to include the original definition of doing business, I think the added tests make it clear that if you are a corporation or LLC generating income in California or maintaining tangible property in California, YOU ARE DOING BUSINESS IN CALIFORNIA, and should file a foreign qualification there, which we can help you with.

Click HERE to read an article from The Wall Street Journal with further details on this topic.

Lawmakers have been debating for months over how to deal with the 1099 provision, named for the IRS form that it requires. On February 2^nd, small business cheered as a successful bi-partisan vote in the U.S. Senate took place to repeal the 1099 requirement. In the January 25^th State of the Union address the President called the reporting rules a “flaw” in the Healthcare Law.

The House of Representatives is working on this and now has two bills passed by the Ways and Means Committee to be considered by the chamber as a whole, and is expected to pass with flying colors.

When and if the 1099 provision is repealed, small business will be greatly relieved, as the law could have burdened small owners with unnecessary paperwork which is involved in complying. Smalls business across the nation are optimistic about the repealing of this legislation, we will keep you posted!

• Taxpayers Claiming Itemized Deductions on Schedule A.  This one is pretty typical and will affect many taxpayers. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes. In addition, itemized deductions include the state and local general sales tax deduction that was also extended and which primarily benefits people living in areas without state and local income taxes. Because of late Congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid to late February.

• Taxpayers Claiming the Higher Education Tuition and Fees Deduction. This deduction for parents and students – covering up to $4,000 of tuition and fees paid to a post-secondary institution – is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit extended last month and the Lifetime Learning Credit.

• Taxpayers Claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23 and Form 1040A, Line 16.

The IRS will announce a specific date when it can start processing these returns in the near future.

On a different note, the IRS announced January 4, 2011 that taxpayers will have until April 18^th to file their tax returns.  They expect to receive more than 140 million individual tax returns, most by the deadline.  For this reason the IRS reminds taxpayers that using e-file is the best way to ensure accurate tax returns, and to get faster refunds.   Taxpayers requesting an extension will have until Oct. 17, to file their tax returns.

For more information, or to read this entire article click HERE.