We recently had the pleasure of presenting a seminar on the effect of the Tax Cuts and Jobs Acts on businesses and individuals. This is the first in a series of blog posts highlighting the information covered.
While we were all focused on the changes that were coming courtesy of the new Tax Cuts and Jobs Act, a number of additional tax law revisions took effect. The following is a brief recap.
Partnership Audit Regime Laws – Federal Law
Starting January 1, 2018, this Federal Law allows tax to now be accessed at the partnership level. While this is an administrative win, it comes with hidden ramifications to the taxpayer:
- Assessed at the highest individual rate of tax – which is currently 37%
- The 20% 199A (flow-through) deduction is no longer applicable
- Current partners can be assessed for deficiencies from the year prior.
As a result, we recommend that all partnerships evaluate your partnership agreements.
1099 Withholding and Filing Requirements – State (Pennsylvania) Law
These requirements also went into effect on January 1, 2018.
The 1099 Withholding Requirement means you must engage in withholding on Pennsylvania-sourced non-employee compensation to non-residents. This includes business income and leases of real estate. This withholding is currently on a volunteer basis if the entity receiving payment is receiving $5,000 or less per year.
The new filing requirements state that starting in 2018, 1099s and W2s are required to be filed electronically if you are filing 10 or more forms. However, the Pennsylvania Department of Revenue is granting a waiver for the 2018 filing period. Learn more about this requirement in one of our previous blog posts.
Wayfair Decision Affecting Revenue from Online Sources
The Wayfair Decision brings economic nexus to online transactions. “Physical nexus” is when the consumer is making a purchase from a store or transacting with a business with a physical location. With the growth of online shopping, many B2C and B2B transactions take place with companies who do not have a physical presence in Pennsylvania, but their product is coming into Pennsylvania. With the Wayfair Decision, if you are a Pennsylvania-based business conducting online sales with people or companies outside of Pennsylvania, you may have multi-state filing requirements. Most states have differing thresholds, so if you are selling one or two items in a year and do not reach their particular threshold, you would not be required to file.
As always, if you have any questions or concerns regarding these changes, please call us at 215-723-4881. You may also consult our free online 2018-19 Tax Planning, which can be found here.
To view the portions of his seminar that were broadcast via Facebook Live, please visit our Facebook page.