Overview of Taxes related to Community Colleges

Transcription

1 Overview of Taxes related to Community Colleges Michael J. White, CPA Partner in Charge El Paso Office June 17, 2015 Alamogordo Albuquerque Carlsbad Clovis El Paso Hobbs Lubbock Roswell

2 Presentation topics Texas Sales Tax Texas Franchise Tax Form 1098 T Tuition Statement UBIT Unrelated Business Income Tax Form 1042S Foreign Person s U.S. Source Income subject to withholding Form 990 Return of Organization Exempt from Income Tax Form 941 Employer s Quarterly Federal Tax Return Form W 2 Wage and Tax Statement Form W 3 Transmittal of Wage and Tax Statements Form 1099 Miscellaneous Income Form 1096 Annual Summary and Transmittal Letter for Form

3 Presentation focus Federal tax or State tax? Purpose of the report / form What requires your College to file? When is the report due? Some Common Mistakes when preparing / filing the report / form Penalties related to non compliance 3

4 Texas Sales and Use Tax Return Federal tax or State tax? State tax Purpose of the return A sales and use tax return is a form used by a Texas sales and use tax permit holder to report the collection and remittance of sales and use taxes to the Comptroller's office. Returns can be downloaded from or call (800) What requires your College to file? Texas tax law refers to tangible personal property and taxable services as taxable items. Each sale of a taxable item is taxable unless a specific exemption applies. When is the return due? On the 20 th day after tax is collected for the previous month, quarter, or year (filing deadlines depend on the amount of tax collected) 4

5 Texas Sales and Use Tax Return Some Common Mistakes when preparing the Texas Sales and Use Tax Return: Using the wrong sales tax rate (from 6.25% to 8.25%); Not filing a report when no tax is due; and Inconsistent with reporting method (ex. Cash vs. Accrual). Penalties related to non compliance with the State of Texas: Sellers and Buyers both bear responsibility for paying sales tax; Late filing penalty of $50; Penalty for failure to maintain records at least four years prior; and Penalty for failing to paying taxes when due. 5

6 Texas Franchise Tax Report Federal report or State report? State report Purpose of the report The Texas franchise tax report is a privilege tax imposed on corporations, including banking corporations and limited liability companies, that are chartered in the State of Texas. What requires your College to file? See Franchise Tax Rule for a list of some activities considered to be "doing business in Texas. The Comptroller's office maintains a toll free number (800) to answer franchise tax questions or click on pdf 6

7 Texas Franchise Tax Report When is the report due? May 15 of each year. Some Common Mistakes when preparing: Not paying tax owed at the time of extension; Entering the wrong year to report. Penalties related to non compliance with the State of Texas: Late filing penalties; Late payment penalties and interest. 7

8 Form 1098 T Tuition Statement Federal form or State form? Federal form Purpose of the form The 1098 T tax form is a tuition statement provided by higher education institutions to all eligible students who pay enrollment fees (including non resident tuition) during the calendar year. The 1098 T form may be used by students or parents to claim on the federal income tax return: The American Opportunity Tax Credit (formerly the Hope Credit); or The Lifetime Learning Credit. What requires your College to file? IRS requires eligible educational institutions to file this form for each student they enroll and for whom a reportable transaction is made. For General Instructions, call call or log on to 8

9 Form 1098 T Tuition Statement When is the form due to the student? Furnish Copy B of the form to the student by January 31 st, Furnish Copy A to the IRS by February 28 th (if you file electronically, you may file by March 31 st ). Some Common Mistakes when preparing : Incomplete student information; or Incorrect student information. Penalties related to non compliance with the IRS: Penalties due to failure to file; Failure to file a complete form; Failure to file the correct student information (972CG). 9

10 Form 990 Return of Organization Exempt from Income Tax Federal report or State report? Federal report Purpose of the report The Form 990 is used by tax exempt organizations to provide the IRS with the information required by section 6033 of the internal revenue code. An organization's completed Form 990 generally are available for public inspection as required by section What requires your College to file? Form 990 must be filed by an organization exempt from income tax under section 501(a) if it has either: Gross receipts greater than or equal to $200,000; or Total assets greater than or equal to $500,000 at the end of the tax year 10

11 Form 990 Return of Organization Exempt from Income Tax When is the report due? The Form 990 is due by the 15 th day of the 5 th month after the end of the tax year. Some Common Mistakes when preparing: Not filing electronically when required to; Failure to complete a required line or a required schedule; or Listing incorrect or outdated information. Penalties related to non compliance with the IRS: Penalties due to failure to file (gross receipts > 1 million, $100 penalty per day after due date up to $50,000); 11

12 UBIT Unrelated Business Income Tax and Form 990 T Federal form or State form? Federal form. Purpose of the form Report on Form 990 T unrelated business income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis of the organization's exemption (ex. Pizza place owned by the College,) What requires your College to file? The obligation to file Form 990 T is in addition to the obligation to file the annual information return (Form 990). Each organization must file a separate Form 990 T. When is the report due? Due by the 15 th day of the 5 th month after the end of the tax year. 12

13 UBIT Unrelated Business Income Tax and Form 990 T Some Common Mistakes when preparing Form 990T: College has not identified unrelated business income subject to taxation; For most organizations, a business activity generates unrelated business income subject to taxation if: It is a trade or business; It is regularly carried on; and It is not substantially related to furthering the exempt purpose of the College. Penalties related to non compliance: Penalties related to not filing; and Failure to make estimated tax payments quarterly. 13

14 Form 1042 S Foreign Person s U.S. Source Income Subject to Withholding Federal or State? Federal Purpose of the form IRS form 1042 S is a tax form for foreign individuals reporting income from a United States based source (ex. non residents who conduct some form of business within the United States, investments, or capital distribution). The form is sent to the non resident by organization that handles the transaction. What requires your College to file? Form 1042 S is used to report income paid to or on behalf of a foreign individual. This form may report (1) Wage payments made to students and graduate assistants who have claimed tax treaty benefits (2) Tax reportable Fellowship/Scholarship income (3) Service payments made to independent contractors for work performed in the U.S. (4) Non employee Prize or Award payments, or (5) report non qualified education (financial aid) expenses, which includes but is not limited to; travel, room and board, research, meal costs and other purposes, etc. When is the report due? Must be filed by March 15 th to recipient and IRS Some Common Mistakes when preparing incomplete or incorrect information of student documented Penalties related to non compliance failure to file penalties, failure to file complete and/or correct student information. 14

15 Form 941 Employer s Quarterly Federal Tax Return Federal or State? Federal Purpose of the form the form used by employers to report employee withholding amounts for federal income taxes and FICA taxes (Social Security and Medicare), employer payments for these withholding amounts, and any amounts due to the IRS. What requires your College to file? Some reporting requirement to use Form 941 include reporting wages you have paid, reporting tips your employees have received, and reporting federal income tax you withheld. When is the report due? Due by the last day of the month after the end of each calendar quarter. Some Common Mistakes when preparing Adjustment to gross payroll for tax exempt retirements or other tax exempt benefits, total tax liability on page 1 = total liability on Schedule B Penalties related to non compliance late deposits penalties, incomplete / incorrect returns penalties, 15

16 Form W 2 Wage and Tax Statement Federal or State? Federal Purpose of the form Form W 2 reports the annual amount of earnings and tax withholdings of an employee's wages, salaries, and tips. What requires your College to file? The IRS mandates that every College provide every employee with a Form W 2, Wage and Tax Statement, in order for the employee to file their federal income taxes at the end of the year. To order forms from the IRS, call When is the report due? Furnish Copy B, C, and Copy 2 to the employee by January 31 st, Furnish Copy A to the Social Security Administration by February 28 th (if you file electronically March 31 st ), Copy D is for the College records. Some Common Mistakes when preparing incorrect employee information, incorrect College information Penalties related to non compliance failure to file penalties, failure to file complete and/or correct student information, total W2s do not equal to balance of W3 16

17 Form W 3 Transmittal of Wage and Tax Statements Federal or State? Federal Purpose of the form Form W 3 Transmittal reports the total amount of earnings and tax withholdings of the W2 employee's wages, salaries, and tips. What requires your College to file? The IRS mandates that every College provide the Social Security Administration with a Form W 3 and W 2 Copy As. When is the report due? Furnish W3 and W2 Copy As to the Social Security Administration by February 28 th (if you file electronically March 31 st ) Some Common Mistakes when preparing incorrect total information, incorrect College information Penalties related to non compliance failure to file penalties (section 6721), failure to file correct information (maximum $200,000 to $500,000 per year) 17

18 Form 1099 Miscellaneous Income Federal or State? Federal Purpose of the form The Form 1099 is one of the IRS's main weapons in fighting under reporting by the self employed. What requires your College to file? The basic rule is the College must file a 1099 MISC whenever the College pays an unincorporated independent contractor who is a sole proprietor or member of a partnership or LLC $600 or more in a year for work done in the course of your trade or business. pdf/i1099msc.pdf When is the report due? Furnish Copy B, and Copy 2 to the independent contractor by January 31 st, Furnish Copy A to the IRS by February 28 th (if you file electronically March 31 st ), Copy C is for the College records. Some Common Mistakes when preparing incorrect or incomplete contractor information, incorrect College information Penalties related to non compliance failure to file penalties, failure to file complete and/or correct contractor information. 18

19 Form 1096 Annual Summary and Transmittal Return Federal or State? Federal Purpose of the form Form 1096 is a compilation form which provides totals for 1099 forms (Misc, Div, Int, etc.) submitted by an employer for independent contractors What requires your College to file? The College issues 1099 MISCs to unincorporated independent contractor. pdf/i1099gi.pdf When is the report due? Furnish Copy B, and Copy 2 to the independent contractor by January 31 st, Furnish Copy A to the IRS by February 28 th (if you file electronically March 31 st ), Copy C is for the College records. Some Common Mistakes when preparing incorrect or incomplete contractor information, incorrect College information Penalties related to non compliance failure to file penalties, failure to file correct contractor information (maximum $250,000 per year). 19

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21 Thank You At WSC We ACHIEVE! A ppreciation C ollaboration H umanitarianism I nnovation E njoyment V igilance E xcellence Michael J. White, CPA Partner in Charge El Paso White + Samaniego + Campbell, LLC A member of Accounting & Consulting Group, LLP 810 E. Yandell Dr. El Paso, Texas mwhite@acgsw.com Alamogordo Albuquerque Carlsbad Clovis El Paso Hobbs Lubbock Roswell