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New business tax discussed at Lions Club

Lions Club members and CPAs Lana Lawrence and Tanja Barnebee spoke to their organization Wednesday about changes made for business taxes in Texas and tips to make tax season a little simpler.
“At the end of the year, the best thing to do is talk to your CPA,” said Barnebee. “It’s easier to deal with something before you do it.”
Barnebee’s parting advice to the group was, whether you plan to use the October 15 extension or not, find out whether you owe or not by April because the interest on what you owe begins on April 16.
Lawrence talked about the change from a Franchise Tax, which is currently in place for businesses, to a Margin Tax. Lawrence said the tax is “a tax for having the privilege to do business in Texas.”
A major change from the Franchise Tax to the Margin Tax will be the taxation of partnerships, unlike previously where partnerships were created in order to avoid being taxed. Other taxable entities include corporations, limited liability companies, banking corporations, savings and loan associations, business associations, professional associations and some joint ventures.
Those exempt from the Margin Tax are entities with gross receipts of $300,000 or less with inflation adjusted every two years, entities that owe less than $1,000 in franchise tax, general partnerships owned by “natural persons,” a term used by the government to differentiate between a corporation and a human being, tax-exempt entities, grantor trusts where parties are natural persons, estates, escrows, family limited partnerships that are passive entities and do not operate a business, insurance companies, non-profits, real estate investment trusts, real estate mortgage investment conduits and passive entities that meet the following:
must be a general or limited partnership, or a trust other than a business trust;
at least 90 percent of federal gross income must arise from a specific list of sources;
no more than 10 percent of the entity’s federal gross income can be received from conducting an active trade or business.
The new tax goes into effect beginning Jan. 1, 2007 with the first returns due in May of 2008. It is based on a percentage of “taxable margins” that equals one-half percent for taxable entities primarily engaged in retail or wholesale trade and one percent for all other taxable entities, according to Lawrence.
Lawrence said the process of calculating the Margin Tax is going to be very complicated and entities will have to keep better records in order to keep track.
The Ennis Noon Lions Club meets every Wednesday at noon at the Ennis Country Club.

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Posted by on Nov 30 2006. Filed under News. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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