Accounting News and Notes

Multi-State Tax Reporting/Incorporating for Corporations

CPA Serving Atlanta GA & Beyond 

When preparing your year-end corporate income tax returns one of the most misused sections tax law is the reporting of taxable income (loss) to all states where a company transacts business. In general terms, companies should register as a corporation in all states where it regularly performs business operations. In general terms this would require legal registration in all states where a business has employees or a physical presence. However if you, for example, have an office in Georgia, but serve clients in other states while doing all of the work in Georgia, then you would register your company only in Georgia as this would be the only state where you physically transact business. Incorporation can be typically be reduced to two types:

Domicile. A corporation’s legal domicile is the location or state that a corporation originally incorporates. Typically this is also where the corporate home or only office of a company is located.

Foreign Corporation. Generally speaking in regards to incorporation issues for U.S. companies, a foreign corporation designation is reserved for corporations that are legally domiciled in other states and are transacting business in that state different from their original incorporation.

Similarly it will be true if you are a Georgia retailer and have clients both in and out of the state. For income tax purposes all of the income (as indeed all of the operations are in Georgia) would be reported and appropriate taxes paid to Georgia alone. However, for sales tax purposes our retailer does not have to collect sales taxes on retail shipments to physical locations outside the state of Georgia but to only collect and remit sales taxes on retail sales from Georgia locations or items shipped to addresses physically within the state of Georgia.

Calculation of state taxable income varies from state to state but most, while using their own specific formulas, allocate income based upon a combination and weighting of several factors including sales, payroll, rent and fixed assets. It is always advantageous to first ensure that the Federal Tax Return is correct before contemplating the assessment and specific monetary allocations by state. It is prudent as a quality control procedure to review allocations between years for consistency and comparability being sure to be able to explain or correct any substantive variances. By totaling the allocations by state in terms of both dollars and percent preparers are best able to ensure that allocations are appropriate as well as accurate.

To grow deeper in your new-found knowledge visit these informative and insightful articles dealing with Incorporating & Corporate Income Tax Returns:

Incorporating in Georgia
Starting your business off with the best tax elections for your business are amongst the most important business decisions you will ever reach. Discover how you can best set yourself up for business success as you consider this critical part of your business start-up.

Determining Where to Incorporate
The decision of where to incorporate your business is a critical component of getting your business started. Learn what you need to know to make a well-informed decision.

Corporate Returns
Discover what type of returns your corporation is required to file and its corresponding due dates ensuring that you do not miss an important deadline resulting in unnecessary penalties and interest.

We are all a work in process for which God prunes us, readying our spirit for what lay ahead. Leaning not on our own understanding but the Bible’s is the most important step you will ever make in determining to use your resources wisely. Applying these precepts to your Christian Money Management skills will help you avoid unnecessary debt, frivolous expenditures, invest wisely and to use your money as it has always been intended.

Written by author John Dillard CPA of His CPA at 770 814 9304 and visit http://www.hiscpa.com/ (a Christian CPA firm). At His CPA we march to the beat of a higher drummer where we put the “Golden Rule” to work each and every day by “Serving Him by Serving You…One Tax Return at a Time.”

We serve clients that are located in Atlanta GA, Gwinnett County, North Fulton County, Cherokee County, Dekalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Alpharetta, Johns Creek, Lawrenceville, Marietta, Milton, Norcross, Snellville, Roswell, Buford, Smyrna, Marietta, Cumming, Grayson, Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, East Point, Gainesville, Snellville, Buckhead, Buford, Peachtree City, Dunwoody, Kennesaw, Decatur, Conyers, Stone Mountain and Decatur.

The number of kids for the Vacation Bible School today was 60, and there were 7 in Adult Bible Study and 25 at the Senior Center. After registration, the kids were given the opportunity to get their face painted. Beverly used this time to give the kids a summary of the story that was being told in VBS that day. Adriano asked Ken Powers who created God. Then, he thought for a while and said, “I know. The Holy Spirit created God.” 

The construction crew completed the painting on the White Horse Church. The church was transformed from light blue with dark brown trim to tan with dark brown trim. The pastor of the church expressed her appreciation to them by preparing for them a delicious lunch of Indian tacos, pinto beans, onions, lettuce, salsa, fruit punch, and watermelon. 

Dee, Tami, Turner, Quinn, Kaylee, Ashley, and Madison spent the afternoon cleaning out the storage room at the Senior Center so that the construction crew could start painting and replacing the floor there on Wednesday. When they pulled stuffing mix from the top shelf, they found rat droppings. All I can say about this is “yuck!” 

The evening activity was Bingo. Julia won one of the games and chose one of the Navajo women to pick out the gift and keep it. To see one of our elementary kids truly grasping the meaning of giving was touching, and this set a precedent for playing Bingo if anyone on our team won.