Yesterday I did my first 2006 Form CBT-100 (New Jersey Corporation Business Tax Return) for a calendar year corporation.
And for the first time I used the new Minimum Tax amount, based on NJ gross receipts, and the 4% surcharge!
The 2006 CBT-100 instructions state, “For privilege periods beginning on or after January 1, 2006, the minimum tax is assessed based on the New Jersey Gross Receipts.”
The return I prepared was for a medical services corporation that I always “zero out” each year by making “management fee” payments to another medical corporation, both of which are 100% owned by the same doctor. So the corporation had a “0” net taxable income. However, because the “New Jersey Gross Receipts” were $360,900.00, the minimum tax was $1,000.00 (“$250,000 or more but less than $500,000”). To that I added the 4% surcharge of $40.00.
So a corporation with “0” net taxable income paid $1,040.00 in NJ state corporate income tax!
The doctor also has another corporation that brings its net taxable income to “0” via management fee payments, and this corporation will also pay $1,040.00 to “Uncle Jon” for 2006.
The corporation to which the management fees were paid is also “zero-ed out” each year by a salary bonus paid to the doctor-owner. So this corporation also has a net taxable income of “0”. Yet it will pay $2,080.00 in NJ state corporate income tax because of its gross receipts!
The State of New Jersey will get a total of $4,160.00 in corporate income tax on a total combined taxable income of “0”. Plus it will get Gross Income Tax from the doctor on the salary bonus, some of which will be taxed at the “millionaire tax” rate of 8.97%.
And that is not all. Because the minimum tax payment for each of the corporations is more than $500.00 they will no longer be allowed the convenience of making a one-time 50% “Installment Payment” on the CBT-100 in lieu of quarterly corporate estimated tax payments. Each corporation must make quarterly payments.
As per the instructions, “If the 206 Total Tax Liability, before the 4% surtax, is greater than $500, the taxpayer must make installment payments toward 2007. These payments are to be made on Form CBT-150 and are due on or before the 15th day of the 4th, 6th, 9th and 12th months of the year.”
So the tax been substantially increased and we have been given more work to do. The DFBs!!!
TAFN
And for the first time I used the new Minimum Tax amount, based on NJ gross receipts, and the 4% surcharge!
The 2006 CBT-100 instructions state, “For privilege periods beginning on or after January 1, 2006, the minimum tax is assessed based on the New Jersey Gross Receipts.”
The return I prepared was for a medical services corporation that I always “zero out” each year by making “management fee” payments to another medical corporation, both of which are 100% owned by the same doctor. So the corporation had a “0” net taxable income. However, because the “New Jersey Gross Receipts” were $360,900.00, the minimum tax was $1,000.00 (“$250,000 or more but less than $500,000”). To that I added the 4% surcharge of $40.00.
So a corporation with “0” net taxable income paid $1,040.00 in NJ state corporate income tax!
The doctor also has another corporation that brings its net taxable income to “0” via management fee payments, and this corporation will also pay $1,040.00 to “Uncle Jon” for 2006.
The corporation to which the management fees were paid is also “zero-ed out” each year by a salary bonus paid to the doctor-owner. So this corporation also has a net taxable income of “0”. Yet it will pay $2,080.00 in NJ state corporate income tax because of its gross receipts!
The State of New Jersey will get a total of $4,160.00 in corporate income tax on a total combined taxable income of “0”. Plus it will get Gross Income Tax from the doctor on the salary bonus, some of which will be taxed at the “millionaire tax” rate of 8.97%.
And that is not all. Because the minimum tax payment for each of the corporations is more than $500.00 they will no longer be allowed the convenience of making a one-time 50% “Installment Payment” on the CBT-100 in lieu of quarterly corporate estimated tax payments. Each corporation must make quarterly payments.
As per the instructions, “If the 206 Total Tax Liability, before the 4% surtax, is greater than $500, the taxpayer must make installment payments toward 2007. These payments are to be made on Form CBT-150 and are due on or before the 15th day of the 4th, 6th, 9th and 12th months of the year.”
So the tax been substantially increased and we have been given more work to do. The DFBs!!!
TAFN
2 comments:
Isn't this double taxation?
The CBT-100S - A-GR part does not explain very welll what goes in each line...Can you elaborate a little bit based on your experince?
For example, I am incorporated (S) in NJ, but travel to perform services in Florida... I bill a broker in Georgia and they bill the Florida Client (get paid by the client) and send checks to my NJ address...
If my services are performed in Florida for a total invoiced amount of 150K for 2006, what goes on each line of A-GR?
C.A.
C.A.-
(1) I do not have any experience with NJ corporations with out-of-state issues.
(2) I do this for a living. While I can answer general questions in areas where I have knowledge and experience, I certainly do not provide specific, detailed tax preparation information for free online.
(3) I no longer accept corporate clients.
RDF
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