In our last article, we introduced you to three changes you should know about for the 2020 tax season. In this article, we’ll share two more things to watch out for as you prepare for April 15. Don’t be caught off-guard by these or any other changes. Talk to tax professionals like those at James Russell, PLLC for professional advice.
Wayfair Decision Summary and Impact
State tax agencies are spreading a wider net to capture more sales tax on interstate transactions as a result of the June 2018 U.S. Supreme Court’s South Dakota vs. Wayfair decision in favor of the State. This decision has changed the rules allowing States to initiate sales tax collections from businesses operating across state borders, without an in-state presence requirement. As a result of this ruling, all 45 states with sales and use taxes are expected to enact revised nexus regulations in order to collect more revenue for their state coffers.
Although sales and use taxes have historically been the burden of the end user, the Wayfair decision has opened the path for States to shift collection and remittance obligations to the seller. In addition, the tax obligations may not stop at the entity level. Conducting business as a corporation or a limited liability company may not protect business owners and officers from personal state tax liability under the responsible person rules.
With the future of virtual marketplace growth in standard business sales and operations, the impact of the Wayfair decision will be shifting into high gear over the next several years. So, hold on it may be a bumpy ride.
Big changes happened with the Estate and Trust rules, as the Federal level exemption increased to $11.58 million. However, caution should be taken as the Washington state threshold is holding at $2,193,000 so it is easy to cross the Washington estate tax threshold and incur an estate tax liability. The average Woodway home is $1.5 million dollars as of October 2019, so by adding the value of your home, other real estate, retirement accounts, and life insurance, you are likely to surpass the Washington estate limit. Collaborating with your attorney and CPA to preserve the step-up basis, leveraging gifts, and optimizing tax savings will provide peace of mind for you and your family.
Talk to your tax professional now to find the best way to save money in light of these changes. We would love to help you. Our expert CPAs are available for consultation so you can be sure you’re receiving the full benefit of the new tax laws.