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USTaxAdvising
USTaxAdvising, CPA
Category: Tax
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Experience:  US Taxation specialist.
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Los Angeles City Business tax question regarding back tax.

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Los Angeles City Business tax question regarding back tax. The column for 'Basis for tax', Column D, is based on gross income from last year 2012. To compute this, I multiply my gross income by the tax rate, then insert it into Column F.

But then the column for 'back tax', Column G, applies to businesses newly established in 2012; I am a newly established business as of 2012. And to calculate this, to simply copy the tax computation in column F to Column G.

Does that mean, I have to pay taxes twice for 2012?

USTaxAdvising :

Hello, Thank you for using justanswer. I can assist you with your questions today.

Customer:

Hello

USTaxAdvising :

No it does not mean that you have to pay taxes on it twice for 2012.

USTaxAdvising :

Basically the amount of tax will be the same for both year 1 and year 2 as taxable income period is the same.

USTaxAdvising :

Here is an excerpt from the LA City Dep of Finance - "


When a new activity subject to tax is started it is required that the minimum tax be paid with the application. At the end of the first business tax calendar year or when the activity is terminated during the first calendar year of such activity, it is required that a statement of the entire first calendar year's gross receipts be filed and payment made of any tax due in excess of that paid at the time of the application. The tax for the first and second calendar years are each measured by the gross receipts of the first calendar year. Consequently, the tax for the first and second calendar year is always in the same amount."

Customer:

Okay. So as I understand it, this tax renewal form I'm currently filing for is actually for this year...2013. And the back tax column, actually applies to 2012. Is this correct?

USTaxAdvising :

Basically yes.

Customer:

So this is UNLIKE federal and state income tax, where taxes are calculated based on last year's earnings, correct? And that I'm paying for this year in advance, based on last year...in this case, 'back tax'. Do I have this right?

USTaxAdvising :

So this is UNLIKE federal and state income tax, where taxes are calculated based on last year's earnings, correct? - This is LIKE federal and state income tax. The tax is computed using the prior year's gross receipts. Only in the first and secon years will both numbers be the same for the amount of gross receipts and tax.

Customer:

Okay, according to lacity finance website my basis for tax are "gross receipts" from the previous calendar year. Which makes sense. Where it is confusing is the back tax, because that's also based on the previous calendar year...at least for newly formed businesses in 2012.

Customer:

and...

USTaxAdvising :

Yes agreed it is confusing, I haven't worked with the Form and license for a few years now so I am looking up a few things as well to help make more sense of it.

USTaxAdvising :

Do you know if you qualifying for any "new business" or "small business" exceptions?

Customer:

...since taxes will be the same for year 1 and year 2, the way it's calculated is that I'm calculating year 2 first, and copying that number to year 1 'back tax' column. I would think that would be in reverse, where I calculate year 1 first, and just copy that over to year 2?

Customer:

Yes, there is a new business exception, but it had elapsed on Feb 28. Growing pains

USTaxAdvising :

Ah ha.Yes....

Customer:

This business tax renewal form was due on Feb 28. I didn't realize that the business tax renewal form is also the same form to declare taxes.

USTaxAdvising :

I see.

USTaxAdvising :

Agreed the back tax is wierd but that is the way they have set it up. It isn't double taxation it's just using the same figures for years 1 and 2. It sounds to me like you are doing it correctly.

Customer:

so the long and short of it, it sounds like I need to place an amount on the 'back tax' column. Here are the instructions LA City provides http://finance.lacity.org/form/Form%201000A.pdf and it's III D the 'basis for tax' and III G 'back tax' that seem to be the same thing.

Customer:

I just found the answer...http://finance.lacity.org/content/BusinessTaxInformationFAQ.htm under the question: Why does it seem like I am being 'double taxed' on my renewals?

USTaxAdvising :

Agreed yes you need to place an amount in the 'back tax' column

Customer:

...It's basically what you said. ha. Thank you very much for your help!

USTaxAdvising :

Can you send me the link to the worksheet you are using?

USTaxAdvising :

I can't find the worksheet online....no problem. :)

Customer:

Thank you again. I'll be sure to give you an excellent rating

USTaxAdvising :

Thanks!

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