| Common questions about TriMet and Lane Transit District self-employment taxes |
|
|
 |
|
|
What if a business activity is done both inside and outside the district?
You may apportion your self-employment earnings for those business activities that are both in and out of the district by using the formula on the return: Sales within the district divided by sales outside the district.
Most taxpayers will use sales factor only to apportion their income if their tax year begins after July 1, 2005. If you are filing for tax years before this date, refer to the instructions and forms for that particular tax year. There is an exception for certain taxpayers that meet the criteria below.
Exception: Taxpayers primarily engaged in utilities or telecommunications may elect to apportion net self-employment earnings using the double-weighted sales factor formula in OAR 150-314.280(3).
For tax years beginning on or after July 1, 2005, taxpayers in the forest products industry that own or manage at least 300,000 acres, but not more than 400,000 acres, and process at least 20 percent of the total wood chip supply for papermaking from sawmill residue generated within the state, are required to use the double-weighted sales factor provided in ORS 314.650.
For those exceptions listed above, use Form TSE-AP to apportion your income and check the box on the transit self-employment tax return that states that you meet that exception.
Where do I look to find my self-employment earnings?
Self-employment earnings are included on your federal Schedule SE, line 3. This is the net amount of earnings that you will begin with on line 1 of your transit self-employment tax return.
The net self-employment earnings on your federal Schedule SE may include those earnings reported on your federal Schedule C or C-EZ, Schedule F, or Schedule K-1 from a partnership return (Form 1065).
I have more than one business. How should I file my TriMet return?
File one return for each individual taxpayer. If you have separate business activities, attach a schedule for each separate business to your return.
Am I required to file a return if I have self-employment earnings of $400 or less?
No. Report only those self-employment earnings that are greater than $400 for each business activity.
Can I offset the gain on one business against the loss on a separate business?
No. Your federal Schedule SE may have netted the self-employment earnings from one business activity against the loss of another. You must include only those self-employment earnings from those businesses included on the federal Schedule SE and not offset these earnings against any business activities with losses.
Example: Business 1 has $10,000 of earned self-employment income. Business 2 has a $4,000 loss. On your Transit SE tax return, include only the business with the gain ($10,000). Do not use the net of the two, $6,000 ($10,000 – $4,000).
Can I file a joint return?
No. Each taxpayer having self-employment earnings must file a separate transit self-employment return. This is true even if you and your spouse filed a joint federal and state income tax return.
The only exception is a partnership that is filing for all of its members. Both spouses could be members of the same partnership and may be included on one transit return filed by the partnership. Refer to the information on partnerships.
Are there any special provisions for the type of business that is conducted?
Yes. See the summary below:
- Consultants—See Services (#12).
- Director's fees—See Services (#12).
- Farmers—Taxable the same as any other business. Farm income is subject to tax to the extent that sales of farm products are within the district. Farmers with sales both in and out of the district use apportionment.
- Fiscal Year Filers—When a partnership tax year ends within a calendar year, the partnership files on a calendar year basis with the return due the following April 15.
- Insurance Agents—Exempt for insurance related income only. Noninsurance-related self-employment activities (consulting, investment advice, etc.) are taxable.
- Manufacturers—Taxable on income earned in the district. Businesses with activities and sales both inside and outside the district use apportionment.
- Ministers—Exempt for compensation received for religious services. Compensation received for independent contract services (weddings, funerals, etc.) is taxable.
- Partnerships—The partnership may file one return for all partners, deducting one $400 exclusion for each partner. If taxpayers have other transit district self-employment income, they may not take the $400 exclusion again.
- Realtors—Realtors are sometimes treated as employees and sometimes as self-employed, depending on their relationship to their employers. If they are subject to the federal self-employment tax, then they are also subject to the transit district self-employment taxes.
- Rental Income—Not subject to tax unless the taxpayer is a real estate dealer and rental income is part of the business (IRC§1402(a)(1)).
- Royalties—See Services (#12).
- Services—Services are taxable if they are performed in the district. Services performed outside the district are not taxable. If services are performed both inside and outside the district, each individual service is either in or out of the district based on whether most of the cost of performance is in or out of the district. Example 1: Mary is a consultant who lives in the district. She does most of her work at each customer's place of business. In this situation, services provided to customers outside the district are not taxable. Example 2: Same facts as Example 1 except that Mary does most of the work for each customer from her home. Since most of Mary's cost of performance for each customer is in the district, all services are taxable, even though some customers are outside the district.
- Truckers—See Services (#12). If a trucker has no pick-ups or deliveries in the district, but merely passes through, then the trucker is not taxable.
- Writers—See Services (#12). If the majority of the cost of performance to create the book, article, etc., is within the district, then the writer is taxable.
Are there any taxpayers that are exempt?
Yes.
- C corporations (Incorporated businesses)
- S corporations (The distributive share)
- Ministers—applies only to compensation received for religious services.
- Insurance agents—applies only to insurance-related income.
When are the transit returns due?
The returns are generally due the same day as your federal and Oregon individual income tax returns. For most taxpayers, that is April 15. Fiscal year returns are due the 15th day of the fourth month after the end of the fiscal year.
Exception for fiscal year partnerships: When a partnership tax year ends within a calendar year, the partnership files on a calendar year basis with the return due on the 15th day of the fourth month after the end of the calendar year.
Do I need to make estimated payments? What if I want to make a payment before my transit tax is due?
There are no estimated payments needed for transit self-employment taxes. If you want to make a payment before or after you file your return, you may do so by including your check with Form TSE-V (payment voucher).
What is the exclusion?
The total exclusion for all of your self-employment earnings is limited to $400.
Individuals: Enter $400 or the amount of your self-employment earnings, whichever is less. An individual taxpayer may not claim more than a $400 exclusion on the transit self-employment tax return. If the exclusion was partially or completely used on another transit self-employment tax return filed by your partnership, you may only use the unused amount of the $400 exclusion.
Partnerships: Enter $400 for only those partners whose share of positive earnings are included in the net self-employment earnings on the transit self-employment tax return. If any partner's exclusion was partially or completely used on another transit self-employment tax return for that year, include only that partner's unused amount of the $400 exclusion. Each partner is responsible for ensuring that the total of all exclusions does not exceed $400.
Can I file an amended transit self-employment tax return?
Yes. File an amended transit return any time you need to correct your return as originally filed. Generally, you are allowed three years from the due date of the return or the date the return was filed, whichever is later, to file an amended return to claim a refund. Check the amended return box on your transit return.
Can I file my return electronically?
No. File your transit return by mail. Include your federal Schedule SE, apportionment worksheets, and payment vouchers. Make a copy for your records, and mail your return to the Oregon Department of Revenue address printed at the bottom of the tax return.
What if I'm audited by the IRS?
If changes are made that affect your self-employment earnings, file an amended return to report and pay any additional tax due. If the change reduces your transit tax, you have two years from the date of the audit report to claim a refund.
How do I file a valid extension?
If you get an extension to file your federal or Oregon individual income tax return, it will also extend your transit self-employment tax return. Check the Extension Filed box on your transit return and attach a copy of the extension to your return when you file.
Be sure to file your transit self-employment tax return within the extension period to avoid additional penalties.
Why am I being charged penalty and interest on my unpaid taxes when I have a valid extension?
More time to file does not mean more time to pay. If you have an extension, you must make your payment by the original due date of the return to avoid a penalty and interest charge. Complete Form TSE-V and send it with your payment of tax. Be sure to use the same name and Social Security number (SSN) or federal employer identification number (FEIN) that you will use on your return when you file.
I'm getting a refund on my Oregon individual income tax return. Can I have that refund applied to this tax?
No. We cannot apply any income tax refund to pay your transit self-employment tax.
Where can I find the forms and instructions?
Forms and instructions are available on our website. These forms cannot be electronically filed at this time. Please print out and mail to the address on the return.
If you do not have access to a computer, contact us.
|
|
| |
|
|
