Nevada is known among business owners to be a tax haven for all types of businesses. Although the state has no corporate or personal income tax, it doesn’t mean you no longer have to pay taxes.
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Nevada is known among business owners as a tax haven for all types of businesses. Although the state has no corporate or personal income tax, this doesn’t mean you no longer have to pay taxes.
Certain taxes could still apply to your startup, depending on its nature and revenue. One excellent example is the Nevada Modified Business Tax (MBT). The MBT is a complex tax system that’s constantly changing. It can also be challenging to understand, especially if you don’t know where to start.
If you need help figuring out how it works, you’ve come to the right place. This article will explore the NV-modified business tax and how it can affect your startup’s finances.
The MBT is a state tax imposed on businesses with employees. It is based on the total wages paid by the employer to its employees. The tax is calculated as a percentage of the gross wages and reported tips paid by the business for a calendar quarter, with rates varying depending on the classification of the business and the amount of wages paid.
There are two classifications for the NV-modified business tax:
Most general businesses (not including financial institutions) have an excise tax rate of 1.17% on their wages after the employer pays healthcare deductions. However, per Nevada Revised Statute (NRS) 363B.110, the first $50,000 remains untaxed.
For example, if your total wages for the first quarter of the year are $101,000, you’ll only be taxed on the remaining $51,000. Thus, your total MBT for that quarter will be $889.95.
It’s also worth noting that employers under this category can enjoy tax credits of up to 50% of the amount they paid during the previous year. They can use their tax credits to pay for their existing tax dues.
If your taxable wages for the quarter are below $50,000, you must still file your tax returns even though your tax due is technically zero.
The excise tax rates for financial institutions and mining companies are higher than those of general businesses. Although the former’s tax rate is 2%, they get the same tax credit opportunity as the latter.
Moreover, they don’t have the same $50,000 exemption as the first classification. This means they must pay taxes on all wages even if they earn less than $50,000 that quarter.
Nevada’s Modified Business Tax is a self-reporting payroll tax. It’s up to you, the employer, to characterize your business as a financial institution or a general business.
However, the Department of Taxation determines whether your business is licensed or registered. If your startup is registered as a savings and holding company, you will be categorized as a financial institution.
Can you dispute your classification? Yes, but the process for these cases takes time. If you want to change your assigned classification, you must write a petition to the department.
Your petition should include the following:
The MBT has a few exemptions, just like any other tax form. The following entities are exempt from NV’s modified business tax;
If these conditions apply to your business, you’ll be exempted from paying the MBT.
Here’s what you need to do to file your MBT tax returns:
If you’re a general business employer, you must complete a TID NO:020-TX Form and submit it at the end of the month following the last day of the quarter. For instance, all forms and tax payments for the first quarter of 2023 should be submitted by April 30, 2023.
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Per the Department of Taxation, you can’t include healthcare deductions like life and occupational disease insurance in your TID NO:020-TX Form.
On the other hand, if you’re a financial institution or a mining company, you must report all paid wages on a TID NO:021-TX Form. The same rule applies to healthcare deductions in this classification.
You can find both TID NO:020-TX and TID NO:021-TX forms on the Nevada Department of Taxation website.
If an employer misses the submission deadline, they’ll be fined as high as 10% of their unpaid balance. There will also be an added .75% interest for each month they don’t pay their tax dues.
Nevada’s MBT affects businesses operating within the state. Specifically, it applies to entities with employees who pay wages exceeding a certain threshold.
The due date for Nevada’s Modified Business Tax usually falls on the last day of the month following the end of the taxable quarter. For instance, taxes for the first quarter of the year (January to March) are due by the last day of April.
Gross wages refer to the total compensation paid to employees before deductions, such as taxes or benefits. There isn’t a cap on gross wages subject to the MBT.
Yes, allowable deductions from gross wages can reduce the taxable amount subject to Nevada’s MBT. Some common deductions include certain employee benefits, retirement contributions, and health insurance premiums.
Business insurance premiums may be eligible for deduction from gross wages, thus reducing the taxable amount subject to the MBT. However, eligibility and specifics regarding deductions for insurance premiums may vary based on the type of insurance and other factors.
You can file an amended return if you need to correct errors or update information on a previously filed tax return. The steps for amending a tax return involve these steps:
If the amended return results in a credit, the credit will be applied first to satisfy current or future liabilities unless a refund is requested. Also, specify if you are requesting a refund.
If you are planning to start a business in Nevada, knowing its modified business tax and what it means for your upcoming venture is imperative. The MBT may be complicated, but NCH guides to file them properly.
NCH offers comprehensive tax services for businesses of all sizes. From tax preparation to compliance, our tax professionals can lessen the burden that MBTs pose to your business.
Because all businesses have unique needs and goals, we have made it our mission to implement a personalized approach to our services. Our team will work closely with you to develop solutions for your unique tax situation.
By working with us, you can rest easy knowing that your startup’s taxes are in capable hands.
Learn more about our strategic tax services by calling us anytime at 1-800-508-1729.
DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.
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