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Tax Tip of the Week | No. 278 | Theft Prevention Measures Likely to Slow 2014 Refunds November 26, 2014

Posted by bradstreetblogger in : General, Tax Tip, Taxes, Taxes , add a comment

Tax Tip of the Week | Nov 26, 2014 | No. 278 | Theft Prevention Measures Likely to Slow 2014 Refunds

Here is a recent article from the Ohio Society of CPAs….

An ID theft problem ahead of the Oct. 15 filing deadline will likely lead to measures that will slow refunds in the spring, Ohio Tax Commissioner Joe Testa told OSCPA this week.

Testa said the Ohio Department of Taxation did not experience a data breach, and is working with law enforcement officials to get to the bottom of the problem.

“We’ve been hit with an issue that has affected other states and the federal governments for some time,” he said. “People somehow acquired Social Security numbers – the identity of other people – and filed bogus tax returns claiming refunds.

“The numbers have dramatically increased this year,” he said, as the state has stopped $230 million of attempted theft to date. The department granted a 30-day grace period for affected taxpayers and tax practitioners.

Testa joined Income Tax Division Administrator Deborah Smith in discussing the issue on the latest episode of OSCPA Spotlight. Though they said they couldn’t get specific about the measures they’re taking to catch the thieves, they said one result is that taxpayers can expect to wait for refunds longer than the five to seven days the department advertised in the past. The tax department will add more steps in the refund request process, which Testa said will unfortunately cause delays.

“We have to err on the side of protecting the state treasury and protecting legitimate taxpayers who are owed their refunds,” he said.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 277 | NCCPAP Warns of Impact of ACA on Tax Season November 19, 2014

Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , add a comment

Tax Tip of the Week | Nov 19, 2014 | No. 277 | NCCPAP Warns of Impact of ACA on Tax Season

Here is a recent article we thought you would like….

The National Conference of CPA Practitioners is warning that the complexities of the Affordable Care Act may negatively affect millions of taxpayers in the upcoming tax season.

Many taxpayers are unaware that their refund may be reduced or delayed — or even vanish entirely – due to issues tied to the act, the organization says, and many may find themselves confused by the new forms and reporting requirements.

“The 8 million-plus taxpayers who purchased health insurance on the Exchange may be in for an unpleasant surprise,” said CPA Stephen Mankowski, who is chair of NCCPAP’s Tax Policy Committee in a statement. Many of them received an Advanced Premium Tax Credit, which subsidized their premiums, but any number of life changes — including a raise, a new job, getting married or getting divorced – could render them ineligible for the credit. “Essentially these life changes could cause a taxpayer to lose the subsidy, resulting in an increase in said taxpayer’s taxes, a loss of refund or a balance due.”

Taxpayers who received the credits will need to reconcile them against their current circumstances – a complicated process. And all taxpayers will need to answer questions regarding their minimum essential coverage. They will also receive new forms whose purpose is unclear to them. “Taxpayers don’t know what they don’t know,” Mankowski said. “The IRS is not aware of the potential fallout that could occur over the confusion regarding these forms, and most tax preparers are frankly unprepared.”

“It is our opinion that the lack of widespread knowledge on this issue is because the new ACA related forms — and their instructions — were only recently released in draft form by the IRS; some were released as late as Oct. 15, 2014,” he continued. “No date has been set for the release of the final forms and instructions. This could delay the start of the filing season, which will delay the processing of those still eligible for refunds.”

As a result, NCCPAP is recommending that the government delay implementing this part of the ACA for one year, to give tax preparers time to set proper expectations with their clients.

There may be a lot of unhappy taxpayers this upcoming tax season—-Please don’t shoot the messenger!

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 276 | The News Keeps Getting Better! November 12, 2014

Posted by bradstreetblogger in : General, tax changes, Tax Tip, Taxes, Taxes, Uncategorized , add a comment

Tax Tip of the Week | Nov 12, 2014 | No. 276 | The News Keeps Getting Better!

A New 75% Tax Deduction in 2014!

Virtually all Ohio small business owners and investors will be eligible for a 75% tax deduction on the first $250,000 of business income when they file their 2014 Ohio tax return.  This is an increase from the 50% deduction they took on their 2013 tax returns.

Eligible businesses are those structured as pass-through entities.  This includes Subchapter S corporations (S-corps), partnerships, sole proprietorships, farmers, rentals, etc.  If the business has multiple owners, each is eligible to claim up to a $187,500 deduction ($250,000 X 75%) on their proportionate share.

If you were scheduled to make a fourth-quarter estimated tax payment to Ohio you should give us a call.  You may be able to reduce or even eliminate this last payment!

As the law reads now, the small business deduction reverts back to 50% for tax years after 2014.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 275 | Grandfather Represents Self in Tax Court and Wins November 5, 2014

Posted by bradstreetblogger in : Deductions, General, Tax Preparation, Taxes, Taxes , add a comment

Tax Tip of the Week | Nov 5, 2014 | No. 275 | Grandfather Represents Self in Tax Court and Wins

Sometimes a grandfather knows best, even when the disagreement involves the Internal Revenue Service.

In a case decided earlier this month in Tax Court, a taxpayer, James Roberts, claimed head of household filing status on his 2012 return, along with the Earned Income Tax Credit, the child tax credit and dependency exemptions based on his relationship to his three grandchildren.

The IRS contested the filing status, the EITC, the child tax credit and the exemptions, and assessed an accuracy-related penalty. At trial, the IRS conceded the accuracy-related penalty.

During January 2012, Roberts’ daughter and her two children became homeless. A third child was born that March. In order to help his daughter and her children, Roberts entered into an agreement with Tammy Moody whereby he and his three grandchildren would reside with Ms. Moody at her apartment.

The agreement stated in part: “This is an agreement between Tammy Moody and [James Roberts]. [James Roberts] agrees to pay 75 percent rent and utilities and bear full cost of meals, etc.”
Both Roberts and Ms. Moody signed and dated the agreement.

Roberts and his two grandchildren moved into the apartment in January 2012, joined by the third grandchild in March. Roberts complied with the agreement to provide rent, utilities and meals. They lived in the apartment until October 2012. During the time they were there, Roberts’ daughter also lived in the apartment and provided nonmonetary care for the three children. Ms. Moody also provided care for the children when Roberts and his daughter were not at the apartment, with Roberts reimbursing Ms. Moody for any expenses she incurred in caring for the children.

The Tax Court, in T.C. Summary Opinion 2014-88, found that Roberts qualified for the deductions, credits, and filing status.

The IRS conceded that Roberts’ grandchildren met both the relationship test and the age requirement for the dependency exemption, but contested the “same principal place of abode as the taxpayer for more than one-half of such taxable year” requirement. Based on its findings of fact, the court found that Roberts established this requirement.

Likewise, the court found that the grandchildren did not provide over one-half of their own support for the 2012 tax year, and therefore they constituted qualifying children for the year. Therefore, Roberts was entitled to the dependency exemptions for his three grandchildren for 2012. The same requirement under Section 152(c) of the Tax Code qualified the children for Roberts to take the EITC and child tax credit.

To qualify for head of household, which provides a special tax rate, the taxpayer must have maintained as his or her home a household that was the principal place of abode for at least one dependent for more than one-half of the taxable year. The Tax Court found that Roberts satisfied this requirement because he maintained a household and the three grandchildren were his dependents for 2012. Thus, he was entitled to head of household filing status in calculating his tax liability for 2012.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.