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Tax Tip of the Week | No. 395 | 2017 Ohio Tax Filing Updates February 22, 2017

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

Tax Tip of the Week | February 22, 2017 | No. 395 | 2017 Ohio Tax Filing Updates

The following is a recent update from the Ohio Society of CPAs, regarding the upcoming Ohio tax filing season. The two biggest take-a-ways are:

1.     If you didn’t receive your 2015 refund because you didn’t pass the identity test on your first attempt, you must follow-up with additional information.  The Ohio Department of Taxation WILL NOT follow-up with you to issue these valid refunds.

2.    To file your 2016 state return, you must include your driver’s license information on the return.

The Ohio Department of Taxation said about 665,000 Ohio taxpayers were asked to take the quiz in 2016 – down from nearly 1.7 million in 2015, when, taxpayers complained about the questions and Gov. Kasich vetoed a budget provision that would have limited the questions to information obtained from the previous five years.

Those who do not take the quiz within 30 days – or fail it multiple times – have to provide documentation to receive their refunds. The requested refund will not be issued until a quiz is passed or ODT receives and accepts proper documentation to confirm your identity.

Tax Commissioner Joe Testa last year said taxpayers found the quiz quick and easy to take, a view supported by its 98.8% passage rate. And ODT said hundreds of millions of dollars of fraudulent refund claims have been blocked since 2014.

What that number should NOT include is legitimate refunds that haven’t been issued. Now, ODT isn’t going to track down failed quiz takers and demand they come get their refunds. So we suggest asking clients who were required to take the quiz whether they actually did so, and whether they received their state refunds. Once you provide the proper documentation, then ODT will release the money.

In other news, the Ohio Department of Taxation announced this week that the state income tax filing season begins Jan. 23. As expected, the ID Confirmation Quiz is back, and taxpayers will need to provide a driver’s license or state ID card information to help combat stolen-identity tax fraud.

ODT said this year’s income tax filing process will include the following changes:

–    The business income deduction for 2016 has been increased to 100% of the first $250,000 of net business income from “pass-through” businesses. Income over that amount from these businesses will remain subject to a flat 3% tax rate.

–    Ohio has added a deduction for contributions to Ohio’s STABLE Account to help taxpayers who are caring for a disabled child or other designated disabled beneficiary. This deduction allows taxpayers to reduce their taxable gross income by up to $2,000 per beneficiary per year.

–    Indexing of income brackets which protects Ohioans from the impact of inflation on their personal income tax rates resumes in 2016 at the conclusion of the phase-in of the Governor’s previous personal income tax rate reductions.

As always, give us a call if you have any questions.  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. 394 | Ten Deductions You Might Miss – Part 2 February 15, 2017

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

Tax Tip of the Week | February 15, 2017 | No. 394 | Ten Deductions You Might Miss – Part 2

This is Part 2 of a two part series……..

Take the time to consider the following potential tax deductions. Nothing is more painful than to find out your tax refund could have been higher if you hadn’t overlooked these deductions:

6.  Lifetime Learning
The tax code offers a number of deductions geared toward the traditional college student. That doesn’t mean, however, that non-traditional students or those who have already graduated don’t get a tax break as well.  The Lifetime Learning credit can provide savings up to $2,000/yr. (20% X first $10,000 in qualified expenses). This credit phases out at higher income levels, but doesn’t discriminate based on age.

7.  Unusual Business Expenses
If something is used to benefit your business and you can document the reasons for it, you can generally deduct it from your business income.  A junkyard owner, for example, might be able to deduct the cost of cat food that encourages stray cats to hang around and control the mice and rats.  A professional bodybuilder got approved to deduct the cost of body oil used in competitions.

8.  Looking for Work
Losing your job is traumatic, and the cost of finding a new one can be high. But if you’re looking for a job in the same field, you itemize your deductions, and these expenses exceed 2 percent of your adjusted gross income, any qualifying expenses over that threshold can be deducted. It may seem like a high bar, but those costs add up quickly – consider deducting the mileage you put on your car driving to interviews and the cost of printing resumes.

9.  Self-Employed Social Security
The bad news about being self-employed: You have to pay 15.3% of your income for social security and Medicare taxes, the portions ordinarily paid by both employee and employer. But there’s one small consolation – you do get to deduct the 7.65% employer portion from your gross income on the front page of the tax return.

10.  Public Safety Officers
The deduction is only available to retired police, fire, corrections officials, judges, etc.  They can deduct up to $3,000 for the premiums they pay for their health insurance.  They would show the total pension distribution on Line 16a of the 1040 tax return and show up to a $3,000 lesser amount for the taxable portion on Line 16b.  Write “PSO” next to Line 16b.

Please note these are very simplified examples and should not be relied upon without professional consultation.

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. 393 | Ten Deductions You Might Miss – Part 1 February 8, 2017

Posted by bradstreetblogger in : Deductions, General, Tax Planning Tips, Tax Preparation, Tax Tip, Taxes, Uncategorized , add a comment

Tax Tip of the Week | February 8, 2017 | No. 393 | Ten Deductions You Might Miss – Part 1

This is Part 1 of a two part series……..

Take the time to consider the following potential tax deductions. Nothing is more painful than to find out your tax refund could have been higher if you hadn’t overlooked these deductions:

1.  Sales Taxes
If you itemize, you have the option of deducting sales taxes or state income taxes, whichever is greater.  In a state that doesn’t have its own income tax (Ohio does have an income tax), this can be a big money saver.  Even in Ohio, the sales tax deduction might be a better deal if you make some large purchases.  It may also help senior citizens in Ohio if they pay no city taxes and limited state taxes. Note:  you must be able to itemize to take this deduction.

2.  Health Insurance Premiums
If you pay health insurance with after-tax dollars, the premiums would be deductible after they exceed 10% of your adjusted gross income. ( Note: employer provided insurance plans will normally have the employee portion of the premiums paid in before-tax dollars.)   The big winners who can use this deduction are self-employed individuals.  They can deduct 100% of the premium cost on the front page of the tax return and do not need to itemize.

3.  Tax Savings for Teachers
Most teachers will pay for some classroom items out of their own pocket.  If you keep records, K-12 teachers can deduct up to $250 on their tax return. You do not need to itemize to take this deduction.

4.  Charitable Gifts
Most people know they can deduct money or goods given to a qualified charity.  But don’t overlook out-of-pocket expenses you may incur while performing charitable work. For example, if you bake cupcakes for a fundraiser, you can deduct the cost of the ingredients.  Also, don’t forget to keep track of your mileage while performing charitable work because the mileage can also be deducted.

5.  Paying the Babysitter
You may be able to deduct the cost of a babysitter if you are paying them to watch your kids while you volunteer to work for a recognized charity. Once again, keep good records for this deduction.

Please note these are very simplified examples and should not be relied upon without professional consultation.

Five more to come next week!

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. 392 | How Are You Going to File? February 1, 2017

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

Tax Tip of the Week | February 1, 2017 | No. 392 | How Are You Going to File?

Some tips are worth repeating—-a reminder we offer every year:

If you were legally married on 12/31/16, the IRS considers you married for the entire year of 2016.

You now must decide if you are going to file as Married Filing Jointly (MFJ) or Married Filing Separately (MFS).  Note, however, if you file MFJ it is an irrevocable election—you cannot go back and amend a MFJ return to a MFS return.

The primary reason to file MFS is to pay less tax.  This is particularly beneficial to save on the amount of Ohio taxes paid. Another reason to file separately is to avoid joint liability.  Each spouse who signs a joint return is responsible for the accuracy and tax liability on the return.

Many times, for example, in a second marriage situation we see couples who have a desire to maintain separate financial responsibilities.  While this is understandable, it could lead to paying several thousand dollars in additional taxes.  If you file MFS, you should consider the following:

–   Child care credits, education credits, adoption credits and the earned income credit are not allowed on MFS returns
–    Deductions for student loan interest, tuition and fees, and savings bond interest are not allowed for MFS returns
–    If one spouse itemizes, or takes the standard deduction, the other spouse must do the same.  (That is, one cannot itemize and the other take the standard deduction.)
–    A greater percentage of your Social Security benefits may be taxable
–    Your ability to contribute to traditional or Roth IRA will be greatly limited
–    Capital losses could be limited to a maximum of $1,500
–    Passive losses could be limited

Remember:  If one spouse itemizes their deduction BOTH spouses must itemize.  You cannot let one spouse use Schedule A for itemized deductions and allow the other spouse to take the Standard Deduction when MFS.

Before filing your return you need to look at both MFJ and MFS to see which lowers your tax burden the greatest.

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.