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Tax Tip of the Week | No. 411 | Ohio Business Gateway Update June 14, 2017

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Tax Tip of the Week | June 14, 2017 | No. 411 | Ohio Business Gateway Update

The following is a recent article from the Ohio Society of CPAs on user improvements when using the Ohio Business Gateway—-

Ohio Business Gateway update: Improved Help & Case Management

The Gateway Modernization Project is not only focused on transforming the way transactions are completed on the Ohio Business Gateway, but also creating new features and functional enhancements to improve the Gateway’s user experience, reliability and efficiency.

One of the features that Gateway users identified as a major pain point was the Gateway’s help and case management functionality. Thus, the modernized Gateway will feature an entirely new help and case management system that will make finding and requesting help on the Gateway simpler.

Gateway users will now be able to request help, be presented with knowledge articles and open an individualized help case from anywhere on the Gateway, at any time.

Automated routing is also a component of the modernized Gateway’s case management system. For example, if a Gateway user opens a help case while completing a Commercial Activity Tax transaction, that help case will be automatically routed to a customer service representative with specific knowledge related to CAT.

Help case status updates will also appear automatically within the modernized Gateway. This will allow Gateway users and customer service representatives to correspond from within the Gateway. The conversation can be tracked and the case status updated accordingly.

Offering new and expanding existing ways to access help resources will decrease the amount of time Gateway users spend on activities not directly related to doing business. A revitalized and expanded case management system puts the Gateway Modernization Project one step closer to fulfilling its mission of making doing business in Ohio easy and efficient by providing e-government services that are simple and secure.

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. 410 | You Make The Call – Home Basis June 7, 2017

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Tax Tip of the Week | June 7, 2017 | No. 410 | You Make The Call – Home Basis

You Make the Call is a monthly format of questions and answers our office faces on a daily basis.  We hope you will find these tips to be a quick and fun read.

QUESTION: Albert walks into our office and tells us that he bought a house from his parents. The house is worth $350,000, but his parents only made him pay $200,000. His parents paid $100,000 for this house a few years ago. After making several improvements, their adjusted basis in the home was $150,000 when they sold it to Albert. He did not assume any mortgages on the home. What is Albert’s basis in the home?

ANSWER: This is a part gift, part sale. Albert’s parents sold it for $200,000, and they gave him a gift of $150,000 ($350,000 FMV (fair market value) less $200,000 sales price). In a part gift, part sale, Albert’s basis is the greater of the amount he paid for it ($200,000), or his parent’s adjusted basis in the home ($150,000) at the time of transfer. Thus, his basis is $200,000.

Please note that the question and answer provided does not take into account all options or circumstances possible.  Call us if you find yourself in a similar situation.

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. 409 | President Trump’s Tax Plan Summary May 31, 2017

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Tax Tip of the Week | May 31, 2017 | No. 409 | President Trump’s Tax Plan Summary

We now have some information about the proposals included in President Trump’s tax plan. Remember that this plan is not a law and has not yet even been introduced to Congress as a bill, and that a bill must be passed by both the House and the Senate and then signed by the President, so there is no way to know what will be passed (if anything). This is just a summary of the proposals, without comment. The plan released by the President is a one page plan, so most other details are not available beyond this summary.

Business Changes

C corporation tax rates would be reduced from the current highest rate of 35% to a new flat rate of 15%. Pass-through S corporation and LLC income would also be taxed at 15% rate for small and medium sized businesses (which were not defined).

Corporations would no longer be taxed on a worldwide system, but would be taxed on a territorial system, and a one-time repatriation tax would apply on the foreign earnings of US companies.

The proposal does not include a provision allowing expensing of all business assets, as originally proposed.

Individual Changes

The President wants to reduce the current seven different individual tax brackets to three brackets, with rates set at 10 percent, 25 percent, and 35 percent. The President also wants to double the standard deduction to $24,000 for Joint retruns, repeal alternative minimum tax and the estate tax and expand the credit for child and dependent care expenses, while also repealing the dreaded net investment income 3.8% surtax.

With the new standard deduction and changed brackets, individual taxpayers with taxable income less than $25,000 and married taxpayers with taxable income less than $50,000 would owe no Federal income tax.

Most individual itemized deductions would be repealed, but the deduction for mortgage interest and charitable donations would be retained.

Stay tuned….should be an interesting summer and fall!

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. 408 | American Health Care Act Update May 24, 2017

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Tax Tip of the Week | May 24, 2017 | No. 408 | American Health Care Act Update

Here is a quick observation from the OSCPAs:

Experts say this is not the health care reform news some were waiting for.

House action last week to replace the Affordable Care Act might have been a big news story for a few days, but an Ohio law expert said it doesn’t represent much progress toward the reform some thought was possible this year.

The U.S. House on May 4 voted 217-213 to pass the American Health Care Act, which would repeal and overhaul parts of the ACA. The bill now goes to the Senate for consideration – and therein lies the rub, said Joe Popp, JD, LLM, tax manager at Rea & Associates in Dublin, Ohio.

“The House has passed something, but the Senate would have to pass the exact same thing for this to really be big news,” Popp said. “I think most people would tell you there’s a zero percent chance of that.”

According to some news reports, the Senate is going to build a new bill from the ground up, in which case, “you’re back to square one,” Popp said.

“The fact that this has passed out of the House is a hurdle that’s been passed, but the larger hurdle was always the Senate,” he said.

Should the bill be modified by the Senate, it would then go to a conference committee, in which both houses of Congress would attempt to agree to a final version. That’s a precarious political position, given the tight margin of the House vote. And – already – 2018 is looming.

“People are going to start to campaign for primaries,” Popp said, adding that it will influence how legislators and those who support and oppose them will behave.

“It’s going to be interesting to see what sort of folks start coming down the pipe in the primary process,” he said.

Popp said the deep philosophical differences among legislators and the public make a stalemate the most likely situation in the short term.

“Someone at some point should have the idea to get rid of just one thing they all don’t like,” he said. “They can do that in a week. The reason they don’t want to do that is there are some unsavory things they want to drive through this, and to do that they need the big thing” they agree on. “They want the whole thing or nothing at all.”

So by all means keep monitoring the news, but much work remains for lawmakers before businesses will get actionable information.

Stay tuned, we’ll keep you posted…….

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. 407 | Treasury Ordered to Review 2016 Tax Regulations May 17, 2017

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Tax Tip of the Week | May 17, 2017 | No. 407 | Treasury Ordered to Review 2016 Tax Regulations

President Donald Trump recently signed an executive order directing the Treasury Department to review “significant” regulations that were issued in 2016 and 2017 to determine if the regulations cost too much, are too complex, or exceed the IRS’s statutory authority (Presidential Executive Order on Identifying and Reducing Tax Regulatory Burdens (April 21, 2017)).

Speaking at the signing ceremony, the president described the executive order as beginning “the process of tax simplification.”

The executive order does not define “significant” but does specify that any earlier determination under Executive Order 12866 (Sept. 30, 1993) of whether a tax regulation is significant will not be controlling.

The Treasury secretary is directed to produce an interim report within 60 days that identifies all Treasury regulations issued on or after Jan. 1, 2016, that “impose an undue financial burden on taxpayers”, “add undue complexity to the Federal tax laws,” or “exceed the statutory authority of the Internal Revenue Service.” Within 150 days, the Treasury secretary is directed to submit to the president recommendations to “mitigate the burden imposed by regulations identified in the interim report.”

The Treasury secretary and the director of the Office of Management and Budget were also told to review and reconsider the current system under which many Treasury regulations are exempt from the regulatory review process set forth in Executive Order 12866.

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. 406 | Great! You Received a Refund. Now What? May 10, 2017

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Tax Tip of the Week | May 10, 2017 | No. 406 | Great! You Received a Refund. Now What?

First and foremost, the goal, according to most CPAs, is to NOT get a refund. While many people love getting a large chunk of change every spring, it indicates you’re overpaying and essentially giving the government a tax-free loan. Getting a very small refund means you’re paying the IRS exactly the right amount. Of course situations change from year to year so you might not always get it right.

Too late, I’m getting a refund. Now what?

If you do receive a refund, there are a number of ways to make the most of it:

Clear your slate. If you have any high-interest debt (think credit cards), pay it down. If you own a home and have a mortgage, consider making an additional mortgage payment for the year. It will help cut down on the amount of interest you pay over the course of the loan. You may also want to consider paying off student loan debt or car loan debt, depending upon your interest rate.

Consider investing your refund to help your money grow. There are many tax beneficial investment vehicles to consider, such as a traditional or Roth IRA, 401(k), etc. A CPA/PFS can help you with financial planning. Whether this means squirreling the money away in retirement accounts, college savings plans, or in a regular old savings account to help you grow your nest egg, you can’t go wrong.

Make a strategic purchase. Driving a 15-year-old car? Need to upgrade your 5-year-old laptop? Looking to make home improvements? Using your refund to make a large, well-thought-out purchase may be the way to go.

Make memories. Do something fun! If you are working hard toward building your savings and have paid down debt, don’t be afraid to earmark some of your refund for a vacation or other experience. A recent survey shows kids remember the vacations they go on with their families way more than they remember “stuff.”

Adjust your withholding and/or estimated tax payments. Speak with your CPA about how to get closer to the goal of zero refund in the future and what adjustments need to be made during 2017. Plus, if you’re like most taxpayers who pay the IRS via payroll withholding, having a little more money in each paycheck is nice.

Things to avoid doing with a refund:

Making a large purchase when you have outstanding high-interest debt (i.e., living beyond your means);
Heading to the casino;
Loaning people money (at least avoid loaning non-deserving people money);
Letting it sit in a zero-interest account;
Buying a boat/pool/other large purchase that could increase your liability insurance and otherwise cost you a ton of money in maintenance.

While it might be a drag to take a cautious, responsible approach to a tax refund, it is an investment in your financial well-being, which is something you’ll never regret.

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. 405 | Items to Note on 529 Plans May 3, 2017

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Tax Tip of the Week | May 3, 2017 | No. 405 | Items to Note on 529 Plans

State Limitations

Often people question which state limits to follow when contributing to a 529 plan. Residence of the contributor? Residence of the beneficiary? The answer is…neither. The limits imposed are dependent on which state sponsors the plan. For most, this will be the state in which the contributor resides. Here in Ohio, the state limit is $414,000 to $426,000 contingent on the type of plan selected. Further, Ohio allows up to $2,000 in tax deductions for contributions to a 529 Plan. So, how much should be contributed annually? Contributors generally try to stay within the annual gift-tax reporting exclusion, which is $14,000, or $28,000 for a couple, per beneficiary. 529 Plans do have a special tax advantage that allow front-load contributions. In short, contributors can contribute $70,000, or $140,000 per couple all at once. However, this bars them from contributing to the same beneficiary for the subsequent four years.

Transferability

Beneficiaries can be changed with no tax consequences, but a change in beneficiary designation may not always be necessary. A strategy formulated by some is to transfer funds between beneficiaries in the earlier years of college to prevent reduction of potential FAFSA benefits. It should be noted that 529 Plan funds are not included in the calculation of FAFSA benefits. It is not until the funds are withdrawn for education purposes that they are included in the FAFSA benefit calculation.

Penalties

Penalties…a word no one likes to hear. Fortunately, this segment of the article focuses on when a penalty for withdrawal of unused 529 funds is waived. If these funds are withdrawn because college expenses were paid via scholarships, GI Bills, etc., then the penalty is waived. Earnings in the account are still subject to tax, but the contributions can be withdrawn tax and penalty free.

To further discuss the benefits of a 529 Plan, contact us today 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. 404 | Top 10 Regulatory Issues for 2017 April 26, 2017

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Tax Tip of the Week | April 26, 2017 | No. 404 | Top 10 Regulatory Issues for 2017

Tax season is over and we now need to look forward to 2017 issues. We have now seen where the new administration and GOP led Congress is trying to make changes.  For the balance of 2017 we will be keeping you updated on what we see as the “Top 10 Regulatory Issues for 2017”:

1.    Tax Reform
Reducing individual and corporate tax rates, a cap of 20% on capital gains, the elimination of the estate tax and the permanent ability to write off capital expenses appear to be major goals in 2017.

2.    The Affordable Care Act (ACA)
The “repeal and replacement of the ACA” was a central theme of President Trump’s campaign. We will be looking to see what the “replacement” will look like.

3.    Wage/Hour Compliance
Uncertainty still surrounds the Dept. of Labor’s Final Overtime Rule.  Numerous states and some cities are looking at adapting their own minimum wage rates. Trump has also voiced general support of federal minimum wage increases.

4.    Immigration Reform
Executive Orders have already been made by Trump to implement another of his major campaign promises.  A new Form I-9 was released on January 22, 2017 to strengthen the compliance of documented workers.  We expect more regulations to be passed in 2017.

5.    Retirement
The Dept of Labor’s Fiduciary Rule which will change the way financial advisors try to help their clients may be changed or repealed in 2017. Proposals have been made to create more generous tax credits for small business to offer qualified retirement plans.  Social Security is expected to garner attention.  Adjustments to Social Security include raising the retirement age, cutting benefits, raising the payroll tax cap and reducing the annual cost-of-living adjustment.

6.    Employment Regulations
Paid sick and family leave laws, maternity leave and EEOC rules to ensure equal pay should be areas of scrutiny during 2017.

7.    Payments
Even though the “smart chip” on credit cards was introduced in 2015 to help facilitate faster payments and reduce cyber theft, the technology has still not been fully implemented.  Also look for expansion of same-day ACH payments for real-time transactions.

8.    Cybersecurity
The growing problem of identity thefts and frauds along with the hacking of business and government databases should see increasing regulations to help curtail these crimes.

9.    Paycards
Payroll cards are an increasingly popular method for many workers to receive their wages.  The Consumer Financial Protection Bureau has issued a 1,689 page set of final rules that will go into effect October 1, 2017.

10.    Infrastructure Initiatives
One of President Trump’s key campaign promises was a $1 trillion infrastructure initiative to build/improve roads, bridges, broadband networks, etc.  Assuming he can find the funding for these projects, it would provide a major opportunity for small business owners and workers in 2017 and beyond.

Who knows what will happen in 2017—-but it should be an exciting year! We will keep you posted.

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. 403 | Is it a Business or a Hobby? April 19, 2017

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Tax Tip of the Week | April 19, 2017 | No. 403 | Is it a Business or a Hobby?

An issue we deal with all the time with our client’s is to help them distinguish if an activity is a Business or a Hobby. The difference is, legitimate business losses are potentially fully deductible.  If the activity is deemed to be a hobby by the IRS, then you can only deduct legitimate hobby expense up to the amount of your hobby income.

Sometimes it is hard to make a determination.  Activities related to horse racing, horse shows, auto racing or auto restoration draw particular scrutiny by the IRS.

The following is a nine part test the IRS considers in deciding whether a taxpayer is running a business genuinely designed to make money or merely a hobby:

1.    You carry on the activity in a businesslike manner.

2.    The time and effort you put into the activity indicate you intend to make it profitable.

3.    You depend on the income for your livelihood.

4.    Your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).

5.    You change your methods of operation in an attempt to improve profitability.

6.    You (or your advisers) have the knowledge needed to carry on the activity as a successful business.

7.    You were successful in making a profit in similar activities in the past.

8.    The activity makes a profit in some years (The guideline is profitable 3 out of the last 5 years).

9.    You can expect to make a future profit from the appreciation of the assets used in the activity.

As usual, when considering this and other tax situations it comes down to making sure it passes the “Smell Test”.

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. 402 | Filing for an Extension April 12, 2017

Posted by bradstreetblogger in : Tax Deadlines, Tax Planning Tips, Tax Preparation, Taxes, Uncategorized , add a comment

Tax Tip of the Week | April 12, 2017 | No. 402 | Filing for an Extension

If you haven’t filed your tax return by now, you should probably consider filing for an extension. It is a lot easier to file for an extension than it is to amend a return later for a mistake you made trying to rush your return to completion. Even more costly is if the IRS finds a mistake you made and assesses underpayment penalties and interest.

To file for an extension, you simply need to submit Form 4868. After submitting this form, you now have until October 16, 2017 to timely file your return.  Note, however, an extension of time to file is not an extension of time to pay.  If you suspect you will owe some taxes, you must send a payment along with the extension.  This is true for your federal, state and city returns.

Ohio will automatically accept the federal extension. Some cities, however, require a special city extension form. Also, some cities will not allow extensions if you only have W2 income.  Be sure to check with your work and/or resident cities before April 15th.

Another reason to file for extension is that some speculate your chances for an audit decreases for extended returns. How?  One of the methods the IRS uses to select a return for audit is to select a random sample of returns filed by April 17th.   If your return is not in that sample—then you don’t get picked!

Editor’s Note:  One of the pledges I make to all my clients is that my personal return will be the last one filed each year. When my most procrastinating client’s return is filed on October 16th —-mine is right behind it!  And has been that way for nearly 20 years!

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.