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Tax Tip of the Week | Keep your Tax Returns Forever? October 24, 2018

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

Tax Tip of the Week
October 24, 2018

One of our more commonly asked questions is, how long do I have to keep my income tax returns?

Maybe, the key words in this question are “have to.” For practically all intents and purposes “have to” refers to the requirement of retaining three (3) years after filing them. The reasoning is that you and the IRS only have three (3) years to amend or change a return (typical statute of limitations).

BUT, there are some notable exceptions to the three (3) year rule:

(1) The IRS may go back six (6) years when a significant income amount (25%) has been omitted from an income tax return. They can also go back indefinitely if the IRS proves you filed a fraudulent tax return.

(2) What about the situation where the IRS says you failed to file a return? Let’s say the IRS asks for a return from four (4) years ago. Oops – you just shredded that one since you were diligently following the three (3) year rule. Who knows why the IRS did not receive the return. Maybe your neighbor hijacked it from your mailbox, possibly your postal carrier lost it or the IRS Center received it but simply missed processing it because the return was attached to another return and overlooked. It matters not, why the return was not shown as received by the IRS, because the burden is yours to prove the return was filed. Now you have to resurrect your records, prepare and file the tax return again or be classified forever and ever as a “non-filer.”

Bob Carlson, editor of Retirement Watch, contends that keeping your tax returns indefinitely may well be worth the hassle. “Once you show a return was filed, the statute of limitations is three (3) years, unless the fraud or six (6) year exceptions apply. With very few exceptions, the IRS won’t be able to question the details of the (older) returns. You can shred and dispose of those supporting records and keep a copy of the return.”

It may well be worth the hassle to store these old returns in an effort to gain just a little peace of mind.

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.

This Week’s Author – Mark C Bradstreet, CPA

–until next week

Tax Tip of the Week | No. 471 | Ohio Worker’s Compensation August 1, 2018

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

Tax Tip of the Week | Aug 1, 2018 | No. 471 | Ohio Worker’s Compensation

To Start: Having a business in Ohio requires you to obtain Worker’s Compensation insurance for your employees and possibly your subcontractors. The application, payments and returns are all filed through the Ohio Bureau of Workers’ Compensation (OBWC) website at https://www.bwc.ohio.gov.

For new employers an application form U-3 requires a $120 non-refundable application fee. Based on your estimated payroll for the following 12 months and the type of work that your employees do (manual number), OBWC will set your annual fee. It is very important that you are specific in the type of work being done and the equipment being used to accurately assign the manual numbers and rates.

Reporting & Paying: Depending on the amount set for your annual fee, you will either need to pay the entire amount up front or it will be broken down into 6 equal payments. You can make these payments online or pay the installments through the mail. Once a year, you can elect to make your 6 payments monthly, quarterly or annually. BWC runs on a fiscal year of July 1- June 30. A true-up report is due annually on August 15 and is required to be filed on their website reporting the actual payroll for the prior fiscal year. Depending on the actual versus the estimated, either an overpayment will be refunded or a balance will be due. If you have a significant increase in your payroll, you may want to increase your payments during the year so that you don’t owe a large sum with the true up.

Rebates: In 2018 OBWC is issuing rebates for the 2016-2017 fiscal year of 85% of the premiums paid for that year. Checks were mailed out in July. Rebates have also been issued in 3 of the past 4 years.

Lowering your rates:  There are various methods to help lower your rates including: belonging to a group, participating in safety programs, i.e. Policy Activity Rebate (PAR) and training through Better You, Better Ohio! as well as other rating programs. Various rules apply to these, including claim history and some may not be combined.

Let us help answer any of your questions about Workers’ Compensation or other tax matters.

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

This week’s author – Linda J. Johannes, CPA

–until next week.

Tax Tip of the Week | No. 467 | Hmmm…Behind on Filing Your Income Tax Returns and/or Paying Your Income Taxes? July 4, 2018

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Tax Tip of the Week | July 4, 2018 | No. 467 | Hmmm…Behind on Filing Your Income Tax Returns and/or Paying Your Income Taxes?

You can run but you can’t hide. Delinquent tax return filing or failure to pay your income taxes is not a problem that ever goes away. In fact, the longer you wait to address this problem, the worse it becomes.

The highlights that follow are specific to the Internal Revenue Service. Other taxing entities have their own rules and regulations for past due returns and past due tax balances.

The “failure to file” IRS penalty is typically 5% per month and the “failure to pay” IRS penalty is an additional 5% per month. These two penalties may each be up to 25% of your unpaid taxes. To add insult to injury, interest expense to the IRS also accrues until the balance is paid in full.

The IRS may waive these penalties if you have reasonable cause for not filing your return or paying your taxes. Criminal charges may be sought against a taxpayer if the IRS believes you are evading taxes.

Some people won’t file a return with a balance due if funds are lacking to pay the IRS. In these cases, one may be in a better position to file the return without payment to avoid the “failure to file” penalty.  In this scenario, the “failure to pay” penalty would be the only penalty assessed, along with the interest expense of course.

If paying your return balance is not an option, an installment agreement may be applied for. If eligible, this agreement sets-up a monthly payment. Warning: These installment agreements are typically null and void if a payment is missed.

Another option, although far from easy to obtain, is to request an “offer in compromise.” This permits you to pay, under certain conditions, less then the full overdue balance.

Another possibility exists, if the IRS agrees you cannot pay your past due balance and your living expenses, your account may be moved to “currently not collectible.” Usually, in this situation, the IRS collection efforts will ratchet down. However, the debt remains with penalties and interest continuing to grow.

The moral of the story is not to ignore any IRS correspondence (or any tax correspondence for that matter) and be proactive in dealing with it. Your tax professional can help you come up with a workable plan. They have been down this road before and most likely will have a working rapport with the tax agency in question.

Credit to Sarah Skidmire Sell, The Associated Press, Sunday April 29, 2018, Dayton Daily News

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

This week’s author – Mark Bradstreet, CPA

–until next week.

Tax Tip of the Week | No. 464 | Ohio’s Commercial Activity Tax (CAT) – General Information June 13, 2018

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

Tax Tip of the Week | June 13, 2018 | No. 464 | Ohio’s Commercial Activity Tax (CAT) – General Information

The commercial activity tax (CAT) was enacted in Ohio House Bill 66 and first applied to taxable gross receipts received on and after July 1, 2005. The CAT is a successor tax to Ohio’s general business property and corporate franchise taxes, both of which were phased out. The CAT is an annual privilege tax measured by gross receipts on business activities in Ohio. This tax applies to all types of businesses: e.g., retailers, service providers (such as lawyers, accountants, and doctors), manufacturers, and other types of businesses including rentals. The CAT also applies whether the business is located in Ohio or is located outside of Ohio if the taxpayer has enough business contacts with this state. The CAT applies to all entities regardless of form, (e.g., sole proprietorships, partnerships, LLCs, and all types of corporations). A person with taxable gross receipts of more than $150,000 per calendar year is subject to this tax.

Taxable Gross Receipts – Gross receipts subject to CAT include most business types of receipts. Some examples of receipts that are not subject to the CAT include interest, dividends, capital gains, wages and gifts. Receipts from sales to out-of-state purchasers are not subject to the CAT.

Registration – Taxpayers having over $150,000 in gross receipts from sales to customers in Ohio for the calendar year are required to file returns for the CAT. In order to file returns, a taxpayer must first register for the CAT with the Ohio Department of Taxation.

Annual and Quarterly Filers – Annual CAT taxpayers (those taxpayers with taxable gross receipts between $150,000 and $1 million in a calendar year) must pay an annual minimum tax. The annual minimum tax is due on May 10th of the current tax year.

Taxpayers with annual taxable gross receipts in excess of $1 million must file returns on a quarterly basis. Quarterly taxpayers pay a rate component for taxable gross receipts in excess of $1 million. The annual minimum tax is paid with the filing of the first quarter return, which is due on May 10th.

Consolidated Elected Taxpayer Groups and Combined Taxpayer Groups – A consolidated elected taxpayer group is a taxpayer that has elected to file as a group including all entities that have either 50 percent or more common ownership or 80 percent or more common ownership. A major benefit of making this election is that receipts received between members of the group may be excluded from the taxable gross receipts of the group. This election is binding for eight calendar quarters.

Annual Minimum Tax –   The annual minimum tax is calculated as follows:
•    $150 for taxpayers with taxable gross receipts of $1 million or less in the previous calendar year;
•    $800 for taxpayers with taxable gross receipts between $1 million and $2 million;
•    $2,100 for taxpayers with taxable gross receipts between $2 million and $4 million; or
•    $2,600 for taxpayers with more than $4 million in taxable gross receipts in the previous calendar year.

Tax Credits – Some credits that taxpayers can claim against the CAT include:
•    the nonrefundable jobs retention credit;
•    the nonrefundable credit for qualified research expenses, or, the nonrefundable credit for a borrower’s qualified research and development loan payments;
•    the refundable motion picture production credit;
•    the refundable jobs creation credit, or the refundable job retention credit;
•    the Ohio historic preservation tax credit (on a temporary basis).

Some Issues We’ve Seen – From the beginning of enactment, and even through the present, many taxpayers are simply unaware that the tax exists, or that they are subject to it. Another issue is that some taxpayers file CAT returns that include all gross receipts and not just those to Ohio customers. And some do not take advantage of credits that can be applied to the tax. Also, we have seen many cases where the taxpayer computes the tax, then goes online and makes the payment, but never files the return. And, it usually takes Ohio over a year to send out a notice for the unfiled return, and by then, they have sent the taxpayer to collections, and filed liens. And finally, we have noticed that audits in this area are on the rise.

As you can see, this simple tax is not always so simple.

Note: most of this information is available on the Ohio Department of Taxation’s website.

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

This week’s author – Norman S. Hicks, CPA

–until next week.

Tax Tip of the Week | No. 439 | Special Holiday Edition December 20, 2017

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Tax Tip of the Week | Dec 20, 2017 | No. 439 | Special Holiday Edition…

Enjoy the Holidays!

We are going to take a break from our tax and business tips this week. Instead, the family of Bradstreet & Company would like to wish you and your family the most joyous holiday season and best wishes for 2018.

We hope you enjoy the Tax Tip of The Week. As always, your topic suggestions and questions are always appreciated.

Is the Tax Tip of the Week real?
While your kids are questioning if Santa is real, we continue to receive some interesting feedback that some of you don’t realize this is really Bradstreet CPAs reaching out each week (… some suspect this is a “packaged” communication to which we add our logo.) Well, rest assured it’s us and we love to hear from you.

Enjoy the week and, “Yes Virgina, there is a Santa Claus”.

Wishing you all great things,

The Staff at Bradstreet & Company

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

…until next week.

Tax Tip of the Week | No. 430 | FINALLY! Penalty Relief for Delinquent Partnership Returns October 25, 2017

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

Tax Tip of the Week | Oct 25, 2017 | No. 430 | FINALLY! Penalty Relief for Delinquent Partnership Returns

In case you are unaware, some Internal Revenue Service filing due dates have changed. These new deadlines which began with the 2016 tax year for returns filed in 2017 included the Form 1065, U.S. Return of Partnership Income. The original due date for calendar-year partnerships was April 15th, the same as your personal income tax return. The new due date for calendar-year partnerships is March 15th.

S corporations have always been due March 15th. Partnerships and S corporations are known as “pass-through entities” because all items of income and expense get “passed through” and are reported on the owners’ personal income tax returns. Partnerships and S corporations generate a K-1 for each partner, shareholder or member. The K-1 provides information necessary for preparation of the owner’s personal return.

By moving the due date of partnerships up to March 15th, the IRS hopes more returns can be filed by April 15th, rather than having to file extensions due to late K-1’s. Or, to say it another way, the Internal Revenue Service hopes to get your tax money faster by taxpayers filing earlier.

However, many partnerships did not meet the new, earlier filing deadline and either filed their returns and/or their extensions late. If you are an owner of a partnership that has received a penalty notice for late filing, we may have some good news. If certain conditions are met, the Internal Revenue Service may provide you relief from the penalties normally assessed when filing a delinquent return. These types of penalties for partnerships may be quite significant since they are assessed on a per partner, per month basis. So, if you have one of these types of notices, let us know. We can help.

Sometimes we have to be thankful for the small things in life.

This week’s author….Mark Bradstreet, CPA

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.

Tax Tip of the Week | No. 391 | 2017 Tax Filing Deadlines January 25, 2017

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Tax Tip of the Week | January 25, 2017 | No. 391 | 2017 Tax Filing Deadlines

Keep the following dates in mind while filing your 2016 tax returns in 2017:

March 15, 2017   Partnership/Form 1065 – This is a new due date for partnerships, changed from April 15.

March 15, 2017   S-Corps/Form 1120S – This deadline remains the same as prior years.

April 18, 2017*    Individual Tax/Form 1040, Estates, Trust/Form 1041 – *Not a typo! 4/15/17 is a Saturday and 4/17/17 is a holiday in Washington D.C.

April 18, 2017      Individual Extension/Form 4868 – Remember, if you owe taxes for 2016, a tax payment is due with the extension.

April 18, 2017      C-Corps/Form 1120 – C-Corps were previously due by March 15.

Sept 15, 2017       Extended Partnerships/Form 1065, S-Corps/Form 1120S, C-Corps(calendar year)/Form 1120,  – Any extended return that contains a K-1 is due prior to individual deadlines.

Oct 2, 2017           Extended Estates, Trust/Form 1041 – These were previously due October 15.

Oct 16, 2017         Individual Tax/Form 1040 – Last day to file individual returns that were placed on extension.

April 15, 2020      2016 Amended Return/Form1040X – You can file an Amended Return to pay taxes anytime, but you only have 3 years from the original due date to claim a refund.

Please Note:  This is not a comprehensive list of all due dates for all tax forms and does not include due date changes for fiscal year-end C-Corps.

Also Note:  Ohio generally follows all federal due dates as do most cities. Please contact us regarding your particular filing due dates.

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. 387 | Happy New Year! December 28, 2016

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Tax Tip of the Week | December 28, 2016 | No. 387 | Happy New Year!

And get ready for the tax filing season.

Hopefully, you followed some of the suggestions we outlined a few years ago in TTW # 21 to organize your records.  If you did, great!  This will make filing your tax returns a lot easier this year. It also means that you and your tax advisor can spend more time on tax and financial planning issues for 2017 vs. looking back to 2016.

If you are new to our Tax Tip of the Week series, or didn’t follow our suggestions from a few years ago, now would be a good time to review TTW #21.   You might want to make getting organized your 2017 New Year’s Resolution!

This week we will look at some of the more common forms that you should be watching for in the coming weeks and months:

W-2:    Employers should mail these by 1/31/17.  If you have moved during the year, make sure former employers are aware of your new address.

W-2G:    Casinos, Lottery Commissions and other gambling entities should mail these by 1/31/17 if you have gambling winnings above a certain threshold. Note:  Some casinos will issue you a W-2G at the time you win a jackpot.  Make sure you have saved those throughout the year.

1096:    Compilation sheet that shows the totals of the information returns that you are physically mailing to the IRS. The check box for Form 1099-H was removed from line 6, while a check box for Form 1098-Q was added to line 6. The spacing for all check boxes on line 6 was expanded. The amounts reported in Box 13 of Form 1099-INT should now be included in box 5 of Form 1096 when filing Form 1099-INT to the IRS.

1098-C:    This form is for contributions of motor vehicles, boats, and airplanes. A donee organization must file a separate Form 1098-C with the IRS for each contribution of a qualified vehicle that has a claimed value of more than $500. All filers of this form may truncate a donor’s identification number (social security number, individual taxpayer identification number, adoption taxpayer identification number, or employer identification number), on written acknowledgements. Truncation is not allowed, however, on any documents the filer files with the IRS.

1099-MISC :    This form reports the total paid during the year to a single person or entity for services provided. Certain Medicaid waiver payments may be excludable from the income as difficulty of care payments.  A new check box was added to this form to identify a foreign financial institution filing this form to satisfy its chapter 4 reporting requirement.

1099-INT:    This form is used to report interest income from banks and other financial institutions. Box 13 was added to report bond premium on tax-exempt bonds. All later boxes were renumbered.  A new check box was added to this form to identify a foreign financial institution filing this form to satisfy its chapter 4 reporting requirement.

1099-DIV:    This form is issued to those who have received dividends from stocks. A new check box was added to this form to identify a foreign financial institution filing this form to satisfy its chapter 4 reporting requirement.

1099-B:    This form is issued by a broker or barter exchange that summarizes the proceeds of transactions. For a sale of debt instrument that is a wash sale and has accrued market discount, enter code “W” in box 1f and the amount of the wash sale loss disallowed in box 1g.

1099-K:    This form is given to those merchants accepting payment card transactions.  Completion of box 1b (Card Not Present transactions) is now mandatory.

K-1s:    If you are a partner in a business or a limited partner in some investments, your income and expenses will be reported to you on a K-1. The tax returns for these entities are not due until 3/15/17 (if they have a calendar-year accounting). Sometimes, you may not receive a K-1 until shortly after the entity’s tax return is filed in March.

If you are a beneficiary of an estate or trust, your share of the income and expenses for the year will also be reported on a K-1. The timing of when you may receive your K-1 is the same as outlined above.

NOTE:  Many times partnerships, estates and trusts will put their tax returns on extension.  If they do, the due date of the return is not until 9/15/17.  We often see client’s receiving K-1s in the third week of September.

If you receive, or expect to receive, a K-1 it may be best if you place your personal return on extension.  It is a lot easier to extend your return then it is to amend your return after receiving a K-1 late in the year.

So start watching your mailbox and put all of these statements you receive in that new file you created!

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. 381 | New W-2 Reporting Requirements November 16, 2016

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

Tax Tip of the Week | November 16, 2016 | No. 381 | New W-2 Reporting Requirements

New W-2 and 1099-MISC Filing Deadlines to Have a Significant Impact on Businesses

This change adds an extensive amount of work for filers in January.

Every tax year brings a variety of changes, whether forms are updated or regulations have changed. This year marks a particularly important year for filers, as the deadline for submitting Form W-2 to the SSA and Form 1099-MISC to the IRS has changed significantly.

Beginning in 2017, for the 2016 reporting year, filers must send W-2 and 1099-MISC recipient copies and submit to the SSA/IRSIRS/SSA by January 31, regardless of method (paper or e-file). In many cases, this is months earlier, increasing workload and stress for filers.

To further complicate matters, the new filing deadline, as it relates to Form 1099-MISC, only impacts filers reporting nonemployee compensation payments in box 7. Although the overwhelming majority of 1099-MISC filers will report information in box 7, there is bound to be some confusion.

Historically, filers were required to provide W-2 and 1099-MISC forms to recipients by January 31; however, they were not required to submit the forms to the SSA/IRS until February 28 (paper) or March 31 (e-file).

With three months of work being condensed into 30 days, this change adds an extensive amount of work for filers in January. In addition, Forms 1095-B and 1095-C filing deadlines also fall at the end of January for recipient delivery. This schedule means businesses will face a huge time crunch when planning for wage, income, and ACA reporting for the 2016 year.

In the past, some businesses would file W-2 and 1099-MISC recipient copies first and wait to find out if any changes were needed prior to filing to the SSA/IRS, which lessened the risk for possible corrections. Due to the earlier deadline in 2017, businesses may need to abandon this strategy and consider filing to recipients and the SSA/IRS concurrently.

To further complicate January’s filing deadlines, the IRS recently eliminated the automatic 30-day extension of time to file W-2 forms. Previously, filers could obtain an automatic 30-day extension by submitting Form 8809 to the IRS on or before January 31. Filers could also request an additional 30-day extension, pushing their e-file deadline to the end of May. These automatic extensions will no longer be available when filing W-2 forms for tax year 2016.

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.