New Ohio Municipal Withholding Payment Rules

George Timoteo, CPA

Senior Manager

timoteo@hwco.com

The enactment of Ohio House Bill 5 became effective January 1, 2016, and with this law came a large number of city income tax rule changes.  One seemingly minor change not widely publicized is the due date for making city withholding tax payments.  The subtle change is that the payment of withholding taxes is due on the 15^th of the month following the end of the reporting period.  The important change is that the payment due date makes no allowance for weekends or holidays.  Therefore, if the 15^th of a given month falls on the weekend, the payment is still due on the 15^th of the month.  No allowance is made for the postmark date of a mailed payment.  Therefore, considerations should be made to make sure payment due will be received by the city in question no later than the 15^th of the month.  Payments received after the 15^th of the month can be subjected to a rather severe 50% penalty of the tax amount paid.

Beware of New Phishing Schemes

Cathy Robinson, CPA

Principal

robinson@hwco.com

 

Cybercriminals are continuing to attempt to get personal information from individuals.  Here is the latest scheme the IRS has shared.  The cybercriminals are emailing payroll and human resource employees posing as company executives and who are requesting personal information for   employees.    The email will contain the name of the actual company executive.  A sample email request might be: “Kindly send me the individual 2015 W-2 (PDF) and earnings summary of all W-2s of our company staff for a quick review.”    If you are a payroll or human resource employee, you should confirm with the company executive who received the email request.

 

The IRS is renewing consumer alerts about email schemes after seeing an approximate 400 percent surge in phishing and malware incidents so far this tax season.  In addition, there are emails being sent to individuals from tax software companies seeking information and asking to confirm personal information.

 

Remember, the IRS will not contact you via email or phone.   Also, your tax software company should not need to contact you.

Don’t Forget to Consider the Ohio Business Income Deduction

Cathy Robinson, CPA

Principal

robinson@hwco.com

 

Beginning in 2015, Ohio has increased the benefit to taxpayers for the Ohio Business Deduction.  A business will receive up to 75% deduction on their first $250,000 of business income. This means up to $187,500 of business income will go untaxed by the state of Ohio no matter where it was earned.  The calculation removes the apportionment calculation that was part of the original deduction.  The remainder of the business greater than $250,000 will be taxed at the graduated rate of up to 3%.  The new deduction applies to both pass - through entities and proprietors alike.  The taxpayer should be careful though and take a closer look at what exactly constitutes business income.  Business income includes monies received in the ordinary course of a trade or business operation.

 

The deduction gets even better in 2016 when individuals can deduct 100% of their business income from their personal Ohio income tax.

 

Please remember to consider this tax deduction when preparing your return, and as always when in doubt, consult your advisor.

 

Lease Accounting Standard and Private Companies

Anthony LaNasa, CPA, CFE

Managing Principal - Columbus

lanasa@hwco.com

 

The U.S. Chamber of Commerce and other trade groups are trying to get the new lease standard expected to be published this month exempted from Private Companies.  In a January 29, 2016 letter to the Financial Accounting Standards Board (FASB), the trade groups state they do not feel the FASB adequately considered the differences between private and public companies.  This new standard will require all leases (those more than 12 months in duration) to be recorded as assets (right to use asset) and debt on all company’s balance sheets.  This is a significant change from prior guidance related to operating leases that were expensed as paid by companies.

 

The letter states:   “We are concerned that the decision to apply the soon-to-be finalized lease accounting standard to private businesses will exacerbate complexity, not meet the needs of private company investors and harm capital formation for those businesses. Such a decision would presume that users of private company financial statements would prefer capitalizing leases on balance sheets. However, since users of private companies are different than public company financial statement users in both composition and motivation this may not be the case”.  The link to the letter is http://www.fasb.org/cs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1175832675827&blobheader=application%2Fpdf&blobheadername2=Content-Length&blobheadername1=Content-Disposition&blobheadervalue2=534659&blobheadervalue1=filename%3DLEASES-16.UNS.0021.U.S._CHAMBER_OF_COMMERCE_SEE_LISTED.pdf&blobcol=urldata&blobtable=MungoBlobs

 

The new standard will apply to all companies (private, public, and nonprofit) and is expected to be released this month.  However, stay tuned to potential last minute changes based on negative reaction such as this.

 

Check your Mailbox - Another IRS Data Breach

 

 

 

Cathy Robinson, CPA

Principal

robinson@hwco.com

 

Last month, the IRS stopped identity thieves from attempting to generate E-file PINS for stolen Social Security Numbers.  The PINS are used to efile a tax return.  There were 101,000 Social Security Numbers affected.  The IRS will be contacting the taxpayers to tell them of the breach, and tax return identity theft markers will be placed on their accounts.  There was no personal taxpayer data compromised or disclosed.  The breach was not related to the shutdown of efiling last week. 

 

Remember, the IRS will only contact you by mail.  They will not contact you by telephone or email.  If you need clarification of the correspondence, do not hesitate to consult your CPA.

 

 

Good news for charitable donors!

Cathy Robinson, CPA

Principal

robinson@hwco.com

 

The IRS has withdrawn proposed regulations regarding the reporting of donor information.  The proposed regulations would have allowed charities to file information returns about donors instead of providing written acknowledgements to the donors.   The problem with filing of information returns would have required obtaining the social security number of donors.  Some charities felt that asking for a social security number would discourage potential donors.  In addition, other charities were worried about identity theft.

 

Therefore, you must obtain written acknowledgement from the charity for a donation over $250 and save it for your tax preparer.

The Research credit has been permanently extended.

Cathy Robinson, CPA

Principal

robinson@hwco.com

 

 

Research and development credits were originally implemented to create jobs and bolster the U.S. position as a leader in technological development. It is also important to note that the name can be misleading as the credit not only covers research and product development, but it also includes new processes, formulas, and software, etc. This effectively extends the industries commonly thought to benefit from the credit to also include industries such as software development and construction (i.e., designing electrical systems, mechanical systems, and testing new building materials, etc.). 

 

The PATH act retroactively and permanently extended this credit, which otherwise would have expired prior to 2015. The qualified research expenses encompass both in-house and contract expenses.  The credit is for 20% of current year qualified spending that exceeds a base amount related to gross receipts in earlier years and cannot exceed 10% of the total spending in the current year on qualified research.

The big impact of the research credit is its ability to be used by eligible small businesses for years beginning after December 31, 2015.  In addition, an eligible small business ($50 million or less in gross receipts) can claim the credit against its alternative minimum tax liability.

 

A second benefit added by the PATH Act allows a qualified small business ($5 million or less in gross receipts) the option to claim a portion of its research credit as a payroll tax credit against its employer FICA tax liability versus  its income tax liability.  If elected, the payroll credit can be claimed beginning with the first calendar quarter after the date on which the small business files its income tax or informational returns for the tax year.

With the start of the new year, it is a good time to have a conversation with your tax adviser to determine if you can qualify for this credit, as well as which option may be most beneficial.