Good News For Ohio Nonprofits

Tony LaNasa
Managing Principal-Columbus Office
lanasa@hwco.com
 

As an HW Nonprofit Advisor I recognize the importance of our clients being informed of the latest changes occurring in the industry.

Ohio nonprofit organizations received great news on September 29th when the Ohio Revised Code Sec. 4123.01 was amended in HB 52 to not consider unpaid corporate officers or volunteers as employees for the purpose of workers’ compensation.  This great news is less costs to nonprofits in premiums, and more dollars for the nonprofits mission and purpose.

To read more on this subject visit the OSCPA's website or click here.

Our 7 Need to Know Tax Strategies for End of Year Tax Planning

 

 

Cathy A. Robinson, CPA
Senior Manager
robinson@hwco.com
 

 

Last week, we shared some tax planning ideas for small businesses.  We recognize that it's just as important for individuals to have a tax strategy in place as well. This week, we share some ideas for individuals, though not all items are ideas individuals will be able to implement. 

1.       Review your filing status to ensure the change will not impact income. 

2.        Postpone income until 2016 and accelerate deductions into 2015, you believe you will be in a lower bracket next year.

a.        Accelerating deductions could be accomplished by bunching deductions together.  For example, you could pay three real estate taxes in one year versus two. 

b.      You could use your credit card to pay deductible expenses before the end of the year.

c.       You may consider if it is advantageous to defer your bonus to 2016.

 

3.        Consider realizing losses on stock or consider selling appreciated assets to offset pre-existing losses.  Of course, for either of these transactions you will need to consult with your investment advisor.

 

4.       Review your required minimum distributions from your IRA or 401(K).   You could delay first required distribution, but it might mean that you double up your distribution in the next year and push you into a higher tax bracket.

 

5.       Pay your fourth quarter state or local estimated payment before the end of the year.

 

6.       If you paid a balance with your state and/or local income tax returns in 2014, remember to include the amounts paid with your 2015 returns.

 

7.       If applicable, remember to consider the effect of any of your year-tax planning on AMT (alternative minimum tax).  A deduction may not save taxes if you are subject to AMT.

 

As always, contact your tax professional in order to begin the planning process so you do not have any surprises in April.

What You Really Need to Worry About When it Comes to Vacation Rentals



Cathy R. Robinson, CPA
Senior Manager
robinson@hwco.com

Owning a vacation property can be a great idea. You get the perks of vacationing somewhere else for as long as you like, while also being able to rent out the property when it’s not in use. It seems like the perfect scenario. However, there are also some drawbacks to owning a vacation property that you may not be aware of.

So what can you do as a vacation property owner to help make sure you’re compliant?   Begin with good recordkeeping.  Documentation is needed for the rental income and expenses.  The amount of rent that is charged should be the fair market value even if renting to relatives.   If your rental property has a loss for the year and you did not charge fair market value, the loss will be disallowed.  The IRS will need to review all records if you are audited. 

Many business owners also make an error when they assume that just because they have simply paid the federal income tax on their revenue they have nothing else to worry about when it comes to the world of taxes. Sadly, they are wrong.  

First, you need to determine the license requirements as well as the tax.  This can be confusing as these items can be highly localized with different names and requirements. The next step is to register with any state and local tax agencies.  Also, remember to renew your business license each year.  

As always, it is important to consult your accounting professional. They can help you to navigate the tricky waters of the various taxes involved and assist with developing a plan for your recordkeeping.

 

Renting your property can be an easy way to help offset the cost of ownership of the vacation home. It’s important to understand each aspect of ownership so you can avoid any surprises at the end of the year.  

 

 

Tips, Tricks and Essentials of Estate Planning (PART 2)

Cathy R. Robinson, CPA
Senior Manager
robinson@hwco.com
 

In Part 1 of Tips, Tricks and Essentials of Estate Planning the four essential documents the CPAs and advisors at HW&Co. most recommend were covered. To recap the list, the essentials were having a will, having durable power of attorney, medical power of attorney, and finally, a directive to physicians or a living will.

So what else can you do to better prepare yourself for planning your estate?  There are additional highly recommended items you should look into. They are: 

A  Trust

You should create a trust while you are alive. Finding a reliable, trustworthy trustee is the second step. This person will manage the property according to legal duties and your instructions. They distribute the assets to the beneficiaries according to your instructions.  So why invest in a trust? The first reason is so that it can help you to provide for and protect a beneficiary. Secondly, the flexibility of asset distribution can help to spread benefits over time. Your instructions will govern who receives the assets of the trust and the amount they receive, while also setting standards and conditions. Finally, a trust can help to protect against your own incompetence. Should something happen with your mental state the trust will already be in place with clear concise orders to help take care of your loved ones.  

It’s important to also be aware that while trusts can be very helpful, they are not always worth the cost, expense and hassle that come with them. You should also look out for the trust “seminars” sponsored by companies claiming to prepare trusts. These people are often not licensed attorneys. Avoid the scam and seek out a professional.  

Self-Designation of Guardian

With this document, you can name the person whom you would want appointed to be in charge of your minor child(ren.) A guardian is the person who will be legally responsible for the personal affairs, health, and well-being of a minor. In some states, you can also disqualify people you do not want appointed.  

Organ Donation

If you are someone who would like to donate your organs, you should have clear documentation and instructions. This can be as easy as going to the DMV to have it placed on your driver’s license. If you do not make this decision for yourself, your family will reserve the right to make the decision for you.  

There never seems to be an ideal time to plan your estate, but it is important to have a plan. These useful documents can help to make things easier on your loved ones, while ensuring your wishes are being carried out accordingly. It is also recommended to seek professional advice as to meet your goals.    

September Intern Recruiting...Coming to a School Near You!

Kirsten Thompson, CPA
Director of HR

Katie Primeau
HR Assistant

 

HW&Co. | CPAs & Advisors will be meeting with students and recent grads from Ohio colleges during the month of September at Accounting Career Fairs!  Check the career services calendar at your university and stop by the HW&Co. booth to introduce yourself.

 

HW&Co. already looking for Accounting Interns to work through busy season January through April 15, 2016. 

September Recruiting at Ohio Colleges for Interns:

College	Date
The Ohio State University	9/08/15
Bowling Green State University	9/09/15
Ashland University	9/10/15
Case Western Reserve University	9/10/15
University of Akron	9/15/15
Cleveland State University	9/16/15
Baldwin Wallace University	9/17/15
University of Dayton	9/17/15
Kent State University	9/17/15
John Carroll University	9/21/15

Tips, Tricks and Essentials for Estate Planning (PART 1)

Cathy A. Robinson, CPA
Senior Manager
robinson@hwco.com
 

In this two part series, we have compiled a list of essential documents, as well as the highly recommended documents, for Estate Planning.  Though you may think you can wait to plan, our advisors recommend starting sooner rather than later.   

Estate planning can be complicated.  It is important you know all the essential tips, tricks, and documents to can help make planning easier on you and your relatives. What are the essential documents that you will need for planning your estate?  

1.)    A Will

Having a will is the first and most important step.  In your will you must clearly and carefully describe the beneficiaries and the property and or assets they will receive. This means identifying their exact name and relationship to you, as well as the property and or asset. Keep in mind a stranger should be able to go into your home and find the item based upon the provided description.

 

This is especially true for heirlooms. They should be specifically left in the will and described carefully. Relying on markings, an informal list, or the idea your children know what you want is a bad rule of practice. Most disputes which occur between family members are over heirlooms. Another good idea is to give the item to the person while you are still alive.

DO NOT give reasons for your actions in your will. Reasons can be used to show a lack of capacity and have the potential for testamentary libel.

The most important part of creating a will is naming a trustworthy executor. This person will carry out your will when you die, pay your debts and distribute property to your beneficiaries. They should also be appointed by a court first. The executor should be honest, have sound judgment, be financially responsible, and be close in proximity. 

2.)    Durable Power of Attorney

You must name a power of attorney to manage your property in the event you are unable to do so yourself. This means this person will have the responsibility of doing things such as paying your bills, maintaining your house, managing your investments, etc.  When selecting this person, they should have experience and skill, good trustworthy character, and are close by.

3.)    Medical Power of Attorney

This person will be the one is responsible for making all of the medical decisions for you in the event you are unable to do so yourself.  It is important to explain in this document the types of decisions they will face such as: “pulling the plug,” what treatments you do and do not desire, forced food and water administration.  When selecting this person, remember they may be making life and death decisions, so you will want to choose wisely. Spend time with this person going over your wishes and consider naming alternates.

4.)    Directive to Physicians (“Living Will”)

This statement will alert the doctor as to whether or not you desire to be kept alive artificially when you are in an irreversible or terminal condition and cannot express your own desires.  This statement differs from the medical power of attorney because it directly expresses your wishes. In your document, include your detail desires for things like artificial nutrition and hydration, as well as antibiotics.

 

 

Student Loan Forgiveness...Do You Know The Dangers?

Cathy A. Robinson, CPA
Senior Manager
robinson@hwco.com

What many people ask themselves, especially millennial’s, is how they can take advantage of student loan forgiveness. Here’s what you need to know:  

Public Service Loan Forgiveness

 This program was created in 2007 and was intended to help to remove the student loan debt from those low-salaried employees of the public service industry. There are also some for profit employers who qualify your employment as a public service.  This list includes:  police officers, teachers, public defenders, and those in the public health sector.  Borrowers of federal loans may qualify for forgiveness on the remaining balance of their student loans if they have made 120 payments on their loans while working in the aforementioned list.

Income-Based Repayment

More people qualify for this type of plan. This plan allows borrowers to pay ten percent to twenty percent of their income towards their loans. These loans will then be forgiven in 20 to 25 years. But a word of caution, with this plan, you will pay more in interest over the life of the loan. 

Pay as you Earn

This plan caps out your payments to being ten percent of your income. Like the Income-Based Repayment plan, it lasts for 20 years, and any balance remaining after this time period will be forgiven. In order to qualify for this program, you need to have taken a loan after October 2007 and have borrowed a Direct Loan or a Direct Consolidated Loan.

In all three of these plans, your payment amount will never exceed the amount you would have to pay under the standard ten-year payment schedule. Unfortunately, like private loans, there are some dangers associated with these repayment plans.

• For income-based repayment plan, the amount of debt forgiven at the end of the plan becomes taxable income for the borrower. The borrower who received student loan forgiveness then faces large tax bills they typically cannot afford.

• You MUST remember to continue to qualify each year, meaning you must remember to send in the application and updated paperwork each year. Failing to do this will get you removed from the program.  

• For participating in Public Service Loan Forgiveness, you must be working full-time at a qualifying public service organization at the time you enter the program as well as at the time the remaining balance is forgiven.

This update is published periodically by HW&Co. as an information service to our clients, business associates and friends. It is general information and professional advice should be obtained before acting on any comments contained in this document.

The 4 Things you NEED to Know Before Taking Student Loans

Cathy A. Robinson, CPA
Senior Manager
robinson@hwco.com
 

 

There are two words that most people are familiar with: Student Loans. If you’re a parent of a child getting ready to go to college or you have a child that is already in college, sometimes student loans are simply unavoidable. Should this be the case, we have some must know tips for you!

 

1.       The first, and most important, point is this: complete the Free Application for Federal Student Aid (FAFSA). By taking advantage of federal student loans now you stand to reap some of the advantages later. These advantages could include:

·         A generally fixed interest rate.

·         You can limit the amount you repay each month later based on your income.

·         Loan forgiveness may be available for those pursuing a career in the public service industry after 10 years.

·         In some cases the federal government may also subsidize the loan –pay interest on- while the student is still attending school

 

2.       Be cautious of private student loans.

·         An advantage of borrowing a private loan is that you’re able to borrow at a higher limit.

·         The problem with borrowing private student loans, however, is that these loans generally come with a higher interest rate.

·         These loans also do not generally offer any kind of subsidies, loan cancellation or forgiveness programs.

·         Co-signers are also sometimes required if the student is applying for the loan and doesn’t have credit history. Should your child be unable to pay the loan on time or make the minimum monthly payment they would eventually look to you to take over the payments.

 

3.       Do your best to plan ahead.  What are the total projected expenses for the year?  Doing this can help you to figure out just how much to borrow or accept when it comes to student loans. If you’re awarded more than what you need, only utilize the amount that you need.  Remember, you have to pay it back in the end. By borrowing too much money now you may struggle to pay it all back later.  The debt must be paid back. This includes garnishing up to 15 percent of your wages and even garnishing Social Security benefits.

 

4.       Finally, some parents may qualify for a student loan interest deduction.  Generally, the amount you may qualify to deduct is less than $2,500 or the amount of interest you may have actually paid on the loan. This deduction is subject to decrease or phase out completely if and or when your modified adjusted gross income (MAGI) amount reaches the annual limit.  Ask your accountant if you qualify for this deduction. 

 

This update is published periodically by HW&Co;. as an information service to our clients, business associates and friends. It is general information and professional advice should be obtained before acting on any comments contained in this document.

 

FASB Provides Guidance for Employee Benefit Plans

 

Tony S. LaNasa, CPA, CFE
Managing Partner-Columbus Office
lanasa@hwco.com
 

On Friday, July 31^st, the Financial Accounting Standards Board (FASB) provided guidance designed to help in simplifying the accounting of employee benefit plans in a three-part document included in  Accounting Standard Update (ASU) No. 2015-12, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plan (Topic 962, Health and Welfare Benefit Plans (Topic 965).

Part I of the update assigns contract value as the only required measure for fully benefit-responsive investment contracts.  This part will reduce the complexity of reporting for fully benefit-responsive investment contracts while still requiring disclosures helping users understand these investment contract types.

 Part II, of the update eliminates requirements for participant-directed investments and nonparticipant-directed investments to disclose:

·         The net appreciation or depreciation for investments by general type.

·         Individual investments representing five percent or more of net assets available for benefits.

Stakeholders informed FASB that disclosing similar investment information in multiple ways is costly for preparers and makes the financial statements more difficult to use.  It is important to note that FASB will still require net appreciation or depreciation in investments to be presented in the aggregate, but it will no longer require amounts to be disaggregated and disclosed by general type.

 Finally, Part III relates to an area of several potential simplifications submitted by stakeholders. It provides a practical expedient allowing the employer to measure and define benefit plan assets on a month-end date nearest to the employer’s fiscal year-end, when the fiscal period does not coincide with a month-end.

 These amendments in each part of the ASU will be effective for fiscal years beginning after December 15, 2015. Earlier application is permitted, and the amendments in Parts I and II should be applied retrospectively for all financial statements presented.  Part III should be applied prospectively.

Working Parents: Are you affected by the Nanny Tax?



Cathy A. Robinson, CPA
Senior Manager
robinson@hwco.com
 

If you are a working parent you understand just how hard it can be to find someone who can help take care of your children. While many working parents may place their kids in a daycare facility, others hire people to come into their homes to take care of their children. What some people may not understand is that hiring a nanny means you may have to pay the Nanny Tax, and you have a household employee.

 

 If the annual wages are over $1,900, you are required by the IRS to withhold and pay social security and Medicare taxes.   However, there are some exceptions to those whose wages are subjected to these taxes.  You should check with your tax advisor on the exceptions.

 

Another tax that will be paid is Federal Unemployment Tax (FUTA).  This tax is .06 percent on cash wages and only the first $7,000 in wages is subject to this tax.  FUTA is not a tax that you withhold from the nanny’s pay.  It is a tax that is paid by you.

 

Depending on the state where you live, you will also need to look into filing and paying state unemployment tax and workers’ compensation.  You will need to complete applications for both of these items.

 

It is important to also note that paying the nanny tax is required if you are the employer. This means even if you used an agency to find your nanny, you are still required to pay the tax. If you are the employer,  you will also need to ensure that your nanny or in-house sitter fills out an I-9 form, a W-4 and a state income tax withholding form (if you live in a state with income taxes.)

 

The nanny tax is reported on Schedule H of your Form 1040.

Plan Now, Save Later: What To Do After Your Child Graduates

 

Cathy A. Robinson, CPA
Senior Manager

 

 

 

Do you have a child that recently graduated from college? Maybe you have a child who will be graduating within the next year.  Did you know that your taxes could be impacted?

 

Once a child is no longer a full-time student, you may not be able to claim them as a dependent. If you’re a single parent that claims head of household filing status, this is especially important for you.   Should your child find a job within six months of graduating you are no longer able to claim them and use the head of household filing status as they will most likely have earned more than $4,000. Your tax filing status will go from head of household to single and the credits you normally could qualify for will no longer apply. In order to make sure you don’t end up owing at the end of the year, be sure to talk to your accountant about making the necessary adjustments to your withholding and estimated tax payments should this situation apply to you.  

 

This doesn’t necessarily mean that you can’t continue to claim them after they graduate college. This is when the support test comes into effect. If the child cannot provide half of his or her own support then you can claim them. They’re considered a relative dependent. If the child’s gross income for the year is only $4,000, you can claim them. 

How Will Same-Sex Marriage Affect Taxes?

The Supreme Court ruling in favor of same-sex marriage is a hot topic at the forefront of everyone’s minds.

 

How will the recent Supreme Court ruling in favor of same-sex marriage affect taxes? Does this ruling affect you?

 



Cathy A. Robinson, CPA
Senior Manager

Since the June 26^th ruling, individuals will see a change to tax filing requirements at the state level.  

 

Before the decision was made, same-sex couples were able to file joint returns at the federal level.  However, there was a catch to this method: most states did not recognize same-sex couples, and they were required to file individually or as head of household.

 

With the new ruling, there will be a streamlined process using the same filing status at the state returns. States will also begin to issue tax guidance on how same-sex couples can file their returns. In fact, Sen. Ron Wyden, a Democrat from Oregon and a member of the Senate Finance Committee, plans to introduce legislation this week that will provide gender neutrality for spouses. This bill will be called the Marriage Equality for All Taxpayers Act and would eliminate gender-specific references in the current tax code.

 

Tax guidelines are also expected to change to include treating all same-sex couples equally in regards to estate tax and other inheritance issues as married couples.

 

Under federal tax regulations, couples who live in states that currently do not recognize same-sex marriages will be now be able to:

·         Make unlimited gifts to one another without gift tax implications

·         Leave property to one another without survivor having to pay estate taxes

·         Leave IRA to surviving spouse as a "rollover" IRA

·         Be able to qualify as surviving spouse with Social Security benefits

Succession Planning...It Starts Now.

Cathy A. Robinson, CPA
Senior Manager

Succession planning isn’t always the first thought on your mind as a business owner or professional.

 

You have put in the time, the hard work, the blood, sweat and tears that have made your company or your profession what it is today. How could you possibly just hand over the reins to someone else?

 

The truth of the matter is simple … you can’t predict the unpredictable.  

 

There are several ways to leave a company:

 

Death

Retirement

Disability

Expected departure

Involuntary departure

 

Eventually your partnership with your company will end, and it is important to make sure you are on a path that is suitable for you, your company, and your clients. What would happen to your company or your partner should you unexpectedly pass away? What would happen to your practice if your partner wanted to leave to be closer to his or her children or grandchildren?  Or, what if your children didn’t want to take over the family business?  Do you have the necessary steps in place to help with any of these situations should they arise?

 

Addressing these questions sooner rather than later will help you deal with the unavoidable later on down the road.  In fact, there are two tips mentioned by lawyer Eliot M. Wagonheim in a blog on Huffington Posts that are especially important to keep in mind.

 

1)      Consider a valuation. Use an expert experienced with doing valuations in your industry for an appraisal of your company.

2)      Work out a purchase agreement with your partner utilizing your accounting professional to ensure everyone is receiving a fair share of the company.  Having a plan in place will help to avoid any possibilities of a sticky situation when someone leaves, expectedly or unexpectedly.

 

Talking with your family members is also important if you own your own business. If you plan on passing the business down, make sure they have a serious interest in taking it over. If they do not, you need to start planning for succession or the possibilities of selling off the business.

 

If you are in the professional service industry, it is also important to sit down and have a conversation with your clients.  Planning according to what is best for the client and the long-term relationship with your company is crucial. The best and smartest succession plans begin with a thoughtful plan that incorporates the wants and needs of your existing and developing clients.

 

Spending just a few hours to put a plan into place now can keep you or your partner from putting fires out later, while helping to manage emergency situations later should they arise.  The earlier you begin planning for the next stage, the better the chances of your company’s continued success will be.



This update is published periodically by HW&Co. as an information service to our clients, business associates and friends. It is general information and professional advice should be obtained before acting on any comments contained in this document.

Mid-Year Tax Moves You Should Consider

Cathy Robinson, CPA
Senior Manager



Recently, AccountingToday & Kiplinger published an article touching on 8 mid-year tax moves that could help people save more money. So what are these recommendations?

1.) Fix Your Withholding

If receive an average refund somewhere around $2,700 this is applicable to you. By adjusting your withholding now, you can boost your take home pay by somewhere around $225 a month for the rest of the year. This also means that since you'll still be able to receive a nice size refund in the spring.

  

 2.) Midyear Adjustment for Obamacare Healthcare Premium

If you've experienced a change in the size of your family or perhaps received a raise at work it's important to know that the size of your subsidy for your healthcare premium could be affected.  Should the change affect your subsidy so that it should be bigger, you have the option to pay lower premiums for the rest of the year. However, if the changes in your life means that your subsidy should fall experts recommend paying higher premiums for the rest of the year so as to avoid being surprised next spring with a bill when you file your form 1040.

3.) Reevaluate Your 401 (k) Contributions
Do you know what you're investing into your 401 (k)? Now is the time to evaluate where your money is going and if you can contribute more.  It's good rule of thumb to keep in mind that roughly every $100 you place into a traditional 401 (k) your pay only is cut by $75 if you're on the 25% federal tax bracket or less.

4.) Flexible Spending Check
 If you divert money into a flexible spending or reimbursement plan it's time to check and see how much money you have diverted into it. Mid-year tracking of reimbursement spending can help you not lose your money later on down the road.

5.) Probe Your Taxable Portfolio
 Keeping your investments in mind now can also be helpful. Kiplinger writes, "If you decide it’s time to take some money off the table by realizing profits now, consider whether this is a good time to harvest losses. Never make an investment move solely for tax purposes. But the tax-saving power of dumping a poor performer might be the extra push you need to seek out a better investment."

6.) For the Newly Minted Septuagenarian
For those who turned 70 earlier this year and will be 70 1/2 by the end of the year it means the start of required minimum distributions (RMDs) from IRAs and other retirement plans. Working with your accounting professional to map out your strategy now can help prevent the unexpected.

7.) Let Uncle Sam Help With Your Debt
Check your credit card debt. Would it make sense for you to borrow home equity to pay off your credit cards?  Kiplinger lends this advice, " Imagine this: $10,000 of credit card debt at 15% costs you $1,500 a year in carrying charges. The same $10,000 of debt on a 4.5% home-equity line of credit costs $450. And, if you’re in the 25% tax bracket, Uncle Sam effectively picks up $112.50.

8.) Take a Good Look at Yourself
Make sure you have an understand of the options available to you. Did you know there are tax breaks for new college grads, new parents, the recently divorced, and the newly widowed?  You don't want to overlook something that could save you money.


The recurring theme with analyzing your financial status mid-year is this, by making sure you're prepared now you could save yourself money in the long run.

It's important to also consult your accounting professional before making any financial moves so as to make sure you have the best strategy working for you and your money.


Have questions? Find us online at www.hwco.com. And to read Kiplingers full article click here.