Ohio Tax Budget - The Impact on Your Wallet

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

Chances are you pay income taxes to the state that you reside in. For individual taxpayers and businesses in the state of Ohio, there's good news. 


On June 30^th, 2015, Governor John Kasich signed into law, the Biennial Budget Bill. So how exactly does this bill affect you?

 

If you are just an individual taxpayer, the bill reduces the personal income tax rates 6.3 percent for all tax brackets. This means the new top marginal bracket for individuals is 4.997 percent.

 

Attention shoppers: if you're a fan of shopping, you will be happy to know the state sales tax rate was not increased. It still remains at the current rate of 5.75 percent.

 

If you own an S Corporation, partnership, limited liability or a sole proprietorship in Ohio, there's even better news for you.  For fiscal year 2015, you will be able to deduct 75 percent of your Ohio apportioned business income up to $250,000. Also beginning in 2015, the excess business income will be subject to a three percent flat tax. The tax will be effective for 2015 and going forward. 

 

As a business owner, you should also be aware there are two tax credits that may now be able to save your company taxes since the law has changed the calculation. These credits are the Jobs Creation Tax Credit and the Jobs Retention Tax Credit.

 

For those who file the CAT tax, there's good news for you as well since the CAT tax rate was not increased due to the law.

 

If you have any questions in regards to the bill and how it will affect you, contact your accounting professional.

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.

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.

FASB Issues Update-April 7th, 2015

Anthony S. LaNasa, CPA, CFE

Principal

lanasa@hwco.com

 

 

 

On April 7^th, 2015 the FASB (Board) issued Accounting Standards Update (ASU) No. 2015-03, Interest: Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.  It was part of the accounting board initiative to simplify U.S. GAAP.

 

So what will this new accounting update mean?

 

It means that the costs for issuing debt should appear on a balance sheet as a direct deduction from the debt’s value. The Board stated that these amendments won’t affect the recognition and measurement of the costs for issuing debt.

 

This update is effective for all companies for reporting periods beginning after December 15, 2015.  Adopting these amendments early is also being allowed by the Board, including any financial statements that have not been previously issued.

 

As companies adopt the amendments, they should revise balance sheets for periods being presented prior to the effective date. Once a company adopts the changes, it is required to disclose the applicable information for a change in an accounting principle.

 

The FASB Board is really focusing on simplifying and making U.S. GAAP more readable and understandable.  Lastly, does this change make sense because are debt issuance costs really assets that provide a future economic benefit?  My opinion to that answer is no.

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 HW Group Goes Purple!

Around the world people are wearing purple to show their support of epilepsy awareness. Annually, March 26th represents a global show of support of epilepsy awareness.

Did you know that 50 million people world wide live with epilepsy and that 50% of those affected don't know the cause? Did you also know that that 2.2 million Americans are living with epilepsy? The facts are scary, but true.

We are proud to raise awareness of such an important cause and invite each and every person to join us in wearing purple next year.

Want to learn more about epilepsy? Or want to know how you can help make a difference? Click on any of the links below for more information.

http://epilepsyinfo.org/

http://www.purpleday.org/aboutepilepsy

First Major Changes to Not-For-Profit Accounting

 

 

Anthony S. LaNasa, CPA, CFE

Principal at HW&Co.

 

On March 4^th, 2015 the Financial Accounting Standards Board voted to release a proposal that will overhaul how universities, charities, foundations, and other not-for-profit organizations convey how they spend their time and how they invest their money.  With this decision came some dissatisfaction with this standard. The uneasiness that came from the decision is even stronger than anyone had initially thought.  This was especially conveyed by the dissenting votes of FASB Chairman Russell Golden and Vice Chairman James Kroeker. It should also be mentioned that two of the five board members who voted in favor of the proposal did so with reservations.

 

The chief concern that Golden has concerning this decision was his belief that the proposal would create too many reporting differences between not-for-profit organizations and for-profit business.  He also believes that the projected changes would go too far.  Kroeker, who was unable to attend the meeting and voted by proxy, said in a prepared statement that he didn’t agree with the changes that would be made to the not-for-profit groups cash flow statements.

 

Although there was concern about the changes to the cash flow statements for members like, Lawrence Smith, the benefits of changing to the proposal weren’t enough to make him vote against it.

 

“I didn’t object to it and I voted for the changes made because I think when you look at the two cash flow statements side by side, one under direct and one under indirect, it’s pretty obvious the direct method conveys more easily understood information than indirect,” he stated.  He further commented on his decision to vote in favor of the proposal by praising the changes made to the basic performance statement.

 

"Is there flexibility? Yes. There's flexibility up the wazoo in terms of how management designates things, but it's clearly laid out and that's the important thing," he said. "It clearly lays out what funds are available to an entity in terms of furthering its mission."

 

The FASB also would like to improve the statement of activities by including the presentation of an operating measure with the information about expenditures related to the organization’s mission and donated funds available to be spent.

 

The changes in the proposal will be the first major changes to not-for-profit accounting and reporting in over 20 years.  My opinion is that the proposal is long overdue and the changes will enhance not-for-profit financial statements and provide the users of the financial statements, like donors, an increased understanding of the financial performance of Organizations.

 

 

This blog 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.