Jan 22, 2024
Last week, the chairs of the congressional tax committee unveiled a significant $78 billion bipartisan tax agreement poised to enhance the Child Tax Credit and offer substantial support to businesses. Named the “Tax Relief for American Families and Workers Act of 2024,” this pivotal legislation awaits the green light from both houses of Congress to be enacted into law. As the 2023 tax filing season commences on January 29, this introduces a narrow window for the bill’s approval and implementation.
Here are some of the key proposed provisions:
- Expanded Child Tax Credit – The deal outlines enhancements to the child tax credit in an attempt to provide relief to families that are struggling financially and those with multiple children. It would also lift the tax credit’s $1,600 refundable cap and adjust it for inflation by $200 per child to $1,800 for 2023, $1,900 for 2024, and $2,000 for 2025.
- Section 174 – The proposed law would postpone the requirement to capitalize and spread out the cost of domestic research and experimental expenses over multiple years. This change would apply to tax years starting from January 1, 2022, but the new rules wouldn’t take effect until tax years that begin after December 31, 2025. However, for research and experimental costs incurred outside of the U.S., these costs would still need to be spread out over a 15-year period.
- Section 163(j) – Under this draft bill, business deductions would be restored a less restrictive limitation for net interest expense, returning to a 30 percent limit based on EBITDA (earnings before interest, taxes, depreciation, and amortization) rather than EBIT (earnings before interest and taxes).
- Bonus Depreciation – The bill would temporarily restore 100 percent bonus depreciation for property placed in service between January 1, 2023, and December 31, 2025. It also would allow 20% bonus depreciation for property placed in service after December 31, 2025, and before January 1, 2027. For property placed in service after January 1, 2027, no bonus depreciation would be allowed.
- Employee Retention Tax Credit (ERC) – Under this deal, businesses would no longer be able to claim the popular ERC credit as of January 31, 2024. In addition, it would also extend the statute of limitations for ERC claims to six years from the date the claim was filed. Finally, it includes more stringent penalties for ERC promoters.
Please keep in mind that this bipartisan tax agreement is still in the proposal stage and must pass through the legislative process to become a law. As always, we will continue to monitor the status of this proposed bipartisan agreement, and keep you apprised of any developments. Please reach out to your tax advisor to discuss how this may impact your tax situation.
Categories: Tax Planning
Jul 17, 2023
Ohioans can expect significant changes to state tax laws next year thanks to Ohio House Bill 33. The newly passed piece of legislature, signed by Governor Mike DeWine on July 3, 2023, establishes state operating appropriations for fiscal years 2024-2025. This comprehensive legislation also brings several tax advantages specifically designed to benefit Ohio business owners. Taxpayers can expect changes to personal income tax, Commercial Activity Tax, Pass-Through Entity Tax Credits, and Municipal tax.
Personal Income Tax Reductions
The first significant change introduced by House Bill 33 is a reduction in personal income tax rates. The new law establishes two tax brackets based on income levels. If you earn over $26,050, you’ll pay a marginal tax rate of 2.75%. For individuals with income over $100,000, the rate increases slightly to 3.5%. Those earning $26,050 or less will be exempt from paying any income taxes to the state of Ohio.
Commercial Activity Tax (CAT) Exemption
House Bill 33 also brings changes to the Commercial Activity Tax (CAT), affecting businesses in Ohio. CAT is determined based off a business’s taxable gross receipts. The new law significantly increases the annual exemption threshold for businesses. Previously, businesses with taxable gross receipts under $150,000 were exempt from paying CAT. However, under the new law, the exemption amount rises to $3 million for the 2024 tax year and further increases to $6 million starting in 2025. This means that a large amount of Ohio-based businesses will no longer have to pay CAT.
Pass-Through Entity (PTE) Tax Credit
Another important change under House Bill 33 is the introduction of a tax credit for Ohio residents subject to double taxation on pass-through entity (PTE) income. Pass-through entities include businesses like partnerships, S corporations, and limited liability companies (LLCs). Often, individuals earning income from such entities face double taxation, meaning they pay taxes at both the entity level and the individual level. The new law allows Ohio residents to claim a credit on their individual tax returns for PTE taxes paid to other states, helping alleviate the burden of double taxation.
Municipal Tax Changes
Finally, House Bill 33 will enact several changes to municipal taxes in Ohio. Municipal taxes are taxes imposed by local governments, such as cities and towns. The new law reduces fees and penalties for late filing of municipal income tax returns, making it more affordable for taxpayers to comply with local tax obligations. Additionally, the bill extends the due date for filing municipal net profits tax returns from October 15th to November 15th, giving individuals and businesses more time to prepare their tax returns.
Furthermore, House Bill 33 exempts individuals under the age of 18 from Ohio municipal income tax. This means that high school students who have part-time jobs or earn income from other sources will not have to pay municipal income tax in Ohio.
The newly passed bill includes numerous other provisions aimed at providing tax relief for both business and individuals. From baby wipes and cribs, to traffic control services often used by construction contractors, taxpayers can expect additions to the state’s list of tax-exempt goods and services. Businesses with remote or hybrid employees in Ohio can also expect a new option for calculating their municipal net profits tax.
Ultimately, the passage of Ohio House Bill 33 introduces several significant changes to the state’s tax landscape. William Vaughan Company’s tax team will continue to monitor changes resulting from House Bill 33 along with other state and federal tax updates. For both businesses and individuals, understanding tax law is crucial when it comes to making informed financial decisions. Don’t leave your finances up to chance, connect with us today to understand how House Bill 33 may effect your specific situation.
Connect with us.
Jun 15, 2023
Don’t leave money on the table!
The Employee Retention Tax Credit (ERTC) is a provision established under the CARES Act which has been enhanced by additional legislation and could provide an immense amount of capital to employers. However, time is running out for business owners to claim what could amount to thousands of dollars in tax refunds.
The ERTC is a refundable tax credit employers can claim against certain quarterly employment taxes, equal to a percentage of qualified wages and health insurance costs paid after March 12, 2020, and before September 30, 2021. For 2020, the credit is 50% of qualified payments, up to $10,000 per employee. Simply put, an eligible business has the potential to request refunds of up to $5,000 per employee for 2020. The benefits are even greater in 2021.
But that means in order to claim the credit for those last three quarters of 2020, business owners need to act now. Tax payers have up to three years to amend their quarterly returns. By amending a return, business owners may unlock substantial benefits to support their business’s growth.
For most businesses, eligibility for ERTC for fiscal year 2020 is determined by meeting one of two tests:
- Test 1: A measure of decline in gross receipts. If an employer experiences a significant decline in gross receipts for any calendar quarter, as compared to the same calendar quarter in 2019, they will be eligible for the credit in that quarter. For 2020, this decline is defined as gross receipts that are less than 50% of gross receipts for the same quarter in 2019, and for 2021, this decline is gross receipts being less than 80% of gross receipts for the same quarter in 2019.
- Test 2: A full or partial suspension of operations. If an employer was subject to any full or partial suspension of operations because of government orders related to COVID-19 they could be eligible. These orders could be Federal, State, county, and/or municipality. Even if the business was deemed essential and was not directly affected by such orders, there still could be avenues to be eligible for the credit.
Despite the expiration of the tax credit in September 2021, eligible businesses, companies, and employers have the opportunity to submit documentation and retrospectively obtain reimbursements for the Employee Retention Credit in 2023. In order to accomplish this, business owners are required to complete IRS Form 941-X, which serves as a means to rectify any errors in their initially submitted Form 941. However, it is important to note that this process is only applicable within a three-year timeframe from the original filing of their payroll tax returns.
With the number of ERTC scams on the rise, WVC always recommends that businesses consult with their trusted tax professional to ensure eligibility, understand the specific requirements, and navigate the amendment process successfully. Connect with William Vaughan Company’s ERTC team today to see if your business meets the eligibility requirements – by acting now, you just may position your businesses for a brighter financial future.
Connect With Us.
Mike Hanf, CPA, CGMA
Tax Partner, ERTC Practice Leader
Mar 12, 2023
Natural disasters, thefts, and other unexpected events can cause significant financial losses for individuals and businesses. Fortunately, the IRS has provided some relief through tax deductions for designated damages. However, there are specific criteria that must be met in order to claim these deductions along with specifications for reporting them on your return. Here are some of the most common questions and answers to claiming casualty & theft losses on your return.
How do I know if my loss qualifies?
You can only deduct casualty and theft losses if they’re directly the result of an event that’s a federally declared disaster. Meaning, the President of the United States has officially declared the event a disaster. Federal disasters are often declared for areas heavily impacted by hurricanes, tornadoes, or floods. To view all federally declared disasters and related information, visit the IRS website.
There are 3 types of deductible losses allowed under the umbrella of federally declared disasters:
1. Federal casualty loss: The loss of personal use property due to a federally declared disaster. The loss must have occurred in the state receiving the disaster declaration.
2. Disaster loss: The loss of personal use or business property resulting from a federally declared disaster that occurred in a county eligible for public or individual assistance, or both.
3. Qualified disaster loss: The loss of personal use property due to a disaster declared under Section 401 of the Stafford Act, or several specific natural disasters or time periods.
Do theft losses qualify for deductions?
The IRS defines theft as the act of taking or removing property with the intention of depriving the owner of it. The act must also be illegal under state law. But as with the case of a casualty claim, the theft must have occurred due to a presidential disaster area declaration. For example, your city is struck by a tornado and the President declares it a disaster area. Subsequently, a thief accesses your home through a window broken by the storm and steals your car. One could argue the loss of the car was from theft due to a disaster.
Can I deduct a loss covered by insurance?
No, you cannot deduct casualty and theft losses covered by insurance, unless you file a timely claim for reimbursement and you reduce the loss by the amount of any reimbursement or expected reimbursement. For more information, please review IRS Publication 547.
How do I calculate my loss?
Personal casualty and theft losses attributable to a federally declared disaster are subject to the $100 per casualty and 10% of your adjusted gross income (AGI) limitations unless they are attributable to a qualified disaster loss. Personal casualty and theft losses attributable to a qualified disaster loss are not subject to the 10% of the AGI limit and the $100 limit is increased to $500. An exception to the rule above, limiting the personal casualty and theft loss deduction to losses attributable to a federally declared disaster, applies if you have personal casualty gains for the tax year.
What form do I use to claim this deduction?
Casualty and theft losses are first reported and calculated on Form 4684. You will then report them on Form 1040, Schedule A.
Can I itemize this deduction?
For tax years 2018 through 2025, you can no longer claim casualty and theft losses on personal property as itemized deductions, unless your claim is caused by a federally declared disaster.
For tax years 2018 through 2025, personal casualty and theft losses may be deductible when: they are attributable to a federal disaster. For tax years beginning before 2018 and after 2025 personal casualty and theft losses may be deductible even if they are not attributable to a federal disaster.
In conclusion, claiming casualty and theft losses on your tax return can provide some relief for individuals and businesses that have suffered unexpected financial losses. It’s important to remember that only losses directly resulting from federally declared disasters are eligible for deduction. As with any tax-related issue, it’s always best to consult with your WVC tax professional to ensure that you are following the appropriate guidelines and maximizing your deductions.
Connect With Us.
Categories: Tax Planning
Mar 02, 2023
Every year, tax season requires clients to share large amounts of data – mostly in the form of paper documents. As technology has evolved, so have the ways in which we share and collect personal files. The use of electronic document exchange software has become the standard for most accounting firms as it is quick and easy.
While most people don’t have a personal document scanner, almost everyone has a mobile device. This year we wanted to share best practices for scanning your tax documents so they are legible and compatible with our tax preparation software.
Image Files (.jpg, .png, .tiff, etc.) are not the best option
Many times, we receive documents as pictures or images which have been taken utilizing the camera app on your mobile device or tablet. Typically, photo/image file types utilize compression to reduce the size of the file for ease of upload. However, this compression results in a loss of quality, which ultimately makes the file harder to read. Instead, you can use your same mobile device or tablet to scan and submit documents in a PDF format! See below for tips!
Why are PDF files optimum?
When you create a PDF file containing data such as paragraphs, images, numbers, graphs, tables, etc., it will always display that data in the exact same way no matter where you are viewing it. PDF files also have universal compatibility meaning most modern browsers are fully capable of opening and displaying PDF files, and most modern operating systems come with basic pre-installed apps to open PDFs with ease.
Tips for creating PDF files
We have provided some resources below for your convenience. You can also do an internet search for your exact phone model for additional scanning options as well as where to find support for scanning from a mobile device.
- Article: Scan Documents with your phone: iPhone and Android
- iPhone specific – Video: Scanning using the Files App
- Android specific – Video: Scanning using Google Drive App
- Adobe Scan
Finally, as you’re working to prepare your tax records for the current filing season, take the time to connect with your tax professional to avoid any surprises and to ensure you have all the necessary documents to meet your filing deadlines. We do not require our clients to send documents electronically, you can still provide your files to us directly in paper form. We will provide you with your original documents when we complete your tax return but we always encourage you to make a copy of your files for safekeeping.
Connect With Us.
419.891.1040 | Email
Categories: Tax Planning
- Audit & Accounting
- Construction & Real Estate
- Cost Accounting
- Estate Planning
- Fraud & Forensics
- Healthcare & Dentistry
- IT & Risk Services
- Manufacturing & Distribution
- Other Resources
- Restaurant & Hospitality
- Risk Services
- Tax Compliance
- Tax Planning