Congress Announces Bipartisan Tax Agreement In The Works
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
Moore v. United States: The Supreme Court’s Tax Dilemma
Dec 13, 2023
In the world of taxes, all eyes have been on the Supreme Court and the case of Moore v. United States. What makes this case so monumental, you ask? It’s not every day that the Supreme Court hears arguments around tax laws affecting individuals, much less a high-stakes case that could redefine the meaning of taxable income.
At the heart of Moore v. United States is a provision of the Tax Cuts & Jobs Act (TCJA) enacted in 2017, requiring companies to pay taxes on foreign profits that had previously been untaxed. This mandatory repatriation tax is now being called unconstitutional by one Washington state couple.
In 2005, Charles and Kathleen Moore invested $40,000 in KisanKraft, a farm equipment retailer based out of India. The couple alleges that they never received any foreign profit payments from the company because all such profits were reinvested by KisanKraft. The Moores argue that such “unrealized gains” are not actually income and therefore should not be taxed. Their case argues that the TCJA provision violates apportionment requirements under the 16th Amendment because it allegedly taxes them on ownership of personal property — in this case, their KisanKraft shares — rather than on realized or received income.
While the Moores are simply seeking a refund of the one-time $15,000 increase in their tax bill due to the change in the law, the case carries much broader implications. A ruling in their favor could threaten other provisions of the tax code. The Justice Department has also noted that a ruling by the Supreme Court invalidating the mandatory repatriation tax could cost the U.S. government $340 billion over the next decade. That amount could grow exponentially if the decision invalidates other tax provisions as well.
While a ruling is not expected until June of 2024, some justices have signaled the possibility of upholding the tax by attributing the income earned by the foreign company to its shareholders. William Vaughan Company’s tax team is closely monitoring updates in the Moore v. United States case. Be sure to subscribe to our insights as we continue to share any breaking news on the ruling.
Categories: Tax Compliance
Ohio House Bill 33 Explained
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.
Other Changes
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.
Conclusion
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.
wvco.com
Categories: Tax Compliance, Tax Planning
Scam Alert: Distraint Warrant Scam
Jul 05, 2023
William Vaughan Company was recently made aware of a highly concerning scam surfacing in Lucas County. Many local businesses have received fraudulent “Distraint Warrants” in the mail, sent by a fictitious entity called the “Tax Resolution Unit.” While these letters seem to primarily target businesses, a handful of individuals have also received them. In the interest of our community and the individuals we serve, here are some important detail about this distraint warrant scam along with essential tips on safeguarding yourself against such fraudulent activities.
The Scam:
In this distrain warrant scam, individuals and businesses receive official-looking documents in the mail from the Lucas County “Tax Resolution Unit.” The document claims that a Distraint Warrant has been issued against the recipient due to unpaid tax debts. The scammers exploit fear and urgency, attempting to coerce victims into making immediate payments via telephone to a toll-free number. However, it’s crucial to note that Lucas County does not have a Tax Resolution Unit or an office of Public Judgment Records.
How to Protect Yourself:
Verify the source: Take a moment to verify the authenticity of any suspicious document you receive. Contact the relevant county offices or authorities to confirm the legitimacy of the warrant or notification. Don’t hesitate to reach out to our team if you need assistance in this regard.
Exercise caution: Be wary of unexpected or unsolicited communications regarding taxes or debts. Genuine organizations typically communicate through official channels and offer multiple opportunities to resolve any issues. Be skeptical of sudden demands for payment or urgent actions.
Guard your personal information: Under no circumstances should you share sensitive personal or financial information, such as social security numbers, bank account details, or credit card numbers, in response to such requests. Legitimate authorities, like the IRS, will not ask for this information via email or phone. Nor will the IRS take payment by cashier’s check, in the form of gift cards, or wire transfer.
Report the scam: If you receive a suspicious document or believe you have encountered a scam, promptly report it to the relevant authorities. You can report it to the IRS by either calling 1-800-366-4484 or visiting the US Treasury website. Consider calling your local police so it is aware of the scam as often times communities are targeted all at once. Finally, the Federal Trade Commission’s Report A Fraud site is shared with law enforcement across the country. Your report can help bring attention to the scam and prevent others from falling victim.
Spread awareness: Share this information with your friends, family, and colleagues to raise awareness about the scam. Utilize social media, local community groups, or any platform that can reach a wider audience. The more people are informed, the harder it becomes for scammers to succeed.
As trusted tax and business advisors, our clients’ financial well-being and security is our top priority. The “Distraint Warrant” scam targeting Lucas County residents and businesses is an unfortunate reminder of the dangers posed by fraudulent activities. However, by staying vigilant, verifying sources, and reporting suspicious incidents, we can collectively protect ourselves and our community from falling victim to these scams. If you have any concerns or require assistance, please don’t hesitate to contact us.
Connect with us.
wvco.com
Categories: Fraud & Forensics, Tax Compliance
Ohio’s TechCred Program
Mar 19, 2023
Ohio’s TechCred program is a state-backed initiative designed to fuel growth and innovation in the state’s technology industry. Launched in 2019, the program helps Ohioans earn industry-recognized credentials that align with the skills that businesses need. The program is designed to address the skills gap in Ohio’s workforce by upskilling employees and preparing them for the jobs of the future.
Ohio’s TechCred Program gives employers the chance to upskill current and future employees. Employers who submit successful applications will be reimbursed up to $2,000 per credential earned and allows for up to $30,000 per employer, per funding round. Reimbursable costs include those related to tuition, lab fees, manuals, textbooks, and certification fees.
How does the program work?
After determining which new credentials will be most beneficial to the business, the employer must partner with an eligible provider, such as a university or tech school, that offers the appropriate training. Once a provider is selected, the employer is ready to apply for the TechCred program at the Ohio.gov website. Employers must file reimbursement applications within six weeks of each employee completing a credential. For a full list of qualifying credentials and providers, click here.
Who is eligible?
Any Ohio registered employer that employs Ohio resident W-2 employees is eligible to apply. Employers of all sizes and in all industries are encouraged to apply. Only one application will be accepted per employer per application period.
To learn more about Ohio’s TechCred program, visit techcred.ohio.gov or download their program guidelines here.
Connect with Us.
wvco.com | 419.891.1040
Categories: Tax Compliance