Tag Archives: ohio taxes

Ohio Municipal Tax Updates

As you may have heard, Governor Kasich recently signed the Municipal Income Tax Reform Bill, which is known as the Amended Substitute House Bill 5 (“HB5”). There is an extensive list of provisions that will take effect on January 1, 2016. Ohio taxpayers have been eager for a bill to emerge that simplifies Ohio’s municipal tax law, and HB5 is a step in the right direction. Here are some of the major changes that you should be aware of:


Pass-Through Entity (PTE) Tax: It is important to know that the municipal net profits tax will be imposed at the entity level for pass-through entities (PTE), but PTE owners will generally be taxed on the pass-through income by the municipality in which they reside. HB5 will stay consistent with the previous law set in place for S corporations, meaning tax is imposed at the entity level, and the pass-through income flowing through to resident owners will generally not be taxed by the municipality.

Net Operating Loss Carryforwards (NOL): Starting on January 1, 2017, carryforwards for NOL’s at the municipal level will be consistent across the state. Any loss incurred after the implementation date will have a required 5 year carryforward period, regardless of the municipality. Remember having to keep track of NOL carryforwards separately for each municipality? This is no longer required due to carryforwards now being calculated on a pre-apportionment basis.

Occasional Entrant Revisions: This provision of the municipal tax reform is associated with the amount of days an individual may work in another municipality, away from their primary place of work, before being required to withhold income there. HB5 has increased the amount of days from 12 to 20. Therefore, if an employee is working in another municipality for 20 days or less, the employer will withhold income from where the employee’s primary place of work is located. If the employer expects the employee to work more than 20 days in another municipality, they are required to start withholding from day one. On the other hand, if an employee happens to work over 20 days, which was not originally expected by the employer, the employer must begin withholding income on day 21. For employers who may try to rotate employees to bypass the 20 day rule, provisions are set in place to prevent this.

Does your business collect less than $500,000 of revenue in a given year? This classifies your company as a small business, which means complete exemption from the 20 day rule. Small businesses are only required to withhold income tax from their employees in the municipality of their fixed location, which could be a warehouse, office, etc.

These are just a few of the provisions associated with HB5, which is effective on January 1, 2016. For a deeper look into the provisions and more, click here.

Jason Wenner, Staff Accountant

Ohio Tax Law Updates!

wq_picHear ye, hear ye! For all of you Ohio taxpayers, have you heard about the Amended Substitute House Bill 59 (HB 59) that was signed into law on June 30, 2013? No? Don’t worry you are not alone.

One notable change that this bill brings is a reduction to Ohio income tax rates, which is music to our ears! The overall income tax base rates and amounts are reduced by 8.5% in 2013, an additional .5%, or 9% in 2014 and then to a total of 10% in 2015. We will have another blog about the impact this will have on employees withholdings.

One of the biggest changes resulting from this bill is starting in taxable years beginning on or after 1/1/13, an individual filing an Ohio income tax return will be allowed a deduction amount to 50% of their Ohio small business income up to $250,000! Income from the taxpayer’s partnership, s-corporation, rental activity, or single member entity will be used to determine this deduction. An important thing to note is this deduction is not for an taxing school districts, only Ohio. More information will be coming from the bill on how to calculate this deduction.

There is also a change related to non-resident individuals involved in a pass-through entity. If that pass-through files an Ohio composite return and pays Ohio income tax, the individual can now file an Ohio return and claim the refundable credit for taxes the entity paid on the investor’s behalf.

Some other changes to come from the bill:

  • Means testing for $20 personal exemption credit. Note: Will only be available to taxpayers with taxable income less than $30,000.
  • Ohio earned income tax credit may be available to those filers who were also eligible for the federal earned income credit.
  • Beginning in 2014 there will be an expanded definition for the deduction of military retirement pay.
  • Any amount of $1 or less will not be refunded or owed on a tax return.

There are a lot of changes coming to Ohio in the next few years, so please make sure you keep up on them and make sure you understand  how they affect you as an Ohio taxpayer. This is particularly important considering  the time of year as we look towards year end planning.

By: Tara West, CPA, CMA

InvestOhio Tax Credit Update: Approximately $50 Million in Credits Still Available

The Ohio Development Services Agency recently made some changes to the InvestOhio program, an incentive program introduced in September 2011 which provides a tax credit to Ohio individual taxpayers who invest in Ohio small businesses. A brief overview of the program and new modifications, effective September 28, 2012 are presented below.

InvestOhio. At the end of 2011, Ohio enacted an income tax incentive for eligible investors; Ohio individual taxpayers, pass-through entities, trusts and estates. This incentive provides a non-refundable personal income tax credit to investors that infuse new equity (cash) into Ohio small businesses, defined below, and hold that investment for two years. The credit which is 10% of the investment is a dollar for dollar reduction in the taxable income of the investor up to $1 million per taxpayer and $2 million for married couples filing jointly.

Eligibility. Business enterprises must meet the definition of an “eligible small business”. To qualify all the following requirements must be satisfied:

  • At the time of a qualifying investment, the enterprise’s total assets must not exceed $50 million, OR the enterprise annual sales are $10 million or less.
  • The enterprise must have enough presence in Ohio to qualify. This interpreted to mean that more than half of your employees are in Ohio, OR you have more than 50 full-time equivalent employees in Ohio.
  • Within six months after an eligible investor’s qualifying investment is made, the enterprise invests or incurs cost in one of five categories of allowable expenses in an amount at least equal to the amount of the qualifying investment.

New Modifications, Effective September 28, 2012. Ohio recently passed a law making some new modifications to the program. Modifications of particular importance include the following:

  • Application fee. The application fee goes into effect for any applications received after September 28, 2012. The fee is calculated at the greater of $100 or 0.10% of the investment amount (on a $1 million investment, the possible credit would be $100,000 and you would have to pay a $1,000 application fee).
  • At the time of the investment, both the small business and the investor need to be in good standing with Ohio. Good standing means the business must be registered with the Secretary of State, if required, and that neither the business nor the investor is involved in illegal activities or delinquent on their state taxes.
  • The asset and sales caps, which limit the size of eligible small businesses, have been modified to include, related or affiliated entities. This change could push many businesses above the upper limits of eligibility. Additionally, business and investors are now required to meet all eligibility requirements, including asset and sales caps, at two different points in time; on the day of the initial investment and six months after that time (when the certificate is to be issued).
  • In addition to all other requirements, for each of the two years in the holding period  the small business must provide records showing the number of jobs created or retained in Ohio on account of the investment. No details yet on what sort of records will satisfy this requirement.
  • The first-come, first-serve basis no longer applies. Ohio can now issue credits in order of completion. In other words, if you were application 0001 when the program went live, and your application was for $1 million investment to be made May 30, 2013, you could now actually be last in line as your six month period post investment date will fall at the end of the possible completion dates.

By: Katie Mokry, Staff Accountant

Ohio Tax Amnesty Program Kicks Off Tomorrow

The Ohio Department of Taxation will allow Ohioans several weeks to get current on their obligations while avoiding penalties and some interest charges.

The general amnesty program, created in the biennial budget, will run May 1 through June 15 this year and applies to several taxes, with a notable exception of the consumer’s use tax, which is the subject of a standalone amnesty program.

Tax Commissioner Joe Testa said the state expects to bring in $36 million, plus $4.2 million for local jurisdictions whose taxes are covered under the amnesty, such as school district income tax. A similar amnesty program offered in 2006 brought in nearly $60 million, according to the department.

Any person with outstanding taxes due as of May 1 is eligible, no matter how far back the liability stretches, unless the department has already initiated an audit or issued an assessment for the amount due. Those opting for amnesty will have penalties forgiven and pay only half the owed interest, which Testa said is levied at 3% plus the federal short-term rate.

Eligible taxes include the following:

  • Individual income
  • Individual school district income
  • Commercial Activity
  • Sales and seller’s use
  • Employer withholding
  • School district employer withholding
  • Corporation franchise
  • Pass-through entity
  • Estate
  • Gross receipts of a natural gas company or combined electric and gas company
  • Motor fuel
  • Cigarette or tobacco products
  • Dealers in intangibles

Tax Commissioner Joe Testa said increasingly sophisticated software is making it easier for the department to find those with outstanding taxes or identify areas where there likely are unpaid taxes.

Testa said the department decided to pursue a separate amnesty program for consumer’s use tax because audits in recent years have shown it to be the least understood tax. He said the previous administration had already been planning a public awareness campaign to address the problem, and the Kasich administration decided to redesign, extend it and pair it with an amnesty program.  “The feeling was it deserved special attention and a longer period of time and more forgiveness,” he said.

Call William Vaughan Company with your questions about the general or use tax amnesty programs.

 By: Sharon Trabbic, COO

Where is My Tax Refund?

Tax season is officially over return should be filed or extended at this point. Many people were forced to write a check to Uncle Sam with their filing or extension, but some are expecting a nice little check from the government. So when should you expect this pleasant little influx of cash? How do you know if your return is being processed? Even though we have touched on this topic in previous blogs, we deemed this to be the most relevant topic following tax season.

According to the Internal Revenue Service’s website, if you e-filed your tax return, you can look forward to receiving your refund within 10-21 days. Sure, that sounds great, but what if you want a better idea? The website also has an app called “Where’s My Refund?” which 72 hours after your return has been accepted for e-filing, you can enter in selected information to get a more accurate prediction of when said check will be mailed or when the refund should be released for direct deposit. Before pulling up the website, make sure you have the following information available:

  • Social Security Number of Taxpayer
  • Filing Status
  • Exact Refund number from your return

If everything is processed within their system, you should have a close estimate of when you can have that extra money in your pocket.

The Ohio website also has a version of “Where’s My Refund?” in which you can enter the following information:

  • Social Security Number of Taxpayer
  • Taxpayer’s Birth date
  • Type of Tax (in most cases- select income)

Other states that have an income tax also have a similar websites if that would apply to you, so be sure to do a search.

Within a couple minutes, you can quickly have the knowledge of when you can have that extra spending or investing money burning a hole in your pocket!

By: Jill Blakeman, CPA

Temporary Ohio Amnesty Program Presents Opportunity to Taxpayers

As you may have heard, on June 30, 2011, the Ohio legislature added two tax amnesty programs to the State Budget Bill. The two programs are as follows:

• From October 1, 2011 until May 1, 2013, a Use Tax Amnesty for use tax due on purchases made by businesses on or after January 1, 2009.

• From May 1, 2012 through June 15, 2012, a General Tax Amnesty for most business taxes, including sales tax, and some individual taxes.

These programs are a unique, limited-time opportunity for taxpayers to pay certain delinquent tax obligations. It is intended to be an incentive to Ohio businesses that are behind in meeting tax obligations, or may be unaware of their use tax obligation. Taxpayers can save significant money because of reduced interest charges and penalty charges. Under the Use Tax Amnesty program, businesses not registered for use tax can pay their past use tax liability with no penalties or interest. Under the General Tax Amnesty Program, businesses can pay their liability with no penalty and one-half of interest charges.

The first program, the Use Tax Amnesty Program, is currently in effect, and runs until May 1, 2013. How do you know if you are required to pay use tax? In general, you either pay sales tax to a vendor or remit use tax to the Department of Taxation for taxable purchases of tangible personal property or certain services. In other words, if you enter into a transaction for the purchase of tangible personal property or a taxable service, without having paid Ohio sales tax, you would owe consumer’s use tax on that transaction. As noted above, one significant advantage to applying for protection under the Amnesty program is that your use tax due will only be assessed on purchases made since January 1, 2009. This could be an especially significant savings if you have larger liabilities dating back two or more years.

The second program, the General Tax Amnesty Program, may be applicable to your business if you have an unpaid liability in another area of taxation. This program begins in just a few months and runs for a much shorter time, commencing on May 1, 2012 and ending on June 15th. The areas of taxation included in this program are:

• Commercial Activity Tax (CAT)

• Sales • Employer Withholding

• School District Employer Withholding

• Corporation Franchise

• Pass Through Entity

If you think your business may qualify for one or both of the Amnesty Programs, your William Vaughan Company representative can discuss both with you in further detail. Keep in mind that after filing under the Amnesty Program, your business will be required to file returns on an ongoing basis. We can assist in the application process, and also ensure that you are meeting your filing requirements going forward.

By: Lindsey P. Wisnewski, CPA