By: Dow Wolfe

If you have unpaid Ohio taxes as of May 1, 2011, now may be the best time to come forward.

For a limited time from May 1, 2012 to June 15, 2012,  the Ohio Department of Taxation is providing a general amnesty program under which the State of Ohio has agreed to forgive all penalties and half the interest owed by taxpayers who come forward and pay the taxes owed as of May 1, 2011.

Qualifying delinquent taxes do not include any taxes for which a bill, notice of assessment or audit has been issued.

Taxes eligible for the general tax amnesty program include individual income, individual school district income, commercial activity tax, 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 a combined electric and gas company, motor fuel, cigarette or other tobacco products, and dealers in intangibles.

After June 15, delinquent tax obligations will again be subject to penalties, full interest and the possibility of legal action.

In order to qualify, the taxpayer must submit a completed amnesty application, completed returns, and payment by June 15, 2012 to:

The Ohio Department of Taxation, General Tax Amnesty, P.O. Box 804, Columbus, OH 43216-0804.

Full payment must be made with the application.

More information can be found at http://www.ohiotaxamnesty.gov/.    If you have additional questions, please contact a BCG&Co. representative.

By: J. Dustin Sheppard, CPA, MT

With the 2012 election year in full swing, many people begin making political contributions to candidates and national parties.

We often get asked how a donation affects an individual tax return, since the term “donation” is used.  Here are some tax pointers you need to keep in mind when making a political donation.

Common questions asked regarding political-type donations:

“Are my donations deductible?”

No. Publication 526 “Charitable Contributions” clearly disallows any donation for “Political groups or candidates for public office.”

“What is the $3 Presidential Election Campaign Fund (PECF) box on top of my 1040, and does this affect my refund?”

The PECF is public general fund administered by the Federal Election Commission. The purpose of the fund is to provide public funds for presidential elections. According to the FEC, the goal of the program is “to reduce presidential candidates’ dependence on large contributions from individuals and groups. In the general election, the public funding system places the two major-party nominees on an equal financial footing in the campaign.” If the box is checked yes, it does not affect the taxpayer’s tax liability. It merely directs $3 per taxpayer of the federal general fund to be allocated to the PECF.

“My brother-in law (or whomever else provides free tax advice) says he (or she) claims a deduction for his political donations. What is he (or she) talking about?”

This could be one of two things. First, that person is incorrectly claiming a deduction for a political contribution. However, they may be referring to the ‘Ohio Political Contribution Credit.’ Ohio allows taxpayers to take a maximum $50 tax credit per taxpayer provided they made a donation to a candidate seeking a state-wide office.

“Are the donations made on line 25 of my Ohio tax return deductible donations?”

Yes, these are qualified charitable donations. However, the donation is only deductible in the year it was made. In this case, the year the tax return was filed with box checked.

If you have any further questions or situations involving political-type donations, please contact a BCG&Co. tax advisor.

Avoid scams that appear to come from the IRS

By: Jenni Davies

The Internal Revenue Service (IRS) identifies ‘tax scams’ as a culprit costing billions of dollars annually.

Tax scams, such as phishing and identity theft, have unfortunately become a nationwide ‘epidemic.’

THE IRS DOES NOT …

… initiate contact with taxpayers by email or any social media tools to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

… request detailed personal information through email.

… send any communication requesting your PIN numbers, passwords or similar access information for credit cards, banks, or other financial accounts.

WHAT TO DO if you receive a suspicious IRS-related communication:

• Email claiming to be from the IRS that contains a request for personal information.

- Do not reply.

- Do not open any attachments. Attachments may contain malicious code that will infect your computer.

- Do not click on any links.
If you clicked on links in a suspicious email or phishing website and entered confidential information, visit the IRS identity protection page. Forward the email as-is, to the IRS at phishing@irs.gov. 

1.  After you forward the email and/or header information to the IRS, delete the original email message you received.

• Website that claims to be the IRS but you suspect it is bogus.

1.  Send the URL of the suspicious site to phishing@irs.gov. Please add in the subject line of the email, ‘Suspicious website’.

• Phone call or paper letter via mail from an individual claiming to be the IRS but you suspect that they are not an IRS employee.

1.  Ask for a call back number and employee badge number.
2.  Contact the IRS to determine if the caller is an IRS employee with a legitimate need to contact you.
3.  Contact the IRS to determine if the mail is a legitimate IRS letter.
4.  If the caller or party that sent the paper letter is not legitimate, contact the Treasury Inspector General for Tax Administration at 1.800.366.4484.

• Unsolicited fax claiming to be from the IRS, requesting personal information.

1.  Contact the IRS to determine if the fax is from the IRS.
2.  If you learn the fax is not from the IRS, please send the IRS the information via email at phishing@irs.gov. In the subject line of the email, please type the word ‘FAX’.

For more information regarding phishing and identity theft, or to contact the IRS regarding one of the scenarios above, please see the links below.

Contact the IRS
The IRS Website
Identity Protection

By: Tim Stiller, CPA, MT

The IRS has unveiled a new tax form for reporting capital gains and losses from stocks, bonds, mutual funds and similar investments.

For many years, Schedule D, the capital gains and losses form, has remained the same. Previously, brokers were not required to report a taxpayer’s basis to the IRS, thus leaving room for inaccurate reporting by taxpayers. For securities purchased in 2011 and later, brokers are now required to report the basis of any securities sold on Form 1099-B.

As a result of this change, Schedule D form has been revised, and has a new counterpart, Form 8949. Investment transactions are listed individually on Form 8949, then the Forms 8949 are summarized on Schedule D. You will likely need to file more than one Form 8949, as all sales with basis reported are required to be on one form, and sales with no basis reported will be on another.

For more information about Form 8949, visit www.irs.gov/form8949 or the Schedule D instructions  http://www.irs.gov/pub/irs-pdf/i1040sd.pdf, and as always, contact a BCG&Co. tax advisor with questions.

By: Chris Martin

Effective January 1, 2012, New York State has new personal income tax rates.

The 2012 tax rates are lower than they were in 2011, but still higher than if the temporary rates enacted in 2009 had expired without further action.

Before the change, New York’s permanent income tax rates reached a maximum rate of 6.85% for individuals with taxable income over $20,000 and married taxpayers with taxable income over $40,000.

In 2009, the “millionaire’s tax” was enacted, which introduced tax brackets of 7.85% for individuals with taxable income of $200,000 to $500,000, and married couples with taxable income of $300,000 to $500,000, and a maximum tax rate of 8.97% for individuals and married couples with taxable incomes above $500,000.

The “millionaire’s tax” was set to expire at the end of 2011. However, action was required because of the budget deficit of $350 million for 2011, which could grow to $3.5 billion this year. Further, without the higher brackets the tax rates reached their maximum rates at relatively low taxable incomes of $20,000 for individuals and $40,000 for married couples.

As a consequence, New York enacted legislation to provide for additional tax brackets for the years 2012-2014.

The new rates for individual and for married taxpayers before and after the rate change are as follows:

In all cases, the new rates are lower than the rates that existed from 2009-2011. The new rates will be adjusted for inflation.

One of the goals was to provide a tax cut to the middle class and greater progressivity to New York tax rates. These rates are expected to collect $1.9 billion in net additional annual revenue, compared with the approximately $4 billion per year that the previous top rates garnered.

So while the tax cut was not as steep as some expected, the rate reductions from 2011 to 2012 should make next tax season a little less painful for New York filers.

By: Nikki Repie

If you are a small employer

• with fewer than 25 full-time equivalent employees,
  

• which pays an average wage of less than $50,000 a year,
  

• and pays at least half of employee health insurance premiums,
  

there is a tax credit that may put money in your pocket!

Here is what you need to know…

How will the credit make a difference for you?

For tax years 2010 through 2013, the maximum credit is 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities.

Here’s what this means for you. If you pay $50,000 a year toward workers’ health care premiums, and if you qualify for a 15 percent credit, you save $7,500. If, in 2014, you qualify for a slightly larger credit, say 20 percent, your savings go from $7,500 a year to $10,000 a year.

Can you claim the credit?

Now that you know how the credit can make a difference for your business, let’s determine if you can claim it.

To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees.

You must also have fewer than 25 full-time equivalent employees (FTEs).

Those employees must have average wages of less than $50,000 a year.

How do you claim the credit?

You must use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit.

If you are a small business, include the amount as part of the general business credit on your income tax return.  If you are a tax-exempt organization, include the amount on line 44f of the Form 990-T, Exempt Organization Business Income Tax Return.

You must file the Form 990-T in order to claim the credit, even if you don’t ordinarily do so.

For more details and additional information, please refer to the IRS Website or contact a BCG&Co. tax advisor.

By: J. Dustin Sheppard, CPA, MBA

Every year the question comes up:

“Are my gambling winnings and expenses reportable on my tax return?”

The answer is “Yes” — especially especially if a Form W-2G was issued to you and/or withholding taxes were taken.

IRS Tax Tip 2010-34 addresses many of the common questions asked by taxpayers.

• Gambling income includes – but is not limited to – winnings from lotteries, raffles, horse and dog races and casinos, as well as the fair market value of prizes such as cars, houses, trips or other noncash prizes.
• Depending on the type and amount of your winnings, the payer might provide you with a Form W-2G and may have withheld federal income taxes from the payment.
• The full amount of your gambling winnings for the year must be reported on line 21 of IRS Form 1040. You may not use Form 1040A or 1040EZ. This rule applies regardless of the amount and regardless of whether you receive a Form W-2G or any other reporting form.
• If you itemize deductions, you can deduct your gambling losses for the year on line 28 of Schedule A, Form 1040.
• You cannot deduct gambling losses that are more than your winnings.
• It is important to keep an accurate diary or similar record of your gambling winnings and losses.
• To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses.

If you have any further questions regarding gambling income or expenses, please contact a BCG&Co. tax advisor.

By: Jenni Davies

IRS Deadline Extended to April 17

The IRS has announced that taxpayers have until Tuesday, April 17 to file their tax returns for the 2012 tax filing season.

During a normal filing season, tax returns are due on April 15. When this tax deadline falls on a Saturday or Sunday, the IRS extends the due date to the following Monday.

Each year, Washington D.C. celebrates April 16 as Emancipation Day. On April 16, 1862, President Abraham Lincoln signed the Compensated Emancipation Act for the release of certain persons held to service or labor in the District of Columbia. According to federal law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have two extra days to file this year.

As a general rule, state and city taxing agencies have also extended the due date of tax forms and payments typically due on April 15. If you have a question about a specific state or city, please confirm the due date with the appropriate agency.

By: Maria Liossis

Numerous tax provisions expired as of the end of 2011 and will become permanent without Congressional action before December 31, 2012.

Some of the more popular expired provisions include…

Business Provisions

• Work opportunity tax credit (except for qualified veterans)
• 100% bonus depreciation (reverts back to 50%)
• 15-year write-off period for qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property (reverts back to 39-year write-off)
• Section 179 expensing reduced to $139,000 and addition maximum is reduced to $560,000
• Research credit
• Biodiesel and renewable diesel income tax credits
• Alternative fuel and fuel mixture tax credits
• Credit for construction of new energy efficient homes
• Credit for energy efficient appliance
• Reduced built-in gains recognition period for S corporations (reverts back to 10 years)

Individual Provisions

• Suspension of income limits on percentage depletion for oil and gas wells
• General sales tax deduction on Schedule A (instead of state and local income taxes)
• Above-the-line deduction for qualified tuition and related expenses
• Mortgage insurance premiums treated as qualified residence interest
• Above-the-line deduction for expenses for teachers
• Adoption assistance programs
• Ability to use personal tax credits against regular tax and alternative minimum tax (AMT)
• Exclusion of the gain on certain small business stock
• Tax-free distribution from individual retirement account (IRA) to charitable organization

Further impacting individuals, without action by Congress, the AMT exemption is drastically reduced for 2012, meaning that AMT will impact even more taxpayers than it currently does. In addition, the adoption credit is reduced by approximately $2,000 and will no longer be a refundable credit.

As you can see, there are quite a few items that will expire or change based on the way the tax code is today. Unfortunately, we can’t say with any certainty what will or won’t occur before the end of the year. This again creates a challenge for adequate tax planning for 2012. The political climate will undoubtedly impact what we will see in the future.….…STAY TUNED!

In the meantime, should you have any questions, feel free to contact a BCG&Co. tax advisor.

Not everyone is required to file a tax return.

Your filing requirement is based upon your filing status, age, and type of income you receive.

Even if you are not required, you should consider filing a return in order to get a refund of withholding, or to take advantage of refundable credits.

Check out the table below to see if you are required to file a return.

Often people have questions about whether someone who is being claimed as a dependent by someone else needs to file their own return. As mentioned above, most dependents will receive some, if not all, of their withholding back, so it is a good idea to file.

See the table below for filing requirements of dependents.

Click image to view:

This is not an exhaustive list of filing requirements.

For more information, see the Form 1040 Instructions on the IRS website or contact a BCG&Co. tax advisor.