Archive for the ‘Ohio’ Category

How To Recover From Identity Theft & Refund Fraud

Wednesday, March 18th, 2015
How To Recover From Identity Theft & Refund Fraud

Have you been (or suspect you’ve been) a victim of identity theft and refund fraud? Rea & Associates recently compiled a variety of information that will help you recover from this nightmarish scenario.

Suspecting, and then confirming, that you’ve had your identity stolen is a nightmarish scenario. It combines one of your worst fears, losing your wallet or purse, with all of the work of replacing the things that were lost. It can be so overwhelming you might be wondering: “Where do I even start?”

An increasing number of identity thefts are first identified when a thief attempts to file a tax return on your behalf and claim a federal or state tax refund. To help you navigate some of the issues you may be confronted with, we recently released a compilation of documents and resources.

The documents that are included are intended to help you navigate some of the issues you may be confronted with if you find that you’ve been an identity theft and fraudulent tax return victim.

Read “How To Recover From Identity Theft & Refund Fraud

Beat The Identity Thieves

The guidance includes a variety of valuable information for those who have been (or suspect they’ve been) a victim of identity theft and refund fraud. The following is a brief synopsis of information included in this guide.

The IRS has provided a short list of items for you to complete, which is substantially similar to the items the Federal Trade Commission (FTC) covered in its longer, checklist-style guidance.

  • The primary item to complete for the IRS is Form 14039 which initiates the IRS fraud protection procedures.
  • Also included is a form letter, one of several, the IRS may send to a taxpayer if tax return fraud is suspected to be occurring on the account.
  • The IRS has published a number of articles related to identify theft and how to protect yourself. A master page with links to all these topics is included in this packet. You may also check out some of our recent articles on the topic, which can be found in the “Related Articles” portion of this post.

The process of reporting fraud in Ohio is similar to the IRS procedures.

  • Ohio also sends form letters to the taxpayer.
    • Ohio recently added an identity quiz for roughly 50 percent of taxpayers requesting a refund. This letter simply asks the taxpayer to complete a quiz specifically used to prove their identity. Note: This request doesn’t indicate that your identity has been stolen (unless you haven’t filed your tax return for the year yet).
    • If the Ohio Department of Taxation suspects fraudulent activity on the account, the taxpayer will receive a second letter that will indicate these suspicions.
  • Ohio includes an affidavit (Form IT TA) that must be filled out to initiate their protection procedures, similar to Federal.

The FTC is the primary federal government agency dealing with identity theft.

  • The FTC has put together a very detailed, checklist to help you with the identity theft process. The guidance includes information on most forms of identity theft – of which tax identity theft is just one. While this may be more information than you need, if the fraud has gone beyond your tax returns and includes false credit activity (or you are concerned this may happen), this guide will be very useful for you.
    • The guide includes a wealth of information, such as sample letters and a variety of websites and contact information to relevant organizations that can help you. It also guides you through the process of making a police report in response to the theft of your personal information. Check it out here.
  • Note: The IRS and the FTC generally do not share data with each other. Therefore if you have completed the IRS identify theft notification procedures, don’t assume that the FTC, credit bureaus, etc., are also aware of your situation.

Check Your Mail, Not Your Caller ID

Remember, the first contact taxpayers will have with the IRS regarding any issue will be in the form of an official mailed letter – not a phone call. These scammers appear to be determined to steal your money and/or your identity and reports of these types of scams continue to be on the rise. By educating yourself, your friends and your family, you are taking a proactive stance against these criminals.

If you would like to learn more about how you can protect yourself against, and recover, from Identity Theft & Refund Fraud, click here to view our compilation of documents and resources. You may also email Rea & Associates for more information.

By Joe Popp, JD, LLM (Dublin office) and Lesley Mast, CPA (Wooster office)

 

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Update: Ohio Tax Quiz Appears To Be Working

Friday, March 13th, 2015
Tax ID Quiz

According to officials at the Ohio Department of Taxation, while the new Identification Confirmation Quiz may be a pain in the neck, it appears to be working as a identity theft deterrent – Rea & Associates – Ohio CPA Firm

We have learned over the last month that Ohio’s new system of validating taxpayer identification, the Identification Confirmation Quiz, appears to be working.

In an effort to boost security and prevent tax-fraud in the state, the Ohio Department of Taxation introduced the quiz at the onset of the 2015 tax season and began flagging tax returns with data points that are inconsistent with public and commercial data sources. If their returns are flagged, taxpayers are required to take a Quiz to prove their identities.

Read: Theft Safeguards To Cause Tax Return Delays In Ohio

“Through Feb. 18, more than 1.3 million tax returns have been filed with about 874,000 requesting a state income tax refund. About half of the refund requests have been selected for additional screening to ensure that they were not filed by an I.D. thief,” stated Ohio’s Tax Commissioner Joe Testa in a press release. “About 97 percent of taxpayers taking the quiz are passing. That proves they are who they say they are.”

That means about 3 percent who fail the test are being declined to receive refunds that they would have normally received in previous years. As long as that 3 percent consists of actual identity thieves, the results reported are significant.

By Lisa Beamer, CPA (New Philadelphia Office)

 

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If You Buy Online You Might Owe Use Tax

Monday, March 2nd, 2015
Ohio Use Tax

Amazon purchases aren’t the only ones to consider when you sit down to file your tax return this year. Other popular online retailers and groups, including Etsy, are also depending on their consumers to pay use taxes on the products they sell. – Rea & Associates – Ohio CPA Firm

If you are one of the millions of people who love to browse and buy online, it may shock you to learn that the Ohio Department of Taxation is looking at you to declare and pay a little more when you go to file your 2014 tax return. From gifts to grocery shopping, many of us use the ease of online shopping to snag a good deal and avoid the hassle of braving the brick-and-mortar shops – especially during the holidays, but sometimes that convenience might come at a price.

Were you charged sales tax for that pair of shoes you bought last October or those books you had shipped to your house in June? If the company you made purchases from doesn’t have facilities in the state or a law that requires it to collect sales taxes for your state, then it’s likely you owe use tax to Ohio – and you have to report your use tax on Line 19 of your Ohio Form IT 1040.

Use Tax Is Not A New Tax

Declaring and paying sales and use tax on your state tax return is not a new responsibility. The Ohio Department of Taxation states that “in transactions where sales tax was due but not collected by the vendor or seller, a use tax of equal amount is due from the consumer.” In Ohio, the use tax rate is the same as sales tax rate you would have paid if sales tax was correctly charged by the vendor.  This is usually the place of purchase (or your home address for shipments from outside Ohio). You can read Ohio’s use tax law in its entirety here.

As a courtesy, Amazon provides a brief explanation of the consumer’s responsibility to pay use tax on its website. Because Amazon suspects its customers aren’t keeping a file of receipts, the online retailer provides customers with the option to create and download an Order History Report, which compiles your download, shipment, return and refund activity and can be used to help calculate use tax.

But your Amazon purchases aren’t the only ones to consider when you sit down to file your tax return this year. Other popular online retailers and groups, including Etsy, are also depending on their consumers to pay use taxes on the products they sell. So make sure you take a second look at that packing slip and receipt.

Little Box, Big Pause

While the responsibility of paying use tax isn’t new, this is the first year taxpayers in Ohio are required to certify their use tax claim before filing their return with the state. If you didn’t shop online or make a “sales tax-free” purchase, you should have nothing to worry about – simply check the box and continue on. On the other hand, if you did partake in online retail therapy in 2014 and don’t have your receipts handy, you may have to pause your tax preparation to give yourself a little more time to find out what you owe.

To find out more use tax, email Rea & Associates.

By Joe Popp, JD, LLM (Dublin office)

 

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Governor’s Budget Proposal Makes The Case For Tax Reform

Wednesday, February 11th, 2015
Proposed tax increase on oil and gas production

If the proposed two-year state budget proposal passes, oil and gas produced by horizontal wells will be taxed at a 6.5 percent tax rate for product sold at the wellhead. If sold downstream, a 4.5 percent tax will be applied.

Since it was unveiled last month, Gov. John Kasich’s proposed two-year state budget has many individuals, businesses, school districts, not-for-profit organizations and others scrambling to find out how his proposed tax reform package will affect them. In his recommendation, Gov. Kasich says his proposal seeks to “create more opportunities for each and every Ohioan.” To this end, the budget focuses on four primary objectives:

  1. To ensure that students are ready for college and careers
  2. To help more students get degrees
  3. To cut and reform taxes
  4. To help Ohioans move up and out of poverty and into jobs

To achieve these goals, Gov. Kasich has proposed implementation of several tactics to help fund his $35.5 billion 2016 budget, which is up 15.5 percent over the state’s projected spending in fiscal year 2015. Of those tactics, a slew of tax cuts and increases are central to his budget initiative. The following points address some primary changes Ohioans can expect to see if Gov. Kasich’s 2016-2017 budget plan is approved.

Proposed Tax Cuts

  • A 23 percent across-the-board income tax rate reduction. This proposed cut would drop the top income tax rate to 4.1 percent, the current from 5.33 percent.
  • Business owners of pass-through entities with gross receipts less than $2 million will pay no income tax on their business income.
  • Other Ohio business owners will see the 50 percent reduction incentive on income that totals $250,000 and less become permanent.
  • Individuals who earn less than $40,000 will see a $1,600 increase in their personal exemption (from $2,400 to $4,000). The personal exemption for those who make between $40,000 and $80,000 will increase by $900 (from $1,950 to $2,850).

Proposed Tax Increases

  • The commercial activity tax (CAT), which is measured by a business’s gross receipts on business activities in the state, will increase 0.6 percent to 0.32 percent.
  • The state’s sales tax will increase to 6.25 percent. The current sales tax rate is 5.75 percent and would be expanded to include management consulting, lobbying, market research and opinion polling, public relations, debt collection services, cable subscriptions and parking and travel services.
  • Means-tested tax credits and exemptions for retired taxpayers who earn more than $100,000.
  • Oil and gas produced by horizontal wells will be taxed at a 6.5 percent tax rate for product sold at the wellhead. If sold downstream, a 4.5 percent tax will be applied.
  • The state currently reduces the price paid for the new car or boat by the value of the trade-in. The proposal calls for a 50 percent deduction in this exemption.
  • The discount vendors receive for collecting, reporting and remitting sales tax will be capped at $1,000 per month.

To learn more about how tax reform could affect you, email Rea & Associates.

By Lesley Mast, CPA (Wooster office)

 

 

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How To Prepare For A Federal Tax Return Headache

Tuesday, January 20th, 2015

Planning to buy a new big-screen television? Airline tickets for that Caribbean vacation you’ve been looking forward to?  A new car? You might want to wait a little longer.

IRS Commissioner John Koskinen recently warned American taxpayers that some federal refunds could be delayed for a week or more because of recent budget cuts. So, if you file your tax return on paper, before you start spending that income tax refund check, you might want to wait for the cash to actually find its way into your bank account. Expect to feel a little discomfort during this tax season.

Refund Delays

Historically, refunds for electronically filed federal returns were processed within 21 days of the e-filing acceptance date. Paper returns were typically processed within six to eight weeks from the date they were received. Amended tax return refunds take even longer – the turnaround for these returns were typically 12 weeks.

“People who paper file tax returns could wait an extra week – or possibly longer – to see their refund,” said Koskinen in a memo sent to IRS staff. “Taxpayers with errors or questions on their returns that require additional manual review will also face delays.”

In his memo, Koskinen didn’t explicitly address electronically filed returns, but it wouldn’t be a surprise for these refunds to be delayed (at least a little bit) as well.

Phone Jams

Nearly eight out of ten taxpayers receive an average tax refund totaling $2,800, which prompts many taxpayers to check in on the status of their refunds by calling the IRS. The agency is predicting an abysmal connection rate of these calls this year – 43 percent connection rate with a hold time of 30 minutes or more.

Instead, if you would like to track the status of your refund, hang up the phone and log onto the IRS’s website to use its Where’s My Refund feature.

Time will only tell how these budget cuts will impact next year’s tax return process, as well as other services provided by the IRS. In the meantime, start preparing to file your tax return as early as possible to avoid additional delays. Email Rea & Associates to learn more.

By Meredith Mullet, CPA (Wooster office)

 

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File Faster With This Tax Prep Checklist

Tuesday, January 20th, 2015

It’s that time of year again – time to gather your information and prepare to file your tax return. If you want the process to go smoothly, make sure to gather and organize your information before sitting down with your tax preparer. You may be surprised how fast the entire filing process goes if you spend a little time preparing!

Here’s a list of some items to compile before you get started.

Personal Information

Hopefully you know YOUR social security number and date of birth by heart. But do you know your spouse’s SSN? Your kids? Make sure you remember to bring the social security numbers and birth dates of everybody who will be claimed on your tax return.

Income Info

While your W-2 is important, there are many other pieces of information you will need to collect before you will be able to get started. Gather the following pieces of relevant information:

  • W-2s for you and your spouse.
  • Investment income: This type of income will be listed on various 1099 forms including –INT, -DIV, -B, etc). You may also have K-1s and stock option information to provide to your tax preparer.
  • Income received from state and local income tax refunds and/or unemployment. This income can be found on the Form 1099-G.
  • Gather information about any alimony you may have received.
  • If you are a business owner or farmer, don’t forget to provide a profit/loss statement and capital equipment information.  And if you use your home for business, your tax preparer will need to know the size of your house, the size of your office and what you have paid to maintain your home and office.
  • You will need to provide your IRA/pension distributions as well. This information will be provided to you on Forms 1099-R or 8606.
  • If you rent a home or other type of property, be sure to gather that information that proves the profit or losses you realized as a result of the rental.
  • Be sure to claim any Social Security benefits you may have received. This information is found on Form SSA-1099.
  • If you sold your house in 2014, you must provide your tax provider with Form 1099-C, which will include the income you received from the sale of the property. Your preparer will also take the home’s original cost and cost of improvements, the escrow closing statement and cancelled debt information into consideration.
  • Some other information you will need to pass along to your tax preparer includes items such as jury duty, gambling winnings, scholarships, etc.

Adjustments To Your Income

Now that you have collected all the information you can to adequately identify your income in 2014, some adjustments may need to be made. Making the following adjustments to your income may help increase your tax refund or lower the amount you owe to the government. If you have documentation of any of the following information, be sure to bring them to your appointment.

  • IRA contributions
  • Student loan interest
  • Medical Savings Account contributions
  • Moving expenses
  • Self-employed health insurance payments
  • Pension plans such as SEP and SIMPLE
  • Alimony you paid
  • Educator expenses

Itemized tax deductions and credits

This is another way to increase your refund or reduce what you owe. The following deductions and credits help lower the tax burden on individuals. Be sure to collect this information before filing your return.

  • Child care costs – child care provider’s name, address, tax ID number and amount paid
  • Education costs – these can be found on Form 1098-T
  • Adoption costs – the SSN of the child as well as legal, medical and transportation costs associated with the adoption
  • Home mortgage interest and points you paid, which can be found on Form 1098
  • Investment interest expense
  • Charitable donations that were made to not-for-profit organizations. Make sure you have the amounts and value of the donated property, and any out-of-pocket expenses you may have accrued in your effort to make the donation, including transportation costs. Include receipts for any contribution over $250

o   Losses you realized as a result of casualty and loss (the cost of the damage and insurance reimbursements

  • Medical and dental expenses
  • Energy credits
  • Other deductions include items such as union dues, unreimbursed employee expenses, such as unreimbursed employee expenses

New for 2014 returns

For the first time, you will need to provide information about your health insurance coverage to your tax preparer. Be prepared to answer questions such as these:

  • Was everyone claimed on your tax return covered by health insurance?

o   If not, why?

  • Did you or anyone on your return obtain health insurance coverage through Healthcare.gov or through a state run exchange in 2014?

o   If yes, did any of those individuals receive a premium tax subsidy, cost reduction, or premium tax credit? If yes, provide Form 1095-A.

It’s likely that you have already started receiving tax forms in the mail from various places. It’s easy to misplace these documents if you’re not careful. If you haven’t already, set aside a place for these items until you have collected them all. Once you have everything you need, you can set an appointment to file your taxes with your financial advisor or tax preparer. For additional tax information, or to speak with a tax expert, email Rea & Associates.

By Lesley Mast, CPA (Wooster office)

 

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Theft Safeguards To Cause Tax Return Delays In Ohio

Tuesday, January 20th, 2015

If time is money then the new security measures to protect Ohio taxpayer’s returns and prevent identity theft comes at a price. The Ohio Department of Taxation (ODT) said that in an effort to boost security and prevent tax-fraud in the state, Ohio will implement an “up-front filter to all tax-refund requests to analyze the demographic information reported on the return.”

According to Joe Testa, the state’s tax commissioner, the ramped up security is in response to increased fraud attempts. The Columbus Dispatch reports that the state foiled $250 million in attempted tax fraud during the 2014 tax season, which is a significant increase over the foiled tax fraud average of $10 million in previous years. Figures of how much fraud went undetected last year or in previous years are not available.

The Tax-Fraud Quiz

If your tax return is flagged as a result of anomalies in reported demographic information then you will have to complete an Identification Confirmation Quiz, according to Testa. If you are selected to take the quiz, you should expect a delay as to when your funds will be dispersed. Traditionally, it takes up to 15 days to process refunds that will be distributed to the taxpayer via electronic deposit. Those who opt to receive their refunds in check form could wait 30 days to receive their money. This year, those who must take the quiz to validate their identities, may have to wait longer than they have in previous years to receive their refunds.

Which Returns Will Be Flagged?

On its website, the ODT says that tax returns will be analyzed for certain inconsistent data points against public and commercial data sources. For example, in the Dispatch article, taxation spokesman Gary Gudmundson said that “names and Social Security numbers that show up in a different part of the state, or in another state, after being located for years in a specific area of Ohio” may be flagged. This means that if you moved this year, your return may flagged as one that has a higher probability of fraud. The next step is to take the quiz to verify your identity. If the return is flagged, the taxpayer will be required to complete the quiz or prove their identity through documentation before the tax return will be processed.

How To Know If Your Return Was Flagged?

The ODT will send a letter to taxpayers who are required to take the identification quiz. Those who don’t receive a letter will not be able to complete the quiz. Those who are selected will have 60 days to complete the multiple choice quiz. The quiz will be timed and it must be completed online. The state agency has provided answers to Frequently Asked Questions about the quiz on its website. You can also view a video tutorial on the Ohio Department of Taxation’s YouTube channel to learn more about the quiz and what to expect if you are selected to participate in this identity theft safeguard.

Contact your financial advisor or seek out a tax professional to help guide you through these security measures. Email Rea & Associates for more information about this and other tax-related concerns.

By Lisa Beamer, CPA (New Philadelphia office)

 

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Put Your Property Easement Agreement To Work

Tuesday, December 16th, 2014

The shale oil and gas play has spurred a significant amount of pipeline and infrastructure activity throughout certain areas of the United States. As a result, many landowners are now being approached by landmen armed with cash offers and easement agreements in the hopes of acquiring the right to use your property to process and transport oil and gas related products. Before you sign on that dotted line, be sure to seek advice from someone well versed in the complexities of property easements.

Be An Informed Property Owner

You probably want to keep as much money in your bank account as possible. So when it comes to paying your taxes, you probably have no intention of giving the government more than its fair share, right? Did you know that when you enter into certain agreements, such as land easements, you may be able to dictate the type of tax treatment your income receives? The trick is to fully understand the tax consequences of language in the agreement.

The tax treatment of a land easement typically is determined (at least in part) by the easement agreement itself. The easement language will either determine if the agreement is for a permanent (or perpetual) easement period, which is exclusive in nature; or if it’s a temporary easement, which will be effective for a finite period of time.

Understand Your Options

If you enter into a permanent easement agreement, the taxable part of the transaction could qualify for capital gains, which may result in an opportunity to save some money during tax season. If you are able to apply the capital gains tax treatment to the income generated from the land easement contract, as opposed to the ordinary income tax rate, you could stand to see your tax rate that is applied to this income drop by almost half.

  • Capital Gains tax rate = 20 percent
  • Regular Income tax rate = 39.6 percent

On the other hand, if you are looking for another option, which could eliminate current payment of tax all together (defer the tax consequence into the future), you might consider the like-kind exchange tax planning strategy. Like-kind exchange rules require the property that is exchanged and the property that is acquired to be held for productive use or investment purposes.

Agreements that receive like-kind treatment under U.S. Code 1031 may result in the deferral of your taxes being due until well into the future or until you dispose of the property acquired in the like-kind exchange. For this to work, the easement agreement must be considered perpetual or permanent and must also involve real estate that is used as part of your trade or business or that is being held for investment purposes.

Don’t Disqualify Yourself

While the thought of exchanging your land easement for other real estate while deferring your taxes may seem attractive, the process of entering into, and maintaining, a like-kind exchange is very complex and must be strictly adhered to. In other words, you will need to seek out help to navigate the waters. If you would like to see if you qualify for a like-kind exchange, email Rea & Associatesfor more information. And remember to always consult your current financial advisor or another professional well versed in like-kind exchange taxation, before signing any land easement contract. Failure to do so may disqualify you from favorable like-kind exchange treatment.

By Jim Fracker, CPA (Zanesville office)

 

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Nonprofit Service Is Voluntary, Workers Comp Coverage Is Not

Monday, November 3rd, 2014

Did you know that the Ohio Bureau of Workers Compensation (BWC) expects you to provide workers compensation coverage to your nonprofit’s board of directors? And while the bureau hasn’t heavily enforced this guideline in the past, you can expect to see more enforcement of the rule in the future.

We recently caught up with a BWC representative to validate a letter one of our clients received pertaining to this issue. The conversation was valuable because we were able to walk away with some important pieces of information that, over time, had either been forgotten or ignored by many in the nonprofit sector.

Even though your board of directors may not receive a paycheck for the time and resources they have put in to your organization, they are likely on the front lines when it comes to managing the organization’s volunteers, finances, events and other initiatives. In other words – they are “working” for you.

“Active executive officers of a corporation, except for an individual incorporated as a corporation or officers of a family farm corporation, are considered employees for workers’ compensation purposes,” the bureau states in its Coverage Information by Employee Types.

Here are four facts nonprofit organizations need to know to avoid issues with the BWC:

  1. An organization’s officers are always considered employees of the organization. Even if an individual receives no pay, officer status indicates that they’re responsible for regular organizational work. Therefore, they are identified as an employee by the BWC, not a volunteer.
  2. Individuals who perform volunteer, non-emergency services for private employers (including nonprofits) are not covered under the BWC’s compensation policy.
  3. Since the BWC identifies those who hold an office with nonprofit organizations as employees, the nonprofit organization is responsible for reporting all wages paid to officers to the BWC, as well as to the IRS.
  4. You must pay the minimum reportable amount even if you have an “all-volunteer board.” However, non-officer board members are not subject to these rules.

Email Rea & Associates today to learn more about the BWC’s compliance requirements. The sooner you understand your compliance requirements, the sooner you can get back to focusing on doing more for your communities, families and causes your organization cares about.

By: Maribeth Wright, CPA (Cambridge office)

 

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