Archive for the ‘Tax’ Category

Like Losing Your Wallet – Only Worse

Friday, July 31st, 2015
Panic Mode - Rea & Associates - Ohio CPA Firm

Typically, owners of businesses and their spouses who fail to file their annual retirement plan returns are in full-scale crisis mode – and rightfully so, since missing this deadline results in a penalty that’s about the size of a small fortune.

For most of us, misplacing our keys, losing sight of our shoes and occasionally forgetting to pay the phone bill on time is not a catastrophic phenomenon. It happens; and most likely we will freak out for a minute, find what we were looking for and move on – only to repeat our dysfunctional routine countless times over the course of a lifetime. Forgetting to file your retirement plan returns on the other hand … well, let’s just say that’s typically not a stress-free event.

Read Also: Do You Know What Your Retirement Plan Is Costing You?

Typically, owners of businesses and their spouses who fail to file their annual retirement plan returns (Form 5500-EZ) are in full-scale crisis mode – and rightfully so, since missing this deadline results in a penalty that’s about the size of a small fortune. To be more precise, in years past, those who failed to meet their filing obligation could face a penalty totaling up to $15,000 per return. Fortunately, the IRS recently announced that instead of facing such an extreme late fee, eligible business owners can take advantage of a “low-cost penalty relief program.”

How Much Would You Pay?

The relief initiative, which started as a one-year pilot program in 2014, was tremendously successful, resulting in the collection of about 12,000 late returns. Because of this success, the program secured it’s permanency in May of this year. According to the news release, the program allows eligible business owners and their spouses to file late returns and only pay a $500 penalty for each return submitted with a maximum of $1,500 per plan. Because the IRS caps the maximum penalty at $1,500, applicants are encouraged to include multiple late returns in a single submission.

Eligibility

The IRS says that businesses with plans that cover the owner or the business’s partners (depending on how the business is set up) and their spouses are eligible to take advantage of this low-cost plan. Complete information about the program can be found by clicking here.

Learn More

Remember, your return must be filed annually no later than the end of the seventh month following the close of your plan year. So, for example, if your plan is governed by the calendar-year, as most are, your 2014 return was due today (Friday, July 31, 2015). Did you fail to file your small business’s annual retirement plan returns? Would you like to find out if you qualify for this program? Email a retirement plan expert at Rea & Associates and take control of your IRS debt now.

By Andrea McLane, QKA (Dublin office)

Want to read more about the importance of Retirement Plan Compliance?
Check out these articles:

401(k) Loans and Keeping Your Plan In Compliance
Retirement Roulette
The ‘Van Halen Philosophy’ of Retirement Plan Compliance

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A Fair Assessment?

Tuesday, July 21st, 2015
How Far Back Can The IRS Go To Collect Back Taxes - Rea & Associates - Ohio CPA Firm

When a taxpayer files a false or fraudulent return, the taxpayer waves their right to statute of limitations protection. And if a taxpayer fails to file their income tax return, the IRS is allowed to undertake collection proceedings at any time and without assessment.

Bob recently received a copy of his account transcripts from the IRS. Upon reviewing the paperwork, he noticed that the government agency made note of a “date of assessment,” which prompted him to wonder how the date of assessment was determined? Moreover, he wanted to know what role one’s date of assessment plays with regard to the time frame the government has to collect back taxes.

If you ever find yourself in a situation similar to Bob’s, with questions about your tax history, in addition to speaking with your tax advisor, you can request that a copy of your tax return transcript and tax account transcript be mailed to you. Fill out the online form here, but make sure you are making the request for the current tax year’s transcript or transcripts for three years prior.

If you are requesting transcripts for older tax years or you need a wage and income transcript or verification of non-filing letter, you’ll need to complete Form 4506-T and send it to the address listed on the form’s instructions. Due to a recent security breach, your transcripts will not be sent electronically.

How Far Back Can The IRS Go To Collect Back Taxes?

If the IRS is attempting to collect past due taxes, the agency will assign a date of assessment to your IRS account transcript.

Read Also: IRS Says You Owe More? Don’t Write That Check Yet!

Like many of the invoices you see every day, every item on your transcript will be assigned a code. Your date of assessment is no different. To identify the date of assessment on your account transcript for the tax year in question, look for Transaction Code “150.” Tip: If you are wondering what the other codes on your transcript mean, you can find a comprehensive list here.

As a general rule, the IRS must assess tax, or file suit against the taxpayer to collect the back taxes, within three years after the original tax return was filed. This three-year period of limitation on assessments also applies to penalties. In fact, this rule continues to apply regardless of whether the return was filed on time or not. In general, the statute of limitations will almost always begin the day after the taxpayer files their income tax return.

The Rules May Not Apply

It seems as though there are always exceptions to the rules we work so hard to uphold – taxes are not excluded from this trend. For instance, when a taxpayer files a false or fraudulent return, the taxpayer waves their right to statute of limitations protection. And if a taxpayer fails to file their income tax return, the IRS is allowed to undertake collection proceedings at any time and without assessment.

Parting Shots

While the statute of limitations for assessment is three years after your return has been filed, the IRS still has 10 years to actually collect the assessed tax. Below is an example of the assessment process in action:

  • April 15, 2015 – you filed your 2014 tax return with the IRS
  • March 31, 2018 – the IRS assesses additional taxes on your 2014 tax return
  • The IRS has until March 31, 2028, to collect the additional tax or file suit against you.

While this information may help to shine some light on IRS assessments and statute of limitations rules, every situation is unique and hinges on several specific variables. Your tax advisor can help you sort through codes and details to get you back on the right track. Email Rea & Associates to learn more.

By Christopher Axene, CPA (Dublin office)

Check out these articles to learn more about your responsibilities as a taxpayer:

How Far Back Can The IRS Go For Tax Auditing?

The Truth About Tax Extensions

If Something Happens To me, What Will Happen With My Financial Matters?

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The Plight of the Snowbird

Friday, June 19th, 2015

It’s warm and muggy now, but once winter blankets the Buckeye State with record snowfall and subzero temperatures again, you will likely be kicking yourself for not having hightailed it to Florida after last year’s bitter cold snap. Sure, it’s easy to say that you would like to pack up and head for a warmer climate during a seemingly endless freeze, but once the icicles melt and the flowers bloom, you begin to remember why you’ve stayed around for so long in the first place. Maybe the fact that your family and friends still call Ohio home is enough to convince you to stay put. Or perhaps its memories of your own childhood that are keeping you tethered to the state. Either way, now that it’s summer – the need doesn’t seem so intense anymore … that is, unless you are considering taking advantage of possible tax savings.

Will Taxes Influence Your Decision To Fly South This Winter?

The Plight of the Snowbird - Rea & Associates - Ohio CPA Firm

Now that you have settled on whether or not you will be packing up and moving for tax and/or weather reasons, make sure you know what’s involved when it comes to changing your state of domicile.

What if I told you that the State of Ohio has made it a little easier for you to escape the winter chill, spend more time in the nation’s heartland during the seasons you love and save on your tax bill? Would you consider making the move then? If so, you’re in luck!

Read: How Can I Make The Most Of My Retirement?

Which State Do I Call Home?

For some, it’s relatively easy to buy and maintain several homes across state lines. The hard part comes when the Internal Revenue Service wants you to decide which home should be considered your primary residence based on how much time you spend in each state. These are the facts that will ultimately influence whether you pay taxes or not. If you are a snowbird who flocks back and forth between Ohio and Florida, for example, to avoid reporting your income to Ohio for tax purposes, it’s up to you to prove that you have spent no more than seven months (or fewer than 212 contact periods) in the Buckeye State. That compares to the 182 contact sessions (or six months) snowbirds were allowed to remain in Ohio under prior rules. The rules were changed in March.

How Do I Change My Residence For Tax Purposes?

Now that you have settled on whether or not you will be packing up and moving for tax and/or weather reasons, make sure you know what’s involved when it comes to changing your state of domicile. Some states, such as Florida, require basic documentation to establish your change of domicile. Therefore, you should make sure all your paperwork is in order, including your Declaration of Domicile. And while you are filing paper work to establish your new residence for tax purposes, keep in mind that some states, including Ohio, require documentation in order to relinquish your residency. Ohioans looking to relocate must complete and sign an Affidavit of Non-Ohio Residency/Domicile. This document helps establish your desire to establish nonresidency within the state. But keep in mind that there are there are other bright line tests the State of Ohio may look at to help determine whether you are actually domiciled in another state. For example, the State may look for information that indicates where you are registered to vote, which state issued your driver’s license, where your vehicles are titled and what address is listed on your tax return.

Email Rea & Associates to learn more about the tax benefits some snowbirds enjoy and whether migration is right for you.

By Trista Acker, CPA, CFP (Dublin office)

 

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Want A Better Business? Structure Matters

Friday, June 5th, 2015
Minimal Tax Liability - Rea & Associates - Ohio CPA Firm

Perhaps the biggest argument for establishing your business as an S-Corp is the minimal tax liability it provides to shareholders and to the business as a whole. Only the wages paid to owners and employees are considered earned income and subject to Federal Insurance Contributions Act (FICA) tax for Social Security and Medicare. Other net earnings passing through to shareholders are considered “passive income,” protecting them from the taxes that would otherwise be assessed per the Self Employed Contributions Act (SECA) tax.

Are you an entrepreneur who wants to take advantage of the benefits often awarded to small-to-midsize business owners? If so, you may want to consider establishing a limited liability company or an S-corporation. Both options offer several distinct advantages depending on the size and scope of your business and it’s even possible to combine the two – potentially providing you with the best options of both worlds.

Read: Is It Time To Review Your Choice Of Entity?

Keep in mind that in some circumstances, making the change to an LLC may simply be impractical. Given your particular situation, the switch may have unfavorable consequences. Consider working with a knowledgeable financial advisor and/or business consultant who can assist you with proper planning and who can articulate the advantages and disadvantages of each option. If you are ready for a structure change, be sure to look closely at your short and long term goals and objectives – and be sure to build in some flexibility so that your business can adapt as it matures.

While it may be nearly impossible to find a perfect fit with regard to your specific needs, you may find one option to be better than another when working toward accomplishing your unique financial and tax goals. Read on to learn more about a few organizational structures that might make sense for you.


Want A Better Business? Structure Matters – Created with Haiku Deck, presentation software that inspires

Just Passing Through

Regardless of whether you establish an LLC or an S-corp, you will receive the benefits associated with owning a pass through entity, meaning that your company’s income will pass directly through to the business owners – potentially receiving better tax treatment. Furthermore, both options grant owners with some form of limited liability protection.

What To Expect From Your LLC

If you decide to structure your business as an LLC you will likely enjoy the tax efficiencies and operation flexibility this traditional sole proprietorship or general partnership will provide. If you plan to enter into a partnership, each owner will be considered members and will report their portion of the profits and losses to the internal revenue service (IRS) on their personal federal income tax return. Another great benefit LLC members report is the ease of their operation and administration responsibilities. Members also enjoy fewer restrictions when the time comes to distribute earnings through profit-sharing.

Be aware, however, that the liability protection provided by an LLC is typically limited to each member’s personal investment in the company.

What To Expect From Your S-Corp

Corporate income, losses, deductions and credits are passed directly through to owners (or shareholders) of S-corporations. Shareholders of the company are then expected to report the business’s income and losses on their federal tax returns – similar to an LLC. Keep in mind that S-Corps may have no more than 100 shareholders. Furthermore, partnerships, corporations and non-resident aliens are not eligible to own S-corps. Shareholders only consist of individuals and certain trusts and estates.

Perhaps the biggest argument for establishing your business as an S-Corp is the minimal tax liability it provides to shareholders and to the business as a whole. Only the wages paid to owners and employees are considered earned income and subject to Federal Insurance Contributions Act (FICA) tax for Social Security and Medicare. Other net earnings passing through to shareholders are considered “passive income,” protecting them from the taxes that would otherwise be assessed per the Self Employed Contributions Act (SECA) tax.

But be forewarned, even though S-Corps have some great tax benefits, they also have complex administrative and recordkeeping obligations. All S-Corps are required to maintain formal minutes, bylaws, forms and filings. Additionally, because shareholders earnings are limited to a proportional percentage of capital contributions, profit sharing is difficult to establish. In other words, if you are looking for a relatively low-maintenance option – you may not want to choose to establish an S-Corp.

The Best Of Both Worlds

Wouldn’t it be great if you could structure your business in a way that allows you to enjoy the benefits of minimal tax liability, profit sharing, and fewer administrative and operational responsibilities while curtailing the restrictions posed by establishing the company solely as an LLC or S-Corp? Good news – that option exists!

There are steps you can take to establish your business as an LLC while allowing it to receive the tax treatment of an S-Corp – it just requires you to seek insight from a professional in business and financial matters and a special election with the IRS via Form 2583.

The decisions you make today will impact the future of your business for years to come. Email Rea & Associates to learn more about the pros and cons of LLCs and S-Corps, as well as other options that may be available to address your specific challenges.

By Gene Spittle, CPA, PFS, CGMA (Wooster office)

 

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What’s That ‘New’ Charge On Your Amazon Bill?

Tuesday, June 2nd, 2015
Amazon Looks To Drone Delivery - Rea & Associates - Ohio CPA Firm

Amazon appears to be unaffected by the possible repercussions of adding sales tax to customer’s invoices as its focus seems to have shifted from a superior price point strategy to high efficiency and extra speedy service. According to reports, the online giant continues to move forward with initiatives that promise even speedier delivery – further cutting the time it takes for a product to hit the customer’s front porch after the order was placed.

If you aren’t already aware, Amazon is in the process of bringing three of its data centers and a distribution center to Ohio. And yes, the company’s decision to open up shop in the Buckeye State is expected to boost the state-wide economy and add about 1,000 jobs to the ranks. But what is generating the most excitement these days (at least throughout Ohio’s retail industry) is the company’s new responsibility to collect sales tax from our state’s shoppers.

Read: If You Buy Online You Might Owe Use Tax

Traditional retailers anticipate this move will effectively level the playing field, helping encourage the growth of the state’s locally-owned businesses. Amazon, however, appears to be unaffected by the possible repercussions of adding sales tax to customer’s invoices as its focus seems to have shifted from a superior price point strategy to high efficiency and extra speedy service. [SPOILER ALERT: Drone delivery appears to be imminent!] According to reports, the online giant continues to move forward with initiatives that promise even speedier delivery – further cutting the time it takes for a product to hit the customer’s front porch after the order was placed. The company is also exploring ways to keep the cost associated with such speed minimal – information from the US Patent and Trademark Office reveals the company’s desire to “dominate the skies.”

Ohio-Based Amazon Shoppers Begin Paying Sales Tax

Paying taxes on your purchased items is not a new phenomenon. In fact, you’re probably not too shocked to see the roughly 7 percent (based on your county) charge permanently affixed to the bottom portion your receipts whenever your purchase a variety of products from a local brick-and-mortar shop. Until June 1 though, Ohio residents didn’t see this charge when purchasing products from Amazon, simply because the online retailer wasn’t required to make those living in the Buckeye State pay these taxes.

In Ohio, only vendors with a physical presence in the state, such as a storefront, warehouse, factory or call center, must charge sales tax to in-state customers. Otherwise, it’s up to individual taxpayers to report and pay the taxes when filing their annual tax returns, which is a relatively uncommon practice.

“The Ohio Department of Taxation has estimated that Ohio will lose out on about $400 million in unpaid sales or use tax on unpaid sales or use tax on so-called remote sales this year,” reported The Columbus Dispatch. “More than 5 million Ohioans filed tax returns for 2012. Of those, a little more than 50,000 paid a total of $3 million in taxes due on Internet or mail-order purchases. Retail groups and analysts welcomed the news that Amazon will start collecting taxes.”

Ohio Taxpayers Still On The Hook For Other Purchases

It may seem like it’s too soon to start thinking about your 2015 tax return, it’s actually a great time to start collecting information you will need to complete your paperwork early next year. For example, while you won’t need to collect your Amazon receipts anymore, you may have to keep tabs of your Etsy habit (for example) to help make calculating your 2015 use tax as simple as possible.

Email Rea & Associates to learn more about use tax.

By Joe Popp, JD, LLM (Dublin office)

 

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Hackers Target IRS – 100,000 Taxpayer Accounts Breached

Wednesday, May 27th, 2015
Hackers Target IRS – 100,000 Taxpayer Accounts Breached  - Rea & Associates - Ohio CPA Firm

Reports state that cyber-criminals were able to gain access to taxpayer accounts by obtaining specific, personal information, which allowed them to navigate the Get Transcript authentication process. The IRS said, since February, there have been about 200,000 attempts to access taxpayer’s Get Transcript accounts from “questionable email domains – of which, about 100,000 were successful.

Just when you thought it was safe to let your guard down, cyber-criminals have blindsided us again. This time they’ve used the Internal Revenue Service’s “Get Transcript” application to gain access to approximately 100,000 taxpayer accounts.

Read: Could A Cyber-Attack Cripple Your Business In 2015?

The IRS released a statement Tuesday stating the government agency is “working aggressively to protect affected taxpayers and strengthen [their] protocols even further going forward,” after learning that hackers used “non-IRS sources” to access data, including Social Security information, dates of birth and street addresses associated with the accounts of nearly 100,000 taxpayers. The IRS said the security breach occurred when criminals gained access to its online Get Transcript application, which has since been shut down pending a full investigation by the Treasury Inspector General for Tax Administration.

According to the IRS, “the online application will remain disabled until the IRS makes modifications and further strengthens security for it.”

The data breach was limited to the Get Transcript application, said an IRS representative. The main IRS computer system that manages tax filing submissions was not affected and remains secure.

Reports state that the criminals were able to gain access to the accounts by obtaining information specific to the certain taxpayers, which allowed them to navigate the Get Transcript authentication process, which includes asking the user to answer several personal questions to confirm their identity. The IRS said, since February, there have been about 200,000 attempts to access taxpayer’s Get Transcript accounts from “questionable email domains – of which, about 100,000 were successful.

Expect to receive a letter in the mail if your account was one of the 200,000 accounts targeted. And if your account was one of those that were compromised, your letter will provide additional information, including specific instructions to access free credit monitoring services that will be provided by the IRS to ensure your data is not being used in other financially damaging ways. According to the IRS, the letters started going out this week.

Concerned about identity theft as a result of this breach? Click here to learn what to do if your identity is stolen or if your personal information is compromised.

If you are a business owner, do you have protocols in place to protect your business from a cybercriminal?Email Rea & Associates to learn how you can protect your business from a cyberattack. You can also get some useful tips and information in the related articles below.

By Lesley Mast, CPA (Wooster office)

 

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Charter Schools Can Thrive In An Era Of Reform?

Friday, May 8th, 2015

It’s hard to avoid the topic of charter school reform these days. From news reports to proposed policy changes, everybody seems to have an opinion when it comes to the proper way to manage these public educational institutions. While it’s still too early to rewrite policy, it doesn’t hurt to monitor the ever-changing pulse of the legislature, especially when it has the potential to drastically impact the way our state’s charter schools are managed.

As students continue to flock to charter schools within their communities, the increased demand has effectively changed the landscape of Ohio’s education facilities. The National Alliance for Public Charter Schools reports that during the 2013-14 school year a record 119,533 students opted to attend one of Ohio’s 400 charter schools. Such a shift in our educational system has spurred increased scrutiny of the charter school industry and has prompted state leaders to call for increased organizational and financial transparency and accountability.

Slideshow: Top 5 Tips For Charter Schools


Top 5 Tips For Charter Schools – Created with Haiku Deck, presentation software that inspires

Charter Schools Continue To Grow In Popularity

Charter schools have proven their worth and show no signs of going away, which has fueled efforts to secure greater regulation and oversight over the institutions. So far this year there has been no shortage of charter school reform proposals – with the most recent one being introduced by State Sen. Peggy Lehner mid-April.

The charter school reforms that are being debated in Ohio’s legislature call for companies and organizations responsible for operating the schools to do so under “higher standards” of quality education. Proponents of reform cite a trend of lower test scores and point to the government funding charter schools currently receive to back a position of greater accountability and transparency.

“Charter schools can be examples of exceptional education,” Lehner told The Cleveland Plain Dealer in April. “But Ohio has been ‘extremely loose’ in its rules about who can run (manage) schools … and (has) ‘failed to put up the sort of guardrails’ that force the schools to be of high quality.”

According to the Cleveland publication, the National Association of Charter School Authorizers (NACSA) points to the success of many national charter schools as examples how communities and students can continue to benefit from properly managed privately-held institutions and point to the importance of outside agencies, namely school districts, state or city panels, colleges and non-profits, “to do a better job of making sure schools provide solid educations to children.”

The three proposals introduced so far this year all call for stricter oversight with regard to which entities are authorized to set up charter schools across the state.

How Are These Proposals Different?

 

Charter School Changes - Rea & Associates - Ohio CPA Firm

The more charter schools grow in popularity, the more attention they get in the legislature – especially in Ohio where during the 2013-14 school year a record 119,533 students attended one of the state’s public charter schools.

Gov. John Kasich’s budget proposal called for Ohio’s charter schools to receive two new potential funding sources while holding school sponsors to a higher standard of accountability. His proposal sought to generate a $25 million facilities fund, which would be available only to the highest-rated sponsors. Those highly-rated sponsors would also be allowed to seek local tax levies while advocating for the closure of poorly performing schools. Furthermore, he would:

  • Require all sponsors to be approved by the Ohio Department of Education and go through the state review and rating process.
  • Prevent sponsors from selling goods and/or services to the schools they sponsor in an effort to avoid conflicts of interest.
  • Mandate that all charter schools only employ treasurers, auditors and lawyers who are not affiliated with the school’s sponsor or management company.
  • Advocate for stronger rules for schools and operators that apply directly to the state for sponsorship.

The next charter school reform that was proposed, House Bill 2, was touted as a solution that would promote accountability, transparency and responsibility by:

  • Requiring all charter schools – including district-created dropout recovery schools – to be included in the Ohio Department of Education’s report card.
  • Mandating that all contracts between schools and sponsors include more detail about expected academic performance of the schools as well as details about the school’s facilities and rental or loan costs.
  • Preventing charter schools from frequently changing sponsors in order to appear as though they are in good standing.
  • Requiring the full disclosure of all conflicts of interest.
  • Calling for the annual disclosure of financial reports that allow sponsors to better monitor the school while advising it.
  • Instructing all management companies or organizations to begin reporting their performance.
  • Prevent sponsors from selling goods and/or services to the schools they sponsor in an effort to avoid conflicts of interest.
  • Prohibiting school district employees and vendors from sitting on the school’s governing board.
  • Ensuring that school treasurers will no longer be hired by the school’s sponsor.

State Sen. Lehner’s most current proposal reportedly “takes many pieces of [the other proposals] and adds additional controls – and benefits.” The Cleveland Plain Dealer states “the bill does not have the state directly close poor-performing charters quickly … instead [it] takes the more indirect path that the charter school community prefers nationally. The bill pressures the ‘sponsors’ … to raise standards.” Her bill aims to:

  • Strengthen language that will prohibit “sponsor hopping.”
  • Increase the transparency associated with expenditures generated by operators.
  • Require all sponsors to have a contract with the Ohio Department of Education [ODE].
  • Incorporate Gov. Kasich’s charter school sponsor oversight proposal.
  • Limit the direct authorizing by the ODE and allows it to decline applicants.
  • Prohibit sponsors from spending charter funds outside of their statutory responsibly.
  • Encourage high performing schools with facilities by encouraging co-location and facility funding.

I am sure we will hear much more about this issue before it comes to a vote. But in the meantime, keep following these events and consider how changes might affect you. Email Rea & Associates to find out how we can help you overcome current challenges while preparing for the future.

By: Zac Morris, CPA (Millersburg office)

 

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Cash Continues To Flow From Ohio’s Shale Industry

Thursday, April 23rd, 2015
Companies Eye Mercer County For Fossil Fuel

Current news reports suggest that oil and gas companies will continue to invest in Ohio’s shale industry which could provide more opportunities for land owners.

For many of us, the future of Ohio’s shale industry has become a regular topic of conversation. And as a landowner in the state’s Marcellus and Utica shale regions, you’ve probably wondered what (if any) effect current events, such as the state budget and plunging energy prices, will have on your financial well-being. While nobody can predict the future, I’m optimistic we won’t see any major slowdowns over the next few years. Here are a few reasons why:

Severance Tax Sees The Cutting Room Floor

We recently learned that Gov. Kasich’s plan to increase the state’s severance tax on horizontal drilling to pay for the plan to cut income taxes was removed in the newest rendition of the state’s proposed budget bill.

The governor’s original two-year budget plan called for oil and gas produced by horizontal wells to be taxed at a 6.5 percent tax rate for product sold at the wellhead – while 4.5 percent tax would have been applied to product sold downstream. Earlier this year, Ohio Tax Commissioner Joe Testa told the media that the governor’s proposed tax hike was because Ohio’s horizontal drilling industry has become more developed and that drilling has proved to be less expensive than anticipated. In response, American Petroleum Institute’s Executive Director, Chris Zeigler, argued that the original budget proposal placed the “future development of Ohio Shale at serious risk.”

Now that the proposed tax increase in question has been removed, one could assume that drilling companies are breathing a sigh of relief. However, while there appears to be no new initiatives in play to raise the existing severance tax rate at the moment, the new budget proposal still has a long legislative journey to make before the June 30 deadline.

Shale Investment Appears To Be Untouched By Low Energy Prices

Lower prices at the pump might be a bit unnerving if you are, for example, in the process of finalizing a mineral lease agreement. But have no fear, even though new drilling initiatives in Ohio’s shale regions are slowing, according to Business Journal Daily, “oil and gas exploration continues to have positive ramifications across the region.”

As Ohio’s oil and gas industry matures, it continues to become more efficient, which has helped it persevere at a time when oil producers in the Middle East and elsewhere appear to be maintaining higher production quotas in an effort to price horizontal drillers out of the market. For example, the practice of “super fracking,” by which producers pump higher quantities of sand into the wells they fracture, has increased productivity from 400 barrels a day to 600. The result is a lower break-even cost for producers and, in general, more staying power than experts had initially thought.

To date, Energy In Depth, an oil and gas trade organization, estimates that Ohio’s shale industry has grown to $22.3 billion, and expects it to grow by another $8.1 billion by 2016, with the construction or extension of additional pipeline infrastructure, power plants and processing plants. In other words – don’t expect the Ohio’s oil and gas industry to slow down any time soon. In fact, it could be expanding as landowners from other parts of the state appear to have been approached by companies looking to increase their reserves.

Companies Eye Mercer County For Fossil Fuel

About 10,000 acres of farmland located in the Mercer County area, about 60 miles southwest of Lima, has been leased for 3D seismic oil and gas exploration according to The Daily Standard, a local news publication. The leased property, which is primarily farmland, will be subjected to noninvasive 3D seismic tests that will identify whether “significant amounts of oil and/or gas” are present. The results are expected to be available by June.

The newspaper reports that “[more] than 90 land leases involving thousands of acres have been filed in Mercer County since 2013 between various companies and property owners … the legal documents give companies access to test, drill or perform other action on the land as stipulated in each agreement.” Mercer County Commissioners agreed to test some government-owned property as well.

This news is not only important to the residents of Mercer County, but to residents throughout Ohio. The fact that companies are actively seeking to further their investment within the state is promising for all landowners. And at the very least, this recent move signifies that these companies have no plans packing up and shipping out anytime in the near future.

Email Rea & Associates if you have questions about how current events could affect your leasing options or if you are considering entering into a lease agreement for drilling or exploratory purposes.

By David Shallenberger, CPA (Wooster office)

 

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Last Chance To Claim Valuable Retroactive Tax Credit

Thursday, April 23rd, 2015
Last Chance To Claim Valuable Retroactive Tax Credit

All businesses that hired members of targeted groups, such as qualifying veterans, must submit Form 8850, a pre-screening notice and certification request for each employee hired between Jan. 1, 2014 and Dec. 31, 2014 to the Ohio Department of Job and Family Services no later than April 30, 2015 to qualify for the WOTC.

It was a cold evening last December when Congress finally voted in favor of extending more than 50 tax provisions considered critical by several businesses and individuals. The Tax Increase Prevention Act of 2014 provided assurance that certain incentives would remain intact and that certain provisions would be put in place to allow for the retroactive extension of some key deadlines. Among them was the deadline to claim the 2014 Work Opportunity Tax Credit (WOTC). Now, as we teeter at the end of April, that deadline is set to expire.

Read: How Do You Qualify For Tax Credits And Incentives?

What You Need To Know

All businesses that hired members of targeted groups, such as qualifying veterans, must submit Form 8850, a pre-screening notice and certification request for each employee hired between Jan. 1, 2014 and Dec. 31, 2014 to the Ohio Department of Job and Family Services no later than April 30, 2015 to qualify for the WOTC.

According to the Internal Revenue Service, under normal circumstances, eligible employers are required to file the appropriate information with their respective workforce agencies within 28 days of the employees start date. Section 51 of the Internal Revenue Code concerning the WOTC states that eligible employers may claim a tax credit for a percentage of the qualified employee’s first-year wages (and second-year wages for some eligible hires).

Email Rea & Associates to learn more about tax incentives that can impact your business’s bottom line.

By Lisa Beamer, CPA (New Philadelphia)

 

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