In 2011, the State of Ohio is making an emphasis on educating the public about Ohio “Use Tax.” They will follow up by concentrating efforts on the collection of unpaid sales and use tax from businesses in the near future. Because Use Tax has not been a focal point in the recent years, the State is offering an Amnesty Program for unpaid Use Tax.
For more information about the Sales and Use Tax please visit:
The recent budget bill passed by Governor Kasich included a provision for the Ohio Use Tax Amnesty Program. This program will allow business consumers to pay any unpaid Use Tax liabilities from January 1, 2009 and forward, without incurring penalties or interest. All other delinquent Use Tax due prior to January 1, 2009 will be waived. The program is scheduled to be available from October 1, 2011 to May 1, 2013.
Under the Hiring Incentives to Restore Employment (HIRE) Act, enacted March 18, 2010, two new tax benefits are available to employers who hire certain previously unemployed workers (“qualified employees”).
1) Payroll tax exemption provides employers with an exemption on Social Security tax on wages paid to qualifying employees.
2) Business Credit for Retention of Certain Newly Hired Individuals in 2010.
Improved Education Credits & Tuition and Fees Deduction
The American Opportunity Credit is available to First through Fourth year students and unchanged from 2010. The maximum annual credit increased to $2,500 and up to 40% of the credit maybe refundable.
The Lifetime Learning Credit will remain at $2,000.
The Tuition and Fees deduction can reduce your income by up to $4,000.
These deductions and credits are subject to AGI limitations and we will evaluate your situation to determine which option is best.
The energy tax credit is available into 2011 but it’s limited to 10% of the cost of the improvement, up to $500.The lifetime limit on Energy Credits is $500.
Not all energy star rated items will qualify for the credit.
Accelerated Depreciation
The amount a small business can immediately write off for capital investments has been extended and expanded. The maximum accelerated depreciation has increased to $500,000.
Also, 100% “Bonus Depreciation” is available in 2011 and 50% in 2012.
Elective Salary Deferrals
Taxpayers can defer $17,000 under elective salary deferral plans for 2012 ($11,500 for SIMPLE plans). The catch-up contribution limit for taxpayers 50 or older is $5,500 ($2,500 for SIMPLE plans).
2011 maximum was 16,500 ($11,500 SIMPLE plans) with the same catch-up contribution limits.
In 2011, the contribution limit is $3,050 for self-only and $6,150 for family coverage (if age 55 or older you are allowed a “catch-up” contribution of $1,000). For 2011, contributions must be made by April 17, 2012.
Starting in 2011, HSAs, HRAs, and FSAs cannot be used for over the counter medicine.
Mortgage Insurance Deduction
Set to expire after 2011
Mortgage insurance premiums will be deductible through 2011 as an itemized deduction. This is another relief provision for homeowners. The three requirements are (1) the insurance must be in connection with the home acquisition debt, (2) the contract must have been issued after 2006, and (3) the premiums must be paid during the year.
Cancellation of Mortgage Debt Relief
For tax years 2007 through 2012, if a taxpayer has debt forgiven or cancelled on the personal residence due to loan modification or foreclosure, they may qualify for relief of the tax on that debt forgiveness. Usually, if debt is reduced or forgiven it must be included as income and subject to income tax. The Mortgage Forgiveness Debt Relief Act of 2007 allows exclusion of income as a result of reduced debts owed.
Beginning in 2005, the rules for car donations changed, making such donations less attractive. Previously, taxpayers could deduct the fair market value of cars donated to a charity. However, if the charity sells the car, a taxpayer's deduction is equal to the proceeds received by the charity. If the charity does not sell the car and instead uses the car in furthering its charitable purpose, the taxpayer may be entitled to deduct the vehicle's fair market value if certain conditions are met.
Sales Tax Deduction
For individuals that itemize their deductions sometimes the total sales tax paid for the year is more advantageous than deducting your state and local taxes. If you have made any major purchases, you may want to review your options.
Kiddie tax now applies to parents with children up to the age of 18 or age 23 (if a full-time student) with investment income over $1,900. The first $950 is exempt and the next $950 taxed at the child’s tax rate.
Eligible out-of-pocket expenses paid for classroom materials can be deducted as an above the line adjustment up to $250 for 2010. Amounts above that limit may be deducted but are subject to a floor of 2% of AGI.
Ohio Commercial Activity Tax
Annual CAT Tax returns are now due May 10th. Quarterly filers due dates are the tenth (10th) day of the second month following each tax period (Feb. 10, May 10, Aug. 10, and Nov. 10).
Qualified Production Activities Income Deduction
The Code Section 199 qualified production activities deduction went into effect in 2005 and can benefit many businesses. It provides a percentage deduction for the lesser of: (1) a taxpayer's qualified production activities income for the tax year, or (2) taxable income (or, for an individual, adjusted gross income), determined without regard to Code Section 199, for the tax year. The rate is 9% in 2010 and thereafter.
The Energy Policy Act of 2005 replaced the clean-fuel burning deduction with a tax credit. A tax credit is subtracted directly from the total amount of federal tax due, thus reducing or even eliminating the taxpayer's tax obligation. The tax credit for hybrid vehicles applies to vehicles purchased or placed in service on or after January 1, 2006. These credits will end for vehicles place in service after December 31, 2010.
