News & Tech Tips

State Offers General Tax Amnesty

The Ohio Department of Taxation has launched a tax amnesty program in effect now through June 15. During that time, the state will forgive penalties and half the interest owed on back taxes that weren’t reported or paid.

Furthermore, those who are granted amnesty and pay their bill in full won’t face future criminal or civil prosecution.

The General Amnesty Program is available to people who owed back taxes as of May 1, 2011. The types of taxes covered include: 

  • Individual income 
  • Individual school district income 
  • Commercial activity tax (CAT) 
  • 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 
  • Dealers In intangibles

Not eligible for amnesty are any taxes for which the state has issued a delinquency notice or bill, and any taxes connected to an audit that is under way.

In addition, the Consumer’s Use Tax is not eligible for the General Amnesty Program, but may qualify under the Consumer’s Use Tax Amnesty program.

All amnesty requests that fit the criteria will be granted. Returns filed under the amnesty program will be subject to an audit just like any other return. Only taxes due as of last May are eligible.

It has been six years since a general amnesty program was last offered to Ohio businesses and individuals who were delinquent on their taxes.

State tax officials estimate the program might bring in $40 million, including $4 million in local sales tax or school-district income.

The tax department will continue to update its website at http:// amnesty_general.stm as further information on the program becomes available.

Those who wish to receive automatic e-mail updates when new information is added may sign up for the department’s Tax Alert email notification system.

Don’t Overlook CAT Filing Requirement

Ohio has an annual tax levied for the privilege of doing business in the state, which is called the commercial activity tax (CAT).

This tax is measured by gross receipts from business activities in Ohio, and businesses with Ohio taxable gross receipts of $150,000 or more per calendar year must register for the CAT, file all the applicable returns, and make all corresponding payments.

Firm Director Patrick McClary, who manages the tax department, advises clients not to overlook this often-missed filing requirement.

The CAT applies to most businesses, including but not limited to retail, wholesale, service, manufacturing and other general businesses regardless of the type of business entity.

For example, sole proprietorships, partnerships, LLCs, S-corporations, corporations, disregarded entities, trusts, and all other type of associations with taxable gross receipts of more than $150,000 in the calendar year are subject to the CAT.

The 2012 quarterly returns will be due on May 10 (first quarter), August 10 (second quarter), November 13, (third quarter) and February 11, 2013, (fourth quarter).

For annual taxpayers, the $150 annual minimum tax is due on May 10 with the 2011 Commercial Activity Tax Annual Return and 2012 Minimum Tax Payment Return.

Tax Hikes in 2013 Make Planning Important in 2012

With the tax season at an end, some taxpayers are already considering ways to lower taxes in the future. While it’s too late to change 2011 taxes, it’s the perfect time to make plans for actions in 2012.

As it stands now, when 2013 arrives, taxes are going up. The tax cuts created by President George W. Bush expire this year, and brackets return to the previous rates of up to 39.6 percent in 2013 from 35 percent now.

Taxpayers at all income levels will be affected. The 10 percent bracket disappears, and 15 percent becomes the lowest tax bracket. In addition, the child tax credit expires, and capital gains rates return to 20 percent from zero to 15 percent this year.

Continued Congressional gridlock and an unknown election outcome in November make it important to plan now to head off the potential tax hike. Some possible actions to consider are:

  •  Convert traditional IRAs to Roth IRAs.  While this decision is based on each individual’s situation, those who are considering converting might want to act this year. Conversions are considered ordinary income, so they will be taxed at an individual’s current tax rate. For the wealthy, it would be better to be taxed at 35 percent instead of 39.6 percent.
  • Take income earlier.  If you are able to control when income is received, taking it in 2012 could result in it being taxed at a lower rate.
  • Sell profitable investments.  If the capital-gains tax is headed to 20 percent in 2013, some individuals might want to consider cashing in gains at 15 percent this year.
  • Reduce dividends.  If qualified dividends become taxed at the taxpayer’s tax rate in 2013 instead of zero to 15 percent now, some individuals might want to rebalance their portfolio to put investments that pay no or lower dividends in their taxable accounts and higher dividend investments in tax-deferred accounts.

On top of this, investment income would be taxed an additional 3.8 percent next year for those with incomes over $200,000 or $250,000 for married filing jointly. This includes interest, dividends, capital gains and rents. The tax is part of the health-care reform plan Continued Congressional to help the Medicare program.

The Value of an Employee Compensation Statement

Many of the companies that are clients of our firm have created a compensation package, also known as an employment package or benefit package, that provides support and work / life balance for their employees.

With the skyrocketing costs of insurance and the necessity to manage human resources, compensation packages continue to be a challenge for most business owners. According to the Bureau of Labor Statistics, benefits make up approximately 30 percent of an employee’s compensation.

As a business owner, you know that the cost of an employee is much more than your employees’ wages. Paid time off such as vacation and holidays, contributions to a retirement plan, insurance premiums, social security, workers’ compensation, training and special programs are all items that comprise the total compensation of your work force.

Employees are aware of their base wages and overtime pay; however, many are not aware of the costs associated with their benefits. Providing a Compensation Statement to your employees at year-end will do just that.

A Compensation Statement outlines wages and benefits for each employee. It includes costs associated with their benefits as well as contributions and profit sharing.

Employees who are informed about their total compensation can appreciate and understand the costs associated with their employment. Awareness of all aspects of their compensation may contribute to the retention of these valuable members of your firm.

Additionally, compensation statements may assist owners in right-sizing benefits and contribute to decisions regarding benefits and their associated costs.

The next time you conduct employee reviews or at the end of each year, consider providing your employees with an Employee Compensation Statement. You will find them very informative for both you and your staff.

-Linda Nay

Linda Nay is an associate director and serves as the firm’s administrator. She works closely with the partners in the management of the firm, oversees the administrative department and serves as the firm’s human resources director and IT coordinator. Linda has been with the firm for 27 years. She has developed an Employee Compensation Statement for Whalen’s staff and has found it to be an effective communications tool.

If you’d like help in developing an Employee Compensation Statement, contact your Whalen adviser to learn how we can assist you.

Effective Cost Controls Need to be in Place

Now more than ever it is important for owner/operators to have effective cost controls in place at their restaurants. Food costs have been steadily rising, and short-term beef costs are expected to remain high due to the limited supply and availability of beef. In addition, labor costs are also rising. In some states, including Ohio, minimum wage increases went into effect at the start of 2012.

Food and labor costs are obviously the two largest controllable expenses that appear on your income statement. It is essential to implement the proper cost controls in conjunction with possible menu price increases to weather the storm in 2012. For every 1 percent that costs increase as a percentage of sales, the typical restaurant will lose $25,000 in cash flow. The message here is to be proactive in controlling rising food and labor costs before these expenses present a cash-flow problem for your organization.

The good news is that the “Food Away From Home” Consumer Price Index (CPI) shows an increase of only 3.1 percent for the 12 months ending February 2012.  By comparison, the “Food At Home” CPI shows an increase of 4.5 percent for the same period. The higher percentage increase in home food costs should help to continue to drive restaurant sales. This enthusiasm may be tempered, however, by a 12.6 percent increase in gasoline prices for the same period, which could negatively impact restaurant sales.

Restaurant groups provide numerous tools to help owner/operators control food and labor costs. Your CPA firm may also be of assistance. For more information on finding ways to control these costs, contact Bruce Berry.