Tax – Hall, Kistler & Company http://www.hallkistlerblog.com Blog Wed, 19 Dec 2018 19:20:42 +0000 en-US hourly 1 http://www.hallkistlerblog.com/wp-content/uploads/2019/01/HK-logo-Twitter2.jpg Tax – Hall, Kistler & Company http://www.hallkistlerblog.com 32 32 2018 Kiddie Tax on Child’s Unearned Income May Be Higher http://www.hallkistlerblog.com/2018-kiddie-tax-on-childs-unearned-income-may-be-higher/ http://www.hallkistlerblog.com/2018-kiddie-tax-on-childs-unearned-income-may-be-higher/#comments Wed, 19 Dec 2018 19:20:42 +0000 http://www.hallkistlerblog.com/?p=381 By Sandra Orcutt, EA, Supervisor

Although the so-called “kiddie tax” will be easier to calculate thanks to the Tax Cuts and Jobs Act (TCJA) of 2017, the unearned income of eligible children (or grandchildren) could be taxed at a higher …

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By Sandra Orcutt, EA, Supervisor

Although the so-called “kiddie tax” will be easier to calculate thanks to the Tax Cuts and Jobs Act (TCJA) of 2017, the unearned income of eligible children (or grandchildren) could be taxed at a higher rate.

For tax years 2018 through 2025, the TCJA has changed the kiddie tax taxable structure. Unearned income is now taxed at the rates paid by trusts and estates. The highest bracket of the trust/estate rates for ordinary unearned income is 37 percent (or as high as 20 percent for long-term capital gains and dividends). Before the TCJA, the kiddie tax was taxed at the parent’s marginal tax rate. With the lowering of individual tax rates for 2018, this change to the kiddie tax could have significant tax consequences for children who derive more than half of their support from unearned income.

Earned income is defined as compensation from a job or self-employment, which is not subject to the kiddie tax. Unearned income is income other than wages, salaries, professional fees, and other amounts received as compensation for personal services. Unearned income subject to the kiddie tax may include capital gains, dividends, and interest — typically received through trusts and estates.

Under the TCJA, the IRS provides these eligibility requirements to determine if unearned income is subject to the kiddie tax:
1. The child does not file a joint return;
2. One or both of the child’s parents are alive at year-end;
3. The child’s net unearned income exceeds the threshold for that year and the child has positive taxable income after subtracting any applicable deductions (i.e., standard deduction). The unearned income threshold for 2018 is $2,100.

If the unearned income threshold is not exceeded, the kiddie tax does not apply. If the threshold is exceeded, only unearned income in excess of the threshold is applicable to the kiddie tax.

The kiddie tax can apply until the year during which the child turns age 24. For ages 19-23 at year-end, the kiddie tax can only apply if the child is a student. A child age 18 or under at year-end is almost always subject to the kiddie tax if meeting the above requirements. These age rules can be tricky, so it’s important to consult with your CPA on whether your child or grandchild is subject to this tax.

The following tax rates will be used to calculate the kiddie tax for 2018 through 2025:

[make this a chart?]
2018 Trust and Estate Tax Rates for Ordinary Income
10% tax rate $0-$2,550 = 10% of taxable income
24% tax rate $2,551-$9,151 = $255 plus 24% of the excess over $2,550
35% tax rate $9,151-$12,501 = $1,839 plus 35% of the excess over $9,150
37% tax rate $12,501+ = $3,011.50 plus 37% of the excess over
$12,500

2018 Trust and Estate Tax Rates for Long-Term Capital Gains and Dividends
• 0% tax rate $0-$2,600
• 15% tax rate $2,601-$12,700
• 20% tax rate $12,701+

One final note: Due to the tax rate change, the kiddie tax is also subject to the Net Investment Income Tax if the child has undistributed net investment income and adjusted gross income is over the dollar amount at which the highest tax bracket for a trust begins. For 2018, this threshold is $12,501. The tax rate for the Net Investment Income tax is 3.8 percent for 2018.

If your child (or grandchild) derived more than half of his or her support from unearned income sources for 2018 and meets the eligibility requirements, contact the tax team at Hall Kistler with your questions.

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Ohio Tax Amnesty is January 1, 2018, through February 15, 2018, for Individuals and Businesses http://www.hallkistlerblog.com/ohio-tax-amnesty-january-1-2018-february-15-2018-individuals-businesses/ http://www.hallkistlerblog.com/ohio-tax-amnesty-january-1-2018-february-15-2018-individuals-businesses/#respond Mon, 04 Dec 2017 21:14:41 +0000 http://www.hallkistlerblog.com/?p=322 Avoid ALL penalties and HALF of your interest!

If you have unpaid taxes, Ohio Tax Amnesty could help you avoid 100% of penalties and 50% of interest due. Ohio Tax Amnesty will help you achieve a fresh start and settle …

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Avoid ALL penalties and HALF of your interest!

If you have unpaid taxes, Ohio Tax Amnesty could help you avoid 100% of penalties and 50% of interest due. Ohio Tax Amnesty will help you achieve a fresh start and settle your unpaid taxes that you have unreported* or underreported that were due and payable as of May 1, 2017.

You may qualify if you have certain unpaid taxes that were due as of May 1, 2017, and have NOT been contacted by the Ohio Department of Taxation. Not all taxes are eligible for Ohio Tax Amnesty; however, the following taxes are eligible:
• Individual Income Tax
• Individual School District Income Tax
• Employer Withholding Tax
• Employer Withholding School District Income Tax
• Pass-Through Entity Tax
• Sales Tax
• Use Tax
• Commercial Activity Tax
• Financial Institution Tax
• Cigarette or Other Tobacco Products Tax
• Alcoholic Beverage Tax

To be approved for Ohio Tax Amnesty, you must submit an application, all appropriate tax return(s) and full payment before the deadline. No partial payments or credit card payments can be accepted. The Ohio Tax Amnesty does not apply to you if the Ohio Department of Taxation has been in contact with you about your tax debt or if you filed a tax return but did not pay taxes.

If you are unsure if you have unreported or underreported taxes, please contact me at 330-453-7633 or sandrao@hallkistler.com.

*Unreported means you know you owe back tax but have not yet been contacted by the Ohio Department of Taxation.

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Ohioans Win with New State Tax Laws http://www.hallkistlerblog.com/ohioans-win-with-new-state-tax-laws-2/ http://www.hallkistlerblog.com/ohioans-win-with-new-state-tax-laws-2/#respond Wed, 29 Jul 2015 15:39:29 +0000 http://www.hallkistlerblog.com/?p=276 by Karen Brenneman, CPA, MT, Managing Partner

 Governor Kasich signed Ohio House Bill 64 into law on July 2 providing new tax rate reductions that will benefit both individuals and small businesses in our fine state. The newly enacted …

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by Karen Brenneman, CPA, MT, Managing Partner

 Governor Kasich signed Ohio House Bill 64 into law on July 2 providing new tax rate reductions that will benefit both individuals and small businesses in our fine state. The newly enacted law may have a funny name (Amended Substituted House Bill 64) but it contains a number of positive tax changes for Hall, Kistler & Company clients and all Ohioans, including:

  • An across the board tax rate cut of 6.3% for individuals, making the top tax bracket less than 5% retroactive to January 2015. This is the lowest Ohio rates have been since 1982. New withholding tables will be coming to employers later in July.
  • The small business deduction of 75% on the first $250,000 of business income is continued for 2015 and will increase to 100% for 2016 and beyond. A new flat tax of 3% of business income from pass-through entities will be in effect for 2015 on business income above $250,000.
  • There are now two Ohio tax apps you may want to deploy. One checks on your tax refund and the other is a sales tax rate finder based on your current location. The latter may come in handy for business owners on the move that have to charge sales tax.

There are also a few things the budget didn’t include, which I find positive as well. Two of these significant omissions are

  • No increase, as proposed, in the Ohio CAT rate
  • No base expansion of state sales tax on professional services

Giving us some indication of where our state tax system is headed, the law also called for a tax policy study commission to make recommendations on further reforming Ohio’s tax system. Specific questions include determining how best to:

  • Transition Ohio’s personal income tax to a 3.5% – 3.75% flat tax
  • Reform the tax code to maximize Ohio competitiveness
  • Reform the state’s severance tax by October 1
  • Make some of Ohio’s tax credits work more efficiently by converting them to grant programs

The last piece of good news is a sales tax holiday slated to run from August 7 through August 9. It exempts sales tax on Ohio purchases of school clothes up to $75 per item as well as school supplies and other school related items up to $20 each during these days.

With this new set of tax laws, you have a real opportunity to devise strategies that will lower your tax liability and enhance your overall financial position for years to come. Hall, Kistler & Company is happy to help you determine the best approach for your situation, so that you can take full advantage of the changes in House Bill 64.

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Everything You Need to Know About Ohio’s Sales Tax Holiday http://www.hallkistlerblog.com/everything-you-need-to-know-about-ohios-sales-tax-holiday/ http://www.hallkistlerblog.com/everything-you-need-to-know-about-ohios-sales-tax-holiday/#respond Mon, 27 Jul 2015 15:37:38 +0000 http://www.hallkistlerblog.com/?p=257 By Constance P. Aycock, EA, Tax Compliance Director

Here at Hall Kistler & Company, we are finding it hard to believe that summer vacation is nearly over. To lesson the burden of purchasing all the necessary school clothes and …

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By Constance P. Aycock, EA, Tax Compliance Director

Here at Hall Kistler & Company, we are finding it hard to believe that summer vacation is nearly over. To lesson the burden of purchasing all the necessary school clothes and supplies, Ohio has implemented a one-year sales tax holiday running from Friday, August 7 through Sunday, August 9, 2015. While the sales tax holiday seems to be geared specifically to students, shoppers of any age can take advantage of the various exemptions (as long as the items will not be “used in a trade or business”).

The concept of a tax holiday may be simple but the details most certainly are not. Ohio is making it complicated for retailers and consumers alike by exempting only very specific items. Retailers are required to know the rules because their participation in the sales tax holiday is NOT voluntary. However, we, as consumers need to educate ourselves so that we can take full advantage of this brief window! During the sales tax holiday, the following items will be exempt from state taxes:

  •  Clothing – each item priced at $75 or less. Generally sports and recreational equipment will not be exempt and the exemption would NOT include the following: ballet shoes, tap shoes, cleated shoes, shin guards and baseball gloves. Athletic shoes (is it okay if I call them all tennis shoes?) and school uniforms (where each item is less than $75) would be exempt, however handbags, cosmetics and briefcases are not. Diapers for both children and adults, including disposable diapers, are exempt. Looking at this list, shoppers may wonder: Is the first $75 of a qualified item that costs more than $75 eligible for the exemption? The answer is NO – it applies to each item selling for less than $75. However, if you have a store coupon that brings the item price down to under $75, that item would then qualify for the exemption – so get out those Kohl’s and Penney’s coupons!
  •  School supplies – each item priced at $20 or less. There is a very specific list of school supplies on the Ohio Department of Taxation website. Only the items listed qualify for the school supplies exemption. If the consumer has a manufacturer’s coupon (third party reimbursement), that reimbursement does not reduce the item’s sale price for determining whether the item is eligible for the exemption. For example, a $5 manufacturer’s coupon on a $22 school supply does not cause the item to qualify for the exemption because the retailer is going to be reimbursed by the manufacturer. Personally, I would use the coupon and pay the sales tax on that Trapper Keeper that the child whining in the school supply section at Target absolutely has to have.
  •  School instructional materials – each item priced at $20 or less. The definition means WRITTEN material commonly used by a student to learn the subject and only includes the following items: reference books, reference maps and globes, textbooks and workbooks. While it’s nice that they’re on the list, it will be extremely difficult to find many of these items for less than $20.

Items commonly used in a trade or business are NOT exempt under the sales tax holiday. If, for some reason, the retailer does not charge the consumer sales tax on trade or business items, the consumer is responsible for the use tax on the items. The use tax can be paid when the consumer files his or her individual income tax return.

And finally, the sales tax holiday includes purchases made on the internet as long as they are paid for during the designated period and the retailer accepts the order for immediate shipment, even if delivery is made after the exemption period.

To learn more about Ohio’s sales tax holiday or other ways to reduce your tax expenditures, please contact Hall, Kistler & Company. Happy school shopping!

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