As a reminder, The Indiana Department of Revenue now offers electronic filing for S-Corporations, form IT-20S, for 2014 taxes filed in 2015 and beyond.
Also, effective January 1, 2015, Indiana’s individual tax rate reduced from 3.4% to 3.3%.
Important changes in Illinois
Illinois recently announced income tax rate decreases applicable to income received on or after January 1, 2015. The Illinois income tax rate for individuals, trusts, and estates is decreasing from 5% to 3.75%, while the Illinois income tax rate for corporations is decreasing from 7% to 5.25%. Fiscal year taxpayers will have to make an irrevocable election to either apportion their income (effectively using a blended rate) or use specific accounting for their tax year that straddles 2014/2015. Additionally, for years ending on or after December 31, 2014, corporations may use their Illinois net loss deduction without the $100,000 limitation that was in place the past few years. Also, as a reminder, beginning with years ending on or after December 31, 2014, composite filing is no longer allowed in Illinois. Pass-through entity withholding will be paid on the IL-1120-ST or IL-1065 and non-resident shareholders/members will need to file Illinois non-resident returns.
Corporate Income Tax – Beginning on or after January 1, 2014, Form 4 (Wisconsin Corporation Franchise or Income Tax Return) for corporations required to file a combined franchise or income tax return will no longer be accepted. Combined return filers must use the new 2014 Form 6 (Wisconsin Combined Corporation Franchise or Income Tax Return). Form 6 is due the 15th day of the 3rd month following year end close and federal extension is accepted. Form 6 must be eFiled unless an approved electronic waiver is received from the department.
Personal Income Tax – The tax treatment of college EdVest or Tomorrow’s Scholar college savings account for 2014 has changed. The deduction allowed has been increased to the lesser of the amount contributed to the account or $3,050 (previously, $3,000). The contribution date for a specific year is extended to April 15 of the following year. Also, the excess of contribution made over the amount deducted may be carried to future years and claimed as a deduction subject to the yearly limitations. Contributions made for purchase of tuition units must be made on or before December 31, 2014 and the new excess of deduction carry over rule does not apply.
Recent changes affect both business & individuals taxed by the state of Ohio
Beginning 1/1/2014, the Commercial Activity Tax (CAT) became a tiered structure. Businesses with Ohio sourced gross receipts will use the prior calendar year’s Ohio receipts to determine their current year annual minimum tax. For additional details and examples see Information Release CAT 2013-05.
Also beginning 1/1/2014, all taxpayers must register, file and pay the CAT electronically via the Ohio Business Gateway.
CAT due dates are as follows:
Annual filers (< $1M of annual Ohio receipts) – May 10
Quarterly filers ($1M+ of annual Ohio receipts) May 10, Aug. 10, Nov. 10 and Feb. 10
Contact your Somerset tax advisor today for additional details.
Beginning with the 2013 tax year, the Ohio legislature created the Small Business Tax Deduction. This deduction is available to investors/owners pass-through entities (S-Corporation, Partnership or LLC) as well as sole proprietors/famers filing federal schedules C or F.
In 2013, the deduction was equal to 50% of the first $250,000 of business income. In 2014, that figure increases to 75% of the first $250,000 of business income.
Business owners must file an Ohio personal income tax return to take advantage of the deduction. Ohio non-residents who have been included in a composite tax return may still file a personal Ohio tax return and claim the deduction.
If you own a business with Ohio source income, contact your Somerset tax advisor today to discuss additional details.
Good News for Businesses Working with Ohio Municipalities:
Ohio Gov. John Kasich has signed legislation that will create a more unified municipal income tax system for Ohio by requiring municipal corporations levying an income tax as of January 1, 2016 to amend their existing income tax ordinances to comply with the limitations set out in the legislation.
The legislation generally establishes a uniform tax base by defining the forms of income that municipal corporations may tax and the forms that they may not tax.
The legislation also sets up various statewide standards that local governments have to follow, including:
- businesses with an annual income of $500,000 or less will be charged municipal income tax only in the area where they are located;
- workers on a job in a different city will not have to start paying income tax in that municipality during their first 20 days (currently 12) there;
- under a phase-in plan starting in 2016, companies will be able to carry forward NOLs for five years to offset taxes on future profits;
- modifications and further specifies on how the sales and payroll factors will be computed in the apportionment formula for taxpayers that have income from both within and outside a municipal corporation.
- an income tax employer withholding schedule for all municipal corporations that depends on recent withholding amounts and requires all municipal corporations levying an income tax to comply with a uniform annual tax return filing schedule, with some exceptions.
Somerset, CPAs will send out more information as it becomes available.
Indiana Increases Security Features for 2015 Tax Filing Year
As Identity theft continues to grow, The Indiana Department of Revenue will implement a new identity protection program for the 2015 tax season.
The department will use the automated identity verification services of LexisNexis to help confirm the identities of all Hoosier taxpayers due a refund in hopes of preventing taxpayers’ refunds from being stolen. Identity information from individual income tax returns is checked against the LexisNexis identity verification database that verifies that the person submitting the return is who they say they are. The department expects 95 percent of taxpayer 2015 returns again will be confirmed at this step.
Some taxpayers will receive a letter from the department asking them to take the Identity Confirmation Quiz. It is important that taxpayers who receive this letter confirm that the names(s) and address information at the top of this letter matches an Indiana income tax return they recently submitted. If the information is not correct or the taxpayer did not file a tax return for the indicated year, he or she should NOT complete the Identity Confirmation Quiz, but rather call the Indiana Department of Revenue at the number indicated on the letter.
Taxpayers whose information is correct must complete the Identity Confirmation Quiz that consists of four questions of which only the taxpayer would know the answer. After successful completion of the quiz, the taxpayer should receive his or her refund on time—within 14 days if electronically filed and within 12 weeks if filed by paper. Those who do not pass within two attempts will be asked to contact the department.
The department states that “Those selected to take the quiz are not suspected of committing identity theft. Irregularities that may trigger the requirement to take the quiz include the taxpayer having moved very recently and neither the department nor LexisNexis had the updated address; or, a taxpayer may have accidently transposed some numbers of his SSN or street address”.
In 2014, the department’s identity protection program stopped $88 million in attempted identity theft through 74,000 fraudulent refunds. 11 percent of all 2014 requested Indiana tax refund dollars were attempted identity theft.
The Venture Capital Investment Tax Credit
Many states offer a Capital Investment Credit for companies and individuals that invest in startup companies or infuse capital into companies that are growing in Life Sciences or Technology industries. Although the technical name of the tax credit program may vary by state, the premises is that startup companies need capital to grow while states want to increase employment and be a leader in technology. Capital Investment Tax Credit programs are a great way to obtain a state tax credit and help finance a growing company
The application process is easy, on line and with a quick response from the local metropolitan development organizations. Once the business application is processed, the individual investor also applies for credit consideration. Typically this credit will offset the taxpayers state income tax liability.
If your business needs startup capital and is in its infancy of development, please contact your Somerset advisor. They can introduce you to the state agency that accepts applications for Venture Capital Tax Credits. We suggest you not assume your organization will not qualify. State tax credit funds were established to assist companies with growing pains. If these credits are not used, they will be lost.