tax practitioner seminar - rita seminar 2018.pdf · tax practitioner seminar january 19, 2018 ......

Tax Practitioner SeminarJanuary 19, 2018 – Dublin, OH

January 26, 2018 – Richfield, OH

Welcome!

“ADMINISTRIVIA”What to Expect Today

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What to Expect Today

Agenda:

Welcome & Introduction What’s New: Website Navigation, FastFile & IVR Court Cases & Legislative Updates Individual Return Business Returns Additional Q & A Wrap-up

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What to Expect Today

Continuing Professional Education (CPE) 3 hours Sign-in Upon Arrival (Please) Certificates Available at Departure

Breaks & Refreshments

Restroom Facilities

Emergency Evacuation

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WHAT’S NEW: Website Navigation, FastFile & IVR

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http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=&url=http://www.chewinitiatives.com/want-2017-to-have-less-pushing-through/&psig=AOvVaw3zVTbGGmWXqDEUtOnuXpx_&ust=1516320347079493

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=&url=http://www.chewinitiatives.com/want-2017-to-have-less-pushing-through/&psig=AOvVaw3zVTbGGmWXqDEUtOnuXpx_&ust=1516320347079493

s-corp

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• Links to today’s presentation

• Notice of Extended Hours

• Other Helpful Information

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Example of Tax Preparer

Notification

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Enhanced Self-service

Phone System

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FastFilereplaces AutoCalc.xls for TY2017

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Electronic Filing Option w/ No User ID or Password required

• Single & Married Filers• W-2 and/or W-2G only• Note: 2106…

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“Nuts & Bolts”New Members, Rate Changes, Extended Hours

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New Members

Newtonsville

Hanover

Gettysburg

MadisonEffective 01/01/17

NorthfieldNorwalk

Ostrander

SmithfieldSouth ViennaSt. Louisville

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New Members

Newtonsville

Hanover

Gettysburg


NorthfieldNorwalk

Ostrander


Midvale (5/1/17)

Aberdeen

Kirkersville

Leetonia

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New Members

Newtonsville

Hanover

Gettysburg


NorthfieldNorwalk

Ostrander


Midvale (5/1/17)

Aberdeen

Kirkersville

Leetonia

ElmoreFayette

West Lafayette

Elmore Wickliffe

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New Members

Newtonsville

Hanover

Gettysburg


NorthfieldNorwalk

Ostrander


Midvale (5/1/17)

Aberdeen

Kirkersville

Leetonia

ElmoreFayette

West Lafayette

WashingtonvilleNew Washington

Lodi

Felicity

BarnesvilleWilliamsport

Stoutsville

SebringNiles

Newton Falls

MedinaElmore Wickliffe

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2017 Rate/Credit ChangesMunicipality Tax Rate Credit Factor Credit Rate

Chagrin Falls 1.85% 75.00% 1.85%Cuyahoga Heights 2.50% 100.00% 2.50%Fostoria 2.00% 50.00% 2.00%Gettysburg * 1.00% 100.00% 1.00%Grandview Heights 2.50% 100.00% 2.50%Hanover * 1.00% 100.00% 1.00%Kirkersville New as of 07/01/2017 1.00% 0.00% 0.00%

Macedonia 2.00% 100.00% 2.00%as of 07/01/2017 2.25% 100.00% 2.25%

Macedonia Northfield Center JEDD 2.00% 0.00% 0.00%

as of 07/01/2017 2.25% 0.00% 0.00%

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Mingo Junction 2.00% 100.00% 2.00%New Franklin 2.00% 100.00% 2.00%Newtonsville * 1.00% 0.00% 0.00%Ostrander * 1.00% 100.00% 1.00%Reynolds Entp Zone 1.50% 0.00% 0.00%as of 07/01/2017 2.50% 0.00% 0.00%Reynoldsburg 1.50% 100.00% 1.50%as of 07/01/2017 2.50% 100.00% 2.50%Richmond Heights 2.25% 100.00% 1.25%Rush Twp Uhrichsville Jedd 1.75% 0.00% 0.00%

as of 07/01/2017 2.00% 0.00% 0.00%Sabina 1.00% 50.00% 1.00%as of 07/01/2017 1.50% 50.00% 1.50%

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Saint Paris 1.00% 0.00% 0.00%Seven Hills 2.50% 100.00% 1.65%Smithfield * 1.00% 0.00% 0.00%South Vienna * 1.00% 0.00% 0.00%St. Louisville * 1.00% 0.00% 0.00%Uhrichsville 1.75% 100.00% 1.75%as of 07/01/2017 2.00% 100.00% 2.00%Vermilion 1.50% 100.00% 0.50%

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Fostoria 2.00% 0.00% 0.00%Lakemore 2.25% 100.00% 2.25%Lodi * 1.00% 0.00% 0.00%South Charleston 1.25% 100.00% 1.25%Stoutsville * 1.00% 0.00% 0.00%Swanton 1.50% 50.00% 1.00%Valleyview 0.00% 0.00% 0.00%Washingtonville * 0.50% 0.00% 0.00%Wellsville 1.50% 50.00% 1.50%Williamsport * 0.50% 0.00% 0.00%

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Where Do I Find Forms? Professional Tax Software - MeFCCH – ATX, ProSystem fxCreative Solutions - UltraTax CSDrakeH&R Block Intuit – Intuit ProConnect Tax Online,

LacerteTax ActGoSystem/OneSource

RITAOhio.comE-FileFast FileFill-in PDFManual forms 35

Taxpayer Assistance Days Norwalk

March 1, 2018 12pm-7pm100 Republic StreetNorwalk, Ohio 44857

North RidgevilleMarch 8, 20181 pm – 7 pm7307 Avon Belden RoadNorth Ridgeville, Ohio, 44039

Grandview Hts.March 16, 201812 pm – 6 pm1515 Goodale BlvdGrandview Heights, OH 43212

NilesMarch 27, 201811:30 am – 6:30 pm213 Sharkey RdNiles, OH 44446

SebringMarch 6, 201812 pm – 6 pm135 East Ohio AveSebring, OH 44672

Newton FallsMarch 13, 201811 am – 5 pm419 N. Center St.Newton Falls, OH 44444

North CantonMarch 20, 20181 pm – 7 pm145 N. Main StreetNorth Canton, Ohio 44720

HollandMarch 28, 201812 pm – 7 pm950 S. McCord RoadHolland, Ohio 43528

LovelandMarch 7, 20189 am – 4 pm120 West Loveland AveLoveland, OH 45140

MedinaMarch 14, 2018 12 pm – 5 pmApril 7, 2018 9 am- 4 pm855 Weymouth RdMedina, OH 44256

Mt. HealthyMarch 21, 201812 pm – 6 pm1541 Hill Ave.Mt. Healthy, Ohio 45231

WickliffeMarch 29, 201812 pm – 7 pm900 Worden RdWickliffe, OH 44092

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Extended Walk-in Service Hours

Brecksville, Worthington and Youngstown RITA locations.

Saturdays March 10, 17, 24, 31April 7, 14.9:00 am – 12:00 pm

April 9- April 11 8 am – 6 pm April 12, 13, 16, 17 8 am- 7pm

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Extended Telephone Service Hours

March 12, 2018 - April 7, 2018:

Monday and Thursday 5:00 pm to 6:00 pm

April 9, 2018 - April 11, 2018

5:00 pm – 6:00 pm

April 12, 2018 - April 17, 2018 (Thurs, Fri, Mon, Tues)

5:00 pm – 7:00 pm

Saturdays March 10, 17, 24, 31, April 7, 14.

9:00 am – 12:00 pm

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Court Cases

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Cohen v. Wickliffe – Clergy Wages

Ohio Board of Tax Appeals Decision and Order issued June 9, 2017, Case Nos. 2016-2384, 2016-2573, 2016-2577.

Considered by the Ohio BTA on its new small claims docket. Amount in controversy is less than $10,000.Hearings are informal and conducted telephonically.No attorney representation necessary.Decisions do not serve as precedent in any other case, hearing

or proceeding.Decisions cannot be further appealed.

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Cohen v. Wickliffe – Clergy Wages

The issue – for tax years prior to 2016, are clergy wages “qualifying wages” subject to municipal income tax?

Taxpayers sought refunds of tax withheld for City of Wickliffe.

The decision – clergy wages are not “qualifying wages” subject to municipal income tax prior to tax year 2016.

For tax years 2016 and later House Bill 5 modified the definition of “qualifying wages” to capture these wages for municipal income tax purposes.

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New York Frozen Foods v. Bedford Heights

Ohio Supreme Court Decision issued November 3, 2016, 150 Ohio St.3d 386, 2016-Ohio-7582.

New York Frozen Foods sought a net profit tax refund of nearly $700,000 from Bedford Heights for tax years 2005, 2006 and 2007 by amending its originally filed net profit returns from a single-entity filer to a consolidated filer.

RITA/Bedford Heights denied the refund claim under the City’s ordinances prohibiting a change in the method of accounting or apportionment on an amended return.

The RITA Rules and Regulations also prohibited a change in the method of filing, i.e., single to consolidated.

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Bedford Heights Board of Review and the Ohio BTA upheld the decision to deny the refund.

The Ohio BTA found that the proposed amendment was not a change in the method of account or a change in the method of apportionment but that it did violate the RITA rule prohibiting a change in the method of filing.

Taxpayer appealed to the Ohio Supreme Court and argued that reliance on the RITA Rules and Regulations, prohibiting a change in the method of filing, was an unconstitutional delegation of the City’s legislative authority, as its ordinance did not contain an identical prohibition.

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The decision – the Ohio Supreme Court did not address the constitutional issue raised by the taxpayer because it found that an amendment from a single entity filer to a consolidated entity filer is a change in the method of accounting and was clearly prohibited by the City’s income tax ordinance.

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Image Group of Toledo v. Holland-Springfield Township JEDZ

Sixth District Court of Appeals Decision issued June 23, 2017.

The issues –Did the Village of Holland and Springfield Township comply

with the relevant statutory requirements when it created the JEDZ?

Did the appellants in the case (businesses located in the geographic boundaries of the JEDZ have standing to challenge the validity of the JEDZ?

The decision – the appellants have standing to challenge the creation of the JEDZ and the creation of the JEDZ met the statutory requirements.

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MacDonald v. Cleveland - SERPs

Ohio Supreme Court Decision issued September 26, 2017, 151 Ohio St.3d 114, 2017-Ohio-7798.

Taxpayer participated in the National City Corporation Supplemental Executive Retirement Plan (SERP).

The City of Cleveland was the taxpayer’s city of employment.

Cleveland sought to tax the present value of the SERP benefit when it was fixed and determined and no longer subject to forfeiture – i.e., when the value was reported in Box 5 of the taxpayer’s Form W2.

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The taxpayer argued that his SERP is a pension and therefore exempt under Cleveland’s ordinance exempting “pensions”.

Cleveland argued that the SERP is not a pension because: It is compensation for services rendered It does not qualify as a pension under the CCA rules and

regulations defining a pension to exclude this type of income. It is taxable as a nonqualified deferred compensation plan It is taxable as a matter of state law, as “qualifying wages”.

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The Court disposed of the City’s arguments by finding that the tax administrator’s rules could not make taxable what the ordinance exempted. The Cleveland ordinance did not contain a definition of pension but its rules and regulations did.

Under Gesler, Cleveland was permitted to exclude pensions from tax.

Mr. MacDonald’s SERP benefit under the National City Corporation Supplemental Executive Retirement Plan is a pension under the City of Cleveland’s ordinance.

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MacDonald v. Cleveland – SERPs

After House Bill 5, “pensions” are exempt from tax. “Pension” is not defined in R.C. Chapter 718. Most all municipalities have adopted by ordinance, as

part of House Bill 5 updates, a definition of “pension” that excludes SERPs.

Does the ruling in MacDonald impact those ordinances and efforts to tax SERP for tax years 2016 and later?

Watch for legislation to be introduced to exempt SERP.

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“Another Bite at the Apple”Legislative Updates

The Impact of Am. Sub. HB 49

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Amended Sub HB 49 Effective for taxable years beginning on

or after January 1, 2018

See uncodified section 803.100

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Amended Sub HB 49 Elimination of “Throwback” Sales Provision

Gross receipts from sales of tangible personal property are sitused to the municipal corporation only if…

…the property is shipped to or delivered within the municipal corporation from a stock of goods located within the municipal corporation, or

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Gross receipts from sales of tangible personal property are sitused to the municipal corporation only if…

…the property is delivered within the municipal corporation from a location outside the municipal corporation, provided (i) the taxpayer has employees regularly engaged in solicitation or promotion of sales within the municipal corporation and (ii) the sales result from such solicitation.

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What has changed?The following provision is no longer in ORC chapter 718 for post-’17 taxable years:

“The property is shipped from a place within the municipal corporation to purchasers outside the municipal corporation, provided that the taxpayer is not, through its own employees, regularly engaged in the solicitation or promotion of sales at the place where delivery is made.”

See division (D)(1)(c) of current section 718.02.

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Amended Sub HB 49 Elimination of “Throwback” Sales

Provision

What does this change mean?

--HB 49 creates “nowhere” sales.

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Amended Sub HB 49 Elimination of “Throwback” Sales

ProvisionHow does this change impact the sales reported to a municipality?

By way of example, distribution centers that previously reported sales made and delivered to destinations outside of the municipal corporation will only report sales made and delivered within the municipal corporation.

All other sales, if not solicited by an employee in another taxing municipal jurisdiction, won’t be in the numerator of the sales factor for any municipality.

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Amended Sub HB 49 Withholding Penalty Change

Per 718.27(C)(2)(b), page 428:

“With respect to any unpaid withholding tax, a municipal corporation may impose a penalty not exceeding fifty percent of the amount not timely paid.”

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Amended Sub HB 49 Withholding Penalty Change Per 718.27(C)(2)(b), page 428:

Penalty for UNPAID withholding tax, (not including LATE FILING penalty), is not to exceed 50%. This change is intended to give municipalities the flexibility to charge less than 50% on unpaid withholding tax, should they choose. Note: A late filing penalty of $25 per month is still applicable.

See ORC 718.27(C)(3) for late filing penalty language, which is unchanged.

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Amended Sub HB 49 New Opt-In Rule

ORC 718.80 - 718.95

Taxpayers, other than individuals, may opt to file their net profit municipal income tax through the State of Ohio Department of Taxation (ODT)

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Individual Tax Forms

Form 32-EXT

Individual Form 37(What’s New?)

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Form 32-EXT

RITA Form 32-EXT: Individual taxpayers will usethis form to request an extension when no federalextension has been requested or received, and/or topay tax due by the annual return filing date, whetheron federal extension or municipal extension. Use to make balance due payments or estimated payments. Please complete all sections Estimate amount for Section 3 should be the total estimate, not

what you’re paying for the quarter. Include a breakdown in section 4 if allocating to more than one

municipality.

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Form 32-EXT

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DECEASED TAXPAYERS

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CITY/VILLAGE/TOWNSHIP OF RESIDENCE

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There have been several changes to provide taxpayers with the ability to calculate Non W-2 Income and to properly calculate items such as Pass-Through Income, Loss Carryforwards and Rental Income allowable Income/Loss.

Schedules/Worksheets on Form 37 that are used to calculate information that is entered on Schedule J:

Schedule P – This schedule will be used to calculate Pass-through income/loss that was earned in any Non-Resident taxing municipality

Worksheet R – This schedule will be used to calculate the tax paid by the partnership to your RITA Resident municipality.

Worksheet L – This schedule will be used to allocate the income/loss and calculate potential credit for the taxpayer’s Resident municipality.

SCHEDULE J

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Non W-2 Income / Loss from a Non-Taxing Municipality is now entered in Column 2.

If a taxpayer has this income from multiple Non-Taxing Municipalities, enter only the total

Example: Rental Income in non-taxing Municipality 1 - $5,000, Rental Loss in non-taxing Municipality 2 – ($3,000). The total of $2,000 would be entered.

Non W-2 Income/Loss for Non-Taxing Municipalities

SCHEDULE J – NON-TAXING MUNICIPALITIES

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Schedule PPass-Through income/loss for Non-Resident taxing municipalities*Pass-through Income earned in Non-Resident municipality is segregated in its own schedule to prevent calculating workplace tax on this income.

Worksheet RPass-Through income/loss for taxpayer’s Residentmunicipality

Pass-Through Income/Loss is now calculated using Schedule P and Worksheet R.

PASS-THROUGH INCOME/LOSS –CALCULATION SCHEDULES AND WORKSHEETS

HB5 – Income from Pass-through Entities is Generally taxed at Entity Level.

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Schedule P – Calculates Pass-through Income from Non-resident Municipalities.The calculated total of Pass-Through Income/Loss from this schedule is carried over to line 28 of Sch. J.

SCHEDULE P

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Net Pass-Through Income in taxpayers RITA Resident municipality is calculated on Worksheet RWorksheet R – Calculates credit for tax paid by the entity to taxpayers RITA Resident Municipality

The calculated total from this worksheet is carried over to line 7B on Form 37 Section B.

WORKSHEET R

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Worksheet L – RITA RESIDENTSUse to allocate income/loss and calculate potential credit for resident municipality

Worksheet L Changes in 2017 Separate column for Non-Taxing

Municipalities (Column 2).

Prior Year Loss Carry Forward will be entered from Schedule P in the total Column (Column 7).

Worksheet L

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Loss carryforward was previously entered individually for each municipality. 2017 changed to the total for ALL municipalities will be entered on one line. Net of all Schedule J income from previous year loss. The loss

carryforward will no longer be tied to a municipality.

LOSS CARRYFORWARD

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HB5 – Rental Loss is limited for municipal tax purposes to that which is allowable on Federal Schedule E

RENTAL INCOME

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Taxable Income Changes –Business Net Profit Filers

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Estimated Payments Quarterly payment of estimated tax is not

required unless the estimated tax liability is $200or more.Due: April 17th, June 15th, September 15th and

December 15th.

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Adjusted Federal Taxable Income (AFTI) When calculating AFTI, a net profit taxpayer will now

strip off all pass-through income (and add back pass-through losses) – not just the pass-through income thatis subject to municipal tax elsewhere.

Beginning with net operating losses (“NOLs”) incurredin tax year 2017, NOLs will be used pre-apportionmentand will not be tracked by municipality.Pre-2017 NOLs will still have to be tracked and used post-

apportionment, by municipality.Until all pre-2017 NOLs are exhausted, net profit filers will have

to track and use NOLs differently, depending on when the NOLwas incurred.

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NOL CF - Pre HB 5 vs. Post HB 5

*Most likely will see an additional line on the form. 77

NOL CF Requirements

HB 5 provides for a state‐wide five-year carryforward for NOLs incurred in taxable years beginning after 2016. Applies to losses incurred in taxable years beginning on or after

January 1, 2017, and then carried forward to future taxable years.

NOL CFs apply to: Business Net Profits; Schedule C, E, & F income of non-residents earned in

taxing municipalities; and All Schedule income of residents of taxing

municipalities.

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NOL CF Requirements con’t

NOL CF Provision is phased in:

Taxpayers may only claim 50% of the available NOL carryforward during years 2018 through 2022.

100% utilization of NOL CFs is delayed until tax year 2023.

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NOL CF Requirements con’t

NOL CF Provision is phased in:

TPs may carry forward any “unutilized” NOLs for 5 years.From technical clarification in State Budget Bill (HB 64) on

how unutilized NOL CFs are handled in regards to the bill’s NOL CF phase-in provisions.

*Phase-in provisions also apply to NOL CF related to Schedule income of residents and non-resident individuals.

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NOL CF Requirements con’t Pre‐2017 NOLs are permitted to be carried forward to the

extent already allowed by municipalities.

The 50% phase-in limitation does not apply to pre‐2017 NOLs.

Pre‐2017 NOLs may be utilized before utilizing new NOLs generated after tax year 2016.

Post-2016 NOL carry‐forwards are calculated and applied on a pre‐apportionment basis.

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Consolidated Net Profit Returns

Municipalities must accept a consolidated municipal netprofit return if the federal return is filed consolidated.

Consolidated net profit filers can discontinue filingconsolidated, without the tax administrator’s permission,after five years.

A decision to deconsolidate remains in place for five years.

Those already filing on a consolidated basis, pre-HB 5,may continue to do so.

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Alternative Apportionment Method Taxpayers may use an alternative method for

apportioning net profits on an annual return (other thanthe 3-factor property, payroll and sales formula) bysubmitting a written request with the return.

Taxpayers may use the requested alternative methodunless the tax administrator denies the use.

The tax administrator’s denial of an alternative methodrequest must be issued in the form of an appealableAssessment.Tax administrators may also impose alternative methods by

issuing appealable Assessments.83

Employer Withholding & the Occasional Entrant Rule

What Employers & Employees Need to Know

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Withholding Due Dates and Thresholds Employer withholding > $2,399 in the previous calendar

year or >$200 per month in any month of the precedingcalendar quarter -- remit monthly, due the 15th day of thefollowing month.

All others, remit quarterly by the 30th day of the monthfollowing the end of the quarter.

BUT, municipalities may require withholding on a semi-monthly basis if withholding > $11,999 in the precedingcalendar year or >$1,000 in any month of the precedingcalendar quarter.

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Those RITA members that have semi-monthly requirements are indicated on RITA’s website in the Special Notes section of the Form 11 instructions.

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Occasional Entrant Rule Extends from 12 to 20 the number of days an employee must be

working in a municipality before tax must be withheld. If thresholdis not exceeded, employer withholds for “principal place of work” ifthat place is within a municipality.

Requires withholding from the 21st day forward, not back to thefirst day.

Defines a “day” for purposes of determining when an employeehas reached 20 days working in a municipality.

Shifts much of the tracking burden to the employee.

Exceptions for “small employers,” certain “worksite locations”and “presume worksite locations.”

Applies to Schedule C Filers.87

Occasional Entrant Flowchart

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Withholding – Small Employers

The small employer withholding rules:A small employer is an employer whose gross receipts

the previous year totaled less than $500,000.Gross receipts are from all sources, including intangible

income, grants and expense reimbursements (sopayments made to a common paymaster to cover therelated party’s payroll are included in gross receipts).Governments (including government hospitals &

universities) cannot be a small employer.To qualify for the small employer withholding rules, the

employer must have a fixed location in Ohio.

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Withholding – Small Employers

The rule:A small employer with a fixed location in Ohio

withholds municipal income tax as if all of the wagesof all employees were earned for work performed inthat fixed location.

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Withholding and the Occasional Entrant Rule

Municipalities and employers may enter into agreements to simplify withholding.

Nothing in HB 5 will “undo” existing agreements between municipalities and employers to simplify withholding.

Employers can elect to withhold where the work is actually being performed for all days that it is being performed.

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Business Updates

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Updated Form 27

NP Form 27 changes Reporting layout requirements

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HB 5 - $10 Deminimus for Tax Due

NP Form 27 changes Reporting layout requirements

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Withholding Updates

Update for W-2 filing, 718.03(H):On or before the last day of February of each year, an employer shall file

a withholding reconciliation return with the tax administrator listing thenames, addresses, and social security numbers of all employees fromwhose qualifying wages tax was withheld or should have been withheldfor the municipal corporation during the preceding calendar year, theamount of tax withheld, if any, from each such employee, the total amountof qualifying wages paid to such employee during the preceding calendaryear, the name of every other municipal corporation for which tax waswithheld or should have been withheld from such employee during thepreceding calendar year, any other information required for federalincome tax reporting purposes on Internal Revenue Service form W-2 orits equivalent form with respect to such employee, and other informationas may be required by the tax administrator.

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Electronic W-2’s – EFW2

The update for including all municipalities for eachemployee, is handled in the EFW2 Specifications foundon our website:

www.ritaohio.comEssentially, it is an additional RS record for each municipality

for each employee

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Paper Filing

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W2 Reporting Specs

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Supplemental W-2 Form

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Schedule R-17Allocation Schedule for Professional Employer Organizations

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Thank you for attending!

Please complete the forthcoming survey!

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tax practitioner seminar - rita seminar 2018.pdf · tax practitioner seminar january 19, 2018 ......

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