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Free workshop will offer tips, help entrepreneurs navigate process. Commercial activity tax's due date is extended for some companies
By Paula Schleis
Beacon Journal business writer
Published on Monday, Nov 09, 2009
With so many businesses downsizing and few companies hiring, lots of unemployed folks are trying their hand at entrepreneurship.
''Being your own boss isn't for everyone, but the conditions are right for some people to say, 'Let me take a stab at my dream here,' '' Canton CPA Bob Fay said.
But that also means there are large numbers of new people trying to understand complicated federal and state tax codes.
Fay will share federal tax news and general accounting tips with participants at a free daylong event at the Hudson Library & Historical Society on Saturday.
Joining him are representatives from the Ohio Department of Taxation, who say September to January is peak tax-preparation season for small businesses.
Debbie Smith and Sarah O'Leary are among department employees who are spending much of their time these days participating in workshops and seminars, helping business owners make the most of deductions and increasing their chances for an error-free filing.
''We both have a pretty full plate of presentations,'' said O'Leary, who represents the state's Commercial Activity Tax division.
Here's a glance at some recent tax changes and general tips that will be discussed at the workshop:
Ohio commercial activity tax
Businesses with taxable gross receipts over $150,000 must file Ohio commercial activity tax (CAT) returns, but next year's due date has been extended for small businesses that took in less than $1 million.
The previous due date of Feb. 9 has
been moved to May 10 to give small businesses additional time to figure out whether they owe the tax or not for the economically challenged 2009 tax year, O'Leary said.
Meanwhile, taxpayers with more than $1 million in taxable gross receipts must file quarterly, on the 10th day of February, May, August and November.
Other CAT tips
• Be sure to include your CAT account number on all correspondence, documentation and checks.
• If you haven't been filing an Ohio commercial activity tax (CAT) since 2005 and you had taxable gross receipts of $150,000 or more in any of those years, you'll need to go back and file a separate return for each year that you qualified.
• If you have a CAT account but had less than $150,000 in taxable gross receipts, cancel your account before the May 10 filing deadline so you do not owe the minimum tax.
Net operating loss
Struggling businesses could get some relief under changes to Ohio's ''net operating loss'' tax deduction, Smith said.
The state has followed federal tax law, which allowed a small business to look back two years in determining a net operating loss.
As part of the American Recovery and Reinvestment Act in February, that ''look back'' has been extended to five years, so the state has followed suit.
For instance, Smith explained, if a small business was profitable in the previous four years and then had a loss this year, it can file an amended return and use this year's loss to offset the gains of a previous year, which could lead to a significant refund.
Electronic filings
For the first time this year, professional tax preparers will be required to file an Ohio return electronically. Individuals can still file a paper return.
However, if you have filed electronically in the past, it is unlikely you will receive a paper booklet from the state. To cut costs, the tax department monitors how people file their taxes and ceases mailings to those deemed unlikely to use them.
Getting information
• The legislature is still active and could pass other tax changes before the end of the year. To stay informed, sign up for e-mail notifications at http://www.tax.ohio.gov. (At the bottom of the home page is a link to sign up for tax alerts.)
• For answers to questions on the Ohio commercial activity tax, call 888-722-8829. Questions about the state's personal income tax can be made to 800-282-1780.
Federal tax news
Sometimes, no change is the change.
The IRS allowed businesses to deduct capital purchases (machinery, equipment, furniture) of up to $250,000 in 2009.
That amount was scheduled to go down, but because of the economy, Congress is keeping the maximum deduction steady, said Fay.
Also staying the same is the Social Security earnings limits.
Individuals and sole business owners paid Social Security tax on the first $106,800 of income in 2009.
Historically, that income level increases each year with inflation, Fay said, but for the first time in his memory, it will not grow.
Accounting tips
• Review your inventory and get rid of anything that is obsolete or discontinued by the end of the year. While there is no separate personal property tax anymore, ''there is still a tax in that it represents an asset to the company,'' Fay said.
• Look over your list of non-paying customers. If it's clear some are never going to pay (i.e., they filed bankruptcy), then be prepared to write off that bad debt as a deduction. If they are simply slow to pay, ''you need to get their attention.''
• If your company was profitable this year, consider setting up retirement plans, which come with substantial deductions.
''Companies can contribute more money than ever to retirement plans in the last few years,'' Fay said. ''It's a nice way for individuals to jump-start their retirement.''
• Don't try to do it all alone. If your business is growing, you'll likely reach the point where you need professional help. ''Payroll taxes can complicate things very quickly,'' Fay said. ''If a business owner doesn't stay on top, it takes just three or four months to get behind the 8-ball very quickly.''
Paula Schleis can be reached at 330-996-3741 or pschleis@thebeaconjournal.com.
With so many businesses downsizing and few companies hiring, lots of unemployed folks are trying their hand at entrepreneurship.
''Being your own boss isn't for everyone, but the conditions are right for some people to say, 'Let me take a stab at my dream here,' '' Canton CPA Bob Fay said.
But that also means there are large numbers of new people trying to understand complicated federal and state tax codes.
Fay will share federal tax news and general accounting tips with participants at a free daylong event at the Hudson Library & Historical Society on Saturday.
Joining him are representatives from the Ohio Department of Taxation, who say September to January is peak tax-preparation season for small businesses.
Debbie Smith and Sarah O'Leary are among department employees who are spending much of their time these days participating in workshops and seminars, helping business owners make the most of deductions and increasing their chances for an error-free filing.
''We both have a pretty full plate of presentations,'' said O'Leary, who represents the state's Commercial Activity Tax division.
Here's a glance at some recent tax changes and general tips that will be discussed at the workshop:
Ohio commercial activity tax
Businesses with taxable gross receipts over $150,000 must file Ohio commercial activity tax (CAT) returns, but next year's due date has been extended for small businesses that took in less than $1 million.
The previous due date of Feb. 9 has
been moved to May 10 to give small businesses additional time to figure out whether they owe the tax or not for the economically challenged 2009 tax year, O'Leary said.
Meanwhile, taxpayers with more than $1 million in taxable gross receipts must file quarterly, on the 10th day of February, May, August and November.
Other CAT tips
• Be sure to include your CAT account number on all correspondence, documentation and checks.
• If you haven't been filing an Ohio commercial activity tax (CAT) since 2005 and you had taxable gross receipts of $150,000 or more in any of those years, you'll need to go back and file a separate return for each year that you qualified.
• If you have a CAT account but had less than $150,000 in taxable gross receipts, cancel your account before the May 10 filing deadline so you do not owe the minimum tax.
Net operating loss
Struggling businesses could get some relief under changes to Ohio's ''net operating loss'' tax deduction, Smith said.
The state has followed federal tax law, which allowed a small business to look back two years in determining a net operating loss.
As part of the American Recovery and Reinvestment Act in February, that ''look back'' has been extended to five years, so the state has followed suit.
For instance, Smith explained, if a small business was profitable in the previous four years and then had a loss this year, it can file an amended return and use this year's loss to offset the gains of a previous year, which could lead to a significant refund.
Electronic filings
For the first time this year, professional tax preparers will be required to file an Ohio return electronically. Individuals can still file a paper return.
However, if you have filed electronically in the past, it is unlikely you will receive a paper booklet from the state. To cut costs, the tax department monitors how people file their taxes and ceases mailings to those deemed unlikely to use them.
Getting information
• The legislature is still active and could pass other tax changes before the end of the year. To stay informed, sign up for e-mail notifications at http://www.tax.ohio.gov. (At the bottom of the home page is a link to sign up for tax alerts.)
• For answers to questions on the Ohio commercial activity tax, call 888-722-8829. Questions about the state's personal income tax can be made to 800-282-1780.
Federal tax news
Sometimes, no change is the change.
The IRS allowed businesses to deduct capital purchases (machinery, equipment, furniture) of up to $250,000 in 2009.
That amount was scheduled to go down, but because of the economy, Congress is keeping the maximum deduction steady, said Fay.
Also staying the same is the Social Security earnings limits.
Individuals and sole business owners paid Social Security tax on the first $106,800 of income in 2009.
Historically, that income level increases each year with inflation, Fay said, but for the first time in his memory, it will not grow.
Accounting tips
• Review your inventory and get rid of anything that is obsolete or discontinued by the end of the year. While there is no separate personal property tax anymore, ''there is still a tax in that it represents an asset to the company,'' Fay said.
• Look over your list of non-paying customers. If it's clear some are never going to pay (i.e., they filed bankruptcy), then be prepared to write off that bad debt as a deduction. If they are simply slow to pay, ''you need to get their attention.''
• If your company was profitable this year, consider setting up retirement plans, which come with substantial deductions.
''Companies can contribute more money than ever to retirement plans in the last few years,'' Fay said. ''It's a nice way for individuals to jump-start their retirement.''
• Don't try to do it all alone. If your business is growing, you'll likely reach the point where you need professional help. ''Payroll taxes can complicate things very quickly,'' Fay said. ''If a business owner doesn't stay on top, it takes just three or four months to get behind the 8-ball very quickly.''
Paula Schleis can be reached at 330-996-3741 or pschleis@thebeaconjournal.com.
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