Under the health care act, starting in 2013, taxpayers with earned income over $200,000 per year ($250,000 for joint filers and $125,000 for married filing separately) must pay an additional 0.9% Medicare tax on the excess earnings. Employers are required to withhold the tax beginning in the pay period in which wages exceed $200,000 for the calendar year — without regard to the employee’s filing status or income from other sources. So, it’s possible your employer:

Will withhold the tax even though you aren’t liable for it. You can’t ask your employer to stop withholding the tax, but you can claim a credit on your income tax return.

Won’t withhold the tax even though you are liable for it. You may use Form W-4 to request additional income tax withholding to cover your liability and avoid interest and penalties.

If you have questions about how withholding issues related to the new 0.9% Medicare tax might affect you, please contact us.

Day camp is a qualified expense under the child or dependent care credit, which is worth 20% of qualifying expenses (more if your adjusted gross income is less than $43,000), subject to a cap. For 2013, the maximum expenses allowed for the credit are $3,000 for one qualifying child and $6,000 for two or more. The credit’s value had been scheduled to drop in 2013, but the American Taxpayer Relief Act of 2012 made higher limits permanent.

Be aware, however, that overnight camp costs don’t qualify for the credit.

A wide variety of tax breaks are available to parents. If you’d like to learn more, please contact us.

Ohio’s small-business owners received a tax cut in the final state budget bill that legislators approved and the governor signed into law at the end of June. “Most small businesses are getting a whopping tax cut,” said Gov. John Kasich in commenting about the budget legislation that the Ohio General Assembly approved on June 28 and the governor signed into law on June 30.

The final budget bill restored the 50 percent income-tax deduction for small-business owners originally proposed by the governor, but deleted in the House’s version of the two-year budget proposal. The Senate had restored the tax cut, and a conference committee, which reconciled differences between the House and Senate versions of the bill, retained the deduction amounting to an estimated $1.4 billion over a two-year budget period that begins July 1.

The legislation provides a deduction equal to 50 percent of a sole proprietor or pass-through entity owner’s business income.  The deduction is limited to $125,000 per taxpayer per year, or $62,500 for spouses who file separately and who each report business income.  This personal income tax deduction is available for 2013 and cannot be applied to returns for estates, trusts, or pass-through entities.  Business owners would save up to a maximum of approximately $7,000 a year in income-tax payments. Total savings for owners would be $1.1 billion over the two years.

The budget authorizes spending through June 30, 2015, with the bulk of the funds devoted to schools and health care programs, including Medicaid. The 5,000-plus page bill also includes a number of tax reforms that the administration and legislators believe will help position the state for further economic growth.

The bill did not include an expanded sales tax on services, as the governor had proposed, but it did make some changes in other tax provisions affecting businesses.

One of these changes involves the Commercial Activity Tax (CAT). The bill sets the following new minimum tax payments:

• Businesses with $1 million to $2 million in receipts would face an $800 minimum.
• Businesses between $2 million and $4 million in receipts would face a $2,100 minimum.
• Businesses with more than $4 million in receipts would face a $2,600 minimum.
• All business would be subject to a .26 percent rate on receipts over $1 million in addition to the tiered minimum while those with $150,000 to $1 million in gross receipts would continue to pay a flat $150.

Other provisions of the bill include: 

• An increase in the state’s sales tax. Changes to Ohio’s sales tax include an increase from 5.5 percent to 5.75 percent, effective September 1. The law also subjects the sale of electronically transferred digital books or digital audio or audiovisual works to sales tax

• A reduction in personal income tax for all taxpayers. Personal income tax rates are cut by 10 percent across-the-board, phased in over three years. The state currently has nine income-tax brackets, ranging from 0.6 percent for annual income under $5,200 to 5.9 percent for income earned beyond $208,500. The new law reduces all income-tax brackets by 8.5 percent this year, then 9 percent next year and 10 percent in 2015 and beyond. A 10 percent cut would bring the top rate to 5.3 percent. It also temporarily freezes tax brackets and personal exemptions so they no longer rise with inflation and puts in place a nonrefundable earned-income tax credit.

• Elimination of the 12.5 percent residential property tax rollback on any new and replacement tax levies. The state pays 12.5 percent of your local property-tax bill. This costs the state about $1.1 billion per year just for schools, which receive most of those taxes. The amount has grown as new levies have been approved. All current levies and those approved in August would not be affected, nor would renewals of current tax levies. But new levies, including replacement levies, would cost homeowners more than they would have under current law because they would pay 100 percent of the levy.

• A change in eligibility for the homestead exemption. Seniors age 65 or older and residents who are permanently disabled qualify for the homestead exemption, shielding $25,000 of the market value of their home from property taxation. Those who are not yet 65 and who earn more than $30,000 no longer would qualify for the homestead exemption. This was the threshold before eligibility was expanded in 2007.

In all, the budget includes a $2.7 billion tax cut over three years.

Among the items the governor vetoed from the bill was a proposal to collect internet sales tax on transactions between out-of-state retailers and Ohioans. The governor questioned the provision’s legality.

He also vetoed language that hindered his efforts to move forward with an expansion of Medicaid. However, discussions on how to expand and reform Medicaid are expected to take place through the summer and could be acted upon in September. The governor wants to cover another 275,000 low-income Ohioans and bring $13 billion in federal funding to the state over the next seven years.

Whalen & Company is a majority women-owned business, and the partners are Laura Wojciechowski, Lisa Shuneson and Richard Crabtree. A number of the firm’s clients are women-owned businesses, and we are very involved in organizations that support the growth and development of women business owners.

We were very pleased to learn recently that one of our clients, Catherine Lang-Cline, president and co-founder of Portfolio Creative, has been recognized as one of 12 “Women You Should Know!” in 2014 by Women for Economic and Leadership Development (WELD).

Each year WELD recognizes a diverse group of 12 women in the central Ohio community who are high impact leaders within their organizations, support the leadership development of other women, give time, talent and resources to their community and invest in the growth of women-owned businesses. The organization honors the achievements of these notable women in its annual Twelve Women You Should Know™ calendar.

Catherine spent more than 20 years in the creative industry as a designer working for ad agencies, in-house marketing departments and as a freelancer. In 2005 she and Kristen Harris started Portfolio Creative to help artists find work and clients find talent. Today Portfolio Creative is the nation’s fastest growing creative staffing and recruiting firm connecting clients with creative talent in all areas of design, marketing, communications and advertising. It also provides direct hire, educational resources and payroll services.

Catherine is a Certified Staffing Professional with the American Staffing Association. She is also an active member of Columbus Society of Communicating Arts, Advertising Federation of Columbus, Columbus Chamber of Commerce, Women Presidents’ Organization, and is a committee member for the National Association of Women Business Owners®.

The company has been recognized with awards from Staffing Industry Analysts, Columbus CEO magazine, the Columbus Chamber, Enterprising Women magazine, the Stevie Awards for Women in Business, the American Staffing Association, the Ohio Department of Development and the National Association of Women Business Owners.

In 2013 Portfolio Creative had average satisfaction ratings quadruple the industry average, as measured by the Inavero Best of Staffing list. It has been an Inc. 5000 fastest growing company for the past four years.

The Twelve Women You Should Know™ calendar will be unveiled at a reception on November 13 at Mount Carmel St. Ann’s Hospital from 6 p.m. to 8 p.m. WELD was founded with the mission to develop and advance women’s leadership to strengthen the economic prosperity of the communities it serves.  For more information about WELD and its 2014 calendar, click here.

Three clients, who joined the Team Whalen Fan Club during the firm’s busy season from February through April, were winners in recent prize drawings open to Fan Club members. Dick and Rhea Hames, owners of R2J and R&E Joint Venture, (pictured) won an autographed football of all of the members of Team Whalen. Holly Richert of United Window won a $50 restaurant gift card.

The idea for a Fan Club came from a client as a way to involve clients and friends in the firm’s team-building activities during the 2013 busy season. This year’s activities, designed to reinforce Whalen’s commitment to excellence, teamwork and five-star client service, related to football. The primary objective of Whalen Warrior team members was to have a winning result for every client.

The firm thanks everyone who participated in our unique Fan Club. The Whalen team works hard to earn the trust and confidence of clients, and we appreciate clients who tell others about their special relationship with our firm.