As we near the home stretch of tax season, check out the latest in State and Local Tax news in Ohio and Florida.
Ohio has made a change to the number of “contact periods” an individual can have with Ohio before the individual will establish Ohio residency for income tax purposes. HB 494, which was passed late December, 2014, increased these contact periods to 212. This is an increase of 30 contact periods over the old law.
By statute, a contact period is defined as an individual being away overnight from their abode located outside of Ohio and a portion of two consecutive days are spent in Ohio. For example, if you have an abode in both Ohio and Florida and claim Florida residency, you can now spend 212 contact periods in Ohio and not compromise being a non-Ohio resident for income tax purposes. If you are away from Florida and travel to Ohio and spend a portion of two consecutive days in Ohio (a portion of Monday and Tuesday) this activity would be considered one contact period. But if you were to spend two days in Ohio and they were not consecutive days (if it was a portion of Monday and Wednesday but not Tuesday) this activity would not be a contact period with Ohio.
The key is not how many days you spend in your resident state but how many contact periods are spent in Ohio.
InvestOhio is still available for the state’s current fiscal year ending June 30, 2015 with all applications due by that date. Keep in mind that the following must take place to secure the credit:
- Funds must be invested into an eligible Ohio Small Business
- Necessary purchases must be made in the first six months after funds are invested
- Items purchased must be maintained for two years
Ohio Municipal Income Tax Reform
Municipal reform has been enacted by the Ohio Legislature. It was a long time in coming but Ohio has taken a big step to simplifying Ohio city taxes. Some of the changes enacted are the following:ies would have an NOL carry forward. Would be phased in over six years
- Creates uniform treatment of filing requirements – extensions, penalties, due dates, etc.
- Creates consistent taxation of pass-through entities – at entity level. Owners will be taxed by resident city
- Adjustments to occasional entry rule – change from 12 days to 20 days
- Changed the definition of a “day” for occasional entry purposes to where the employee spends a “preponderance of work day.”
Ohio saw a significant increase in identity theft from its 2012 tax filing season to the 2013 tax filing season. As a result, the Ohio Department of Taxation is stepping up its efforts to prevent fraudulent refunds from being issued. If the Department of Taxation suspects a return is being fraudulently filed, the state will hold the refund being requested and request that the taxpayer complete an identity quiz to confirm your identity. The Department of Taxation is also randomly choosing taxpayers to complete the identity quiz and questions asked are very specific to the taxpayer. If a joint return is filed, the husband and wife will have to complete separate identity quizzes. Any taxpayers required to complete the quiz will receive a letter from the state of Ohio with instructions on how to complete the quiz. If a letter is not received, the taxpayer is not required to complete the quiz. Only taxpayers who have received the request will be able to access the quiz. Taxpayers failing the quiz will have the opportunity to submit documentation to prove their identity. Ohio has also delayed the issuing of refunds to help prevent fraudulent refunds from being issued. In the past, the state would issue a refund for direct deposit in five to seven days; for 2014, a refund that is directly deposited will be issued in 10 to 15 days.
In a recent news release the state of Ohio has indicated that its strengthened security measures have intercepted a record number of returns seeking fraudulent refunds. The state also indicated that individuals who filed a fraudulent return rarely attempt to take the identity quiz. As of the news release, 160,000 filers who have been requested to complete the identity quiz have not done so. The state also has indicated that about 98% of the one million taxpayers who have taken the quiz have passed.
Small Business Tax Deduction
The small business tax deduction for 2014 is 75% of the first $250,000 of income received from a pass-through entity. For 2013 the percentage was 50%. This increase is only for 2014. The state has indicated that numerous small business owners did not take advantage of this deduction on their 2013 Ohio individual tax return.
Wireless E911 fees
Legislation was passed in 2014 that requires retail sellers to collect a 40 cent fee on each sale of prepaid wireless services that allows a caller to interact with the Enhanced 911 System. The collection of the fee began January 1, 2015 but retailers are permitted to retain fees that were collected in January and February 2015 to defray the setup costs for collection of the fee. Beginning March 1, 2015, the fee collected is now required to be remitted to the state of Florida. The first return is due April 1, 2015. If a retailer has not yet registered, the state has developed a simplified registration process that is available at www.myflorida.com/dor/e911reg. This site is for taxpayers who already registered with the state of Florida for sales tax.
The prepaid wireless service includes calling cards, plans, replenishments or devices sold with prepaid wireless services. A retailer with multiple business locations must separately register each location. The retailer must separately state or disclose the fee on an invoice or similar document provided to the consumer. The fee is not subject to Florida sales tax.
The fee collected is required to be reported on Form E911-PPW. Retailers can retain a 5% collection allowance if the return is timely filed. If currently filing a consolidated sales tax return, only one response is needed for all Florida locations. This is the case even if not all locations sell prepaid wireless services. If you begin operations after January 1, 2015, the simplified registration is not available and the normal Form DR-1 must be completed.
More information concerning the E911 Fee can be found on the state of Florida’s website http://dor.myflorida.com/dor/taxes/e911.html.