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A popular tool for parents trying to save for their child’s college education is now even more helpful for families. Gilmore Jasion Mahler’s Charlie Heid tackled the topic during his monthly appearance on WTOL’s “Your Day.” It’s called a “529” plan and is basically like a 401K, but it saves for your child’s education instead of your retirement. It’s an investment account that allows families to let money grow tax free to help pay for a child’s college education. It’s become a popular savings tool to ease the financial burden for parents who want to pay for their child’s college education.

The new tax law now allows families to use up to $10,000 a year in 529 funds for elementary and high school costs as well as college costs.

Some more good news is that the tax deduction you can take has also doubled in Ohio from $2,000 per child to $4,000 per child. That change was part of the budget bill passed last year in Ohio. The Michigan deduction is $5,000.

There is no annual limit for contributions to a 529 plan, but keep in mind you or a family member (like your kids grandparents) can give up to $15,000 a year (or $30,000 per married couple) to your child’s 529 account without having to pay any federal gift tax.

While these are state-run plans, you don’t have to use the 529 plan for your state. You may find you like the rate of return better on an out of state plan.

529 plans pay for college related costs (and now high school and elementary school costs) including:

• Tuition
• Mandatory fees
• Room and board

Be aware, there are fees associated with 529 plans, so you need to ask questions and inquire about potential administrative fees or an application fee. Sometimes these fees can be waived, for example, if you maintain a certain balance, or agree to electronic only document delivery. Also be aware that a 529 plan could impact your child’s eligibility for financial aid based upon need.

529 plans are sponsored by states, state agencies, or sometimes educational institutions. There’s a nice website collegesavings.org established by the National Association of State Treasurers called the College Savings Plan Network with some good information. You can search info on any state’s 529 plans.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting services and provides comprehensive services including assurance, business advisory, tax, risk advisory and healthcare management. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

Stamps were 32 cents. DVDs launched in Japan. Dolly the sheep was cloned and Tickle me Elmo was the holiday toy sensation. 

The year was 1996, the same year that two young professionals decided to go into business for themselves. Little did they know their decision would benefit thousands of businesses, families and individuals, and better our community as a whole.

In March of 1996, Adele Jasion and Kevin Gilmore were both working in the accounting industry in northwest Ohio. They decided to team up and break out on their own, establishing their own firm called Gilmore & Jasion. With only 11 employees, they launched their new business just a month before the April 15 tax deadline, a bold move in the accounting business.

”I was always confident that we could become the alternative to what is now the Big Four,” says Gilmore, referring to the top national firms. “I just wanted to be the best. I wanted to be the firm that people wanted to go to. That was my vision.” 

Partner Adele Jasion says there was a need at the time for a high quality local firm with diverse resources that provided personal attention to clients.  She says Gilmore & Jasion was able to meet that need.

“The timing was actually good. The big firms were shedding clients, reinventing themselves, more interested in the very large public company work, not so much in the privately-held companies. Right place, right time,” she says. “We had the skillset to service those clients.”

In the fall of 1996, Andy Mahler came on board as a partner, giving the firm its current name Gilmore Jasion Mahler, LTD. Mahler retired in 2008. Five years later, Pry Professional Group in Findlay merged into Gilmore Jasion Mahler. Now, with two offices and over a hundred employees, GJM is northwest Ohio’s largest public accounting firm.  

The last 20 years have brought remarkable change to the industry and to client service. There was no email when GJM was established. Tax returns were printed out and mailed. Now, technology has catapulted the Firm forward with cloud-based accounting services. Sharing information and documents with clients has never been faster, more convenient or as secure.  

Those choosing the profession have also changed. Adele Jasion says it wasn’t common to have a woman co-owner of a CPA firm in the mid 1990’s. She describes the accounting industry as a typically male-dominated field for decades. But, she says, that has changed slowly over time.  

“I’m very proud to say that of the fourteen partners we have today at GJM, six of them are women. We’re providing a good example for young women choosing our profession.”

“GJM is far from a “stuffy accounting firm” to say the least,” says one such young woman, Audit Associate Lauren Grana. “It is not an everyman for themselves environment where no one communicates and keeps to themselves. Everyone is encouraged to ask questions when they don’t understand, share discoveries that others may benefit from, and share victories together.”

Gilmore Jasion Mahler has challenged the typical CPA firm model from the very start, working closely with clients, getting to know their businesses and building a responsive, friendly relationship. The firm has developed expertise in particular industries, including healthcare, construction & real estate, utilities and manufacturing & distribution. Services cover a broad range from business advisory to tax to business valuation. The Firm has exceled as a community partner as well, supporting charitable causes in both the Toledo area and Findlay-Hancock County region. Many employees sit on the boards of local nonprofits and the Firm is involved in events year-round to support many organizations and causes.

Gilmore Jasion Mahler, LTD is ever evolving to meet client needs and attract new talent, but one thing that hasn’t changed is the supportive nature of a business that started twenty years ago with nothing more than a vision.

“Add good people, add good clients,” says Gilmore. “It wasn’t about being big, it was about being the best quality and with that would come success and growth. We have a great deal to be proud of.”

Question: I’m trying to save for college for my child. Can you explain what a “529” plan is and how it works in Ohio? Any particular issues or restrictions I should watch out for with this method of college savings?

Tax Partner Dave Baymiller’s answer: A 529 plan is a Qualified Tuition Program and is also referred to as a College Savings Plan.  These plans are established by states to allow for contributions to be made to an account for paying a student’s qualified education expenses at a postsecondary institution. No federal deduction is allowed for the contribution, but no tax is due on the distributions that are used to pay the qualified education expenses. Under the Ohio plan, you are allowed to take an annual state deduction on the Ohio tax return of up to $2000 per beneficiary and any excess is allowed to be carried forward and deducted in future years. So, if you contribute $4000 to the Ohio plans for two beneficiary students during the year, you would be allowed to deduct $4000 ($2000 each) with the remaining $4000 carrying over to the next year. But, you don’t have to contribute to just your resident state plan. Also, just because amounts are in a state plan does not mean that the postsecondary institution needs to be in the same state. Some things that you need to watch out for are: Federal Gift tax issues- If you contribute more than a certain amount in a year per beneficiary, you will want to consider making an election on a timely filed gift tax return to treat the contribution as made over 5 years. Distribution issues- You want to make sure that when amounts are distributed that they are used to pay “qualified education expenses “. Don’t just assume that because the expense relates to college in some way that it is going to be included as qualified. You also want to make sure that you are timing the distributions to cover the expenses in the proper periods. This is a common trap. Excess distributions are subject to not only income tax but also to a penalty. You as the owner of the account or the beneficiary will receive a form 1099-Q that shows the full amount of the distributions during the year as well as the earnings portion of that distribution. You should also be looking for a 1098-T from the institution that has information about the expenses. Don’t ignore them. They need to be reported properly with your income tax filing. If not, you will most likely receive a notice from the IRS with a calculated tax and these are somewhat painful to get resolved. 

Dave Baymiller is a partner in the tax services area with over thirty years of public accounting experience. He practices exclusively in the area of federal, state and local taxation with an emphasis on tax planning and consulting. Learn more about Dave's expertise.

Businesses in Ohio, and those nearby with operations in the State, are likely all too familiar with the frustrations that can accompany disparities among compliance with the income tax laws of the hundreds of municipalities within the State.  When are tax returns due?  Are we required to make estimated payments?  Does this city allow the carryforward of net operating losses, and if so, for how long? How does that city handle taxation of pass-through entities?

House Bill 5 (H.B. 5), signed into law on December 19, 2014 by Ohio Governor John Kasich, attempts to reform municipal tax law, making it more uniform and less burdensome for taxpayers.  Many of the provisions of H.B. 5 were effective January 1, 2016, while others kicked in as of 2017.  Several technical corrections to the bill were enacted during the biennial budget bill process, and others may still occur as taxpayers react to the bill’s provisions and how each municipality adopts such provisions.

While interpretation and education of this significant reform is still ongoing, here’s an overview of the key changes businesses should be aware of going into the 2017 filing season and beyond:

1. 20-day withholding rule:

• As a general rule, employers do not need to withhold income tax for a municipality if an employee is working 20 or fewer days during the calendar year in that municipality (this is increased from 12 days).  Instead, the employer must withhold to the employee’s “principal place of work” municipality (where he/she reports for employment duties on an ordinary basis, whether that is a fixed location, a worksite location, or the location at which he/she spends the greatest number of days in the year).  

2. Small employer withholding exception:

• A “small employer” (any employer with less than $500,000 of total revenue during the preceding taxable year) only needs to withhold income tax on employees to the municipality (if applicable) in which it has a “fixed location”.
• A “fixed location” must be a permanent place of doing business in Ohio (office, warehouse, store), even if it is in a jurisdiction without a municipal income tax.

3. Uniformity of estimate thresholds and due dates:

• H.B. 5 established a standard threshold for the requirement of estimated income tax payments at an annual liability projection exceeding $200.  In the past, municipalities were spread across the board regarding this requirement, but most had settled for a lower threshold of $100.
• All city income tax returns for businesses are now due on the 15^th day of the fourth month following the end of its taxable year (April 15^th for calendar year taxpayers).

4. Net operating loss provisions:

• Before H.B. 5, municipalities could choose whether to allow for the carryforward of net operating losses (NOL) and for how long.  Now, the bill enforces the application of a five-year NOL carryover period, effective for NOLs incurred in tax years beginning on or after January 1, 2017.  Pre-existing NOLs are permitted to continue to be carried forward if allowed by the municipality.
• This NOL carryforward provision will be phased in over a five-year period, with a 50% per year limit beginning in tax year 2018 (any unused NOLs resulting from this 50% limitation may also be carried forward).  Full utilization at 100% of NOL carryovers will not occur until tax year 2023.

5. Pass-through entity treatment:

• Pass-through entities (S corporations and partnerships) must file and pay municipal tax at the entity level based on apportioned net profits (such entities are no longer able to push tax liabilities down to owners by filing informational only returns with municipalities).  

Although the intent of House Bill 5 is uniformity and simplification, it is inevitable that questions and differing interpretations arise, especially as the first filing season of the tax year for which H.B. 5 is effective approaches.  Therefore, taxpayers should be sure to consult with a tax advisor to determine the applicability of the H.B. 5 provisions to their specific circumstances and situations.

Jessica Nunn contributed this article, which was also published in the Toledo Business Journal on February 1, 2017 edition. Jessica is a CPA with Gilmore Jasion Mahler, LTD. She is a member of GJM's Manufacturing Industry Group, working with many manufacturing clients as well as clients in many other industries.

What better month than April to feature those in the accounting business? As tax day approaches, Ohio Secretary of State Jon Husted has just announced that the office is featuring the profession throughout the month as a part of it's Ohio Business Profile, including a feature on Gilmore Jasion Mahler. The Secretary of State's office says the Ohio Business Profile was established in 2011 and helps to showcase companies doing business in the state and offering outstanding service. We're proud to be among those businesses featured. Learn more about our capabilities.