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After 21 years with Gilmore Jasion Mahler (GJM), Tax Partner Steve Schult has decided it is time to retire at the end of 2019. Steve works with many different clients, from individuals to family businesses to multi-national companies. Aside from his client service, he is a career advisor to young professionals within the firm and has taken an active role in GJM’s community service efforts. As he prepares to retire, he took some time to reflect on his years of client service and his time at GJM.

What do you like most about the work you do?

Steve: Getting to know and working with clients - and helping them not only save taxes, but also make decisions that are best for their businesses and their families. I have always said that taxes are a piece of your decision, not the whole decision. Being in public accounting my whole career, I also always appreciated the fact that I was working with the best and the brightest.  I learned something every day from not only my other partners, but everyone in the firm.

What made you decide to retire now?

Steve: My wife Diane and I both had some prior health issues.  We are fine now, but it makes you realize that life is short.  It’s time to slow down and smell the roses.  (For you Michigan fans, just FYI, you smell a lot of roses when you go out to the Rose Parade and the Rose Bowl!)

What will you miss the most?

Steve: That’s easy – the daily interactions with clients and the people at GJM.  I am extremely lucky to have worked with so many smart, quality and fun people in my career.  I already know I will struggle with that.

What will you miss the least?

Steve: That’s easy too - Keeping track of time daily and the constant tax deadlines.

Favorite story about helping a client with a tax problem?

Steve: There are actually two stories.

Early in my career I had a 70-year-old client who owed a lot of money on his tax return because he had a large capital gain that was missed in his year-end planning.  I felt it would be best to meet with him to personally review the return.  I called and said I would like to meet him to review his return with him – and he said to meet him at his office on my way in to work the next morning.

After losing sleep that night thinking about the meeting, I met him at his office the next morning.  Upon entering his office, he said “Stevie, you are never going to believe what I got it the mail yesterday when I got home from work.  I applied for tickets to the Masters golf tournament 40 years ago and was informed that I am finally off the waiting list. I now have four tickets to the Masters for the rest of my life!”  Upon asking what I wanted to discuss with him I said, “You owe $25,000 on your tax return”.  He said “Stevie, no problem – I don’t care.  You must not have heard me.  I now have four tickets to the Masters for the rest of my life!”  Timing is everything!  

I also had a large business client who was going through a tough IRS audit.  While most IRS auditors I worked with were pretty reasonable, the agent on this case was very difficult.  Wanting to hopefully resolve a few issues with him, the client and I met with him one day right after he had gotten back from the eye doctor – and he was wearing sunglasses because his pupils were dilated.  Having recently watched some poker tournaments on TV, I semi-jokingly told him it wasn’t fair that he was wearing sunglasses during a negotiation.

After failing to come to an agreement, we requested a meeting with him and his case manager to hopefully resolve our issues.  Upon entering the meeting a few days later, the client team and I were all wearing sunglasses.  The IRS case manager was very amused by this, setting the tone to finally get the issues on the audit resolved.

Favorite memory or story from your time at GJM?

Steve: While there are many, my favorite memory is from our involvement with Flag City Honor Flight.  The night we raised over $125,000 we were all in shock.  Going to Washington DC as a guardian on one of the flights was also a memory I will never forget – and is something I would encourage everyone to do.

What are your plans in retirement?

Steve: Getting in shape; learning to play the guitar; hiking a few times a week in Oak Openings with my two dogs (they keep me walking at a brisk pace); XC-skiing; fly-fishing; learning woodworking from my dad and helping him on the family farm; more time with Diane, (which she may regret) kids and grandkids; getting more active on a few boards; travel; and many more fun adventures that I don’t even know about yet.

Do you have any travel scheduled?

Steve: Yes.  XC-skiing trip in January, visit cousins in Lake Tahoe in February, finally getting to go to Detroit Tigers spring training in Lakeland Florida in March, a trip to hike in the Scottish Highlands this summer, and other trips with kids/grandkids that we haven’t quite finished scheduling yet.

Are you totally disconnecting from GJM or will you be around for client issues, etc.?

Steve: While I don’t want to interfere with other people at GJM developing their own relationships with clients I worked with in the past, I will still be in the Toledo area and will be available as needed.  I want to make sure there is a smooth transition and want to also make sure our clients are being properly served.  I’m sure I could add historical perspective that may be helpful in some situations.   

Will you still stay involved in some GJM events, like the Big Brothers Big Sisters Holiday Party and Flag City Honor Flight?

Steve: If I am not traveling, I would certainly be available to help with the many great causes GJM has supported over the years.

There’s been a lot of change in the accounting industry during your time in the field.  Do you have any advice you’d give to young people pursuing the field now?

Steve: Every industry is constantly changing.  I think the best advice for any young person is pretty easy:  Work hard, communicate, get involved in your community, and show your clients, your family and the people that work with you that you appreciate and care about them.

Anything else you’d like to add?

Steve: As I mentioned before, I know I will miss the constant interactions with clients and the people at GJM.  Those people become part of your family.  I am not leaving the Toledo area.  Now that I will have the time, hopefully people will still occasionally call me for breakfast, lunch, dinner, fishing, etc.  I know Diane will appreciate them getting me out of the house and out of her hair for a while!

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 and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.  

As children (and adults, too!) head back to school, we'd like to remind you of a few ways you can minimize your income taxes:

Most before and after school care can be deducted. For a child under the age of 13, the cost of before and/or after school care may qualify for a tax credit.  This includes the child care component costs of private school tuition.  School uniforms are not deductible even though they are required.  Donating outgrown uniforms to charity can be deductible if you itemize.

School fundraiser tickets may be fully or partially deductible.  Check your raffle tickets for the amount deductible.

Earnings in 529 Plans are not federally taxable. Use the money you've saved into a 529 Plan to pay for eligible college expenses as well as books and computers for elementary, high school and college students.

Student loan interest is deductible. Student loan interest paid up to $2,500 is usually deductible. You do not have to itemize deductions on Schedule A in order to claim this valuable deduction.

The American Opportunity Tax Credit can amount to $2,500 in tax credits per eligible student and is available for the first four years of post-secondary education at a qualified educational institution.

The Lifetime Learning Credit can amount to up to $2,000 credit for qualified education expenses paid for a student enrolled in an eligible educational institution.

The Tuition and Fees Deduction applies to qualified education expenses for higher education for an eligible student taking undergraduate, graduate or post graduate courses.

As always with tax law, there are exceptions and exemptions. consult with your tax preparer if you need mor information or have any questions.

Guest blogger Amy Sigurdson contributed this article. Amy is a Tax Associate at Gilmore Jasion Mahler, LTD (GJM). Learn more about GJM's expertise in Tax.

Gilmore Jasion Mahler, LTD (GJM) has announced some key promotions and new staff members that strengthen the Firm and its leadership team. The promotions are effective January 1, 2019.

Judy Anderson and Matt Cavanagh are promoted to partner. Anderson, a Toledo native and graduate of The University of Toledo has been with the firm for 11 years. She has over twenty years of experience in public accounting and in the healthcare industry. A member of Gilmore Jasion Mahler’s healthcare and outsourced accounting group, she works with many of the Firm’s healthcare clients providing practice management and consulting services.  

Cavanagh, a Bowling Green native and BGSU graduate, joined Gilmore Jasion Mahler in November of 2005. Also a member of the Firm’s healthcare team, Matt’s focus is healthcare services. His expertise is in ambulatory surgery centers, outsourced accounting, practice management and modeling.

“Judy and Matt are already valued members of our leadership team,” says Gilmore Jasion Mahler Managing Partner Kevin Gilmore. ”Their hard work and dedication have strengthened our healthcare specialty and the Firm as a whole. I’m thrilled to see them both reach partner level.”

The Firm also announced some other key promotions. Partner Nikki Clement has been named managing partner of Gilmore Jasion Mahler’s Findlay office. Partner Mike Brough will lead growth efforts for the Findlay office. Nikki Clement's focus is the utilities industry. She specializes in accounting for regulated utilities.

Mike Brough works across a number of industries including manufacturing & distribution, government, and nonprofit operations.

Steve Miller is being promoted to senior manager. Both Ryan Avery and Ryan Emerson are promoted to supervisor and Nick Jackson is promoted to senior associate.

Earlier in the year, Diane Stretten and Mary Jo Pitzen were promoted to senior manager. Andrea Jennex moved up to supervisor in the GJM Findlay office. Ben Lochbihler was promoted to manager and Corey Selhorst, Lauren Grana and Clay Barron were all promoted to senior associate.

The Firm also brought on well over a dozen new employees in 2018 to further strengthen GJM’s administrative team and client service. They include Elijah Blackburn, Alyssa Essert, Alexandria Frances, Courtney Haas, Nicole Hartranft, Jennifer Henning, Dana Herr, Thomas Keyser, Jessica Knepper, Dylon Lause, Wendy Long, Tim Merkel, Madeline Mielcarek, Caleb Neeper, Joe Osentoski, Tina Rochowiak and Logan Sager.

“I couldn’t be happier with the staff we have in place headed into 2019,” says Gilmore. “When you have great people, great things happen. I’m excited to see what we can accomplish at a team.”

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, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

Sweeping change is coming to the way you plan for your retirement. Congress passed the SECURE (Setting Every Community Up for Retirement Enhancement) Act as part of a huge government spending deal at the end of 2019. Gilmore Jasion Mahler is already getting questions from clients wondering how they’re affected by the changes.  

While the SECURE Act includes a number of changes that will impact retirement planning, the change with perhaps the most immediate impact involves the age at which individuals need to start taking required minimum distributions (RMDs) from their retirement accounts. As of the year 2020, that age has been changed to 72 years old from the former age of 70-and-a-half years old. Here’s an important note: If you were 70-and-a-half at the end of 2019, you are not impacted by the law change, and will still need to start taking your RMDs at 70-and-a-half years old.

The SECURE Act brings other retirement planning changes as well, including:

• Increasing restrictions on how non-spouse beneficiaries stretch out RMDs from a loved one’s retirement account
• Allowing people who work past the age of 70-and-a-half to contribute to an IRA (with some restrictions)

What should you do?

The SECURE Act could change how you plan for your retirement in a number of ways. It is important that you consult with your GJM tax advisor to understand the impact as it relates to your personal situation. You can learn more about GJM's tax experts and our team capabilities here.

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 and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.  

On December 22, 2017, our President signed into law the Tax Cuts and Jobs Act, the largest major tax reform in over 30 years. Within this Act are major changes to the taxation of regular corporations (C corporations) and to non-corporate taxpayers, which include individuals, estates, and trusts who own interests in what are called pass-through entities such as sole proprietorships, partnerships, limited liability companies (LLCs), and S Corporations. These entities are for the most part not subject to entity level tax, but instead pass the income through to their owners who are then taxed on the income.

This article will focus only on the pass-through entity income tax changes that came about as a result of the tax rate benefit provided to C corporations limiting the tax rate to a flat 21%, a key component of tax reform. Before I get into the meat of the changes, let me just warn you that we will need a whole lot more guidance coming from the IRS and Treasury in order to understand how this all works.

Let's start out with some basics:

• The new rules are effective for tax years beginning after December 31, 2017 and expire after December 31, 2025
• There is a deduction for individuals, estates, and trusts equal to 20% of domestic "Qualified Business Income" (QBI), which is defined below, from a pass-through entity
• Since the maximum individual income tax rate is now 37%, the 20% deduction provides an effective top marginal tax rate of 29.6%
• QBI would include Specified Service Trade or Business, which is defined below

Definitions in Basic Terms

Qualified Business Income (QBI): The net amount of qualified items of income, gain, deduction, and loss with respect to the qualified trade or business of the taxpayer and it doesn't matter if the taxpayer is "Active" or "Passive" in the business. This is determined for each qualified trade or business of the taxpayer.

Specified Service Trade or Business:

Any trade or business involving the performance of services in the fields of health, law, consulting, athletics, financial services, brokerage services; or any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners; or involves the performance of services that consist of investing and investment management trading, or dealing in securities, partnership interests, or commodities. Engineering and architectural services are excluded. This is a definition that needs a whole lot of clarity, which hopefully will be provided soon. For example, what are included in services in the fields of health? How do you determine what business has a principal asset being the reputation or skill of one or more of its employees or owners? Couldn't this pull in a lot of companies that you wouldn't normally think of as service businesses? And would this trump the exception for architectural and engineering services? Stay tuned.

Threshold Amount:

These are individual taxable income amounts that, if exceeded, cause the 20% deduction to be phased out. The starting threshold amounts are $157,500 for individual taxpayers and $315,000 for married taxpayers filing jointly. Once the taxable income exceeds $207,500 (or $415,000 for joint filers), you are fully phased in, and for owners of Specified Service Trade or Businesses, the deduction is $0. For other businesses that exceed the threshold amounts, the deduction is limited to what is called a "Wage (Capital) Limit" (Hmmm, sounding a bit complicated).

Wage (Capital) Limit:

The greater of:

(a) 50% of your share of the W-2 wages paid with respect to the qualified trade or business or

(b) The sum of 25% of your share of the W-2 wages with respect to the qualified trade or business plus 2.5% of the unadjusted basis, immediately after acquisition, of all qualified property (basically, this is depreciable property cost).

The (b) above was an additional provision added to allow for businesses with low or no wages to qualify, such as real estate businesses. (Uh-oh. Sounding more than a bit complicated here).

Qualified Trade or Business:

Basically any trade or business other than a Specified Service Trade or Business and other than the trade or business of being an employee.

Some other important points:

• The 20% deduction is a deduction against taxable income and not adjusted gross income (AGI)

• The 20% deduction cannot exceed your taxable income reduced by net capital gain for the year

• If your individual taxable income (AGI at the bottom of page one of your Form 1040, less itemized deductions) is less than the threshold amounts, you do not need to worry about the definition bullet point for Specified Service Trade or Business or Wage (Capital) Limit

Example: Easy one first, which is based on taxable income below the threshold amounts.

You are a single taxpayer with taxable income of $157,000. This is below the single threshold of $157,500 so all we care about is QBI. You have QBI from your 100% owned S Corporation of $100,000. Your deduction is 20% of $100,000 or $20,000. It doesn't matter whether you are a Specified Service Trade or Business or not. Any Specified Service Business or Qualified Trade or Business qualifies for this.

Dealing with Threshold Limitations and Exceptions

Now, we move to taxpayers with taxable income in excess of the above Threshold Amounts ($157,500 or $315,000), where the deduction is subject to phase-in rules. So, now we need to take into consideration the Specified Service Trade or Business as well as the Wage (Capital) Limit.

Unfortunately, the limitation on the 20% deduction is computed differently for businesses that are Specified Service Trade or Business and all other Qualified Businesses.

I am going to begin with Specified Service Trade or Businesses. In computing the qualified business income, the taxpayer takes into account only the applicable percentage of qualified income, gain, deduction, or loss, and of allocable W-2 wages. The applicable percentage with respect to any taxable year is 100%, reduced by the percentage equal to the ratio of: (the excess of the taxable income of the taxpayer over the threshold amount) to $50,000 ($100,000 with a joint return). What the heck does that all mean?

Let's look at an example to make this clearer, but I am only going to use the 50% Wage Limit and not the 25% wage plus 2.5% of capital to try to simplify it.

Example: Specified Service Trade or Business

A single taxpayer owns 100% of an S Corporation and has taxable income of $182,500 — of which $150,000 of this is QBI due to providing services in the field of health after paying wages of $100,000 to employees and herself. She has an "applicable percentage" of 1 - ($182,500-$157,500) / $50,000, which is equal to 50%.

Then, 50% is applied to the QBI of $150,000, or $75,000. Then, we have to determine the includible wages, which is 50% of $100,000, or $50,000. The deduction is then the lesser of 20% of $75,000 ($15,000) or 20% of $50,000 ($10,000), which leaves the deduction for the single taxpayer who is over the threshold amount at $10,000.

What if the taxable income is $207,500? With the same factors above, the deduction would be "applicable percentage" of 1 - ($207,500-157,500) / $50,000, which equals 0, which means that there is $0 deduction. For Specified Service Trade or Business income, the deduction can be totally eliminated.

This total elimination, however, does not apply to Other Qualified Businesses.

Let's move to Other Qualified Businesses. If the taxable income exceeds the threshold amount, the Wage (Capital) limitation applies. If the maximum threshold is met, the Wage (Capital) limit applies fully.

The tentative deductible amount for these other businesses is equal to the lesser of 20% of the qualified business income with respect to such trade or business or the greater of (a) 50% of the W-2 wages with respect to that business, or (b) 25% of the W-2 wages plus 2.5% of the unadjusted basis of all qualified property (the Wage (Capital) Limit). The one big difference with this computation is that there is not a "1 minus a percentage" as in the computation for Specified Service Businesses.

Again, what does this mean?

Another example, and again I am only going to use the 50% Wage Limit and not the 25% wage plus 2.5% of capital to try to simplify it. This example is complicated.

Example: Other Qualified Business

Same facts as above, except I am changing wages to $50,000 to show the full effect of the wage limitation. The Qualified Business manufactures widgets.

(a) is 20% of QBI of $150,000, or $30,000.

(b) Is 50% of W-2 wages of $50,000, or $25,000.

Since (b) is less than (a), the application of the wage limit applies.

The wage limit computation is as follows: ($182,500-$157,500) / over $50,000, which equals 50%.

(a) Above of $30,000 is reduced 50% of the difference between (a) and (b) = $30,000-$25,000 x 50%, which equals $2,500.

Therefore, the taxpayer's deductible amount is $30,000-$2,500 = $27,500.

What if the taxable income is $207,500? With the same factors above, the wage limit computation is as follows: ($207,500-$157,500) / $50,000 equals 100%.

(a) Above of $30,000 is reduced by 100% of the difference between (a) and (b), which equals 5,000 x 100%, or $5,000.

Therefore, the taxpayer’s deductible amount is $30,000-$5,000 = $25,000, which is equal to the 50% of wages limitation.

If all of those figures and equations have your head swimming, don’t panic. That’s what your tax professional is for; to help walk you through all of this. If you haven’t already reached out to him or her for a conversation on the impact of tax reform on your business, I suggest you do so right away.

Also keep in mind there are a number of other issues related to this whole pass-through business benefit. We shall see what comes out of the additional guidance by the IRS and the Treasury, which will allow us to really explore the opportunities and plan accordingly.

One question that has surfaced is whether a pass-through business should just convert to a C Corporation and get the benefit of the 21% tax bracket on all of the C Corporation taxable income.

I will tell you right now that there is no one size that fits all, and care should be taken and due diligence done to understand all of the issues associated with being a C Corporation as it relates directly to the business activity as well as to the owners instead of just blindly converting.

This is all going to be such fun, don't you think?

David Baymiller, CPA contributed this blog. A partner in GJM’s Tax Department, Dave has over 35 years of public accounting experience with an emphasis on tax planning and consulting. Dave recently joined other GJM experts to present an education session on the Tax Cuts and Jobs Act. The event offered information on key changes for individuals and businesses as a result of the new law.

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.