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A recent study by T. Rowe Price showed over half of parents worry they spoil their kids and 71 percent are reluctant to talk to their kids about money.

Are you teaching your kids what they need to know about money? Or are you spoiling them? GJM Tax Partner and CPA Charlie Heid offered up some advice for parents on Fox Toledo News. Here are some key points on what your child should know by the time they reach 18 years old.

1. How to Save for a Goal

Idea: try a savings bank for preschoolers. They can learn to save to buy a toy. Tip: attach a picture of the toy to the bank. Elementary/middle school: open a savings account, aim for a bigger goal, you can offer to match their savings. High school: make college savings the goal.

2. They can’t have everything they want

If you buy them everything they want, they’ll feel entitled. Tell them why you’re saying no, offer an alternative.

3. How to Earn Money

Valuable lessons can come from that summer job: responsibility, getting along with coworkers, being on time. Their own paycheck means an opportunity to manage their own money and understand that tax withholding even applies to teenagers. They can contribute to a Roth IRA and even get an early start on retirement savings.

4. How Fast Money Grows

Teach them the concept of compounding interest using something called the rule of 72: 72 divided by the interest rate equals the number of years it will take for your money to double. MoneyChimp.com compounding calculator can do it too

5. How to Stay Out of Debt

Teach your child that using a credit card is taking out a loan you will have to repay with interest (unless it is paid off monthly). There are differing opinions on whether it’s helpful to have your teens become authorized users of your credit card. One school of thought: let them learn about covering their expenses with a college checking account before starting a line of credit after they turn 21 and can do it themselves. Source: Kiplinger.com.

Charlie Heid is a tax partner with Gilmore Jasion Mahler specializing in Tax. Learn more about Charlie's expertise.                 

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.

Q: Why did you decide to become a CPA?  I started out at Ohio State in the College of Agriculture majoring in Agricultural Economics (an area that was recommended to get into Veterinary School at the time).  I liked the agriculture and accounting classes I took, but hated the chemistry classes required for vet school.   I was advised that majoring in accounting would be a good background for any career in business, so that is the path I took.

Q: What do you think is most gratifying about your work?  Being a trusted advisor to my clients relating to business and tax issues.  The strong personal relationships I’ve developed with clients and their entire family is also very gratifying.

 Q: How long have you been with the Firm?  16+ Years

Q: What do you like best about working at GJM?  I know it sounds cliché, but it is the people.  We have a great management group that brings very complementary strengths to the organization.  We try to make it a fun atmosphere for people to work, but also know how to get work done in a very deadline driven business.  We are also hiring the best and brightest out of the local colleges – and it is exciting to see their technology skills (which are far superior to mine) and the renewed energy they bring to Gilmore Jasion Mahler, LTD.  It helps keep me young (at heart).  

Q: What community organizations or events are you involved in? I have been the past president of both The Ohio State Alumni Club of Lucas County and The Rotary Club of Waterville.  I have been the Treasurer for The City of Waterville (appointed by City Council) since 2004 and am a board member for The Waterville Community Foundation.  I am involved with the Waterville organizations as my wife and I have lived in Waterville for the past 22 years and it is a fantastic community. I am currently on the board at The Victory Center, an organization that supports the emotional needs of both people fighting cancer and their families.  I am involved with this board because my wife is a breast cancer survivor, and many people in the GJM office are also cancer survivors.

Q: How do you like to spend your spare time? My wife and I are big Detroit Tigers fans and go to about 25 games a year at Comerica Park in Detroit.  I am also a member at Rockwell Springs Trout Club near Castalia, Ohio and enjoy fly fishing there (and taking clients for a unique experience - as most have never gone fly fishing).  I also enjoy downhill and cross country skiing.

Q: Any stories or anecdotes that you think help to convey “who you are?”  “Don’t Sweat the Small Stuff!”  “Attitude is Everything!”  “Optimism is Moral Courage!”

Q: What is something people may be surprised to find out about you?  I went to school for a summer in Oxford, England,  I rode my bike from Toledo to the Montreal Olympics and back in 1976, and I have climbed Mount Rainier in Washington with a guided climbing team.

Steve works with a variety of clients including those in manufacturing and healthcare. Learn more about Steve’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.