Category Archives: Credit

Maine Educational Opportunity Tax Credit. Are you receiving it?

The Maine Educational Opportunity Tax Credit seemingly, silently began in 2008. I say silently because many people still don’t know about it. The program provides a Maine income tax credit for Maine residents who received an associate’s or bachelor’s degree from an accredited Maine college. You must be working in Maine and repaying student loans. In 2016, the credit expanded to include an associate’s or bachelor’s degree from a non-Maine college. It also now includes graduate degrees obtained from a Maine college after 2015. If your degree is in science, technology, engineering or mathematics (referred to as a “STEM”degree) the credit is refundable. For other degrees, the credit can reduce your tax to zero and any unused portion will carry forward for up to ten years.

In its’ simplest form, the credit works like this:

Maine resident student started college in 2008, received a bachelor’s degree in 2012 from a Maine college and begins paying student loans January of 2013. The individual makes 12 equal loan payments of $342. This amount is coincidently the “benchmark amount” which is the maximum the state allows for the credit. This individual’s credit would be $4,116 (12 x 342). If they obtained a STEM degree this credit would be refundable, meaning if their Maine income tax was zero, they would receive a refund of $4,116. If they did not obtain a STEM degree, still assuming the Maine income tax was zero, the $4,116 would apply to a future Maine income tax liability. Either way this can be a powerful credit.

However, as with any tax credit, it isn’t that simple. The student could have started college before 2008, transferred to a college outside of Maine for a period of time, worked outside of Maine for a period of time, made unequal or sporadic loan payments, all which alter the calculation, perhaps drastically. Let Perry, Fitts, Boulette & Fitton CPAs help you sort out the complexities and variations of the credit to ensure you get the maximum benefit.

About the Author: Lynn Stover  is an integral part of the PFBF CPAs tax team and a valued senior tax specialist. She operates primarily from the mid-coast Bath location, meeting with clients for tax planning and preparation. You can contact her at lynn@pfbf.com or 207-371-8003.

 

Protecting Americans from Tax Hikes Act 2015 – Its effect on the Timber and Wood Products Industries.

Kudos to congress for passing legislation and protecting the timber industry from a bevy of tax increases.  Importantly, the Act extends, and in some cases makes permanent, many provisions that will allow businesses more tax savings opportunities.

The PATH act, signed by the President on December 18, makes tax planning considerably easier and grants a few new tax breaks that will greatly enhance industry write-offs.

Paul Ryan R-Wis suggests “…we are ending Washington’s days of extending tax policies one year at a time.”  Let’s hope Mr. Ryan’s words are true.

EXTENDERS IMPACTING THE TIMBER HARVESTING & WOOD PRODUCTS INDUSTRIES

Code Sec. 179: Expensing

The Act makes permanent an annual expensing limit of $500,000 with an overall investment limit of $2,000,000 (both amounts are now indexed for inflation).  The new law also adds increased expensing of qualified leasehold improvement property.

Bonus Depreciation

The Act extends Bonus Depreciation for all new equipment placed in service through 2019.  The percentage of allowed bonus is reduced from 50% through 2017 to 40% in 2018 and 30% in 2019.  After 2015, Bonus Depreciation will include qualified improvement property without regard to whether the property is subject to a lease or if it is placed in service more than 3 years after the date that the building was first placed in service.  Also, the Act included language that eliminates AMT adjustments for assets that are elected out of Bonus Depreciation placed in service after 2015.

Combined with the enhanced repair regulations, the above expensing provisions will significantly increase tax savings for our Timber Harvesting and Wood Products clients.

Timber Gains

C corporations are subject to a reduced tax rate of 23.8% for qualified timber gains.  Qualified timber gains means net gain described in Code Sec. 631(a&b) for the year, taking into account only trees held more than 15 years.

Research Credit is permanently extended, and for eligible small businesses the credit may be claimed against alternative minimum tax.  Qualified small business may even claim the credit against FICA tax liabilities.

S-Corp recognition period for Built-In Gains Tax is permanently extended.  The recognition period is now 5 years.

Work Opportunity Tax Credit Extended and Expanded.

The WOTC allows employers who hire targeted individuals to receive a credit against income tax for the first year wages, up to $6,000 per employee.  The credit also applies to employers who hire qualified long-term unemployed individuals (40% of the first $6,000 of wages).  The Act extends the WOTC so that it applies to eligible veterans and non-veterans who begin work by Dec. 31, 2019.  In light of recent mill closures, we might expect to see more people eligible for the WOTC.

If you have questions about how these changes will impact your business, please do not hesitate to call us at, 207-873-1603.

Don’t be the Victim of Identity Theft…

Today’s technology is amazing!  We have the ability to pay bills online, make deposits, shop, and share pictures and information with friends and family anywhere in the world.

Unfortunately, it has also provided the same benefits to identity thieves who use someone else’s personal financial information to access bank accounts and obtain credit, often destroying the life savings and good credit history of innocent victims.

Identity theft has increased so dramatically that the Federal Trade Commission has listed it as the top fraud-related consumer complaint for the past five years, with consumers reporting millions of dollars lost to fraud.

The “Summit”, is a group that includes IRS, state tax authorities, and tax industry firms that work in a collaborative effort to protect taxpayers from identity theft tax fraud.  They have put new procedures into place that will take effect during the upcoming 2016 tax filing season.

Software providers will enhance identity requirements and strengthen validation procedures for new and returning customers to protect against account takeover by criminals.  These will include: a) new password standards to access tax software that will require a minimum of eight characters with upper case, lower case, alpha, numerical and special characters; b) new timed lockout feature and limited unsuccessful log-in attempts; c) the addition of three security questions; and d) “out-of-band” verification for email addresses, which is sending an email or text to the customer with a PIN.  These enhancements will be the most visible to taxpayers in 2016.

MAINE CREDIT FREEZE FACT SHEET

You now have added free protection under the law to prevent identity theft by placing a credit freeze for free on your credit report with the three major credit reporting agencies.

Attorney General Janet Mills strongly encourages all consumers to take advantage of this benefit, which went into effect on October 15, 2015.  A credit freeze will prevent unauthorized parties from accessing your credit report unless you give them specific permission.  A current lender can access your report information for the purposes of account maintenance, monitoring credit line increases and account upgrades and enhancements.

Locking down your credit will not impact your credit score.

You can place a freeze with the three credit reporting agencies via their website, telephone or by letter.  Telephone calls and website requests are the quickest way to file the freeze.  It takes approximately 5-10 minutes per agency to place a freeze this way.  You will be asked to provide personal information, such as your social security number (SSN), date of birth, partial address, and zip code.

To request the freeze in writing, you will need to provide a letter with the information mentioned  in the previous paragraph, your full name, signature, current street address, any addresses where you have lived during the past two years, a copy of an official photo government ID, and a copy of a recent utility bill.

Equifax: 1-800-349-9960; https://www.freeze.equifax.com ;  Equifax Security Freeze, P.O. Box 105788, Atlanta, GA  30348

Experian; 1-888-397-3742; www.experian.com/freeze/center.html; PO Box 4500, Allen, TX  75013

Transunion: 1-888-9090-8872; www.transunion.com/securityfreeze; PO Box 2000, Chester, PA  19022

In all cases, the credit reporting agency will follow up with you in writing, confirming placement of the file freeze and providing you with a personal identification number or PIN.  A PIN is used to temporarily unfreeze your credit file for a specific period of time or for a specific creditor, or to permanently unfreeze your credit file.

Consider placing freezes on the accounts of your children too.  If their SSN gets in the wrong hands, someone could attempt to open credit in their name.  If successful, they become the victims of identity theft.  You can also place a freeze on a minors file; however, a credit reporting agency can charge $10 to create a file if one does not already exist.  The freeze can be placed for free.  Currently, Equifax is creating files for free.

A credit freeze cannot protect you from fraudulent credit or debit charges.  Regularly review your statements from credit card companies and your health care providers to catch any errant charges and dispute them promptly.

If you should have any questions, contact the Attorney General’s Consumer Information & Mediation Service at 1-800-436-2131 or consumer.mediation@maine.gov

If you believe that you have become a victim of identity theft, you must act immediately to minimize the damage and secure your legal rights.  It can be a frustrating and time consuming battle, but resources exist to help you.  You can find all the detailed steps to take on the following website : www.maine.gov/ag/privacy/index.shtml