July, 2016 | RKL LLP
Posted on: July 26th, 2016

Computers Now Covered and Refunds Permitted: How the PATH Act Changed 529 Plans

Computers now covered and refunds permitted: get the latest on changes to use of 529 plansAs students head back to campus for a new semester, another expense can now be covered by their 529 college savings plans: a computer and related software and equipment. This is one of several changes to the use of 529 plans that was passed as part of the large, omnibus tax legislation, known as the PATH Act, that was signed into law in December 2015.

The PATH Act extended or made permanent a wide range of business and individual tax credits, deductions and incentives. The 529 changes may have received less attention than other components of the bill, but they are equally as important to students and families working hard to save and pay for college tuition and related costs.

Computers now considered qualified higher education expense

Distributions from a 529 plan are tax-free when used to pay for qualified higher education expenses, such as tuition, room and board, fees, books and special needs services. Computers were not considered part of this category, unless it was a requirement by the school. The PATH Act permanently categorized computers, related equipment, software and internet access as qualified higher education expenses.

Provided the computer and software is used primarily by a student currently enrolled in an eligible educational institution, it may be paid for with a distribution from a 529 plan. Computer games or software unrelated to education do not qualify.

Contributions of refunds permitted within 60 days

The PATH Act also made it easier for refunds to be added back into a 529 account without tax consequence. There are various reasons a college or university would refund tuition or other expenses, such as illness forcing a withdraw early in a semester. In these cases, the refunded amount may be recontributed to the 529 account within 60 days after the refund date. Otherwise, the original distribution may be retroactively considered a nonqualified withdrawal by the IRS that is subject to income taxes and a 10 percent penalty.

It is important to note that the amount recontributed must equal the amount of the refund. Another best practice is to retain documentation supporting the refund and the recontribution in case of scrutiny. Specific 529 plans may have slight differences in the application of this policy, so be sure to check with your plan provider and your tax advisor for guidance.

These changes are the latest enhancements to the popular 529 college savings vehicles. Contact your RKL tax professional or RKL Wealth Management financial advisor with any questions or for more information.

Amy L. Strouse, CPA, RKLContributed by Amy L. Strouse, CPA, a manager in RKL’s Tax Services Group. Her responsibilities include individual taxation and tax planning, as well as not-for-profit compliance.

 

 

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Posted on: July 21st, 2016

Lancaster-based IT Consulting Firm Climbs Top 100 VAR List

RKL eSolutions, the IT consulting subsidiary of RKLPRESS RELEASE

LANCASTER, PA (July 21, 2016) – A familiar local name in IT consulting with a growing coast-to-coast footprint is climbing the ranks of the top value-added resellers (VARs). RKL eSolutions, a subsidiary of Reinsel Kuntz Lesher LLP (RKL), Certified Public Accountants and Consultants, ranked 39th on Accounting Today’s “2016 VAR 100,” up seven spots from its 2015 ranking.

“We’re proud that RKL eSolutions continues its rise among leading VARs, thanks to its focus on client service excellence and innovation,” RKL CEO Edward W. Monborne said. “Just as RKL’s CPAs have evolved into trusted business advisors for our clients, the RKL eSolutions team has developed into strategic partners that help clients comprehensively tackle IT challenges.”

“RKL eSolutions’ growth and success is a direct result of our team’s high level of technical skill, focus on implementation and commitment to making systems more beneficial for our clients,” said RKL eSolutions President Joe Noll. “Our rise in this annual Accounting Today ranking confirms that we are delivering significant and positive results for our clients nationwide and around the world.”

Accounting Today’s annual VAR 100 list is an exclusive ranking of the top value-added resellers of accounting and accounting-related software by revenue generated during the previous year. This year’s survey took special note of the strategies firms use to respond to the technology challenges faced by clients and the increasing demand for mobility and systems integration.

Named 2015’s Business Partner of the Year by Sage North America, RKL eSolutions offers customized IT services to businesses in a wide variety of industries. The Lancaster, Pennsylvania-based company has experienced significant coast-to-coast growth over the past year through strategic acquisitions and client growth in New England and the San Francisco Bay Area.

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Posted on: July 19th, 2016

The Tax Impact of Pennsylvania’s 2016-17 Budget

RKL Tax Impact of PA 2016-17 Budget Pennsylvania passed a $31.5 billion budget on July 14, 2016; although not on time, the delay was nowhere near the magnitude of last year’s nearly nine-month budget impasse. The budget for Fiscal Year 2016-17 increased spending in several areas including public schools, early childhood education and special education.

Transaction-based taxes a major focus

When Governor Wolf presented his budget proposal earlier this year, he included several broad-based tax initiatives. None of these proposals made it into the final budget. Instead, the increased spending will be funded primarily by the following transaction-based taxes and tax increases:

  • $1 per pack increase on the sale of a pack of cigarettes (effective August 1, 2016)
  • $0.55 per ounce tax at the wholesale level on roll your own and smokeless tobacco
  • Wholesale tax of 40% of the wholesale price of e-cigarettes and other vaping devices
  • Expansion of the sales and use tax to include digital downloads of media including books, music, games, movies, satellite radio services and streaming services such as Netflix and Hulu (effective August 1, 2016)

Although this budget emphasizes tobacco type taxes, cigars are still not subject to tax in Pennsylvania. Another interesting point on taxing tobacco products so heavily is that this could have a negative impact on revenue. Faced with higher taxes, tobacco users may choose the healthier option to quit using the products or look to purchase these products outside of Pennsylvania.

Sales and use tax changes

Pennsylvania’s new budget also provides some limited exemptions to sales and use taxes such as exemptions for timbering, an exemption for convention center maintenance and an exclusion for corrugated boxes used for delivering products.

One seldom discussed but financially significant change to Pennsylvania’s sales and use tax is the new limitation on vendor discounts for sales and use tax filers. Prior to this budget, Pennsylvania provided an unlimited vendor discount for timely filers equal to 1% of the taxes collected. Starting with this budget, the discount is now limited to the lesser of 1% of the tax collected or $25 per monthly return filers, $75 per return for quarterly filers or $150 per return for semi-annual filers. This new cap on the vendor discount will be greatly felt by large retailers, but Pennsylvania was only one of 13 states that still provided an unlimited vendor discount.

In addition to the transaction-based taxes, Pennsylvania will now impose its 3.07% personal income tax rate on lottery winnings – making California the only remaining state that does not impose its personal income tax on lottery winnings. The new budget also increases the bank shares tax rate from 0.89% to 0.95% and increases taxes on revenue from slot operators who have table games.

Tax Amnesty Program on the horizon

A final piece to this year’s budget puzzle is not a new tax, but rather the opportunity for delinquent or non-filers to become compliant with Pennsylvania tax filings through a Tax Amnesty Program. The Tax Amnesty Program will run over 60 days and will allow taxpayers to file and pay tax liabilities with no penalty and only 50% interest imposed on the liability.

As with all developments in the state capitol, RKL’s state and local tax team will continue to monitor the implementation of the tax changes and initiatives contained in this year’s budget. Readers with questions about Pennsylvania’s new budget, possible additional revenue streams under consideration or the budgetary impact on a specific tax credit program should contact me at jskrinak@rklcpa.com.

 

Jason C. Skrinak, CPAContributed by Jason C. Skrinak, CPA, State and Local Taxes (SALT) Practice Leader for RKL’s Tax Services Group. Highly regarded throughout the region for his deep knowledge and expertise in SALT consulting, Jason has significant experience representing taxpayers before Pennsylvania’s Board of Appeals and Board of Finance and Revenue.

 

 

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Posted on: July 12th, 2016

How to Save for College and Save on Taxes

How to Save for College and Save on Taxes The numbers don’t lie: Higher education is expensive, and the cost keeps rising. FinAid.org predicts that the price of college will increase around eight percent each year, which means that the cost of tuition doubles every nine years.

In the face of such daunting financial figures, it’s no surprise that families and students are going into debt to finance higher education. Our financial planning experts recently outlined several factors to consider before taking out student loans. There is one surefire way to minimize the amount of loans needed to fund higher education: save ahead of time for this considerable expense.

Not only does saving now help ease the cost of college down the road, it also allows savers to reap federal, and in some cases even state, tax benefits in the meantime. Of course, all savings vehicles are not created equal, so it’s important to find the one that best aligns with your unique financial situation. Below, we highlight several of the more popular college savings tools and examine how they help families achieve their savings goals.

529 College Savings Plans

With a name derived from the governing section of the IRS code, it is no surprise that 529 plans offer savers a wide range of tax benefits when funds are used for qualified higher education expenses. Typically sponsored by a state government or individual school, 529 plans come in two varieties: the college savings plan or prepaid tuition plans. In a 529 college savings plan, money is set aside for college in an individual investment account similar to a 401(k) plan for retirement. 529 prepaid tuition plans operate very differently, allowing savers to lock in today’s price for tuition credits for future use.

Both varieties of 529 plans offer significant tax benefits and easy-to-use features, such as:

  • State and federal tax-free growth and distributions when used for qualified higher education expenses, such as tuition, room and board, books, etc.
  • State tax deduction for contributions (availability may vary by jurisdiction).
  • High annual and lifetime contribution limits.
  • Flexibility to change beneficiaries or roll over account to another 529 plan.
  • Account owner retains control of funds indefinitely; funds are never transferred directly to beneficiary.
  • Gift and estate tax benefits up to $70,000 ($140,000 for married couples).
  • Wide use of funds at most colleges and trade schools.
  • Account is treated as parent/account owner’s asset with less impact on financial aid calculations.

Coverdell Education Savings Account (ESA)

The primary difference between a Coverdell account, formerly known as the Education IRA, and a 529 plan is that funds saved in a Coverdell account may be used for K-12 education expenses, in addition to post-secondary education. Coverdell ESAs are offered by financial institutions, not schools or state governments. Significant features of a Coverdell ESA include:

  • State and federal tax-free growth and distributions when used for qualified college or K-12 expenses.
  • Annual combined contribution limit of $2,000 a year per beneficiary.
  • Rollovers permitted into another qualified Coverdell ESA.
  • Unused funds must be distributed to the beneficiary by age 30 (except for beneficiary with special needs).
  • Eligibility to open account limited to individuals with adjusted gross income of $110,000 or less ($220,000 for married filing jointly).
  • Account is treated as parent/account owner’s asset with less impact on financial aid calculations.

Custodial account (UGMA/UTMA)

Custodial accounts are the original vehicle to set aside money for children under the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). Unlike the more recent 529 plans or Coverdell ESAs, custodial accounts offer less tax benefits and less control over how the assets are used. Here is how custodial accounts work:

  • Contributions are not tax-deductible, earnings are subject to federal income or capital gains tax and account balance may trigger “kiddie tax” rules.
  • There may be fees associated with opening and funding an account.
  • No contribution limits, but federal gift tax will be incurred at current levels.
  • Assets may be used for any expense that benefits the child, education-related or not.
  • Once the beneficiary turns 18, he or she takes full control of the account assets.
  • Beneficiaries cannot be changed and accounts may not be rolled over.
  • Account is treated as the child’s asset and weighs heavily in financial aid calculations.

College Savings Vehicle Comparison

SavingForCollege.com offers a helpful tool that allows savers to compare and contrast different savings vehicles according to criteria important to them.

Every dollar saved today is one less that students may have to borrow down the road, so saving for college can be an important component of a family’s financial game plan. In order to maximize the tax benefits, however, it is important that students and families consider the implications of certain savings vehicles or accounts. Your RKL tax professional or RKL Wealth Management financial advisor can help you plot a tax-advantaged course to achieve your college savings goals.

Amy L. Strouse, CPA, RKLContributed by Amy L. Strouse, CPA, a manager in RKL’s Tax Services Group. Her responsibilities include individual taxation and tax planning, as well as not-for-profit compliance.

 

 

 

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Posted on: July 5th, 2016

RKL Welcomes Two New Partners to Firm Leadership Team

Jill E. Gilbert, CPA, CGMA, Partner in RKL's Audit Services Group

Jill E. Gilbert, CPA, CGMA

PRESS RELEASE

LANCASTER, PA (July 5, 2016) – Reinsel Kuntz Lesher LLP (RKL), Certified Public Accountants and Consultants, today announced that Jill E. Gilbert, CPA, CGMA, and Douglas L. Smith, CPA, CVA, have been admitted as partners in the firm.

“We’re proud to welcome Jill and Doug to the firm,” RKL CEO Edward W. Monborne said. “Our firm’s greatest asset is our people, so adding two leaders with long track records of professional excellence and community engagement is a clear benefit to RKL and our valued clients throughout the region.”

Douglas L. Smith, CPA, CVA, Partner in RKL's Tax Services Group

Douglas L. Smith, CPA, CVA

“I’m excited about the opportunity to join such a dynamic and highly respected team of professionals,” Gilbert said. “RKL’s client focus, entrepreneurial culture and commitment to quality really resonated with me.”

“RKL’s reputation for expertise and specialization is unsurpassed in Lancaster County and throughout the region,” Smith said. “I look forward to helping my clients attain even greater success through access to the firm’s wide range of resources and capabilities.”

The addition of Gilbert and Smith as partners is the latest chapter in RKL’s growth and evolution. Strengthened by deep roots in Central and Eastern Pennsylvania, RKL continues to innovatively respond to client needs with specialized expertise and unmatched skill level. Whether it is the coast-to-coast growth of its IT subsidiary or the development of cutting edge service lines, RKL remains focused on igniting growth and creating new opportunities for its clients.   

Jill E. Gilbert joins RKL as a partner in the firm’s Audit Services Group. Gilbert comes to RKL from a regional CPA firm and boasts 20 years of public accounting experience. She specializes in providing auditing services to local governments, employee benefit plans and not-for-profit organizations.

Gilbert is a member of both the Pennsylvania Institute of Certified Public Accountants (PICPA) and the American Institute of Certified Public Accountants (AICPA), and she was accredited as a Chartered Global Management Accountant in 2014. Gilbert is treasurer of Willow Valley Retirement Communities. She earned her bachelor of science degree in business administration from Elizabethtown College and resides in Elizabethtown with her husband and two children.

Douglas L. Smith joins RKL as a partner in the firm’s Tax Services Group. Smith comes to RKL from a regional CPA firm with more than 30 years of public accounting experience. He specializes in serving the consulting and tax needs of clients in the healthcare, professional services, construction and manufacturing sectors, particularly with regard to estate planning, business valuation and mergers and acquisitions.

A member of both the PICPA and AICPA, Smith is also accredited by the National Association of Certified Valuation Analysts and sits on the Lancaster County Estate Planning Council. Smith has long been an active member of several community benefit organizations, most recently as a member of the Board of Trustees of The Heart Group of Lancaster General Health (LGH) and a member of LGH’s Mission and Community Benefit Committee. He resides in East Hempfield Township with his wife and has four children.

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