November 29, 2012
We are in the time of year for “Seasons”:
THANKSGIVING – When we express Gratitude for our Clients; their Loyalty and Referrals
RELIGIOUS HOLIDAYS – When we wish everyone and their families “Happy Holidays”,”Merry Christmas” and extend our wishes for Peace and Joy
NEW YEARS – When we wish everyone a Happy New Year filled with Success and Happiness
TAX SEASON – This one isn’t as fun as the above, but a necessary part of life in America. The following is an update on how we can try and make this easier for everyone, some tips to reduce your tax liability and update you on the changes for the 2012 income taxes and possible coming changes for 2013.
First – the tax provisions that expired at the end of 2011 and are no longer available for this tax year:
- Deduction of expenses for school teachers
- Tuition and fees deduction
- Deduction for state and local sales tax – no deduction of the sales tax for new vehicles
- Credit for non-business energy property
Next – the tax provisions set to expire on December 31, 2012 (pending Congressional action):
- The “Bush Tax Cuts” which include
- Lower tax rates on ordinary income, capital gains and qualified dividends
- No phase-out for itemized deductions and exemptions
- Marriage penalty relief (tax brackets, standard deduction)
- Increases to the following benefits – child tax credit, dependent care credit, earned income credit, American opportunity credit, and adoption credit.
- The 2% payroll tax cut for employees
WHAT’S NEW- 2013 This is part of the Health Care law and is not part of the Income Tax negotiations going on in Washington DC now:
A new .9% tax on earned income and a 3.8% tax on investment income for those with income of at least $200,000(single)/$250,000(married).
WHAT TO DO
While we don’t know yet what the final 2013 tax rates will be, it may make sense to accelerate income/deductions into the 2012 tax year to take advantage of lower rates now. These may include:
. Selling stocks or other assets that have a taxable gain
Taking qualified IRA distributions this year rather than next year, if you are 59 1/2 (some exceptions apply to this age qualification)
- Accelerating medical deductions into 2012 if you are under age 65. The threshold increases from 7.5% to 10% of AGI for those under age 65 in 2013.
- If you own a traditional IRA or SEP IRA, convert it to a Roth IRA, and recognize the conversion income this year.
- Consider delaying some deductible expenditures until 2013 to lower your taxable income, such as, paying for property taxes in 2013, or delaying sizable, out of pocket medical procedures until 2013 (if you won’t make the 2012 threshold anyway.
OTHER TAX SAVING TIPS
If you expect to owe taxes this year and you receive a paycheck, increase your Federal withholding for the rest of the year rather that make an estimated tax payment – this will reduce the chance of an underpayment penalty.
State Tax Credits- The credits for Arizona are still in effect for 2012 and a new one has been added:
- Working Poor Credit -$250 (single) $400 (married)
- Public School Credit – $250 (single) $400 (married)
- School Tuition Credit – $503 (single) $1,006 (married) – NOTE slight increase
- For 2012, an individual may claim an additional credit for making a donation to a School Tuition Organization if the amount contributed is greater than the maximum amount that can be claimed for the original STO credit. The additional maximum is $500 (single) and $1,000 (married).
As with all charitable contributions, you must have a receipt from the organization documenting the donation – the amount, date, and statement that you received no tangible benefit from the gift. The IRS is much more stringent in requiring these documents and we will ask for them during our tax interview.
This is not intended to be an all inclusive review, but to give you food for thoughton your individual tax situations and to encourage you to call or email us ifyou have questions regarding your situation before the year ends.
See you all soon
Schutte & Hilgendorf, PLLC
Schutte & Hilgendorf wishes you a Happy Holiday Season! Some things to consider as the 2011 TAX YEAR comes to an end:
FEDERAL – There are no major tax changes for this year – most of the “Bush tax breaks” were extended at the end of 2010 to run through 2012. However, there are a couple of items that may affect some of you that are expiring at the end of 2011 and will not be available in 2012:
The option to deduct state sales taxes in lieu of income taxes.
The opportunity for those age 70 1/2 and older to transfer up to $100,000 tax free from their IRAs to a public charity.
The non-business energy credit for qualified energy efficiency improvements and residential energy property expenditures. If you are considering window, furnace, or insulation replacement, 2011 is the last year to be able to obtain a tax credit for these items.
OTHER TAX RELATED ISSUES TO KEEP IN MIND BEFORE THE YEAR ENDS:
If you use a personal vehicle for business purposes you must have a mileage log to document the deductible business use.
If you have a business “home office” there are certain deductions you can use as business expenses. There are limitations and the space you use must be used exclusively for the purpose of the business office.
ARIZONA – Arizona still has three tax credits available for 2011:
• Public School credit – $400 Married; $200 Single
• Working Poor Credit – $400 Married; $200 Single
• School Tuition Foundations – $1,000 Married; $500 Single – this credit can be made up to April 15, 2012 for credit on the 2011 return.
For those of you who file a Schedule C business reporting and you have employees, the minimum wage has been raised to $7.65 beginning January 1, 2012.
If you have any questions regarding these items or other individual tax concerns, please contact us to do a quick review or clarification. We post current and updated information on our website www.prescottaccountants.com. We encourage you to check our site often.
As in prior years, we will be sending out your tax “Organizer” with your prior year tax information on it and in the upper right hand corner will be a pre-set appointment time (if you had an appointment last year). Please notify us with any scheduling conflicts.
Thanks for your time in reviewing this, have a Happy Holiday Season.
This tip brought to you by Schutte & Hilgendorf CPA’s, a Prescott firm serving the greater Yavapai County, providing audit, accounting, bookkeeping, tax preparation and planning, QuickBooks accounting and setup to individuals and small businesses.
Contact us for a free initial consultation 928-778-0079
MILTARY FAMILY RELIEF FUND TAX CREDIT
There is an Arizona Tax Credit available for military members and their families that is not widely known. The Arizona Department of Veteran’s Services administers the Military Family Relief Fund. The fund helps service members and their families faced with unforeseen expenses when a loved one becomes a casualty of war. Your donations of $200.00 for single taxpayer and $400.00 for married filing jointly to the fund may qualify for this income tax credit.
This credit is available for tax years 2011 and 2012. Donations will qualify if the total amount donated to the fund during the calendar year has not exceeded 1 (one) million dollars state wide. Qualifying credit will be determined on a first come basis. Information available indicated only about $200,000 has been received by the Fund so far in 2011.
This is a credit similar to the Working Poor and Public School credit which directly reduces your tax liability to the State of Arizona. This credit is available only to individuals. Corporations and other business entities may not claim this credit.
You must receive a receipt from the Arizona Department of Veterans’ Services to verify your donation qualifies for the credit.
Click here to get the form to mail in with your check.
This tip brought to you by Schutte & Hilgendorf, CPA’s, a Prescott firm serving the greater Yavapai County, providing audit, accounting,bookkeeping,tax preparation and planning, Quickbooks accounting and setup to individuals and small businesses.
Contact us for a free initial consultation at 928-778-0079
Private School Tuition Credit
AZ Tax Credit-Qualifying School Tuition Organizations
Frequently Asked Questions (from the AZ DOR Website:
What do I have to do to qualify for this credit?
To qualify for this credit, you must make cash or payroll
withholding contributions to a school tuition
organization that provides scholarships or grants to
What is the maximum dollar amount of the credit?
The credit is limited to the actual amount of the
contribution. However, in 2011 the credit cannot exceed
$500 for single or head of household taxpayers. For
married taxpayers that file a joint return, the 2011 credit
cannot exceed $1,000. If married taxpayers file separate
returns, each spouse may claim only 1/2 of the credit that
would have been allowed on the joint return. Please Note:
Starting in 2011, the maximum credit amounts will be
annually adjusted (although never downward) in
accordance with changes in the metro Phoenix consumer
Must the private school tuition tax credit be claimed
in the year of donation?
No. Beginning in 2011, a contribution made by April 15
may be treated for purposes of this tax credit as if it was
made on December 31 of the prior year. For example, a
contribution made to a school tuition organization from
January 1, 2011 to April 15, 2011 could be used as a tax
credit on either your 1) 2010 or 2) 2011 Arizona income
What is a school tuition organization?
A school tuition organization is one that is tax exempt
under Section 501(c)(3) of the Internal Revenue Code,
allocates at least 90 percent of its annual revenue to
scholarships or grants, and makes its scholarships/grants
available to students of more than one qualified school.
Will the Department of Revenue certify school
Yes. Beginning January 1, 2011, the Arizona
Department of Revenue is required to begin certifying
school tuition organizations. The Arizona Department
of Revenue will maintain a registry of currently
certified school tuition organizations on its website,
What is a qualified school?
A qualified school is a non-governmental preschool for
handicapped students, or a non-governmental primary
or secondary school located in Arizona. The school
cannot discriminate on the basis of race, color,
handicap, familial status, or national origin. The
primary school begins with kindergarten, and the
secondary school ends with grade 12.
Are there situations where a contribution to a school
tuition organization, as defined in statute, would not
qualify for the tax credit?
Yes. Your donation to the school tuition organization
will not qualify for the credit if you designate the
donation for the direct benefit of your dependent. Your
donation will also not qualify if you designate a student
beneficiary as a condition of your contribution to the
school tuition organization. Additionally, the tax credit
is not allowed if you agree with another person to
designate each other’s contribution to the school tuition
organization for the direct benefit of each other’s
dependent, a practice commonly known as swapping.
May I make credit eligible contributions through
Yes. You may now be able to make credit eligible
contributions to a school tuition organization through
payroll withholding. Check with your employer to see
if your employer has agreed to withhold contributions
that qualify for this credit from your pay.
Charitable Tax Credit
An individual income tax credit is available for contributions that provide assistance to the working poor. Below, you will find a link for recent changes in the law that impacts both taxpayers and charitable organizations. For a publication to assist taxpayers, a current list of Qualifying Charitable Organizations, and forms and instructions for a Charitable Organization to be added to the list.
For a list of current Qualifying Charitable Organizations click on the following link: Working Poor_Certified Orgs_2010. A list of Umbrella Organizations is found at the very end on the last page of the list.
Provided by the Arizona Department of Revenue web page http://www.azdor.gov/TaxCredits/CharitableTaxCredit.aspx as of 3/26/10