Category Archives: Arizona Taxes

New Mandatory Sick Leave Under Prop 206 – Arizona law Effective July 1, 2017

REMINDER: Check your paid-time-off policies to include the new requirements under Prop 206:

In addition to the increased minimum wage in Arizona,the less publicized part of Prop 206 is the requirement for private and municipal employers to provide paid sick leave to all employees beginning July 1, 2017. Under Prop 206, all employees must accrue paid sick time at a minimum rate of one (1) hour of paid sick time per every thirty (30) hours worked (not confined to a work week or pay period). Employers with less than fifteen (15) employees, must provide and allow the use of twenty-four (24) hours of paid sick time per year, while employers with fifteen (15) or more employees must provide and allow the use of forty (40) hours of paid sick time a year.

Under Prop 206, earned paid sick time may be used by employees for the following reasons:

  • Employee’s own physical or mental illness;
  • Care for employee’s family member who has a physical or mental illness;
  • Public health emergency;
  • Absence due to domestic violence, sexual violence, or stalking of employee or employee’s family member

Implementing mandatory paid sick time may present challenges to employers given the many nuances of Proposition 206, including:

  • Part-time and temporary workers are considered “employees”
  • Employers must post a notice in the workplace that outlines employees’ rights and protections under Prop 206
  • Employers are required to retain payroll records for four (4) years
  • Employers must also provide employees either in or on an attachment to the employee’s paycheck: (1) the amount of earned paid sick time available to the employee, (2) the amount of earned paid sick time taken by the employee to date in the year, and (3) the amount of pay time the employee has received as earned paid sick time
  • Employers can require reasonable documentation from an employee after three (3) or more consecutive work days of paid sick time used
  • Employees may use earned paid sick time as soon as it is accrued; however, an employer may require an employee hired after July 1, 2017 to wait ninety (90) calendar days after the start of employment before using accrued earned paid sick time
  • Employers can include accrual and usage caps on paid sick time in accordance with the mandatory requirements
  • Paid sick time can be used in hourly increments or the smallest increment of employer’s payroll system used to account for absences or use of time, whichever is smaller
  • Employers cannot require employees seeking to use earned paid sick time to find a replacement worker to cover the employee’s absence
  • Employers cannot count the use of paid sick time as an absence that leads to discipline or termination
  • Employers are not required to pay out unused paid sick time upon termination

For further information, contact Schutte & Hilgendorf, CPAs at 928-778-0079.

Schutte & Hilgendorf offers a broad range of professional accounting, tax, and audit services to individuals and businesses throughout Yavapai County and Northern Arizona.   With over 40 years combined certified public accounting experience, we specialize in providing services to numerous industry specific areas, including non-profit organizations, homeowner’s associations and construction contracting.  We also provide tax planning and preparation, sales tax and payroll tax return preparation, ongoing accounting/bookkeeping, live payroll, and QuickBooks setup and training (QuickBooks Proadvisors).  Given our small size, we can still provide a personal touch with professional expertise. Come in and see us anytime at 2086 Willow Creek Road, Prescott, Arizona or call us at 928-778-0079.


Prescott becomes a Program City for Arizona Sales Tax

All Prescott and other cities’ sales taxes will now be reported and paid through the State of Arizona.

Effective January 1, 2017, the Arizona Department of Revenue (ADOR) will become the single point of administration and collection of transaction privilege tax (TPT).  Your sales tax return that is due in February will be the first required return to be filed using the new method.  The link for details on the new requirements for reporting sales tax is:  https://www.azdor.gov/News/tabid/74/newsid530/732/Centralized-Licensing-and-Reporting-of-Transaction-Privilege-Tax-TPT-Begins-Jan-1/Default.aspx?utm_medium=email&utm_source=govdelivery

The Arizona licensing fee was due on January 1, 2017.  If you have not renewed your license, you should log onto the aztaxes.gov website and renew.  Information on how to do this may be found at this link:   https://www.azdor.gov/Portals/0/TPTSimplification/license_renewal_fs.pdf

The City of Prescott requires a business license and registration with the city in addition to the required registration with Arizona/Prescott for a sales tax license.  Additional information on this can be found at this webpage:

http://www.prescott-az.gov/business/license/

Residential & Commercial Rental owners have had their license information submitted to the State of Arizona by the City of Prescott for processing.  Owners will receive a letter from the State containing the new Arizona license number and instructions on how to obtain an online account.  Further information from the City of Prescott for commercial and residential landlords and how to register with the state can be found at:  http://www.prescott-az.gov/_d/residential_and_commercial_rental_tips.pdf

Additional information on licensing for Arizona can be found at:  https://www.azdor.gov/Business/LicensingGuide.aspx

 

For additional information, contact Schutte &  Hilgendorf at 928-778-0079

Schutte & Hilgendorf, CPAs offers a broad range of professional accounting, tax, and audit services to individuals and businesses throughout Yavapai County and Northern Arizona.   With over 40 years combined certified public accounting experience, we specialize in providing services to numerous industry specific areas, including non-profit organizations, homeowner’s associations and construction contracting.  We also provide tax planning and preparation, sales tax and payroll tax return preparation, ongoing accounting/bookkeeping, live payroll, and QuickBooks setup and training (QuickBooks Proadvisors).  Given our small size, we can still provide a personal touch with professional expertise. Come in and see us anytime at 2086 Willow Creek Road, Prescott, Arizona or call us at 928-778-0079.


2016 Changes to Arizona Tax Credits

 

Two Arizona bills (SB1216 and SB1217) have made significant changes to the Qualifying Charitable Organization and Foster Care Charitable Organization tax credits for 2016.

 

The allowable credit made to Qualifying Charitable Organizations has increased from $200 to $400 for individuals and from $400 to $800 for married couples.  The allowable credit made to Foster Care Charitable Organizations has increased from $400 to $500 for individuals and from $800 to $1,000 for married couples. These credits are now independent of each other.  Contributions for one of the credits will no longer affect the allowed credit to the other.

 

The deadline to make the contributions for the credits has been extended to April 15th of the subsequent year.  All of these changes were made after and are retroactive to January 1, 2016.

 

If you have any questions about these changes or any other tax questions, please give us a call at 928-778-0079.

 

Schutte & Hilgendorf is a leading Prescott CPA firm, offering superior client service to individuals, small businesses, non-profit organizations, and homeowners associations.

Our services include accounting, bookkeeping, audit, review, tax return preparation, tax planning, payroll and QuickBooks consulting. We are located in Prescott and serve all of Yavapai County, and Northern Arizona.


Protect Yourself From Tax Identity Theft

Tax identity theft continues to rise.  In 2013, $6.5 billion in fraudulent returns were filed.  By 2016, that number is expected to increase to $21 billion.  To make matters worse, it can take several months for the rightful taxpayer to straighten out the confusion.  You can protect yourself by being aware of one of the key ways fraud is initiated–through email.  the IRS NEVER uses email or social media to contact taxpayers directly, so you should never respond to a message from the “IRS” addressing tax concerns via email.

Schutte & Hilgendorf is committed to protecting our clients’ records and follows several security measures to ensure that sensitive data are carefully guarded.  We can help if you have questions about any type of correspondence or request you received involving tax information.

If you have additional questions about this post or any other, please contact us directly at 928-778-0079.

Schutte & Hilgendorf is a leading Prescott CPA firm, offering superior client service to individuals, small businesses, non-profit organizations, and homeowners associations.

Our services include accounting, bookkeeping, audit, review, tax return preparation, tax planning, payroll and QuickBooks consulting.  We are located in Prescott and serve all of Yavapai County, and Northern Arizona.

 


2014 Year-end Tax Update

The team at Schutte & Hilgendorf, CPA’s wishes you a very Happy Holiday Season. We hope you enjoy this time with your family and friends and take time to enjoy the sights and sounds of Prescott-“Arizona’s Christmas City”.

The 4th Quarter Estimated Payments are due January 15, 2015 – however, if you pay Arizona by December 31, it can count as a state tax deduction for 2014.

As has been our tradition, we want to remind you of changes that have occurred in the area of individual tax for the year 2014 and to give you some tax planning tips that might apply to your specific tax and financial situation. As always, please call or email if you have any questions or concerns. All areas of tax cannot be covered here, but I have highlighted the major changes.

There are two major changes this year:

  1. The Affordable Care Act (ACA) – The individual requirement under the ACA means everyone is required to have health insurance for the year 2014. There is an additional line on the Individual Tax Form – 1040 – that asks that specific question. If the box is not checked, this will indicate to the IRS you were not covered by the minimal essential health insurance and may be subject to a penalty. Even though Medicare and Medicaid recipients were qualified participants without having to do anything additional, they are still required to check this box. There are 5 additional tax forms, plus worksheets, that may be required to be completed with the tax return, depending on your situation and the coverage you have.

The subsidized credits and possible penalties are calculated on the tax returns. The additional forms will be similar to a 1099 Form/W-2 Form and will be issued by the Exchange, the insurance companies, or your employer. These will arrive in January/February with other tax forms you normally receive. We are required to have a copy of these before we can prepare your tax return. Please remember to save these with your other tax forms you will be receiving and bringing to us.

If you have college students that are covered by your health insurance policy and they have earnings that require them to file a return, we recommend we prepare their returns along with yours. There are family income levels that must be considered in determining the subsidies or credits.

Because of the additional time and calculations that are required of preparers and the liability it exposes us to, your tax preparation fee will increase this year. We are estimating it to be a $50 minimum increase. Depending on the complexity of your situation, the cost could be quite a bit higher . If you are receiving Medicare coverage for health costs, the additional cost will be on the low end. Those with private insurance plans or employer plans could be on the more complex side.

If you have any questions regarding how this will affect your tax return, please call us now.

  1. The second change is the “Extenders” as they are referred to in the media. These are a number of credits/deductions that were allowed in 2013, but expired January 1, 2014. These include:
  • Energy credits for windows, insulation, doors, etc. The only energy credits allowed are for solar installations
  • The above-the-line deduction for out-of-pocket school classroom supplies for teachers
  • The contribution to charitable organizations of your RMD
  • The above-the-line deduction for qualified tuition and related expenses
  • The state and local general sales tax deductions
  • Exclusion of $2 million for discharge of principal mortgage debt

These “extenders” are now being debated in Congress, and as of this date the House passed a bill allowing them to continue for 2014. It is now in the Senate for debate. We are closely watching the developments.

Arizona is continuing with the credits for schools and other charitable organizations for this year, which is very good news.

The credits will allow you to re-direct any Arizona tax liability to other avenues of your choice rather than the State, and most of these credits also qualify for a Federal charitable contribution, if you itemize. You do not need to itemize for Arizona to take advantage of these credits.

The credits and amounts allowed are as follows: (for single/married filing jointly)

  • Public School Credit – $200/$400
  • Qualifying charitable organizations (formerly known as the “Working Poor” credit) – $200/$400
  • Qualifying Foster Care organizations – $200/$400
  • Private School Tuition organization – $528/$1,056
  • Certified School Tuition organization – $525/$1050

Except for the last two, all charitable donations must be made before December 31, 2014. You have until April 15, 2015 to contribute the 2 School Tuition credits to have it apply for 2014 returns.

There is a link on our website www.prescottaccountants.com also detailing these credits and links for you to verify if an organization you are considering for a contribution is a qualified organization for receiving these.

You are also encouraged to call or email us if you have any questions regarding these.

General Info: The standard deduction for a Married Filing Jointly is $12,400 and for Singles is $6,200. If you do not have mortgage interest, high medical bills, or considerable charitable donations for 2014, your itemized deductions may not total these amounts. It will be to your advantage to take the standard deduction, and you do not have to gather and total your medical receipts. TIP:   if you want to do a comparison, all medical offices and pharmacies will print out an annual recap of the amounts you paid to them, if asked. A big time saver!

The tax organizers will be mailed to you after the Christmas Holiday. There will be additional questionnaires included this year asking you to verify specifics on Health Insurance, foreign bank accounts and foreign pensions. These must be returned to us along with the questionnaire (which will also have a place for signature this year) and the signed engagement letter.

We are offering another option for you this year. The organizer will include a pre-set date and time for your tax appointment. If the pre-set date and time is inconvenient for you, please call or email Sharon sharonb@ prescottaccountants.com in our office to change the appointment. In order to make tax preparation more convenient for you, if you do not feel you need a personal face-to-face appointment, you are welcome to drop off your tax information. We have a secure “drop box” just to the left of the entrance, if the time convenient to you is not during office hours.  Adam Rutherford or Lois Hilgendorf will call you when we are preparing your return if we have any questions, or you may set up a telephone consultation appointment if that is more convenient.

This tax update is also posted on our website, www.prescottaccountants.com, so if you have family or friends that would find this helpful, please urge them to visit the website.

If you need assistance in organizing or planning call us before December 31.


2014 INDIVIDUAL ARIZONA TAX CREDITS

The Arizona Department of Revenue allows Charitable Contribution to certain organizations for 2014 tax return filings. This is a wonderful way to direct monies where you would like it to go, rather than to the Department of Revenue.

 

These credits reduce your AZ tax liability dollar for dollar, and if you itemize, you can deduct them as a charitable deduction on your Federal Return.

 

The amounts of eligible credits available this year have not changed much from previous years. The amounts eligible for the credits for Married filing jointly (MFJ) are double the amount for Single or Head of Household filers (S):

 

QUALIFYING CHARITABLE ORGANIZATIONS (Formerly Working Poor Credit)
Credit of up to $200 (S)/$400 (MFJ)

 

QUALIFYING FOSTER CARE ORGANIZATIONS
Credit of up to $400 (S)/ $800(MFJ)
NOTE: You can donate these higher amounts for this credit only if you do not contribute to the Working Poor Credit, OR you can do $200 (S)/$400(M) to both type of Organizations.

 

PUBLIC SCHOOL EXTRA CURRICULAR ACTIVITIES
Credit of up to $200 (S)/ $400 (MFJ)

 

PRIVATE SCHOOL TUITION ORGANIZATION
Credit of up to $528 (S)/ $1,056 (MFJ)

 

CERTIFIED SCHOOL TUITION ORGANIZATION
Credit of up to $525 (S)/ $1,050 (MFJ)

 

If you are not certain your favorite organization or school is qualified to receive these donations, you can go to the website: www.az.gov/charitableorganizations and there is a list of those that meet the qualifications or call us at 928-778-0079 or email: loish@prescottaccountants.com for any questions.


GOOD ACCOUNTING HABITS FOR SMALL BUSINESS OWNERS

Most small business owners we come in contact with do not like the paper work side of running a business. They are very good at building houses, fixing vehicles, landscaping, or whatever the specialty is, but paperwork is often the last thing they want to do and /or they just do not have the time. They often do not realize what a benefit it would be to their business if they had up-to-date and accurate financial information available to help in business decisions and just to see how they are doing.

Here are some tips to help keep your books in order and up-to-date:

  1. Keep it Separate – You should have a separate bank account and credit card(s) just for the business AND use them for just business expenses. When you use these accounts for personal expenses, it becomes much more difficult to separate items when it comes time to prepare your tax returns, you do not have an accurate running account of business costs, and the IRS frowns deeply upon this practice. If your returns were picked for an audit, the IRS could give you a very bad time.
  2. Schedule a time – actually enter it into your appointment calendar to set aside some time every week for doing paperwork and organize your finances. You can then make informed financial decisions and you will be ready for tax filings deadlines.
  3. Employees make your business run – you have successfully grown your business and now cannot do it alone. Labor is often the biggest expense a small business has. You have to make sure you are keeping track of the costs of wages, benefits, overtime, payroll taxes and payroll reporting and making accurate payments to the IRS for payroll taxes. Accurate recording of labor cost will allow you to track if you are over-spending on labor costs or if you can give incentives or bonuses to employees to help market your business.
  4. Are you getting paid? – Keep an accurate running balance of customers/clients who owe you money. Knowing each month who has outstanding invoices can enable you to do follow up calls. By knowing who is perpetually late paying, you can put policies in place to have those pre-pay or require a retainer up front.
  5. Call in a Professional – CPA’s can be trusted allies in running your small business. They actually like to “keep books” and have the expertise to do it correctly. A CPA will find allowable deductions you may have not thought of and will keep you timely and penalty –free in filing reports. You may think you cannot afford a CPA, but they will save you from headaches and stress and it may be more cost effective than you think.

Some things to consider as another year comes to a close and you are faced with a year’s worth of receipts/deposit slips and invoices stacked up somewhere waiting for you to get to.


2015 Arizona TPT Tax Simplification

Effective January 1, 2015, the Arizona Department of Revenue will collect all state, county and city sales taxes in Arizona. This means you will no longer be required to file a sales tax report with the City of Prescott. The Prescott sales tax will now be included on the ADOR sales tax form TPT-1. ADOR will also be improving their website for electronically filing of returns. In the coming months you should be receiving an updated TPT-1 form and notices concerning these changes.

Please contact us if you have any questions about these changes or use this link for the Arizona Department of Revenue’s website regarding these changes.

This tip brought to you by Schutte & Hilgendorf, PLLC, 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 businesses.

Contact us for a free initial consultation at (928) 778-0079.


2014 Arizona Minimum Wage Increase

The new Arizona hourly minimum wage, effective January 1, 2014, will be $7.90. This is a $0.10 increase over the 2013 rate. The federal minimum wage is $7.25, but Arizona employers are required to pay the higher Arizona rate to their employees.

This tip brought to you by Schutte & Hilgendorf, PLLC, 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 businesses.
Contact us for a free initial consultation at (928)778-0079.


A Simplified Home Office Deduction

Do you work at home or have a home-based business?  If so, you should be aware that beginning this year, the IRS has created a simpler option for calculating the deduction for the business use of your home.  The new option makes recordkeeping easier because instead of maintaining records of specific home office expenses, you can use a standard rate per square foot.  The rate is $5 per square foot (up to a maximum of 300 square feet or $1,500) for qualifying business use space in place of taking a pro rata percentage of items such as mortgage interest, taxes and repairs.

Keep in mind there are good and bad aspects to this “simpler” method.  The new method gives you back your full interest and tax deduction on Schedule A, but you will lose your depreciation and loss carryover deductions.  Of course, you must still use your home office regularly and exclusively for business.  This may be a welcome relief for some taxpayers, but it might not be the best choice for others.

Is it the right choice for you?  Contact us today and let’s decide together.