Category Archives: Bookkeeping

HAPPY NEW YEAR – Important Announcements for Employers

HAPPY 2017!

This letter was sent to all of our business clients at year end with important Arizona and Federal announcements affecting employers in the new year.

Click the link:   Business-Year-End-Letter-2016

 

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.


Overtime rules for Business Owners

There has been an important update on the new DOL Overtime Rules that were set to go into effect on December 1st. Yesterday a U.S. District Judge issued an injunction against the new rules. This means that the new overtime rules will not go into effect on December 1st. The injunction stops implementation or enforcement of the new  rules until further action is taken by the Department of Labor, most likely through appealing the ruling. At this point it is uncertain when, if ever, the new rules will go into effect.

We will keep you apprised of any new developments. Please check our website as well for any updates. Contact us if you have any questions about how this will affect your business.

Since the release of the new overtime regulations from the Department of Labor, we have received many questions from our business clients. One reoccurring question we would like to address is how/if the new overtime rules will affect the business owner’s salary. An employee who owns at least 20 percent equity interest in the enterprise in which they are employed and who is actively engaged in its management is not subject to the salary level requirements of the overtime regulations. This rule applies to LLCs, Partnerships, S Corporations, Corporations or any other entity type. Because of this, the final rules recently released should not have an effect on business owners who own 20 percent or more of their company. Any owners who own under 20 percent would have to apply the standard overtime tests and requirements. If you have any questions about your specific situation, 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.


Misclassifying Workers as Independent Contractors Can Be A Costly Mistake

Using independent contractors in your business can save money.  Independent contractors do not receive typical company benefits such as vacation, sick pay or health insurance/retirement benefits.  Plus, employers don’t pay social security taxes (FICA), or provide unemployment benefits. However, it is easy to blur the line between a true independent contractor and employee and the IRS is cracking down.

In order to be considered an independent contractor, a worker should meet certain criteria.  Control is one of the primary determinators.  What is your level of control over the worker?  An independent contractor determines how and when work will be performed whereas an employee’s work parameters are established by the employer.  For example, if you require a worker to attend regular meetings, work set hours and use specific materials and equipment, then in most cases that worker is an employee because you are exercising significant control over his/her job performance.

Other factors include such things as:

  • Working relationship. Does the worker have other clients with whom he works or does he work exclusively for you?  An independent contractor is in business for himself so he should have other clients or at least be in the market to acquire other business opportunities.
  • Work hours. An independent contractor should, in most cases be able to set his own work schedule. As long as the contractor meets the deadline established by the client, he can decide his own work schedule.
  • Work location. Generally, an independent contractor provides for his own work location, materials and equipment.  In other words, his primary office is not located at your company’s facility.
  • Expenses. Employees typically submit their work-related expenses to their employer for reimbursement. An independent contractor, however, generally absorbs expenses as part of the cost of doing business.
  • Taxes. An independent contractor pays his own taxes by filing quarterly estimated tax returns.  Your company does not withhold taxes.

If the IRS determines you have misclassified a worker as an independent contractor rather than an employee, get out your checkbook.  You may be charged for back taxes, interest and penalties.  In fact, there is even the possibility of criminal charges.  And in some cases the misclassified worker has been able to sue the employer for lost benefits during the time in which he should have been considered an employee.

The IRS has a set of guidelines an employer can use to determine the proper status of a worker.  If you are still uncertain, give us a call us.

While in the short-term, using independent contractors in your business may save you money, it could cost you significantly more in the long-term.  Make sure you make the right choice.

 

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.


Document Retention and Destruction Policy

Many clients ask about record retention.  Click on the link below for a suggested record retention policy for non-profits, proposed by the AICPA.  It can be used by just about anyone that has business or non-profit organization records.

Not-for-Profit Document Retention Policy

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.

 


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.


Questions and Answers for the Additional Medicare Tax – Effective January 1, 2013

The following link will take you to questions and answers that will  provide employers and payroll service providers information that will help them as they prepare to implement the Additional Medicare Tax which goes into effect in 2013. The Additional Medicare Tax applies to individuals’ wages, other compensation, and self-employment income over certain thresholds; employers are responsible for withholding the tax on wages and other compensation in certain circumstances. The IRS has prepared these questions and answers to assist employers and payroll service providers in adapting systems and processes that may be impacted.

Click on the link below to be taken to the IRS Q&A:

Questions and Answers for the Additional Medicare Tax – From the IRS

For further tax planning considerations and questions, contact Schutte & Hilgendorf, pllc – CPAs.  We offer free initial consultations.  Schutte & Hilgendorf, pllc – CPA’s, is a full service public accounting firm providing tax planning, preparation, audit, accounting, and QuickBooks consulting to individuals, small businesses, non-profits, and homeowners associations in the Prescott and greater Yavapai County area.  Call us at 928-778-0079 or visit www.prescottaccountants.com


IRS/DOL Crackdown on Independent Contractor vs. Employee

IRS/DOL Crackdown

If you classify any workers as “independent contractors”—or have plans to do so—2013 is the year to make sure you get that classification correct.

Below is Topic 762 – Independent Contractor vs. Employee provided by irs.gov to help in identifying which classification a worker falls:

To determine whether a worker is an independent contractor or an employee under common law, you must examine the relationship between the worker and the business. All evidence of control and independence in this relationship should be considered. The facts that provide this evidence fall into three categories – Behavioral Control, Financial Control, and the Type of Relationship.

Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done, through instructions, training, or other means.

Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker’s job. This includes:

  • The extent to which the worker has unreimbursed business expenses
  • The extent of the worker’s investment in the facilities used in performing services
  • The extent to which the worker makes his or her services available to the relevant market
  • How the business pays the worker, and
  • The extent to which the worker can realize a profit or incur a loss

Type of Relationship covers facts that show how the parties perceive their relationship. This includes:

  • Written contracts describing the relationship the parties intended to create
  • The extent to which the worker is available to perform services for other, similar businesses
  • Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay
  • The permanency of the relationship, and
  • The extent to which services performed by the worker are a key aspect of the regular business of the company

For more information, refer to Publication 15-A (PDF), Employer’s Supplemental Tax Guide, or Publication 1779 (PDF), Independent Contractor or Employee. If you want the IRS to determine whether a specific individual is an independent contractor or an employee, file Form SS-8 (PDF), Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.

Contact Schutte & Hilgendorf with your questions related to independent contractor vs. employee.  Schutte & Hilgendorf, CPAs, is a full service public accounting firm providing tax planning, preparation, audit, accounting, and QuickBooks consulting to individuals and small business in the Prescott and greater Yavapai County area.  Call us at 928-778-0079 or visit www.prescottaccountants.com


Knowing when to make your Arizona Withholding Payment

How does an employer know whether to make Arizona withholding payments on a quarterly basis or more frequently?

QUARTERLY BASIS PAYMENTS: An employer must make its Arizona withholding payments on a quarterly basis if the average amount of Arizona income taxes withheld during the preceding four calendar quarters does not exceed $1,500.

MORE FREQUENT PAYMENTS: An employer must make its Arizona withholding tax payments at the same time as its federal withholding deposits if the average amount of Arizona income taxes withheld during the preceding four calendar quarters exceeds $1,500.

WHY DOES THE EMPLOYER MAKE THIS COMPUTATION? Arizona law requires an employer, at the beginning of each new quarter, to compute its average Arizona withholding tax liability for the preceding four calendar quarters. This calculation is performed to determine the correct Arizona withholding payment schedule.

HOW DOES THE EMPLOYER MAKE THIS COMPUTATION? An employer that has four full consecutive calendar quarters of Arizona withholding liability historical data must use the regular withholding payment schedule computation. An employer that does not have four full consecutive calendar quarters of Arizona withholding liability historical data must use the alternate withholding payment schedule computation. Refer to the “Arizona Withholding Liability/Payment Schedule” section of the Form A1QRT instructions for further information

Per the State of Arizona – Department of Revenue – Arizona Withholding FAQ’s

Should you have questions regarding this post or any other tax needs, contact us at Schutte & Hilgendorf, PLLC, Prescott accountants serving the greater Yavapai County with tax, accounting, auditing, and QuickBooks consulting expertise.