Category Archives: Federal Tax Developments

IRS Alerts

Borrowed via Checkpoint Newsstand – Thomson Reuters post 2/7/17
The following are some recent phishing scams and myths that the IRS would like you to be aware of :
Federal Tax Highlights

Washington Alert — Part I

IRS, joined by state tax agencies and the tax industry, has issued an “urgent alert” to all employers regarding the Form W-2 (Wage and Tax Statement) email phishing scam. (IR 2017-20) According to the agency, the phishing scam “has evolved beyond the corporate world and is spreading to other sectors, including school districts, tribal organizations and nonprofits”. The W-2 scammers have been coupling their attempts to steal employee W-2 information with a scheme regarding wire transfers. As described by IRS, cybercriminals use a variety of techniques to make an email appear as if it is from an organization executive. The email is sent to an employee in the payroll or human resources departments and requests a list of all employees and their Forms W-2. In a new twist, the perpetrators follow up with an “executive” email to the payroll department or comptroller and ask that a wire transfer be made to a specific account. In some cases, companies have responded to this request. Noting that there has been “an upswing of [scam] reports in recent days”, IRS urged employers to immediately share this information with their payroll, finance and human resource personnel. They also should have an internal policy on the distribution of employee W-2 information and conducting wire transfers. “This is one of the most dangerous email phishing scams we’ve seen in a long time”, said IRS Commissioner John Koskinen. “It can result in the large-scale theft of sensitive data that criminals can use to commit various crimes, including filing fraudulent tax returns.” Additional information is available at irs.gov/uac/dangerous-w-2-phishing-scam-evolving-targeting-schools-restaurants-hospitals-tribal-groups-and-others

IRS has issued tips to taxpayers that refute several “myths” pertaining to tax refunds currently circulating. (IR 2017-16) The myths included the following – all refunds are delayed; calling IRS or a tax professional will provide a better refund date; ordering a tax transcript is a “secret way” to obtain a refund date; the “Where’s My Refund” tool must be incorrect because there is no deposit date appearing; and delayed refunds for those claiming the earned income tax credit or the additional child tax credit will be delivered on Feb. 15. Complete details can be found at irs.gov/uac/newsroom/irs-answers-common-early-tax-season-refund-questions-and-addresses-surrounding-myths

IRS has commenced publishing entries to its annual list of “Dirty Dozen” tax scams for the 2017 filing season. (IR 2017-15) Phishing schemes now lead the newest Dirty Dozen list. As of Feb. 3, IRS published two additional entries on its list – telephone scams and identity theft. It is expected that the agency will be announcing daily additions to the list. Updated information will appear at irs.gov/uac/newsroom/dirty-dozen

 

If you receive any suspicious emails, phone calls, or mail, contact us at  Schutte & Hilgendorf CPAs .

 

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.

 

 


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.


New Law “Cures” Small Employer Health Insurance Dilemna

eTax Alert™ (Provided by Western CPE)

New Law “Cures” Small Employer Health Insurance Dilemma

The 21st Century Cure Act has passed Congress and the President has just approved and signed. The legislation provides for an exception from group health plan requirements for qualified small employer health reimbursement arrangements. Beginning in 2017, a small employer may again reimburse employees for individual health insurance premiums without fear of the onerous $100 per day per employee penalty assessed for violation of health care reform.

Plan requirements. To qualify as “a qualified small employer health reimbursement arrangement,” the plan must meet certain requirements.

  1. The plan must be provided on the same terms to all employees. Some employees may be excluded from the plan:
    • employees who have not completed 90 days of service,
    • employees who have not attained age 25,
    • part-time (less than 30 hours a week) or seasonal employees,
    • employees subject to collective bargaining.
  2. The plan must be funded solely by the employer and no salary reduction contributions may be made under the arrangement.
  3. The plan must provide, after the employee provides proof of minimum essential coverage, for the payment of, or the reimbursement of, medical expenses (as defined in §213(d)) of an eligible employee or the employee’s eligible family members.
  4. The plan must provide that payments and reimbursements for any year be no more than $4,950 for an eligible employee and $10,000 if the arrangement provides payment or reimbursement for family members.
    • In the case of an individual who is not covered for the entire year, the limitations are prorated. For example, an employee who is covered for nine months of the plan year may have payments and reimbursements of no more than $3,712.50 (9/12 of $4,950).

Small employer. An eligible employer is one that is not an applicable large employer under §4980H(c)(2). Thus, the employer may offer a qualified small employer health reimbursement arrangement if it has less than 50 full-time and full-time equivalent employees. An eligible employer may not offer a group health plan to any of its employees.

Tax-free fringe benefit. A qualified small employer health reimbursement arrangement payment or reimbursement is not excluded from gross income if, for the month in which such medical care is provided, the individual does not have minimum essential health coverage.

Premium tax credit. For an employee who is provided a qualified small employer health reimbursement arrangement for any coverage month, the premium tax credit for that month will be reduced.

Other rules.

  • The eligible employee must receive proper and timely notice of the plan availability (see §9831(d)(4)(A) for details).
  • The total amount of the permitted benefit must be reported on the employee’s Form W-2.
  • The transition relief provided in Notice 2015-17 is extended for any plan year beginning on or before Dec. 31, 2016.

Example. Sharon has three full-time employees working in her tax practice. She does not provide a group health plan. With proper notice to her employees, Sharon establishes a qualified small employer health reimbursement arrangement effective Jan. 1, 2017 to reimburse up to $4,950 (or a lesser amount if she wishes) of §213(d) medical expenses.

Action item. Small business clients should be advised that Congress, in a rare bipartisan effort, has granted relief to the small business that wants to help employees with insurance premiums and out-of-pocket medical expenses without going through the trouble or expense of adopting a group health plan.

© 2016 Sharon Kreider and Vern Hoven


2017 Standard Mileage Rates

From the IRS website:

Beginning on Jan. 1, 2017, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 53.5 cents per mile for business miles driven, down from 54 cents for 2016
  • 17 cents per mile driven for medical or moving purposes, down from 19 cents for 2016
  • 14 cents per mile driven in service of charitable organizations

The business mileage rate decreased half a cent per mile and the medical and moving expense rates each dropped 2 cents per mile from 2016. The charitable rate is set by statute and remains unchanged.   The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

 

Go to the following link for more information:

 

2017 Standard Mileage Rates for Business, Medical and Moving Announced

 

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.


IRS Warns of Latest Tax Scam Involving Bogus Federal Student Tax

Go to the following link:

 

IRS Warns of Latest Tax Scam Involving Bogus “Federal Student Tax”

 

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.


INCREASE IN PENALTIES FOR FAILING TO FILE AN INCOME TAX RETURN

On February 24, 2016, President Obama signed a new law banning income taxes on Internet Services.  This law also included a provision increasing the penalty for failing to file a tax return.

 

The higher failure-to-pay penalty is effective for returns to be filed after calendar year 2015, so it applies to this tax return season.  The penalty is equal to 5 percent of the amount of additional taxes owed for every month that your return is late, up to a maximum of 25 percent.

 

Remember there are 2 penalties:  A failure-to-file penalty AND a failure-to-pay penalty.   If you have a balance owing it is always better to file the returns timely and pay when you can or set up an Installment Agreement Payment Plan with the IRS.  You can also pay your tax balance by credit card.

 

Filing an extension ONLY delays filing the return.  If you owe tax, the tax must be paid by April 15 to avoid a failure-to-pay penalty.

 

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.

 


Tips from IRS for Year-End Gifts to Charity

WASHINGTON — The Internal Revenue Service today reminded individuals and businesses making year-end gifts to charity that several important tax law provisions have taken effect in recent years.

Some of the changes taxpayers should keep in mind include:

Rules for Charitable Contributions of Clothing and Household Items

Household items include furniture, furnishings, electronics, appliances and linens. Clothing and household items donated to charity generally must be in good used condition or better to be tax-deductible. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return.

Donors must get a written acknowledgement from the charity for all gifts worth $250 or more. It must include, among other things, a description of the items contributed.

Guidelines for Monetary Donations

A taxpayer must have a bank record or a written statement from the charity in order to deduct any donation of money, regardless of amount. The record must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, and bank, credit union and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.

Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.

These requirements for the deduction of monetary donations do not change the long-standing requirement that a taxpayer obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet both requirements.

Reminders

The IRS offers the following additional reminders to help taxpayers plan their holiday and year-end gifts to charity:

  • Qualified charities. Check that the charity is eligible. Only donations to eligible organizations are tax-deductible. Select Check, a searchable online tool available on IRS.gov, lists most organizations that are eligible to receive deductible contributions. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations. That is true even if they are not listed in the tool’s database.
  • Year-end gifts. Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2015 count for 2015, even if the credit card bill isn’t paid until 2016. Also, checks count for 2015 as long as they are mailed in 2015.
  • Itemize deductions. For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction. This includes anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2015 Form 1040 Schedule A to determine whether itemizing is better than claiming the standard deduction.
  • Record donations. For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.
  • Special Rules. The deduction for a car, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.

If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.

IRS.gov has additional information on charitable giving, including:


ALERT FROM THE IRS

The IRS has sent notification that a new fraudulent email is being issued to tax preparers and self-filers asking them to update their information. This email WAS NOT generated by the IRS.
Please do not respond. Just delete the email.

The IRS does not notify anyone of anything by email. They conduct all correspondence by mail.


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.

 


2015 Standard Mileage Rates

The Internal Revenue Service just issued the 2015 standard mileage rates used to calculate the deductible cost of operating a vehicle for business, charitable, medical or work related moving purposes.

 

Beginning January 1, 2015, the standard mileage rates for the use of a car, van, pickup, or panel truck will be:

  •             57.5 cents per mile for business purpose miles driven, up from 56 cents for 2014
  •             23 cents per mile driven for medical or moving for work purposes, down from 23.5 cents
  •             14 cents per mile driven for charitable organization purposes, the same as previous years

 

Taxpayers always have the option of claiming actual costs of operating a vehicle rather than the standard mileage. If you have claimed depreciation on a vehicle in prior years, you cannot use the business standard mileage rate for that vehicle – you must use actual expenses.

Taxpayers must have accurate mileage logs for all business mileage and the total mileage of the vehicle if used part of the time for personal use, for both methods of cost calculations.