Category Archives: Federal Tax Developments

Arizona Minimum Wage Increase

As of January 1, 2019, Arizona has raised the hourly pay rate for minimum wage workers. Employers are required to pay employees at least the new minimum wage rate and post a notice in the workplace to inform employees of their right to the minimum wage.  Employers with employees who work in the City of Flagstaff, AZ have additional minimum wage requirements.

 

Arizona voters passed Proposition 206, or the Fair Wages and Healthy Families Act, in November of 2016. The law provides employees with earned paid sick leave and set up a series of scheduled increases to the minimum wage that began in January of 2017. Arizona will incrementally raise the state minimum wage to $12.00 per hour by 2020, after which it will rise relative to changes to the Consumer Price Index (CPI), which measures cost of living in the U.S.

 

Effective January 1, 2019, the minimum wage will increase to $11.00 per hour for non-tipped workers in the state of Arizona. The minimum wage for tipped workers is always set at $3.00 less than the general minimum wage, so in 2019 it will be set at $8.00 per hour.

 

Employers with one or more employees who work 25+ hours in the City of Flagstaff are required to pay a higher minimum wage and post the 2019 Flagstaff Minimum Wage Poster in addition to the state and federal minimum wage posters. Effective January 1, 2019, the municipal minimum wage for Flagstaff will increase to $12.00 per hour worked within the city.

 

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.

 

 

 

 


Schutte & Hilgendorf Individual Year End Letter

2018 Individual Year End Letter

 

 

With the end of the year fast approaching Schutte and Hilgendorf would like to remind you about tax matters and changes from the new tax law that you may want to consider in anticipation of tax season. Please click the title above in order to view the year end individual tax letter. Happy Holidays from everyone here at Schutte & Hilgendorf!

 

 

 

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.


Schutte & Hilgendorf Business Year End Letter

2018 Business Year End Letter

 

 

With the end of the year fast approaching Schutte and Hilgendorf would like to remind you about tax matters and changes from the new tax law that you may want to consider in anticipation of tax season. Please click the title above in order to view the year end business tax letter. Happy Holidays from everyone here at Schutte & Hilgendorf!

 

 

 

 

 

 

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.


Tax Tuesday with Inek Contreras


Video: What are Qualified Charitable Distributions and Why Should I Care?

 

 

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).  Come in and see us anytime at 2086 Willow Creek Road, Prescott, Arizona, call us at 928-778-0079 or check out our website at www.prescottaccountants.com.

 


IRS New Withholding Calculator

The IRS encourages everyone to use the Withholding Calculator to perform a quick “paycheck checkup.” This is even more important this year because of recent changes to the tax law for 2018.
The Calculator helps you identify your tax withholding to make sure you have the right amount of tax withheld from your paycheck at work.
There are several reasons to check your withholding:
• Checking your withholding can help protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year.
• At the same time, with the average refund topping $2,800, you may prefer to have less tax withheld up front and receive more in your paychecks.
If you are an employee, the Withholding Calculator helps you determine whether you need to give your employer a new Form W-4, Employee’s Withholding Allowance Certificate. You can use your results from the Calculator to help fill out the form and adjust your income tax withholding.
Plan Ahead: Tips For Using This Program
The Calculator will ask you to estimate values of your 2018 income, the number of children you will claim for the Child Tax Credit and Earned Income Tax Credit, and other items that will affect your 2018 taxes. This process will take a few minutes.
• Gather your most recent pay stubs.
• Have your most recent income tax return handy; a copy of your completed Form 1040 will help you estimate your 2018 income and other characteristics and speed the process.
• Keep in mind that the Calculator’s results will only be as accurate as the information you provide. If your circumstances change during the year, come back to this Calculator to make sure that your withholding is still correct.
• The Withholding Calculator does not ask you to provide sensitive personally-identifiable information like your name, Social Security number, address or bank account numbers. The IRS does not save or record the information you enter on the Calculator.
IMPORTANT NOTE: This Withholding Calculator works for most taxpayers. People with more complex tax situations should use the instructions in Publication 505, Tax Withholding and Estimated Tax. This includes taxpayers who owe self-employment tax, alternative minimum tax, the tax on unearned income of dependents or certain other taxes, and people with long-term capital gains or qualified dividends.

Ready to start? Make sure Javascript is enabled.

 

IRS Withholding Calculator

To Change Your Withholding:

  • Use your results from this Calculator to help you complete a new Form W-4, Employee’s Withholding Allowance Certificate, and
  • Submit the completed Form to your employer as soon as possible. Withholding takes place throughout the year, so it’s better to take this step as soon as possible.

Special Note for 2019:  If you follow the recommendations at the end of this Calculator and change your withholding for 2018, the IRS reminds you to be sure to recheck your withholding at the start of 2019. This is especially important if you reduce your withholding sometime during 2018. A mid-year withholding change in 2018 may have a different full-year impact in 2019. So if you do not file a new Form W-4 for 2019, your withholding might be higher or lower than you intend. To help protect against having too little withheld in 2019, we encourage checking your withholding again early in 2019.

If you have additional questions about your withholding, consult your employer or 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 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


A Warning for Taxpayers: per IRS “Report Phishing and Online Scams” website

 


A Warning for Taxpayers:  per IRS “Report Phishing and Online Scams”  website


Internet and telephone scams are a growing issue in the U.S. and we at Schutte & Hilgendorf spend a great deal of time and expertise protecting our clients and their information from theft and hackers.  We continually upgrade and update our systems, software, hardware and procedures to keep you and your information safe from predators.

 

However, we cannot protect the information you have on your own computers or information you may be asked to give out over the phone.  So we would like to help you to avoid the latest in predatory behavior:  IRS contact is never initiated by robocall, email, text messages or social media channel per information distributed by the IRS. 

 

If you have received any sort of communication from the IRS other than by letter from the U.S. Postal service, please do not interact with the communication.  Go to this link: https://www.irs.gov/privacy-disclosure/report-phishing and follow the suggested actions as per this IRS official website posting.

 

If you are uncertain about any communication you have received, please contact us or the IRS before responding.


2018 Standard Mileage Rates

From the IRS website:

Beginning on Jan. 1, 2018, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 54.5 cents for every mile of business travel driven, up 1 cent from the rate for 2017.
  • 18 cents per mile driven for medical or moving purposes, up 1 cent from the rate for 2017.
  • 14 cents per mile driven in service of charitable organizations.

The business mileage rate and the medical and moving expense rates each increased 1 cent per mile from the rates for 2017. The charitable rate is set by statute and remains unchanged.

 

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.


Recent Tax Law Changes

Schutte & Hilgendorf, PLLC has been tracking the Tax Cuts & Jobs Act very closely. We believe your knowledge of these changes and how they affect you and/or your business is very important.  Following are a few of the main components of the bill that may affect your tax returns. Most of the provisions of the bill go into effect for 2018 tax returns, but there are couple changes that will go into effect for 2017 tax returns.

 

Individual Tax Law Changes

Individual mandate

The act removed (by reducing it to zero) the penalty for not obtaining qualified health insurance, effective after 2018.

 

A top individual tax bracket of 37%

The top tax bracket for individuals has been reduced from 39.6% to 37%. Many of the other brackets have been reduced as well.

 

Standard deduction: The act increased the standard deduction to $24,000 for joint returns and $12,000 for single individuals. The additional standard deduction for elderly and blind taxpayers was not changed by the act. The personal exemptions of $4,050 per person were repealed.

 

Itemized deductions

  • Overall limitation: The act repealed the overall limitation on itemized deductions.
  • Mortgage interest: The home mortgage interest deduction was modified to reduce the limit to $750,000 of acquisition debt (from the limit of $1 million) on mortgages created or modified after December 15th, 2017.
  • Home-equity loans: The home-equity loan interest will no longer be deductible. 
  • State and local taxes: Individuals will only be allowed to deduct up to $10,000 in state and local income or property taxes.
  • Miscellaneous itemized deductions: All miscellaneous itemized deductions subject to the 2% floor under current law will no longer be allowed, including common deductions like employee business expenses, tax preparation fees, investment fees, safe deposit box fees.
  • Medical expenses: The threshold for deduction of medical expenses was reduced to 7.5% from 10% of adjusted gross income for 2017 and 2018.

 

Individual Alternative Minimum Tax (AMT)

The act increased the thresholds for when AMT will apply to individuals.

 

Child tax credit

The act increased the amount of the child tax credit to $2,000 per qualifying child. The maximum refundable amount of the credit is now $1,400. The act also created a new nonrefundable $500 credit for qualifying dependents who are not qualifying children. The threshold at which the credit begins to phase out was increased to $400,000 for joint returns and $200,000 for other taxpayers.

 

Education provisions

The act modifies Sec. 529 plans to allow them to distribute up to $10,000 in expenses for tuition at an elementary or secondary school. This limitation applies on a per-student basis, rather than on a per-account basis.

 

Alimony

For any divorce or separation agreement executed or modified after Dec. 31, 2018, the act provides that alimony and separate maintenance payments are not deductible by the payer spouse. Payments to the recipient spouse are also no longer taxable.

 

Business Tax Law Changes

 Corporate tax rate of 21%

The act replaced the prior-law graduated corporate tax rate, with a flat rate of 21%. The new rate took effect Jan. 1, 2018.

 

Pass-through income deduction

For tax years after 2017, individuals may be allowed to deduct 20% of “qualified business income” from a partnership, S corporation, or sole proprietorship, as well as 20% of qualified real estate investment trust (REIT) dividends, qualified cooperative dividends, and qualified publicly traded partnership income.

 

The deduction can be phased out based on W-2 wages above a threshold amount and for “specified service businesses” when the taxpayer has taxable income in excess of $315,000 for a joint return and $157,500 for single individuals.

 

Bonus depreciation

The act extended and modified bonus depreciation, allowing businesses to immediately deduct 100% of the cost of eligible property in the year it is placed in service. It also removed the rule that made bonus depreciation available only for new property.

 

Sec. 179 expensing 

The act increased the maximum amount a taxpayer may expense under Sec. 179 to $1 million and increased the phaseout threshold to $2.5 million. These amounts will be indexed for inflation after 2018.

 

Like-kind exchanges 

Under the act, like-kind exchanges under Sec. 1031 will be limited to exchanges of real property that is not primarily held for sale. This will affect the trade in of company vehicles when purchasing a new company vehicle.

 

Domestic production activities

The act repealed the Sec. 199 domestic production activities deduction.

 

Entertainment expenses

The act disallows a deduction for (1) an activity generally considered to be entertainment, amusement, or recreation; (2) membership dues for any club organized for business, pleasure, recreation, or other social purposes; or (3) a facility or portion thereof used in connection with any of the above items.

 

Corporate Alternative Minimum Tax (AMT)

The act repealed the corporate AMT.

 

Employer credit for paid family or medical leave

The act allows eligible employers to claim a credit equal to 12.5% of the amount of wages paid to a qualifying employee during any period in which the employee is on family and medical leave if the rate of payment under the program is 50% of the wages normally paid to the employee. The credit is increased by 0.25 percentage points (but not above 25%) for each percentage point by which the rate of payment exceeds 50%. The maximum amount of family and medical leave that may be taken into account for any employee in any tax year is 12 weeks. However, the credit is only available in 2018 and 2019.

 

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.