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2011 YEAR END TAX CONSIDERATIONS AND PLANNING
FOR YOUR BUSINESS
The Holidays are here and that brings us thoughts of sugarplums and year-end close for your business. Below are some items for you to consider.
PURCHASE OF BUSINESS EQUIPMENT:
Qualifying new property placed in service before December 31 can be written off under 100% bonus depreciation. The bonus rate is scheduled to fall to 50% in 2012.
Section 179 depreciation applies to new or used equipment that can also be written off 100% up to a $500,000 purchase cost. This phases out after $2,000,000 of total qualifying purchases. Section 179 expensing will still be available in 2012, but the limits will be much lower.
As in previous years there are special rules and limits for vehicle purchases, so contact us if you have questions regarding those.
The qualifying equipment can be purchased on credit and expensed in 2011 as long as it is placed in service before year end.
IMPROVEMENTS ON YOUR BUSINESS REAL PROPERTY:
There are a variety of energy–related incentives that are scheduled to expire at the end of 2011. If you have, or are still considering some energy efficient improvements to your commercial building such as lighting, heating, cooling, and hot water systems this could be beneficial. There are certain standards that must be met to qualify.
VEHICLE USE EXPENSE IN YOUR BUSINESS:
A mileage log is required to prove your business-mile percentage if you use the vehicle for personal use or for commuting to work. This is required whether you use the standard mileage rate or actual vehicle expense, (i.e. gas, repair, etc). A value for personal mileage on a business vehicle needs to be calculated and added to your W-2 as an “auto fringe”. Call us for details or to calculate the personal value.
OFFICER WAGES AND HEALTH INSURANCE:
S-Corporation owners MUST pay themselves a reasonable wage and issue a W-2 to themselves. A “reasonable wage” is often described as what you would have to pay someone else to do your job. If you have taken “draws” out of the company this year and no wages, call us to reclassify an amount to wages and calculate payroll taxes on the amount. These payroll taxes must be paid by January 15, 2012 to avoid interest and penalties.
As a business owner, your personal health insurance premiums paid through the business should be added to your W-2 and thus deducted in full on your personal return– if they are not added to your W-2, the deduction is not a business deduction and will be taken on Schedule A- Itemized Deductions subject to the 7.5% medical adjustment. Call us for more information on how to handle this for maximum tax benefit.
HEALTH CARE TAX CREDIT FOR EMPLOYEES
If you pay any portion of health insurance premiums for employees you may be eligible for a credit on your tax return. There are eligibility requirements and the credit is limited to those who have 25 or fewer employees with average income of $50,000 or less. If you think you may qualify for this credit, contact us for more information.
HIRE ACT
The HIRE ACT, passed in 2010, provided credit for employers for each new person hired between February 4, 2010 and December 31, 2010 who had been unemployed for 60 consecutive days prior to hiring. The payroll tax credit was given on payroll taxes paid in 2010, but an additional credit is allowed if this employee was employed by you for the following consecutive 52 weeks. The additional credit is allowed to be taken on the 2011income tax return if this requirement is met. If this applies to your company, be sure to let us know.
PAYROLL
As of January 1, 2012, Arizona minimum wage will increase to $7.65. This amount is higher than the Federal minimum; however, Arizona employers must follow the Arizona statute.
THINGS TO DO:
Start gathering your business receipts, update your mileage logs, and tally up your income and expenses for the year. Remember to note the business reason for any travel, meals, and entertainment expenses on your receipts. If this is an over-whelming task for you, call us for help. We do provide this service at an hourly fee.
If you have employees, make sure you have up-to-date information on them – W-4 and A-4’s for deductions, addresses, name change if married/divorced during the year, and verify you have the correct Social Security number before you issue the W-2’s. If you pay year-end bonuses, be sure to add the amount to the W-2 and calculate and pay the additional payroll tax.
If you paid service providers/subcontractors over $600 during the year, make sure you have current addresses and a business EIN # or Social Security number for them. You must issue a 1099-MISC form to them by January 31. This also includes anyone you paid rent to if the amount is $600 or above. If you need assistance in this area give us a call.
We hope that this year was a prosperous one for your business. Call us before year-end at 928-778-0079 if you need an updated estimate of tax liability and to discuss any tax planning considerations.
Remember the filing deadline for Corporations and S-Corporations is March 15 – personal and Partnership returns is April 15.
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
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
For employers who hire unemployed veterans who begin work after November 21, 2011 and before January 1, 2013.
The size of the credit depends on how long the new hire was out of work. It could be 40% of the first $14,000 of pay for vets who were jobless for at least six months in the year before they were hired. For those out of work between four weeks and six months it is 40% of the first $6,000 of pay.
This tip is 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.
Exempt Organizations Annual Reporting Requirements – Annual Electronic Notice (Form 990-N) for Small Organizations: Information Reported
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| What information do I need to provide on the e-Postcard?
The e-Postcard is easy to complete. All you need is the following information:
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Organization’s legal name –
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Any other names your organization uses – If the organization is known by or uses other names to refer to the organization as a whole (and not to its programs and activities), commonly referred to as Doing-Business-As (DBA) names, they should be listed.
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Organization’s mailing address – The mailing address is the current mailing address used by the organization.
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Organization’s website address (if you have one).
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Every tax-exempt organization must have an EIN, sometimes referred to as a Taxpayer Identification Number (TIN), even if it does not have employees. The EIN is a unique number that identifies the organization to the Internal Revenue Service. Your organization would have acquired an EIN by filing a Form SS-4 prior to requesting tax-exemption. The EIN is a 9-digit number and the format of the number is NN-NNNNNNN (for example: 00-1234567).
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If you do not know your EIN, you may be able to find it on the organization’s bank statement, application for Federal tax-exempt status, or prior year return.
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Please note that the EIN is not your tax-exempt number. That term generally refers to a number assigned by a state agency that identifies organizations as exempt from state sales and use taxes.
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If you do not have an EIN, see the Instructions for Form SS-4 for different ways to apply for an EIN. DO NOT use the EIN of a parent or other organization.
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Name and address of a principal officer of your organization –
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Usually president, vice president, secretary, or treasurer – often specified in the organization’s by-laws.
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Organization’s annual tax year –
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Like any taxpayer, exempt organizations must keep books and reports and file returns based on an annual accounting period called a tax year. A tax year is usually 12 consecutive months that can be either calendar year or fiscal year and is often specified in the organization’s by-laws.
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Answers to the following questions:
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Page Last Reviewed or Updated: September 21, 2011 |
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Schutte & Hilgendorf, CPAs, a Prescott accounting firm, specializes in auditing, accounting and tax preparation and planning for non-profit Organizations throughout Yavapai County and Northern Ariziona. Should you need assistance with filing a non-profit information return (990) or notecard, please call us at 928-778-0079. We can e-file 990-e postcards (990-N) for you from our office for a nominal fee. Call us today!
June 23, 2011
This article was just published on the IRS Newswire Issue Number: IR-2011-69
WASHINGTON — The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2011. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes.
The rate will increase to 55.5 cents a mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011, as set forth in Revenue Procedure 2010-51.
In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2011. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.
“This year’s increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices,” said IRS Commissioner Doug Shulman. “We are taking this step so the reimbursement rate will be fair to taxpayers.”
While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.
The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.
The new six-month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.
Published by the AICPA:
2011 Tax Saving Tips for Small Businesses
If you have questions related to any of these tax saving tips, please call us at Schutte & Hilgendorf, CPAs. serving the greater Yavapai County. We have over 40 years combined experience with small business accounting, bookkeeping. and tax planning and preparation. We are certified QuickBooks Proadvisors and may also be able to help you setup or clean-up your QuickBooks files for the filing season.
Schutte & Hilgendorf is located in the Crossings at 3140 Stillwater Drive, Ste. A, Prescott, AZ 86305. Or call to setup a free inital consultation at 928-778-0079. Ask for Gidget Schutte or Lois Hilgendorf.
IRS/DOL Crackdown
If you classify any workers as “independent contractors”—or have plans to do so—2011 is the year to make sure you get that classification correct.
A massive new “Misclassification Initiative” launched by the IRS and U.S. Department of Labor is targeting employers with more audits and closer scrutiny. The IRS estimates that 80% of workers classified as “independent contractors” are actually employees.
As part of the crackdown, the DOL hired 100 new auditors solely to investigate misclassifications. State investigators are also turning up the heat on employers. And all this attention is prompting more independent contractors—and their attorneys—to challenge their classifications in court.
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
The Medicare and Medicaid EHR Incentive Programs will provide incentive payments to eligible professionals, eligible hospitals and critical access hospitals (CAHs) as they adopt, implement, upgrade or demonstrate meaningful use of certified EHR technology. This program, part of the 2009 Economic Stimulus Act, is a $20 million program, with up to $44,000 available for eligible professionals.
From a tax perspective, this means that eliglible medical professionals receiving these incentives may be taxed on this extra income in the form of bonus Medicare and Medicaid payments.
With bonus and 179 depreciation programs in effect for 2011, you may be able to deduct the entire purchase of hardware and software necessary to implement these mandated programs, thus offsetting the increased taxable income provided by the incentive payments.
Eligible medical professional should act quick! Incentives are only available from 2011 – 2014 and will be phased out completely by 2015 with EHR being mandated!
For more information about the Medicare and Medicaid EHR Incentive Program, visit http://www.cms.gov/EHRIncentivePrograms.com
For more information on the tax implications of this incentive program and how to take advantage of tax saving opportunities, contact Schutte & Hilgendorf, CPAs, a prescott accounting firm providing tax planning, preparation, audit, accounting and QuickBooks consulting to the greater Yavapai County area. Phone: 928-778-0079 or website: www.prescottaccountants.com
| From the eTax Alert™ February 11, 2011, Western CPE |
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IRS Changes Its Mind on Medicare Premiums as Self-Employed Health Insurance
With no notice, the IRS changed the wording in its 2010 Form 1040 Instructions. The instructions now say that Medicare B premiums can be used to figure the self-employed health insurance deduction. The 2009 instructions and Publication 535 said that they didn’t qualify.
Example: Mary is a 67-year-old, self-employed real estate broker. Because she’s a high income individual and is means tested for Medicare B, Mary pays $4,243 for her 2010 Medicare coverage. Mary also pays $1,200 for Medigap health insurance and $2,900 for long-term care insurance. If she’s otherwise qualified, Mary can claim a self-employed health insurance deduction of $8,343. For 2010 only, this amount also reduces her self-employment income for SE tax purposes.
© Vern Hoven & Sharon Kreider
If you have additional questions related to healthcare deductions or other tax preparation or tax planning questions, contact Schutte & Hilgendorf , CPAs, a prescott accounting firm providing audit, tax and accounting to Yavapai County and beyond.
IR-2011-7, Jan. 20, 2011
WASHINGTON — The Internal Revenue Service plans a Feb. 14 start date for processing tax returns delayed by last month’s tax law changes. The IRS reminded taxpayers affected by the delay they can begin preparing their tax returns immediately because many software providers are ready now to accept these returns.
Beginning Feb. 14, the IRS will start processing both paper and e-filed returns claiming itemized deductions on Schedule A, the higher education tuition and fees deduction on Form 8917 and the educator expenses deduction. Based on filings last year, about nine million tax returns claimed any of these deductions on returns received by the IRS before Feb. 14.
People using e-file for these delayed forms can get a head start because many major software providers have announced they will accept these impacted returns immediately. The software providers will hold onto the returns and then electronically submit them after the IRS systems open on Feb. 14 for the delayed forms.
Taxpayers using commercial software can check with their providers for specific instructions. Those who use a paid tax preparer should check with their preparer, who also may be holding returns until the updates are complete.
Most other returns, including those claiming the Earned Income Tax Credit (EITC), education tax credits, child tax credit and other popular tax breaks, can be filed as normal, immediately.
The IRS needed the extra time to update its systems to accommodate the tax law changes without disrupting other operations tied to the filing season. The delay followed the Dec. 17 enactment of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which extended a number of expiring provisions including the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction.
If you need assistance with your tax filings, contact Schutte & Hilgendorf, CPAs, serving all of Yavapai County with accounting and tax services.
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We Are The Piece That Fits.
Schutte & Hilgendorf PLLC
3140 Stillwater Drive
Prescott, AZ 86305
Phone: 928-778-0079
Fax: 928-778-0261
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