Category Archives: Prescott Accounting

CITY OF PRESCOTT BUSINESS LICENSE REGISTRATION – MANDATORY AS OF 1/1/17

CITY OF PRESCOTT BUSINESS LICENSE REGISTRATION – MANDATORY AS OF 1/1/17

(passed May 2016)

Effective January 1, 2017, the City of Prescott is requiring anyone who engages in any business, occupation, or profession within the City to obtain an annual city business license.  This new requirement includes:  For-profit and nonprofit, home-based businesses, residential and commercial rentals, special event vendors and promoter/sponsors.  This also includes businesses located within the municipal limits of Prescott, and those that may be physically located outside of the limits but enter the city to engage in business activity.  If you have multiple locations, in the city limits, you will also need a separate license for each location.

The annual business license fee is $35 dollars with no proration. In addition, a $40 annual fire inspection will be required for all businesses located inside the Prescott City limits with the exception of home occupations and residential rental properties with less than three (3) dwelling units on one lot or parcel. License fees are paid online at the time of application.

There are additional fees for vacation rental and structured sober living homes which will be paid in conjunction with the business license application.

There are a few exemptions from the new ordinance that include schools, churches, governments, and employees of licensed businesses.

     For more information and to apply online, please visit the city’s  website at:

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

 

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. www.prescottaccountants.com


Mandatory Rules for Overtime Pay Have Changed

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.

On May 18, 2016, President Obama finalized the Department of Labor’s new rule updating regulations regarding overtime compensation for salaried employees. Starting December 1, 2016 any salaried employee paid under $47,476 must be paid overtime for working more than 40 hours in a week. Non-discretionary bonuses and incentive payments can be included, up to 10%, in the salary calculation. Please contact us if you have any questions or see the link below for more information from the Department of Labor.

 

https://www.dol.gov/whd/overtime/final2016/index.htm

 

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.


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.

 


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.


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.


TWO IMPORTANT TAX LAW CHANGES

June 2014

TWO IMPORTANT TAX LAW CHANGES TO NOTE:

1. Beginning in 2014, the IRS is required to file Form 8822-B to notify the IRS of a change in the entity’s responsible party. This is especially important for non-profit organizations who name the Treasurer or President (or any other Board Member or Executive Director) as the “responsible person” on the entity tax return and there is turnover on the Board.

This is the individual the IRS has on record for sending notices and other correspondence to. If this person is no longer connected to the organization, any notices may not get to the current responsible person and there could be serious consequences when notices go unanswered.

The Form may be found on IRS.gov and requires minimal information.

2. The Affordable Care Act has brought numerous changes, but one particular rule can have significant consequences. The ruling eliminates an employer’s ability to use a stand-alone health reimbursement arrangement to help employees pay for individual health insurance policies on a tax-free basis.

An exception to this is to offer reimbursement for limited-scope vision and dental benefits if they are provided under separate policy. Also, employees may still purchase coverage on a SHOP Exchange on a pre-tax basis using the employer’s cafeteria plan if the employer offers SHOP coverage to its employees.
We suggest contacting an insurance company if you have questions on your particular health coverage for employees as there are many factors that come into play. We bring this to your attention as the penalties for violating the Health Care Act Rules on this issue can be up to $100 per employee.

 

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.

 

 

 

 


Job Hunting? You May Be Able to Deduct the Expenses

Did you know that if you are trying to find work in your current occupation, the costs of your search, including expenses for preparing and sending resumes, employment agency fees and related travel expenses, should be deductible?

The deductions aren’t available in all cases.  For example, you’re not eligible to use them if you are seeking employment in a new field or if this will be your first job.  If it’s been a long time since you left your last job, your costs also may not qualify.

Don’t try to navigate the rules on your own.  If you want to learn more about these deductions, or ask any questions about your tax situation, contact us today.