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If you have too little withheld from your pay check, you could end up owing money when you file your taxes. If you withhold too much, you get a large refund, BUT you have let the government have too much of your money all year.
The IRS has a withholding calculator at IRS.gov to help you figure the correct amount of federal withholding for your tax situation. If you find you are over or under withholding, you should fill out a new W-4 Form with your employer and have the withholding adjusted.
To use the withholding calculator have this information available:
*Your most recent pay stub
* Your most recent federal tax return
Then:
*Fill in all information that applies and print the screen that summarizes your information. Use this information to complete a new W-4 Form.
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 at 928-778-0079.
The Federal Unemployment Tax (FUTA) rate was reduced from 6.2% to 6.0% effective July 1, 2011. This makes all employers who are subject to Arizona unemployment insurance tax also subject to the .10% Arizona Job Training Tax (JTT) on taxable wages paid after June 30, 2011.
Consequently, the above-mentioned JTT exemptions for certain tax-rated employers expired on July 1, 2011, so those exemptions are no longer in effect with respect to taxable wages that are paid after June 30, 2011. Therefore, ALL tax-rated employers, regardless of their UI Tax rate and whether they are “new employers” or experience-rated, are subject to JTT on taxable wages they pay after June 30, 2011.
Employers who were exempt from JTT in the first and second quarters of 2011 continue to be exempt from JTT on taxable wages they paid in those quarters. In other words, for 2011: (1) if such an employer did not meet the $7,000 taxable wage base of an employee in the first or second quarter, the employer is subject to JTT only on taxable wages paid to that employee in the third and fourth quarter; (2) if the employer did meet the taxable wage base of an employee in the first or second quarter, the employer is not subject to JTT on wages paid to that employee in the third or fourth quarter. Reimbursement employers continue to be exempt from JTT after June 30, 2011.
From Arizona Department of Economic Security Change in FUTA Rate and Job Training Tax Exemptions
If you need more information about the article above, contact Schutte & Hilgendorf, CPAs serving all of Yavapai County with accounting, tax preparation and planning, auditing, bookkeeping, payroll, and QuickBooks consulting.
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.
Article provided by Paychex, July 12, 2011:
Because Arizona was one of the 30+ states that borrowed money from the feds after our unemployment coffers were depleted as a result of our most recent recession, all Arizona employers who are subject to State Unemployment Tax are subject to a Special Assessment beginning July 20th 2011.
Here are a few of the details:
All employers subject to Arizona UI Tax in 2011 and 2012 are also subject to the SA.
- Reimbursement employers are exempt from the SA.
- “Taxable wages” are the first $7,000 of gross wages paid to each employee in a calendar year.
- The SA rate is 0.40% of taxable wages paid in 2011 (maximum $28 per employee).*
- The SA rate is projected to be 0.60% of taxable wages paid in 2012 (maximum $42 per employee).*
- Payment of the SA for the first three quarters of 2011 is due by October 31, 2011, payable as follows:
- In mid to late September 2011, DES will mail employers statements of the SA amounts they owe, if any, for the first two quarters of 2011.
- Beginning with the third quarter of 2011, SA amounts due are payable with quarterly UI taxes and reported on Line 7, Part C of the Unemployment Tax and Wage Report (form UC-018).
- Employers may include the amount of SA due for the first two quarters of 2011 on their third quarter 2011 report and remit a single payment for all amounts due.
- Alternatively, employers may pay the SA for the first two quarters separately from a report, via the online Tax and Wage System (TWS) at www.azuitax.com or by check or money order.
Please see attached article (Special Assesment change with SUI) from DES for details, or visit the below website:
https://www.azdes.gov/main.aspx?menu=316&id=6767
| As reported by AICPA Tax Alert/Tax Section News 5/27/11FUTA Surtax Expires at the End of June |
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| Originally enacted by Congress in 1976, the temporary surtax on the Federal unemployment tax was imposed to assist states in rebuilding their unemployment trust funds. That was 35 years ago and the temporary surtax has been renewed each time expiration date drew near. The last renewal was in 2009, when the Worker, Homeownership, and Business Assistance Act was signed into law.The Federal Unemployment Tax rate is 6.2% of the first $7,000 of wages paid by an employer. The .2% is a surtax that is the equivalent of an added tax of $14 per year per employee. When Congress first enacted the surtax, it also requested that Congress?? seek a more permanent solution to the long-term funding of the Federal Unemployment Tax system that would leave it in a better position to deal with economic swings that resulted in greater demands on the unemployment funds.
The temporary surtax expires on June 30, 2011. While the President’s budget proposal includes an extension of the surtax, no legislation has been seriously discussed and barring other action, the FUTA tax will be lowered to 6% on July 1.
For details on FUTA, see the instructions to IRS Form 940, filed by all employers each year. |
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
Written and originally published by the Arizona Department of Revenue,
Changes to Arizona Withholding for Wages Paid After December 31, 2010.
The Department prescribed new withholding tables in early 2010 in accordance with Senate Bill 1185 (Laws 2009, 1st Reg. Session, Chapter 2). The new tables were effective for wages paid after June 30, 2010.
The new withholding tables are based on a percentage of gross taxable wages. “Gross taxable wages” is the amount that meets the federal definition of “wages” contained in IRC § 3401 and that will generally be included in box 1 of the employee’s federal Form W-2 at the end of the calendar year (i.e. gross wages net of pretax deductions, such as the employee’s portion of health insurance premiums).
Each employee subject to Arizona income tax withholding was required to complete a new Arizona Form A-4.
The Department has revised Arizona Form A-4 effective for wages paid after December 31, 2010.
The changes include:
■Providing an additional withholding percentage of 0.8%. Previously available percentages are unchanged.
■Removal of the $15,000 annual compensation threshold. All seven withholding percentage rates are available to all employees, regardless of annual compensation.
■Relaxing the exemption requirements. The employee only has to expect that there will be no Arizona tax liability in the current taxable year (instead of not having a liability in the prior year and not expecting one in the current year). However, this withholding exemption election will need to be renewed annually, similar to federal requirements.
Unlike the previous changes effective July 1, every employee is not required to complete a new Arizona Form A-4. Employees wanting to renew their withholding exemption are required file a new Form A-4 with their employer. Employees wanting to take advantage of the lower withholding percentage must file a new Form A-4 with their employer. Individuals with a current withholding percentage elected on Arizona Form A-4P or Arizona Form A-4V may also file a new form to take advantage of the new withholding percentage.
Withholding percentage options for wages paid after December 31, 2010.
Rates are a percentage of gross taxable wages.
Percentage Rates
0.8%
1.3%
1.8%
2.7%
3.6%
4.2%
5.1%
The 2011 Arizona Form A-4, Arizona Form A-4P, and Arizona Form A-4V are available on the
Department’s website at http://www.azdor.gov/Forms/Withholding.aspx
Arizona Withholding Tax Basics For Arizona purposes, an employer must withhold Arizona income tax from the payment of wages to an employee whose compensation is for services performed in Arizona.
Arizona income tax withholding is a percentage of the employee’s gross taxable wages.
“Gross taxable wages” is the amount that meets the federal definition of “wages” contained in IRC § 3401 and that will be included in box 1 of the employee’s federal Form W-2 at the end of the calendar year (i.e. gross wages net of pretax deductions, such as the employee’s portion of health insurance premiums). Employees may also have their employer withhold an additional amount.
The employee completes Arizona Form A-4, Employee’s Arizona Withholding Percentage Election, to elect an Arizona withholding percentage. Amounts that are considered wages for federal tax purposes are also considered wages for Arizona income tax and withholding purposes.
Amounts that are included in wages and are subject to mandatory federal withholding are subject to mandatory Arizona withholding. Amounts that are excluded from wages and are excluded from mandatory federal withholding are excluded from mandatory Arizona withholding.
An employer must withhold Arizona tax from wages paid for services performed within Arizona regardless of whether the employee is a resident or nonresident of Arizona. However, there are two exceptions to the general mandatory withholding requirements for nonresident employees temporarily performing services for their employer in Arizona. Although a nonresident employee may be exempt from Arizona income tax withholding, the employee may be required to file a nonresident Arizona income tax return if the employee meets the filing requirement.
An employer may not have to withhold Arizona tax from wages paid to a nonresident performing services in Arizona if:
■The employee is physically present in Arizona for less than 60 days in a calendar year for the purpose of performing a service that will benefit the employer; AND
■The employer is an individual, fiduciary, partnership, corporation or limited liability company having property, payroll and sales in Arizona, or of a related entity having more than 50% direct or indirect common ownership.
An explanation of this exemption (including examples) is included in the Employer’s Instructions for the Arizona Form A-4.
If you need more information about the article above, contact Schutte & Hilgendorf, CPAs serving all of Yavapai County with accounting, tax preparation and planning, auditing, bookkeeping, payroll, and QuickBooks consulting.
WASHINGTON ― The Internal Revenue Service today released instructions to help employers implement the 2011 cut in payroll taxes, along with new income-tax withholding tables that employers will use during 2011.
Millions of workers will see their take-home pay rise during 2011 because the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 provides a two percentage point payroll tax cut for employees, reducing their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid. This reduced Social Security withholding will have no effect on the employee’s future Social Security benefits.
The new law also maintains the income-tax rates that have been in effect in recent years.
Employers should start using the new withholding tables and reducing the amount of Social Security tax withheld as soon as possible in 2011 but not later than Jan. 31, 2011. Notice 1036, released today, contains the percentage method income tax withholding tables, the lower Social Security withholding rate, and related information that most employers need to implement these changes. Publication 15, (Circular E), Employer’s Tax Guide, containing the extensive wage bracket tables that some employers use, will be available on IRS.gov in a few days.
The IRS recognizes that the late enactment of these changes makes it difficult for many employers to quickly update their withholding systems. For that reason, the agency asks employers to adjust their payroll systems as soon as possible, but not later than Jan. 31, 2011.
For any Social Security tax over withheld during January, employers should make an offsetting adjustment in workers’ pay as soon as possible but not later than March 31, 2011.
Employers and payroll companies will handle the withholding changes, so workers typically won’t need to take any additional action, such as filling out a new W-4 withholding form.
As always, however, the IRS urges workers to review their withholding every year and, if necessary, fill out a new W-4 and give it to their employer. For example, individuals and couples with multiple jobs, people who are having children, getting married, getting divorced or buying a home, and those who typically wind up with a balance due or large refund at the end of the year may want to consider submitting revised W-4 forms. Publication 919, How Do I Adjust My Tax Withholding?, provides more information to workers on making changes to their tax withholding.
From IRS Announcement IR-2010-124, Dec. 17, 2010
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.
Arizona Department of Revenue has revised Arizona Form A-4 effective for wages paid after December 31, 2010. The changes include:
1) Providing an additional withholding percentage of 0.8%. Previously available percentages are unchanged.
2) Removing the $15,000 annual compensation threshold. All seven withholding percentage rates are available to all employees, regardless of annual compensation.
3) Relaxing the exemption requirements. The employee only has to expect that there will be no Arizona tax liability in the current taxable year (instead of not having a liability in the prior year and not expecting one in the current year). However, this withholding exemption election will need to be renewed annually, similar to federal requirements.
Unlike the changes that took effect on July 1, not every employee is required to complete a new Arizona Form A-4. Individuals with a current withholding percentage elected on Arizona Form A-4P or Arizona Form A-4V may file a new form to take advantage of the new withholding percentage. However, employees wanting to renew their withholding exemption or those wanting to take advantage of the lower withholding percentage are required to file a new Form A-4 with their employer.
Click here to download a new 2011 Arizona A-4.
Changes to Arizona Withholding for Wages Paid After December 31, 2010, Arizona Department of Revenue, December 7, 2010.
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.
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.
(From business.gov article Misclassifying Workers as Independent Contractors Can Be Costly)
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.
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Schutte & Hilgendorf PLLC
3140 Stillwater Drive
Prescott, AZ 86305
Phone: 928-778-0079
Fax: 928-778-0261
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