Tag Archives: prescott accountant

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 The personal exemptions of $4,050 per person were repealed.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  • Overall limitation: The act repealed the overall limitation on itemized deductions.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.


Non-Profit Guidance for New DOL Overtime Rules

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.

 

Many of our clients have asked for information pertaining to the new Department of Labor rules for overtime, especially as they pertain to the not-for-profits.  The link below takes you directly to Q&A excepts from the Department of Labor’s webinar for the not-for-profit sector.

 

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

 

Even if a non-profit only engages in non-commercial, charitable operations, the Individual Coverage test may apply to specific employees because of their duties.

 

Examples:

Q1:  How does an employer handle an employee who works part time doing business enterprise and part time charitable enterprise? Is overtime only required when an employee passes 40 hours of enterprise work in a week?

 

A1:  There are two ways that an individual employee may be covered under the Fair Labor Standards Act (FLSA) and entitled to its protections: individual coverage and enterprise coverage.

 

A nonprofit organization is not considered a covered enterprise under the FLSA unless it engages in ordinary commercial activities that result in sales made or business done that meets the $500,000 threshold. If an nonprofit meets this threshold, its employees are covered by the FLSA and entitled to overtime for work performed over 40 hours a week regardless of how the employee spends their time.

 

Even if a nonprofit organization is not covered on an enterprise basis as described above, it may have individual employees who are covered individually and therefore are entitled to the FLSA’s protections. An employee who engages in interstate commerce or in the production of goods for interstate commerce or in the protection of goods for interstate commerce is covered by the FLSA and is entitled to overtime pay for time worked over 40 hours in a week.

 

Q2:  So we have a Special events position that makes donation requests to sell at our annual basket auction fundraiser. If any of those requests will be made or received from across state lines she would be individually covered even if we don’t earn $500,000 in sales revenue as an agency? She would be covered because of the Individual test?

 

A:  Generally, employees who make phone calls across state lines are individually covered under the Fair Labor Standard Act (FLSA). For further assistance with coverage principles under the FLSA, please refer to Fact Sheet #14 at:

 

https://www.dol.gov/whd/regs/compliance/whdfs14.pdf

 

or contact your nearest WHD district office at:

 

https://www.dol.gov/whd/america2.htm

 

 

We also found this article, provided by the National Council of Non-Profits to be informative:

 

https://www.councilofnonprofits.org/trends-policy-issues/overtime-regulations-and-the-impact-nonprofits

 

As always, please don’t hesitate to call us at 928-778-0079 with your specific questions about these rules and how they apply to your Organization.

 

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.


Overtime rules for Business Owners

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.

Since the release of the new overtime regulations from the Department of Labor, we have received many questions from our business clients. One reoccurring question we would like to address is how/if the new overtime rules will affect the business owner’s salary. An employee who owns at least 20 percent equity interest in the enterprise in which they are employed and who is actively engaged in its management is not subject to the salary level requirements of the overtime regulations. This rule applies to LLCs, Partnerships, S Corporations, Corporations or any other entity type. Because of this, the final rules recently released should not have an effect on business owners who own 20 percent or more of their company. Any owners who own under 20 percent would have to apply the standard overtime tests and requirements. If you have any questions about your specific situation, please give us a call 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.


Schutte & Hilgendorf CPAs receives acceptance of their Passed peer review

Schutte & Hilgendorf is proud to announce that they have received a Pass grade and acceptance of their 2012 peer review. This is the second peer review conducted for the newly formed firm since 2008 by the California Peer Review Program (who conducts Arizona’a peer reviews).

Click on the link below for the latest peer review report for Schutte & Hilgendorf CPAs.

PR Acceptance Letter 2012

The American Institute of Certified Public Accountants (AICPA) requires its member firms to undergo a peer review every three years. A peer review is a periodic external review of a firm’s quality control system in accounting and auditing and is also known as the AICPA’s practice monitoring program. AICPA members engaged in the practice of public accounting are required to practice in a firm that is enrolled in an approved practice-monitoring program such as the Peer Review Program.

Schutte & Hilgendorf CPAs provides audit, accounting, tax and QuickBooks consulting services for Prescott, Yavapai County and Northern Arizona. We specialize in performing these services for non-profits and homeowners associations, but also are here to serve individuals and small businesses. Call us today for a free consultation or quote! 928-778-0079.


Are my Social Security Benefits Taxable?

We get a lot of clients that ask us when their Social Security Benefits become taxable.  The following information is provided bythe Social Security Administration and clearly explains when your Social Security Benefits become taxable.  This is also available by

 

CLICKING HERE

 

Should you need assistance or have questions about your Social Security Benefits and their taxability, contact Schutte & Hilgendorf, CPAs, providing tax planning and preparation, auditing, accounting and QuickBooks consulting to the greater Yavapai County. Call us at 928-778-0079 or email at info@prescottaccountants.com

Some people have to pay federal income taxes on their Social Security benefits. This usually happens only if you have other substantial income (such as wages, self-employment, interest, dividends and other taxable income that must be reported on your tax return) in addition to your benefits.

No one pays federal income tax on more than 85 percent of his or her Social Security benefits based on Internal Revenue Service (IRS) rules. If you:

  • file a federal tax return as an “individual” and your combined income* is
    • between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
    • more than $34,000, up to 85 percent of your benefits may be taxable.
  • file a joint return, and you and your spouse have a combined income* that is
    • between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits
    • more than $44,000, up to 85 percent of your benefits may be taxable.
  • are married and file a separate tax return, you probably will pay taxes on your benefits.

*Note:

Your adjusted gross income

+ Nontaxable interest

½ of your Social Security benefits
= Your “combined income

Each January you will receive a Social Security Benefit Statement (Form SSA-1099) showing the amount of benefits you received in the previous year. You can use this Benefit Statement when you complete your federal income tax return to find out if your benefits are subject to tax.

If you do have to pay taxes on your Social Security benefits, you can make quarterly estimated tax payments to the IRS or choose to have federal taxes withheld from your benefits.

For more information about taxation of benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits.


Questions and Answers for the Additional Medicare Tax – Effective January 1, 2013

The following link will take you to questions and answers that will  provide employers and payroll service providers information that will help them as they prepare to implement the Additional Medicare Tax which goes into effect in 2013. The Additional Medicare Tax applies to individuals’ wages, other compensation, and self-employment income over certain thresholds; employers are responsible for withholding the tax on wages and other compensation in certain circumstances. The IRS has prepared these questions and answers to assist employers and payroll service providers in adapting systems and processes that may be impacted.

Click on the link below to be taken to the IRS Q&A:

Questions and Answers for the Additional Medicare Tax – From the IRS

For further tax planning considerations and questions, contact Schutte & Hilgendorf, pllc – CPAs.  We offer free initial consultations.  Schutte & Hilgendorf, pllc – CPA’s, is a full service public accounting firm providing tax planning, preparation, audit, accounting, and QuickBooks consulting to individuals, small businesses, non-profits, and homeowners associations in the Prescott and greater Yavapai County area.  Call us at 928-778-0079 or visit www.prescottaccountants.com


IRS Net Investment Income Tax – Effective January 1, 2013 – FAQs

The Net Investment Income Tax is imposed by section 1411 of the Internal Revenue Code (IRC). The NIIT applies at a rate of 3.8 percent to certain net investment income of individuals, estates and trusts that have income above the statutory threshold amounts. The Net Investment Income Tax goes into effect on Jan. 1, 2013.

For more information directly from the IRS, click on the link below for a FAQ page.

3.8% NET INVESTMENT INCOME TAX – EFFECTIVE 2013 – FAQS

For further tax planning considerations and questions, contact Schutte & Hilgendorf, pllc – CPAs.  We offer free initial consultations.  Schutte & Hilgendorf, pllc – CPA’s, is a full service public accounting firm providing tax planning, preparation, audit, accounting, and QuickBooks consulting to individuals, small businesses, non-profits, and homeowners associations in the Prescott and greater Yavapai County area.  Call us at 928-778-0079 or visit www.prescottaccountants.com