|
|
Arizona has not fully conformed to the federal changes to the Internal Revenue Code made in 2009. Each year the Arizona legislature considers whether to conform to changes made to the Internal Revenue Code during the prior year. On April 27, 2010, the Governor signed House Bill 2156 which incorporated the federal changes made in 2009 into Arizona’s definition of “internal revenue code.” However, House Bill 2156 also included additions to and subtractions from income that have the effect of Arizona not conforming to the following changes:
1) Unemployment compensation exclusion up to $2,400
2) Itemized deduction for sales tax on the purchase of a new motor vehicle
3) Deduction for cash contributions for Haiti earthquake relief made after January 11, 2010 and before March 1, 2010
4) Discharge of indebtedness income from business indebtedness discharged by the reacquisition of a debt instrument
5) Original issue discount on reacquisition of debt instrument
6) Special federal net operating loss carryback rules for 2008 and 2009 losses
Arizona Department of Revenue has now developed a new Arizona form 140X-NC to make non-conformity changes to their previously filed Arizona individual income tax returns. If you report non-conformity changes using form 140X-NC and pay the entire tax due by October 17, 2011, you will not owe any penalties or interest on the additional tax.
(From Arizona Department of Revenue Notice Regarding Non-conformity (updated 8/6/2010))
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.
The HIRE act of 2010 also extends the $250,000 limit on first-year expensing for purchase of business equipment and machinery in 2010, (Known as Section 179). If the total cost of qualifying purchases in 2010 exceeds $800,000, the $250,000 Section 179 deduction is reduced.
The 50% bonus depreciation in effect in 2009 HAS NOT YET been extended to apply in 2010. The latest news we have received is that it is included in a bill that the Senate is considering, but has not yet passed. We are keeping an eye on the developments and will post new information to our website www.prescottaccountants.com as soon as it is available.
If you have any questions about how to apply this depreciation extension or any other aspect of the 2010 HIRE act, or just need tax planning assistance, please call Schutte & Hilgendorf, CPAs at 928-778-0079. We specialize in accounting, auditing, and tax planning and preparation for individuals and business in the great quad-city area.
On July 1, 2010 the Arizona withholding rates will change. They are currently based on a percentage of the Federal withholding. Starting on July 1, 2010 the rates will change to being based on a table prescribed by the Arizona Department of Revenue. The rates effective July 1, 2010 have recently been issued along with the new Form A-4. This form will need to be completed by employees prior to the change on July 1, 2010.
The tax rate did not increase – Arizona is now using a different method for calculating withholding
The following table can be used as a guide for determining your new rate:
If your rate
Before July 1 was |
|
Then use this rate
After June 30 |
| 10.7% |
|
1.3% |
| 20.3% |
|
1.8% |
| 24.5% |
|
2.7% |
| 26.7% |
|
3.6% |
| 33.1% |
|
4.2% |
| 39.5% |
|
5.1% |
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.
On March 18, 2010, The HIRE Act was signed into law and provides some incentives for hiring and retaining previously unemployed workers.
Under the HIRE Act, employers who hire unemployed workers after February 3, 2010 and before January 1, 2011 are exempt from having to pay the employers share of Social Security taxes(6.2%) on the wages paid to the qualified employees after the March 18th effective date. The employer still withholds and pays the employee share of Social Security tax(6.2%) and both the employee and employer share of Medicare tax(1.45%).
Qualifying employees are those who certify to the employer on new Form W-11 that they did not work more than 40 hours in the 60 days prior to the hire date. If the new hire is replacing another worker, the exemption applies only if the worker left voluntarily or was fired for cause.
The credit is obtained by filing the new Form 941 for the 2nd quarter payroll tax reporting.
One additional credit will be available if the qualifying employee is retained for at least 52 consecutive weeks. The retention credit is taken in 2011 and will be the lesser of $1,000 or 6.2% of the wages paid to the worker during a 52 consecutive-week period.
If you need further information please contact us.
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.
WASHINGTON ― Many small businesses and tax-exempt organizations that provide health insurance coverage to their employees now qualify for a special tax credit, according to the Internal Revenue Service.
Included in the health care reform legislation, the Patient Protection and Affordable Care Act, approved by Congress and signed by President Obama on March 23, the credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.
“This credit provides a real boost to eligible small businesses by helping them afford health coverage for their employees,” said IRS Commissioner Doug Shulman. “We urge small businesses and tax-exempt employers to look closely at this important tax break — which is already effective — to see if they qualify.”
The maximum credit is 35 percent of premiums paid in 2010 by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. In 2014, this maximum credit increases to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible employers that are tax-exempt organizations.
The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ low and moderate income workers. It is generally available to employers that have fewer than 25 full-time equivalent (FTE) employees paying wages averaging less than $50,000 per employee per year. Because the eligibility formula is based in part on the number of FTEs, not the number of employees, many businesses will qualify even if they employ more than 25 individual workers.
The maximum credit goes to smaller employers — those with 10 or fewer FTEs — paying annual average wages of $25,000 or less.
Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. For tax-exempt employers, the IRS will provide further information on how to claim the credit.
The IRS will use postcards to reach out to millions of small businesses that may qualify for the credit. The postcards will encourage small business owners to take advantage of the credit if they qualify.
(From IRS Issue Number IR-2010-38)
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.
If you are donating to charities providing earthquake relief in Haiti, you may be able to claim those donations on your 2009 tax return. Here are 10 important facts the Internal Revenue Service wants you to know about this special provision.
1. A new law allows you to claim donations for Haitian relief on your 2009 tax return, which you will be filing this year.
2. The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti.
3. To be eligible for a deduction on the 2009 tax return, donations must be made after Jan. 11, 2010 and before March 1, 2010.
4. In order to be deductible, contributions must be made to qualified charities and can not be designated for the benefit of specific individuals or families.
5. The new law applies only to cash contributions.
6. Cash contributions made by text message, check, credit card or debit card may be claimed on your federal tax return.
7. You must itemize your deductions in order to claim these donations on your tax return.
8. You have the option of deducting these contributions on either your 2009 or 2010 tax return, but not both.
9. Contributions made to foreign organizations generally are not deductible. You can find out more about organizations helping Haitian earthquake victims from agencies such as the U.S. Agency for International Development ( www.usaid.gov).
10. Federal law requires that you keep a record of any deductible donations you make. For donations by text message, a telephone bill will meet the record-keeping requirement if it shows the name of the organization receiving your donation, the date of the contribution, and the amount given. For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check or a receipt from the charity. Receipts should show the name of the charity, the date and amount of the contribution.
(From IRS Special Edition Tax Tip 2010-01)
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.
WASHINGTON — The Internal Revenue Service today reminded tax-exempt organizations to make sure they file their annual information form on time. In 2010 the tax-exempt status of any non-profit that has not filed the required form in the last three years will be revoked.
The Pension Protection Act of 2006 requires that non-profit organizations that do not file a required information form for three consecutive years automatically lose their Federal tax-exempt status. This requirement has been in effect since the beginning of 2007.
A list of revoked organizations will be available to the public, as well as state charity and tax officials on this website.
If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.
Form 990-series returns and e-Postcards, are due by the 15th day of the 5th month after an organization’s tax year ends.
(From IRS Issue Number IR-2010-010)
Contact us today for assistance filling the appropriate return for your tax-exempt organization.
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.
The IRS urges people to use care and caution when choosing a tax preparer. Remember, you are legally responsible for what’s on your tax return even if it was prepared by an another individual or firm.
Most tax return preparers are professional, honest and provide excellent service to their clients. However, unscrupulous tax return preparers do exist and can cause considerable financial and legal problems for their clients. Therefore, it’s important to find a qualified tax professional.
The following tips will help you choose a preparer who will offer the best service for your tax preparation needs.
- Check the person’s qualifications Ask if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.
- Check on the preparer’s history Check to see if the preparer has any questionable history with the Better Business Bureau, the state’s board of accountancy for CPAs or the state’s bar association for attorneys.
- Find out about their service fees Avoid preparers that base their fee on a percentage of the amount of your refund or those who claim they can obtain larger refunds than other preparers.
- Make sure the tax preparer is accessible Make sure you will be able to contact the tax preparer after the return has been filed, even after April 15, in case questions arise.
- Provide all records and receipts needed to prepare your return Most reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items.
- Never sign a blank return Avoid tax preparers that ask you to sign a blank tax form.
- Review the entire return before signing it Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.
- Make sure the preparer signs the form A paid preparer must sign the return as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return. The preparer must also give you a copy of the return.
(Taken from IRS Tax Tip 2010-06)
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.
Last year, 2 out of 3 tax returns were filed electronically. Was yours? If not, here are three important reasons to e-file your return.
- It’s fast Your tax return will get processed more quickly if you use e-file. If there is an error on your return, it will typically be identified and can be corrected right away. If you file electronically and choose to have your tax refund deposited directly into your bank account, you will have your money in as few as 10 days.
- It’s safe The IRS is fully committed to protecting your tax information and e-filed returns are protected by the latest technology. In 20 years, nearly 800 million e-filed returns have been processed safely and securely by the IRS.
- It’s time Don’t miss out on the benefits of e-file, 2 out of 3 taxpayers, 95 million, already get the benefits of e-file.
(Taken from IRS Tax Tip 2010-07)
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.
|
We Are The Piece That Fits.
Schutte & Hilgendorf PLLC
3140 Stillwater Drive
Prescott AZ 86305
Phone: 928.778.0079
Fax: 928-778-0261
|
