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Click on the link below for this months QuickBooks Tip:
April 2011 QuickBooks Tip: Using Sales Orders
Sales Orders in QuickBooks: Why? When? How?
There aren’t that many different types of forms to keep straight in QuickBooks, but you likely don’t use all of them. You probably use invoices and purchase orders frequently, and may fill out the occasional sales receipt or credit memo or estimate.
But what about sales orders? You may find that they could make your bookkeeping more accurate and easier. There are only a few situations where they’re needed, but they’re the appropriate form to use at those times.
Schutte & Hilgendorf, CPAs, serving the greater Yavapai County, provides accounting, bookkeeping, tax preparation and planning, and QuickBooks consulting and setup to individuals and small busienesses. Contact us for a free initial consultation at 928-778-0079.
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.
Private School Tuition Credit
AZ Tax Credit-Qualifying School Tuition Organizations
Frequently Asked Questions (from the AZ DOR Website:
http://www.azdor.gov/ReportsResearch/SchoolTaxCredit.aspx )
What do I have to do to qualify for this credit?
To qualify for this credit, you must make cash or payroll
withholding contributions to a school tuition
organization that provides scholarships or grants to
qualified schools.
What is the maximum dollar amount of the credit?
The credit is limited to the actual amount of the
contribution. However, in 2011 the credit cannot exceed
$500 for single or head of household taxpayers. For
married taxpayers that file a joint return, the 2011 credit
cannot exceed $1,000. If married taxpayers file separate
returns, each spouse may claim only 1/2 of the credit that
would have been allowed on the joint return. Please Note:
Starting in 2011, the maximum credit amounts will be
annually adjusted (although never downward) in
accordance with changes in the metro Phoenix consumer
price index.
Must the private school tuition tax credit be claimed
in the year of donation?
No. Beginning in 2011, a contribution made by April 15
may be treated for purposes of this tax credit as if it was
made on December 31 of the prior year. For example, a
contribution made to a school tuition organization from
January 1, 2011 to April 15, 2011 could be used as a tax
credit on either your 1) 2010 or 2) 2011 Arizona income
tax return
What is a school tuition organization?
A school tuition organization is one that is tax exempt
under Section 501(c)(3) of the Internal Revenue Code,
allocates at least 90 percent of its annual revenue to
scholarships or grants, and makes its scholarships/grants
available to students of more than one qualified school.
Will the Department of Revenue certify school
tuition organizations?
Yes. Beginning January 1, 2011, the Arizona
Department of Revenue is required to begin certifying
school tuition organizations. The Arizona Department
of Revenue will maintain a registry of currently
certified school tuition organizations on its website,
www.azdor.gov.
What is a qualified school?
A qualified school is a non-governmental preschool for
handicapped students, or a non-governmental primary
or secondary school located in Arizona. The school
cannot discriminate on the basis of race, color,
handicap, familial status, or national origin. The
primary school begins with kindergarten, and the
secondary school ends with grade 12.
Are there situations where a contribution to a school
tuition organization, as defined in statute, would not
qualify for the tax credit?
Yes. Your donation to the school tuition organization
will not qualify for the credit if you designate the
donation for the direct benefit of your dependent. Your
donation will also not qualify if you designate a student
beneficiary as a condition of your contribution to the
school tuition organization. Additionally, the tax credit
is not allowed if you agree with another person to
designate each other’s contribution to the school tuition
organization for the direct benefit of each other’s
dependent, a practice commonly known as swapping.
May I make credit eligible contributions through
payroll withholding?
Yes. You may now be able to make credit eligible
contributions to a school tuition organization through
payroll withholding. Check with your employer to see
if your employer has agreed to withhold contributions
that qualify for this credit from your pay.
Click on the link below to get this month’s Quickbooks Quick tip. Check back monthly for more easy, time-saving tricks.
QuickBooks Tip for March 2011: MAKE A STATEMENT!
QuickBooks Helps You Make a Statement
How do you let customers know they owe you money? Probably by sending invoices. And how’s that working for you? If your customers are all conscientious and pay on time, maybe that’s all you need to do. But perhaps you need to consider doing at least part of your billing by dispatching statements. These forms have their drawbacks. For example, you can’t include sales tax or discounts on them. You can’t group related charges and subtotal them. And your customization options are weaker than in invoices.
For more QuickBooks training tips, contact Schutte & Hilgendorf, CPAs, a full service accounting firm providing Prescott and the greater Yavapai County with excellent tax, accounting, auditing, bookkeeping and QuickBooks consulting services. We can be reached at 928-778-0079.
Click on the link below to get this month’s Quickbooks Quick tip. Check back monthly for more easy, time-saving tricks.
February 2011 QuickBooks Tip: Memorizing Transactions
For more QuickBooks training tips, contact Schutte & Hilgendorf, CPAs, a full service accounting firm providing Prescott and the greater Yavapai County with excellent tax, accounting, auditing, bookkeeping and QuickBooks consulting services. We can be reached at 928-778-0079.
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
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.
Small businesses whose books are audited—by a hired certified public accountant, not the Internal Revenue Service—improve their chances of getting a loan, and at far better terms, than businesses with less scrutinized financial statements, a new study shows.
Yet even as owners continue to struggle with tight credit, few can afford the time, effort or cost of preparing complex financial statements, let alone having them audited, small-business owners, lenders and accountants say.
“Banks love when you have audited financials because they view it as a form of insurance,” says Buzz Rose, a certified public accountant in Pittsburgh. “But audits have become very expensive and to have one done ‘just in case’ would seem to be a waste of time and money.”
But the benefits might outweigh the costs.
Based on data from more than 10,000 closely held companies—about half of which have less than 500 employees—a study by the University of Chicago Booth School of Business found audited businesses save an average of $6,900 for every $1 million in outstanding debt every year as a result of lower interest rates, which were more than half a percentage point below rates paid by nonaudited businesses. For a loan of $3.3 million, the average size of loans analyzed in the study, the savings was about $23,000.
A small-business audit costs anywhere from $5,000 to $75,000, depending on the size of the company, the complexity of its data and other factors—typically double the cost of a financial statement review, the next highest level of CPA-verified assurance after an audit.
An audit provides third-party assurance that a company’s financial statements are correctly prepared and based on verified business data, while a review shows the statements are at least internally consistent with data provided by management.
“There appears to be a very real cost benefit to getting an audit, beyond the obvious value of having your financial statements in order,” says Michael Minnis, a Booth School assistant professor of accounting who led the study. The Booth School study is expected to be published in the Journal of Accounting Research in May.
Similarly, a joint study last year by Michigan State University and Indiana University found small businesses with audited financial statements were “significantly less likely” to be denied credit from banks.
David Leuthold, chief executive of Century Negotiations Inc., a North Huntingdon, Pa., consumer-debt settlement firm, says he started having his books audited annually in 2005 to double-check his own bookkeeping, paying about $8,000 an audit. The move paid off when he applied for a $100,000 line of credit the following year.
“The bank required audited financial statements,” says Mr. Leuthold, whose company made $8 million in revenue last year. Even without audited books, he believes the bank might have approved the loan, though at less favorable terms. “We had what they wanted, so it was definitely worth it,” he says.
Still, for many small businesses seeking a loan, lenders say an audit is costly and unnecessary.
“Audits provide good information. The more concrete information a lender can get, the better,” says Tom Burke, the director of Wells Fargo’s Small Business Administration lending division. But he questioned the necessity of audits for every business.
Mr. Burke says a business with less than $1 million in annual revenue can ask a CPA to prepare a compilation, which is a cheaper, unaudited financial statement based on recorded sales, inventory and other data. Since owners often use these statements to manage daily operations—and they’re prepared by CPAs—lenders have some assurance of the statements’ accuracy in making loan decisions.
“I’d hate to see people taking steps that aren’t necessary, or that they can’t afford,” Mr. Burke says.
Small-business accountant David Wilke, of Carnegie, Pa., says he helps borrowers and lenders negotiate loan terms based on mutually acceptable levels of assurance, ranging from compilations to audits. He says a CPA “adds value by determining what a bank wants and what a business can provide at an early stage,” rather than trying to convince every client to get audited.
Mr. Rose, the accountant in Pittsburgh, says it’s only worth going through an audit—which can require days and even weeks of a manager’s time—when a business owner has a loan in hand that’s contingent on providing audited financial statements.
Audited or not, less than a quarter of businesses with fewer than 500 employees keep financial statements of any kind, according to the Federal Reserve Board’s National Survey of Small Business Finances.
“There’s a lot of criticism that it’s expensive and difficult to prepare and audit your financial statements,” says Teri Yohn, an Indiana University associate professor of accounting who sits on the Financial Accounting Foundation’s blue-ribbon panel on private-company accounting standards. “But there are clearly benefits.”
Schutte & Hilgendorf, PLLC, a Prescott based CPA firm provides audits and reviews to small businesses, government entities, non-profit organizations, and homeowners associations. We also provide tax preparation and planning services, QuickBooks consulting and training and payroll and sales tax services to individuals and small businesses. Contact us for pricing or more information about how we can help you!
Many more tax-exempts can file e-Postcard instead of Form 990 for 2010 under new rule
Rev Proc 2011-15, 2011- IRB, IR 2011-3
In a Revenue Procedure, IRS has raised the annual gross receipts threshold at which tax-exempt organizations (other than private foundations and Code Sec. 509(a)(3) supporting organizations) must file Form 990, Return of Organization Exempt from Income Tax, from $25,000 to $50,000, for tax years beginning on or after Jan. 1, 2010. Thus, under this new rule, most tax-exempt organizations whose gross annual receipts are normally $50,000 or less can file the simpler Form 990-N (Electronic Notification e-Postcard).
Background on tax-exempts’ filing requirements. Under Code Sec. 6033(a), most tax-exempt organizations, other than churches, must file with IRS an annual Form 990, Form 990-EZ (Short Form Return or Organization Exempt From Income Tax), or Form 990-PF (Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation). Under the discretionary authority in Code Sec. 6033(a)(3)(B), IRS provided that exempt organizations, other than a private foundation, whose annual gross receipts aren’t normally in excess $25,000 do not have to file Form 990, but instead can file the simpler Form 990-N, the e-Postcard which only requests eight items of information items. (Rev Proc 83-23, 1983-1 CB 687) IRS provides similar exceptions for tax-exempt foreign (Rev Proc 94-17, 1994-1 CB 579) and possession organizations (Rev Proc 2003-21, 2003-1 CB 448).
Form 990-series information returns are due on the 15th day of the fifth month after an organization’s fiscal year ends.
RIA observation: Non-church exempt organizations that fail to file for three consecutive years automatically lose their tax-exempt status. In an effort to help them keep their status, IRS offered a one-time, two-part filing relief program in July of 2010 to bring small organizations back into compliance, see Federal Taxes Weekly Alert 07/29/2010.
New simpler reporting rule. Rev Proc 2011-15, Sec. 3.01, provides that a exempt organization (other than a private foundation or a Code Sec. 509(a)(3) supporting organization) that normally has annual gross receipts of not more than $50,000 (as described in Rev Proc 2011-15, Sec. 4) isn’t required to file an annual return under Code Sec. 6033(a) , i.e., Form 990. Rev Proc 2011-15, Sec. 4, provides that the annual gross receipts of an organization are normally not more than $50,000 if:
· in the case of an organization that has been in existence for one year or less, its gross receipts, including amounts pledged by donors, are $75,000 or less during its first tax year;
· in the case of an organization that has been in existence for more than one year, but less than three years, its average annual gross receipts for its first two tax years are $60,000 or less; and,
· in the case of an organization that has been in existence for three years or more, its average annual gross receipts for the immediately preceding three tax years, including the tax year for which the return is filed, are $50,000 or less.
In addition, Rev Proc 2011-15, Sec. 3.02, provides that a tax-exempt foreign organization or a U.S. possession organization (other than a private foundation or a Code Sec. 509(a)(3) supporting organization) isn’t required to file an annual return under Code Sec. 6033(a) if:
(1) it normally doesn’t receive more than $50,000 in annual gross receipts from sources within the U.S.; and
(2) it has no significant activity (including lobbying and political activity and the operation of a trade or business, but excluding investment activity) in the U.S.
If at any time an organization ceases to meet the conditions set out in Rev Proc 2011-15, it must file an annual return on Form 990 for the year in which it first ceased to qualify for relief under Rev Proc 2011-15 and for all later years in which the organization doesn’t qualify. (Rev Proc 2011-15, Sec. 3.04)
Tax-exempt organizations exempted from filing an annual return under Rev Proc 2011-15 must submit a Form 990-N e-Postcard annually in electronic format. By submitting an e-Postcard, an organization acknowledges that it isn’t required to file a return because its annual gross receipts are normally not more than $50,000. (Rev Proc 2011-15, Sec. 3.03) Further, Rev Proc 2011-15 doesn’t affect an organization’s obligation under the Code to file any tax or information return other than Form 990. For example, if an organization earns sufficient gross unrelated business income, it is still required to file of Form 990-T, Exempt Organizations Business Income Tax Return. (Rev Proc 2011-15, Sec. 5)
Rev Proc 2011-15, Sec. 1, provides that it doesn’t apply to organizations exempt from income tax under Code Sec. 527 (i.e., political organizations).
RIA Research References: For tax-exempt organization’s annual return Form 990, see FTC 2d/FIN ¶ S-2801; United States Tax Reporter ¶ 60,334; TaxDesk ¶ 688,001.
Source: Federal Tax Updates on Checkpoint Newsstand tab 1/14/2011
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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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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