|
|
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.
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!
How many non-profit boards hire an outside auditor?
Eighty-four percent of the respondents of a recent BoardSource governance survey say that they annually hire an auditor to conduct an external financial audit. Smaller organizations are less likely than large organizations to hire an auditor.
Here are five key ways to maximize the audit process:
Be sure the board is in the audit driver’s seat. The nonprofit board has the responsibility to oversee the audit process. This includes assessing the financial controls, policies, procedures, and condition of the organization and overseeing the external auditor.
Review the auditor’s independence. The board should be certain that the auditor is independent and objective in performing duties.
Choose your auditor carefully. Even with rigorous efforts by professional bodies governing the practice of Certified Public Accountants to improve the quality of audits, not all audits are created equal.
Invest your audit dollars wisely. While it is important to be certain the audit fees are reasonable in light of the quality and value of an audit, focusing too much attention on cost can be detrimental to the health of the audit and ultimately to the organization.
Properly use your audit committee. The audit committee should be the fulcrum of the financial reporting function. Start with an independent audit committee. The committee members should not be members of the nonprofit’s staff. Invite staff members to committee meetings to answer questions and to provide information.
Excerpted from the Maximizing the Audit Process by Dan Busby.
Should you have questions regarding this post or any other accounting or auditing needs, contact us at Schutte & Hilgendorf, PLLC, Prescott accountants serving the greater Yavapai County with tax, accounting, auditing, and QuickBooks consulting expertise.
The newly passed and signed 2010 Tax Act, formally named the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, includes several provisions that will affect taxpayers. Here is the information you need to know now about this legislation.
Major Provisions
The new law
- postpones the sunset of the 2001 and 2003 tax cuts;
- reduces the estate tax;
- extends unemployment benefits;
- includes an alternative minimum tax (AMT) patch;
- continues through 2012 the lower capital gains tax rate introduced by the Jobs and Growth Tax Relief Reconciliation Act of 2003; and
- extends for two years the repeal of the itemized deduction phase-out and the personal exemption phase-out.
Provisions That May Affect You
Estate Tax
The Act temporarily reinstates the estate tax, with an estate tax rate of 35% and an estate tax exemption of $5 million (adjusted for inflation after 2011).
Payroll Tax
For 2011, the Act reduces the rate for the Social Security portion of payroll taxes to 10.4% by reducing the employee rate from 6.2% to 4.2%. The employer’s portion remains 6.2%.
Family
The Act extends several expired or expiring provisions affecting families, including the following:
- The increased standard deduction for married taxpayers filing jointly, which is scheduled to expire after 2010, continues for two years.
- The $1,000 child tax credit amount continues for two years instead of reverting to $500.
- The increased starting and ending points for the earned income credit continues for two years.
- The $3,000 amount for the child and dependent care credit, which was scheduled to revert to $2,400 after 2010, continues for two years.
- The American Opportunity Tax Credit continues for two years.
Business
The Act extends the 100% bonus depreciation for business property acquired after September 8, 2010, before January 1, 2012, and placed in service before January 1, 2012 (or before January 1, 2013, in the case of certain property). It also sets the expensing limitation under IRC §179 at $125,000 and the phase-out threshold amount at $500,000 for 2012. The Act then reduces these amounts to $25,000 and $200,000 for tax years beginning after 2012.
The temporary 100% exclusion of gain from the sale of certain small business stock under IRC §1202, enacted by the Small Business Jobs Act of 2010, is extended through 2011.
AMT
The Act includes an AMT patch for 2010 and 2011.
- For 2010, the AMT exemption amounts will be $47,450 for unmarried individuals and $72,450 for married individuals filing jointly.
- For 2011, the amounts will be $48,450 and $74,450, respectively.
Needless to say, the 2010 Tax Act is still very new. It is only just being analyzed by professional advisers. The law is potentially subject to modifications by technical correction acts. In addition, provisions of the law may be interpreted by the Treasury Department issuing regulations and by the IRS issuing forms and instructions.
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.
HOW-TO Choose A Good CPA and Relieve Year End Stress
What you do now: Wait until the day before your tax appointment and throw all your receipts in a box. You show up at the tax office stressed and worried.
With a Good CPA, you will: Meet with your CPA and talk about the weather and brag about your grandchildren because you are so prepared that you already know what you’ll owe and everything is organized. Schutte & Hilgendorf offers a full range of accounting and tax services during the year to avoid surprises. We provide you with tax strategies that you can implement BEFORE your taxes are due.
What you do now: “Wing it” -This means that you categorize 80% of your expenses for your business into “ASK ACCOUNTANT”.
With a Good CPA, you will: Call your CPA during the year as needed to get advice on categorizing your expense. Schutte & Hilgendorf can set up your chart of accounts and software to meet your unique businesses needs.
What you do now: Tell your tax preparer at your tax appointment that you bought a new truck for the business last year. When they ask you about your mileage log, you look at them with a blank stare and ask, ”What’s that?”.
With a Good CPA, you will: Be informed to contact them with any major business or personal purchases or changes as they happen. It is more cost effective to meeting with us a couple of times a year than to wait until the week your taxes are due.
What you do now: Call your tax preparer and wait for 8 days for a response.
With a Good CPA, you will: Receive a response to your phone call or email within 1 business day. At Schutte & Hilgendorf, we consider ourselves partners and trusted advisors to our clients. We are always available for our clients.
What you do now: You nod your head and smile when your tax preparer explains the new tax laws and the IRS code.
With a Good CPA, you will: Understand what your options for tax savings are because they explain it in an understandable manner. Schutte & Hilgendorf is your local accounting & tax firm providing straightforward and friendly advice.
What you do now: Find out about tax laws and strategies at tax time that could have saved you money if only you had known about them.
With a Good CPA, you will: Be informed of new laws as they happen and can make decisions that can save you tax dollars. At Schutte & Hilgendorf, we stay on top of developments around the nation that affect our clients. We maintain our website to provide up to the minute news and advice.
What you do now: On April 15, you say to your tax preparer as you walk out the door, Oh Yeah! I started a new business last year. Do I need to file a tax return?
With a Good CPA, you will: Have the advice you need when starting a new business. This includes what filings are required.
Schutte & Hilgendorf offers consulting services for choosing the right entity and starting up your new business. We also offer ongoing maintenance of your accounting records.
Schutte & Hilgendorf has 4 full time CPAs and specializes in providing audit, accounting, tax and consulting services for individuals, businesses, non·profit organizations, and homeowners associations.
From Prescott Newspapers, Inc.’s How-To Guide Article, September 2010.
“Leading Edge Ladies”
Schutte & Hilgendorf, PLLC is a women-owned CPA firm, located in Prescott and serving all of Yavapai County. The firm is predominantly women with two CPA owners; Gidget Schutte and Lois Hilgendorf, and three women staff; Katja Lopez, CPA, Crystal Garcia, and Rosie Clayton. Our token male, Adam Rutherford, CPA provides the male perspective and helps to maintain the balance.
As a women-owned business, we take our responsibility seriously to promote the accounting profession to women of all ages. The partner’s personal stories are a testament to the joys and challenges of having a woman-owned business.
Gidget Schutte was raised in Blythe, California and moved to Prescott in 2001 after vacationing here with her family for many years. Out of college in 1990, she worked in public accounting, and industry accounting for the next 18 years. In 2008, just as the economy was taking a dive, the opportunity to buy an existing practice in Prescott came up and she and Lois decided to make a go of it. “We had been doing the work for so many years it just seemed natural that we could now put our name on the door.” The decision was still a tough one, with two young children at home at the time. “The challenge is trying to keep the balance between family and work however the best part is having that responsibility to make those decisions myself as the owner.”
Lois was raised on a farm in southern Minnesota and moved to Prescott with her husband and small children in 1978. Lois went back to get her accounting degree and obtained her CPA in 1992 while working full time for the predecessor firm and while her kids were cycling through high school. “It was very difficult, but I have no regrets and the pride of owning a business has been tremendous.” Her children are grown now and she juggles managing the workload with visiting her 6 grandchildren as often as possible.
Schutte & Hilgendorf offers a broad range of professional accounting, tax, and audit services to individuals and businesses. Our mission is to provide knowledgeable, caring, and prompt service to all our clients. We specialize in providing all of our services to numerous industry specific areas, including non-profit organizations, government, homeowner’s associations, and construction contractors. We also provide tax planning and preparation, sales tax and payroll tax return preparation, on going bookkeeping and QuickBooks setup and training. “We have placed a huge emphasis on supporting the local business community with setting up proper QuickBooks accounting systems. A good accounting system can be invaluable in assisting small business owners manage expenses and identifying avenues for generating revenue.”
Come in and see us anytime in the Crossings at 3140 Stillwater Drive, Ste. A, Prescott, Arizona or call us at 928-778-0079. See our website at www.prescottaccountants.com.
From Daily Courier Women in Business Article, August 13, 2010.
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.
|
We Are The Piece That Fits.
Schutte & Hilgendorf PLLC
3140 Stillwater Drive
Prescott, AZ 86305
Phone: 928-778-0079
Fax: 928-778-0261
|
