Tag Archives: tax preparation

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 The personal exemptions of $4,050 per person were repealed.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  • Overall limitation: The act repealed the overall limitation on itemized deductions.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


New Mandatory Sick Leave Under Prop 206 – Arizona law Effective July 1, 2017

REMINDER: Check your paid-time-off policies to include the new requirements under Prop 206:

In addition to the increased minimum wage in Arizona,the less publicized part of Prop 206 is the requirement for private and municipal employers to provide paid sick leave to all employees beginning July 1, 2017. Under Prop 206, all employees must accrue paid sick time at a minimum rate of one (1) hour of paid sick time per every thirty (30) hours worked (not confined to a work week or pay period). Employers with less than fifteen (15) employees, must provide and allow the use of twenty-four (24) hours of paid sick time per year, while employers with fifteen (15) or more employees must provide and allow the use of forty (40) hours of paid sick time a year.

Under Prop 206, earned paid sick time may be used by employees for the following reasons:

  • Employee’s own physical or mental illness;
  • Care for employee’s family member who has a physical or mental illness;
  • Public health emergency;
  • Absence due to domestic violence, sexual violence, or stalking of employee or employee’s family member

Implementing mandatory paid sick time may present challenges to employers given the many nuances of Proposition 206, including:

  • Part-time and temporary workers are considered “employees”
  • Employers must post a notice in the workplace that outlines employees’ rights and protections under Prop 206
  • Employers are required to retain payroll records for four (4) years
  • Employers must also provide employees either in or on an attachment to the employee’s paycheck: (1) the amount of earned paid sick time available to the employee, (2) the amount of earned paid sick time taken by the employee to date in the year, and (3) the amount of pay time the employee has received as earned paid sick time
  • Employers can require reasonable documentation from an employee after three (3) or more consecutive work days of paid sick time used
  • Employees may use earned paid sick time as soon as it is accrued; however, an employer may require an employee hired after July 1, 2017 to wait ninety (90) calendar days after the start of employment before using accrued earned paid sick time
  • Employers can include accrual and usage caps on paid sick time in accordance with the mandatory requirements
  • Paid sick time can be used in hourly increments or the smallest increment of employer’s payroll system used to account for absences or use of time, whichever is smaller
  • Employers cannot require employees seeking to use earned paid sick time to find a replacement worker to cover the employee’s absence
  • Employers cannot count the use of paid sick time as an absence that leads to discipline or termination
  • Employers are not required to pay out unused paid sick time upon termination

For further information, contact Schutte & Hilgendorf, CPAs at 928-778-0079.

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.


2017 Standard Mileage Rates

From the IRS website:

Beginning on Jan. 1, 2017, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 53.5 cents per mile for business miles driven, down from 54 cents for 2016
  • 17 cents per mile driven for medical or moving purposes, down from 19 cents for 2016
  • 14 cents per mile driven in service of charitable organizations

The business mileage rate decreased half a cent per mile and the medical and moving expense rates each dropped 2 cents per mile from 2016. The charitable rate is set by statute and remains unchanged.   The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

 

Go to the following link for more information:

 

2017 Standard Mileage Rates for Business, Medical and Moving Announced

 

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.


Volunteers for Charities – Tax Tips

If you volunteer for a charitable organization and you itemize your deductions, here are some tips to keep in mind:

  • Keep track of your mileage, date, and purpose of the trip.  The IRS allows you to deduct 14 cents per mile.
  • You can also deduct parking fees if applicable.
  • There are also deductions for other expenses incurred while volunteering such as the cost of stamps for a fund-raising mailing, or ingredients for making cookies for a bake sale fund raiser or for your religious organization.

 

If you have any questions about this or any other tax questions, 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.


IRS Tax Tips: Premium Tax Credit Checkup for your 2016 Health Insurance Marketplace Coverage

If you or anyone in your family are getting advance payments of the “premium tax credit” you should check to see if you need to adjust your premium assistance.  Please see IRS tax tips link below for more detailed information.

 

Premium Tax Credit Checkup for 2016 Health Insurance Marketplace Coverage

 

If you have additional questions about this post or any other, please contact us directly 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.


IRS Warns of Latest Tax Scam Involving Bogus Federal Student Tax

Go to the following link:

 

IRS Warns of Latest Tax Scam Involving Bogus “Federal Student Tax”

 

If you have additional questions about this post or any other, please contact us directly 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.


INCREASE IN PENALTIES FOR FAILING TO FILE AN INCOME TAX RETURN

On February 24, 2016, President Obama signed a new law banning income taxes on Internet Services.  This law also included a provision increasing the penalty for failing to file a tax return.

 

The higher failure-to-pay penalty is effective for returns to be filed after calendar year 2015, so it applies to this tax return season.  The penalty is equal to 5 percent of the amount of additional taxes owed for every month that your return is late, up to a maximum of 25 percent.

 

Remember there are 2 penalties:  A failure-to-file penalty AND a failure-to-pay penalty.   If you have a balance owing it is always better to file the returns timely and pay when you can or set up an Installment Agreement Payment Plan with the IRS.  You can also pay your tax balance by credit card.

 

Filing an extension ONLY delays filing the return.  If you owe tax, the tax must be paid by April 15 to avoid a failure-to-pay penalty.

 

If you have additional questions about this post or any other, please contact us directly 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.

 


IRS Tax Tip 2016-20:

What You Need to Know About Taxable and Non-Taxable Income  (click on the link below)
IRS Tax Tip 2016_20

 

If you have additional questions about this post or any other, please contact us directly 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.


2016’s Dirty Dozen Tax Scams

In this day and age of technology, each day brings new ways for thieves to part individuals from their hard earned income.  Each year the IRS releases a list of what it considers the worst tax scams of the year.  See the link below for the article published by the Journal of Accountancy for the worst tax scams in 2016.    

“dirty dozen” worst tax scams

 

If you have additional questions about this post or any other, please contact us directly 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.


Non-Cash Contributions – Have your Documentation

From Western CPE

eTax Alert™

 

Court Shows No Charity in Disallowing $37,315 of Non-cash Contributions (Kenneth Kunkel, TCM 2015-71)

Kenneth and Susan Kunkel claimed a $37,315 charitable deduction for non-cash contributions on their 2011 tax return. The Kunkels claimed to have donated property to four organizations: their church, Goodwill, Purple Heart, and Vietnam Veterans. They had no receipts, photos, or other documentation for the contributions, but claimed that they didn’t need receipts because each donation was less than $250.

What documentation is required?

$250 or more. For all contributions of $250 or more, the taxpayer generally must obtain a contemporaneous written acknowledgment from the donee (§170(f)(8)).

Less than $250. “Separate contributions of less than $250 are not subject to the requirements of Subscribe Share Past Issues Translate §170(f)(8), regardless of whether the sum of the contributions made by a taxpayer to a donee organization during a taxable year equals $250 or more” (§1.170A-13(f)(1)).

$500 or more. Additional substantiation requirements are imposed for contributions of property with a claimed value exceeding $500 (§170(f)(11)(B)).

More than $5,000. Still more rigorous substantiation requirements, including the need for a “qualified appraisal,” are imposed for contributions of property with a claimed value exceeding $5,000 (§170(f)(11)(C). “Similar items of property” must be aggregated in determining whether gifts exceed the $500 and $5,000 thresholds (§170(f)(11)(F)).

What are “similar items?” The term “similar items of property” is defined as “property of the same generic category or type,” such as clothing, jewelry, furniture, electronic equipment, household appliances, or kitchenware (§1.170A-13(c)(7)(iii)).

The court categorized similar items from Kunkel’s list of non-cash items.

Clothing – $21,920
Books – $8,000
Furniture – $3,090
Household items – $1,653
Toys – $1,072
Telescopes – $800
Jewelry – $780

No appraisals and no receipts equal no deduction.
Clearly the clothing and book donations exceeded the $5,000 value and required appraisals to properly substantiate the deduction. All other categories exceeded $250 and required receipts. The court agreed with the IRS’s disallowance of all non-cash contributions.

Tax practitioner idea. Claiming a $6,000 contribution of “household goods” would require an appraisal. Claiming a $3,000 donation of furniture and a $3,000 donation of clothing would not. Categorize the donations carefully.

 

© Vern Hoven and Sharon Kreider 

Western CPE

If you have additional questions about this post or any other, please contact us directly 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.