Charitable Contributions

With the holidays now upon us, remember as you give to others don’t forget you can give to yourself at the same time!

Many of your Arizona charities donations could equal a dollar-for-dollar Arizona tax credit, meaning it is of no additional cost to you to make these donations. But hurry! Although you can donate until April 15, 2017 to receive a tax credit on your 2016 Arizona tax return, donations must be donated by December 31, 2016 to be deductible on your 2016 federal tax return. 

These tax credits are available to individuals who make charitable contributions to certain organizations and schools. Each of these tax credits provides a dollar-for-dollar reduction of your Arizona tax liability (up to your tax liability, subject to limitations). These tax credits effectively redistribute your Arizona taxes from the Arizona Department of Revenue to the charities of your choice.

If you have questions on how these tax credits can be utilized to their maximum potential, please reach out to us to discuss.

Contributions to Qualifying Charitable Organizations (previously called the Working Poor tax credit)

The maximum amount of the credit for 2016 is $800 for married couples ($400 if single).

Contributions to Qualifying Foster Care Charitable Organizations

An additional credit, over and above the QCO credit described above, is available for contributions made to Qualifying Foster Care Charitable Organizations (QFCO).

The additional available credit amount for 2016 is $1,000 for married couples ($500 if single).

For recommendations or suggestions on charities to donate to, please see our website www.aataxcpa.com

Contributions to Public Schools

Arizona provides a credit for contributions made to a public school, regardless of whether you have a child in school. This credit allows taxpayers to make donations in the following year (until April 15th, 2017) to claim a credit against 2016 Arizona tax.

The maximum amount of the credit is $400 for married couples ($200 if single).

The Arizona Department of Education keeps a listing of all public and charter schools in Arizona. You can search for a school by name or by location on their website, http://ade.az.gov/edd/

Contributions to School Tuition Organizations

In addition to public schools, Arizona also provides a credit for contributions made to a Private School Tuition Organization (STO) AND a Certified School Tuition Organization. This credit also allows taxpayers to make donations in the following year (until April 15th, 2017) for a credit against 2016 Arizona tax.

The maximum amount of these credits is $2,173 for married couples ($1,087 if single). 

A current list of School Tuition Organizations can be found online at:

https://www.azdor.gov/Portals/0/RefundCredits/sto_i_list.pdf

Please call our office today if you would like any further information or clarification.

Thank you for supporting Arizona Charities!

Seasonal Tax Preparer Job Posting

We are a growing CPA firm looking for a Tax Preparer with a great personality to assist with the preparation of individual tax returns from January through April 2017.

Responsibilities

• Prepare state and federal income tax returns for individual clients

• Establish and maintain a positive relationship with all clients and co-workers to promote a positive work and client environment

• Deliver a full range of tax services in compliance with current laws and regulations and remain current on all state and federal tax laws

• Research and resolve client and system problems to ensure accuracy of work

Skills/Requirements

• 2-5 years income tax experience

• Exceptional customer service skills and the ability to develop strong client relationships

• Knowledge of tax accounting, tax compliance and all varieties of tax returns

• Experience with tax software

• Developed written and verbal communication skills

Pay

• Will vary based on experience; Range is $15-25/hour

Email resumes to jmilner@aataxcpa.com

The Trump Tax Plan – How will it Impact You?

Donald Trump has won the presidency and the Republican Party retained control of both the House of Representatives and the Senate. This means that the tax plan Donald Trump has proposed, which is mostly in line with the ideas of the rest of his party, could actually happen, resulting in the biggest overhaul to U.S. tax code since 1986. Here's what it could mean to your personal income taxes if Trump's planned changes go into effect.

Consolidated Tax Brackets

Trump has proposed consolidating the seven current tax brackets into just three. Here's what the current tax brackets look like:

Marginal Tax Rate

10%

Taxable Income (Single) = $0 - $9,275

Taxable Income (Married) = $0 - $18,550

15%

Taxable Income (Single) = $9,276 - $37,650

Taxable Income (Married) = $18,551 - $75,300

25%

Taxable Income (Single) = $37,651 - $91,150

Taxable Income (Married) = $75,301 - $151,900

28%

Taxable Income (Single) = $91,151 - $190,150

Taxable Income (Married) = $151,901 - $231,450

33%

Taxable Income (Single) = $190,151 - $413,350

Taxable Income (Married) = $231,451 - $413,350

35%

Taxable Income (Single) = $413,351 - $415,050

Taxable Income (Married) = $413,351 - $466,950

39.6%

Taxable Income (Single) = $415,051 and above

Taxable Income (Married) = $466,951 and above

Trump’s planned tax brackets would change this to:

Marginal Tax Rate

12%

Taxable Income (Single) = $0 - $37,500

Taxable Income (Married) = $0 - $75,000

25%

Taxable Income (Single) = $37,500 - $112,500

Taxable Income (Married) = $75,000 - $225,000

33%

Taxable Income (Single) = $112,500 and above

Taxable Income (Married) = $225,000 and above

The 20% maximum tax on long term capital gains would remain unchanged, although Trump plans to eliminate the provisions of Obamacare that created the additional 3.8% tax on certain investment and other passive income. 

The Trump Plan will lower the top corporate tax rate from 35 percent to 15 percent, rewarding small and large businesses that retain profits within the business.

The Alternative Minimum Tax would be repealed for individuals and businesses.

Increased Standard Deduction

Trump has proposed eliminating the personal exemption and increasing the standard deduction amount from $6,300 to $15,000 for single taxpayers and from $12,600 to $30,000 for married joint filers. Most Americans will benefit from this, especially those that do not itemize deductions, but larger families could actually see their taxes go up.

Eliminate the Estate Tax

Under current law, estates valued at more than $5.45 million are subject to a 40% tax rate on the excess. Trump’s proposal to eliminate this tax could save wealthier families quite a bit of money.

What it means for America

The argument that Trump's tax plan favors the rich is mostly true.  Per the Tax Policy Center, about 47% of the benefits will go to the richest 1%. However, the average American family will feel the impact of Trump's plan as well. When the tax cuts are considered together with the lower tax rates, it's safe to say that the average American will see his or her taxes go down during the next four years.  How that budget deficit will be reconciled remains unclear.

IRS Warns of Fake Tax Bill Emails

Numerous reports of scammers sending fraudulent CP2000 Notices for tax-year 2015 have been received by the IRS. A common current scam relates to the Affordable Care Act (ACA) and requests information regarding 2014 coverage. It also includes a request for payment of unpaid taxes.

Here's what taxpayers need to know:

What is a CP2000 Notice?

A CP2000 Notice is generated by the IRS Automated Under-reporter Program when income reported from third-party sources (such as an employer) does not match the income reported on the tax return. It provides instructions to taxpayers about what to do if they agree or disagree that additional tax is owed.

A CP2000 Notice is never sent as part of an email to taxpayers.

Indicators that the CP2000 Notice you received is a scam include the following:

• Notices are sent electronically, even though the IRS does not initiate contact with taxpayers by email or through social media platforms;

• The CP2000 notices appear to be issued from an Austin, Texas, address;

• The underreported issue is related to the Affordable Care Act (ACA) requesting information regarding 2014 coverage;

• The payment voucher lists the letter number as 105C.

The fraudulent CP2000 Notice often includes a payment request, asking taxpayers to mail a check made out to "I.R.S." and sent to the "Austin Processing Center" at a PO Box address. This is in addition to a "payment" link within the email itself.

Unlike the fake version, a real CP2000 Notice provides instructions to taxpayers about what to do if they agree or disagree that additional tax is owed. A real notice also requests that checks be made out to "United States Treasury,” not IRS.  (Note how easy it is to forge “IRS” into “CASH.”)

IRS Impersonation Scams

IRS impersonation scams take many forms: threatening telephone calls, phishing emails, and demanding letters. Anyone who receives this scam email should forward it to phishing@irs.gov and then immediately delete it from their email account.

Taxpayers should always beware of any unsolicited email purported to be from the IRS or any unknown source. Never open an attachment or click on a link within an email sent by an unknown person or a source you do not know.

Always contact your CPA before responding to any notice from tax authorities.

Five Tips for Starting a Business

Are you thinking about starting a new business this year?  Understanding your tax obligation can be critical to the success of your business. When you start a new business, you need to know about income taxes, payroll taxes and much more. Here are five tips that can help you get your business off to a good start:

1. Business Structure. An early choice you need to make is to decide on the type of structure for your business. Forming an LLC is helpful for asset protection, but does not dictate the business structure.  Your LLC can be structured however you choose.  The most common types are sole proprietor, partnership, S-corporation, and C-corporation. The type of business you choose will determine which tax forms you file.
2. Business Taxes. There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. In most cases, the type of tax your business pays depends on the type of business structure you set up and the products that you sell. You may need to make estimated tax payments. If you do, you can mail payments with estimated payment vouchers, or use IRS Direct Pay online.
3. Employer Identification Number (EIN). You may need to get an EIN for federal tax purposes. Search “do you need an EIN” on IRS.gov to find out if you need this number. If you do need one, you can apply for it online and get your EIN in minutes.
4. Accounting Method. An accounting method is a set of rules that you use to determine when to report income and expenses. You must use a consistent method. The two that are most common are the cash and accrual methods. Under the cash method, you normally report income and deduct expenses in the year that you receive or pay them. Under the accrual method, you generally report income and deduct expenses in the year that you earn or incur them. This is true even if you get the income or pay the expense in a later year.
5. Employee Health Care. The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees. You may be eligible for the credit if you have fewer than 25 employees who work full-time, or a combination of full-time and part-time. The maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities.

If you are starting a new business and would like to discuss the proper steps for setting it up, call us today to set up an appointment!