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More Changes For AZ Taxpayers

Friday, June 25th, 2010

July 1 is the start of the Ari­zona State fis­cal year which is why sev­eral changes are going into effect on that date. 

AZ With­hold­ing Tax Change: On July 1, 2010 an employer must with­hold Ari­zona state income tax accord­ing to the new A4s, which they should have obtained from all of their employ­ees prior to that date. We have pre­vously  blogged about the change com­ing to the Ari­zona A4. On July 1st Arizona’s state income tax with­hold­ing rate will decou­ple from the fed­eral with­hold­ing rate. Every employee needs to do a new A4. An employer should not advise employ­ees about how to com­plete the form except to point out the form comes with work­sheet to assist them. That said, a quick and dirty cal­cu­la­tion would be to see how much tax you owed to the state last year and divide it by your Ari­zona state income; but of course this assumes that your income, expenses, mar­i­tal sta­tus, depen­dents, items of credit and deduc­tion, etc. are sim­i­lar to last year, which it may not be.

AZ Child Sup­port Gar­nish­ments Change: If you are an employer who does gar­nish­ments for things like child sup­port in Ari­zona through CLEARINGHOUSE, please be advised that the fee will increase from $2.25 to $5.00  start­ing July 1.

In addi­tion to these changes that go into effect in less than a week, there are other things you should aware of. 

Trans­ac­tion Priv­i­lege Tax License Change:  You are prob­a­bly aware that the Ari­zona “sales tax” increased 1% statewide on June 1st, and you should have already adjusted your soft­ware, point of sales sys­tems and reg­is­ters.  How­ever some­time in Sep­tem­ber the AZ DOR is going to be send­ing out Trans­ac­tion Priv­i­lege Tax renewal forms.  The only peo­ple who won’t have to renew their licenses are those who got their licenses on or after July 1, 2009.  The law increases the fee to obtain, change or renew a license to $40 up from $12 for a period of 1 year and 2 weeks start­ing June 15, 2010;  means the change will be in effect for the state’s entire upcom­ing fis­cal year.  It’s not expected to be a big rev­enue raiser, but the AZ DOR hopes to get peo­ple who have never filed a TPT return or who haven’t filed in a long time off the sales tax rolls.  If you’e had your license a year or longer, you will need to pay for the renewal if you want to keep it.

Non­con­for­mity with Fed­eral 2009 tax forms: This change qui­etly went into effect on April 27, 2010.  The State of Ari­zona decided not to con­form to the Fed­eral Tax code after the first tax dead­line had passed.  If you filed your tax form on or before April 15, 2010 and you had any of the fol­low­ing items of income, deduc­tion or credit on your tax return-you may need to file an amended Ari­zona tax return and pay addi­tional tax.  You do not need to amend your fed­eral tax return, just Arizona’s. 

  • Unem­ploy­ment: you need to add the $2400 the fed­eral gov­ern­ment exempted from gross income back into your Ari­zona income and pay the addi­tional tax.
  • Auto­mo­bile Sales Tax deduc­tion: you need to remove the auto­mo­bile sales tax from your deduc­tions, which will increase your income and you may owe addi­tional tax.
  • Haiti Con­tri­bu­tions made between Jan­u­ary 11 and before March 1, 2010 that were taken as a char­i­ta­ble deduc­tion in 2009.  These con­tri­bu­tions will be eli­gi­ble char­i­ta­ble deduc­tions on your Ari­zona taxes in 2010.  Again this will increase your income and you may owe addi­tional tax.
  • Dis­charge of Indebt­ed­ness (DOI) Income From Busi­ness Indebt­ed­ness Dis­charged by the Reac­qui­si­tion of a Debt Instru­ment–the feds allowed it to be added rat­ably over 5 years, AZ did not. 
  • Orig­i­nal Issue Dis­count (OID) on Reac­qui­si­tion of Debt Instru­ment–the feds allowed the income to be deferred, AZ did not. 
  • Spe­cial Fed­eral Net Oper­at­ing Loss (NOL) Car­ry­back Rules for 2008 and 2009 Losses-the feds allowed a spe­cial longer car­ry­back period of 3, 4, or 5 years, instead of 2, AZ did not. 

 The amended tax form is 140X for indi­vid­ual tax­pay­ers and it can be found on the AZ DOR web­site.  There is more infor­ma­tion about AZ 2009 non­con­for­mity here. These links take you to the Ari­zona Depart­ment of Rev­enue web­site and you will be sub­ject to their pri­vacy poli­cies etc.; Art and Busi­ness Con­sult­ing LLC is not affil­i­cated with the AZ DOR. 

If you live in another state, check with your state’s depart­ment of rev­enue regard­ing con­for­mity issues with respect to your state. 

As always Art and Busi­ness Con­sult­ing is here to help.  If you need help fil­ing an amended Ari­zona tax return, or any other with a small busi­ness and or tax issue, please give us a call.

The usual dis­claimers: Although ABC has made every effort to insure the accu­racy of Taxes, Tips and Tools, mis­in­for­ma­tion, dis­in­for­ma­tion, changes, mis­takes, typos and hack­ers hap­pen, there­fore Art & Busi­ness Con­sult­ing LLC takes no respon­si­bil­ity for any action taken or results based on the infor­ma­tion sup­plied here in. The con­tent of this blog gen­er­ally applies to busi­ness and indi­vid­ual tax­a­tion in the United States of Amer­ica.  Inter­nal Rev­enue Ser­vice Cir­cu­lar 230 Dis­clo­sure:  As pro­vided for in Trea­sury reg­u­la­tions, advice (if any) relat­ing to fed­eral taxes that is con­tained in this com­mu­ni­ca­tion (includ­ing attach­ments) is not intended or writ­ten to be used, and can­not be used for the pur­pose of (1) avoid­ing penal­ties under the Inter­nal Rev­enue Code or (2) pro­mot­ing, mar­ket­ing or rec­om­mend­ing to another party any plan or arrange­ment address herein.  Art & Busi­ness Con­sult­ing LLC cur­rently does not have a cer­ti­fied pub­lic accoun­tant, human resource spe­cial­ist, finan­cial plan advi­sor or an attor­ney on staff; this infor­ma­tion is purely for edu­ca­tional pur­poses and not to be con­strued as legal or finan­cial advice. Art & Busi­ness Con­sult­ing LLC and its employ­ees, mem­bers and asso­ciates are not engage to prac­tice law; you always should dis­cuss legal mat­ters with your attor­ney before talk­ing to any­one else.

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Posted in Business Taxes, General Business, General Individual, HR Info, Individual Taxes, Other Information | No Comments »

Medical Plans for Small/Micro Business Owners

Monday, June 14th, 2010

In gen­eral Group Health insur­ance includ­ing den­tal & qual­i­fied long-term care insur­ance is deductible as a busi­ness expense, but there are very spe­cific issues with respect to small busi­ness own­ers.  A sole pro­pri­etor, part­ner or 2% or more share­holder of an S-corporation can­not deduct more than they earned from self-employment and can­not deduct med­ical insur­ance under self-employment for any time they are cov­ered under any other employer’s plan includ­ing their spouse’s employer.

  • Pay­ments made by a part­ner­ship on behalf of a part­ner are deductible as Guar­an­teed Pay­ments to the part­ners, not as med­ical insur­ance expense/employee ben­e­fits.  The part­ner­ship must reim­burse the part­ner if the part­ner pays for the insur­ance in their own name. 
  • For 2% share­hold­ers such pay­ments must be included in their wages sub­ject to the usual with­hold­ing taxes. 2% share­hold­ers must be reim­bursed by their S-corporations in order for the insur­ance to be con­sid­ered estab­lished under the busi­ness to qual­ify for the adjustment.
  • Self-employed per­sons, AKA Sole Pro­pri­etors, can take the Med­ical Insur­ance Adjust­ment to 1040 Income, whether they pur­chase the insur­ance in their own name or the name of the business. 

How­ever there is a way to obtain med­ical insur­ance for busi­ness owner that is deductible as a busi­ness expense.  Based on Sec­tion 105 of the Inter­nal Rev­enue Code, a small busi­ness owner who can demon­strate employ­able inter­est in the busi­ness can become eli­gi­ble for an employee ben­e­fit pro­gram. All busi­ness fil­ing types are eli­gi­ble includ­ing sole pro­pri­etors, part­ner­ships, C– and S– cor­po­ra­tions. Sec­tion 105 HRA plans are designed specif­i­cally for small busi­ness own­ers that can legit­i­mately hire their spouse. Because the spouse/employee can be reim­bursed for fam­ily expenses the employer indi­rectly ben­e­fits as well. This type of plan is made pos­si­ble by Sec­tion 105 of the Inter­nal Rev­enue Code, Rev­enue Rul­ing 71–588 and IRS Let­ter Rul­ing 9409006. For C-corporation and S-corporation own­ers it will not be nec­es­sary to use the spouse/employee method. The cor­po­ra­tion becomes the employer and the owner is an employee as long as they are an employee receiv­ing a reg­u­lar paycheck.

So you are say­ing, “So what.  If I can take the deduc­tion on my per­sonal tax forms why would I care?”  Whereas it is true that up to 100% of the pay­ments made for health insur­ance maybe deductible on your 1040, which saves on the asso­ci­ated income tax, all those pre­mi­ums will be sub­ject to Self-employment taxes as well.  Under a sec­tion 105 Plan, the amounts paid for the plan pre­mi­ums will not be, a tax sav­ings of 15.3% of those pre­mium costs.  Fur­ther­more out-of-pocket med­ical expenses are only deductible if you item­ize, sub­ject to the 7.5% lim­i­ta­tion of income; under a sec­tion 105 it may be pos­si­ble to write off 100% of out-of-pocket med­ical expenses too. 

Set­ting up a Sec­tion 105 Plan is not a triv­ial exer­cise.  Care must be taken when estab­lish­ing a Sec­tion 105 HRA to ensure that a legit­i­mate employer/employee rela­tion­ship exists with the fam­ily mem­ber. In 1999 the IRS Indus­try Spe­cial­iza­tion Pro­gram issued a paper that said: “The extent and nature of a spouse’s involve­ment in the busi­ness oper­a­tions is crit­i­cal. Although, part-time work does not negate employee sta­tus, the per­for­mance of nom­i­nal or insignif­i­cant ser­vices that have no eco­nomic sub­stance or inde­pen­dent sig­nif­i­cance may be chal­lenged. Merely call­ing a spouse an “employee” is not suf­fi­cient to qual­ify a non-working spouse as an employee”.

If you are going the employee/spouse route, the spouse must pro­vide mean­ing­ful ser­vices to the com­pany, those ser­vices must be nec­es­sary (have eco­nomic sub­stance), and the spouse’s com­pen­sa­tion, which includes the Sec­tion 105 plan, must be rea­son­able. Fur­ther­more it is essen­tial that busi­ness and per­sonal funds not be co-mingled.  e.g. If you hire your spouse to do fil­ing for 4 hours a week and then pay them $10/per hour and pro­vide them with fam­ily med­ical plan cost­ing $800 per month, you can bet the IRS is going to look askance at com­pen­sa­tion which is 82% ben­e­fits and 18% hourly wages.  It prob­a­bly won’t fly. 

How do I estab­lish a sec­tion 105 plan?  If you are a busi­ness owner, you are going to have to hire your spouse.  Really, we are talk­ing the whole employ­ment enchi­lada here. Your busi­ness will need an EIN for pay­roll pur­poses.  You will need an employ­ment appli­ca­tion, w-4, I-9, New Hire paper­work and other items from your spouse, just as you would for any other employee.  You will need to keep a record track­ing hours your spouse worked and a descrip­tion of your spouse’s duties.  You will need to pay rea­son­able com­pen­sa­tion for those duties on a reg­u­lar pay­roll sched­ule.  The house­hold account and the busi­ness account must be sep­a­rate so that pay­checks and reim­bursed med­ical expenses won’t be deposited back into the account they came out of.  Your spouse/employee will need to be the pol­icy holder.  Finally you will need the Sec­tion 105 plan documents. 

In order for a Sec­tion 105 plan to work there are a lot of rules that must be fol­lowed, which is why Art and Busi­ness Con­sult­ing LLC rec­om­mends you get help if you think your busi­ness might qual­ify for a one.  Sec­tion 105 plans are really out­side Art and Busi­ness Con­sult­ing LLC’s baili­wick, although we could cer­tainly advise you on the related tax issues.  So we have found some­one who does do Sec­tion 105 plans.

Art and Busi­ness Con­sult­ing LLC is not affil­i­ated with the fol­low­ing entity, Total Admin­is­tra­tive Ser­vice Cor­po­ra­tion (TASC), but we did meet with Todd Kuehn, Regional Sales Direc­tor–Scotts­dale Region Office TASC  at an Ari­zona Soci­ety of Enrolled Agents event.  TASC’s baili­wick does include Sec­tion 105 Plans; they are a third-party ben­e­fits admin­is­tra­tor based out of Madi­son, Wis­con­sin, can sim­plify com­pli­ance and the admin­is­tra­tive pro­ce­dures asso­ci­ated with Sec­tion 105. Accord­ing to their web­site, TASC has been doing just that for over 30 years with Biz­Plan. They even offer a sav­ings guar­an­tee and a full Audit Guarantee!

For more infor­ma­tion see http://www.tasconline.com/buytasc/affiliate/bizplan/460163769708.  Please note if you click on this link you will be nav­i­gat­ing away from our web­site; you will be sub­ject to their poli­cies and we have no idea what those poli­cies are. Art and Busi­ness Con­sult­ing LLC has not received any gifts or other com­pen­sa­tion for men­tion­ing these folks, and we are not specif­i­cally endors­ing them. 

As always Art and Busi­ness Con­sult­ing is here to help.  If you need help with a small busi­ness and or tax issue, please give us a call.

The usual dis­claimers: Although ABC has made every effort to insure the accu­racy of Taxes, Tips and Tools, mis­in­for­ma­tion, dis­in­for­ma­tion, changes, mis­takes, typos and hack­ers hap­pen, there­fore Art & Busi­ness Con­sult­ing LLC takes no respon­si­bil­ity for any action taken or results based on the infor­ma­tion sup­plied here in. The con­tent of this blog gen­er­ally applies to busi­ness and indi­vid­ual tax­a­tion in the United States of Amer­ica.  Inter­nal Rev­enue Ser­vice Cir­cu­lar 230 Dis­clo­sure:  As pro­vided for in Trea­sury reg­u­la­tions, advice (if any) relat­ing to fed­eral taxes that is con­tained in this com­mu­ni­ca­tion (includ­ing attach­ments) is not intended or writ­ten to be used, and can­not be used for the pur­pose of (1) avoid­ing penal­ties under the Inter­nal Rev­enue Code or (2) pro­mot­ing, mar­ket­ing or rec­om­mend­ing to another party any plan or arrange­ment address herein.  Art & Busi­ness Con­sult­ing LLC cur­rently does not have a cer­ti­fied pub­lic accoun­tant, human resource spe­cial­ist, finan­cial plan advi­sor or an attor­ney on staff; this infor­ma­tion is purely for edu­ca­tional pur­poses and not to be con­strued as legal or finan­cial advice. Art & Busi­ness Con­sult­ing LLC and its employ­ees, mem­bers and asso­ciates are not engage to prac­tice law; you always should dis­cuss legal mat­ters with your attor­ney before talk­ing to any­one else.

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Posted in Business Taxes, General Business, HR Info, Other Information | 4 Comments »

Restaurants, Form 8027 & Tips Reporting For Employers & Employees

Friday, May 21st, 2010

An inde­pen­dent con­trac­tor sug­gested that although the IRS receives about 50,000 Form 8027’s in a given year it should be receiv­ing around 3 times that amount.  As a result, the IRS will focus exams on firms that failed to file form 8027.

What is Form 8027? It’s the Employer’s Annual Infor­ma­tion Return of Tip Income and Allo­cated Tips.  It’s required of employ­ers who oper­ate large food or bev­er­age estab­lish­ments.  If more than one estab­lish­ment oper­ates under 1 roof each estab­lish­ment must pro­vide a Form 8027 if receipts are recorded sep­a­rately, and file form 8027-T, Trans­mit­tal of Employer’s Annual Infor­ma­tion Return of Tip Income and Allo­cated Tips as well along with the form 8027.

What is a large food or bev­er­age establishment?

  • It serves food or bev­er­ages to be con­sumed on the premises.
  • Tip­ping is customary
  • More than 10 employ­ees, who worked more than 80 hours, were typ­i­cally employed on the premises in a typ­i­cal busi­ness day.  The num­ber of employ­ees includes those who are not nec­es­sar­ily tipped, such as bussers, cooks, kitchen staff, wine stew­ards, seat per­sons etc.  but it does not include a per­son who owns 50% or more of the stock in a cor­po­ra­tion while work­ing in the business.

The Instruc­tions for Form 8027 includes a work­sheet to deter­mine if Form 8027 is required.  You will take ½ the aver­age of the num­ber of hours worked/per day in the month with the great­est gross receipts and add it to ½ the aver­age of the num­ber of hours worked/per day in the month with the low­est gross receipts.  If this num­ber s more than 80 hours then your firm is required to file Form 8027.

If busi­ness is a new busi­ness, and has more than 10 employ­ees who worked more than 80 hours that were typ­i­cally employed on the premises in a typ­i­cal busi­ness day for 2 con­sec­u­tive months, the busi­ness will be required to file form 8027 cov­er­ing the remain­der of the year start­ing with the next pay period after they meet the requirement.

Busi­nesses not required to file form 8027:

  • Estab­lish­ments that oper­ated less than 1 month dur­ing the year.
  • Estab­lish­ments where tip­ping is not cus­tom­ary such as fast food where 95% of the sales are car­ry­out or cafe­te­rias with a 10% or more ser­vice charge.

Forms 8027 are due on March first of the fol­low­ing year, or March 31 if filed elec­tron­i­cally.  An exten­sion of time to file is requested using form 8809, Appli­ca­tion of Exten­sion of Time to File Infor­ma­tion Returns, and can be filed no later than March 1.  There are penal­ties for fail­ure to file unless the firm can show rea­son­able cause for the delay.

You will be report­ing Gross Receipts.  You may have Non-allocable Receipts for car­ry­out and items for with a 10% or more ser­vice charge that are not included in Gross Receipts.  Com­pli­men­tary Items for which tip­ping is cus­tom­ary must be included in the Gross Receipts; e.g. drinks at a casino, tip­ping is cus­tom­ary – include them in Gross Receipts, fruit bas­ket in hotel room, tip­ping is not cus­tom­ary – do not include them in Gross Receipts.   You must allo­cate tips among employ­ees if total tips reported to you dur­ing any pay­roll period are less than 8% (or the approved lower rate; the bur­den of proof for a lower rate rests with the peti­tion­ing employer). Employers-you need employ­ees to report tips to you. When you allo­cated tips you must include the allo­cated tips on the employee’s W-2, which is due to the employee by Jan­u­ary 31 of the year fol­low­ing.  The instruc­tions for Form 8027 pro­vide spe­cific instruc­tions for com­plet­ing the form.

Tips Reporting-Employees

  • The employee must report ALL tips if the employee receives more than $20 per month in tips. The employee may have heard all they need to do is report tips equal to 8% of sales, or 10%, or just charge-card tips. That’s a big myth, and could get the employee in legal trou­ble if they earn more.
  • Employ­ees should keep a daily tip diary, so they have a record to show to the IRS to prove earnings.
  • Employ­ees need to report tips to their employ­ers if they earn more than $20/month.  They must report these tips by the 10th day of the month fol­low­ing.  The employer can require report­ing more often….
  • The employer needs to know this tip income so they can prop­erly with­hold Social Secu­rity, Medicare and other pay­roll taxes from the employee’s paychecks.
  • Fail­ing to report tip income can result­ing in penal­ties, inter­est, a big bill for the unpaid FICA taxes and pos­si­ble jail time.
  • Some­times the employee owes more pay­roll taxes than the wages on their pay­check will cover.  The employee may either pay their employer money out of their tips to cover the unpaid Social Secu­rity Taxes avoid­ing under­pay­ment of esti­mate tax penal­ties, OR they may pay esti­mated taxes. The employee also may need to set aside some money to cover their taxes come tax time.

Tips Reporting-Employers

  • Employ­ers are required to gather tip reports from their employees.
  • The employer is required to pay the employer’s share of taxes on employee tips, and with­hold all pay­roll taxes for tips and wages, from the wages actu­ally paid to the employee.
  • Some employ­ers must file form 8027 and allo­cate tips.
  • Some­times the employee owes more pay­roll taxes than the wages on their pay­check will cover.  In this case the gov­ern­ment requires the employer to pay with­hold­ing taxes in a cer­tain order. The employer needs to report Uncol­lected Social Secu­rity Taxes on the employee’s w-2.

Are you required to file Form 8027? Are you prop­erly record­ing and with­hold­ing taxes for employee tips?  As always, small busi­ness ser­vices and tax­a­tion are our busi­ness.  If you need help Please give Art & Busi­ness Con­sult­ing a call.  We would love to engage you as a client.

The usual dis­claimers: Although ABC has made every effort to insure the accu­racy of Taxes, Tips and Tools, mis­in­for­ma­tion, dis­in­for­ma­tion, changes, mis­takes, typos and hack­ers hap­pen, there­fore Art & Busi­ness Con­sult­ing LLC takes no respon­si­bil­ity for any action taken or results based on the infor­ma­tion sup­plied here in. The con­tent of this blog gen­er­ally applies to busi­ness and indi­vid­ual tax­a­tion in the United States of Amer­ica.  Inter­nal Rev­enue Ser­vice Cir­cu­lar 230 Dis­clo­sure:  As pro­vided for in Trea­sury reg­u­la­tions, advice (if any) relat­ing to fed­eral taxes that is con­tained in this com­mu­ni­ca­tion (includ­ing attach­ments) is not intended or writ­ten to be used, and can­not be used for the pur­pose of (1) avoid­ing penal­ties under the Inter­nal Rev­enue Code or (2) pro­mot­ing, mar­ket­ing or rec­om­mend­ing to another party any plan or arrange­ment address herein.  Art & Busi­ness Con­sult­ing LLC cur­rently does not have a cer­ti­fied pub­lic accoun­tant, human resource spe­cial­ist, or an attor­ney on staff; this infor­ma­tion is purely for edu­ca­tional pur­poses and not to be con­strued as legal or finan­cial advice. Art & Busi­ness Con­sult­ing LLC and its employ­ees, mem­bers and asso­ciates are not engage to prac­tice law; you always should dis­cuss legal mat­ters with your attor­ney before talk­ing to any­one else.

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Posted in Business Taxes, HR Info, Individual Taxes, Other Information | 2 Comments »

Time to HIRE?

Wednesday, May 12th, 2010

The Hir­ing Incen­tives to Restore Employ­ment Act (HIRE) was signed in to law by Pres­i­dent Obama on March 18, 2010.  Under the new laws cer­tain employ­ers may ben­e­fit from hir­ing cer­tain kinds of new employ­ees.  The first break elim­i­nates the employer’s por­tion of the Social Secu­rity tax of 6.2%.  If the new employee is kept for 52 weeks a sec­ond tax credit kicks in.  The new tax breaks apply to employ­ees hired after Feb­ru­ary 3, 2010 and before Jan­u­ary 1, 2011.

The FICA tax break only applies to the Employer’s Social Secu­rity por­tion — the employer must still pay the Medicare Tax and col­lect both the Social Secu­rity and Medicare employee portions.

  • The newly hired employee can­not have worked more than 40 hours in the last 60 days  in order to be eli­gi­ble for this tax credit.
  • The employer can­not replace cur­rent employ­ees unless those employ­ees are dis­charged for cause or the employee quits voluntarily.
  • The newly hired employee can­not be related to the employer.
  • The newly hired employee can­not directly or indi­rectly own more than 50% of the company.
  • A qual­i­fied employee may work any num­ber of full-time or part-time hours.

The tax break for March will show up as a credit on the Q2 941; for the rest of the year the employer can take the break into account when mak­ing reg­u­lar pay­roll deposits.  This tax credit CANNOT be taken in con­junc­tion with the Work Oppor­tu­nity Tax Credit (WOTC).  Employ­ers also CANNOT dou­ble up using the FICA Tip Credit either.   The sec­ond half of the credit kicks in after the employer has retained the employee for a year; the tax credit is the lesser of 6.2% of the employee’s wages or $1000.

As eager as an employer might be to take advan­tage of this tax credit, they should not use it as a con­di­tion of hire, which would prob­a­bly be a dis­crim­i­na­tory hir­ing prac­tice.   If an employer decides to hire some­one they should be care­ful about when and whether they ask the employee if they are long-term unem­ployed until after mak­ing a hir­ing deci­sion.  Once they decide to hire some­one then they can ask them to cer­tify that they have not been employed for more than 40 hours in the last 60 days.

As always, small busi­ness ser­vices and tax­a­tion are our busi­ness.  If you need help Please give Art & Busi­ness Con­sult­ing a call.  We would love to engage you as a client.

The usual dis­claimers: Although ABC has made every effort to insure the accu­racy of Taxes, Tips and Tools, mis­in­for­ma­tion, dis­in­for­ma­tion, changes, mis­takes, typos and hack­ers hap­pen, there­fore Art & Busi­ness Con­sult­ing LLC takes no respon­si­bil­ity for any action taken or results based on the infor­ma­tion sup­plied here in. The con­tent of this blog gen­er­ally applies to busi­ness and indi­vid­ual tax­a­tion in the United States of Amer­ica.  Inter­nal Rev­enue Ser­vice Cir­cu­lar 230 Dis­clo­sure:  As pro­vided for in Trea­sury reg­u­la­tions, advice (if any) relat­ing to fed­eral taxes that is con­tained in this com­mu­ni­ca­tion (includ­ing attach­ments) is not intended or writ­ten to be used, and can­not be used for the pur­pose of (1) avoid­ing penal­ties under the Inter­nal Rev­enue Code or (2) pro­mot­ing, mar­ket­ing or rec­om­mend­ing to another party any plan or arrange­ment address herein.  Art & Busi­ness Con­sult­ing LLC cur­rently does not have a cer­ti­fied pub­lic accoun­tant, human resource spe­cial­ist, or an attor­ney on staff; this infor­ma­tion is purely for edu­ca­tional pur­poses and not to be con­strued as legal or finan­cial advice. Art & Busi­ness Con­sult­ing LLC and its employ­ees, mem­bers and asso­ciates are not engage to prac­tice law; you always should dis­cuss legal mat­ters with your attor­ney before talk­ing to any­one else.

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Posted in Business Taxes, HR Info | No Comments »

Another Change Coming to Arizona’s State Withholding Form A4

Friday, April 30th, 2010

Last year the fed­eral gov­ern­ment decided to give a tax break to work­ers in the mid­dle of the year by reduc­ing the amount of tax with­held from each paycheck.

Unfor­tu­nately, this meant the Ari­zona state income tax with­held went down, as AZ with­hold­ing is based on a per­cent­age of the Fed­eral income tax with­held.  So some­where in the mid­dle of the year, Ari­zona changed its with­hold­ing rates and required employ­ers to get new A4’s from their employ­ees select­ing a new higher with­hold­ing tax rate.

This year the tax break is spread out over the entire year, there­fore Fed­eral with­hold­ing went up just a smidgeon.  So at the begin­ning of the year, all employ­ers were required to new A4s from their employ­ees select­ing slightly lower with­hold­ing tax rates as Ari­zona had to adjust its with­hold­ing per­cent­ages again.

But hold on, we are not done yet.  The Ari­zona Depart­ment of Rev­enue (AZ DOR) has been tasked with com­ing up with a state with­hold­ing tax rate that is inde­pen­dent of the fed­eral amount with­held.  The AZ DOR has now posted the new AZ A-4s at their web­site: http://www.azdor.gov/LinkClick.aspx?fileticket=9_U8ufG2wH8%3d&tabid=265&mid=884 If this link is bro­ken you can find it by going to the AZDOR.gov forms pages.  

Ari­zona employ­ers will need to get their employ­ees to com­plete new A-4s before July 1, 2010 and start with­hold­ing amounts in accor­dance with those new A-4s on July 1, 2010.  The new A-4s list  AZ With­hold­ing amounts as a per­cent­age of income; they are not valid until July 1, 2010. 

A good start­ing place for an employee would be to see what per­cent­age of income taxes were in 2009.   For exam­ple if an employee had an AZ adjusted gross income of 70,000 and was required to pay 1,700 in AZ taxes in 2009 their tax was about 2.4 % of their income.  They might opt for the 2.7% check box on their AZ A-4 assum­ing their sit­u­a­tion in 2010 is sim­i­lar to their sit­u­a­tion in 2009.   For a tax­payer that had $30,000 in AZ adjusted gross income for 2009 and paid $500 in taxes, their tax was about 1.7 % of their adjusted gross income in 2009. They might opt for the 1.8% check box on their AZ A-4 assum­ing their sit­u­a­tion in 2010 is sim­i­lar to their sit­u­a­tion in 2009. The new A-4 on-line the form actu­ally has a work­sheet to help them fig­ure out what their with­hold­ing should be.  NOTE:  As an employer you should not advise employ­ees as to what amounts to with­hold, but you can sug­gest they use the work­sheet that is part of the new AZ with­old­ing form.

In other news as a fund-raising mea­sure AZ DOR will now require busi­nesses, which have a Trans­ac­tion Priv­i­lege, Use and Sev­er­ance Tax License (TPT)  issued before July 1. 2009 to “renew” them and pay a fee AND they are rais­ing the fee for a license and updates effec­tive June 15, 2010.  Art & Busi­ness Con­sult­ing LLC has an inquiry out to the AZ DOR as fur­ther infor­ma­tion about this change to TPT did not appear to be located on their web­site as of the day we received notice of the change.   We will update you when we receive fur­ther infor­ma­tion, such as how much the new license fee will be, are they going to mail the “renewal notices” out to cur­rent license hold­ers, how often the license will need to be renewed, etc.

If you need help with this issue or any other, remem­ber, small busi­ness ser­vices and tax­a­tion are our busi­ness.  Please give Art & Busi­ness Con­sult­ing a call.  We would love to engage you as a client.

The usual dis­claimers: Although ABC has made every effort to insure the accu­racy of Taxes, Tips and Tools, mis­in­for­ma­tion, dis­in­for­ma­tion, changes, mis­takes, typos and hack­ers hap­pen, there­fore Art & Busi­ness Con­sult­ing LLC takes no respon­si­bil­ity for any action taken or results based on the infor­ma­tion sup­plied here in.  Inter­nal Rev­enue Ser­vice Cir­cu­lar 230 Dis­clo­sure:  As pro­vided for in Trea­sury reg­u­la­tions, advice (if any) relat­ing to fed­eral taxes that is con­tained in this com­mu­ni­ca­tion (includ­ing attach­ments) is not intended or writ­ten to be used, and can­not be used for the pur­pose of (1) avoid­ing penal­ties under the Inter­nal Rev­enue Code or (2) pro­mot­ing, mar­ket­ing or rec­om­mend­ing to another party any plan or arrange­ment address herein.  Art & Busi­ness Con­sult­ing LLC cur­rently does not have a cer­ti­fied pub­lic accoun­tant or an attor­ney on staff; this infor­ma­tion is purely for edu­ca­tional pur­poses and not to be con­strued as legal or finan­cial advice.  Art & Busi­ness Con­sult­ing LLC and its employ­ees, mem­bers and asso­ciates are not engage to prac­tice law; you always should dis­cuss legal mat­ters with your attor­ney before talk­ing to any­one else.

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Posted in Business Taxes, HR Info, Individual Taxes, Other Information | 4 Comments »

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