The IRS has recently added a new online search tool so people can better check if the tax-exempt organizations they donate to are really eligible to receive charitable donations.

It used to be that finding out whether a tax-exempt organization was in good standing was a bit of a crapshoot, as the relevant information can be easily implied by the organization to entice donations that aren’t qualified as taxable deductions.  The danger of this state of affairs, of course, was that your donations to the no-longer-tax-exempt organization in question could not be used as a deduction to offset your income!  Talk about a bad surprise come tax (or audit) day!

But now, with the IRS’s EO Select Tool, uncertainty or assumptions are a thing of the past.  With EO Select, individuals and organizations can check to see if an organization is eligible to receive tax-deductible charitable donations (and you are able to properly deduct them) along with a whole host of other info about the organization’s standing as far as the government is concerned.

So rest your uncertainty, grab your mouse, head to http://apps.irs.gov/app/eos/ and get those donation checks ready!

Tax Time Approaches!!!  Need Help?

It is getting to be that time of year (yippee).  Are you prepared?  We have the tools to accurately and timely prepare all business and personal tax returns.  With most all business returns due March 15, businesses everywhere are crunching numbers and preparing all of the year-end filings from W-2s and 1099s to annual and quarterly payroll reports.   Let us know if you need any help!

Also, for Sterling clients who don’t use accounting software such as QuickBooks, we have a personalized and formulized spreadsheet for all of your business income and expenses.  All you have to do is enter the individual amounts and it will summarize everything by category and put it into a profit and loss format for analysis and tax return preparation.  It sure beats burning out that calculator!

On the individual side, once you receive all of your year-end tax forms and get your information organized, stop on by or let us know – the earlier the better, because April 17th (Yes, it is the 17th this year) will come sooner than you think!  We will be glad to answer any questions you might have before, during, and after the preparation.  Additionally, if you need help getting organized, you can download a blank tax organizer from our website.  If you are a current client, we can also resend you an electronic or paper organizer with prior year amounts and items in it for comparison and to make sure you didn’t leave anything out!  If you are not a current client, come on in for a free consultation.

See or talk to you soon!  Is anyone getting excited like we are?

PAYROLL TAX CUT EXTENDED! Well at least for now…

The US Congress just recently passed a two-month extension of the payroll tax cut on the employee side starting at the first of the year.  This cut lowered the employee portion of the payroll tax from 6.2% down to 4.2%.  The temporary extension was passed eight days before it was set to expire.  Additionally, the extension also keeps in place expanded unemployment benefits and it suspends a reduction in Medicare payments to doctors through the end of February.

With the 2012 elections coming up, neither side wants to take the blame for lowering the net pay of voters everywhere.  That would be political disaster.  We can only hope in the next couple months when Congress reconvenes that they will be able to work out a longer solution or reorganization.  Good ole bipartisanship at its best!

VETERANS – LISTEN UP! BUSINESSES WANT YOU!

On November 21, 2011, a new law was enacted that creates employment incentives designed to get unemployed veterans back to work after their service.  This should create a much smoother transition for vets to getting back into the workplace and give the businesses that hire them an incentive to do so.  Veterans’ experience can prove to be invaluable in private enterprise and combined with this new law, will give businesses an even greater advantage when employing a vet.

The law provides for a “Returning Heroes Tax Credit” for businesses hiring unemployed veterans.  The tax credit provides:

• $2,400 maximum for vets unemployed for at least one month
• $5,600 maximum for vets unemployed for at least six months

The law retains the “Work Opportunity Credit” providing:

• Maximum credit of $4,800 for hiring unemployed veterans with service-related disabilities

Lastly, the law creates a “Wounded Warrior Tax Credit” providing:

• Maximum of $9,600 for hiring vets who have service-related disabilities and who have been unemployed for longer than six months

Get those resumes ready!

Inflation = Increased Tax Benefits? Yes for 2012!

Today’s economy sometimes makes us feel like the flower in the picture, which leaves us asking is there any benefit from the situation. Well I do have good news amongst all the bull (referring to the picture of course). Uncle Sam is increasing various tax breaks effective for the 2012 tax year including:

Each personal and dependent exemption will be $3,800, which is up $100 from this year.

The new standard deduction is $11,900 for married couples filing jointly, $5,950 for single individuals and those couples that are filing separate, and $8,700 for people filing as head of household. These increased by various amounts as much as $300 from this year.

Tax-bracket thresholds have increased for each filing status. This essentially means that more of the money you make will be taxed at more favorable rates. Most will not notice a huge difference in overall tax savings, but everything helps.

Additionally, many other deductions and credits have been adjusted for inflation as well. Among these is the Earned Income Credit which will increase by various amounts depending on filing status and amount of dependents claimed. The foreign income deduction, income thresholds for education benefits, and medical savings account deductible amounts will all rise slightly in 2012 just to mention a few. At least in these inflationary times we will see some benefit; however slight it might be in the overall picture!

AZ MINIMUM WAGE INCREASES! Hourlies and Business Owners Listen Up!

On October 13^th, 2011, the Industrial Commission of Arizona bumped up the minimum wage by $.30 to $7.65/hour starting on Jan 1, 2011.  Tipped employees, who make $3 below the standard minimum wage, will also receive the raise.  For a full-time wage worker, that is $624 more next year.

This is partially due to fact that the U.S. Bureau of Labor Statistics reported that the year-to-year cost of living for all urban areas went up 3.8% from August 2010.  With the upcoming change in minimum wage, AZ will be above the federal rate of $7.25/hour.  Enjoy it or hate it, it is going in effect starting 2012!

Effective October 1, 2011, businesses may now pay themselves or their employees $242 a day for meals, lodging, and incidentals in 43 high-cost regions (surprise surprise…Sedona = one of those high-cost regions). In all other localities, it increased to $163. For solely meals and incidentals, the rate remains unchanged – $65 a day in high-cost areas and $52 elsewhere.

For self-employed individuals, the meals and incidental rate can be used in lieu of keeping receipts, but lodging expenses must be kept separately. Keep this in mind when planning your next business trip!

For information on the localities you can visit http://www.irs.gov/publications/p1542/ar02.html. Safe travels!

American Opportunity Credit – Refundable Tax Credit for Paying College Expenses?

The short answer? Yes! The American Opportunity Credit (AOC) replaced the Hope credit of previous years and is a great way to get a little money back from the ever-increasing amount of college expenses that are incurred every year. Here it is in a nutshell:

• Up to $2,500 for each of the first four years and up to $1,000 of the credit is refundable (meaning even if you owe zero tax, you still can get up $1,000 back)

• College students or parents claiming students as dependents are eligible for this credit

• Qualified expenses include:

o Required course material (books, supplies, and equipment needed for the course of study even if not purchased from the post-secondary education institution as a condition of enrollment or attendance)

o Tuition and fees

• Valid for the first four years of college

• Expires 12/31/2012 so take advantage of it while you can!

Of course there is fine print such as limitations, phaseouts, etc, but for the majority of people, it is typically a great way to help ease some of the burden of those mounting college expenses we have come to know.

Arizona is one of more than 30 states that borrowed money from the federal government after our states’ unemployment trust funds were sucked dry during the economic recession. This enabled us to keep paying unemployment benefits to those that qualified as required by federal law.  What does this mean?

MORE TAXES – unfortunately.

A House Bill passed on July 20 of this year retroactively imposing a “Special Assessment” tax on all taxable wages paid in 2011 and 2012.  The first three calendar quarters of 2011 is now due by October 31, 2011.  The agency that will be collecting it is the DES Unemployment Insurance Tax Section from which you should be receiving a letter or notice shortly (if you haven’t already).  Here are the details:

• All employers subject to Arizona UI Tax in 2011 and 2012 are also subject to the Special Assessment
• “Taxable Wages” are the first $7,000 of gross wages paid to each employee in the calendar year
• For 2011, it is .4% of taxable wages (max of $28 per employee)
• For 2012, it is estimated to be around .6% – .8% ($42 – $56 max per employee)

You already know the bad news… The small amount of good news? It is tax deductible as a cost of doing business.

We will continue to post updates so stay tuned for more info on how to not get like the little guy in the picture…

Taxpayers with incomes of $1 million or more got the most “attention.” The IRS audited 8.36% of these filers. That is an average of one out of every 12 returns.

Three other classes of taxpayers experienced significant audit heat as well, with audit rates more than twice the average:
Filers with incomes of at least $200,000 up to $1 million
Business returns with gross receipts of $25,000 and up, especially Schedule C filers
And taxpayer returns that claim the Earned Income Credit

Stay tuned, in future posts, we will help give you tips and hints on how to generally minimize this chance.

By the way….they will not give you a t-shirt if indeed you are audited .