Written by partridgecpas

2018 Tax Reform

2018 Tax Reform

On January 1st, 2018, Congress passed the largest piece of tax reform in more than 30 years. This bill will affect most taxpayers for the 2018 tax year.

Wondering what’s in the new tax bill and how it might affect you? Here’s is a quick summary of some of the most major tax provisions in the new bill and how they affect you.

Lowered Tax Rates and Income Ranges Changed

The 7 tax brackets found in the current law retain but lowers the number of tax rates. Income thresholds are also changed at which the rates apply.

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Current Tax Brackets:

  • 10%
  • 15%
  • 25%
  • 28%
  • 33%
  • 35%
  • 6%

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New Tax Brackets:

  • 10%
  • 12%
  • 22%
  • 24%
  • 32%
  • 35%
  • 37%

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Income thresholds have changed as well.

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Current Income Thresholds
(Married Joint Filers)

  • 10% – $0 to $18,650
  • 15% – $18,651 to $75,900
  • 25% – $75,901 to $153,100
  • 28% – $153,101 to $233,350
  • 33% – $233,351 to $416,700
  • 35% – $416,701 to $470,700
  • 6% – More than $470,700

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New Income Thresholds
(Married Joint Filers)

  • 10% – $0 to $19,050
  • 12% – $19,051 to $77,400
  • 22% – $75,401 to $165,000
  • 24% – $165,001 to $315,000
  • 32% – $315,001 to $400,000
  • 35% – $400,001 to $600,000
  • 37% – More than $600,000

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Current Income Thresholds
(Single Filers)

  • 10% – $0 to $9,325
  • 15% – $9,326 to $37,950
  • 25% – $37,951 to $91,900
  • 28% – $91,901 to $191,650
  • 33% – $191,651 to $416,700
  • 35% – $416,701 to $418,000
  • 6% – More than $418,000

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New Income Thresholds
(Single Filers)

  • 10% – $0 to $9,525
  • 12% – $9,526 to $38,700
  • 22% – $38,901 to $82,500
  • 24% – $82,501 to $157,500
  • 32% – $157,501 to $200,000
  • 35% – $200,001 to $500,000
  • 37% – More than $500,000

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AMT Exemptions Increased

The new tax bill raises the income exempted for married filing jointly from $84,500 to $109,400 (adjusted for inflation) and single filers from $54,300 to $70,300 (adjusted for inflation), so fewer taxpayers will pay it.

Tax Relief For Families and Individuals

Standard Deduction Increase:

This tax law almost doubled the previous standard deduction amount. Single filer’s deductions jumped from $6,350 to $12,000.

Married joint filers increased from $12,700 to $24,000.

Child Tax Credit Increase:

The child tax credit doubled from $1,000 to $2,000 per child. Also, the amount refunded went from $1,100 to $1,400. It also adds a non-refundable credit of $500 if are claiming dependents other than children. It also raised the income threshold from $110,000 to $400,000 at which these benefits phase out for married couples.

Reductions or Eliminations In Deductions

Dependent & Personal Deductions

The new bill eliminates the personal and dependent exemptions which were $4,050.

Local & State Taxes/Home Mortgages

The new bill eliminated the amount of local and state property, sales, and income taxes that may be deducted to $10,000. In the previous year, these taxes were generally fully tax deductible.

The new bill also puts a cap on the amount of mortgage indebtedness for new home purchases on which interest may be deducted at $750,000 vs $1,000,000 in the previous law.

Health care Changes:

The new bill eliminated the tax penalty for no health insurance. It also temporarily lowered the floor above which out-of-pocket medical expenses can be deducted in the previous law from %10 to $7.5%. So when you are filing taxes in 2019, you can deduct medical expenses that are greater than 7.5% of your AGI.

Self-employed (freelancers, contractors, sole proprietors) and small businesses:

The new bill has many new changes for business. The biggest change includes reducing the top corporate rate to 21%, a 20% deduction for incomes from certain types of “pass-through” entities (sole proprietorships, S Corps, partnerships), limits on expensing of interest from borrowing, just about doubling the amount a small business can expense from section 179 amount of %510,000 to $1,000,000, and eliminated the corporate alternative minimum tax.

Partridge & Associates Offers Tax Preparation in Scottsdale, Arizona

These tax changes apply for filing taxes in 2019. If you have more questions about taxes or need a great tax preparation expert, you can contact Partridge & Associates today to get your tax question answered and have your taxes filed for you. Learn more about our expert tax preparation services in Scottsdale. We offer business tax preparation, small business tax preparation, personal tax preparation, and more.

Written by partridgecpas

2019 Tax Changes

Tax Changes 2019

Searching for 2019 tax changes? This post should help! Here we outline the most important 2019 tax changes for individuals and families.

Standard Deduction Changes

The standard tax deduction for married filing jointly increased another $400 from the previous year to $24,400 for tax year 2019.

Single Tax Payers & Married Individuals Filing Separately

Standard deductions for both single and married individuals filing taxes separately for 2019 have increased another $200 to $12,200.

Head Of Household Changes

The standard deduction for head of household has increased another $350 to $18,350 for 2019.

Personal Exemption Changes

The personal exemption for 2019 stays at 0, the same as 2018, as elimination of the personal exemption was one of the provisions in the Tax Cuts and Jobs Act.

Individual Single Taxpayers Tax Rate Changes

  • 37%, for income over $510,300
  • 35%, for income over $204,100
  • 32%, for income over $160,725
  • 24%, for income over $84,200
  • 22%, for income over $39,475
  • 12%, for income over $9,700
  • 10%, for income over $9,700

Married Couples Filing Jointly Tax Rate Changes

  • 37%, for income over $612, 350
  • 35%, for income over $408,200
  • 32%, for income over $321,450
  • 24%, for income over $168,400
  • 22%, for income over $78,950
  • 12%, for income over $19,400
  • 10%, for income over $19,400

Itemized Deductions Changes

There is not a limit on itemized deductions in 2019, the same as in 2018, as the limitation was eliminated by the TCJA.

Alternative Minimum Tax Exemption Changes

The AMT exemption amount for 2019 is $71,700 (up $1,400 from 2018) and starts to phase out at $510,300 (up $10,300 from 2018). The AMT exemption amount for married couples filing jointly is $111,700 (up $2,300 from 2018) and starts to phase out at $1,020,600 (up $20,600 from 2018).

Earned Income Credit Changes

The maximum Earned Income Credit for 2019 is $6,557 (up $126 from 2018) for tax payers filing jointly and have 3 or more qualifying children.

Qualified Transportation Fringe Benefit & Qualified Parking Changes

The monthly limitation for the qualified transportation fringe benefit it 2019 is $265 (up $5 from 2018), as is the limitation for qualified parking.

Health Coverage Penalty Changes

For 2019, the penalty for not maintaining health coverage is 0, per the TCJA (down $695 from 2018).

Employee Salary Reduction Changes

For taxable years starting in 2019, the limitation for employee salary reductions is $2,700 (up $50 from 2018) for contributions to health flexible spending arrangements.

 Medical Savings Account Changes

Participants who have a Medical Savings Account with self-only coverage, the plan must have a yearly deductible that isn’t less than $2,350 (up $500 from 2018); but not to exceed $3,500 (up $50 from 2018). The minimum out-of-pocket expense amount for self-only coverage is $4,650 (up $100 from 2018). The annual deductible for participants with family coverage is $4,650 (up $100 from 2018); but not to exceed $7,000 (up $150 from 2018). The out-of-pocket expense limit for family coverage is $8,550 (up $150 from 2018).

Adjusted Gross Income Changes

The AGI amount used by tax payers filing jointly to determine the reduction in Lifetime Learning Credit is $116,000 (up $2,000 from 2018).

Foreign Earned Income Exclusion Changes

The foreign earned income exclusion changed to $105,900 (up $2,000 from 2018.

Exclusion For Gifts Changes

The annual exclusion for gift changes to $15,500 in 2019 (no change from 2018).

Adoption Credits & Expenses Changes

The maximum tax credit for adoptions is the amount of qualified adoption expenses up to $14,080 (up $270 from 2018).

Source

https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2019

Written by partridgecpas

Do I Need an Accountant or CPA for My Small Business?

Do I Need an Accountant for my Small Business

If you are wondering whether you need an accountant for your small business, Partridge & Associates CPAs can help! When most people think about an accountant, they immediately think about accounting and bookkeeping. However, accountants do so much more than number crunching and can help with the growth of your small business. Know when to hire an accountant or CPA and what an accountant can do for your small business here.

Do I Need An Accountant For My Small Business?

You will need to hire an accountant:

1. When You Need Business Tax Preparation Services

Hiring an accountant for business tax preparation or small business tax preparation is a great idea because it can save you time and money vs performing tax preparation yourself. Also, an accountant will make fewer mistakes ensuring your tax filing goes smoothly.

2. When You Need Help Writing A Business Plan

An accountant can use accounting software to create financial projections as well as other reports. These reports can help you create a plan that’s more likely to succeed. Hiring an accountant at the early stages of business planning means you will benefit from their advice right from the start.

3. When You Need Help With Business Formation

There are different types of legal business structures to choose from including LLC, Corporation, Sole Proprietor, and more. An accountant can help with business formation and choosing the right legal business structure that best suits you.

4. When You Need Help Understanding Your Financial Situation

An accountant is key when measuring business metrics such as the ratio of total revenue to ratio of expenses, etc. Being able to see all of these charts and tables at a glance can help you keep track of, or monitor, important things like cash flow.

5. When You Need To Concentrate On Other Aspects Of The Business

Hiring an accountant to worry about finances can take a lot of stress off your shoulders. Most people want to have control over their finances but learning to trust a professional accountant with that task can let you focus on other aspects of the business.

6. When You Need Help Dealing With The Government

Dealing with the government can be a daunting task. A good accountant can make your life simpler by completing and filing compliance and legal documents, keeping you up to date with tax laws, preparing annual statements, handling payroll, maintaining important records and more.

7. When You Are Being Audited By The IRS

Audits can be expensive and time-consuming. An accountant can help with the audit process by giving you advice, making sure you didn’t violate any tax laws, and more. Hiring an accountant after you get audited is good, but having one beforehand might prevent you from being audited altogether.

8. When You Apply For Business Loans & Overdrafts

A good accountant can improve your chances of getting loans or overdrafts. Your accountant can use their accounting software to present facts and figures to the lender to back up your application. They can also answer questions about revenue, expenses, and projections.

9. When Your Business Is Growing Quickly

It’s important to hire an accountant if your business is growing very quickly, you’re hiring a lot of new employees, or taking on more space. An accountant can look after utility payments, property tax, employee taxes, payroll, and more. They can also provide financial analysis to provide insight on growing your business properly.

10. When You Are Buying A Business

If you are buying a business that is already up and running, it’s a good idea to hire an accountant because they can help you look into the company’s financial accounts to make sure everything is accurate. They can find out about a company’s assets and whether they have any outstanding debt you should be worried about.

11. When You Are Selling A Business

A good accountant produces statements of accounts and puts your financial records in order to show your prospective buyers. They can put together useful tables and charts to structure your affairs so you get the maximum amount of money from selling your business.

12. When You Want Peace Of Mind

The biggest advantage of hiring an accountant is the peace of mind you get from knowing your financial situation is being handled by a true professional. Just like you are a master at what you do, an accountant is a master at keeping your financials on point.

Do I Need A CPA For My Small Business:

You will need to hire a CPA:

1. When you need audited financial statements

An accountant can only prepare compiled financial statements. A CPA can prepare audited and reviewed financial statements. This is especially important for public companies as they must produce audited financial statements.

2. When You Need A Certified Professional

Don’t take your chances with just any accountant. Hiring a CPA ensures you are dealing with a trained professional that has experience and meets state licensing requirements. State licensing requirements typically include getting a degree, having plenty of experience, and passing a CPA exam.

Read more reasons why you need a CPA.

Partridge & Associates Are The CPA’s For You

Our CPA firm has over 35 years of tax and accounting experience and has served thousands of businesses and families throughout the Scottsdale and Phoenix areas. We are proud that our CPA firm has the highest standards of education, training, and expertise available. We are pleased to say that we are one of the most creative and dynamic CPA firms in tax planning and strategies.

Written by partridgecpas

Filing Small Business Taxes for the First Time

Filing Small Business Taxes For The First Time

If this is your first time filing small business tax returns, this post should help! Handling the first time filing taxes for small business owners is an overwhelming experience.  Use this guide to make the first time you’re filing taxes for your small business smooth and easy by understating the potential liabilities.

Filing small business taxes for the first time will be exponentially easier if you are preparing for this task year-round.  Keeping well-organized accounting records is the foundation for making it easy to file taxes for small businesses for the first time and every time thereafter!

It’s vital to track all of your daily transactions for your business.  There are a number of great online accounting software that makes this daily recording simple and quick.  The records you keep will help you report the correct figures when you file your small business taxes.  In addition, doing this for yourself will help reduce your overhead as your accountant won’t have to bill you for as many hours.

Business Taxes & Structures

When you found your company it’s required to choose which business structure you’ll be.  There are various tax liabilities for the different business structures.  It is vital to choose the right business structure that fits the type of business you are starting.

There are some business structure types that hold the owner responsible personally for the company’s taxes.  In other cases the business structure separates the owner’s liability from the liability of the company’s taxes.  Each of these different business structures require a different form for the IRS.  Learning how to file taxes for small businesses will vary depending on the structure you choose.

Learn about the four common business structures and the tax responsibilities for each:

Sole proprietorship

A sole proprietorship is a business structure where there is a single owner.  It is the most simple way to structure a company and has the least amount of regulations from the government.

In a sole proprietorship, the owner is considered the same legal entity as the business.  In a case where the business isn’t able to pay tax debts, the sole proprietor may have their personal assets at risk to pay the business’s debts.

Form from the IRS that you will need:

Self-Employment Tax – Schedule SE

In the case that you’re self-employed make sure to use a Schedule SE to figure out any monies owed in self-employment taxes.  File the Schedule SE self-employment form when you are self-employed and make $400 or more in a tax year.

Profit or Loss From Business – Schedule C

Sole proprietors fill out the Schedule C to report expenses and income to the IRS.  A Schedule C is a section of the 1040 Tax Form.

Partnership

The partnership business structure is one where there are two or more owners.  With this structure, the partners share losses or profits equally.  That is unless there is a partnership agreement that states otherwise.

Much like in the case of a sole proprietor a partnership has the same personal tax liability.  If the business is unable to pay its own tax debts, they will be assessed to the owners in the partnership.

Form from the IRS that you will need:

U.S. Return of Partnership Income – Form 1065

A partnership business structure isn’t obligated to pay federal income taxes.  The 1065 Tax Form is used to report expenses and income to the IRS.

To file for the business in the partnership each of the partners is sent a 1065 Form Schedule K-1.  This will show each partner’s share of the income and losses.  The Schedule K-1 is used by each of the partners in filling out their own personal income taxes.

Corporation

When a business chooses to structure as a corporation, or a C Corp, the owners are considered a separate entity from the business.  This is used to protect owners from any potential tax debts that the business isn’t able to pay.

Corporations protect the owner’s personal assets but are double taxed. First, the income is taxed at the level of the business and then again each of the owners are taxed on their income.

Form from the IRS that you will need:

U.S. Corporation Income Tax Return – Form 1120

To file for your small business taxes use the 1120 Form to calculate and file the business’s federal income taxes.  This is the same form that’s used to report the corporation’s income and expenses.

Limited liability company (LLC)

In the limited liability company business structure, there is a combination of partnership and corporation.  Much like a corporation the owners are separate entities from the LLC.  An LLC is similar to a partnership in that owners share tax liability.

An LLC limits the amount of each individual owner’s personal tax liability.  The taxes are passed through to each owner’s personal income, so the business is not double taxed (like in the case of a corporation).  Depending on the way in which the owners set up the LLC the company will file as a partnership, corporation, or as part of each owner’s personal taxes. The forms needed to file will depend on which is chosen.

Tax-deductible expenses

As this is the first time you’ll be filing taxes for a small business, you’re likely unfamiliar with what are and are not tax deductible expenses.  In many cases, filing will allow you to subtract a portion or all of the cost from the total owed taxes.

In an SBA article, Caron Beesley, a writer, marketing communications consultant, and small business owner said:

Petty cash purchases, magazine subscriptions, educational classes and more. These ‘small’ expenses can add up quickly. Make sure you track all your expenses and check with your tax advisor about what you can and can’t deduct.

To claim these small business tax deductions it is vital to keep accurate and complete accounting and financial records.  You need to be able to prove that you purchased an item for your business, and not personal use.  Read about fire common small business tax deductions.

Employee expense deduction

If your company employees workers there is a portion of your payroll expense that might be deductible. It is possible for small businesses to deduct contributions to employee benefits and wages.  There are certain regulations that need to be followed to properly claim the employee expense deduction.

Home Office Deduction

You are able to deduct the areas of your home that you utilize for business operations.  When using the home office deduction it is critical that you only claim the areas that are solely used for the operation of your business.

Business use of a vehicle deduction

It is possible to claim the use of your vehicle whenever it is being used for business purposes.  This would include fuel but no include travel from your home to your business or any parking fees or traffic tickets that are assessed during work hours.

Travel Cost Deduction

When travel is needed for business purposes it can be claimed as a deduction on your taxes.  Any travel must be necessary, ordinary, and reasonable for your business.  It is not possible to deduct for personal vacations or travel that isn’t related to the operation of your business.

Professional and Legal fee deduction

If you’ve needed to pay for any professional or legal fees there is a chance you can deduct them on your filing for your taxes.  These fees also must be deemed necessary, ordinary, and directly involve your small business.

Charitable Deductions

Donating to charity is more than good business citizenship; it can also save tax. Food donations, Qualified conservation contributions, and S corporation stock donations can also help you get an additional deduction on your small business tax return. Read more about charitable deductions here.

First time filing taxes for small business

It is important when filing your small business taxes for the first time that you carefully follow the tax form instructions.  Ensure that you fill out all of the fields carefully with the correct information.  Mistakes made when filing taxes can lead to audits, fines, and IRS penalties.

Once complete send the form to the appropriate government agency.  Instructions are how and where to send the forms will be located on the form.  Ensure that you send the forms so they will arrive before the deadline.

Keep in mind, this article focuses on filing taxes for federal tax liabilities.  It will also be necessary for a small business to file taxes for the state and potentially the county and city. Ensure you check with your local and state business agencies to find the appropriate tax obligations and any necessary forms.

Keeping track of income and expenses is a vital part of filing taxes for small businesses.  To simplify keeping track of this information for your small business books, let Partridge & Associates take care of your business taxes or small business tax preparation so you know its done correctly. 

Partridge & Associates Offers Professional Small Business Tax Preparation

If you do business in the Phoenix or Scottsdale area, Partridge & Associates can help you with your business taxes. Partridge & Associates offers professional business tax preparation, including small business tax preparation services.

Arizona CPA accountants in Scottsdale and Phoenix

Written by partridgecpas

What is a CPA?

What Is A CPA

Many people wonder “what is a CPA”? A CPA or Certified Public Accountant is a financial advisor that has passed the CPA certification exam, meets work experience requirements, and stays up to date on educational courses required to maintain their CPA certification.

Types of CPAs

  • Tax Consultants
  • Accounting Consultants
  • Financial Consultant
  • Bookkeepers
  • Business & Tax Advisors
  • Enrolled Agents
  • Decision Makers

Are Accountants & CPAs the Same Thing?

The short answer is no. All CPAs are accountants but not every type of accountant is a CPA. The main difference between a CPA and an accountant is the certification. CPA has to have the right education and experience requirements to become a certified CPA.

What Does a CPA Do?

CPAs have many jobs they can have including working for small to large accounting firms, as a CFO for a fortune 500 company and more. Simply stated, A CPA is a financial advisor with experience in helping individuals and business reach their financial goals. These goals could be anything from planning a billion dollar merger to opening a new office.

Need a Certified CPA in Arizona?

If you are looking for a certified public accountant in Arizona, Partridge & Associates can help! We have helped 1000’s of individuals and businesses throughout the Arizona area with business formationaccounting & bookkeeping, personal and business tax preparation (including small business), IRS representation and more.

Written by partridgecpas

The Tax Cut and Jobs Act of 2017

Tax Cut and Jobs Act of 2017

  • The President signed the biggest tax reform law in over 30 years
  • Most of the changes will take place in 2018, expire after 2025
  • Your tax return could look very different
  • In many business areas, the computation will be very complex and will require on-going accounting and planning prior to year-end to maximize your tax savings

Small Business Tax Return Changes

  • There could be up to a 20% deduction for individual owners of-flow through” businesses (sole proprietors, LLCs (excluding C corporations), partnerships, S Corporations, renal activity and REITS) on qualified business income. The new IR Code Section 199-A is very comprehensive and is not always easily understood. Because of its complexity and difficult interpretation, it is highly advised to consult with a tax professional – before the end of the year.
  • The new corporate income tax rate will be a flat 21% (permanent)
  • The business deduction for entertainment is eliminated
  • The 50% meals deduction now includes meals on the employer’s premise
  • Many more and enhanced business asset write-off options (including increased Section 179 deduction)
  • New Net operating rules eliminating the two-year carry back and the percentage of the loss carried forward.

Individual Tax Return Changes

  • Tax brackets have been expanded-ranging from 10% to 37% (lower top rate). There are no changes in the tax rates for long-term capital gains and dividends
  • The is no longer a deduction of personal and dependent exemptions
  • The maximum child credit is increased to $2000 per qualifying child (up to $1400 refundable) with higher income limits to qualify
  • You will no longer be able to deduct state and local taxes above $10,000 per year
  • There is a limit on new home mortgage interest deductions limited to %750,000 and home-equity loans not used to purchase or substantially improve the home are eliminated.
  • Member of American Institute of Certified Public Accountants and Arizona Society of Certified Public Accountants
Written by partridgecpas

Starting a Business in Arizona

Starting a Business in Arizona | Partridge & Associates CPA's

If you are thinking about starting a business in Arizona, Partridge & Associates can help! However, you should know that the entity you choose can greatly impact your financial potential. Partridge & Associates can help guide you through the rigorous business startup and legal documentation process.

What Kind Of Business Should I Start In Arizona?

The first step to starting a business in Arizona is choosing what type of business to start. You should choose a business that suits your natural abilities, interests, and goals. This will keep you motivated when the times get tough and improve the odds of success.

  • Pool Service Business
  • Jewelry Retail Store
  • Contractor – Roofers, Plumbers, etc.
  • Solar Company

Careful Planning Creates Successful Businesses

Businesses that become successful are mostly built through careful planning. Before dedicating tons of money toward your business, you need to have the right strategies in place:

Developing Your Product Or Service

What type of problem does your product or service solve? What sets your service or product apart from the competition.

Marketing & Sales

How will you get the attention of your potential customers? Who is your potential customer?

Partnerships and People

What professional relationships will need to be created in order for your business to succeed?

Profit & Loss

How many sales or clients will it take for you to profit or break even? Where will you get the money and how much will it take to get there?

Business Formation In Arizona

Choosing the right business entity can greatly impact your finances. It is very important that you have a tax strategy in place when forming a new business. Furthermore, the right entity can also keep your personal and business finances separate, protecting you from liability. From taxes to personal liability, there is a lot to sort out beforehand.

  • Small Business LLC Formation
  • C Corporation Formation
  • S Corporation Formation

Partridge & Associates Can Help With Business Formation

Additionally, consider the integrated services we offer. From initial start-up to your first business income tax filing, Partridge & Associates CPA’s will be there for you – with answers that can make a difference to your bottom line, both personally and for your business.

Learn more about how Partridge & Associates can help with New Business Formations

Registering For Taxes In Arizona

Registering for taxes is one of the first things you need to do when starting a small business in Arizona. While most business will only be required to pay certain taxes, like withholding income tax, there are other specific taxes that will apply to specific services. For example, a bingo operator that works in the state of Arizona would be required to pay bingo tax, tobacco companies working in the state would need to pay tobacco luxury tax and liquor distributors would be required to pay a liquor luxury tax, etc.

In either case, most business will need a Tax ID number, also known as an EIN number. Without a Tax ID number, you will not be able to hire employees or even open a bank account for your business.

Other Taxes May Be Required

If you are planning on selling a physical product, you will need to register for the Arizona Transaction Privilege Tax. The ATPT is similar to sales tax. Furthermore, if you plan on hiring employees in the state of Arizona you will also need to register for Arizona Employee Withholding Tax and Arizona Unemployment Tax.

Learn more about Arizona State Tax & Licensing Requirements

Partridge & Associates Can Help With Tax Planning, Registration & Preparation

Our CPA’s know that small business owners and self-employed professionals need professional tax planning and preparation services just like large businesses do. Our business tax preparation services work for any size business, not just large ones. We can help with everything including business tax registration, planning, and preparation.

Learn more about how Partridge & Associates can help with Business Tax Planning & Strategy, Business Tax Preparation, Small Business Tax Preparation and IRS Representation & Audits

Hire An Accountant or Develop An Accounting System

Whether you decide to do your own accounting or hire a professional accountant, you will need an accounting system to help you track the financial performance of your business. Developing a great accounting system will also help when it comes time to file taxes.

Partridge & Associates Can Help With Accounting & Bookkeeping Services

Business owners in Arizona have more important tasks to perform than having to do your own accounting and bookkeeping. Partridge & Associates CPA’s can all of that for you so you can focus on the daily operation of your business.

Whether you select monthly or quarterly bookkeeping and accounting, we will take care of the following tasks for you:

  • Bank Account Reconciliation
  • Profit & Loss Statements
  • Statement Of Financial Position
  • General Ledger Review & Maintenance

We can also help with the following QuickBooks services:

  • QuickBooks Setup
  • QuickBooks Training
  • QuickBooks Cleanup
  • QuickBooks Review

Learn more about how Partridge & Associates CPA’s can help with Bookkeeping & Accounting or QuickBooks Services

Obtain Your Business Licenses & Permits

Some small business owners will also have to seek business permits or licenses that are specifically related to their services. While other business may not even need a single license, some businesses may need a variety of them. Most licenses in the State of Arizona fall into one of the categories below:

  • City and State Transaction Privilege Tax Licenses
  • Professional or Regulatory & Special Permits and Licensing
  • Occupational/Local Business Permits and Licenses

Learn more about Licensing & Taxes in Arizona

City Licenses & Permits

The city you live in may require specific licenses and permits. Each city will have its own regulations. Below are a list of the most common permits and licenses you might need:

  • Permit For Zoning
  • Permit For Signage
  • Occupation Permits
  • Permit For Alarm Systems
  • Building Permit
  • Tax Permit and/or Business License
  • Health Permit

Partridge & Associates Can Help With Licensing & Permits

Not sure what type of city/state licensing or permits you will need for your business? Partridge & Associates can help guide you through the business licensing and permitting process to ensure you get everything you need to succeed.

Obtain Business Insurance

Obtaining business insurance will help you manage risk. Common types of business insurance worth considering are Professional Liability Insurance, Workers Compensation Insurance, and General Liability Insurance.

It is recommended that all business including home-based business should at least purchase a general liability insurance policy. Other businesses selling professional service or advice should also consider purchasing professional liability insurance. Furthermore, if you plan on having one of more employees,  you will also need to have workers compensation insurance.

Not Sure What Type Of Insurance Your Business Will Need?

It can be confusing to understand what type of insurance your business might need. Let Partridge & Associates guide you through the business start-up process to clear up the confusion and create a plan so that you don’t miss anything.

Requirements For Employers

If you plan on having employees there are additional guidelines you will need to follow in order to stay ok with the IRS.

Income Tax Withholding

The IRS states that employers should keep employment tax records for at least 4 years after filing. The retain tax records should include:

  • Social Security numbers, contact information and personal information of employees
  • Your EIN number
  • Pension, wage, and annuity payment information for employees
  • Copies of your employees’ tax withholding allowance certificates

It is very important to keep your business records as they help your business run smoothly and can help prevent future problems, like preparing tax returns.

W-2 and W-4 Forms

You will need to have your employees give you a signed copy of their W-4 so you can submit it to the IRS. According to the IRS, “Form W-4 tells you, as the employer, the marital status, the number of withholding allowances, and any additional amount to use when you deduct federal income tax from the employee’s pay.

You as the employer will be responsible for the W-2 form. The W-2 form is a document that relates to taxes and wages of each employee.

It is required that you provide your employees with a copy of their W-2 form by the end of January and provide the SSA (Social Security Administration) a copy by the end of February.

I-9 Forms & Employee Eligibility Verification

New employees in AZ should fill out an Employee Eligibility Form, also known as an I-9 Form, within 3 days of their employment start date. All employers need to keep I-9 Forms on file to provide proof of their eligibility to work in the US.

Learn more about I-9 Forms

Report Newly Hired Employees

State and Federal law requires all employers in the state of Arizona to report re-hired or newly fired employees to the ANHRC (Arizona New Hire Reporting Center) within 20 days.

Learn more about Arizona New Hire Reporting

Need Help With Starting A Business In Arizona?

There is a lot of requirements, licenses, permits, etc. you will need to start a business in Arizona! Partridge & Associates CPS’s can help at any stage of the process!

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IRS Meals and Entertainment Expense Deduction Changes in 2018

IRS Meals and Entertainment Expense Deduction Changes In 2018

If you are searching for “entertainment expense deduction 2018” or “IRS meals and entertainment 2018“, this guide should help! The Tax Cuts and Jobs Act of 2017 made big expense deduction changes to entertainment and business meals starting in 2018.

Entertainment Expense Deduction Changes in 2018

The new meals and entertainment tax act does not allow entertainment expense deductions. Before this new tax act came into place on Dec. 31, 2017, you were allowed to deduct 50% of your entertainment expenses.

This means that any entertainment expenses paid or incurred after Dec. 31, 2017 are no longer tax deductible.

Meal Expense Deduction Changes In 2018

The meal expense deduction changed in 2018 as well where the IRS is only allowing businesses to deduct 50% of their meal deductions, vs. 2017, where you could deduct 100% of meals provided to employees.

Entertainment & Meal Expense Deduction Changes Under Tax Reform

Event

(Old rules) 2017 Expenses

(New rules) 2018 Expenses

Office Picnic or Holiday Party 100% deductible 100% deductible
Business Meals with Client If the tax payer is present 50% deductible (not extravagant or lavish) If the tax payer is present and business is conducted 50% deductible (not extravagant or lavish)
Meals Related To Entertainment 50% deductible 0% Deduction (No deduction if business is not conducted)
Transportation to or from Restaurants For Client Business Meals 100% deductible 100% deductible
Tickets For Sporting Events 50% deductible of the face value

50% deductible of skybox expenses

100% deductible for charitable sporting event tickets

80% deductible for tickets to an education athletic event

50% deductible for any transportation to or from parking spots at sporting events

0% Deduction

0% Deduction

0% Deduction

0% Deduction

0% Deduction

Memberships To A Club Club dues offer no deduction while 50% deduction is allowed for expenses incurred at any club organized for pleasure, business, recreation or other purposes if related to business 0% Deduction
Meals That Are Provided For The Convenience Of The Employer 100% deductible if they are excludable from the employees’ gross income as “de minimis fringe benefits” 50% deductible (0% deduction after 2025)
Meals Occasionally Provided To Employees & Meals During Overtime 100% deductible if they are excludable from the employees’ gross income as “de minimis fringe benefits” 50% deductible (0% deduction after 2025)
Snacks, Coffee & Water at the Office 100% deductible if they are excludable from the employees’ gross income as “de minimis fringe benefits” 50% deductible (0% deduction after 2025)
Meals Provided In Office During Meetings of Directors, Agents, Stockholders or Employees 50% deductible 50% deductible
Business Travel Meals 50% deductible 50% deductible
Business League Event, Conference or Seminar Meals 50% deductible 50% deductible
Meals provided in a Charitable sports Package 100% deductible 50% deductible
Meals Provided As Taxable Compensation to Independent Contractor or Employee 100% deductible 100% deductible
Meals Expenses Sold to a Customer or Client (or Reimbursed) 100% deductible 100% deductible
Free Food Offered To Public 100% deductible 100% deductible

Meal & Entertainment Expense Documentation

Under the previous law, in order for a business to be able to deduct expenses for meals and entertainment, the expenses must have been directly associated with or related to the active conduct of business or trade, or for the collection or production of income.

Under the new deductible rules, this requirement will essentially remain the same, although in a different form that states that meals expenditures must be deductible. However, this requirement no longer applies to entertainment expenses as those expenses have been repealed altogether. This repeal will also eliminate the deduction for meals if they are entertainment related.

Meals centered around entertainment fall under the purview of expenses when the activity centers around entertainment (In simpler words, just because the expenditure is a meal does not exclude it from the broader entertainment designation). Because these new rules treat entertainment-related meals differently, it may be wise to establish a new information management system or documentation procedure to account for each category separately. Business meals are only deductible if they are not extravagant or lavish, and if the actual taxpayer is present with the client.

For example, it is important to make sure you conduct business with the client to be deductible, and distractions might prevent the business argument (e.g., meal expenses at cocktail lounges, night clubs, country clubs, athletic clubs, vacation, fishing or similar trips

50% Deductible Meal & Entertainment Expenses 2018

The following business expenses are 50% deductible:

  • Expenses for meals during business meetings of directors, agents, stockholders, and employees. Partner meetings and office meetings now fall into this category. If there is no business conducted during the meal, it is non-deductible
  • Generally speaking, any meals during business travel, if they can be considered personal (not related to the function of the business trip) then a portion of the personal meals will be non-deductible.
  • Meals at seminars, conventions, or any other type of meeting, even if the meal cost isn’t separated from the event cost. If the cost is not separated, it must be calculated based per diem rates of that location or reasonableness.
  • Meals with other people related to businesses such as vendors, customers, and clients as long as there is some benefit to the business and the taxpayer is present (also not extravagant or lavish)

Meals that were 100% deductible that changes to 50%:

  • Meals provided to employees on employer’s premises to more than 1/2 the employees (for the convenience of the employer), and meals provided to employees to enable them to work overtime, weekends, etc. These meals satisfy the de minimis fringe benefits 
  • Snacks at the office – donuts, bottled water, soft drinks, coffee and other beverages or snacks provided on the employer’s premises 
  • Meals provided as a package of charitable sports tickets

100% Deductible Meal & Entertainment Expenses 2018

Meals provided for a company holiday party or picnic

Food used as part of a promotional campaign where it is given to the public for free

If the meal that is provided for the independent contractor or employee is included as taxable compensation and included on form 1099 or W-2, the expenses are 100% deductible to the employer.

Meals sold to a customer or client

Read more about how the new tax law affects you.

Expense Deduction Changes

If you would like to learn more about Partridge & Associates services, you can contact us today.

Written by partridgecpas

Do I Need a CPA? Why to Hire a CPA Firm

Why to hire a CPA

Do I need a CPA? Yes, absolutely you need a CPA if you want to save money, prepare your taxes correctly, plan your retirement & more.

One of the biggest reasons why to hire a CPA firm is for business taxes. A CPA can represent your business before the IRS if there is ever an audit, while an accountant can only help with IRS in a limited manner.

Here are most of the reasons why you need a CPA:

  1. To Stay Current With Tax Law
  2. To Lower Your Audit Risk
  3. To Report Income Correctly
  4. For Starting A Business
  5. Filing Taxes
  6. To Reduce Taxes
  7. To Stay Current With Tax Benefits
  8. To Avoid Making Mistakes
  9. For Help With Filing Back Taxes
  10. To Save Lots Of Money

1. To Stay Current With Tax Law

CPAs or Certified Public Accountants can help you stay current with tax law.

For example: Meal and entertainment expense deductions changed this year. In 2017 you could write off 50% of meals and entertainment. Well, that law changed in 2018 and entertainment is no longer tax deductible.

Just knowing this fact at the beginning of the year could help you avoid spending thousands on entertainment only to find out at the end of the year that they are not tax deductible.

2. To Lower Your Audit Risk

Business owners earning $200,000 or more per year are far more likely to receive an audit. Having a certified public accountant on your side during an audit can be extremely valuable.

3. To Report Income Correctly

It’s not that tough to file taxes when you only have one W-2. Reporting everything to the IRS correctly if you have multiple sources of income can be confusing. Certified public accountants are trained to handle these scenarios with ease.

4. For Starting A Business

CPAs can help with starting a business, business formations, registering businesses and developing accounting systems. Furthermore, they can also help with obtaining business licenses, and finding business insurance.

5. Filing Payroll Taxes

Not only can CPAs help with starting a business but they can also help you with filing taxes for you and your employees. They can help with income taxes (W-2, W-4 forms), Employee eligibility forms (I-9), reporting of new hires to the ANHRC and more.

6. To Reduce Inheritance Tax

If you own a large sum of money or property, you should know that inheritance taxes can cost you! A CPA will advise you of current tax law and help reduce taxes for the present and the future.

7. To Stay Current With Tax Benefits

Did you know that making a large financial gift might be tax deductible? A CPA can help you understand what kinds of gifts or charitable acts are tax deductible so you can help others and save money at the same time.

8. To Avoid Making Mistakes

If you are not that good with numbers, getting a CPA is one of the smartest decisions you can make. Accountants are number gurus! They will help you catch mistakes you’ve made and fix them for you.

9. For Help With Filing Back Taxes

If you owe the IRS back taxes, contact a CPA immediately as they can help you negotiate with the IRS to lower your tax debt and come up with a payment plan to get it paid back. It’s not as scary dealing with the IRS when you have a certified public accountant on your side.

10. To Save Lots Of Money

The most important reason to hire a CPA is because they can save you lots of money. A certified public accountant is great when it comes to business planning, preparing business taxes and retirement planning. Set your business up for success by hiring a CPA today!

Partridge & Associates Are The CPA’s For You

Our CPA firm has over 35 years of tax and accounting experience and has served thousands of businesses and families throughout the Scottsdale and Phoenix areas. We are proud that our CPA firm has the highest standards of education, training, and expertise available. We are pleased to say that we are one of the most creative and dynamic CPA firms in tax planning and strategies.

CPA and llc for small businesses
Written by partridgecpas

How Will the New Tax Law Affect You

The Tax Cut and Jobs Act was passed by Congress and signed by President Trump. The final bill reflects some compromises and is substantially different than the earlier House and Senate bills. The new tax law includes many expected changes, some unexpected ones, and some changes that were expected but didn’t make the cut. Here are the most important things that individual taxpayers need to know.

1. New individual tax rates and brackets

For 2018 through 2025, the new law keeps seven tax brackets, but six are at lower rates. In 2026, the current-law rates and brackets would return. The temporary rate brackets under the new law are as follows.

Single Joint Head of household

  • 10% tax bracket $0 – $9,525 $0 – $19,050 $0 – $13,600
  • Beginning of 12% bracket $9,526 $19,051 $13,601
  • Beginning of 22% bracket $38,701 $77,401 $51,801
  • Beginning of 24% bracket $82,501 $165,001 $82,501
  • Beginning of 32% bracket $157,501 $315,001 $157,501
  • Beginning of 35% bracket $200,001 $400,001 $200,001
  • Beginning of 37% bracket $500,001 $600,001 $500,001

Most folks will benefit from the new rates, but some who are currently in the 33% marginal tax bracket will find themselves in the 35% marginal bracket next year. This unfavorable change will mainly affect singles and heads of households with taxable income between $200,000 and $400,000. However, the new lower rates on income below $200,000 will offset some or all of the negative effect of being in the 35% marginal bracket. For comparisons, see the table at the bottom of this story for the 2017 rate brackets.

Year-end planning impact: Most individuals will benefit from year-end planning moves that push income into next year and pull deductions into this year.

2. No change in taxes on long-term capital gains and dividends

The new law retains the existing 0%, 15% and 20% tax rates on long-term capital gains and dividends. For 2018, the rate brackets are as follows.

Single Joint Head of household

  • 0% tax bracket $0 – $38,599 $0 – $77,199 $0 – $51,699
  • Beginning of 15% bracket $38,600 $77,200 $51,700
  • Beginning of 20% bracket $425,800 $479,000 $452,400

Year-end planning impact: These brackets are almost the same as what they would have been under the old law, with the only change being in the way the inflation adjustment for 2018 is calculated. Therefore, the traditional year-end tax planning strategies for securities held in taxable brokerage firm accounts still apply.

3. No mandatory FIFO stock basis rule

Starting next year, the Senate version of the tax reform bill would have forced you to use the first-in-first-out (FIFO) method to calculate the tax basis of shares that you sell from taxable accounts. If the price of the shares stair-stepped higher as you bought them, having to use the FIFO method would have meant that your taxable gain would be figured by treating the oldest and cheapest shares as being sold first. That would maximize your gain and maximize the resulting tax hit. Fortunately, this proposed change didn’t make the cut, so it’s business as usual.

Year-end planning impact: None. You need not sell shares before year-end just to avoid the now-discarded mandatory FIFO stock basis rule. Good!

4. Higher standard deductions, but no more personal and dependent exemption deductions

The new law almost doubles the standard deduction amounts, starting in 2018. However, personal and dependent exemption deductions, which would have been $4,150 each for 2018, are eliminated. Obviously, these changes will benefit some taxpayers and harm others. If you have many dependents, you may not be pleased. The 2018 standard deduction amounts are as follows.

  • $12,000 for singles (up from $6,350 for 2017)
  • $24,000 for joint-filing married couples (up from $12,700)
  • $18,000 for heads of households (up from $9,350)

Additional standard deduction amounts for the elderly and blind are still allowed.

5. New limits on deductions for state and local taxes

Under the old law, you could claim an itemized deduction for an unlimited amount of personal state and local income and property taxes. You could also choose to forego any deduction for state and local income taxes and instead deduct state and local general sales taxes.

Starting next year, the new law limits your deduction for state and local income and property taxes to a combined total of $10,000 ($5,000 if you use married filing separate status). Foreign real property taxes can no longer be deducted. So no more property tax write-offs for your place in Cabo. However, you can still choose to deduct state and local sales taxes instead of state and local income taxes.

Year-end planning impact: Traditional year-end tax planning advice includes prepaying state and local taxes that would otherwise be due early next year. That way, you get a bigger deduction on this year’s return. However, the new law says you cannot get any tax-saving benefit from using this strategy to prepay state and local income taxes. Specifically, you cannot claim a 2017 deduction for state or local income taxes that are imposed for a tax year beginning after Dec. 31, 2017. How this rule could be enforced is a mystery.

The good news: you can still prepay state and local property taxes before year-end and claim a 2017 deduction. That could be a really good idea in view of the new $10,000/$5,000 deduction limitation that takes effect next year. However, if you will be an alternative minimum tax (AMT) victim this year, deductions for state and local property taxes (prepaid or otherwise) aren’t allowed under the AMT rules. So prepaying could do you little or no tax-saving good.

6. New limits on home mortgage interest deductions

Effective next year, the new law reduces the maximum amount of mortgage debt to acquire a first or second residence for which you can claim itemized interest expense deductions from $1 million (or $500,000 if you use married filing separate status) to $750,000 (or $375,000 if you use married filing separate status). However, this change doesn’t affect home acquisition mortgages taken out under binding contracts in effect before Dec. 16, 2017, as long as the home purchase closes before April 1, 2018.

Also, the old-law $1 million/$500,000 limits continue to apply to home acquisition mortgages that were taken out under the old-law rules and are then refinanced after this year (as long as the refinanced loan principal doesn’t exceed the old loan balance at the time of the refinancing). Starting next year, the new law also eliminates the old-law rule that allowed interest deductions on up to $100,000 of home-equity loan balances.

7. No change in home sale gain exclusion rules

The new law preserves the valuable break that allows you to potentially exclude from federal income taxation up to $250,000 of gain from a qualified home sale, or $500,000 if you are a married joint-filer. The earlier House and Senate bills both included restrictions on this break, but none of the proposed changes made the cut. So it’s business as usual. Good!

8. Expanded medical expense deduction for 2017 and 2018

The House version of the tax reform bill would have killed the itemized deduction for medical expenses. Instead, the new law preserves the deduction and actually expands it to cover medical expenses in excess of 7.5% of adjusted gross income (AGI) for 2017 and 2018 (the old-law deduction threshold for 2017 was 10% of AGI).

Year-end planning impact: Since it is now easier to exceed the percent-of-AGI deduction threshold, consider loading up on elective medical expenses, such as vision care and dental work, between now and year-end if that would net you a bigger 2017 deduction.

9. Education tax breaks preserved

The new law leaves existing education-related tax breaks in place.

Year-end planning impact: If your 2017 AGI allows you to qualify for the American Opportunity higher-education tax credit (worth up to $2,500 per qualifying undergraduate student) or the Lifetime Learning higher-education tax credit (worth up to $2,000 per tax return and covering most postsecondary education expenses including graduate school), consider prepaying tuition bills that are due in early 2018 if that would result in a bigger credit on this year’s Form 1040. Specifically, you can claim a 2017 credit for prepaying tuition for academic periods that begin in January through March of next year.

10. Other important changes and non-changes

  • Starting next year, you will not be able to reverse the conversion of a traditional IRA into a Roth account. Under the old-law rules, you had until October 15 of the year after an ill-advised conversion to reverse it and avoid the conversion tax hit. At this point, it is not clear if this change would prevent you from reversing a 2017 conversion by 10/15/18 or if would only prevent you from reversing a conversion done in 2018 and beyond. So if you have a 2017 conversion that you already know you want to reverse, get it reversed before year-end to be on the safe side.
  • Unfortunately, the new law retains the individual alternative minimum tax (AMT), but the AMT exemption deductions are significantly increased and phased out at much higher income level, starting next year. For many folks, AMT exposure was caused by high itemized deductions for state and local income and property taxes and lots of personal and dependent exemption deductions. Those breaks were disallowed under the AMT rules. With the new limits on deductions for state and local taxes, the elimination of personal and dependent exemption deductions, and larger AMT exemption deductions, many previous victims of the AMT will find themselves off the hook, starting next year.
  • Starting next year, the maximum child credit is increased to $2,000 per qualifying child, and up to $1,400 can be refundable (meaning you can collect it even if you don’t owe any federal income tax). In addition, a new $500 nonrefundable credit is allowed for qualified non-child dependents.
  • Starting next year, deductions for moving expenses and most miscellaneous itemized expenses are eliminated.
  • Starting next year, itemized deductions for personal casualty and theft losses are eliminated, except for personal casualty losses incurred in a federally-declared disaster.
  • Starting in 2019, you will no longer be able to deduct alimony payments if they are required by a divorce agreement entered into after 12/31/18. Recipients of nondeductible payments won’t have to include them in taxable income.
  • Tax breaks for adoption expenses are preserved.
  • The tax credit for qualified plug-in electric vehicles is preserved. For details on this credit, see: You can get a $7,500 tax credit for a new electric vehicle.
  • Starting next year, the unified federal gift and estate tax exemption will basically double — to about $11.2 million or $22.4 million for a married couple. Wow! That is indeed a tax break for the rich.

How will the new tax law affect you

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