Wednesday, September 21, 2016

Common Arizona Tax Credits Update for 2016

Arizona Tax Credits for 2016


This week I had a client ask if I had updated the list of Arizona Tax Credits for 2016.  She had checked the blog that I post and didn't see the full listing so gave me a great reminder to sit down and list out the available credits.

There are many credits available to Arizona taxpayers, this blog will focus on the donation related credits and not as much on the multitude of miscellaneous credits for things such as solar energy/lighting, research and development, etc.

The credits I want to highlight are: 1) Public School Fees paid or donation, 2) School Tuition Organizations, 3) Charitable Organizations, 4) Qualifying Foster Care Organization, and 5) Arizona Military Family Relief Fund.  These credits are allowed to be used together but are limited in the separate category by donation amounts.  These credits can be used up to your tax liability to the state of Arizona and some of the credits allow excess amounts to be carried over up to 5 years.

1 - Public School Tax Credit

The amount that is eligible is $200 for single taxpayers (or head of household), $400 for married filing joint taxpayers.  The payment must be in cash/check/credit card and can not be done by in-kind donations (purchased items donated to the school).  The payment also must be to an Arizona K-12 school (public or charter school) and is able to be made up to April 15th following the year it is to be claimed as a credit.

It does not have to be just a donation, the payment may be for fees paid to the school.  According to the Arizona School Tax Credit Publication 707:
"What are qualified activities or qualified programs for the purpose of the public school credit? 

For the purpose of the public school credit, qualified activities and qualified programs include any of the following: 
Extracurricular activities 
Character education programs
Standardized testing fees for college credit or readiness offered by a widely recognized and accepted educational testing organization
Preparation courses and materials for standardized testing
The career and technical education industry education industry certification assessment "
Extracurricular activities include athletics, band, choir and other similar participation fees.  It may also include field trip or class trip amounts, if paid to the school.  The standardized testing fees and costs must be paid to the school to be eligible.

2 - Private School Tuition Organizations

This credit is for organizations that provide scholarships to private school students, in grades K-12.

This credit is adjusted for inflation each year and technically is comprised of 2 components.  The 2016 credit amounts that can be contributed are up to $1,087 for single taxpayers, $2,173 for married filing joint.  The AZ Department of Revenue provides a listing of the eligible organizations, here is a link to that document: STO List - AZ DOR.

3 - Charitable Tax Credit

This credit was previously known as the Working Poor Tax credit.  This credit is available for donations made to qualifying charitable organizations.  The contribution amounts have significantly increased for 2016, $400 for single taxpayers and $800 for married taxpayers (this is double the amount previously allowed for this credit).

The AZ Department of Revenue provides a listing of the eligible organizations, here is a link to that document: Charitable Organizations

4 - Qualifying Foster Care Organization Credit

This credit is the newest credit that was implemented in just the last couple of years.  There was a major change to this credit for 2016 - the allowed amounts increased to $500 for single taxpayers and $1,000 for married taxpayers plus this credit used to be combined/connected with the Charitable Tax Credit but for 2016 it will be a stand alone credit not dependent on the other credit.

The AZ Department of Revenue provides a listing of the eligible organizations, here is a link to that document: Qualifying Foster Care Organizations

5 - Arizona Military Family Relief Fund Credit

This credit provides grants and assistance to military family and members that are struggling financially.  The credit has a cap on the total donations that it can receive, once $1,000,000 has been received the funds have to be returned by law.  So make sure you make your contribution early enough to have it qualify.  The amount that can be contributed is $200 for single taxpayers and $400 for married taxpayers.

There is a form to submit with your check that can be obtained here: MFRF 2016 Donation Form

Summary
In summary, you can do all of the above credits up to the amount for your tax filing status or a combination of any of the credits. The above listed credits are available to offset Arizona tax liability up to the amount of the tax liability but these credits will not by themselves create a refund. The credits combined with withholding or estimated tax payments may result in a refund of the overpayment of the withholding or estimated taxes.  

If you are unsure if these would benefit you specifically, I recommend that you contact a tax professional that can answer that question for you.  Our office uses these credits as part of year-end tax planning for clients.  If you want to support specific, qualified organizations then utilize these credits to direct your tax dollars.

Saturday, September 17, 2016

AZ IRS Offices Will Stop Accepting Walk In Appointments

The below information was summarized and provided via a member of a professional organization that I belong from the IRS Stakeholder Liaison:

Here is an email from the IRS:
There are only 8 employees available to assist taxpayers. The walk in office averages 200 people per day.  They will be turning people away at 3:45 p.m. because they cannot stay past 4:30 p.m. each day.  

They are setting up appointments but will assist walk ins in between the appointments until October 12, 2016.  At that point they are only seeing people with appointments.

Taxpayers can still walk in and make payments.

Accounts Management employees will be answering the phones and setting up appointments.  If they can help the taxpayer on the phone they are supposed to.  The walk in manager says this is not always happening and they are working on this. 

Also the person making the appointments is supposed to let the taxpayer know what they should bring in to their appointment.  This is still a work in progress.

The walk in office will not assist practitioners.  The practitioners have their own telephone number to call and should be using it.

IRS is pushing online assistance with all taxpayers.  Most items and assistance can be secured online and that is where the IRS is moving towards.

ITIN issues are only worked on Tuesdays and Thursdays so taxpayers will need to make appointments for those days if they have an ITIN issue.

The Mesa and Glendale offices will be going to appointments on November 12, 2016, they will continue to see walk ins until December 12, 2016, when they go to full appointment only.


The TAC (walk in) offices are working with the Social Security Administration to have offices in the SSA offices nationwide.  This is planned for Fiscal year 2017.

Monday, August 22, 2016

Arizona Tax Credits - Military Family Relief Fund

Last time I provided information about the public school tax credit allowed for Arizona taxpayers.  I am continuing the series on AZ tax credits this time providing information about contributions to the Arizona Military Family Relief Fund.

This credit is established to provide support to families of currently deployed military service members and post-9/11 veterans and their families.  I have read some of the grants provided include providing assistance for families to travel to visit hospitalized service members when the military was unable to provide travel for the entire family.

This credit is capped to $1,000,000 in donations per year, when the organization receive donations that total that amount they are prohibited from keeping the funds.  I generally recommend that taxpayers make this donation around or before Thanksgiving as that tends to be before the annual cap is reached.

Like the other AZ state tax credits, this qualifies for a dollar for dollar reduction in taxes.  It may also qualify as a charitable contribution for Federal itemized deductions.  This can also be used in conjunction with the other credits up to the liability you have for AZ taxes during the year of the donation.


  • To read more information about this credit and the department responsible for collecting donations and providing assistance, click here: DVS 2016 Military Family Relief Fund
  • To download the donation form to accompany your check or money order, visit the website here: MFRF 2016 Donation Form
In the coming weeks I will provide more information on other AZ tax credits and changes for 2016.


Friday, July 8, 2016

Arizona Tax Credits - Public Schools


Summer vacations are underway but with the 4th of July just passed, most parents and teachers know that means it is close to time to return to school.  For high school students, this means the start of football season, marching band and other extracurricular activities.  For parents of high schoolers, this means money will be spent in athletics fees, participation fees, etc.  It may also mean money to be spent for other expenses such as ACT or SAT tests.

I know very few people that enjoy spending money, but did you know that money paid to K-12 schools in Arizona may be eligible for an income tax credit?

From the Arizona School Tax Credit Publication 707:
"What are qualified activities or qualified programs for the purpose of the public school credit? 

For the purpose of the public school credit, qualified activities and qualified programs include any of the following: 
  • Extracurricular activities 
  • Character education programs
  • Standardized testing fees for college credit or readiness offered by a widely recognized and accepted educational testing organization
  • Preparation courses and materials for standardized testing
  • The career and technical education industry education industry certification assessment "
Extracurricular activities include athletics, band, choir and other similar participation fees.  It may also include field trip or class trip amounts, if paid to the school.  The standardized testing fees and costs must be paid to the school to be eligible.

The amount that is eligible is $200 for single taxpayers (or head of household), $400 for married filing joint taxpayers.  The payment must be in cash/check/credit card and can not be done by in-kind donations (purchased items donated to the school).

The credit is available to reduce your AZ tax liability dollar for dollar up to the amount contributed or the limit for the filing status ($200/$400).  This credit can be used in conjunction with the other Arizona tax credits (Charitable Tax Credit, Foster Care Organizations Credit, Private School Tuition Credit, and Military Family Relief Fund) up to the amount of each of those credit limits (which I will discuss later on another blog post).

Please be sure to check with your advisor to see is this may be of benefit in your particular situation. Look for my additional discussion on the available tax credits to be coming up.

Friday, July 1, 2016

Freedom of Working from Home

As we approach the Fourth of July holiday weekend, in the US we take time to celebrate the declaring of independence of the colonies from Great Britain.  We have many freedoms to celebrate in the US and I wanted to take a moment to point out a huge benefit many Americans enjoy - being able to work from home.

From a personal standpoint, this allows flexibility for self-employed and employees that telecommute for work. You can work in an environment that is as comfortable as you want to make it. Working from home also offers short commutes, casual wardrobes and comfortable rest breaks.

From a tax standpoint there may be some benefits as well but there are some criteria to meet to be eligible for a tax break.  To qualify for the deduction, you generally must maintain a specific area in your home that you use regularly and exclusively in connection with your business. So that means the kitchen table will not qualify as exclusive use.  What’s more, you must use the area as your principal place of business or, if you also conduct business elsewhere, use the area to regularly conduct business, such as meeting clients and handling management and administrative functions. If you’re an employee, your use of the home office must be for your employer’s benefit.

The only option to calculate this tax break used to be the actual expense method. With this method, you deduct a percentage (proportionate to the percentage of square footage used for the home office) of indirect home office expenses, including mortgage interest, property taxes, home owner association fees, insurance premiums, utilities (if you don’t have a separate hookup), security system costs and depreciation (generally over a 39-year period). In addition, you deduct direct expenses, including business-only phone and fax lines, utilities (if you have a separate hookup), office supplies, painting and repairs, and depreciation on office furniture.

But now there’s an easier way to claim the deduction. In just the last couple of years, the IRS has introduced a simplified method, much like the standard mileage rate for business use of a vehicle. Under the simplified method, you multiply the square footage of your home office (up to a maximum of 300 square feet) by a fixed rate of $5 per square foot. You can claim up to $1,500 per year using this method. Of course, if your deduction will be larger using the actual expense method, that will save you more tax.

I recommend discussing this topic with your tax advisor to see if this is applicable to you.  Also many folks remember this being a RED FLAG when claimed on a tax return but with the advancement of technology and many home based businesses, this has become more common of a deduction.  It is important to make sure that you document the usage of the space and be sure you qualify for the deduction.

Have a happy and safe Fourth of July holiday!


Friday, June 3, 2016

IRS Scams Continue To Scare People

There is a new telphone scam where the caller claims to be from the IRS (Internal Revenue Service) and is calling about a tax bill.  The caller then proceeds to indicate that the called taxpayer owes a Federal Student Tax.  This is a SCAM as 1) the IRS will not initiate contact to the general public via phone about balances due and 2) there is not a "Federal Student Tax".

If you receive a phone call, the caller will be requesting immediate payment or threatening that a warrant will be issued for your arrest.  You should remain calm and check with your tax professional or call the IRS directly to verify if any outstanding balances are true.  Do not offer any personal information or offer any payment and/or banking information to the caller.

Please check your mail box to see if you have any love notes from the IRS (if there is truly an outstanding balance, you will have received several notices indicating such).  If you don't have correspondence from the IRS, then you most likely have NOTHING to WORRY about.  If you have letters from the IRS, then be sure to read the notice and see what action is needed.

If you want to report a SCAM phone call, you can report that at the IRS website here: IRS Report Phishing.

Also consider this a good reminder to protect your Social Security Number - that number is used to claim many tax benefits and file your tax returns.  ID Theft continues to be an issue as well, that might just be another topic for another post.
 

Wednesday, June 1, 2016

Updates to Arizona Charitable Tax Credits

News FLASH!



The Governor of the state of Arizona has signed a bill on May 6, 2016 that has expanded the tax credits available for Charitable Tax Credits and Foster Care Organization Tax Credits.  The effective date of the bill will be August 2016 (90 days following the Governor's signature), but it will be retroactive to the beginning of the 2016 calendar year.

Under prior law, the maximum credit for both the Charitable Tax Credit (aka Working Poor Credit) and the Foster Care Organization Tax Credit was $800 for a married couple/$400 for a single.  The credit would allow for $200/$400 towards Charitable Organizations and an additional $200/$400 towards Foster Care.  As long as the total contribution did not exceed the $400/$800 amount based on filing status, you could claim up to that amount for purposes of reducing your tax liability to the state of Arizona.

Under the new law, in 2016 there are 2 changes.  The first change is that the Charitable (Working Poor) Tax Credit will be doubled, allowing single taxpayers to make contributions of $400, married can make $800. The second change is to allow contributions to Foster Care Organizations to be $500 for single and $1,000 for married taxpayers.

The effect of these changes is to increase the allowed tax credits for the organizations that qualify under these credits.  So instead of being capped to a total of $400 for single, $800 for married, the tax credits now allow a total of $900 for single, $1,800 for married between the combination of the 2 credits.  This is the way that I am reading the text of the law but I am interested to see how the Arizona Department of Revenue applies the law to the forms and instructions for the 2016 tax returns.

If you would like to see a list of qualified organizations, visit the Arizona Department of Revenue page and select 2016 Qualifying Organizations here: Tax Credits Lists

As a reminder, these contributions may also qualify for Federal charitable deductions if you itemize on Federal Schedule A.