Your AZ withholding amount used to be a percentage of what you had withheld for your Federal tax.  Since the Feds mucked things up, AZ broke their shackles and allowed your withholding choices to be based upon your particular AZ tax liability.

Generally speaking, your AZ tax liability, for now, is about 3%.

Go ahead and look at last year's AZ tax return - it's ok, I'll wait.  Now take a tax liability amount like line 25 or line 30 and divide that by line 12 which is your Adjust Gross Income (AGI) from your Fed tax return.  Come up with around 3%?  I knew you would.

So what would be a good choice on the new withholding forms?  Anyone? Anyone?  Bueller?  That's right - somewhere around 3%.

Just when you thought you figured out the best withholding to fit your taxes, the Feds decided to help. They forced an adjustment to your Federal withholding. They adjusted the already archaic tax tables* (Single & 0, Married & 1, etc.) to withhold less money. Of course, this was to help you get more money in your pocket for the 2009 "Making Work Pay" credit.

You 'get' the credit when you file your 2009 tax return. But, since you were forced to withhold less during the year, you got your lollipop early. However, you’d better check to make sure that there is a lollipop in your future. The beneficent action of the Fed might have dealt you a bum hand.

Amount of the Credit

The credit is worth 6.2% of an individual's earned income, with a maximum credit of $400 per person. Married couples who file a joint tax return thus have a maximum credit of $800.

Other Tax Credits Can Reduce the Total

There is a one-time-only tax credit of $250 for Social Security recipients, retired railroad workers and disabled veterans. So, if you're getting Social Security payments and you're also working, you would be eligible for a Making Work Pay credit of only $150 (that's $400 minus the $250 economic recovery payment).

Credit phase-out: No Lollipop if you make "too much" money

The Making Work Pay credit starts to be reduced for individual filers making $75,000 in modified adjusted gross income, or $150,000 for joint filers. The credit is reduced by 2% of the amount of income in excess of the $75,000 (or $150,000) threshold. The credit is completely phased out for individuals making $95,000 or more, or $190,000 for joint filers.

No lollipop if you are a dependent

Anyone claimed as a dependent is not eligible for the credit. That means kids who are working, including college students who are still claimed as dependents, are not eligible for the credit.

Arizona steps in, too

AZ saw a drop of revenue (from your pocket) because the AZ withholding was a percentage of your Fed withholding. So, AZ changed the withholding method.  Now the AZ withholding is a percentage of your income.  A change for the BETTER!!

You're not a robot - you can change your withholding!

Because your employer was forced to adjust your paycheck withholding, working dependents, working retirees, multiple job holders and those of you evil people that make "too much" money (you are a tax target) may need to adjust your withholding to avoid owing tax at the end of the year. So, if you want to withhold more, then you must lower the number. If you are currently at Married & 2 (Married filing status with 2 exemptions) and you want more withheld, then change it to Married & 1. You can also have a specific amount of money added to your withholding.

You are required to pay your tax liabilities by April 15th but, you can pay through an IRS installment agreement although penalties and interest will be added.  (Click for the IRS installment agreement form 9465)

You can also pay your taxes by credit card via the two (2) authorized web sites.  It'll cost you a fee (about 3%) to use your plastic, but it's cheaper than paying IRS interest and penalties!

Official Payments.com

Pay 1040.com

Lastly, plan ahead for next years taxes by reviewing what caused the problem in prior years and adjust your withholding or adjust your taxable income or seek assistance with your situation before tax time.

C corporation is a for profit corporation taxed under the normal corporate income tax rules.  Every state allows a one person corporation

Comparing Corporations to LLC

Both have limited liability protection from personal liability for debts and claims of the business

Corporation

• A corporation is a legal and tax entity separate and apart from its owners
• With a corporation there is limited liability protection from personal liability for debts and claims of the business
• With a corporation you have to adhere to certain rules, otherwise you risk losing your personal liability protection (also called piercing the corporate veil). These include, but are not limited to:
• Prepare and update By-laws
• Keep minutes of shareholder and board meetings
• Maintain current and accurate shareholder records
• A corporation is a separate taxable entity
• A corporation can choose any number of shareholders and directors it wants (S corporations are limited to 100 shareholders)
• All shareholders need to be citizens of the U.S or residents
• A corporation has unlimited (perpetual) life
• Directors must be individuals

• Every state allows a one person LLC
• With an LLC, any person or entity can become an LLC member (owner)
• Other business entities like a corporation or another LLC can be an owner of a LLC
• An LLC is not a corporation, but it has many of the same benefits
• With an LLC there is limited liability protection from personal liability for debts and claims of the business
• An LLC is easier to operate, is less complicated and has less paperwork
• An LLC has pass-through taxation-the profits of the business are taxed on your individual tax return
• An LLC has flexible management and ownership structures
• An LLC does not necessarily have unlimited (perpetual) life
• An LLC can elect corporate tax treatment by filing IRS Form 8832 Entity Classification Election

• Every state allows a one person corporation
• Corporations have unlimited (perpetual) life
• All shareholders have limited personal liability protection from the corporate debt and claims
• Both have limited liability protection from personal liability for debts and claims of the business. However, you have to adhere to certain rules, otherwise you risk losing your personal liability protection (also called piercing the corporate veil). These include but may not be limited to:
• Prepare and update By-laws
• Keep minutes of shareholder and board meetings
• Maintain current and accurate shareholder records

• C corporations are more flexible
• There is no limit on the number of shareholders (owners) and directors
• C corporation is taxed under normal corporate income tax rules. The owners pay individual income tax on salary they receive and the corporation pays taxes on the net profits that remain in the business
• You can issue more than one class of stock. All shareholders need to be citizens of the U.S. or residents
• C corporations are better if you need venture capital

• S corporation has the pass-through tax treatment (similar to a partnership)
• You need to initially file as a C corporation and then covert the corporation to an S corporation by completing the IRS form 2253, so there is more paperwork and time involved
• S-Corporations cannot have more than 100 shareholders and cannot make a public offering of its shares. All shareholders need to be citizens of the U.S. or residents
• S Corporations have a pass through tax. As a legal tax entity, the corporation files its own tax returns and pays taxes on profits that are left in the business, thereby avoiding “double taxation”
• You are limited to issuing one class of stock. Not having the ability to issue different classes of stock affords a business less control over the company and limitations on the stock value
• S corporation is not as attractive to outside investors. Money. Venture capitalists will not want to see the pass through tax setup or a limit of 100 shareholders