Tuesday, July 29, 2014

5 Quick Rules on Tax Reform for Entrepreneurs and Small Business

Raymond J. Keating for the SBE Council writes: There’s a great deal of political talk about tax reform these days. Whether this is mere posturing or a precursor to real legislative action is an open question, to say the least.

But as the debate and discussion continues, tax reform advocates must not ignore entrepreneurs and small businesses.

So, here are 5 quick rules that must be recognized from an entrepreneur and small business perspective as tax reform moves ahead.

1) Corporate Income Tax Rates Matter to Small Business. Reducing our high and non-competitive corporate income tax rate of 35 percent – which can top 41 percent when state tax rates are factored in – is not just an issue for big business. After all, among employer C Corporations in 2011 (latest Census Bureau data), 99.2 percent had less than 500 workers, and 86.4 percent had fewer than 20 employees.

2) Personal Income Tax Rates Matter to Small Business. Of course, the case can be made that the personal income tax rate matters even more to entrepreneurs and small businesses, since more than 96 percent of businesses, according to the latest IRS data, pay the personal income tax (as sole proprietorships, partnerships, S-Corps, etc.) rather than the corporate income tax. The top federal personal income tax rate is 39.6 percent, rising to 43.8 percent with the Medicare income tax, and reaching as high as 52 percent in California, for example, after adding in state income levies. That’s non-competitive and destructive.

3) Zero Out Capital Gains Taxes. Given that entrepreneurship and investing are the market endeavors that drive economic growth, it makes no sense to tax the returns on such critical risk taking. For good measure, gaining access to capital stands as the biggest challenge faced by entrepreneurs. Yet, under President Obama, the capital gains tax has increased from 15 percent to 23.8 percent, and he would like to raise the top rate further to 30 percent. Also, since capital gains are not indexed for inflation, the real capital gains tax rate is even higher. Make no mistake, being a direct tax on the returns of risk taking, the capital gains tax could rank as the most economically destructive levy imposed by the federal government. Both the individual and corporate capital gains taxes should be eliminated under pro-growth tax reform.

4) Make Expensing a Permanent Option. Under President Obama’s 2015 budget plan, he called for small business (Section 179) expensing of capital expenditures up to $500,000 (with expensing phased out by the amount the investment tops $2 million). This is the level that prevailed from 2010 to 2013, and would be made permanent under his proposal. This would be a minimal goal under tax reform, however, as all businesses should be given the choice of expensing capital expenditures or using depreciation. A permanent expensing option would be a big plus for investment, and therefore, for economic growth, productivity, and income growth.

5) Tax Reform Must Not Be a Tax Increase. Finally, in the past, tax reform efforts operated under the overarching principle that the final product would strive for revenue neutrality. That is, the elimination of deductions and credits in order to lower tax rates would not result in a net tax increase. Unfortunately, some talking tax reform today, including President Obama, have pushed the idea that tax reform wind up being a significant tax increase. Entrepreneurs, small businesses and our economy in general already have suffered through enough tax increases in recent years. In fact, from the perspective of maximizing the potential growth effects of tax reform and helping to get the economy back on track, one can make a strong case that reform should implement a sizeable tax cut.
Posted on 11:36 AM | Categories:

U.K. MarketInvoice partners with Xero to offer instant funding to UK businesses

Two major fintech companies are partnering to offer businesses unparalleled access to almost instant funding. The partnership between MarketInvoice and Xero will enable businesses to apply and be approved for funding directly through their accounting software in a total of just 20 minutes.

After the one-off approval process is complete, businesses can repeatedly generate near-instant finance with just three clicks of a mouse by selling their long-dated invoices directly to investors.

Utilising the data held by Xero, funding decisions can be made much faster than ever before. This is the first time instant, flexible finance has been available to UK businesses outside an overdraft or credit card, with the process of application significantly simpler and more accessible than traditional forms of finance.

MarketInvoice CEO Anil Stocker said: "Accessing finance for a growing business has long been a painstaking process dogged by delays, hidden fees, and complex long-term contracts. All of that is changing. MarketInvoice and Xero are both companies using innovation to shake-up jaded industries and this partnership changes the way businesses access finance.

"We're harnessing two pioneering innovations to put power back in the hands of business owners. By bringing big data and intelligent finance together we can help businesses access funding in a tiny fraction of the time it takes to meet your bank manager."

Gary Turner, Xero UK MD, said: "We are pleased to partner with MarketInvoice to offer business owners access to new, alternative and flexible means of finance through this new addition to our cloud ecosystem.

"The chronic challenge small businesses face in trying to access working capital isn't helped by the fact their accounting data is locked away inside archaic systems and often out of date. Xero's cloud-based accounting software easily eliminates these issues and so it's very encouraging to see new funding services now emerging that unlock cash tied up in long-dated invoices directly through our cloud accounting platform."

How it works:
Businesses go to the MarketInvoice Xero portal and click 'apply through Xero'. They then login (if not already logged in) to their Xero account and an application form is pre-populated with data from Xero. They set up a password and contact number and click apply.
MarketInvoice will get back to within 24 hours (usually 20 minutes) to let them know if they've been approved.

Once approved businesses can access the MarketInvoice platform directly from Xero and sell selected invoices in just three clicks. Funding will be advanced within a couple of hours. 
Posted on 11:32 AM | Categories:

Australia: Wave Apps Accounting Review with Follow Up From Wave / Payroll Pricing in U.S. & Canada Compared to Xero

 Alexey Mitko for Digital First writes: When doing an app review it is always difficult to give a general recommendation, as apps are usually developed and work great for a particular kind of client. With Wave Accounting this dilemma does not exist as the app is placed firmly in the “has a couple good ideas, not ready for daily operations” category.
Wave Accounting positions itself as a collection of accounting apps for small business. Some functionality is available on the mobile device with additional features accessible through the online portal. The mobile app can send invoices from your iPhone, along with adding new client records and products or services. The app also provides provides simple cash flow analytics and a notifications centre.
Overall, the app sports a clean and fluid look but needs a bit of testing as it did not allow me to add sales tax or choose a sales account straight after downloading it on an iPhone 5C. The app proceeded to crash when I first tried to add a product but worked without problems afterwards.
The web portal gives access to more apps and functionality and positions itself as an accounting platform with invoicing, bill tracking, Yodlee bank feeds, payroll management (US and Canada only), some reporting and a paid-for services section.
Some functions are done well. For example, CSV imports include very accessible step by step instructions, and receipts processing is a step above the digital storage seen in other accounting platforms.
However, a couple of features require a redesign and additional thought. To name a few:

1. No Credit Notes

While I could raise an invoice with a negative amount as a total, I wasn’t able to offset it against another invoice without using a clearing account. Credit notes are an essential feature in invoicing but are apparently missing from Wave.

2. No Custom Invoices

Invoices are not freely customisable, you need to adhere to one of the three templates provided. While not all businesses need invoices with a custom layout, the feature is common across cloud accounting platforms.

3. No Audit History

There is no audit history yet you are able to invite additional collaborators to your business account.

4. No bulk invoices or bills

There is no way to bulk upload invoices or bills. This can be problematic if your invoices are generated by another system or if you have a large number of invoices you need to key in.

5. Slow reconciliation

The bank reconciliation is not entirely intuitive. It relies on a tabular format and may take additional time if volume of transactions is significant.
In terms of pricing the basic version of Wave is free. The money is made on advertisements, higher than average credit card processing fees and product recommendations.
A special note to put credit card processing charges in perspective. The 2.9 percent charge that Wave asks for credit card processing compares with 2.7 percent for Stripe and 2.4 percent for PayPal. For a small business in Australia that turns over $300,000 per year a 0.2 percent difference would mean $600 per year and a 0.5 percent difference would add up to $1,500.
Wave’s functionality is sufficient for a freelancer with straightforward affairs, not a small business owner. Other cloud accounting applications offer functionality and refined user interfaces that are ahead by several years of development.
Alternative platforms are usually not free to use but would provide a scalable solution for your business and additional options when it comes to structuring your business processes.
It remains to be seen if Wave is able to catch up, but it probably has a brighter future concentrating its development efforts for businesses that do not require payroll.
___________________________Comments__________________________

Hi Alexey, I’m with Wave so thought I’d offer my comments and opinions on this article:
I think part of challenge here is the way in which you are using the term “small business”. At Wave, we serve customers in the 0-9 employee segment. Many of our customers have no employees, but at 40-50% have 1 or more. However, one thing to be clear of is that EVERY one of our customers, including those with no employees, still consider themselves to be a “small business”. Sure, there are different labels you can use (solopreneur, solo trader, etc.), but they’re still small businesses. And as a result, when your headline says “..falls short for small business”, we believe that to be unfair and inaccurate.
Wave now has about 2 million customers globally in our ecosystem, with 10s of thousands of very happy small business Wave users in Australia.
As far as pricing goes, you made a comment that at 5 employees, we’re basically on par with Xero. Here’s how I look at it:
- Wave’s price for 5 employees is $25 (payroll only available in the US and Canada)

- Xero’s price in the US for 5 employees is $30. But, there is no direct deposit included in that plan. There is also no multi-currency in that plan. Wave includes these things at no additional cost, because after all, we’d argue that charging extra for basic functionality like this could be considered nickel & diming your customers.
- You also need to factor in that with Xero, you need to pay for each company. With Wave, you can create as many companies as you like.
- The more comparable Xero package would be their “premium 10″ at $70/month: http://www.xero.com/us/pricing/

One other big thing that just changed last week, (and I noticed you guys already blogged about it) is that Stripe dropped their fees in Australia. The fee is now 1.75% + $0.30 for domestic Visa & MasterCard. Amex & International cards are 2.9% + $0.30. This is a big win for our customers, as we’re now significantly more competitive than Paypal. And it’s worth noting that Paypal has other hidden fees that you may not see on the surface (virtual terminal fees, fixed fees, etc.)
Another point of differentiation with Wave is how we actually handle payments. Firstly, we can process payments in the web app or directly from the mobile app. Secondly, you can get set up to take cards immediately. One tap/click and you’re good to go. No forms to fill out, no clunky approval processes. I’d encourage you to experience this process for yourself, then go compare with any other accounting/invoicing app on the market. You might be surprised 
Cheers,

Scott Zandbergen
@szandbergen

Posted on 9:32 AM | Categories:

Avalara TrustFile Wins Innovation Award for Simplifying Sales Tax Reporting & Filing / a totally free sales tax reporting and filing solution for on-line sellers

Avalara, Inc., a top provider of cloud-based computer software that delivers a broad array of compliance options related to sales tax and other transactional taxes, nowadays announced that Avalara TrustFile™ (http://www.trustfile.com), a totally free sales tax reporting and filing solution for on-line sellers, has won the CPA Practice Advisor Tax and Accounting Technology Innovation Award. 

“The Innovation Awards are focused on shining a spotlight on technologies that are proving exceptionally beneficial for accounting firms, or for the customers they serve and advise,” mentioned Isaac M. O’Bannon, managing editor of CPA Practice Advisor. “Avalara has lengthy been an innovator in technologies for businesses, and its redesigned TrustFile method, which received the Innovation Award this year, continues this trend, helping tiny companies be far more productive and profitable, streamlining their sales tax reporting and filing.”

TrustFile offers detailed sales tax reporting information across more than 12,000 tax jurisdictions in the United States, helping online sellers know specifically exactly where, when and how considerably to file. Ecommerce organization owners can use TrustFile to figure out whether or not they are collecting the correct amount of sales tax in each and every individual state, and then store a record of their sales tax history securely in the cloud.
TrustFile supports Fulfilment by Amazon sellers with timely, correct details on sales tax collection specifications primarily based on Amazon’s company presence in states or municipalities exactly where a seller’s customer might reside. With assistance for PayPal, TrustFile adds yet another layer of integration to make managing sales tax easy. 

Furthermore, Avalara’s totally free TrustFile answer permits uploads and reconciling of sales transaction for merchants using Etsy, eBay, Shopify, Bigcommerce, Large Cartel, WooCommerce, and HighWire – as properly as .csv files uploaded from practically any platform an ecommerce seller selects to run their business. Customers simply import transaction history and TrustFile creates a detailed sales tax filing report. Sellers can also maintain track of how much sales tax has been paid in case of an audit. 

“A few cloud-primarily based solutions exist to assist tiny ecommerce organizations with the pain of handling sales tax reporting needs, but at a expense,” stated Webb Stevens, Head of Item at Avalara. “We’re pleased to get rid of this obstacle by offering our TrustFile resolution cost-free of charge. It’s our way of helping budding ecommerce companies get a foothold in a threat-free way.” 

Avalara will be demonstrating its TrustFile answer at booth # 1229 at the Web Retailer Conference + Exhibition held at Chicago’s McCormick Location West June 10 – 12, 2014.
About Avalara
Avalara aids firms of all sizes obtain compliance with sales tax, excise tax, and other transactional tax requirements by delivering complete, automated, cloud-primarily based options that are fast, precise, and straightforward to use. Avalara’s finish-to-finish suite of solutions are made to properly handle difficult and burdensome tax compliance obligations imposed by state, local, and other taxing authorities in the United States and internationally. 

Avalara gives hundreds of pre-built connectors into top accounting, ERP, ecommerce and other enterprise applications. The organization processes millions of tax transactions for clients and free customers each and every day, files hundreds of thousands of transactional tax returns per year, and manages millions of exemption certificates and other compliance related documents. Founded in 2004 and privately-held, Avalara’s venture capital investors include Battery Ventures, Sageview Capital, Arthur Ventures, and other institutional and person investors. Avalara employs a lot more than 700 people at its headquarters on Bainbridge Island, WA and in offices across the U.S. and in London, England and Pune, India. Far more data at: http://www.avalara.com
Posted on 5:08 AM | Categories:

New Breed of Small Business Accounting Apps: 5 Spreadsheet Killers in the Cloud : Xero , FreeAgent , KashFlow , Nutcache , Street Invoice ( Quickbooks Alternatives )

Todd Spear for GetApp writes: If you’re like some small businesses, you may be under the wrong impression about the tools to maintain and close your books. You might think you have only two choices: spreadsheets or QuickBooks. But that couldn’t be further from the truth.
You now have access to an ever-expanding field of cloud-based accounting apps. More importantly, a few accounting apps on the market stand out as strong alternatives to QuickBooks or humdrum Excel spreadsheets.

That’s what we’re covering in this article. But rather than looking at idle clones of older software tools, we’re discussing accounting apps that offer new and exciting features, integrations and forward-thinking pricing models.

Let’s dive right in and look at five spreadsheet killers from the cloud!

Xero LogoXero

Xero is a cloud-based accounting app that’s made quite a name for itself since its inception in 2006.
Xero is made with mobile-friendliness in mind, allowing you to keep track of your income and expenses no matter where you go. The app’s simple interface allows you to see your current balances at-a-glance, as well as peek at upcoming bills and outstanding invoices.
Xero integrates with other business apps (like WorkflowMax, Vend, and Expensify.)
Xero makes reconciliation ultra simple (in a way that will be very familiar for anyone who’s ever reconciled on paper – albeit, more simply).
Advantages of Xero:
  • Accounting and payroll in one app (at one price)
  • Unlimited users (your staff + accounting professionals)
  • Simple, powerful interface
  • 99.9% up-time
  • Free 24/7 email support
  • Integrates with more than 300 third-party business apps
  • Xero starts at $9 per month and its pricing scales up alongside your growing company, based on the size and complexity of your accounting and payroll needs – not the number of users.

Freeagent reviewFreeAgent

FreeAgent is an accounting app especially for freelancers and small businesses.
FreeAgent is fully cloud-based, meaning there is nothing to install and you can access the app from anywhere with a mobile or Internet connection.
FreeAgent departs from the old notions of accounting in the digital space because it incorporates proposals and invoicing. Those tasks are of particular interest to freelancers and small businesses, and FreeAgent manages them with ease.
FreeAgent also sports a squeaky-clean, mobile-friendly interface (for iOS devices). What’s more compelling to us though is he heightened security offered by FreeAgent. Your data is routinely backed up to FreeAgent’s servers. FreeAgent even encrypts your data with 256-bit SSL encryption. That gives you peace of mind, when you file away your accounting data in the cloud with FreeAgent.
Advantages of FreeAgent:
  • Invoices and proposals
  • Tax estimates
  • PayPal and GoCardless integrations
  • Bank statement importantly
  • Real-time cash flow and P&L statements
  • FreeAgent offers straightforward pricing at $24 per month.

Kashflow-logoKashFlow

KashFlow focuses squarely on the UK market.
It’s also utterly simple to operate, with its developers boasting that no accounting knowledge is necessarily – no jargon, no no complex operations, and, best of all, no complicated formulas to remember.
KashFlow even makes VAT a snap – and that’s reason enough alone to give it a try.
The development team responsible for KashFlow have seen fit to cut it down to only those essential features for small business accountants.
Advantages of KashFlow:
  • Payroll functions
  • Automation features
  • Third-party integrations
  • Invoicing
  • Proposals and estimates
KashFlow is very simple to use. It’s unique focus on the UK makes it a no-brainer if that’s your market.

nutcache-logoNutcache

Nutcache is a free invoicing and time management app. Why does it make our list of accounting apps? The reason is that some businesses are just that simple – all they need is invoicing and time management.
Nutcache boasts easy invoicing and time management. If you’re a one person show, you’ll be able to keep your sanity as you keep track of multiple projects.
Nutcache also allow you to track expenses. This helps you gauge the profitability of your business (or micro-business).
Nutcache is completely free, and the company places no limit on the number of invoices and transactions available to you.
Advantages of Nutcache:
  • Easy to use
  • Ideal for freelancers, small businesses, and micro-businesses
  • Professional invoicing
  • Simple data export
  • Free!
Nutcache is the accounting app for the rest of us – and it proves that no task is too small.

street-invoice-logoStreet Invoice

Street Invoice is a mobile accounting app that works on Android, Blackberry and Windows PC.
Street Invoice makes it easy to send professional-looking invoices to your customers, as well as capture signatures.
This is great for your mobile business, as you can use your smartphone to collect payments and capture signatures on-the-go.
Street Invoice’s mobile integration is very well implemented. The app even allows you send invoices via text message, email or chat. On the other end of the Street Invoice spectrum, the app provides clean, professional reports of all your transactions.
Advantages of Street Invoice:
  • Mobile invoicing and payments
  • Estimates
  • Cost tracking
  • Mobile printing
  • Ultra-secure cloud-based services
Street Invoice is super simple and highly mobile. If that’s what fits the bill at your business, you owe it to yourself to give Street Invoice a shot. A freemium version of Street Invoice is offered and paid subscriptions start at $4.99 per month.
Posted on 4:53 AM | Categories:

Here's What It's Like To Work At Xero, The Accounting Software Company Which Is Flipping The Industry On Its Head

Alex Heber for Business Insider Australia writes: Xero, the cloud accounting software company which hails from New Zealand but has been adopted as an Aussie tech company – especially after its ASX IPO a couple of years ago – looks like a pretty cool place to work.

Xero MD Chris Ridd told Business Insider in three years its Australian operations have grown from seven people in a little office in the Melbourne suburb of Richmond to over 150 employees.
“It’s all about having fun and working hard. Everyone’s passionate and comes in with a purpose of what we’re doing and that’s been a big factor in our success,” he said.
While it’s no longer considered a startup, the company is trying to keep its culture true to its roots. Ridd said becoming a global corporate but staying nimble requires strong values including being human and transparent.

“You can see when corporate stuff starts to creep in,” he said, adding when that happens the company slows down with “unnecessary rules, when people are trying to protect turf and worrying about their own careers and managing up.”

“You’ve got to create a culture where people want to help each other, they’re happy to share information. When they see behaviours that are against your company values that they challenge each other – they don’t wait for management to step in,” he said.

“It’s all those subtle moments of truth along the way that make up a culture.”
Black and white photograph of the iconic Brighton bathing boxes in Victoria sprawled across the foyer wall in Xero’s Melbourne office. Image: Supplied. 
Two of the biggest physical challenges the company has faced is employing the right people and housing all its new staff. 

“The challenge for any business in hyper growth is in the early days you can have your national meetings in a cafe – seven staff. As things grow you’ve got to really watch who you bring into the company,” Ridd said. 

Ridd said he gets involved, in some form, in every interview.

“I like to do the last gate keeping interview. It’s not that I’m a control freak, but I do want to stay connected for two reasons: I want the people to know that I care – I don’t care if it’s a customer support role or a senior leadership role – I want to meet everyone who is coming into the business because I think it sends a message of ‘hey I want to know about you’,” he said.
Ridd explained he’s on the look out for culture fit, as well as what drives the candidate and what they know about the company.

“I’ve said no probably three times in the last year,” Ridd said, adding it was over about 60 interviews and it always came down to culture fit and the person’s ability to cope with change.

Musical Accountants

There was an in joke at Xero for a while that because of Ridd’s musical background – he plays in a band – that you would get a job at Xero if you’re a musician.

For the last two years at Xero’s annual conference, the entertainment has been the company’s in-house band, made up of staff, accountants and bookkeepers.

“We don’t hire an external band,” he said, adding he gets involved playing guitar, harmonica and singing.

“We have jams in the office,” he said, adding “We’ll have a jam session probably every couple of months on a Friday…It’s good fun.”
Here’s a video of the band at last year’s event.

Too much information

Communication in any company is crucial for growth and employee engagement. Ridd said at Xero it’s all about transparency.

“I’d rather tell them more than less. And I think sometimes that gets you into trouble but at least people know then that we’re being completely open and honest,” he said.

Australian operations


In May Xero hired 23 new staff and about another 15 people in June. The company is now building its product development team in Australia, with 15 developers in Canberra and another 30 in Melbourne. 

“All of our development was done out of Wellington, and Wellington is about the size of Geelong,” Ridd said. 

“The theory at the time was we’re not going to be able to scale our development capability to the level that we need to with the limited resources and talent pool that’s available in that market.
“I fully expect over the next couple of years that team will be up to around 80 to 100 [developers] in Melbourne.”

But it’s not just developers the company looks for.
“We hire a whole mix of people – sales, marketing, customer care, you name it. But one of the faster growing areas is development,” he said.

“My difficulty early on was finding tax geeks…They don’t grow on trees.”
But one of the hardest positions Xero struggles to fill is front-end designers – an important role considering part of the company’s product strategy “beautiful design”. Xero has simplified accounting and made it almost fun, where the experience, for example, of doing a bank reconciliation is akin to playing a game of Tetris, pulling in bank feeds to match up transactions simply. 

“We never got into accounting to build an accounting product. It was understanding the workflow of small business,” Ridd said.

Xero is currently in the process of expanding its office in Hawthorne. Signing a lease for over 800 square metres in a new building which the company is looking to house between 250 to 300 people over the next few years.

The fit out is currently in the planning stages and company management has been scoping out the Atlassian and Google offices in Sydney this week to get some ideas.

The existing offices have a pool table, big open seating plan and industrial kitchen. It’s understood the new space will include similar industrial design elements.

Market movers

Australia, with about 1.8 million small businesses, is Xero’s fastest growing market. Ridd said the Uk is also showing strong growth year-on-year and the US, with about 27 million small businesses, is a big market the company is still trying to crack.

“The worst thing we can do right now is go after a whole lot of opportunities and spread ourselves to thin,” he said.

“We’re likely to go into markets that are English speaking so Canada, South Africa, Ireland.”
Posted on 4:53 AM | Categories:

Monday, July 28, 2014

Travel And Entertainment: Maximizing Tax Benefits

Dan Gordon for Tax Connections writes: Tax law allows you to deduct two types of travel expenses related to your business, local and what the IRS calls “away from home.”
First, local travel expenses. You can deduct local transportation expenses incurred for business purposes such as the cost of getting from one location to another via public transportation, rental car, or your own automobile. Meals and incidentals are not deductible as travel expenses, but you can deduct meals as an entertainment expense as long as certain conditions are met (see below).
Second, you can deduct away from home travel expenses-including meals and incidentals, but if your employer reimburses your travel expenses your deductions arelimited.
Local Transportation Costs
The cost of local business transportation includes rail fare and bus fare, as well as costs associated with use and maintenance of an automobile used for business purposes. If your main place of business is your personal residence, then business trips from your home office and back are considered deductible transportation and not non-deductible commuting.
You generally cannot deduct lodging and meals unless you stay away from home overnight. Meals may be partially deductible as an entertainment expense.
Away From-Home Travel Expenses
You can deduct one-half of the cost of meals (50 percent) and all of the expenses of lodging incurred while traveling away from home. The IRS also allows you to deduct 100 percent of your transportation expenses–as long as business is the primary reason for your trip.
Here’s a list of some deductible away-from-home travel expenses:
• Meals (limited to 50 percent) and lodging while traveling or once you get to your away-from-home business destination.
• The cost of having your clothes cleaned and pressed away from home.
• Costs for telephone, fax or modem usage.
• Costs for secretarial services away-from-home.
• The costs of transportation between job sites or to and from hotels and terminals.
• Airfare, bus fare, rail fare, and charges related to shipping baggage or taking it with you.
• The cost of bringing or sending samples or displays, and of renting sample display rooms.
• The costs of keeping and operating a car, including garaging costs.
• The cost of keeping and operating an airplane, including hangar costs.
Transportation costs between “temporary” job sites and hotels and restaurants.
• Incidentals, including computer rentals, stenographers’ fees.
• Tips related to the above.
Entertainment Expenses
There are limits and restrictions on deducting meal and entertainment expenses. Most are deductible at 50 percent, but there are a few exceptions. Meals and entertainment must be “ordinary and necessary” and not “lavish or extravagant” and directly related to or associated with your business. They must also be substantiated (see below).
Your home is considered a place conducive to business. As such, entertaining at home may be deductible providing there was business intent and business was discussed. The amount of time that business was discussed does not matter.
Reasonable costs for food and refreshments for year-end parties for employees, as well as sales seminars and presentations held at your home are 100 percent deductible.
If you rent a skybox or other private luxury box for more than one event, say for the season, at the same sports arena, you generally cannot deduct more than the price of a non-luxury box seat ticket. Count each game or other performance as one event. Deduction for those seats is then subject to the 50 percent entertainment expense limit.
If expenses for food and beverages are separately stated, you can deduct these expenses in addition to the amounts allowable for the skybox, subject to the requirements and limits that apply. The amounts separately stated for food and beverages must be reasonable.
Deductions are disallowed for depreciation and upkeep of “entertainment facilities” such as yachts, hunting lodges, fishing camps, swimming pools, and tennis courts. Costs of entertainment provided at such facilities are deductible, subject to entertainment expense limitations.
Dues paid to country clubs or to social or golf and athletic clubs however, are not deductible. Dues that you pay to professional and civic organizations are deductible as long as your membership has a business purpose. Such organizations include business leagues, trade associations, chambers of commerce, boards of trade, and real estate boards.
Tip: To avoid problems qualifying for a deduction for dues paid to professional or civic organizations, document the business reasons for the membership, the contacts you make and any income generated from the membership.
Entertainment costs, taxes, tips, cover charges, room rentals, maids and waiters are all subject to the 50 percent limit on entertainment deductions.
How Do You Prove Expenses Are Directly Related?
Expenses are directly related if you can show:
• There was more than a general expectation of gaining some business benefit other than goodwill.
• You conducted business during the entertainment.
• Active conduct of business was your main purpose.
Record-keeping and Substantiation Requirements
Tax law requires you to keep records that will prove the business purpose and amounts of your business travel, entertainment, and local transportation costs. For example, each expense for lodging away from home that is $75 or more must be supported by receipts. The receipt must show the amount, date, place, and type of the expense.
The most frequent reason that the IRS disallows travel and entertainment expenses is failure to show the place and business purpose of an item. Therefore, pay special attention to these aspects of your record-keeping.
Keeping a diary or log book–and recording your business-related activities at or close to the time the expense is incurred–is one of the best ways to document your business expenses.
If you need help documenting business travel and entertainment expenses, don’t hesitate to connect with me on TaxConnections. We’ll help you set up a system that works for you–and satisfies IRS record-keeping requirements.
Dan has been preparing tax return for US Taxpayers and Expatriates since 1998 beginning with US military and Embassy mission personnel in Bangkok, Thailand. He has always loved math and took business accounting at City U. in Seattle Washington. Dan worked at Clint Gordon & Associates (Accredited Tax Consultant) were he gained his foundational knoledge of the US taxing system. You can reach Dan Gordon @ his Facebook site here.
Posted on 4:44 PM | Categories:

U.K. / Accountancy's rising star looks for £3.3m through crowdfunding / CLEAR BOOKS

Kevin Reed for AccountancyAge.com writes:  Tim Fouracre , founder and CEO of cloud-based accounting software business Clear Books, is looking to raise the funds by offering 275,000 shares at a subscription price of £12 per share when it goes live on to the general public from 4 August, and is initially open to existing shareholders.

Fouracre, an accountant listed onAccountancy Age's 35 under 35 for 2014, launched Clear Books' own crowdfunding platform, a method that keeps down the cost of fees.
"If you enjoy investing in small British businesses, you can do so from just £12. Our customers are small business owners and entrepreneurs who know our company intimately - they rely on our software every day to run their own businesses," said Fouracre. "It's a wonderful validation of our mission, to help small businesses in the UK, that these entrepreneurs continue to invest and support Clear Books as we grow."
Clear Books has increased its customer base from 5,000 to more than 7,000 small businesses since September 2013, and increased its monthly revenue from £60k to £100k, achieving a 74% increase in annual revenue to the financial year 31 March 2014.
Last month was chosen as the cloud accounting provider to Santander's iBusinessHub. The iBusinessHub offers bundled packages of small business software exclusively to Santander's 250,000 small business customers in the UK.
Posted on 9:48 AM | Categories:

Sage Continues Collaboration With Microsoft to Serve Small and Medium-Sized Businesses / Sage Set to Announce Continued Product Advancements With Microsoft Support at Annual Sage Summit in Las Vegas

Sage North America today announced continued focus on providing cloud-delivered exceptional user experiences to small and medium-sized businesses through close collaboration with Microsoft Corp. This collaboration builds on a number of years of innovation and close ties between the two organizations -- ties that have led to product advancements that enable Sage customers to manage their businesses with greater efficiency anytime, from anywhere, through solutions that enable -- not constrain -- today's growing businesses.
"Sage and Microsoft share a common goal of supporting small and medium-sized businesses. The advancements that help us move toward this common goal will be showcased at this year's Sage Summit, which is shaping up to be a transformative experience for our small and medium-sized business attendees," said Gabrielle Boko, executive vice president of marketing, Sage North America. "And this is just the beginning, as Sage looks at more ways to work with Microsoft to better support small and medium-sized businesses, helping them to achieve their goals and follow their dreams."
Sage has already been working in collaboration with Microsoft to bring innovative solutions to small and medium-sized businesses on a global basis, including Sage 300 Online, Sage 100 Online and Sage Construction and Real Estate Solutions in North America. A key example of the joint innovation that is in development is the interoperation of the Microsoft Cortana personal digital assistant and Sage 100, which was recently spotlighted at the Microsoft Worldwide Partner Conference, and will be showcased this week at Sage Summit. Sage Summit will focus on creating a dialogue for small and medium-sized business owners, to address critical issues like customer acquisition and retention, growing sales and maximizing profit margins. Those in attendance at the event will have the opportunity to take in a variety of perspectives from a high-powered roster of business thought leaders including: Earvin "Magic" Johnson, chairman and CEO of Magic Johnson Enterprises; Biz Stone, cofounder of Twitter cofounder/CEO of Jelly Industries; Susan Solovic, renowned small business expert and author; and more.
In an effort to include as many small and medium-sized businesses in the conversations as possible, Sage will offer live streaming of daily keynotes at the conference. Tuesday, July 29, Wednesday, July 30, and Thursday, July 31, interested parties may visitwww.SageSummit.com to gain access to keynote conversations featuring Sage executives and top business leaders, or for more information about the conference.
Posted on 9:45 AM | Categories:

Capital Gains and Losses: Short-Term and Long-Term / Explained

Mike Piper for the Oblivious Investor writes: When you sell something (such as a share of stock) for more than you paid for it, you’re generally going to be taxed on the increase in value. This increase in value is known as a “capital gain.”

The amount of gain is calculated as the proceeds received from the sale, minus your “cost basis” in the asset.

What is “Cost Basis”?

In most cases, your cost basis in an asset is simply the amount that you paid for that asset. (Note: This includes any brokerage commissions that you paid on the transaction.)
EXAMPLE: Lauren buys a share of Google stock for $250, including brokerage commissions. She owns it for two years and then sells it for $400. Her cost basis is the amount she paid for it: $250. Her gain will be calculated as follows:
$400 (proceeds from sale)
$250 (adjusted cost basis)
= $150 (capital gain)

Long Term Capital Gains vs. Short Term Capital Gains

The rate of tax charged on a capital gain depends upon whether it was a long term capital gain (LTCG) or a short term capital gain (STCG). If the asset in question was held for one year or less, it’s a short term capital gain. If the asset was held for greater than one year, it’s a long term capital gain.
STCGs are taxed at normal income tax rates. In contrast, LTCGs, are taxed at the same rates as qualified dividend income. That is, any long term capital gains that fall in thehighest (39.6%) tax bracket will be taxed at a rate of just 20%, any LTCGs that fall in the 25-35% tax brackets will be taxed at a rate of just 15%, and any LTCGs that fall in the 10% or 15% tax brackets will not be taxed at all.
An important takeaway here is that if you’re ever considering selling an investment that has increased in value, it might be a good idea to think about holding the asset long enough for the capital gain to be considered long term.
Note that a capital gain occurs only when the asset is sold. This is important because it means that fluctuations in the value of the asset are not considered taxable events.
EXAMPLE: Beth buys ten shares of Honda Motor Company at $25 each. Five years later, Beth still owns the shares, and the price per share has risen to $45. Over the five years, Beth isn’t required to pay any tax on the increase in value. She will only have to pay a tax on the LTCG if/when she chooses to sell the shares.

Taxation of Mutual Funds

Mutual funds are collections of a very large quantity of other investments. For instance, a mutual fund may own thousands of different stocks as well as any number of other investments like bonds or options contracts.
Each year, a mutual fund (like any other investor) is responsible for income tax on the net capital gains it incurred over the course of the year. However, instead of the mutual fund paying those taxes itself, each of the fund’s shareholders pays taxes on her share of the related gains. (Every year, each shareholder’s portion of the gains will be reported to her on Form 1099-DIV sent by the fund company.)
What makes the situation counterintuitive is that, in any given year, the capital gains realized by the fund can vary (sometimes significantly) from the actual change in value of the shares of the fund.
EXAMPLE: Deborah buys a share of Mutual Fund XYZ on January 1 for $100. By the end of the year, the investments that the fund owns have (on average) decreased in value, and Deborah’s share of the mutual fund is now worth $95.
However, during the course of the year, the mutual fund sold only one stock from the portfolio. That stock was sold for a short term capital gain. Deborah is going to be responsible for paying tax on her share of the capital gain, despite the fact that her share in the mutual fund has decreased in value.
Note how even in years when the value decreases, it’s possible that the investors will be responsible for paying taxes on a gain. Of course, the opposite is also true. There can be years when the fund increases in value, but the stock sales made by the fund result in a capital loss. And thus the investors have an increase in the value of their holdings, but they don’t have to pay any taxes for the time being.

Capital Gains from Selling Your Home

Selling a home that you’ve owned for many years can result in a very large long-term capital gain. Fortunately, it’s likely that you can exclude (that is, not pay tax on) a large portion — or even all — of that gain.
If you meet three requirements, you’re allowed to exclude up to $250,000 of gain. The three requirements are as follows:
  1. For the two years prior to the date of sale, you did not exclude gain from the sale of another home.
  2. During the five years prior to the date of sale, you owned the home for at least two years.
  3. During the five years prior to the date of sale, you lived in the home as your main home for at least two years.
Note: To meet the second and third requirements, the two-year time periods do not necessarily have to be made up of 24 consecutive months.
For married couples filing jointly, a $500,000 maximum exclusion is available if both spouses meet the first and third requirements and at least one spouse meets the second requirement.
EXAMPLE: Jason purchased a home on January 1, 2011. He lived there until May 1, 2012 (16 months). He then moved to another city (without selling his original home) and lived there until January 1, 2013. On January 1, 2013 Jason moved back into his original home and lived there until October 1, 2013 (9 months) when he sold the house for a $200,000 gain.
Jason can exclude the gain because he meets all three requirements. The fact that Jason does not have 24 consecutive months of using the home as his main home does not prevent him from excluding the gain.

Capital Losses

Of course, things don’t always go exactly as planned. When you sell something for less than you paid for it, you incur what is known as a capital loss. Like capital gains, capital losses are characterized as either short-term or long-term, based on whether the holding period of the asset was greater than or less than one year.
Each year, you add up all of your short term capital losses, and deduct them from your short term capital gains. Then you add up all of your long term capital losses and deduct them from your long term capital gains. If the end result is a positive LTCG and a positive STCG, the LTCG will be taxed at a maximum rate of 20%, and the STCG will be taxed at ordinary income tax rates. If the end result is a net capital loss, you can deduct up to $3,000 of it from your ordinary income. The remainder of the capital loss can be carried forward to deduct in future years.
EXAMPLE 1: In a given year, Aaron has:
$5,000 in short term capital gains,
$3,000 in short term capital losses,
$4,000 in long term capital gains, and
$2,500 in long term capital losses.
For the year, Aaron will have a net STCG of $2,000 ($5,000-$3,000) and a net LTCG of $1,500 ($4,000-$2,500). His STCG will be taxed at his ordinary income tax rate, and his LTCG will be taxed at a maximum rate of 20%.
EXAMPLE 2: In a given year, Sandra has:
$2,000 in short term capital gains,
$3,500 in short term capital losses,
$3,000 in long term capital gains, and
$5,000 in long term capital losses.
Sandra has a net short term capital loss of $1,500 and a net long term capital loss of $2,000. So her total capital loss is $3,500. For this capital loss, she can take a $3,000 deduction against her other income, and she can use the remaining $500 to offset her capital gains next year.
So what happens when you have a net gain in the short term category and a net loss in the long term category, or vice versa? In short, you net the two against each other, and the remaining gain or loss is taxed according to its character (that is, short term or long term).
EXAMPLE 1: In a givne year, Kyle has:
$5,000 net short term capital gain and
$4,000 net long term capital loss.
Kyle will subtract his LTCL from his STCG, leaving him with a STCG of $1,000. This will be taxed according to his ordinary income tax bracket.
EXAMPLE 2: In a given year, Christopher has:
$3,000 net short term capital loss and
$6,000 net long term capital gain.
Christopher will subtract his STCL from his LTCG, leaving him with a LTCG of $3,000. This will be taxed at a maximum of 20%.
EXAMPLE 3: In a given year, Jeremy has:
$2,000 net short term capital gain and
$3,000 net long term capital loss.
Jeremy will subtract his LTCL from his STCG, leaving him with a $1,000 LTCL. Because this is below the $3,000 threshold, he can deduct the entire $1,000 loss from his ordinary income.
EXAMPLE 4: In a given year, Jessica has:
$2,000 net long term capital gain and
$4,000 net short term capital loss.
Jessica will subtract her STCL from her LTCG, leaving her with a $2,000 STCL. Because this is below the $3,000 threshold, she can deduct the entire $2,000 loss from her ordinary income.

Simple Summary

  • If an asset is held for one year or less, then sold for a gain, the short-term capital gain will be taxed at ordinary income tax rates.
  • If an asset is held for more than one year, then sold for a gain, the long-term capital gain will be taxed at a maximum rate of 20%.
  • If you have a net capital loss for the year, you can subtract up to $3,000 of that loss from your ordinary income. The remainder of the loss can be carried forward to offset income in future years.
  • Mutual fund shareholders have to pay taxes each year as a result of the net gains incurred by the fund. This is unique in that taxes have to be paid before the asset (i.e., the mutual fund) is sold.
  • If you sell your home for a gain, and you meet certain requirements, you may be eligible to exclude up to $250,000 of the gain ($500,000 if married filing jointly).
Posted on 9:24 AM | Categories:

Blog Archive