Tuesday, March 5, 2013

Higher tax rates force retirement redo in Tax Planning / Big changes ahead for how you save, invest, draw down

Robert Powel for MarketWatch writes: The new tax law—the American Tax Payer Relief Act of 2012—is forcing retirees to take a closer look at their tax strategies in retirement and, for some, it means big changes in how they save, invest and draw down their resources.  First, there is a new top income tax bracket and a new top rate for capital gains and dividend income for individuals, estates and trusts.
Next, itemized deductions and personal exemptions are phased out for high-income taxpayers. (There’s a broader definition of who falls into that category than applies to the new tax rates.) And finally, everyone who earns wages or has self-employment income will contribute more to Social Security through their payroll taxes.
According to ATRA, there’s a new 39.6% tax bracket for single taxpayers with taxable income over $400,000 and married taxpayers filing jointly with taxable income over $450,000. Plus, for taxpayers in the new 39.6% tax bracket, capital gains and qualified dividends might be taxed at 20%, up from 15% in 2012. Itemized deductions are phased out for single taxpayers with adjusted gross income of more than $250,000 and married couples with adjusted gross income of more than $300,000. And the deduction for personal exemptions was reduced or eliminated for certain high-income taxpayers.
Given the new top tax rates for capital gains, dividends and other income, what are the best strategies now for saving for retirement and drawing down assets in retirement? In this edition of Retirement Adviser, MarketWatch’s Robert Powell spoke with three tax experts about retirement planning in the wake of the new tax law.
First, Frank Paré, an instructor in the personal financial planning program at the University of California at Berkeley and the founder of PF Wealth Management, said most taxpayers can breathe a sigh of relief in the wake of ATRA. The vast majority of taxpayers, retired or not, will be largely unaffected by ATRA.
Most pre-retirees, for example, who are contributing to retirement accounts such as an IRA, 401(k) or a Roth IRA have little about which to worry. “Their money is still going to be tax deferred, or tax free if the Roth conditions are met,” he said. “And so they’re not going to have to worry about the recent changes.”
High-income taxpayers who are in or nearing retirement, however, ought to examine how the new tax law will affect their retirement-income plans. “What will the tax changes mean for them in terms of their distributions, the amounts and so forth?” Paré asked.
In the wake of ATRA, high-income taxpayers have to consider whether distributions from their retirement accounts will put them into the highest income tax bracket. A taxpayer might think they are in a lower tax bracket, but the distribution from a retirement account could potentially put them in the highest bracket, he said.
For instance, if you’re single and your income is around $380,000 by the end of the year, it might not be worth taking a distribution of more than $20,000 from your IRA if you can avoid it. Income over $400,000 will be taxed at the 39.6% rate rather than the 35% rate.
“Now would be the time for retirees and would-be retirees to talk with their tax professionals and financial planners to see how all of these different moving parts are going to impact their distributions going forward,” said Paré.
And Mary Kay Foss, a director at Sweeney Kovar and an instructor for the CalCPA Education Foundation, added: “Generally retirees are in the same tax bracket as when they were working, but now they have the risk of perhaps being in a higher tax bracket,” she said.
Michael Jackson, a partner with Grant Thornton, and a leader of the firm’s private wealth services team, agreed that retirees and would-be retirees have to do what some describe as income-tax bracket planning, but they also have to worry about losing the value of some of their deductions.
“A lot of retirees are going to have to do a lot more planning for what income they want to have at each given year,” Jackson said. By managing their distributions the can avoid having their deduction be worth less or paying taxes at a higher rate, he said.
To be fair, Jackson said retirees and would-be need to coordinate their distributions so that they are tax efficient but not so much that you’re letting the “tax tail lead the dog.”
Paré also said most investors need not worry about paying the 20% tax on capital gains and dividends. But high income tax payers can use certain strategies and tactics to avoid being taxed at the highest rate. “In some regards it depends on the asset that they’re holding,” Paré said.
Owners of real estate, for instance, might consider a 1031 Exchange or “Like-kind” property exchange in order to defer capital gains. And owners of stock might consider offsetting their capital gains with capital losses.
“Taking some losses to offset the gains is always a very good idea,” said Foss. “(Some investors) tend to forget that they still have some (loss carry-overs) available to offset their gains. So, one good thing is to make sure that people are aware of what they have carrying over.”
Taxpayers might also consider deferring their capital gains and/or creating tax-efficient portfolios.
“I think looking at your overall investment portfolio and making sure you understand that the asset mix you have is what’s key here,” said Jackson. “We haven’t had a major shift in the tax law like this for some time. So, people made decisions on asset allocation based on the tax rates that were in existence prior to 2013. Now, that we have higher tax rates the efficiency of the portfolio needs to be redetermined.”
For instance, Jackson noted that with municipal bonds the tax-equivalent yield went up for someone who’s in the highest tax bracket. “So, with 3% yielding municipal bond where the tax equivalent yield was somewhere in the 4s is now well over 5%,” he said. “So, it may mean a little bit of a shift in how they structure portfolios in order to maximize return after taxes.”
Personal exemption phaseout
Each personal exemption you’re entitled to fully deduct (for yourself, your spouse, and your dependents) will reduce your taxable income by as much as $3,900. However, a tax law provision phasing out higher income taxpayers’ exemptions has been reinstated for 2013. The exemption phaseout starts once adjusted gross income (AGI) exceeds $250,000 (single), $300,000 (married filing jointly), $275,000 (head of household), and $150,000 (married filing separately).
For each $2,500 of AGI over the threshold, personal exemptions are reduced by 2%. So, if you’re subject to it, the exemption phaseout can increase your effective tax rate.
“On the front page of your tax return there are some deductions that are not affected by these limits,” Foss said. “In fact, they may be more beneficial given these limits.”
Foss said she doesn’t want to encourage divorce, but the alimony deduction is a good one. Other deductions that you can take on the front page of your tax return, according to Foss, include contributions to a retirement plan, medical insurance premiums for somebody who’s self-employed especially now that the IRS has said that if somebody is working past retirement age they can use their Medicare as a self-employed medical deduction. Plus self-employed taxpayers can deduct part of their Social Security tax on the front page of the return.
“So, these are some nice little deductions to be aware of,” said Foss.
Paré also noted that self-employed workers might consider restructuring the ownership of their company from an S corporation to a C corporation if their company is profitable. An S corporation is a pass-through entity that might be creating a lot of income. “By simply going to a C corporation they have some control with respect to their personal income,” Paré said. And that could be a huge benefit with respect to income and deductions on the front page of a tax return.
However, the decision to conduct business as a C corporation, S corporation, limited liability corporation or partnership should be made in consultation with experts who understand the intentions of and the impact on each of the business owners, Jackson said. “There are many instances where continuing to operate in pass though form makes a lot of sense,” he said after the roundtable.
Itemized deduction limitation
Along with any deduction for personal exemptions you’re entitled to, you may claim either itemized deductions or a standard deduction, whichever is larger. As you plan for 2013, however, consider whether you will be subject to the newly reinstated limitation on itemized deductions. Like the personal exemption phaseout, this limitation essentially increases the effective tax rates paid by affected individuals, the experts noted.
The limitation applies to taxpayers with AGI over a threshold amount: $250,000 (single), $300,000 (married filing jointly), $275,000 (head of household), or $150,000 (married filing separately). Basically, deductions are reduced by 3% of the amount by which AGI exceeds the threshold. However, deductions for medical expenses, investment interest, casualty and theft losses, and gambling losses are not subject to the limitation. And you can’t lose more than 80% of the itemized deductions that are affected.
“It’s basically a stealth tax,” said Jackson. “It’s another tax over and above the 39.6% tax bracket that some of taxpayers may hit along with other taxes (such as the Medicare surtax) that are going to be coming into play for 2013.”
So, are there ways to avoid this or plan around it?
“Again, the biggest thing is planning for your income levels because it’s not a deduction-based limitation,” said Jackson. “It’s based on your income. So, the more income you have the more susceptible you will be to losing some of those itemized deductions. The best strategy might be to restructure how you get your income.”
Paré agreed. “The real point here I think is given the changes that have taken place now is the best time to start talking to a tax professional,” he said. “Oftentimes individuals get into this sort of automatic, it is what we’re going to do. It’s every year we do it this way and there’s no real reason to change, but I think now, if ever, is perhaps the best time for them to engage someone to say ‘OK, let’s look at how we can shift this income or shift the way we’re doing our business in order to take advantage of some of these changes.’”
2013 Tax Rates & Brackets
Tax Rate2013 Taxable Income2013 Taxable Income
Single FilersMarried Joint Filers
10.0%$0 to $8,925$0 to $17,850
15.0%$8,925 to $36,250$17,850 to $72,500
25.0%$36,250 to $87,850$72,500 to $146,400
28.0%$87,850 to $183,250$146,400 to $223,050
33.0%$183,250 to $398,350$223,050 to $398,350
35.0%$398,350 to $400,000$398,350 to $450,000
39.6%$400,000 and up$450,000 and up

Posted on 9:43 AM | Categories:

EcoTaxFile.com / New income tax filing system lets users calculate their carbon footprint, plus get CPA advice on IRS issues

Tax season just got a little easier for both consumers and the environment with the launch of EcoTaxFile.com, the world’s first online tax return service that helps clients save money on their taxes while showing them how to reduce their carbon footprint and earn green perks.
Available for tax filers in the U.S. and Canada, EcoTaxFile.com offers real-time, personalized consulting from professional tax accountants and provides individuals and small businesses with tools and specific recommendations for cutting their carbon consumption along with special offers and deals for less carbon-intensive activities.
“It’s simple: When you file your taxes with us, we’ll also calculate your carbon footprint,” says EcoTaxFile.com founder Brad Cran. “We then identify areas where you can reduce your impact to live cleaner and save even more money.”
A social entrepreneur by passion and accountant by training, Cran devised the EcoTaxFile.com concept to help people get the most out of both their tax returns and their lives. “We help our clients understand how, for example, taking a vacation closer to home can be a greener choice than flying the whole family to a tropical resort. And we offer incentives — like discounts to nearby hotels — to make those choices more attractive,” said Cran.
Unlike other online services, EcoTaxFile.com uses professional accountants who consult with clients in the preparation of returns. EcoTaxFile.com provides all the benefits of working with a tax professional without having to visit an accountant’s office. The company’s free Carbon Footprint Calculator measures greenhouse gas emissions, and its Eco Report helps clients discover ways to reduce their personal carbon footprint and live “greener.”
“EcoTaxFile.com gives consumers and small businesses a level of confidence in their tax returns that can only come from working with a full-time accounting professional,” said Jody Padar, CPA, MST, operations director for EcoTaxFile.com. “We provide direct access to full-time CPAs and tax professionals who can help eliminate the stress of tax filing while finding every possible way to maximize your refund or reduce your tax payment.”
EcoTaxFile.com also provides accounting and sustainability services to small businesses. “Being green is as much about operational efficiency as ethics. When a business lowers their carbon footprint they are also reducing their costs,” said Michelle Bonner, EcoTaxFile’s climate advisor. “This is why accounting and sustainability go hand in hand.”
EcoTaxFile.com has established key relationships with industry-leaders like Climate Smart Businesses Inc., which provides the science and emission factors behind EcoTaxFile.com’s Carbon Footprint Calculator and Eco Reports. The company has also teamed up with Offsetters as its official offset provider.
EcoTaxFile.com is a member of 1% for the Planet, meaning the company has pledged to donate 1 percent of their gross revenue directly to environmental organizations. EcoTaxFile.com will also use an additional 5 percent of its net profits to fund its own sustainability initiatives to fight climate change, supporting climate research and offering annual scholarships so that students studying climate change can complete fieldwork. The first scholarship will be announced on March 18, 2013.
EcoTaxFile.com is the world’s first tax return service where clients can take stock of their annual finances and environmental impacts at the same time. Tips, discounts and incentives make it easy for customers to make better choices that will reduce their personal carbon footprints and environmental impacts over the long-term. EcoTaxFile.com services individuals and businesses through secure personalized online service with competitive rates. EcoTaxFile.com helps people save money and live smarter by providing custom sustainability tips and tailored green perks.
Posted on 9:26 AM | Categories:

Tax Tip: Not All Deductions Are Created Equal

Robert Flach for MainStreet.com writes: There are two types of tax deductions. “Above the line” deductions are claimed on Page 1 of Form 1040 and reduce Adjusted Gross Income. “Below the line” deductions are claimed on Page 2 of the 1040 and reduce Taxable Income. The “line” is your Adjusted Gross Income.
“Above the line” deductions are “more better” than “below the line” ones. Because these deductions reduce your AGI, they could also increase a multitude of other tax benefits that are “phased out” or disallowed altogether based on your AGI, or a “modified” AGI, and could also reduce the amount of taxable Social Security or Railroad Retirement benefits. An “above-the-line” deduction of $1,000 could actually reduce your net Taxable Income by more than $1,000.
“Above the line” deductions include expenses that are claimed on Schedules C, D, E and F, and “Adjustments to Income” such as:
  • Alimony
  • Early withdrawal penalties for CDs and savings accounts
  • Educator expenses
  • Job-related moving expenses
  • Qualified tuition and fees
  • Self-employed deductions for health insurance premiums, half of the Self-Employment Tax and traditional retirement plan contributions
  • Student loan Interest
  • Traditional IRA contributions
“Below the line” deductions are the Standard Deduction or Itemized Deductions from Schedule A and Personal Exemptions. The tax benefit of a deduction claimed “below the line” is always limited to the amount of the actual deduction. A $1,000 “below the line” deduction will reduce your net taxable Income by only $1,000.
Here is a tip: You can deduct as a miscellaneous itemized deduction the cost of preparing your tax returns. If the invoice is itemized you can allocate the tax preparation fee to Schedules A, C, E and F as per the itemization.
The invoice for preparing your 2011 tax returns totals $350, which is itemized as $150 for Form 1040 and Schedule A, $125 for Schedules C and SE and $75 for Schedule E. You can deduct $150 on your 2012 Schedule A, $125 on Schedule C and $75 on Schedule E.
By allocating the fee you have reduced your AGI by $200. If you claimed the entire fee on Schedule A you would have reduced your taxable income only. And it is possible that, because of the 2% of AGI exclusion that applies to miscellaneous deductions, you would get only a partial, or no, tax benefit from the fee.
So if your tax return includes multiple schedules, ask your tax pro to itemize your invoice.



Posted on 9:25 AM | Categories:

IRA and Roth tax perks get better : New tax law brings new benefits for retirees


Andrea Coombes for MarketWatch writes Thanks to the new law, workers saving for retirement in a 401(k) have an easier time switching over to the Roth option in their 401(k), assuming their employer offers one. Meanwhile, people age 70½ or older can once again turn their government-mandated IRA distribution into a donation to charity.
This benefit, which lets you shield your IRA distribution from income tax, isn’t new—but some other provisions of the new law make the charity rollover a better idea for more people.
Until now, for many people the choice was a wash: they could either take the distribution, donate the money and claim a charitable deduction for that amount, or, equally valuable from a tax perspective, they could donate the money directly from their IRA and avoid income tax on that distribution, said Michael S. Jackson, a partner in tax services with Grant Thornton LLP, in Philadelphia.
“This really wasn’t something that a lot of my clients took advantage of over the last couple of years, because the income and deduction were washing out,” he said.
Jackson was speaking as part of a roundtable discussion at a recent MarketWatch Retirement Adviser event in San Francisco, hosted by columnist Robert Powell, editor of MarketWatch’s Retirement Weekly e-newsletter.
The law changed that decision for some high-income taxpayers, thanks to the return of the Pease limitation, which limits deductions based on your adjusted gross income.
“Now that we have several different types of AGI-based increases in the tax rate, it is going to make a difference and will save them a few dollars if they go through the mechanics of actually distributing it directly to the charity,” Jackson said.
Others agreed. “This is a really great provision,” said Mary Kay Foss, who also participated in the MarketWatch roundtable discussion. Foss is a CPA and director with Sweeney Kovar Financial Advisors Inc., in Danville, Calif.
There are a variety of benefits to the charity rollover rule, Foss said. “You don’t get a charitable deduction for it, but it doesn’t increase your adjusted gross income which [means] the amount of Social Security benefits that are subject to tax may be lower,” she said.
Also, “If somebody is charitable, but doesn’t itemize deductions, they’re still going to get the benefit by doing things this way. If somebody has a charitable contribution carry-over it’s going to benefit them,” she said. “It’s really a win-win situation and I think a lot of people should consider it.”
Still, it’s available solely to people aged 70-1/2 and older; you have to be at least that age when making the donation, Foss said. She added that the $100,000 limit is a maximum; charitable-minded taxpayers can give less, but they should check with their IRA custodian—some firms may not be willing to transfer very small amounts.
Also, Foss said, it’s possible to donate to more than one charitable organization via the charity rollover.
The fiscal-cliff deal in January also brought changes to rules governing Roth 401(k)s, offered by some employers in their 401(k) plans. (People who contribute to a Roth put in after-tax dollars—unlike the traditional 401(k), contributions to which are pretax—but the money grows and is withdrawn tax-free.)
“If the employer does offer a Roth 401(k), I would strongly encourage individuals to look at that as a potential strategy,” said Frank Paré, a certified financial planner and president of PF Wealth Management Group LLC, in Oakland, Calif., who also took part in MarketWatch’s panel discussion.

“You may want to take a portion of the amount that you’re putting in your traditional 401(k) and allocate it to the Roth 401(k),” Paré said. “It’s definitely an opportunity to diversify one’s tax strategy between tax-deferred and tax-free” retirement distributions.
One aspect of the new rules is that any 401(k) participant—not solely those who are eligible for a qualified distribution—now can choose to rollover their 401(k) funds to the Roth 401(k), assuming the employer offers the option.
But, while the panel participants said the Roth option can be a valuable tool for some savers, the new rollover perk isn’t necessarily the best way to invest in a Roth.
“I have strong feelings about that,” Foss said. “Roth conversions are a good thing. But within the plan it’s a little messier. You can’t do the recharacterization. I think it’s just a little more complicated. I think it’s neater to do an IRA conversion to a Roth or the whole 401(k) conversion to a Roth and not do it within the same plan.”
Some workers might want to consider converting just a portion of their 401(k) funds to a Roth, Jackson said. “You don’t have to do an all or nothing on this,” he said.
The Roth question
Of course, the big issue with a conversion is the tax bill, Paré said. “That’s really the driver here in terms of, can you afford to give up some of that income deduction, so to speak, in the sense that you’re channeling this money to a traditional 401(k) and it’s pretax dollars,” he said.
Taxes are “the painful part,” agreed Jackson. “A lot of people see [that] as the limiting factor to making the conversion happen,” he said.
“They are going to be out money and, while their 401(k) and Roth 401(k) statement will say the same amount regardless of whether they make the conversion or not, it’s not until years and years down the road when they actually take the money out that they will see the benefit from the tax-free distributions. But they’re out of pocket up front,” he said.
Contributing or converting to a Roth may be more ideal for a younger worker, Paré said. “If you’re near to retiring, maybe [a conversion] is not a strategy. …However, if you’ve got 10, 15, 20 years before you retire, it might make sense to do something like that.”
Jackson agreed. “The longer you have to enjoy that tax-free growth, the better it’s going to be to convert,” he said. “If you have a very, very short time horizon between taking a distribution now versus taking one later, it’s probably not going to be enough time to recoup that tax.”
For her part, Foss said people thinking about converting should consider their income-tax bracket.
“For instance, the 25% and the 28% brackets are very, very wide brackets. With many of my clients, they’re in those brackets while they’re working and they’re probably going to be in those brackets when they retire. So, they would not want to do a conversion that’s going to put them in a higher bracket than the 28%,” she said.
“You have to look at bracket creep, as it were,” Foss said, “because you don’t want to pay tax now that you would never pay it in the future.”


Posted on 9:24 AM | Categories:

2013 Review of FreshBooks & A “First Hand” Perspective / Getting small clients to be diligent about their bookkeeping is a challenge that all accountants face, especially those who specialize in the smallest businesses.

Isaac O'Bannon for CPA Practice Advisor writes:  A Fresh Start.  Getting small clients to be diligent about their bookkeeping is a challenge that all accountants face, especially those who specialize in the smallest businesses.
Helena Swyter, a CPA in Chicago, knows this first hand, since she’s developed a strong specialty in serving the accounting and tax compliance needs of creative types and others in the social media world. While she also serves some larger entities, most of her clients are Sch. C filers, professional bloggers who receive income in varying forms.
After working for a Big 4 firm for several years, in 2012 she started her own practice, SweeterCPA, and quickly found that the online accounting system FreshBooks was a perfect fit for her clients and for her. “I recommend that all my clients use FreshBooks and I only recommend things that I would use myself.”  
Active with social media, she realized the potential for serving the people who make a business of providing content, particularly bloggers. After attending a conference, she saw that these individuals were an untapped market, but one that was very much in need of professional accounting, consulting and tax services. Generally a younger and more technology-inclined group, they also preferred online applications.
“Bloggers already live online, so even though my clients are all over the country, they are comfortable doing their accounting and working collaboratively online,” she said. “With FreshBooks, they can access their files at any time, and I can access their data and reports whenever they need me to.”
Another benefit of working with these entrepreneurs is that she never has to deal with the proverbial box of receipts. Her clients work online, usually get paid electronically and prefer to e-file when tax time comes around.
One of the features in FreshBooks that Helena finds most beneficial is its integration with payment and financial systems. It can automatically pull client data into the program, including PayPal, credit cards and bank accounts. This ensures that she and her clients are always working with the most up-to-date information.
Helena also appreciates that the system doesn’t overwhelm her clients. “Some programs offer so many features and tools that most small businesses never use, but FreshBooks has narrowed it down to the core essentials, especially for what my clients need.” Plus, the program includes multiple reports that make it easy for her to produce quarterly updates and run profit and loss statements, whether helping clients understand their finances or when preparing their taxes.
Helena’s biggest praise for FreshBooks is the company’s customer service. “It doesn’t feel like somebody in a business suit on the other side of the world. They’re wonderful and can help my clients when I’m not available.” The support website also has several easy-to-understand videos that make understanding bookkeeping processes simple, she said.
“And the FreshBooks staff is very friendly. They even sent me a congratulations message when I got married.”
FreshBooks is a cloud accounting application which started as a tool for managing invoicing, collections, and revenue tracking for small businesses. The product has grown over the last ten years to include time tracking, expense management, bank imports and integration with the BaseCamp Classic project management tools.
The company now boasts five million users (including users tracking their time and their customers). Long ago, the company moved out of founder and CEO Mike McDerment’s parents’ basement, and has been recognized by a number of major media outlets like USA Today, Fast Company, Bloomberg, ZDNet, andMashable for its ease of use.
Instead of focusing on depth of features for accounting professionals, FreshBooks markets directly to end users by promoting its ease of use and by citing their internal statistics which show that, “the average FreshBooks user gets paid 11 days faster and saves eight hours a week doing invoices,” as compared to previously used solutions. FreshBooks also makes it easy for customers to pay with credit, as it integrates with a wide range of merchant service accounts.
Basic System Functions: 4 Stars
FreshBooks is one of the easiest applications to use included in this review. Users with no financial background can create, distribute, and collect invoices using this tool with almost no training. Invoices are based on customizable templates, and users can add details about their business as well as a logo to give the invoices a very professional look. User menus are not customizable, and a dashboard showing a fixed set of key performance indicators is shown in a screen called “the Account Overview.”
The product is designed for small businesses, (e.g. integration with BaseCamp Project Management), these industry specializations would be useful to almost any business user.
FreshBooks supports all major Web Browsers, and has a number of available mobile apps, including company-provided apps for iOS, and Google’s Chrome browser. Users who do not want a separate app can also access their FreshBooks portal through the browser on almost any online mobile device.
Although FreshBooks is a Canadian company, the company’s primary servers as well as the backup servers are housed at two different public data centers which are more than 100 miles apart. If the primary data center has a catastrophic failure which overcomes the redundancies built into each site, the backup servers are configured to automatically handle traffic as the primary server.
The product has an audit trail (referred to as the “autobiography” of each transaction), and can be accessed for each record in the application. The company also keeps logs of every user login and IP address, although there is not a formal, user-facing report which shows the changes made to all records over a period of time.
FreshBooks supports billing and collecting receivables in multiple currencies), and although it is possible to use FreshBooks with multiple profit centers, there is not a simple way to separate results for each unit and still see the combined results for all divisions.
There is not a maximum number of employees who have access to a company, however, FreshBooks charges an extra $10 per month for each additional staff employee user. Users can have simultaneous access to the database; however, no two users can simultaneously post to the same database record.
Core Accounting Capabilities: 4 Stars
Freshbooks is designed for simplicity, and is primarily built around billing and collecting receivables from customers. As such, it is primarily a “forms oriented” application, and it is difficult to even find debits and credits in the application. The product does an excellent job of creating, distributing, and making it easy for customers to pay invoices.
Invoices can be created on a mobile phone, on a tablet, or using a computer, and in addition to printing and mailing, distributing via e-mail, or delivering via a portal, FreshBooks will print an invoice and send it via snail mail (for a small fee) to the intended recipient. Users can pay with a number of supported merchant services providers, including Authorize.net, PayPal and Google Checkout.
FreshBooks is a single-entry system, and does not have a traditional general ledger as such. Despite this limitation, many small business owners find that it meets their needs for tracking and reporting revenues and expenses. The Expenses module is less useful than the invoicing functions however, as FreshBooks is not designed to track and pay outstanding bills as they are due, but is configured to report on transactions imported from a linked bank account or credit card account.
Expenses are classified automatically based on the payee name and amount of the expense during the import process. Users can change the classification of any transaction after FreshBooks has initially assigned an expense account. The expenses module does a good job of tracking out of pocket expenses for reimbursement by clients, and a credible job of automatically classifying transactions, although adjustments will always be needed.
The strengths in receivables, along with the less robust payables management functions and lack of support for inventory make this product a good fit for professional services firms and others who invoice for time and do not need to track inventory. The product supports both traditional sales tax as well as value added taxes (e.g. HST, GST, and PST in Canada).
(Users could prepare payroll in a web-based application and then record the imported banking transaction to properly distribute the pay to the proper accounts as a workaround.)
While the FreshBooks user interface is available only in English, the languages used to sent invoices and estimates can customized for each client. Languages available include Danish, Dutch, Estonian, French, German, Italian, Norwegian, Portuguese, Romanian, Spanish and Swedish.
Day to Day Operations: 4 Stars
There are a number of supported third party online shopping carts available for Freshbooks, however, there are not any traditional retail point of sale applications listed in the company’s add-on site. Sales tax support for U.S. and Canadian/EU style Value Added Tax is also included in the product.
FreshBooks has integrations with a wide range of line of business applications, including Basecamp Classic for project management, ZenDesk for IT support, SalesForce CRM, WuFoo and MailChimp e-Marketing, as well as GeoOP and BlueFolder for mobile workforces. The product also has some integration with itDuzzit and OneSaaS, generic tools for syncing data across multiple cloud applications.
The product does not support inventory tracking and valuation, and is best suited for service-based businesses.
Management Features: 4 Stars
FreshBooks primary dashboard is called the Account Overview screen, and is shown in Figure 1. This page updates automatically based on account activity, but is not customizable. There are no interfaces for external report writers like Crystal reports, although existing reports can be filtered using on screen controls, and can also be downloaded from the website in either CSV or Excel format.
Users can be granted access to FreshBooks with a few very simple permission levels. The product does not support role-based user security, although staff access can be restricted by client project. Both staff members and contractors can track time for use in creating customer invoices.
Integration and Import/Export: 5 Stars
Many types of data, including bank import files and client lists, can be brought into FreshBooks. Most data can also be exported to CSV (comma-delimited text file), including expenses, clients, invoices, staff, and timesheets. The application has integrations into over 70 third party applications and services through its developer program.
Freshbooks launched its bank integration module in early 2013. This tool permits users to download their bank and credit card transactions directly into FreshBooks. Transactions are automatically classified based on logic in the FreshBooks servers which looks at the date, amount, and name of the expense, and assigns an expense account if one appears appropriate. Some transactions are not assigned to an account, and are flagged for end user follow up.
Help and Support: 4 Stars
FreshBooks provides support through Facebook, Twitter (@FreshBooks), e-mail, or via telephone (9 AM- 6 PM ET, Monday through Friday). Support is free All support is Canadian-based (Toronto, ON), and the company hosts webinars and support documentation to help users get the most out of the product.
Summary and Pricing
FreshBooks is free for 1-3 clients and a single user, $19.95/month for up to 25 clients for a single user, $29.95/month for unlimited clients for one user and $10/month for each additional user. FreshBooks runs the Beancounters United program for accounting professionals who use FreshBooks to work with their clients.

2013 Overall Rating: 4.25 Stars







Posted on 9:23 AM | Categories:

IRS Cracks Down On Undisclosed Foreign Accounts


Peter Anderson & Rick Stone for McClane write: The message from the IRS to owners of undisclosed foreign financial accounts is clear: Enter the IRS Offshore Voluntary Disclosure Initiative (OVDI) or risk criminal prosecution and/or enormous civil penalties.
United States taxpayers are required to pay taxes on their worldwide income and to disclose the existence of foreign financial accounts on their tax returns. If the account or accounts have a value in excess of $10,000, taxpayers are also required to file a Report of Foreign Bank and Financial Accounts (FBAR) by June 30 of each tax year.

Criminal penalties associated with failure to report a foreign financial account are a maximum fine of $250,000 and up to five years in prison. The penalty for a non-willful civil violation is a fine of up to $10,000. However, if the violation is deemed willful, then the penalty is the greater of $100,000 or 50 percent of the account balance at the time of the violation. The foregoing penalties are applicable to each violation of the FBAR reporting rules.
Many clients are indecisive and apprehensive about making a voluntary disclosure, in light of the hefty penalties imposed by the OVDI. Some clients are willing to "take their chances" and avoid entering the OVDI. It is important to make these clients aware of IRS enforcement initiatives.

Since 2007 and beginning with the United Bank of Switzerland, the government has launched investigations of foreign banks that have resulted in disclosures of account-holder information to the IRS. The government has also been actively pursuing treaty requests with countries with which the United States has tax treaties. Finally, the government has at its disposal the recently enacted Foreign Account Tax Compliance Act (FATCA).

While the intricacies of FATCA are beyond the scope of this article, the act represents a major enforcement tool for the government. FATCA was signed into law in 2010, and already the United States has understandings or agreements with Ireland, Denmark, France, Spain, Germany, Italy, the United Kingdom and Switzerland, to implement information exchange regarding foreign accounts. And the government is aggressively pursuing agreements with other countries.

These government enforcement initiatives make it much more likely that the IRS will become aware of undeclared foreign accounts of US taxpayers. Once the IRS is aware of undeclared foreign account information, the OVDI is no longer an option available to a client, and much more severe penalties, civil and/or criminal, will likely be imposed.

According to the IRS, "Taxpayers with undisclosed foreign accounts or entities should make a voluntary disclosure because it enables them to become compliant, avoid substantial civil penalties and generally eliminate the risk of criminal prosecution."
A voluntary disclosure also makes it possible to calculate, with a reasonable degree of certainty, the total cost of resolving offshore tax issues, the IRS has said.

"Taxpayers who do not submit a voluntary disclosure run the risk of detection by the IRS and the imposition of substantial penalties, including the fraud penalty and foreign information return penalties, and an increased risk of criminal prosecution," the agency warns. "The IRS remains actively engaged in ferreting out the identities of those with undisclosed foreign accounts. Moreover, increasingly this information is available to the IRS under tax treaties, through submissions by whistleblowers, and will become more available as the Foreign Account Tax Compliance Act (FATCA) and Foreign Financial Asset Reporting (new IRC §6038D) become effective."

The "increased risk" that the IRS refers to is dramatic, as thousands of names have already been disclosed to the IRS by foreign banks and cooperating tax authorities. The IRS is using these lists for both criminal prosecutions and civil audits and is aggressively pursuing information exchange agreements with other countries.

For calendar-year taxpayers, the voluntary disclosure period is the most recent eight tax years for which the due date has already passed. The OVDI disclosure is made by filing both the original returns and amended returns for the prior eight years to report all income and disclose the foreign accounts, filing all missing FBAR reports, cooperating fully in the OVDI process, signing agreements to extend the statutes of limitations, paying a penalty of 27.5 percent (reduced in only very limited cases) of the accounts' highest balance over the eight-year period, paying a 20 percent accuracy penalty based on the total underpayment for the eight years, paying failure-to-pay penalties, and paying failure-to-file penalties, if appropriate.
The OVDI program is evolving and has many critics. However, the IRS has had tremendous success in raising revenue – as of June 2012, it collected more than $5 billion in back taxes, interest and penalties from 33,000 voluntary disclosures made under the first two programs in 2009 and 2011.
Posted on 9:22 AM | Categories:

Next chapter for Xero US

Jamie Sutherland for Xero company news writes: Over a year ago we set up our US office at the corner of Harrison St and 5th street in San Francisco. It was a perfect place to get things rolling. We stepped right into the silicon valley technology community and connected to the many leading players that make up this incredible place including venture capitalists, tech leaders, startups, and associations. It has been a perfect foray into the US technology landscape. A special thanks goes out to the Kiwi Landing Pad for making the setup simple, fast, and easy.

This is an exciting time for Xero in the US. We’ve expanded to almost 30 employees and along with that growth is a need for a larger office we can call our own. We have just moved to 244 Jackson Street. We have taken a full floor on the 2nd level of a four story building. The space itself is creative with brick and beam structures, high ceilings, and an open concept. For those that aren’t familiar with the area it is a fantastic location just north of the financial district right next to the Transamerica Building. The area is surrounded by great restaurants like Kokkari, great cafes, green spaces, and Sightglass coffee right around the corner. It’s also a hop, skip, and jump from Muni and BART. Needless to say, but the move has been incredibly uplifting for the US team.


For many San Franciscans it is a small distance between Harrison Street and Jackson Street, but for us it’s a big move—a milestone. It feels like chapter one in the US is complete. We’ve built the foundation for growth, built a strong team, have a market-leading product, and lots and lots of runway. The story is unfolding very nicely.
We are all very excited about the next chapter and to write it we need some more people. We have some incredible open positions across many disciplines including engineering, sales, marketing, and talent management. If you are looking for a fast-growing company building a first-class product for a massive market, then we want to talk to you.
Posted on 9:21 AM | Categories: