Wednesday, April 17, 2013

Monchilla offers new cloud-based accounting and payroll option / Startup Spotlight: Monchilla looks to take on Quickbooks with new accounting service / Wave Accounting vs PlanGuru Basic vs Monchilla

We keep a close on on the Quickbooks alternatives and are familiar with ContaAzul & Cheqbook and indeed have commented about them here.  Today someone suggested we look at "Monchilla" - and as we have never heard of "Monchilla"....we are!   Isaac M. O'Bannon for CPA Practice Advisor writes: A new, completely cloud-based, accounting system is about to give small business owners an alternative to QuickBooks, and some experts think even public accountants will prefer it over other bookkeeping systems.

Monchilla.com announced its beta release at the 2012 Sleeter Accounting Solutions Conference. The Monchilla.com beta includes an entire suite of services including small business accounting, payroll, invoicing, billing, time tracking, electronic payments, and direct deposit for employees.
“We are thrilled to share Monchilla.com with the world.  We know this will help thousands of small businesses, bookkeepers and accountants manage their businesses better and with a lot less work” said Jack Couch, Monchilla.com’s CEO. “By taking advantage of new technology, Monchilla.com makes your life easier, but it also gives you a great dashboard that gives you insight into the health of your business.”
Monchilla.com downloads transactions from your bank and uses repeating transactions to provide future financial data while reducing time spent keying in transactions. Large businesses have separate departments to deal with payroll, financial accounting (historical records) and management accounting (forward looking accounting). The idea behind Monchilla is to bring all of these together into one package so that small businesses can get some of the benefits big businesses already enjoy.  
Monchilla.com also provides something it calls “turn-by-turn business navigation.” This allows users to do “what-if” analysis to see how your business will be affected if you hire a new employee or take on a small business loan. The “write-up” feature is also unusual for a cloud solution, as it allows fast, keyboard only data entry so accountants can quickly update the books before filing taxes.
Randy Johnston, a widely-respected thought leader for the profession and one of the most popular speakers at ASC2012, said “One of the interesting things about Monchilla.com is that it has payroll integrated at such a low cost. I think this and its management accounting provide a solid revenue opportunity to small business consultants and accountants.”  
For businesses that would like to keep QuickBooks they can still take advantage of the impressive dashboard by simply uploading their QuickBooks backup file. The Monchilla dashboard has all of the major financial statements (income, cashflow, balance sheet, etc) including a very interesting cash balance report that will alert you to a cash shortfall. Because it is completely cloud based, it is easy to share these reports with clients or other support staff.
Monchilla’s employee time tracking features can also be used with QuickBooks - good news for small businesses that have been forced to pay for a third party time tracking solution after Intuit discontinued it’s time tracking solution in December.
Monchilla.com is a self funded startup of 11 that already boasts over 1000 small businesses that signed up through it’s inviation only beta.

During Beta testing, Monchilla.com is available free of charge by going to www.monchilla.com and clicking on the “sign-up for a free account” button. When Monchilla releases the final version early next year it will charge users $5 per employee per month for payroll. Businesses that don’t use the payroll service will not be charged. According to the Monchilla.com website, the average company of five will save $800 pear year when switching from QuickBooks.

Startup Spotlight: Monchilla looks to take on Quickbooks with new accounting service


Mikey Tom for GeekWire.com writes: If you’ve ever taken an accounting course or have run your own business, you know that accounting is a huge pain.  Sadly, it’s a necessary evil for every business.  But Monchilla is looking to make it a a little more tolerable.
The self-funded team of eleven has spent the past 2.5 years building an accounting platform from scratch, including features such as payroll, time tracking, invoicing, electronic payments and bank integration. It’s biggest rival is Intuit’s Quickbooks, not to mention some up-and-coming startups such as IndineroXero and WaveAccounting.
In fact, the company formed because the founders struggled with using Quickbooks in their own software startup and weren’t too impressed when they gave other services a try. ”We had used Quickbooks, but it made us hate our lives because it is so hard to use,” said Monchilla’s Nanjuan Shi.
We caught up Monchilla’s Shi and Jack Couch for this installment of Startup Spotlight:
Explain what you do so our parents can understand it : “We make accounting easy so business owners can make smarter decisions.”
Inspiration hit us when: “We were four guys writing code and we had a full time bookkeeper just to manage payroll and invoice customers and we still didn’t have a clue how much money we would have in three months.  We looked at everything and nothing worked for us.  Then we talked to all of our friends that owned business and found out some of them already made business killing mistakes because they couldn’t see clearly.  That’s when we knew we could do something that would make a big difference.”
VC, Angel or Bootstrap: “Self funded.  This isn’t our first start-up and some of those earlier successes have given us the capital to build Monchilla. We are open to outside funding, we just haven’t needed it yet.”
Our ‘secret sauce’ is: “We completely rethought double-entry bookkeeping to make it more intuitive without sacrificing any benefits.  Its all ham and no burger (we promise we are better at accounting than jokes).”
The smartest move we’ve made so far: “ We tackled the hardest problems first.  Instead of worrying about powder blue versus periwinkle we worked hard for 2+ years on building an engine that could handle everything from payroll taxes to depreciation and now that is paying off.
The biggest mistake we’ve made so far: “When we first started we thought we could just build additional features on top of QuickBooks and we spent several months and a lot of money trying to make that work.  Eventually we realized it was like trying to build a house on sand because every version update would break us and the database wasn’t normalized.  We really didn’t want to have to start from scratch, but we should have figured that out sooner.”
Would you rather have Gates, Jobs, Zuckerberg or Bezos in your corner:“Bezos because he has a very similar outlook on business and the good that it can accomplish, which is what drives us to push through the difficult stuff.  Helping every small business owner be more successful is the most significant thing we can do to make the world a better place and I think Bezos would agree.  I’m also not sure Bill doesn’t hold a grudge for the time he tripped on my console cable and my laptop slid across my desk and hit him on the way down – I know his security guys are still keeping an eye on me.”
Our world domination strategy starts when: “When small business owners have more fun running their businesses because of Monchilla.  We have already seen the kind of gratitude and word of mouth recommendations that comes from that and we can’t wait
to see that happen on a larger scale.”
Rivals should fear us because: “We are ready to spend the next 20 years attacking this problem with everything we have.  And we have the only online service that actually does everything a business owner would expect, including payroll and time tracking, built in.”
We are truly unique because: “We love accounting.  Many accountants don’t even love accounting, but for us there is something amazing about the moment when everything is clear and people are empowered to make smart moves.  As business owners we have sailed the same stormy seas as our customers so we have a good grasp of what is helpful and what isn’t.”
The biggest hurdle we’ve overcome is: “Finding the right team of fanatics.  Software people that are truly passionate about accounting are few and far between.
What’s the one piece of advice you’d give to other entrepreneurs just starting out: “ First, care about other people.  Then find a problem that is so irritating to you that you are willing to sacrifice to solve it for them.  When we started we could see all the time, money and life wasted because of bad tools and we couldn’t help but do something.  We knew we could fix it and we felt like it would have been wrong to ignore it.  Find something like that and you will enjoy getting out of bed and busting your butt.





Posted on 9:08 AM | Categories:

The Tax Implications of Starting a Business With Retirement Money

Josh Patrick for the NY Times writes: Last week I wrote about the risks of using retirement money to finance your business. I spent some time looking at a strategy called ROBS — rollover as business start-up — and came to the conclusion that although it is being done by thousands of businesses, it has yet to receive the full blessing of either the Internal Revenue Service or the Department of Labor. As a result, I would advise my clients to stay away from the strategy.
But there is another reason to be wary, and it might be even more important — it’s about how you will be taxed if you do manage to build a company using ROBS and sell it at a profit. The tax implications are significant, and I think the lessons are important regardless of how you choose to finance your business.
If you are going to use ROBS to finance a business, you must file taxes as a C corporation, and that is where the tax issue comes into play. That’s because when it comes time to sell the company, you will be taxed twice — first at the corporate level and then at the personal level. And this, of course, is why most closely held small businesses are subchapter S corporations, whose structure allows income to flow untaxed to the owners of the company, who then pay taxes individually but only once.
Here’s an example. Let’s look at what happens if you sell a C corporation for a $1 million gain without using a ROBS strategy.
Gain……………………………………………………………………. $1,000,000
Corporate taxes @ 35%…………………………………………….. 350,000
Gain after corporate taxes ………………………………………..   650,000
Personal taxes @ 20% (capital gains)…………………………. 130,000
Cash left after taxes…………………………………………………..  520,000
Thus, if you were the owner of this corporation you would have paid 48 percent in total taxes. Now, if this company had been financed through ROBS, you would not have paid 20 percent capital gains taxes at the personal level. Instead, the stock would have been owned through a 401(k) and you would have had to pay 39.6 percent ordinary income taxes. Here’s what that would have looked like:
Gain……………………………………………………………………. $1,000,000
Corporate taxes @ 35%…………………………………………….  350,000
Gain after corporate taxes…………………………………………   650,000
Personal taxes @ 39.6%……………………………………………  257,400
Cash left after taxes…………………………………………………… 392,600
As you can see, using a ROBS strategy increases the tax bite from 48 percent to a little more than 60 percent. And that’s my point: even if ROBS transactions are legal, the tax implications are significant.
Now, a ROBS promoter might object to this example and argue that the seller should do a stock sale rather than an asset sale. (Here’s the difference: with a stock sale, the buyer purchases the owner’s share of a corporation; with an asset sale, the buyer purchases individual assets of the company but the seller retains ownership of the legal entity.) And it’s true that with a stock sale, the taxes would be the same as they are on any stock that is bought and sold inside a qualified retirement plan. No taxes would be paid until money is withdrawn from the retirement plan, when the maximum rate would be 39.6 percent.
This might be a great idea except for one thing: buyers generally do not like stock sales. Buyers do not want to buy your liabilities, and they do not want to buy surprises that might not show up for years. If you insist on a stock sale, you may have a difficult time selling your business.
But there is an alternative, another way of using retirement funds if you really want to start a business and have no other way of getting capital. You can establish a retirement plan in your new company, roll your existing retirement plan into the new company, and then borrow up to 50 percent of your account balance.
So, if you need, say, $250,000 to start a new business, and you have an I.R.A. with $500,000, you could establish a subchapter S corporation, create a new retirement plan in the new company, transfer your I.R.A. balance of $500,000 to the new plan and then borrow half of it to finance the company.
You would have to repay the loan with interest over the following five years. If you failed to repay the loan, you would be presented with a tax bill at ordinary income rates for the amount of the loan that had not been repaid. If you were under 59.5 years old, you would have to pay income taxes, and you would also have a 10 percent penalty for early withdrawal.
Before borrowing money from your retirement plan, you will want to think long and hard about whether you want to risk retirement savings on a business that could fail. If it does fail, and you cannot repay the loan, the tax consequences will be serious.
But let’s say that you borrow the money and you do make a go of it. When it comes time to sell, because you established a subchapter S corporation, you will have preferential tax treatment.
Gain…………………………………………………… $1,000,000
Individual capital gains @ 20%……………….. $200,000
Cash left after taxes ……………………………….. $800,000
Obviously, from a tax perspective, this is an attractive option (although I urge you to talk all of this over with a tax adviser before doing anything). But again, the main thing I want to emphasize is that it makes sense to think about how you are going to get out before you decide to get in. Seemingly small decisions can have big consequences down the road.
What do you think? Would you still do a ROBS transaction knowing what the tax cost is likely to be?
Posted on 7:04 AM | Categories:

Tax Tip: How Long Should I Save My Tax Records?

Robert D. Flach  for TheStreet.com writes: You’ve filed your 2012 tax returns, and either paid your taxes or spent your refund. How long should you keep a copy of these returns?
I believe you should keep the paper copy of your federal tax returns (Form 1040 or 1040A plus all Schedules and Forms) forever. This provides a permanent record of your financial history. You never know when the information on a prior year’s return will come in handy for a variety of tax or financial reasons, or just to satisfy personal curiosity.
The time period for keeping all other tax return records relies on the fact that the IRS, and most state tax agencies, has three years from the due date of a tax return (some states have four years), or filing date if you had any extensions or filed late, to audit and revise that return. If you filed your 2012 Form 1040 by the April 15, 2013 due date, Uncle Sam has until April 15 of 2016 to audit the return and assess additional taxes.
Except in the case of tax fraud - if the IRS auditors can prove tax fraud they can go back forever.
I recommend keeping all of the back-up documentation for a tax return for four full years. This includes all applicable bank statements and cancelled checks as well as W-2s, 1099s, 1098s, worksheets and appropriate receipts and bills. You can toss all such information for your 2012 tax return on April 16, 2017.
Certain documentation requires longer holding periods.
For investments keep all confirms and appropriate back-up, such as notices of splits and records of any dividend reinvestments, for as long as you hold the investment plus four additional years. If you invested in a partnership or “sub-chapter S” corporation, keep the annual Form K-1 and all paperwork you receive from the investment or business for as long as you own an interest in the entity plus four additional years.
Similarly, if you buy real estate keep all closing or settlement statements for the purchase, refinancing, and sale of the property and documentation of any capital improvements made, for as long as you own the property plus four additional years.
Posted on 7:04 AM | Categories:

Taxes Filed--But Is Your Return Safe From Audit?

Robert Wood for Forbes writes:  “Is it safe yet?” is a good question to ask about your tax returns. The IRS normally has three years to question your taxes but the tax code says that time is doubled if you omitted 25% or more of your income. Should the IRS get double the time if you achieve the same effect by a higher basis—say by claiming you paid $2 million for a house you actually bought for $1 million?
In 2012, the U.S. Supreme Court in U.S. v. Home Concrete & Supply, LLC dramatically cut back on IRS reaches into the six year territory. The Court ruled basis claims aren’t omissions from income so 3 years means 3 years. See HUGE Taxpayer Win: Supreme Court Tells IRS 3 Years To Audit Is PLENTY!
Many people are flummoxed by IRS statute of limitations questions. We all want to know when we can throw receipts away and legitimately point to the statute of limitations rather than finding receipts and making substantive tax arguments why a deduction was proper. Regarding the need for receipts, see What If A Taxpayer Doesn’t Have Receipts?
Fraud? Who Me? One good question is how the statute of limitations on fraud fits into this puzzle. The IRS has no time limit if you never file a return (the three year clock never starts to run) and no time limit on fraud. See Section 6501(c)(2). The fraud rule is confusing. You might think the IRS would assert fraud to get unlimited time.
Fortunately, the IRS has a high burden to carry to show fraud. The result of the high burden of proof is that the IRS doesn’t often try to use the unlimited fraud statute. The IRS handbook on fraud makes interesting reading. 
Extending the Time? Another common glitch is what happens if the IRS asks you to extend the statute. The IRS may contact you (usually about two and a half years after you file), asking you toextend the statute of limitations. The IRS may want to examine an issue, but has not had time to complete its analysis to determine if you do or don’t deserve a tax bill.
As a result, the IRS will send you a form asking you to sign and return it consenting to extend the statute. Some taxpayers say “no” or ignore the request. Either way, that usually leads the IRS to send a notice assessing extra taxes based on whatever information the IRS has.
Posted on 7:04 AM | Categories:

Review: 4 Services to Keep Tax Records Organized

Anick Jesdanun for Edgeonthenet.com and  the AP writes: If you’re like me, you waited until the final days of the tax season to file your returns.   As I procrastinated on doing my taxes, I researched several Web services that can help make tax season smoother next year. These aren’t services that help you prepare and file your tax returns. Rather, they’re designed to help you track expenses, charitable contributions, investments and other financial data you’ll need to enter on tax forms.


Although there’s no shortage of websites and mobile apps that will do the job, I haven’t found a single service that will do everything I was looking for. But I was able to piece together a collection of four services to do all that. In my research, I gravitated toward the cheaper or free services, as well as those that work on multiple systems, including Android, iPhones and personal computers. I rejected a few simply because they work on just the iPhone or Android, but not both. I also tried to recommend services that do multiple things, so you won’t have to keep track of too many accounts and passwords.

You’ll still need to keep your W-2, bank and investment tax forms handy. Store them in a shoebox or large envelope as you get them. With that in mind, here’s a collection of services that will help you organize the rest of your financial data.
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MINT.COM
A good starting point is this free service from Intuit Inc., which also makes the TurboTax software for preparing returns. You’re free to use a competitor to file taxes, though, as there’s no syncing between the two beyond links trying to get you to use TurboTax. Mint doesn’t make it easy to export data to any tax service, including Intuit’s own. But Mint will keep track of the information, which you’ll then have to retype into the tax software.

After creating a Mint account, you simply need to add your financial accounts, such as credit card, mutual fund and PayPal. Mint will automatically pull transactions from those accounts. Credit card transactions often will have a category already assigned, based on the merchant. You can change that or add tags such as "taxes" and "charity." You can also manually add transactions paid in cash.

Let’s start with investments. Your investment firms should provide you with 1099-DIV and 1099-B forms that summarize dividends earned and sales of any stocks and mutual funds. There may be some cases where you’ll need more details on when and how much you bought stocks for. Unfortunately, many banks offer records going only a few months back. But once you add them to Mint, those transactions will stay in the system. So if you use Mint long enough, you’ll have all your key information right there.

Banks will also provide 1099-INT forms to summarize interest earned, which you must report as income. But those forms won’t be sent if you’ve earned less than $10 - not uncommon in these days of low interest rates. With Mint, simply type "interest" into the search box under transactions. You can choose to search specific accounts or all of them.

For me, the most time-consuming aspect of tax returns is gathering the records for deductions. Mint can help, as long as you do some work throughout the year.

- Medical and work expenses. Tag credit card and check payments as "medical" or "work" throughout the year. Add those you pay by cash. Then when tax time comes, you have the records right there. If you get money back from your insurer or employer, tag those payments as well. You can calculate the net spending when you prepare your returns. If you’re not sure whether a particular item is deductible, tag it anyway. You can figure it out come tax time. The idea initially is to help you quickly find those records to review.

- State and local taxes. Tag these "taxes," whether they are quarterly estimated payments or taxes you pay or get back in refunds with this year’s return.

- Interest payments on mortgage. You can search Mint for payments to your mortgage company. Or if there are multiple companies, tag payments as "mortgage" throughout the year.

- Charitable contributions. Tag credit card and check payments as "charity" throughout the year. Add those you pay by cash. Keep in mind that the IRS requires receipts from the nonprofit organization in some circumstances. Keep those records in a shoebox, or use one of the options I’ll describe below. You’ll need another app - described below - to track donations of goods.

- Other. You may be eligible for other deductions. Tag them "miscellaneous" for now.
Mint offers free apps for the iPhone, iPad and Android devices so you can tag these items on the go. Even if you don’t itemize your deductions, doing all this might help you determine next year whether you’ll get more by itemizing than by claiming the standard deduction.

EXPENSIFY

One thing Mint isn’t good with is keeping track of cash payments. You need to enter those manually. Expensify can supplement Mint if you often pay with cash. Like Mint, Expensify can grab data from your bank, credit card and PayPal accounts. It doesn’t handle investments, though, so you’ll still need Mint for that.

Expensify goes beyond Mint by letting you submit cash transactions simply by photographing a receipt with a camera phone, uploading a scanned image from a computer or emailing a receipt to a supplied address. Expensify will then automatically pull relevant data, such as the date, merchant and amount. If the receipt matches a credit card transaction in the system, the two will be linked. That way, you can have the itemized receipt from the drug store handy when you go through your deductions.

Expensify has tagging like Mint, so you can stay organized using the sample tags above.
The service is free for the first 10 receipts automatically processed. After that, it’s 20 cents each. To avoid the fee, you can manually enter data. Free apps are available for Apple, Android, Windows Phone and BlackBerry devices.

If you have stacks of paper receipts, consider Shoeboxed. It doesn’t pull data from your financial accounts, but it lets you mail in receipts for scanning. Like Expensify, the important data get pulled in the processing. But the service can get expensive - starting at $99 a year for plans with mail-in options.
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IDONATEDIT

The iDonatedIt app is good for tracking your non-cash donations to goodwill. You add items one by one and say whether it’s in "good," ’’better" or "best" condition. The app then estimates the fair-market value of that item and calculates a total.

You can also enter the address and other important details on the nonprofit organization receiving your donations. You may need that information for your tax returns. You can also attach an image of your donation receipt, though the Android version of the app won’t take the picture for you.

The $2.99 app comes from the BMG accounting firm. Versions are available for the iPhone, iPad and Android devices. Don’t expect much from the Android version, though. Many of the features beyond the basics didn’t work properly or caused the app to crash on multiple Android phones and tablets.

There’s also no Web-based version. Intuit’s free ItsDeductible service works on the Web, but has no mobile app. Non-cash donations might be something you’ll want to record on the go - as you browse through the thrift shop to estimate the value of goods the app doesn’t have information on.
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MILEBUG

If you’re on the road a lot of work, consider MileBug to keep track of your mileage and related expenses. The $2.99 app is available for the iPhone, iPad, Android and Windows Phone devices. There’s no version for regular computers, but these are things better handled from a mobile device as you travel.

To use it, simply add the odometer readings at the start and end of your trip. Or you can have your phone track that using GPS as you drive, but be careful about draining your phone’s battery and data plan. Either way, MileBug calculates the costs, based on the IRS’ published rates. There’s room to add expenses for parking, tolls, lodging and meals.
Expensify’s app lets you do some of it, but MileBug is worth getting if you travel a lot.
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For some people, Mint will be enough to keep you organized. Expensify is better for tracking cash payments and paper receipts, iDonatedIt will help with non-cash donations and MileBug is ideal for those on the road for work a lot.
Posted on 7:03 AM | Categories:

IRS backs off on warrantless email surveillance

Josh Peterson for DailyCaller.com writes: Following last week’s uproar over internal IRS documents that suggested it engaged in warrantless email surveillance, a top agency official told a Senate committee Tuesday that it does no such thing.
Internal documents from the agency’s criminal division, revealed through a Freedom of Information Act (FOIA) request by the ACLU, suggested that the agency has had a policy allowing for it to engage in warrantless email surveillance for several years.
Acting IRS Commissioner Steven Miller told the Senate Finance Committee Tuesday, “In the criminal context, we seek a warrant in advance.”
 Law enforcement cannot obtain search warrants for civil matters.
In 2010, the Sixth Circuit Court of Appeals ruled that law enforcement must obtain a probable cause warrant before compelling email providers to hand over emails pertinent to a federal investigation.
A special counsel to the IRS Criminal Tax division said in an internal email in 2011 that he had not heard of any fallout from the decision, and that it was the agency’s position to always obtain a warrant for emails less than 180 days old.
It was unclear from that exchange, however, whether the Sixth Circuit decision affected how the agency pursued electronic communications older than 180 days.
Much to the concern of the ACLU, even a current version of the IRS manual did not reflect a policy change.
Miller told the committee that the agency intended to change the policy for emails within 30 days.
Nina Olsen, the National Taxpayer Advocate, told the senate committee that the IRS had not consulted her office when it had drafted the policy, and that it might “have looked different if the voice of the taxpayer had an opportunity to comment on it.”
Democratic Colorado Senator Mark Udall, in a statement following the hearing, called Miller’s testimony “a victory for Americans everywhere and our Constitution.”
Last week, Udall issued a call for the agency to reconsider its then-position on warrantless email surveillance.
The ACLU has been making the case that the documents are an example of why the nation’s privacy law — the Electronic Communications Privacy Act (ECPA) of 1986 — needs to be updated.
ECPA currently states that a warrant is only needed for electronic communications 180 days old or less.
The civil liberties group is joined by a broad bipartisan coalition of advocacy groups, think tanks, private sector businesses and congressmen.
The coalition is looking to reform the law to ensure that warrants are required for federal agents seeking electronic communications, regardless of how old the message is.

Posted on 7:03 AM | Categories:

Missed The Tax Filing Deadline? Don't Panic! / The IRS offers the following tips for people who missed the April 15 tax filing deadline. If you don't owe any money, there's no penalty for filing late.

The IRS has some advice for taxpayers who missed the tax filing deadline. 


  • File as soon as possible.  If you owe federal income tax, you should file and pay as soon as you can to minimize any penalty and interest charges. There is no penalty for filing a late return if you are due a refund.
  • Penalties and interest may be due.  If you missed the April 15 deadline, you may have to pay penalties and interest. The IRS may charge penalties for late filing and for late payment. The law generally does not allow a waiver of interest charges. However, the IRS will consider a reduction of these penalties if you can show a reasonable cause for being late.
  • E-file is your best option.  IRS e-file programs are available through Oct. 15. E-file is the easiest, safest and most accurate way to file. With e-file, you will receive confirmation that the IRS has received your tax return. If you e-file and are due a refund, the IRS will normally issue it within 21 days.
  • Free File is still available.  Everyone can use IRS Free File. If your income is $57,000 or less, you qualify to e-file your return using free brand-name software. If you made more than $57,000 and are comfortable preparing your own tax return, use Free File Fillable Forms to e-file. This program uses the electronic versions of paper IRS forms. IRS Free File is available only through IRS.gov. 
  • Pay as much as you can.  If you owe tax but can’t pay it all at once, you should pay as much as you can when you file your tax return. Pay the remaining balance due as soon as possible to minimize penalties and interest charges.
  • Installment Agreements are available.  If you need more time to pay your federal income taxes, you can request a payment agreement with the IRS. Apply online using the IRS Online Payment Agreement Application tool or file Form 9465, Installment Agreement Request.
  • Refunds may be waiting.  If you’re due a refund, you should file as soon as possible to get it. Even if you are not required to file, you may be entitled to a refund. This could apply if you had taxes withheld from your wages, or you qualify for certain tax credits. If you don’t file your return within three years, you could forfeit your right to the refund.
 For more information, visit IRS.gov.
Posted on 7:02 AM | Categories:

The Tax Complexity Lobby

Len Burman for Forbes.com writes: You might think that everyone hates tax complexity, but you’d be wrong.  Two factions like things just the way they are: tax software companies (especially Intuit, the maker of TurboTax) and government haters like Grover Norquist, president of the ironically named Americans for Tax Reform.

Both Intuit and Norquist were featured in a recent story in ProPublica and NPR titled “How the Maker of TurboTax Fought Free, Simple Tax Filing.”
Software makers like the status quo because they profit so handsomely from it. Intuit’s profit fell by 40% ($47 million) in the first quarter because the start of the tax season was delayed. Imagine what would happen if most filers could do their tax returns without help.
The second group has a more Machiavellian perspective. Grover Norquist is famous for saying that he wants to shrink the federal government so much that it will fit in a bathtub… and then he wants to drown it. A simpler, less onerous tax system would presumably make people feel better about the government, and that is the last thing Grover and his fellow travelers want.
The Obama Administration had proposed that government pre-fill your tax return with information it collects from employers, financial institutions, etc. The idea has gone nowhere, at least in part because of fierce opposition from the tax software industry. Intuit had also temporarilyderailed a free file program in California and killed a simple online filing system in Virginia.
Grover portrays himself as the defender of “seniors, low-income and non-English speaking citizens” who might be intimidated into signing an erroneous tax return completed by the IRS. Maybe, but I’m pretty sure that Norquist’s main fear is that taxpayers would appreciate the simplicity.
Forbes investment editor, Janet Novack, has a smart essay about how the complexity of our current tax system makes any efforts at simplified filing problematic. One goal of tax reform should be to simplify things enough that the IRS could accurately prepare most people’s returns for them. Novack also invited commentary from law profs Joe Bankman and Dennis Ventry, strong advocates ofCalifornia’s ReadyReturn system, and Arlene Holen, a critic.
Novack is surely right that our current tax system is needlessly complex, but Bankman responds that the IRS could still simplify matters by assembling data from information returns and providing it to us as a starting point. Holen argues that this would create an undue burden on small businesses. (Holen’sresearch institute is partially funded by Intuit.)
The burden could be lessened by extending the filing deadline to give companies time to get their info to the IRS. We tend to think of April 15 as a date set in stone, but the original filing deadline was in March. It could be pushed back again.
Tax reform obviously creates the possibility for much more sweeping simplification. Several proposals would banish “Tax Day” altogether.
Columbia law professor Michael Graetz proposed to replace the income tax with a VAT (a kind of national sales tax common in the rest of the world) for most households. Only upper-income households would have to file income tax returns. Refundable tax credits would offset the regressivity of the VAT for those with low incomes.
The Bipartisan Policy Center (BPC) proposed to simplify the income tax codeso much that half of households would no longer need to file. (Joe Minarik and I designed this proposal.) The income tax would be a flat 15% for most households; thus, tax withholding at a flat 15% rate would exactly match liability. Like Graetz’s proposal, there would be refundable credits tied to employment and children that would offset the regressivity of the flat income tax rate. Tax subsidies for mortgage interest, IRAs, and charity would be delivered directly to financial institutions and charities, obviating the need for tax deductions or filing. For example, if you gave $100 to your favorite charity, they’d claim a matching $18 on your behalf from the IRS. The UK uses this system, called Gift Aid, to promote charitable contributions without requiring tax filing.
The BPC plan would discourage the creation of new complexifying tax credits and deductions, which might make tax reform more durable than in its last incarnation.
Supreme Court Justice Oliver Wendell Holmes once said that taxes are the price we pay for civilized society.
But needless tax complexity is the price we pay for Washington’s dysfunction, aided and abetted by the complexity lobby. We should just say no.
Posted on 7:02 AM | Categories:

Tax filing changes could help fight refund fraud: IRS

Patrick Temple-West for Reuters writes Changes to the tax filing process may be needed to fight tax-refund fraud, the top tax collector told a congressional panel on Tuesday, a day after the federal tax filing deadline.

In steps that could lead to slower processing of tax refunds, Internal Revenue Service Acting Commissioner Steven Miller said a delay in the start of the tax filing season could help fight refund fraud.

So might getting taxpayer information more rapidly from employers, he told the tax-law writing Senate Finance Committee.

Such changes would "not necessarily" mean later issuance of refunds, "but that's part of the discussion," he told Reuters after the hearing.

Refund fraud, which has exploded in recent years, typically involves using stolen names and Social Security numbers to file phony electronic tax forms and refund claims.

Perpetrators then pocket the refund checks that follow, costing the Treasury billions of dollars a year, according to government estimates.

The IRS tries to process and distribute refunds quickly, often within days. This works against fraud prevention because the agency does not always corroborate filing information with third parties, such as employers, before issuing a refund.

Taxpayers can begin filing tax returns in January. Refunds often get distributed by the IRS before it gets corroborating information, which sometimes does not arrive at the agency from employers until after the tax-filing season is over.

Tax professionals have said that corroboration would help fight refund fraud, but such double-checking takes time.

One change to the filing process might be to wait until the end of the tax season before issuing refunds. But that could require the IRS to pay interest on refunds, according to a Joint Committee on Taxation report.

Earlier this month, senators introduced legislation to combat the use of taxpayer data in tax-refund fraud scams. Similar legislation has been introduced in the House of Representatives.

Separately, the IRS recently lost a federal court case over its effort to regulate thousands of unlicensed tax-return preparers. The IRS has appealed the court ruling.

Senate Finance Committee Chairman Max Baucus, a Democrat from Montana, said the court ruling was "a major setback" for the IRS.

He said he may consider legislation specifically to grant the IRS authority to regulate tax-return preparers.
Posted on 7:02 AM | Categories:

AICPA Suggests Solutions for Tax Identity Theft and Tax Fraud At Senate Finance Committee Hearing

The American Institute of CPAs (AICPA) suggested solutions at a hearing today of the Senate Finance Committee about what Congress could do to curb tax identity theft and tax fraud and offered tax reform recommendations focused on simplifying tax laws for families and businesses. In addition, the AICPA's testimony described the reasons this year's tax filing season was so difficult for tax return preparers and offered a recommendation for easing one of the factors.
"One of the most important topics for our members is identity theft," Jeffrey A. Porter, CPA, chair of the AICPA's Tax Executive Committee, told the members of the Senate Finance Committee. He said the AICPA supports the Internal Revenue Service's (IRS) proposal to allow truncated Social Security numbers used on some information reporting forms, but that it will be more effective if Congress changes the law so that the IRS can expand the initiative. For example, employers are required to provide employees a W-2 with their full Social Security number.
"We urge Congress to permit truncation of Social Security numbers on all copies of W-2s other than the copy filed with the Social Security Administration," Porter said. "We also urge you to consider extensive legislation to allow truncated Social Security numbers on all types of tax forms and returns provided to a taxpayer, employee or other recipient."
One of the contributing factors to making this tax filing season so challenging was the late issuance of corrected 1099 forms by brokerage firms, Porter said. He explained that generally a 1099 form must be furnished to taxpayers by February 15(th) . However, brokerage firms can amend a 1099 at any time.
"Over the last few years, we've noticed more brokerage firms issuing corrected 1099s, sometimes issuing multiple corrected forms on the same account," Porter said. "These forms create anxiety, confusion and for some taxpayers, an increase in tax preparation fees. As a result, many taxpayers now have a tendency to wait until they have received their anticipated corrected 1099s before providing the records to their CPA."
"We recommend that you consider legislation that would permit taxpayers to report corrected 1099 de minimis changes in their income in the year of receipt," Porter told the lawmakers. "It would streamline the tax return reporting process for both the government and taxpayers."
The other major contributor to a difficult tax filing season, Porter said, "was the late enactment of legislation and the resulting delay in the release of 31 tax forms."
"Our members essentially lost the first half of filing season," Porter said, "because the IRS could not accept tax returns that included certain forms until February or early March. Nevertheless, we believe the IRS did an outstanding job under difficult circumstances. They maintained an open dialogue with stakeholders and were responsive to our concerns. Earlier this year, we submitted a letter to Acting Commissioner IRS Steve Miller on the delayed release of forms. Within days, the IRS issued a notice, which provided the relief requested from late-payment penalties."
Porter singled out tax penalty reform as an important area for Congress to consider because the United States' tax system depends on voluntary compliance by taxpayers.
"Tax penalties should deter bad conduct without deterring good conduct or punishing the innocent," he said. "Targeted, proportionate penalties that clearly articulate standards of behavior and are administered in an even-handed and reasonable manner encourage voluntary compliance with the tax laws. On the other hand, overbroad, vaguely-defined, and disproportionate penalties, particularly those administered as part of a system that automatically imposes penalties or that otherwise fails to provide basic due process safeguards, create a perception of unfairness that are likely to discourage voluntary compliance."
Porter said that the AICPA has "consistently supported tax reform simplification efforts because we are convinced such actions will reduce taxpayers' compliance costs, encourage voluntary compliance, and facilitate enforcement actions."
Among the most important tax reforms supported by the AICPA, Porter said, are repeal of the alternative minimum tax, the harmonization of education incentives, the enactment of consistent definitions in the Code, wherever possible, the repeal of unused provisions and the simplification of the Kiddie Tax rules. "We also believe in the simplification and harmonization of retirement planning vehicles," he said.
Posted on 7:02 AM | Categories:

Sandy Victims May Have Wait Awhile For New Jersey Tax Appeals

PropertyPilot.com writes: The April 1st deadline for filing a tax appeal within the State of New Jersey came and went and county boards are receiving a record numbers of appeals from homeowners who believe their property’s values have dropped so precipitously that they should be granted a tax reduction .  This trend is continuing since the real estate market took a dramatic downturn in 2008 and has remained depressed since that time.
Homeowners who suffered significant losses due to damage from Hurricane Sandy in late October and early November, 2012, may be in for even more bad news. They may be left without recourse until next year unless they took early action and filed a appeal by January 10.  Those who missed the deadline but filed under the traditional April 1 deadline will likely be denied any tax relief.
new jersey tax appeal

Filing A New Jersey Tax Appeal

A property owner cannot challenge a “tax rate”, but must instead challenge the “tax assessment” laid on their specific property.  Generally, there are two tax assessments for residential properties and commercial properties:
  1. land value
  2. structure/ building value
The property owner is taxed on the total of these two assessments combined.  But if market value has decreased so significantly, an owner can challenge the assessment.  Each municipality in New Jersey is assigned an equalization ratio, which is a ratio of total assessed value for properties in a community to those properties’ true market values.
The number represents the municipality’s judgment of how closely assessed value matches market value.  If, after applying the applicable equalization ratio to the specific property’s assessment, the owner proves that market value is 15% or more lower, then the assessment will be adjusted accordingly.

Procedures To File A New Jersey Tax Appeal

But there are specific procedures that must be followed in order to obtain this adjustment.
  1. Most importantly, a tax appeal must be timely filed on or before April 1.
  2. The market value to be proven by the homeowner is the property value as of October 1 of the prior year.
This does not bode well for those who suffered damage in Hurricane Sandy, since the hurricane did not strike until nearly 1 month after October 1.  Normally, a property that decreased in value after October 1 would have to wait until the following year to challenge the assessment.

TAX RELIEF FOR DISASTER VICTIMS

But the law provides a special outlet for those who suffer damage between October 1 and January 1 as a result of a catastrophic storm such as Hurricane Sandy:
When any parcel of real property contains any building or other structure which has been destroyed, consumed by fire, demolished, or altered in such a way that its value has materially depreciated, either intentionally or by the action of storm, fire, cyclone, tornado, or earthquake, or other casualty, which depreciation of value occurred after October first in any year and before January first of the following year, the assessor shall, upon notice being given to him by the property owner prior to January 10th of said year, and after examination and inquiry, determine the value of such parcel of real property as of said January first, and assess the same according to such value. [N.J.S.A. 54:4-35.1.]
The notice to the tax assessor of this special damage has to be provided by the property owner by January 10.  If this was done, a property owner’s application will be heard for a reduction in assessment.  The same rules will apply in that challenge as in a traditional tax appeal challenge (owner must prove that market value is 15% or more lower than the assessed/ equalized value from the municipality).

One of the problems facing sufferers of Hurricane Sandy is that many were unable to fully perform market value analysis prior to January 10. Access to many areas damaged by the storm was limited and the sheer volume and mass scale of destruction placed significant and unparalleled burdens on those who perform these market value analysis tasks.
Accordingly, a well-supported and documented statement of market value was often unable to be provided by the deadline.  There has been discussion of extending the filing deadline from January 10 to sometime later in the year for those who suffered from this particular storm, but to date no such effort has been taken by the Legislature.

Therefore, unless a property owner filed its assessment appeal by January 10, it is unlikely that relief will be available until next year when the owner can file under the traditional procedures. 
Posted on 7:01 AM | Categories:

Xero : Payroll reporting in real time (click to view video)



Oliver Furniss for Xero writes: Today for Australia we’ve released an update that gives you more power when it comes to payroll reporting. Retrieving the right information when you need it is key to good payroll administration. With this release, we’ve completely rebuilt our reporting framework and increased the number of reports available from seven to fourteen.
So what’s new?
Allowing you to quickly and easily find and report on your information were our main priorities when building this update. Some of the key features you will notice include:
  • Extensive filtering and sorting: Choose to report on all kinds of information including employees, employee groups, custom dates, and employee status.
  • Custom views: Choose the columns to display on the page making viewing different types of information, straight forward.
  • Easy as: Predictive search helps you find information already contained in the report without the need to remember.
  • Export: All reports can be exported to PDF and Excel.
  • Results in seconds: Our advanced technology can generate search results in a flash.
New Reports
As well as enabling you to find and report more effectively on your information, this release also includes 14 new and updated payroll reports including:
  • Payroll Activity Summary
  • Payroll Activity Details
  • Transaction Listing Summary – New
  • Transaction Listing Detail – New
  • Timesheet Summary – New
  • Timesheet Details – New
  • Superannuation Accrual
  • Superannuation Payment
  • Leave Balances – New
  • Leave Transactions
  • Leave Requests – New
  • Payment Summary Details – New
  • Employee Remuneration – New
  • Employee Contact Details
For more information on the above reports please take a read of our release notes.
You might also notice the fantastic new videos that we announced a few weeks ago are now located entirely within the application, on the relevant pages. Helping you navigate the potential complexities of payroll is a real focus for us and hopefully these videos will just help a little bit!
If you’d like to go through an overview and demonstration of the latest features of the new Payroll Reports you can also sign up to our webinar for more information.
More updates to Payroll will be released before the end of financial year so keep an eye out for more information coming soon.
Posted on 7:01 AM | Categories: