The best and worst tax strategies / Creativity counts when figuring out how to mitigate the hit on retirement income, tax expert says

Darla Mercado for InvestmentNews.com writes:   The tax regime is unforgiving to the wealthy, but there are still plenty of strategies to help mitigate the impact — for those who are creative.

Tax expert Natalie B. Choate, who is of counsel at Nutter McClennen & Fish LLP, last Monday unveiled her “201 Best and Worst Planning Ideas for Your Client's Retirement Benefits” at the InvestmentNews Retirement Income Summit in Chicago. Regarding distribution strategies, wealthier clients already are using withholding of their income taxes from their individual retirement account distribution to reduce estimated taxes.

“Your wealthy client who is over age 701/2 doesn't want or need to take the distribution from his IRA, but he has to,” Ms. Choate said. “He also hates paying estimated income taxes.” One way to soften the blow is to use the 2013 required minimum distribution from the IRA to pay down the year's estimated income taxes on Dec. 1.  The RMD payment should go straight to the Internal Revenue Service from the company holding the IRA, Ms. Choate said.  By doing so, the client avoids paying these taxes in four installments, and the withheld income taxes are credited to the client as if he or she had paid them throughout the year, even though the IRS didn't get the money until December.  

This can amount to a few thousand dollars in savings, Ms. Choate said. Another good idea on distributions from a retirement plan is for individuals over 701/2 to direct up to $100,000 from an IRA to a favorite charity. It has to be a charitable organization, not a donor-advised fund, a charitable-remainder trust or the client's own private foundation. By shipping the money off to a charity, the client is keeping that money out of his or her adjusted gross income, which can have lots of planning implications for the taxability of Social Security benefits, the amount the client has to pay in Medicare premiums and the application of the new surtax on investment income, Ms. Choate said. 

Single people with more than $200,000 or married couples filing jointly who have more than $250,000 in adjusted gross income are subject to the 3.8% surtax on investment income. Moving that money out of the IRA via a charitable distribution can keep some people below those AGI limits, Ms. Choate said.  “This isn't something that's just for billionaires and millionaires,” she said. “It helps lower income for people who are charitably inclined.” In terms of rollover guidance, Ms. Choate unveiled a number of tips, including how to ensure that clients who are remarrying can pass their retirement plan benefits to their children.

SIDESTEPPING ERISA

The Employee Retirement In-come Security Act of 1974 requires that a worker's spouse be named a beneficiary on an ERISA plan. But clients can sidestep that if they roll their money over to an IRA before they get married, and allow the children from the earlier marriage to be beneficiaries.  “IRAs are subject to state law spousal rights, which you can waive with a prenuptial agreement,” Ms. Choate said. But what if the client has already remarried and only now finds out about the ERISA requirement?  “With a 401(k), you can roll over to an IRA without spousal consent, at least under federal law,” Ms. Choate said. “I've heard sad stories here at this conference where things could have gone better if only people had known the rules.”

En Garde: Tax-Hike Investment Tips / Top advisor recommendations on how to use variable annuities, trusts, munis, and private equity to lower your tax bill.

Karen Hube for Barron's writes: With a range of taxes set to rise sharply, the rush is on: Private banks, family offices, and wealth managers are tapping the smartest tax minds they can find to come up with new tax-efficient products and portfolios.

The recommendations run the gamut, from stashing money in tax-deferred annuities to loading up on municipal bonds to favoring private equity over hedge funds and cleverly using trusts. The thoughtful reshaping of portfolios is happening with good reason; the tax hikes of 2013 are going to hurt.

Someone with $8 million in earnings and investment income will pay an average $450,000 this year in taxes on top of the $2.7 million paid last year, figures the Tax Policy Center. A married couple with two young kids and a combined income of $2 million can expect to pay $87,500 more in taxes than the $500,000 they paid in 2012.

The government is clawing back revenue from everywhere. The top marginal income-tax rate for couples earning $450,000 and up has increased to the well-publicized rate of 39.6%. Long-term capital gains are not only subject to a higher 20% rate, but also a new 3.8% Medicare tax for a total 23.8%. Short-term gains are taxed at the highest marginal rate plus 3.8% Medicare tax for a total 43.4%. And that's not all. Alan Kufeld, a tax advisor at Rothstein Kass, points out that a new limit on itemized deductions for top earners adds as much as 1.2% on top of each of those rates.

Unlike the 1990s tax increases under Presidents George H.W. Bush and Bill Clinton—which increased income-tax rates but lowered taxes on investment gains and income—the current assault comes from all sides. "In the past, you could arrange your income to take more in the form of capital gains at a lower tax rate," says Roberton Williams, a senior tax fellow at the Tax Policy Center. "Now you're going to pay higher taxes on just about everything; it's much harder to hide."

Not wanting to miss out on all the fun, New York, Connecticut, New Jersey, and California have been raising their own taxes. California became the highest-tax state by raising its top rate to 13.3% on earned income, investment income, and capital gains. That brings the total income-tax hit for top earners in that state to 51.9%; for wealthy residents of New York City, it's 51.7%.

But don't despair. There are things you can do to ease the hurt. Here are some tax-saving moves the best advisors are currently recommending to their clients:

POSTPONE TAXES. Pursue as many tax-deferring opportunities as possible. Certain variable annuities have no limits on how much you can sock away and let your investments grow tax deferred in underlying mutual-fund-like investments. Fee-based advisors have traditionally been highly critical of variable annuities, because they are so expensive and complex. The average variable-annuity investor can easily pay in excess of 3%—a 1.46% contract fee, 0.50% to 1.5% in annual expenses for the underlying funds, and, frequently, guaranteed-income riders typically averaging 1%.

But some annuity companies, such as Jefferson National, Symetra, and Security Benefit, have been quick to respond to the higher tax rates by launching variable annuities that are cheap, liquid, and simple; they include a broad array of investment options, including normally tax-inefficient alternative strategies. The real value of these annuities is their tax-deferment feature.

John Capets, an advisor and vice president at Harbor Capital Management in Charlotte, N.C., says he has started using the Jefferson National Monument Advisor Variable Annuity for his high-net-worth investors. It has 397 investment options, from mutual funds to alternative investments. "The alternatives portfolio can generate a lot of short-term capital gains, but inside the tax-deferred annuity it has no impact," Capets says.

Investors pay the annuity's fund-management fees and $20 a month. On the firm's average policy size of $230,000, that turns out to be an attractive 0.11% charge for the tax-deferral product, compared with the 1.46% charged by the industry's average variable annuity.

CONSIDER NONQUALIFIED deferred-compensation plans. These allow you to sock away a portion of pretax compensation and let it grow tax deferred until a specified date. These plans fell out of favor in 2008 and 2009, when many top executives lost millions in deferred compensation at the likes of Lehman Brothers and Circuit City. If your company goes bankrupt, your deferred-compensation may become subject to creditors' claims.

"That shook things up, but now that tax rates are higher and balance sheets are in much better shape, we are starting to evaluate deferred-compensation plans more closely," says Chris Zander, head of strategic wealth planning at Evercore Wealth Management. "It's very client- and company-dependent. You have to make an overall assessment of the health of your company."

Business owners and self-employed taxpayers can defer taxes by setting up a defined-benefit plan, which is like a traditional pension structured to pay a certain lifetime annuity in retirement. For 2013, the maximum benefit you can fund equates to a $205,000 per year payout for life.

So let's assume a 58-year-old wants to set up a pension for himself, with $205,000 annual payouts starting at age 65 and lasting until the final curtain comes down. For the next seven years there is no limit to how much he can pour into the plan to fund the retirement payout meant to last the remainder of his actuarially determined life under the palm trees. Even better, says Stephen Baxley, director of tax and financial planning at Bessemer Trust, is that "he gets a tax deduction every year for the amount he puts into the plan."

CONSTRUCT TRUSTS WISELY. Tax deferral and other benefits are, for example, byproducts of charitable-remainder trusts. If you intend to leave assets to charity, do so with these trusts "and in the process create your own tax-deferred retirement account," says Allen Laufer, managing director at Silvercrest Asset Management in New York.

You can set up the trust for a period that can be as long as the combined lifetimes of you and your spouse. When you fund the trust, you specify what percentage of the trust assets you want to leave to charity at the end of the trust's term; the charitable minimum is 10%, according to tax law.

Upon funding the trust, you get a tax deduction based on the present value of your gift. For the term, your assets grow tax deferred in underlying investments, and you receive an annuity. The annuity is calculated to pay out all of the trust's assets, except for the amount slated for charity.

Consider funding the trust with a highly appreciated asset that you would like to sell to diversify. "If you transfer it to the trust, you can sell without any immediate tax impact," Laufer says. If, instead, you sold your position outside the trust, you would likely pay capital-gains taxes and the 3.8% Medicare tax, and reinvest a significantly smaller sum.

Let's assume a couple, ages 50 and 47, fund a trust with a $1 million stock holding that has a cost basis of $150,000. At the end of their assumed joint life expectancy of 36 years, using an 8% average annual-return assumption, they will have collected and reinvested annuity payments amounting to $7.3 million; $1.8 million would go to charity, according to an analysis by Laufer. Their heirs, meanwhile, would receive $4.38 million, net of a 40% estate tax.

ANALYZE AFTER-TAX INVESTMENT picks.Wealth advisors are making sure that individual investment choices create more tax-efficient portfolios over all. Private equity, for example, tends to be tax efficient because of its long-term holding period and capital-gains-tax treatment. Active trading inside hedge funds, meanwhile, typically triggers higher short-term capital gains—and higher taxes.

In 2012, in anticipation of higher tax rates, Citi saw net private-equity inflows of over $1.5 billion and net inflows into hedge funds of $500 million. "Four years ago, that was exactly the opposite," says David Bailin, global head of managed investments for Citi Private Bank.

Advisors in high-tax states have also been bulking up on state-issued municipal bonds. While most munis are exempt from federal taxes, if you buy a tax-exempt muni issued by your own state, you will be spared state taxes on the bond, too.

"In recent years, we had diversified out of California municipal bonds because California was going through a series of fiscal challenges," says Bruce Simon, chief investment officer at City National Asset Management. Higher tax rates and fiscal improvements mean "we've reallocated back to 100% California municipal bonds."

The 10-year California muni is currently yielding 2.25%, which is 42 basis points more than current yields in the high-grade municipal-bond market. "If you're in the highest tax bracket, to get the same after-tax yield on a corporate bond, you'd have to find a 10-year yielding 5% at a time when they're going closer to 3%," says Greg Kaplan, City National's director of tax-exempt fixed income.

Creating more tax-efficient stock portfolios is also critical, given that capital-gains taxes have gone up 59% over the past year. Harvest losses in your portfolios to offset your gains, advises Robert Breshock, managing director of Parametric Portfolio Associates.

An exchange-traded fund or index fund has low turnover, but you miss opportunities to realize losses to offset gains. Consider that with normal volatility, about 10% to 15% of the S&P 500 index is trading at a loss at any given time, but in a fund you miss the opportunity to realize the losses. If, instead, you invest $1 million in a separate account that mimics the S&P 500, says Breshock, "you'd be able to realize $100,000 to $150,000 in short-term losses to offset any short-term gains you may have." That translates to between $43,000 and $64,500 in potential tax savings.

But be aware that actively managed accounts are more expensive than index funds and ETFs. Whether it makes sense to pay more in fees depends on whether the manager outpaces his benchmark, and how much the manager is saving you in taxes by capital-gain offsets.

MOVE TO ANOTHER STATE, preferably a no-income tax state like Florida, Nevada, or Texas. The migration is already in full force, as reported in our Luxury Second-Home Survey in the March 4 issue of Penta. "Often these are people who will be selling their businesses soon for a tremendous gain, and their thinking is, 'If I move out of my state now, the state-tax savings could put a nice down payment on a nice retirement home,' " says Bessemer's Baxley.

Not all taxpayers are waiting until retirement to make the move. Seeing what was coming down the pike in the political debates of 2010, David Kotok pulled up stakes in high-tax New Jersey after almost 40 years of living and operating his financial advisory business there. His Cumberland Advisors is now headquartered in Sarasota, Fla.; he and his eight partners are enjoying an 8% or so reduction in their personal income-tax burden, he says. "And that doesn't count lower property taxes, lower sales taxes, and the fact that there is no state estate tax in Florida," Kotok says.

RETHINK TRUST PAYOUTS. The new tax climate has been particularly hard on trusts. While individuals get hit with tax increases at varying high-income thresholds, the higher tax rates, including the 3.8% Medicare tax, punitively hit trust income in excess of just $11,950. "One way to address this is rather than reinvesting income in the trust, distribute it to beneficiaries—assuming they have lower tax brackets—earlier than the trust had intended," says Jere Doyle, estate planning strategist at BNY Mellon.

Use the same principle to avoid the new Medicare tax and the 20% capital-gains tax above $11,950 by distributing the trust's appreciated asset to a beneficiary whose income is low enough to avoid the higher charges, says Mitch Drossman, managing director at U.S. Trust. To avoid both the Medicare and highest capital-gains taxes, income of the beneficiary would have to be below $200,000 for singles and below $250,000 for a couple. "Then the beneficiary can sell it at a lower tax rate or give it to charity," he says.

Of course, that also means you or your trustees could be prematurely enriching beneficiaries for tax reasons, when they aren't mature enough yet to handle the sudden wealth. Hence our final bit of advice: Whatever asset-shuffling moves you make, never let your desire for a lower tax bill override basic common sense. 

Surviving a Sales and Use Tax Audit: Tips for Online Retailers

 Ina Steiner for EcommerceBytes.com writes: With states gaining power to force merchants to collect and remit sales tax for their residents' online purchases, the potential for an audit follows. In today's Guest Column,Thomson Reuters expert Carla Yrjanson outlines the top ten pitfalls that are most likely to be raised in a sales and use tax audit and how to address them.

Whether or not the Marketplace Fairness Act passes, the fact is that changes to sales and use tax laws will continue, and with change comes the possibility of an audit. It used to be that the physical presence nexus standard determined if you were required to register to collect and remit taxes. With "Amazon Laws" and the potential Marketplace Fairness Act, those rules are gradually fading away. Now, a business may never have a physical presence in a state but may have a sales/use tax collection responsibility as these laws change.

With a registration requirement, comes the potential for an audit. When you surpass the sales threshold, or start to approach it, states will have the authority to audit your business if they believe you meet the requirements to begin collecting online sales tax.

If you are in the unfortunate position to have to undergo an audit, keep in mind that the auditor's job is to capture additional tax revenue that is due to the jurisdiction. Knowing that each new tax law change increases an online retailer's odds of having errors and therefore being non-compliant, auditors have a specific list of common errors to look for. But if you too, know what auditors look for, you can take preventative measures to ensure compliance.

Based on data from current and former auditors, here are the top ten pitfalls that are most likely to be raised in an audit and how to address them:

1) Use tax. In every state that imposes a sales tax, there is a tax called "use tax" that you are supposed to pay in lieu of sales tax if you buy items out of state or online and bring it in state. If you have an office or physical location in a state and that state's auditor performs the audit, a use tax assessment can be an easy and substantial "hit" for the state to assess the tax.

Use tax applies to the routine purchase of such items as consumables and office supply, as well as to the purchase of large fixed assets. Thus there is the potential for the state to assess a very large fee. Unfortunately, most people don't know this until it's too late - i.e., when the auditor has come in, looked at a certain period of time, and then assessed back taxes and penalties retroactively.

The only way to fight this is to maintain domain expertise in determining use tax applicability. But that is traditionally an expensive proposition for businesses of all sizes. The more locations a business has, the more complex use tax becomes.

2) Exemption and resale certificates. If you don't possess proper exemption certificates, that is certificates that enable your customers to purchase items from you tax free, some auditors will let you go back and try to get them retroactively, but that's not something you want to count on.

As for resale certificates, if they're not on file, the auditor will typically determine an error rate and project backwards to assess tax and penalties. If it's proven that a resale certificate has been used improperly, the penalties can be substantial.

To avoid these situations, companies need an automated process to enforce exemption and resale certificate compliance for each tax jurisdiction in which they do business.

3) Unreported sales. Mistakes happen and certain sales can go unreported. Sometimes even entire divisions get left out in error.

The remedy is to rely on systems, not people - i.e., let automated systems determine and calculate tax. The Marketplace Fairness Act has a threshold for small business. It is critical to understand the threshold and track sales to know when the threshold has been surpassed and a registration responsibility created.

4) Charging wrong rates. In 2012, there were over 2500 tax rate changes across the globe. Staying on top of these changes and instituting new rates at the right time is extremely difficult, especially when districts get re-aligned.

The only good answer is to have real-time rates applied automatically from the day they are effective. Keeping up with these rate changes becomes even tougher when you aren't physically located in that state. Utilizing automation and rate files is the key to keeping up with these changes.

5) History of audits and assessments. Bureaucracies have the memory of an elephant. Once flagged, you're under the microscope for life and can expect repeated audits. Most auditors will cite an error, and you might not have the time, energy or resources to address it going forward. Then, upon the return audit, auditors can easily find the exact same infraction and assess penalties on it.

The defense here is to have iron-clad processes and procedures and good documentation. Adequate documentation makes an audit go much more smoothly, while poor record keeping will prolong an audit and ultimately sink you. Lacking documentation, an auditor will try to get a visual sample - which for a retailer just might end up being the day after Thanksgiving or the week before school starts - and then extrapolate that sample across your business year, potentially to your disadvantage.

6) Unique rules and regulations. Each region has its own special twists to its indirect taxes. Auditors are highly tuned into these, particularly when the rules are new, and are quick to spot non-compliance. Tax authorities often have special taxes that apply to specific goods. There are many food/beverage, gambling, cigarette/tobacco, soft drink, timber, and fuel taxes that can be uncovered during an audit. Tax authorities will also audit specifically for these types of taxes from time to time, which can open you up to a full-blown sales tax audit if it appears there is weak recordkeeping.

As with the issues above, adequate documentation and automated processes are necessary to keep you out of trouble. Specialized domain and region-specific expertise in determining taxability for specific items is also requisite.

7) Sales tax accruals. Many companies don't properly remit the sales taxes they've collected. An auditor will look at federal tax returns, the general ledgers, invoice register, actual invoices, sales journals and summaries of sales by state to identify and reconcile disparities, and will then use the number that provides the best assessment.

The best advice here, obviously, is to do the same thing yourself - exhaustively and comprehensively - before you report and remit.

8) Acquisitions. A business acquisition can really roil the waters when it comes to sales and use tax compliance. For one thing, if an acquisition brings you into new markets, you can be creating nexus and thus opening the door to new tax liabilities and an increased number of audits. Then there is the issue of previous liability: when you acquire a company, you must immediately notify all states where the new combined company is doing business; if you don't do this, you automatically assume all previous tax liabilities.

Specialized expertise is required to ensure that you are properly reporting pre- and post-acquisition taxes. After all, you are dealing with the potential for new nexus as well as material changes to your business.

9) Internet sales. It used to be that the physical presence nexus standard determined if you were required to register to collect and remit taxes. However, New York and numerous other states have required online retailers, that meet specific requirements, to collect sales tax for items sold to consumers within their respective states.

As states continue adopting similar click-through-nexus laws and with the potential for passage of the Marketplace Fairness Act, nexus standards have been continuously changing. An online business may never have a physical presence in a state, but now may have a sales/use tax collection requirement. With a registration requirement, comes the potential for an audit.

Domain expertise is required to stay abreast of the so called "Amazon tax laws." These laws are changing quickly which requires diligent legislation tracking, tracking sales while monitoring threshold amounts, and eventual real time sales tax rates fed into your operational system to minimize the chance for error and ensure timely compliance.

10) Business Activity Questionnaires. These questionnaires are issued by Tax Discovery Auditors. The audit world's version of the Marines, they are much tougher than your normal tax auditors as they are tasked with uncovering unregistered businesses and businesses engaged in fraudulent activities.

As with other Informational Document Requests (IDRs), it's easy to check the "yes" box next to the general questions on these questionnaires, but doing so may well create nexus.

Hence, be sure to seek counsel before filling out these or other IDRs.

Thomson Reuters Resources

The cost of automated compliance solutions depends on the complexity of the e-retailer. In terms of offerings for retailers of all sizes, one example is ONESOURCE Indirect Tax in the cloud.

You can find more information about the Marketplace Fairness Act here.

Divorce Finance: How To Get Your Finances In Order Post-Split

Jeff Landers for GalTime.com  & HuffPo writes:    As a divorcing woman, you are no doubt looking forward to having the whole divorce process over with, so you can move ahead to your new life. If you’re like most women, you probably think the past few months (or years!) have been filled with enough emotional upheaval, not to mention legal and financial hassle, for a lifetime, and you’ll be very glad to have it all behind you... at last.

Of course, life as a single woman will bring new responsibilities, including all the issues surrounding your personal finances. Even today, it is surprisingly common for wives to remain uninvolved in family finances. If that was the dynamic in your marriage, then it may now seem quite intimidating to face all the budgeting and bill paying, in addition to managing investments and debt, and saving for education, retirement and other long-term goals.
However, there is a bright side.

Throughout the divorce process, it’s likely you’ve become intimately familiar with your marital financial situation. Now, as your divorce settlement agreement is finalized, you can take that know-how forward as you plan for a secure financial future.
Here are a few important practical steps to help you get on the road to financial stability after your divorce:

Do the financial housekeeping.
If you changed your name after the divorce, you’ll need a new Social Security Card, driver's license, passport and credit cards. You’ll also need to notify your bank, utilities, insurance companies, credit card companies, the motor vehicle department, your children's school(s), etc., about any name or address changes. Titles on all houses and vehicles will have to be modified and recorded with lending institutions, and you will also need to update beneficiaries on your life insurance, 401k, pensions and IRA accounts.

To keep all these details straight, follow this checklist of financial tasks that need prompt attention post-divorce:

1. Obtain a copy of your certified divorce decree, and make extra copies so that you’re able to provide them promptly when needed.

2. Close joint credit accounts.

3. Remove your husband’s name, and/or change your name/address, on all remaining accounts, including:
· Bank, brokerage and investment accounts
· Credit cards
· Driver’s license, automobile title, registration and insurance policies
· Employer’s records
· IRS records
· Life, health, homeowner’s and disability insurance policies
· Post office (Remember to have your mail forwarded, too.)
· Professional licenses
· Social security card
· Title to real property
· Utility bills

4. Research your health insurance options and apply for COBRA, if necessary.

5. If your divorce decree requires a Qualified Domestic Relations Order (QDRO):
Provide the QDRO to appropriate banks, brokerages, pension plan advisor, 401k administrators, etc. (Even better, have this step completed before your divorce is finalized!), a quitclaim or warranty deed: Make certain the appropriate documents are executed and recorded. Also, the transfer of title to property (automobiles, boats, etc.): Sign and deliver the necessary documents to complete the transfer.

6. Open a new bank account. Consider establishing direct deposit or income withholding for child support, spousal support and/or alimony payments.

7. Open a new credit card account and request a copy of your credit report.

8. Disinherit your husband. Write and execute a new will, trusts, medical directives and/or living wills and powers of attorney. Don’t forget to change the beneficiaries on your life insurance, 401k, pension and IRA accounts.

9. Establish a system to keep track of all child support made/received, alimony payments made/received, medical expenses, etc.

Establish good credit in your own name.
Good credit is the foundation of your financial future. Without it, it can be very difficult to get a bank loan, and even hard to manage regular household expenses. Get a copy of your credit report (AnnualCreditReport.com offers them free of charge), and address any inaccuracies it contains. Then, if you are employed and/or already have credit cards in your name, building your credit is relatively straightforward: use your cards regularly, pay off the balance in full and on time each month, and watch your score rise!
However, if you’re not employed and don’t already have a credit history, the process may not be as simple. A few years ago, new federal regulations made it difficult for women with little or no income to establish credit on their own. The Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 was designed to protect consumers from getting into financial trouble by running up credit card debt they can’t afford to pay, but unfortunately, this legislation also makes it difficult for “at-home” spouses without paid work to obtain credit on their own.

After a public outcry, the Consumer Financial Protection Bureau recently proposed changes to rectify these unintended consequences. When enacted, the modifications will allow non-working spouses to apply for credit in their own name based upon shared household income.
So, be prepared. Securing credit may require more than simply filling out an application or making a single phone call.

Develop a comprehensive financial plan for the future.
If you had a Lifestyle Analysis prepared during your divorce, you should now have a very clear understanding of what funds came into the marriage (income) and what funds went out (expenses). Use this as a basis for developing a budget going forward. You’ll need to address both short-term (day-to-day expenses, monthly utilities, mortgage, car payments, etc.) and long-term (college tuition, retirement, travel) financial needs.
If your divorce settlement includes any lump sum payments (i.e., for alimony, pension rollovers, sale of a vacation home), you’ll also need to develop a sound strategy for managing those assets. Establishing –and then sticking to – a financial plan is essential, both for financial stability and peace of mind.

Seek help from an experienced financial advisor.
All the fundamental components of a sound financial plan – creating a budget, investing, retirement planning, outlining your goals and aspirations, saving for college, choosing life insurance, etc. – should be completed under the guidance of a financial advisor.
Be sure to find a financial professional with expertise and experience helping divorced women, specifically. The financial needs of divorced women are very different from those of a married couple, and you should have an advisor who completely understands those differences and knows how to properly manage their money and invest on their behalf.
In addition to an experienced financial planner, I believe most post-divorce women can benefit from the assistance of:
· An estate-planning attorney to work with your financial advisor to help with your estate planning needs and the legal issues concerning your will, medical directives, trusts, charitable giving, etc.
· A therapist or counselor to help you cope with the emotional challenges of starting your life as a single woman.
· A vocational counselor to help you re-enter the job market, or even start your own business.

Enjoy your new life!
With your divorce in the rear-view mirror, and these important steps completed, you’ll be well-positioned for a secure financial future. It’s likely you will find, as most women do, that it’s empowering to make financial decisions on your own, and to be the one who’s in control of your financial portfolio. Rest assured: The road ahead belongs to you!

ESTATE PLANNING: Do non-married couples need to plan?

Christopher W. Yugo Times Business Columnist writes:Q: My partner and I have been living together for almost 10 years. Is there anything special that we need to add to our wills?

A: Cohabitating adults have to address certain issues that married couples don't. The problem is they are in a sort of legal limbo. The state isn't going to prohibit them from living together, but on the other hand it isn't going to grant them the same rights it grants to married couples.
When a couple marries, the state grants them certain rights including inheritance rights. If a married individual dies, the surviving spouse has inheritance rights even if the deceased spouse fails to leave a will. The intestate statutes provide the surviving spouse the right to inherit a portion of the deceased spouses estate. Even if the deceased spouse leaves a will disinheriting the surviving spouse, he or she may still take against the will and receive a portion of the estate. Indiana, like most states, tries to look out for the surviving spouse.

The same cannot be said for cohabitating individuals. The state isn't looking out for their rights. That's why it is so important for folks who are living together to prepare an estate plan. If you want your partner to inherit your property, execute a will or trust. Name them beneficiary on your bank accounts and investments. Name your partner personal representative of your estate. In other words, plan.

Although planning for a death is important, it is equally important to plan for events that might occur during a lifetime.
Remember that cohabitating adults do not share a state recognized family relationship. That means issues relating to medical care and even visitation rights need to be addressed. Hospitals may restrict non-family members from visiting with a sick partner. After all, they aren't family. At least not in the legal sense.

To plan for this, a health care representative designation is an essential estate planning document. Without a health care appointment, the doctors and hospital may be legally prohibited from discussing a sick partner's condition and a hospital may not let them in the room.
Another concern should be disposition of the remains of a loved one. Unless you plan, your partner may not have any say in what happens with your remains following death. By executing a funeral planning declaration, you can designate your partner as the person who makes your final arrangements. That way, you can be assured that your partner can plan and be a part of your funeral.

Expensify takes on Freshbooks with invoicing & billing features

Sean Ludwig for VentureBeat writes: Popular expense report startup Expensify has introduced invoicing and billing clients from inside its cloud-based dashboard, the company said today.

 

Expensify was founded in May 2008 with the promise of offering “expense reports that don’t suck.” It’s main mission is to make the expense report and reimbursement process easier for companies with relatively simple web, iOS, and Android apps. The company has attracted 1.4 million users from more than 200,000 companies to date.

Expensify CEO David Barrett told VentureBeat that this is a “major milestone” for the company because it is the first time it has launched a feature not directly related to expense reporting.

The new feature will compete directly with Freshbooks and Bill.com, two companies known for cloud-based billing. What makes the new feature so handy is that Expensify users can now take expense reports you have created or been submitted to you and can re-bill them as an invoice to clients.

If clients already use Expensify, payment options for invoices and bills are the same as the ones offered for expense reports, including ACH Direct Deposit, PayPal, and even Bitcoin.

 

“Expensify’s addition of invoicing and bill processing might seem odd to an outsider,” Barrett said via email. “But inside the industry, we’re all jockeying for advantage in a bigger long-term game: becoming the next Intuit.”

San Francisco-based Expensify has raised $6.7 million in funding from investors including Hillsven Capital, Baseline Ventures, SV Angel, and Travis Kalanick.

‘Excel killer’ Tableau Software ups its IPO price to $31

Christina Farr for VentureBeat.com writes: Data visualization company Tableau Software has raised the price range of its initial public offering to $31 per share.

In a media release, Seattle-based Tableau announced that it has raised $254 million by offering 8.2 million shares at $31, above the revised range of $28 to $30. The shares are expected to begin trading on the New York Stock Exchange on May 17 under the symbol DATA.

The company originally filed for its IPO in early April. Back in November, we picked it as one of 10 startups leading the way in ‘big data.’

“Our mission is to help people see and understand data,” Tableau’s prospectus says. The company offers products to help technical and nontechnical users create interactive charts and simulations based on raw data. Tableau offers a variety of public, corporate and premium products, and caters to a range of customers.

Tableau’s is the latest in a series of high-performing enterprise IPOs, including Workday, Splunk, and Palo Alto Networks, making 2013 the year for business software.

“Data visualization applications like Tableau are ushering in a post-spreadsheet era, threatening to kill Excel as the killer app for desktop analytics,” said data scientist Mike Driscoll, who is also the CEO of Metamarkets.

Still, Tableau faces strong competition from giants like IBM, Microsoft, Oracle, and SAP as well as startups like Tibco Spotfire. And maybe even Google.

“Our mission, to help people everywhere see and understand data, isn’t all that different from Google’s,” Christian Chabot, the company’s cofounder and chief executive, said in a recent interview with VentureBeat.

Goldman, Sachs & Co. and Morgan Stanley are acting as lead joint book-running managers for the offering.

The future of accounting is up in the cloud

Accountingweb.co.uk writes:   A leading US commentator on technology for accountancy practices recently commented that “if you choose not to embrace the cloud you are retiring in five years”. Scary stuff, which is not just the preserve of our transatlantic colleagues. In December, no lesser figure than Sage Group’s Chief Executive felt the need to comment at their 2012 results announcement; “I wish we had been there earlier in North America. We’re coming to the market for cloud-based solutions in time in Europe.”  So why is cloud accounting for small firms now garnering such bold predictions and senior focus?

What has changed
In the UK, cloud accounting usage has been doubling each year since the emergence of packages such as KashFlow in the middle of the ‘noughties’, when a small base of a few hundred users became a few thousand and then a few tens of thousands. What has changed in the last few months is that cloud solutions are now the default entry-level product for even the largest vendors, Sage and Intuit. This means that over the next eighteen months a huge wave of new firms in the UK, quite possibly hundreds of thousands, will be adopting this technology. Sound difficult to believe? Remember that around half a million new companies will incorporate this year and hundreds of thousands of sole traders will also commence trading.

Why is cloud so profoundly different?
In my experience, the reasons cloud accountancy will transform the way that small firms manage their finances are poorly understood by many accountants. Five years ago, when there were just a few thousand evangelical early adopters, discussions around the merits of cloud versus desktop were very technical in nature (“where does the data sit?”), and phrased in terms that were opaque and frankly irrelevant to the average small business user. The key benefit of cloud accounting that is so often ignored or underplayed is better collaboration.

Cloud moves to the mainstream
It was around 2011, just as Sage and Intuit were getting in on the act, that we began to see the true advantages of cloud really begin to emerge. It was not from inside the software (there’s only so far that entering transactions and running reports can be differentiated, regardless of where the data sits), but rather that cloud accounting enables far better collaboration with external partners. This is the truly revolutionary idea.

Let’s consider some examples:
With cloud software it’s far easier to synchronise bank account data straight into your accounts (bank reconciliations are remarkably fast when you’re working from the same source data). Xero are notable for the focus they put on this feature, but we’ve also recently seen FreeAgent and QuickBooks Online deploying authorised data feeds from bank partners.
Another benefit is that accountants can collaborate online with clients in real-time and on the same live data, meaning that small businesses can receive simple, jargon-free functionality with their accountants discreetly doing the ‘heavy lifting’ like charts of accounts; one solution provider, Crunch Accounting, is entirely built around this collaborative principle with its own team of remote accountants.

There’s even a service called Receipt Bank that allows firms to take a picture of a paper receipt with a smartphone, then for it to be automatically transmitted into the cloud and remotely entered into their accounting software (no more ‘shoebox accounts’ from that client!).

So we’re in a period where a new type of accounting is saving small firms and their accountants from pain with data entry, reconciliation and error-checking, freeing them up to spend more time on more profitable tasks. This can only be a good thing but is just the beginning.

A world of possibilities
It’s in 2013 and beyond that we’ll really see why even companies of the scale of Sage Group Plc are going all in on this new cloud model. Cloud will no longer just be about making life easier, but also giving firms significant competitive advantage by helping with their key business issues. Hard to believe? Already firms that use the cloud to manage their finances are twice as likely to be fast growing as those that don’t.

Let’s take two of the top challenges faced by small firms – getting finance and getting paid – and the way that cloud accounting addresses them:

Getting Finance – It’s no secret that banks struggle to finance fast-growing small businesses, which are often so hungry for working capital that they resort to using personal credit cards to fund expansion. This is due in no small part to the challenges lenders have in getting the quality and quantity of information they need to extend appropriate finance. These challenges lead them to put in place procedures and terms simply too onerous for the typical small firm to bear. As an example, less than 10% of firms that could use invoice finance products currently do so, even though this sort of working capital finance product could improve the cashflow position of many more firms. In the near future, small but growing firms will find it much faster and simpler to work with lenders, and to get the growth finance they need. In a recent conference visit to London the founder of Xero even commented, “Who knows, we might have to become a bank?” which really underlines just how different this new world might be. Providing business finance advice and getting finance quotes is a subject close to our hearts at Funding Options, and we’re very excited about the potential of the cloud.

Getting Paid – Late payment and bad debt is another critical issue for small firms, with existing best practice credit management tools often too remote and complex to be adopted in large numbers. Cloud accounting will finally drive mass-market adoption of electronic invoicing and payment among small firms, eliminating many exceptions, and making it far easier to manage and finance trade flows. One electronic invoicing provider, Tradeshift, is now recruiting over 2,000 firms a week onto its platform around the world. Equally, my own firm has a solution called LedgerLive that gives small firms the credit control capabilities previously only available to larger firms by synchronising cloud accounting software with credit reference agency data.

Implications for accountants
For accountants currently working within SME businesses, I personally believe that we haven’t quite reached the point where most firms will see a compelling reason to switch to the cloud (although there are many instances where they will), but I do think that by the start of 2014 many accountants in business will face hard choices as to whether they’re hampering their firm’s competitive advantage by not bringing these new capabilities to bear. At the very least, 2013 should be the year when these accountants should explore the rapidly emerging challenges and opportunities.

For accountants in practice, it’s much more simple. Embracing the cloud right now is a pre-requisite for sustainable growth. If you want to attract new start-up firms to your practice, you need to recognise that even the global giants of small business accounting are now trying to sell their cloud solutions to your potential client. If you want to attract fast-growing established firms, remember that these potential clients will already be twice as likely to use cloud accounting software as their slower-growing peers, and won’t deal with you unless you talk their language.

The emergence of cloud accounting solutions will transform the way that small firms manage their finances just as radically as the emergence of desktop accounting software did two decades ago. Though this creates challenges for accountants both in business and in practice, it’s also tremendously exciting, as more than ever finance professionals will be right at the centre of solving the key issues faced by small firms.

The Collaborative Online Model for Small Business Accounting Professionals

Joanie Mann for Cooper Man Consulting Group writes: Accountants and bookkeepers serving small business clients are facing a growing problem – how to provide services that are valuable to the client in a way that makes it profitable for the provider.  Part of the problem is that small business, while they need quality accounting and bookkeeping services, have a hard time paying for it unless the person doing the work is sitting in the office producing tangible reports and paperwork all day long (and maybe answering the phone while they’re at it).  Accountants and bookkeepers working with a variety of small business clients can’t be profitable when they have to travel to client offices to do the work or pick up and deliver files and paperwork, and they certainly aren’t expecting to be the office receptionist while they’re there.

The solution for both is an online working model, where the outsourced professional and their client can both login together.  Each accesses the applications and data to get their work done, and is able to access when and where they need to.  Online accounting approaches help service providers increase their profitability at the same time they increase their level or range of service provided to clients.  With a collaborative online accounting model, professionals and their clients can work from anywhere at any time, giving both the freedom to focus on what needs to get done.

This doesn’t necessarily mean that the bookkeeping or accounting solution has to be an “online” service, per se.  Looking at the accounting product alone isn’t often the best way to solve the mobility and managed service problem for the client, which is really what “online” for the client is about.  The fact that their service providers (accountants, bookkeepers, etc.) can also work in the system is of secondary benefit to the client.  The worst thing an accounting pro can do is tell their client they have to switch accounting solutions just to make it easier for the accountant or bookkeeper.  It makes sense to improve that situation, but accounting/bookkeeping isn’t generally the entire IT requirement for the business client.

An online working model enables collaboration with team members and providers alike.  Reducing or eliminating the requirement for sophisticated technology solutions is the key element, providing everyone the ease-of-use and security of server-based computing.   The real benefits include centralization of business application management, protection data resources, and the ability to more fully streamline business processes.   For many businesses, the earned benefit is increasing the capacity to do business profitably simply by making the current working model much more efficient and effective.   The benefits are there for both the client is collaborators to experience, and this is where the focus should be – on the benefit to the small business.

Accounting professionals can also seamlessly increase their own opportunity and value by embracing a collaborative online working model.  Through the use of outsourced bookkeeping, payroll services and other providers, accountants can increase or expand the services they offer to clients by seamlessly incorporating them into the overall offering.  An online approach makes this possible, and can position these valuable services as the key to client business success. Working online together, professional service forms and their contractors or outsourcers can work closer than ever before, and the accounting professional is positioned to deliver far more value to the business client.

An online working model improves the profitability of the professional practice, too. The movement of information from one place to another, the restructuring of information from one form to another… these are processes that represent the cost and inefficiency in the professional accounting office.  By working online in client accounting solutions along with the client, firms can reduce or eliminate redundant and time-consuming work that is the bane of the practice. Bookkeeping, property tax compliance work, payroll, HR and benefits administration – these are areas where outsourcing may make the most sense for the practice while enabling accountants to increase the overall value of service provided.

Does your professional practice offer valuable business services like these for your clients? Profitably?

A collaborative online working model can enable your firm to deliver the range of services business clients need most while improving the bottom line for both.

Make Sense?