Tax Planning for High Income Taxpayers AICPA Conference – 5 Takeaways

Diane Gilabert for Gilaberttax writes: I recently attended the 2013 AICPA Conference: Tax Planning for High Income Individuals in Las Vegas.  I hear you snickering. How could any serious learning take place in Las Vegas? Surrounded by the luscious surroundings at the Bellagio no less?

A tax geek to my core, I did not attend one show or put even one quarter in a slot machine. I skipped no classes.

While some of the sessions were better than others, the overall quality of the speakers’ presentations and materials was outstanding. Much fodder for future blog posts!

Before the memories fade, here are my 5 takeaways:

1. No Comprehensive Tax Reform Likely in 2013

We’ve all heard that Dave Camp (House Ways and Means Committee Chair) and Max Baucus (Senate Finance Committee Chair) – that’s them in the photo above – are committed to passing tax reform. Check out this joint Wall Street Journal op ed. Max Baucus even announced his retirement to lend urgency to the quest. But the reality is the likelihood for passing comprehensive tax reform in 2013 is grim.

To learn about what’s being proposed (and what should be), check out my recent series of posts on tax reform for small business:

Tax Reform for Businesses: What’s Being Proposed and What Should Be

Tax Reform for Businesses: Proposed Changes to Tax Accounting Methods

Tax Reform for Businesses: Proposed Changes to Section 179 Expensing

Tax Reform for Businesses: Proposed Changes to Start-up Expendtures

Tax Reform for Businesses: 5 Suggestions for Tax Simplification

2. Tax Planning Will Be Tough Due to Expiring Tax Provisions (Again)

Remember how impossible it was to do tax planning last fall when so many tax provisions were expiring? Well it’s happening again, and the speakers in the know at the Conference see another last minute deal on the horizon. Another fall of uncertainty for us and our clients.

Some examples of expiring tax provisions December 31, 2103: 50% bonus depreciation, expanded §179 limits, 15 year depreciation for qualified leasehold improvement, retail, and restaurant property, and the R&D tax credit.

3. “Permanent” is a Myth

The recently enacted lower estate and gift tax rates and exemption amounts were supposedly made permanent by the Tax Reform Act of 2012 signed January 3, 2013. So much for that. The Obama Administration’s budget proposal would hike rates again and roll back the estate and gift tax exemption to pre-2010 levels.

4. Inflation is the Enemy of Taxpayers (Again)

Remember how not indexing the AMT exemption resulted in more and more middle income taxpayers caught in its net every year? The constant flurry of last minute patches required to “fix” it? Well apparently Congress has a short memory: the new 3.8% tax on net investment income has thresholds not indexed for inflation.

Not sure how the new §1411 works? Check out this blog post to get up to speed fast.

5. Tax Rates are Not Going Down for High Income Taxpayers

Do you have clients hoping the recent tax increases will be repealed? In the words of my fellow New Jerseyians, fuggetaboutit! If anything, further increases on the “wealthy” are likely in the form of the “Buffet rule” and the Obama Administration’s pledge not to raise taxes on individuals making less than $200,000 and families making less than $250,000.

What’s the message for tax practitioners? Don’t fear, we will still have jobs! Tax planning will be paramount. One thing all the speakers agreed on is that whatever tax legislation is passed, there will be “winners and losers”. It’s up to us to make sure our clients aren’t blindsided by the changes.

Have you attended CPE recently? Share your key tax planning takeaways in the comments below.

PlanGuru Review – Simplify Your Accounting Practices

http://www.business2community.com writes: By itself, budgeting can be overwhelming task for small businesses. After all, this is where the rubber hits the road. Expensive on-premise software further complicates the task. Fortunately, a solution is on hand.

In this PlanGuru review we will see how this budgeting and forecasting software simplifies and automates any forward looking financial analysis. We will look at its interface, features, and see how it can be of use to you.

Planning a Budgeting Software

A thirteen-year-old product, PlanGuru was initially built to help CPAs model financial projections for their clients. “The time and inaccuracy of creating formulas in spreadsheets led PlanGuru’s founders to develop an accurate and flexible solution,” says Tripp Graham, Director of Marketing at the company. Subsequently, the company has improved it’s usability for other customers, including entrepreneurs, small businesses, nonprofits, and large corporations.

The design starting point for the solution was Excel’s complicated setup. “Developing and maintaining multiple spreadsheets in Excel is painfully time-consuming and can be error prone,” says Graham. So, the solution’s developers aimed for simplicity, integration, and automation. With PlanGuru, you can import your chart of accounts then choose from 20 inbuilt forecasting methods to project your budgets over a ten-year period.

This also frees up time for financial professionals to focus on the more important parts of their business. “Because PlanGuru alleviates the painful aspects of budgeting (such as correcting faulty Excel sheets), these professionals can now spend more time drawing insights from their projections,” says Graham.

According to him, future plans for the solution include more robust analytics and reporting features. “While the core PlanGuru application is a solving tool, PlanGuru analytics will allow users to draw deeper insight into the forecasted financial statements they have created in the application,” he says.

Working With PlanGuru

In its simplest form, PlanGuru is an integrated set of financial statements and associated analyses. The statements (and analyses) are enclosed in a format that is similar to an Excel Workbook. The statements help you budget and forecast analysis. You can budget for up to ten years in advance. However, granular planning is only available at the quarterly and monthly level.

As I mentioned earlier, the solution automates several associated components of budgeting and forecasting. For example, the statement of cash flows is updated automatically, once you update budget and income statements. Similarly, the solution offers you a choice of 20 different forecasting methods (with multiple sub-options).

The PlanGuru setup is fairly easy and involves constructing (or, uploading) tables to create a chart of accounts. PlanGuru already has several account groupings under which you can enter line items. However, if you are unsure about groupings, you can simply add expenses by line items. Automation is, again, an overriding theme in maintaining and forecasting your line items: the system automatically calculates budget ratios and makes rolling forecasts for you.

The Basics: What Does The Interface Look Like?

The interface is fairly similar to Microsoft Excel. Although it is not Excel based, it adopts a similar cell- and grid-based approach. The design was a conscious choice, according to Graham. “Our users were more comfortable viewing their budgeted/forecasted numbers in a spreadsheet-like format,” he says.

Pros & Cons

Perhaps, the tool’s greatest benefit lies in its ability to automate and simplify complex budgeting and forecasting practices. That it does this without the help of messy and unwieldy excel sheets is fantastic. PlanGuru also provides comprehensive analysis for your line items. For example, modeling techniques enable you to accrue expenses or declare dividends in multiple formats.

Finally, there is an added side benefit to the tool. For someone who does not understand financial statements, I thought the solution did a neat job of simplifying accounting for me. This can be an especially important benefit for entrepreneurs. For example, they can create custom accounting line items to track their expenses and balance books. “The one role nobody wants to play is auditor of their own spreadsheet models,” says Graham. He says PlanGuru helps businesses starting out by automating this task and preparing them for a number of contingencies.

One area where PlanGuru could improve is in its interface. The solution’s interface, which is similar to Excel, helps business transition quickly and easily to PlanGuru. However, it does not mark a significant improvement over the Excel interface. I think a SaaS paradigm offers great scope for users to interact with software in new and innovating formats. Improving the interface (by reducing the number of cells, adding color, or automating more financial transactions) will help simplify PlanGuru further.

Pricing

PlanGuru has interesting pricing models that encompass multiple formats. Thus, the PlanGuru Cloud Hosting plan enables you to purchase a license and host it in a private cloud. The Lease PlanGuru in the “cloud plan” enables you to lease a PlanGuru license in the cloud on a per-month basis. Both plans enable you to access the application from anywhere. Finally, you can also purchase a traditional PlanGuru on-premise desktop or network license, if security is your biggest concern.

The Bottom Line

Yes. With a diverse array of features and its ability to simplify complex budgets and forecasts, which can be customized to fit a wide variety of businesses, PlanGuru is a winner all the way.

Ratings: ease of use 4/5, features 5/5, value 5/5 and ease of deployment 4/5 

How 3 Different Types Of Investment Income Are Taxed (Introduction for Beginners)

Miranda Marquit for istockanalyst writes: As you probably know, our tax system is far from straightforward. Not only are there a number of different deductions and credits to take into accounts, and various tax brackets to consider, but even your income falls into different categories.

You can't even rely on a division between "regular" income that you receive at a traditional job and investment income received as a result of your careful division of resources. As you fill out your tax return, you will find that even your investment income is divided into different categories and taxed differently.

Interest Income

When you invest in cash products, like high yield savings accounts and CDs, or in bonds (municipal bonds aren't taxed at a federal level, though), you are likely to earn interest. The interest you earn is taxed in a fairly straightforward manner: It's added to your regular income and taxed at your marginal rate.

In most cases, your interest income is taxed in the year that you receive it, even if it is reinvested and you never actually hold the money in your hands. Some CDs automatically reinvest your interest earnings back into the CD, and if this is the case, you will receive a 1099-INT describing how much you have earned that year.

There are some cases in which bond interest and CD interest isn't paid out until the investment matures. In these cases, you are responsible to pay taxes on the interest you receive at the end of the term, when you receive the interest.

Capital Gains

A capital gain is the increase that you see when you sell an asset for more than you bought it for. So, if you spend $1,000 on an asset, and a few years later you sell it for $2,500, you have a capital gain of $1,500. This is the amount that you are taxed on.

The good news about capital gains, though, is that they are taxed at a preferred rate – if you have held the asset long enough. There are two types of capital gains income:

1. Long term: If you have held the asset for more than a year (so you need to hold the asset for at least a year and a day), you receive a preferred tax rate. You pay 0% on the income if you fall into the 10% or 15% tax brackets. If you fall into the marginal tax brackets ranging from 25% to 35%, you will pay a capital gains tax of 15%. Those who fall into the highest tax bracket (39.6%) pay a capital gains tax of 20%. In any case, you pay less on long term capital gains than you would normally pay on income.
2. Short term: For capital assets held for a year or less, you pay at your marginal tax rate.

Your tax planning requires you to consider the impact of how long you hold your assets before selling.

Dividend Income

Your dividend income is taxed at a preferred rate as well. As long as your dividend income is "qualified," your dividend income is taxed at the long term capital gains rate – at least for now. Dividend income is subject to the possibility of reverting to being taxed as regular income in the year it is earned.

Pay attention to the type of investment income you have, and plan your investment and tax strategy accordingly.

Home office deduction can have tax implications when you sell

Stephan Fishman writes: A home office can provide a great tax deduction. However, taking this deduction could have a tax impact when you sell your home.

If your home office was located within your home, you do not need to allocate the gain (profit) on the sale of the property between the business part of the property and the part used as a home. This means that your entire profit qualifies for the special home-sale tax exclusion.

Under this exclusion, a substantial amount of the profit you make on the sale of your home is not taxable: up to $250,000 of the profit for single taxpayers and $500,000 for married taxpayers filing jointly. You qualify for the exclusion if you lived in your home for at least two out of five years before you sell it.

Example: Richard, a single taxpayer, lived in his home for 10 years and had a home office in a bedroom, amounting to 10 percent of the home. He sells the home for $100,000 profit. Since the office was within the walls of his home, his entire profit qualifies for the $250,000 exclusion and Richard owes no tax on it.

On the other hand, if your home office was not located inside your home — for example, it was in an unattached garage, cottage or guest house — you must allocate your profit between the living and office portions of the home and pay taxes on the profits that you allocate to your office.

Example: Assume that Richard from the above example has his home office in an unattached garage, amounting to 10 percent of his total home. Since his home office was not within the walls of his home, he must allocate his $100,000 profit between the main home and office. He owes tax on the $10,000 of capital gains attributable to his office (10 percent x $100,000 = $10,000). 

IRA Financial Group Introduces Attorney Direct Tax Consultation Service for All Self-Directed IRA Clients

We don't know the IRA Financial Group however they sent us this press release (advertisemet).   We publish it only because we feel it illustrates the trend of Providing Tax Consulting/Planning services to individuals who are self-managing their investments. [Following is the Press Release].   The IRA Financial Group, the leading facilitator of self-directed IRAs with checkbook control has launched a new attorney tax consultation services called “Attorney Direct” aimed specifically for the self-directed IRA investor. With the increase popularity in using a self directed IRA to make investments, such as real estate, an increasing number of individuals with retirement funds have been seeking expert tax consultation on the IRS rules surrounding the use of retirement funds to make non-traditional investments, such as real estate in the most tax efficient manner. As a result, the IRA Financial Group has designed an attorney tax consultation service specifically for the self-directed IRA investor. “ When making a non-traditional investments with retirement funds, we at the IRA Financial Group believe it is crucial that all our clients are able to consult directly with a tax attorney, “ stated Adam Bergman, a tax attorney with the IRA Financial Group. “Because a self directed IRA investment requires the understanding of various tax rules which are based off the Internal Revenue Code and tax court cased, it is imperative that each of our clients is able to work directly with a tax attorney,” stated Mr. Bergman.

When it comes to making investments using a self directed IRA, the Internal Revenue Code does not describe what a self directed IRA could invest in, only what it cannot invest in. Internal Revenue Code Sections 408 & 4975 prohibits Disqualified Persons from engaging in certain type of transactions. The purpose of these rules is to encourage the use of qualified retirement plans for accumulation of retirement savings and to prohibit those in control of self directed from taking advantage of the tax benefits for their personal account. “Our tax consultation service is predicated on working with the client to structure the most tax efficient self directed IRA transaction,” stated Maria Ritsi, a senior paralegal with the IRA Financial Group.

Clients of the IRA Financial Group will be automatically enrolled in our “Attorney Direct” self directed IRA tax consultation service. Each client will have direct and unlimited access to our in-house tax and ERISA attorneys. Each client of the IRA Financial Group is assigned a tax attorney in order to ensure that the self directed IRA transaction is established is in compliance with IRS rules. “Our clients have worked hard their whole life for their retirement funds and we are dedicated to offering individualized tax consultation regarding the IRS prohibited transaction rules”, stated Maria Ritsi of the IRA Financial Group.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP and Dewey & LeBoeuf LLP.

IRA Financial Group is the market’s leading “Checkbook Control” Self Directed IRA and Solo 401k Plan Facilitator. We have helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate tax-free and without custodian consent!

Why software-as-a-service (SaaS) fragmentation is giving rise to new markets / Running Your Business Entirely on Cloud Applications

Mark Boyd for Venture Beat writes: Fragmentation between software-as-a-service (SaaS) solutions is beginning to affect the average business that has moved from server-based software to the cloud.

Christian Staples runs spa installation business Arctic Spas Utah, and uses eight SaaS apps: accounting using Xero, CRM and support with Zoho, collections through Bill.com, ecommerce on Big Commerce, email marketing via Constant Contact, Service Pro, and a phone system from Ringio.

Like many businesses that have moved to some or all in cloud for their business IT, the difficulties now are in getting these apps to connect data and keep business processes flowing along.

“The frustration is to get everything to talk with each other and sync. Everything is manually entered. It is hours everyday for sure,” Staples said.

Patricia Vargas, marketing director at tour operator GoCar manages travel bookings for business groups. She arranges for customers to take a break from conference attendance to see their visiting city from one of Go Car’s GoKart-like vehicles. She regularly uses up to seven business apps across her operational tasks including CRM, accounting apps, cloud-based email and online marketing tools.

“It is very difficult to move data, and very easy to lose it,” Vargas said. “I spend at least an hour each month maintaining the data between just two of the cloud-based apps I use.”

Midsize companies are already feeling the pain. A Forrester survey this year found 64 percent of midsize companies are planning to focus on improving their workflows this year. They are looking for ways to smooth out the staccato rhythm of their business processes caused by multiple cloud apps.

Brick and mortar businesses not typically associated with cloud computing are becoming the major drivers behind the server-software diaspora. They are settling in to the new cloud environment with a tech savviness and a clear vision of what they need. Few are finding exactly the right solutions, mostly due to the fact that cloud apps are focusing on just one part of the business process, and are oblivious to the wider supply chain.

The costs of fragmentation are significant for both small and midsize businesses. First, there are the costs of double handling, perhaps an hour or two a week for a smaller business, but many more for a mid-size company. Then there are all the errors that this duplicate data entry causes.

But on top of that, for businesses that want to create their own “patches” to connect their business apps and streamline their workflow, complex coding is required. Each time a new app version is released, developers have to go back and check that their patch still automatically routes their data between their apps in the way they expect. It is the exact reverse of the benefits businesses were looking for when moving to the cloud.

This so-called ‘fragmentation frustration’ is causing some investment re-shuffling as players seek to take advantage of the disconnect within the cloud business ecosystem.

Jason Lemkin, serial entrepreneur and founder of EchoSign (which has since been sold to Adobe) believes that addressing theSaaS disconnect is where the next wave of innovation needs to take place: “We need SaaS startups that automate much of what is still manual data-entry in current generation SaaS products,” he lamented on Q&A site Quora. “Software is great. Web software is better. Data entry is horrible. Data entry by high-priced employees who aren’t paid to do data entry? Unconscionable.”

Startups in the app integration space are seeking to capitalize on the growing need for business solutions to manage SaaS as part of a supply chain. CloudWork are expanding their integration offerings on a weekly basis, and provide services to developers who need to stay in control of the quality of their integration tools. [Disclosure: I occassionally blog for CloudWork].

This week, IFTTT have released a new series of app integrators aimed at linking SaaS to sensors, extending the automated workflow even further into the physical workspace. And another app integration startup Zapier has released a status board service to let anyone monitor outages that may affect the movement of data between apps, quickly identifying another new market service that didn’t need to exist before the SaaS ”growth-plosion.”

All of this hasn’t gone unnoticed by venture capitalists and investors. Integration company Mulesoft bought the developer community and website ProgrammableWeb in April for an ‘undisclosed amount’, obviously using some of the $37 million they had just raised. In the same month, app interface management platform 3scale raised $4 million.

“The open API market is developer-centric, because only developers are able to leverage all the possibilities of such a tool,” says Mehdi Medjaoui, co-founder of Webshell and one of the organizers of the API market conference series, APIdays. APIdays seeks to encourage more product development from startups and API developers, and will explore how this market is set to grow in the next few years.

“An API product becomes like a service contract with a supplier,” he said. As was the case with the move to Software-as-a-Service, Medjaoui explains, “businesses don’t need a big investment or to reinvent the coding wheel to start using API products. They can stay focused on their own business proposition. But, of course, they will also become dependent on the API service.”

And for the emerging API market economy to blossom, that’s what investors and startups are counting on. 

Wealth Advisors Embracing Their Independence

Gail Perry & Tony Batman for AccountingWeb write:  Current events can often dictate wealth advisor behavior, particular when it comes to the prospect of becoming an independent advisor. With financial markets riding high and tax season behind us, many CPA firms that sat on the sidelines are now re-engaged and looking for new ways to boost their bottom lines and explore the growth component our industry: wealth management. For the last five years, CPA firms have seen a difficult path to growth, managing low single-digit revenue gains. CPA firms are searching for new slices of opportunity to showcase their consulting opportunities and feel confident about wealth management capabilities.

A recent Fidelity study confirms a continued shift from the wirehouse channel to Independent Broker Dealer and Registered Investment Advisor channels[1].  We’ve seen this shift for years, but some interesting statistics came to light that underscore much of the rationale for going independent.

• Advisors who became independent instead of being associated with specific products earn 38 percent more in compensation in 2012 vs. 2008 over those who moved to a non-independent firm (16 percent)
• Newly independent advisors increased their investable assets with existing clients (“share of wallet”) by more than 54 percent
• Just as important, 89 percent of advisors were happy with their decision
• Other top motivators included confidence that clients would follow, reputation of the new firm and the prospect of achieving better work-life balance

When viewed through one lens, all these findings start to tell a bigger story. The reason the independent side of the wealth management business continues to grow is due in large part to entrenched organic growth within firms. These firms are now free of pushing proprietary product lines and can incorporate newfound marketing and prospecting techniques to help turn their practices into high performance market dominators. You start to see a clearer picture of how advisors are able to better position a practice to reflect their clients’ needs, while not sacrificing their dignity or the bottom line. Best yet, the vast majority of advisors are happy with their decision to embrace independence.

At 1st Global, advisors are leveraging our consultative approach to wealth management and critical matters such as succession planning. We consult with growing tax and law firms to help groom and integrate new advisors to a financial services environment. The philosophies of independent wealth management align perfectly with many CPA firms – the virtues and ethics of independence are some of the key tenets in the DNA of many CPA firms. The model that a CPA firm relies on includes independent, objective advice that is free from any conflict of interest. It’s why the vast majority of CPA firms work with an independent (RIA or IBD) advisor model in the delivery of wealth management service to their clients. Your same standards of independence can bloom even further when aligning with 1st Global. We support your firm with everything it needs for a wealth management practice, including securities brokerage services, fee-based asset management, insurance services and retirement planning.

Many of our newly transitioned advisor groups report similar findings. Our Practice Development Group provides one-on-one support to advisors to assist with the integration of financial services into your practice. Our 20-year track record of helping CPA firms embrace independence speaks for itself.

H&R Block Offers Remote Tax Prep for Expatriates

Michael Cohn for AccountingToday writes: H&R Block has introduced a remote service for U.S. citizens living abroad that will help them meet their often confusing tax-filing obligations. The Kansas City, Mo.-based tax prep giant estimates that there are more than 6 million expatriates, and that many of them will need help to meet the June 17 filing deadline (see IRS Warns Taxpayers with Foreign Assets of Filing Obligations).

Expatriates can have their U.S. tax returns completed by H&R Block tax experts in an H&R Block office in more than 14 countries and U.S. territories. In addition, they can work with a tax professional, using the company’sremote service, which includes a customized interview and secure connections.

Block has also launched a microsite for expats that aims to answer many of their questions and describe the filing obligations of those with dual citizenship and who are working or retired abroad.

“Taxes can be confusing enough,” said Kathy Pickering, executive director of The Tax Institute at H&R Block in a statement. “Throw in the additional complexity of residing or working abroad and the simplest of tax situations can become more complicated. Whether the taxpayer has dual citizenship, works abroad or has retired to a tropical island paradise, H&R Block and its new microsite are here to help in-person and online.”

U.S. citizens who meet the minimum income requirement—$19,500 for married filing jointly and $9,750 for single filers—are required to file a federal tax return regardless of where they live, even if all of their income was earned in a foreign country, Block noted. Some taxpayers working abroad may be able to exclude some foreign income and claim a credit for foreign taxes paid on their U.S. tax return, which could offset any taxes owed to the United States.

Many expatriates also may have foreign bank or retirement accounts. The IRS recently announced it is working closely with United Kingdom and Australian officials to identify accounts held by Americans who may have a reporting requirement. The foreign bank account reporting form must be submitted to the Department of Treasury by June 30, but the information also may need to be included with the tax return on Form 8938, which is due earlier in the month.

Taxpayers working abroad who are not able to file an accurate return by June 17 can submit a tax filing extension to make their filing deadline Oct. 15. While penalties are not assessed, interest accrues on any balance due from the April 15 filing deadline.

New Website for Tax Pros Introduces Tax Planning Tool

Yourbusinessmattersinc.com, a unique new Web-based subscription service for tax professionals, has added a new tax planning tool that enables subscribers to provide clients with specific considerations and recommendations for 2013 tax planning.

"This new add-on to our regular monthly service plans — at no additional cost — enables tax preparers to be more proactive for their clients," said Chris Basom , the company's founder and a tax accountant/financial planner. "It enables them to serve clients year-round and protect them from nasty surprises in April."

By using data from the clients' last year's tax return, the new tool requires just 24 quick inputs to instantly render a tax planning action list for clients. It accounts for the impact of new tax laws, including those related to the Affordable Care Act, any changes in state and federal tax rates, capital losses carried forward, passive losses carried forward and the child-care tax credit, among others. It also discusses the impact of the Alternative Minimum Tax and any tax underpayment. This enables tax professionals to anticipate liabilities and help clients avoid them or, failing that, to alert them so they can work with tax professionals on a strategy to pay them.

"By using this tax planning tool, our subscribers have a tangible reason to meet with their clients in summer and fall, and can demonstrate to clients that they can help them succeed financially," Basom added. "The benefit for tax professionals from having this kind of conversation with clients is that they naturally segue into advice on wealth management and financial planning, expanding the existing advisor/client relationship."

Tax professionals, who subscribe to the online platform for its suite of business growth tools, may charge their clients for the new tax planning service or include it in their existing service arrangement as a value-added item.  "The practitioner can decide whether – and if so, how much – they want to charge for this specific service, said William Hamilton , the company's general manager. "Our tools are designed so the tax professional can use them any way that works best for their individual practice. They run the show."

The tax planning analysis, like the rest of the site's growing suite of tools, helps tax professionals set themselves apart from their competition. The site includes training guides, analytical/financial analysis tools, document templates, and marketing tools, all designed around a robust client relationship management (CRM) system. Access to the portal enables tax professionals to grow their businesses and take advantage of industry changes at a time when their survival is threatened by the commoditization of tax prep and accounting services.

The user-friendly site is a unique all-in-one solution that combines specialized educational content with seamless CRM functionality and unique revenue-boosters. "Nowhere else are all these features and functions available in one place," said Basom. "The site includes everything the tax preparer needs to go beyond tax returns and deliver client-centric financial analysis services at a time when delivering   value is critical for tax preparers to attract and retain clients."

The basic subscription ($69 monthly) provides access to training guides, analysis tools, marketing templates and CRM features that allow subscribers to upload and manage client data, issue reports and track clients' status. It also features a legal document prep system that users can access to prepare customized documents for items including wills, trusts and incorporations. Premium subscriptions ($99 per month) include an online calendar function that integrates with their users' websites, enabling their clients to schedule their own appointments.  

All subscribers get unlimited free telephone, email and chat support from a dedicated support team. And all subscribers can upload substantial amounts of client data onto the highly secure website, protected by 256-bit encryption. Free 30-day trials are available simply by visiting the website.

Who Benefits from Tax Preferences? You Do.

Howard Gleckman for the Tax Policy Center writes: The Congressional Budget Office report on the distribution of tax expenditures is getting lots of buzz, nearly all of it positive. This is a gratifying and somewhat surprising outcome. The paper confirms many of the findings of my Tax Policy Center colleagues who have done similar analyses in recent years.

The basic story is pretty simple: Just about everyone benefits from these tax preferences (which, for the most part, look like government spending). The highest income households get the biggest share of these tax breaks. But when looked at through a somewhat different lens—how much these subsidies increase after-tax income–the lowest income households are the big winners. And middle-income households do pretty well too.

But to me the most interesting results are in the details. Who benefits from which preferences? Or, to put it another way, who would lose if Congress trimmed or even eliminated some of these provisions as part of a broad-based tax reform.

And make no mistake, CBO was looking at the big commonly used tax preferences that politicians often dismiss as loopholes or special interest tax breaks. When pols talk about cutting rates by getting rid of loopholes, this is what they are talking about.

Note that CBO is looking at a broader universe of tax preferences than the Congressional Research Service did recently. CRS looked only at a handful of big deductions—such as mortgage interest, state and local taxes, and charitable giving. CBO cast a much wider net that captures exclusions from taxable income for employer sponsored health insurance, Social Security benefits, and pension contributions and earnings; low-income refundable credits; and preferential rates on capital gains and dividends.

It is probably no surprise that the biggest beneficiaries of the Earned Income Credit and the Child Tax Credit are low-income households. That was the intent, and indeed, 80 Percent of the EITC and 51 percent of the CTC go to the lowest-income 40 percent.

Similarly, you won’t be shocked to read that preferential rates on investment income overwhelmingly benefit the highest income households.  Many analysts argue that these low rates are not subsidies in the same way most deductions and credits are, but they still show up in the list of tax expenditures.

Ninety-three percent of the benefit goes to the highest income 20 percent, and 68 percent goes to the top 1 percent. The low rates on gains and dividends represent 5.3 percent of the 1 percent’s after-tax income.

The story is very different for the exclusions. For the most part, the big winners are not the rich or the poor, but the middle-class. For instance, households in the fourth quintile (by CBO’s reckoning, two-person households making between $77,900 and $115,100) get about 26 percent of the benefit of the exclusion for health insurance, equal to 3.1 percent of their after-tax income. That group also gets about one-third of the benefit of the partial exclusion for Social Security benefits.

Bottom line: When it comes to tax preferences, Pogo was right. “We have me the enemy and he is us.”

Should You Buy Taxable Muni Bonds?

Joe Light for the Wall St Journal writes: What do you get when  you throw out the chief reason investors buy municipal bonds—their tax-free status?

Apparently, a truckload of buyers.

This year through Monday, issuers have originated $19.6 billion in taxable municipal bonds, nearly double the amount of the same period a year ago, according to investment researcher Municipal Market Advisors.   

Taxable munis, unlike their tax-exempt cousins, aren't shielded from federal, state or local taxes.

Some investors still might find the bonds worth a look. But most small investors should be wary.

Despite the lack of tax benefits, issuers have found no shortage of buyers. The bonds are popular among institutional investors and mutual funds that can't take advantage of tax breaks. One example: The Build America Bonds program, through which state and local governments issued $181 billion worth of bonds before its expiration in December 2010.

Nowadays, the chief issuers are organizations that want to use the money for purposes that aren't permitted with tax-exempt bonds, such as to bolster an underfunded pension plan.

Some organizations also have issued the bonds to refinance their debt. Harvard University, for example, issued about $402 million in taxable muni bonds in May.

But in their persistent search for income, some small investors are grabbing the bonds, too, says Jim Colby, senior municipal strategist at Van Eck Global, which manages five tax-exempt municipal-bond exchange-traded funds.

"I don't doubt for a moment that some of these bonds are finding their way into individual accounts," Mr. Colby says.

In the past 12 months, for example, about $107 million has poured into the $1.1 billionPowerShares Build America Bond BAB -0.40% ETF, one of the biggest taxable-muni-bond ETFs, according to investment researcher IndexUniverse.

So what is the problem, you ask?

For starters, though the bonds typically have a higher yield than their tax-exempt peers, this year that premium has fallen sharply.

Just a year ago, the spread between the yield of a typical tax-exempt municipal bond and that of a taxable one was about one percentage point, says Matt Fabian, managing director of Municipal Market Advisors. Now, that premium can be as small as half a percentage point.

That means, at least for taxable accounts, small investors will be hard-pressed to find a taxable muni that leaves them with more money than a tax-exempt alternative.

For example, someone in the 39.6% federal tax bracket who could earn 3% with a tax-exempt bond would need to find a taxable bond yielding nearly 5% to make the switch worth it, before factoring in state or local taxes or the 3.8% investment surtax.

Second, funds—the easiest avenue for investors to get exposure to the taxable-muni market—have very long average maturities, which makes them vulnerable to interest-rate changes.

The PowerShares ETF, for example, has a yield of 4% and costs 0.28% annually, or $28 per $10,000 invested. The SPDR Nuveen Barclays Build America Bond ETFBABS -0.52% yields 4% with a 0.35% expense ratio, or $35 per $10,000 invested.

To estimate how a one-percentage-point rise in rates would hurt bond prices, investors calculate a measure called "duration." A fund with a duration of two years, for example, would lose 2% if interest rates rose by one percentage point immediately.

Both Build America Bond ETFs have a duration of more than 10 years, meaning that their values will drop by more than 10% if interest rates rise one percentage point.

"It's too risky. You only get a 4% yield for a lot of interest-rate risk," says Timothy Strauts, an ETF analyst at investment researcher Morningstar MORN -0.13% .

To be sure, in some specific cases, taxable munis could still make sense.

For one thing, tax-exempt munis don't have an edge in tax-advantaged vehicles, like individual retirement accounts. Inside an IRA, income is already tax-deferred.

And next to high-grade, long-term corporate bonds, taxable-munis—which many regard as safer investments—look like a deal.

For example, the yield of the PowerShares ETF is only slightly below that of the Vanguard Long-Term Corporate Bond ETF, which yields 4.5% and has a longer duration.

Finally, President Barack Obama's latest budget proposal calls for a cap on the amount of muni income exempt from federal taxes for some high earners, which if passed would lessen the advantage of tax-exempt munis.

Taxable munis can sometimes look like a relative value compared with other bonds. But that just reflects the fact that all bonds, no matter what slice you take, are high priced, Mr. Strauts says. If and when rates rise, long-term bonds of all stripes will suffer, he says.

As with all parables, the Great Bond Bubble eventually will end with a memorable lesson. Here's hoping you will read about it in the papers rather than in a portfolio statement.