Xero vs Intuit vs NetSuite Stock Price Change, Xero Wins Big, The Big Switch

The always thought provoking Mike Block of Quickbooks Xero Blog writes:  Here is where you can see the real fight for the future of business computer accounting and management.

The Xero vs Intuit vs NetSuite stock price change chart below shows that Xero wins big. Xero is up about 16 times as much as Intuit. Xero also is up about five times as much as NetSuite. Oracle billionaire Larry Ellison has been backing NetSuite from the beginning. Ellison had the money to buy the America's Cup vs New Zealand, but New Zealand's Xero should keep beating NetSuite badly in growth. 

I am now reading and very much enjoying the The Big Switch: 

The Big Switch actually further confirmed my faith in Xero and my conviction that Intuit is killing itself and its users. The book traces how electricity went from being a laboratory marvel, into a novelty for the rich and then into a very reliable, cheap and responsive utility for us all. It also shows how this completely transformed our lives. However, it does this is to show us exactly how this pattern is precisely repeating, in even faster and more distruptive ways, first with computers and now with the web.

The web is no longer simply a place where you can browse anywhere and use any programs that you wish (or can afford, with costs dropping fast). It is where individuals, businesses, non-profits and government increasingly can and do run programs and store data, in the most cost effective, reliable and creative ways. It also shows that what is possible is changing incredibly fast.

The CERN supercollider and Berkley NASA SETI projects (search for extraterrestrial intelligence) use the web to process far more data than they could afford. Both distribute programs and parts of their data to anyone who volunteers to process it. You need not be a computer genius, as simple programs download data and process it only when computers are not busy. In the case of CERN, this is taking the place of an estimated 100,000 dedicated computers. In the case of SETI, there are more than three million volunteers. The number of SETI volunteers should rise quickly once the new Android app goes live. Dick Tracy's computer watch was nothing like this.

Here is how The Big Switch shows us that Xero is on the right track and Intuit is still going down a wrong track fast. Xero uses many redundantRackspace computers, at many highly secure and geographically disbursed locations, with continuous backup. Redundant computers have built-in auto-switching spare parts. However, it does not matter if computers occasionally fail completely, as software automatically switches to other computers.

Rackspace has an outstanding reputaion for reliability and security. That is why it was no surprise to see Xero availablility of more than 99.99% since its 2007 launch. Rackspace also lets Xero almost instantly add or subtract computer power and storage, based on user needs. Changes can happen automatically with high (or low) CPU use, how long it takes to process entries or with day, night or weekend schedules. This lets Xero deliver superlative service at minimum cost. This is exactly the type of approach that excited The Big Switch author. It is also what excited me, so this non-data-processing professional CPA used it to save $1,000+ a month, for faster and more reliable processing.

Contrast this with the sad example of Intuit. A few years ago it had one main computer center. It then had many major outages. ONE lasted for about five days. After repeated CEO apologizies, Intuit began building major new centers.

WRONG! WRONG! WRONG! 

Good computer professionals always advise buying computers to process a five-year expected maximum load. An old IBM story says:

• Estimate jobs with quotes from three committees.
• Take the HIGHEST estimate!
• Double it!
• Double it again!

Intuit probably made even bigger mistakes. Its prior system was too unreliable, so it must have made absolutely sure its new system would be much bigger, more reliable AND EXPENSIVE than needed on day one. However, even if it were almost the right size, such static sysems are like stopped clocks. They are sure to be right only twice a day. That is, they are almost always too big or too small, with no hope of fast change. Then it got far worse. Intuit probably did not expect:

• QuickBooks desktop losing 17% of users
• QuickBooks Online adding only 75% of these users
• QuickBooks losing 70% of add-ons links in 21 months
• A drop in TurboTax online filings
• Website, real estate, financial & medical business sales
• A $1.350 billion Digital Insight asset doing badly
• Losing $320 million on Digital Insight (a Big Switch favorite)
• This 2013 loss effectively cut July 2012 capital to $2.424 billion
• Insiders sold $4 billion in Intuit stock in four years
• Insiders only bought option stock, which they sold quickly
• Stock buybacks cost more than cumulative earnings
• Use Digital Insight proceeds for $2.43 billion more buybacks
• $2.43 billion is more than July 2012 adjusted capital
• $2.43 billion is four times July 2013 after tax income

This means the new Intuit computer centers are probably vastly more expensive than what Intuit now needs or will need, because no one read The Big Switch.

In search of tax-friendly states for retirees

Kurt Rossi for NJ.com writes:  For many retirees, retirement is a bit more challenging than they thought. Interest rates have been low, investment returns have been volatile and health-care costs are on the rise. There simply isn’t any room for excessive taxes in the retirement equation.

In an effort to make their funds go further, many retirees have been forced to relocate to more cost effective and tax-friendly states. There are plenty of areas that offer low income tax, sales tax, inheritance and estate taxes, not to mention significantly reduced real estate taxes. In fact, a few states provide low tax rates and some nice weather, too.

Since any reduction in taxes can be used to improve your personal cash flow, retirees may want to consider the following states which offer attractive tax rates.

Delaware

As the state with one of the most tax-friendly reputations for businesses and individuals, Delaware can be a great place for retirees to call home. While Delaware does have an income tax ranging from 2.2 percent to 6.75 percent, residents do enjoy no sales tax and no estate or inheritance taxes for 2013. Social Security benefits are exempt from state income taxes and those older than age 60 can exclude $12,500 worth of qualified pension benefits, investment income, dividends, interest, rental income and even capital gains.

Additionally, eligible taxpayers age 65 and older may qualify for a credit equal to half the school property taxes up to a $500 limit. If that isn’t enough, the average property tax rate as a percentage of the average home value is only 0.52 percent, making Delaware one of the top five states in the nation when it comes to property tax affordability.

Georgia

Retirees looking to stretch their dollars may find that Georgia offers some very attractive tax laws. Georgia does impose an income tax rate varying from 1 to 6 percent and an overall state sales tax rate of 4 percent. However, residents age 65 and older can exclude up to $65,000 of retirement income for those filing single and $130,000 for joint tax filers. Since this applies to pensions, dividends, interest, rental income, royalties and capitals gains, some serious savings can be realized.

While property taxes are not as low as other states, the average property tax rate as a percentage of the average home value is still only 0.97 percent. With no estate or inheritance taxes, Georgia may also offer those concerned about estate planning additional tax savings for beneficiaries.

Nevada

Retirees might just hit it big in this state. With no state income taxes, retirement income sources including pensions and Social Security escape taxation. While there is a 6.5 percent sales tax imposed, it does not apply to food and prescription drugs leaving retiree with more dollars in their pocket.

Property taxes aren’t too high either as the average property tax rate as a percentage of the average home value is only 0.90 percent. Nevada residents also benefit from no estate or inheritance taxes.

Florida

The “snow birds” from the northeast have already begun making their annual migration to this retirement destination. Why do so many retirees make Florida their primary residence? Besides the weather, Florida offers some attractive tax rates.

Since there is no state income tax, retirees will enjoy more of their retirement income including pensions, Social Security, dividends and interest. Unfortunately, Florida does have a sales tax of up to 7.5 percent. However, it does not apply to food or prescription and nonprescription drugs.

Also consider that real estate taxes as a percentage of the average home value are only 0.97 percent and the assessed value of property will not increase more than 3 percent or the consumer price index, whichever is less.

Additionally, those who have a permanent residence in Florida may be eligible to receive a homestead exemption. Retirees concerned about estate planning also will benefit because Florida does not have inheritance or estate taxes.

South Carolina

From historic Charleston to Myrtle Beach, this retirement destination has a lot to offer retirees concerned about taxes. Although, South Carolina does impose an income tax of 3 to 7 percent and a sales tax of 6 percent, there are no taxes owed on Social Security benefits. Additionally, those 65 and older may be able to deduct up to $15,000 per spouse in qualifying retirement income.

Homeowners age 55 or older may be qualify for a local tax exemption on the first $50,000 of their property’s fair market value. With real estate taxes as a percentage of the average home value reaching only 0.54 percent, South Carolina lands in the top five states nationally for real estate affordability.

Finally, South Carolina residents are not subject to inheritance or estate taxes.

There are many attractive retirement destinations for retirees to consider. While minimizing taxes may help improve the overall quality of your retirement, it should not be the only consideration as family and other factors may take precedence.

Keep in mind that while many states do not impose a state estate or inheritance tax, federal estate taxes may still apply.

Since everyone’s retirement goals are unique, consider speaking to your tax adviser to determine the most appropriate plan for your circumstances.

Tax implications when selling your home

 Tania Soussan / For the Journal | writes: Selling your home at a profit is one of the few times you can make money on an investment and not pay tax.

There are, of course, plenty of rules and some caveats.

If you sell your main residence at a gain, you can exclude up to $250,000 of the profit – or $500,000 for couples filing a joint tax return – from your income. You must have owned and used the property as your main home for at least two out of the five years before the date of sale, according to the Internal Revenue Service.

That’s enough to cover most homeowners in this market where real-estate prices have not gone through the roof.

“Most people, even if they do have a gain, don’t pay tax, particularly in Albuquerque,” said CPA Jim Hamill, a tax specialist at Reynolds Hix & Co.

If you can exclude all of the gain, you get another bonus – less paperwork. It’s not necessary to report the sale at all on your tax return. But if you can’t or don’t exclude all the profit, you’ll have to file Form 8949. You’ll also have to report the sale if you received a Form 1099-S, Proceeds From Real Estate Transactions, according to the IRS.

Things do get a bit prickly if you used your home as a rental property before living in it yourself.

And “if they ever used the property for business purposes … then they could still have problems,” Hamill said. “They might not be able to claim the full deduction.”

The rules for a rental property are a bit complicated. The profit from the sale of a rental home is taxable, and a 2009 change in tax law requires home sellers to prorate the amount of the exclusion they can claim.

Take the case of a house that was used as a rental for eight years and then lived in for two years before being sold. The home was a rental for 80 percent of the time and a main residence for 20 percent of the time. Therefore, the seller can exclude 20 percent of the profit on the sale of the house from his or her income but must pay tax on 80 percent of the gain, Hamill said. Any rental use that occurs before 2009 is exempted.

Property owners who’ve claimed a tax deduction for having a home office must report any depreciation they claimed after May 6, 1997, as a gain.

That shouldn’t scare people off from claiming depreciation, Hamill said, in part because the tax rate will be lower at the time the home is sold.

“As long as somebody qualifies, most tax advisers would say, ‘Go ahead and claim it,’” he said.

The new IRS rule that allows filers to claim $5 a square foot for a home office deduction instead of calculating actual expenses does not include depreciation, by the way.

Hamill stressed that these sorts of complicated scenarios are uncommon. In 1,000 tax returns, only about 100 will include home sales and only 10 or 20 of those will involve something quirky, he said.

A couple of things to remember: If you own more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the profit you make when selling any other home. And you can exclude a gain from the sale of only one home in a two-year period.

So, what’s your main home? That’s a good question and one people sometimes are tempted to fudge the answer to by calling their vacation home their principle residence, said Hamill, who also writes a tax column for the Journal .

“There’s no bright line test. It’s sort of a list of factors,” he said. “This is the only asset where you can completely exclude the gain. It creates an incentive for people to say, ‘This is my primary residence.’”

Basically, if you have two homes and live in both of them, your main home is usually the one you live in most of the time. But you can prove that the home where you spent less time is your main home if that’s where you are registered to vote, have a driver’s license and are involved in organizations, for example.

A few more things to keep in mind:

You cannot deduct a loss from the sale of your main home. And converting your house into a rental generally won’t help because any loss is calculated based on the fair market value at the time you turned the property into a rental.

You can deduct only the property taxes you actually pay. Property taxes here are paid retroactively so the seller generally is charged for those taxes as part of the closing of the real-estate sale. The seller should use that settlement form to show how much property tax they can deduct. The buyer, meanwhile, cannot deduct that amount, Hamill said.

When buying a first home late in the year, be aware that you might not have enough expenses to itemize deductions and therefore won’t be able to deduct mortgage interest until the next year, Hamill said.

Special rules may apply when you sell a home for which you received the first-time homebuyer credit within three years. See Publication 523 for details.

Tax Deductions: Alimony Payments

EG Conley writes: If your marriage breaks up and you make payments to your ex-spouse, those payments may qualify as deductions on your tax return – or they might not.  On the other hand, payments which are deductible by one spouse are included in the taxable income of the spouse receiving the payments. Many factors are involved in negotiating a divorce decree or separation agreement, and tax considerations should be one of those factors. Don’t assume that any payments you make will be tax deductible. The IRS has specific rules for the tax treatment of payments to a former spouse. Consider the requirements below and consult your tax advisor in order to get your desired tax results.

Requirements for Deductible Alimony

A payment must meet the following requirements to qualify as deductible alimony on your federal income tax return:

• No voluntary payments: The payment must be pursuant to a written divorce or separation agreement. Payments made voluntarily, or amounts above those required by the written agreement, cannot be deducted on your tax return.
• Payments must be made directly to your ex or on behalf of your ex: Payments to third parties under the terms of the agreement, such as direct payment of rent or mortgage on behalf of the former spouse, can qualify.
• Payments must stop at death: The payments must be required, whether by terms of the agreement or under state law, to stop when the former spouse dies. If the payments are to continue after the spouse dies (i.e. to the spouse’s estate), then none of the payments – including those made while the spouse is alive – are deductible.
• Cash only: The payments must be made in cash or cash equivalent to be taken as a tax deduction.
• Child support doesn’t qualify: Payments that are considered child support don’t qualify as alimony. This includes payments that are clearly noted as child support in the agreement, and payments which the agreement denotes as alimony but which are linked to a contingency related to a child. For example, if “alimony” is required at $2,000 per month, but it decreases to $1,500 when a child turns 18, then the $500 difference is nondeductible child support.
• Terms of the agreement: The divorce or separation agreement cannot state that the payments are not alimony.
• Must live apart: You must be living apart for the payments to qualify as alimony.