Cloud Accounting Player Gem Accounts Enters U.S. Market

Seth Fineberg for Accounting Today writes: Australia-based Gem Accounts has launched a U.S. version of its midmarket-focused cloud accounting product, with plans to staff a newly opened office in San Francisco.

Gem Accounts claims to be targeting medium to large-sized businesses interested in replacing their desktop accounting systems with a cloud product, or perhaps upgrading from existing small business cloud accounting products.

The U.S. version of Gem Accounts cloud accounting features inventory management, full quote to cash workflows, purchase orders, standard U.S. chart of accounts, and a flexible payroll system.

Other key features of Gem Accounts include an accounting workflow from creating quotes to sales transactions, invoices, cash collection, full reporting set and multi company consolidations; a recurring transaction manager; project tracking and billing including timesheets; and partner and reseller portals.

The company has offices in Melbourne, Australia; Aukland, New Zealand; and London and just opened an office on Mission Street in San Francisco. Gem plans to have it more fully staffed this month, meanwhile its support center runs 24/7 for ticketing but its call center currently runs for Asia, Australia and New Zealand business hours only. Gem is in the process of expanding capacity in the call center and will have 24-hour availability in the U.S. by the end of this month, according to chief technology officer Jonathan Eastgate.

Along with a U.S. office, Gem Accounts will be looking to establish a partner network with accountants and resellers as well.

Other features coming to the Gem Accounts product in the next few weeks include a fixed asset register, automated depreciation tools, and batch processing for large payrolls.

“At Gem we aren’t looking to compete with the existing cloud accounting packages already on the market, we are creating a new space for those businesses that don’t fit into the limitations of these existing packages be that either through structural limits like transaction volumes or feature limitations,” said Gem founder David Wilson. “It’s now possible to start off a small business on something like Quickbooks Online, Kashoo, Xero, MYOB Live or Saasu so your client can start to adapt to the benefits of the cloud, but when they grow and need more accounting functionality or start hitting system limits, then you can move them up to Gem. Once they grow into an enterprise or need even greater functionality, the options are to move them off Gem and onto something like SAP. The beauty is that now with Gem the entire lifecycle of a business can run accounting in the cloud.”

Pricing and additional information can be found on the Gem Accounts site.

What are the Tax Rates on Capital Gains and Dividends?

Brunercox.com write: Despite the passage of the American Tax Relief Act of 2012 (ATRA) - which its supporters argued would bring greater certainty to tax planning – many taxpayers have questions about the tax rates on qualified dividends and capital gains.

Background
Before ATRA, the maximum tax rate on net capital gains and qualified dividends was 15 percent for taxpayers in the 25, 28, 33, or 35 percent individual income tax brackets (the 35 percent rate was the highest individual tax bracket before ATRA). For 2008 through 2012, taxpayers in the 10 and 15 percent individual income tax brackets enjoyed a zero percent tax rate on net capital gains and qualified dividends. Generally, the 15 and zero percent rates applied to long-term capital gains (resulting from the sale of an asset held for longer than one year) and qualified dividends (such as dividends received from a domestic corporation and certain foreign corporations).

ATRA’s rates
Under ATRA, the 15 percent rate on net capital gains and qualified dividends is made permanent for taxpayers in the 25, 28, 33, or 35 percent individual income tax brackets. This treatment applies for 2013 and all subsequent years unless modified by Congress in the future. ATRA also made permanent the zero percent tax rate on net capital gains and qualified dividends for taxpayers in the 10 and 15 percent income tax brackets. This treatment applies for 2013 and all subsequent years unless modified by Congress.
Additionally, ATRA created a 20 percent tax rate on net capital gains and qualified dividends intended to apply to higher income taxpayers. The 20 percent tax rate applies to qualified capital gains and dividends of taxpayers subject to the revived 39.6 percent income tax bracket. Taxpayers are subject to the 39.6 percent income tax bracket to the extent their taxable income exceeds certain thresholds: $450,000 for married couples filing joint returns and surviving spouses, $425,000 for heads of households, $400,000 for single filers, and $225,000 for married couples filing separate returns. These threshold amounts are projected to be slightly higher in 2014 as indexed for inflation.

Collectibles and unrecaptured Code Sec. 1250 gain
The Tax Code has special tax rates for collectibles and unrecaptured Code. Sec. 1250 gain. These tax rates were not changed by ATRA or other legislation. A 28 percent tax rate applies to collectibles, and a 25 percent tax rate applies to unrecaptured Code Sec. 1250 gain.

Short-term capital gains
The tax rates are significantly different for short-term capital gains than for long-term capital gains. Short-term capital gains are taxed at ordinary income tax rates. This means that the tax rate on short-term capital gains can range from 10 percent to 39.6 percent, depending on the taxpayer’s situation. Income generated from non-capital assets are also subject to these rates.

Net investment income surtax
Unrelated to ATRA’s changes is a new 3.8 percent surtax imposed by the Patient Protection and Affordable Care Act (PPACA) on individuals, estates and trusts that have certain investment income above threshold amounts including $250,000 for married couples filing jointly and $200,000 for single filers. These amounts are not subject to an annual adjustment for inflation. The 3.8 percent surtax took effect January 1, 2013 and therefore will be reflected on 2013 returns filed in 2014.

Xero more than doubles Australian customer base / In the 12 months until the end of September 2013, Xero has seen global growth of 89 percent, and experienced growth in Australia of 143 percent.

Chris Duckett for ZD Net writes:  New Zealand accounting software vendor Xero has announced significant growth in its worldwide customer base today, with the company now having 211,300 paying customers on its books as of September 30, which is up 89 percent on the 2012 figure of 111,800. 

Broken down by country, New Zealand remains the Kiwi vendor's largest market, with 85,500 customers, up 49 percent; Australia is catching up rapidly, though, with Xero now having 79,100 customers across the Tasman Sea, up from 32,500 at the same time last year; the United Kingdom fell just short of doubling its 15,100 customers in 2012, with the company now having 30,100 customers.  The rest of the world, including the United States, experienced 141 percent growth and rose from 6,900 to 16,600.

Although Australia is slightly behind Xero's homeland in customer terms, it is now Xero's largest market by revenue. Of its NZ$70.6 million annualised committed monthly revenue, Australia makes up NZ$30.2 million, followed by New Zealand at NZ$23.9 million, the UK on NZ$10.2 million, and the rest of the world making up NZ$6.3 million.

"We now have 79,100 paying customers in Australia, almost two and half times the previous year," said Xero Australia managing director, Chris Ridd, in a statement. "We are seeing an entire industry coming together, made up of accountants, bookkeepers, financial advisers, add-on developers, cloud integrators, and even banks, recognising the opportunity to connect via the cloud and drive productivity gains for small business."

"All of these factors make us confident about the continued popularity of Xero online accounting software in Australia against the incumbents."
Xero also doubled its global workforce to 584 employees over the past twelve months, 90 of which are based across Melbourne, Sydney, Canberra, Perth, and Brisbane.

The company said that its operating revenue for the first half of FY 2014 would exceed NZ$30.3 million, which is says is up 84 percent on last year, once the revenue from its discontinued Xero Personal product is removed from the figures.

10 Sweet, Often-Overlooked Tax Breaks

Kay Bell for Bankrate/Yahoo writes: The goal of every taxpayer is to make sure the Internal Revenue Service gets as little as possible. For that to happen, you need to take every tax deduction, credit or other income adjustment you can.

Here are 10 tax breaks -- some for itemizers only, others that any filer can claim -- that often get overlooked but could save you some tax dollars.

And yes, even though you got an extension until Oct. 15 to file your 2012 tax year Form 1040, you can still claim any of these tax deductions or credits that apply to your situation.

1. Additional charitable gifts
Everyone remembers to count the monetary gifts they make to their favorite charities. But expenses incurred while doing charitable work often aren't counted on tax returns.
You can't deduct the value of your time spent volunteering, but if you buy supplies for a group, the cost of that material is deductible. Similarly, if you wear a uniform in doing your good deeds, for example as a hospital volunteer or youth group leader, the costs of that apparel and any cleaning bills also can be counted as charitable donations.

So can the use of your vehicle for charitable purposes, such as delivering meals to the homebound in your community or taking the Boy Scouts or Girls Scouts troop on an outing. The IRS will let you deduct that travel at 14 cents per mile.

2. Moving expenses
Most taxpayers know they can write off many moving expenses when they relocate to take another job. But what about your first job? Yes, the IRS allows this write-off then, too. A recent college graduate who gets a first job at a distance from where he or she has been living is eligible for this tax break.

3. Job hunting costs
While college students can't deduct the costs of hunting for that new job across the country, already-employed workers can. Costs associated with looking for a new job in your present occupation, including fees for resume preparation and employment of outplacement agencies, are deductible as long as you itemize. The one downside here is that these costs, along with other miscellaneous itemized expenses, must exceed 2 percent of your adjusted gross income before they produce any tax savings. But the phone calls, employment agency fees and resume printing costs might be enough to get you over that income threshold.

4. Military reservists' travel expenses
Members of the military reserve forces and National Guard who travel more than 100 miles and stay overnight for the training exercises can deduct related expenses. This includes the cost of lodging and half the cost of meals. If you drive to the training, be sure to track your miles. You can deduct them on your 2012 return at 55.5 cents per mile, along with any parking or toll fees for driving your own car. You get this deduction whether or not you itemize, but you will have to fill out Form 2106.

5. Child, and more, care credit
Millions of parents claim the child and dependent care credit each year to help cover the costs of after-school day care while Mom and Dad work. But some parents overlook claiming the tax credit for child care costs during the summer. This tax break also applies to summer day camp costs. The key here is that the camp is a day-only getaway that supervises the child while the
 parents work. You can't claim overnight camp costs.

Remember, too, the dual nature of the credit's name: child and dependent. If you have an adult dependent who needs care so that you can work, those expenses can be claimed under this tax credit.

6. Mortgage refinance points
When you buy a house, you get to deduct the points paid on the loan on your tax return for that year of purchase. But if you refinance your home loan, you might be able to deduct those points, too, as long as you use refinanced mortgage proceeds to improve your principal residence.

7. Many medical costs
Taxpayers who itemize deductions know how difficult it often is to reach the 7.5 percent of adjusted gross income threshold required before you can claim any medical expenses. It might be easier to clear that earnings hurdle if you look at miscellaneous medical costs. Some of these include travel expenses to and from medical treatments, insurance premiums you pay for from already-taxed income and even alcohol- or drug-abuse treatments.

These added medical expenses will be even more valuable on your 2013 tax return. Beginning this tax year, a health care reform act provision now requires you have medical expenses of more than 10 percent of your adjusted gross income before you can deduct them.
Self-employed taxpayers who are not covered by any other employer-paid plan, for example, one carried by a spouse, can deduct 100 percent of health insurance premiums as an adjustment to income in the section at the bottom of Page 1 of Form 1040.

8. Retirement tax savings
The retirement savings contribution credit was created to give moderate- and low-income taxpayers an incentive to save. When you contribute to a retirement account, either an individual retirement account (traditional or Roth) or a workplace plan, you can get a tax savings for up to 50 percent of the first $2,000 you put into such accounts. This means you get a $1,000 tax credit, which is a tax break that directly reduces dollar for dollar any tax you owe.

9. Educational expenses
The Internal Revenue Code offers many tax-saving options for individuals who want to further their education. The tuition and fees deduction can help you take up to $4,000 off your taxable income and is available without having to itemize.
The lifetime learning credit could provide some students (or their parents) up to a $2,000 credit.
Don't forget the American opportunity tax credit, which offers a dollar-for-dollar tax break of up to $2,500. This education tax break was created as part of the 2009 stimulus package as a short-term replacement for the Hope tax credit, and was extended through tax year 2017 as part of the American Taxpayer Relief Act of 2012, also known as the "fiscal cliff" tax bill.

10. Energy-efficient home improvements
Generous tax breaks for energy-efficient home improvements expired at the end of 2010, but some homeowners still might be able to pocket a tax credit of up to $500 on their 2012 and 2013 returns, again thanks to a provision in the fiscal cliff bill, for a few common residential energy upgrades.

The bad news is that the tax credit is just a third of what was previously available. You also now must pay attention to specific spending limits, such as $150 for high-efficiency furnaces and boilers, $300 for air conditioners and heat pumps and $200 for replacement windows. And the overall $500 tax credit cap applies to anyone who received any previous energy tax credit since Jan. 1, 2005.

But if you qualify, the tax break is a tax credit, giving you a dollar-for-dollar reduction of your tax bill. And when it comes to taxes, every dollar saved helps.

Planning for State Estate Taxes

Michael Foltz for the Wall St Journal writes: In the last 30 years, advisers have looked at federal estate taxes much more closely than they have state estate taxes. But now that the federal estate tax exemption is $5.25 million and the exemption between spouses is portable, most people don't end up paying federal estate taxes.

Therefore, when looking for ways to lower estate taxes for clients, advisers need to start paying attention to tax laws in individual states and seriously consider taking advantage of techniques to mitigate any state estate taxes. 

There are 19 tax jurisdictions, 18 states and Washington, D.C., that levy their own estate taxes, which can be as much as 16%. Also each state has different estate tax exemptions: New York has a $1 million exemption whereas New Jersey's exemption is only $675,000. So there's a lot to pay attention to. And, since the federal estate tax is no longer such a material consideration for most people we have to think about not only state estate taxes, which include inheritance and gift tax, but also state income tax.

Where a client retires is a very relevant question. Some clients may be willing to relocate to states that have beneficial tax laws. However, for those who don't want to move, one way to mitigate state estate taxes is to adopt estate-planning strategies in a jurisdiction where there is no tax. This can be done even if you don't live there. 

For example, often a husband and wife will have a revocable living trust that provides for a credit shelter trust upon death. It's becoming more popular to put estate tax planning vehicles like these in place during a client's lifetime. We can put assets in that credit shelter trust, and you don't necessarily have to create the trust in the state that the client resides. If you're an Illinois resident, for example, you can create this lifetime credit shelter trust in South Dakota--a state that does not tax trust income--and thereby escape the 5% Illinois state income tax.
To determine how to help clients, especially those willing to move, advisers should not only take a look at each state's estate taxes, but also how each state taxes wage income, capital gains, interest dividend, pension income, Social Security income and sales tax.

We ran an internal study that examines income taxes, state inheritance and gift taxes, real estate tax, and the sales tax. We found that Wyoming, Alaska, South Dakota, Florida, Nevada, New Hampshire, Texas and Washington represent some of the best jurisdictions to consider retiring. 

Tax laws have changed a lot over the last couple of years, and it's important that advisers talk to clients about the current tax laws, and also remind them that especially federal taxes could change in the near future. We need to adequately account for state taxes and make sure we are considering and implementing proper techniques during a client's lifetime.