Xero Makes Leaving QuickBooks® Easy With Free Conversion Service / New 'Ditch Your Desktop' Service Brings Xero's Online Accounting to Millions

Xero online accounting software, today announced a free QuickBooks® Conversion Service to convert QuickBooks data directly into its powerful cloud accounting solution. The service untethers over four million small businesses and accounting professionals from Intuit® QuickBooks, providing them easy access to a disruptive five-star online accounting experience, as noted by CPA Practice Advisor.

A service long in demand, Xero's QuickBooks Conversion platform is the first service to resolve the industry hurdle of comprehensive data migration to a non-Intuit system. The service will be demonstrated nationally during an upcoming roadshow, beginning October 21 in Baltimore and spanning 20 cities over the next month. For more details on when Xero will be in your town, visithttp://www.xero.com/us/roadshow.

"Any small business accountant will tell you that converting accounting platforms can be a nightmare. For years, my clients have felt trapped in their current solutions," said Blake Oliver, CEO, Cloudsourced Accounting. "With Xero's QuickBooks Conversion, I've freed my clients from the tyranny of these slow and archaic financial systems. Their businesses now move at breakneck speed and by migrating QuickBooks data into Xero's cloud-based accounting software, we can now access and understand their full financial data whenever and wherever."

Xero's QuickBooks Conversion Service is an industry first. According to a recent Forbes article, "No one's figured out migration... none of these vendors have really come up with a seamless way to migrate data from your old system..." Xero has cracked this code, as the conversion transfers nearly every component of a small business' QuickBooks financial landscape directly into the Xero platform, including chart of accounts, contacts, inventory items and transaction history such as invoices, payments and more.

"We created our QuickBooks Conversion Service in response to strong industry demand. With this service, we're removing the last barrier for small businesses and their accounting partners to realize the power of the cloud in building a strong financial foundation," said Jamie Sutherland, president, Xero U.S. "We're thrilled to make this long awaited industry demand a reality and spread the news to small businesses and accounting professionals across the U.S. during our national road show."

Xero's QuickBooks Conversion is available immediately. Learn more at www.xero.com/us/convert.

Tax Preparation Fees Deduction / Deducting tax preparation fees

About.com writes:  Individuals can deduct the cost of hiring a tax professional to prepare their tax returns.  This also includes the cost of tax planning advice, representation in a tax-related audit, collections and/or criminal investigations. Individual taxpayers can deduct their professional tax preparation fees as a miscellaneous itemized deduction on their Schedule A. Business taxpayers also deduct their professional tax preparation fees as a business expense on the tax forms relevant to the business.  

What Types of Fees Can Be Deducted

• Fees for preparing a tax return
• Advice on tax planning
• Legal counsel on tax issues
• Legal fees for representation in a criminal tax matter
• Fees for representation in a tax audit
• Fees for representation on tax collections
• The cost of tax preparation software
• The cost of tax-related books and other publications

When to Deduct Tax Preparation Fees

Fees for professional tax preparation are deducted in the same year the fee is paid. So, fees paid in 2013 for preparing your 2012 tax return are deducted on your 2013 tax return, since that was the year the fee was paid.

Where to Deduct Tax Preparation Fees

The following quotation from IRS Publication 529 provides a clue into how tax preparation fees are reported on the tax return:

"Deduct expenses of preparing tax schedules relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F) on the appropriate schedule. Deduct expenses of preparing the remainder of the return on Schedule A (Form 1040), line 22, or Form 1040NR, Schedule A, line 8."

In other words, for a personal income tax return, professional tax preparation fees can be deducted in the following places:

• Tax preparation fees related to preparing a sole proprietor's Schedule C are deducted on Schedule C on the line for legal and professional fees.
• Tax preparation fees related to preparing Schedule E for rental income and expenses are deducted on Schedule E on the line for legal and professional fees.
• Tax preparation fees related to preparing Schedule F for farm income and expenses are deducted on Schedule F under the section for other expenses.
• Tax preparations fees related to other parts of the tax return are deducted on Schedule A on line 22 as a miscellaneous itemized deduction.

Relevant Tax Laws on Deducting Tax Preparation Fees

Internal Revenue Code section 212 permits the deduction of tax preparation fees. That Code section says,

"In the case of an individual, there shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year ... in connection with the determination, collection, or refund of any tax."

In the Treasury Regulations section 1.212-1, paragraph l, provides further guidance. This part of the Treasury Regulations says,

"Expenses paid or incurred by an individual in connection with the determination, collection, or refund of any tax, whether the taxing authority be Federal, State, or municipal, and whether the tax be income, estate, gift, property, or any other tax, are deductible. Thus, expenses paid or incurred by a taxpayer for tax counsel or expenses paid or incurred in connection with the preparation of his tax returns or in connection with any proceedings involved in determining the extent of his tax liability or in contesting his tax liability are deductible."

4 Tax Planning Strategies for Parents / Have you started your tax planning?

Sally Herigstad for TaxAct writes:   If you wait until preparing your tax return to start thinking about tax planning, you’re missing some of your best opportunities to save money.

To really make a difference on your refund or how much you owe for 2013,start thinking about taxes before the year ends.

Take a look at these tax planning strategies and see which ones can help you:

1. Pay your child

If you have a business, one way you can legitimately reduce your tax bill is to pay your kids to work in the business.

Your kids learn the value of work and earning money, and they generally pay less tax on the income than you would, because they are probably in a much lower income tax bracket.

If you employ your child in your unincorporated business, you don’t have to pay or withhold FICA tax (Social Security and Medicare) on your child as long as the child is under age 18.

If you pay your child for domestic work (household chores), you don’t have to pay or withhold FICA tax as long as he or she is under age 21.

You don’t have to pay FUTA, federal unemployment tax, in either case as long as your child is under age 21.

You don’t have to worry about the “kiddie tax” when you pay your kids to work. The kiddie tax does not apply to earned income.

Make sure your kids can actually do the work they are being paid for, and that the amount you pay them is reasonable.

You can generally only deduct payments made to your kids to work in your business, and you must actually make the payments.

2. Make cash and noncash contributions by December 31

If you have kids, you probably have a constant supply of outgrown clothing and forgotten toys. Get a fresh start for the new year – and a great tax deduction – by hauling it to a charitable thrift shop.

Don’t forget to ask for a receipt, and make notes about what you donated.

If you donate something worth more than $250, you’ll need a statement from the charitable organization describing the item (but not a valuation) and whether you received anything in value in return for the contribution.

If you’re making cash contributions to your favorite charities, including organizations your children may be involved in, consider stepping it up at the end of the year.

You’re going to contribute anyway – why not write a check or put a contribution on your credit card by December 31?

3. Consider giving a portion of large gifts to children before the end of the year

If you want to give a large gift to your child – more than $14,000 (in 2013) – consider spreading the gift out over two or more years to avoid having to file a gift tax return.

For example, say you want to give your daughter $20,000 to use as a down payment on a house.

If you give it to her all at once, you must file a gift tax return. If you give her $10,000 in December, and another $10,000 in January, you’re below the limit for both years.

4. Make sure you know who is claiming the child as a dependent for the year

The parent who lives with the child for more than half the year is allowed to claim the dependency exemption for the year on his or her tax return, unless the custodial parent relinquishes the right to take the dependency to the other parent.

In addition, if you provide a home for at least one dependent for more than half the year, you can file as a head of household instead of as single. You’ll generally pay less tax filing as head of household.

Xero Announces Major Growth as Online Accounting Takes Hold / United States/Rest of World Region More Than Doubles, Xero Opens Multiple Offices Across US as Company Rapidly Expands

Xero online accounting software, has announced the company experienced 89% global growth in customers for the year to September 30, 2013. Customer numbers more than doubled in its United States/Rest of World region (excluding United Kingdom, Australia and New Zealand), with 141% growth. Additionally, the company announced that global revenue has increased 84% for the six-month period to September 30, compared to the same period last year.

Xero also announced today it has moved its US Headquarters in San Francisco to a new state-of-the-art, 25,000 square foot facility, providing capacity for future growth for core US sales, marketing and development teams. The company now has 100 employees across the US, with new offices being opened in Denver and New York this year. This adds to the Los Angeles office opened earlier this year and a presence in Atlanta. Globally, Xero has opened its second office in London and is growing rapidly in Australia and New Zealand.

"The secret is out: cloud computing has turned accounting on its head, opening new insight and opportunity for financial advisors and businesses," says Jamie Sutherland, president, Xero U.S. "Financial professionals are quickly moving away from legacy desktop solutions like QuickBooks and embracing the power of the cloud. We're thrilled with the massive growth and will continue to make investments in resources, facilities and technologies to support our customers, partners and expanding Xero team into 2014 and beyond."

Xero's affordable and easy-to-use cloud-based accounting services are now in use by more than 210,000 customers and 8,800 accountant partners globally. The company is driving and tapping into demand from accountants and bookkeepers to manage their clients' finances in the cloud. A recent US survey commissioned by Xero revealed 43% of accountants are looking to offer new cloud services, highlighting the market potential.

"We switched to Xero's cloud-based accounting platform years ago and have never looked back," said Bridget Labus, Owner, The Sixth Course. "Xero makes accounting almost pleasurable: its software is so easy-to-use and affordable, we can make certain our focus is on revenue rather than billing."

Expansion

Xero is also opening a Customer Experience office in Denver on October 14, strengthening the company's 24/7 support for customers both in the United States and around the world. The Denver office will handle bank feed, billing and technical queries, as well as payroll and tax inquires.

In addition to the company and customer growth, there has been an accelerated expansion in the number of software applications that integrate with Xero. This includes key integrations announced this year with high profile partners such as Expensify, Harvest and SurePayroll. As of today, over 300 applications integrate with Xero's cloud accounting platform, up from 160 a year ago.

"We help hundreds of clients navigate the world of tax and accounting, and Xero is an invaluable tool in our effort," said Bruce Phillips, CPA and Managing Member, Harshman Phillips & Company. "Once we implement Xero, our clients are often blown away by the platform's usability and accessibility. Xero helps us deliver a unique and powerful competitive differentiator."

Xero also continues to garner industry accolades for its cloud-based accounting platform. CPA Practice Advisor awarded the company 5 stars; K2 Enterprises gave a nod to Xero as the Best CPA Program as part of its annual Quality Awards; and Xero was named a Small Biz Trends Top 100 Small Business Influencer Champion.

Wring tax savings out of capital loss carryovers

Business Management Daily writes: Suppose you’ve carried forward a short-term capital loss from securities sales in prior years. Now you’re poised to sell stock at a sizable long-term capital gain.

Strategy: Think twice. From a tax perspective, it doesn’t make sense to use a short-term loss to offset a long-term gain, which is taxed at more favorable rates than a short-term gain.

Unless circumstances dictate otherwise, postpone the sale or realize a short-term gain instead.

Here’s the whole story: Under longstanding rules, you can use capital losses to offset capital gains plus up to $3,000 of ordinary income ($1,500 if you used married filing separate status). Any excess is then carried forward to the next year. So a capital loss carryover is like having an ace up your sleeve.

Conversely, the maximum federal tax rate on long-term capital gain is 15% for most investors. For 2013 and thereafter, the American Taxpayer Relief Act (ATRA) increased the maximum tax rate to 20% for single filers with taxable income above $400,000 and joint filers above $450,000. But even with the ATRA change, the tax rates for long-term gains still beat the tax rates on ordinary income for upper-income investors. The top ordinary income tax rate in 2013, which includes short-term gains from securities sales, is 39.6%—almost twice as high.

Therefore, if you use a short-term loss carryover to offset a long-term gain, you’re effectively wasting your best tax punch.

Example: You have a short-term loss of $10,000 that you carried over from 2012. Now you’re sitting on a long-term stock gain of $15,000 and a short-term stock gain of $12,000. You expect to be in the regular 35% tax bracket in 2013.

If you sell the stock producing the long-term gain, the carryover loss will offset $10,000 of your long-term gain. The remaining $5,000 gain is taxed at 15% for a tax of $750 (15% of $5,000). When you sell the short-term gain stock in 2014, the tax will be $4,200 (35% of $12,000), assuming no other changes. Total tax: $4,950 ($750 + $4,200).

Better approach: Sell the stock showing the $12,000 short-term gain. The carryover loss still offsets $10,000 of gain, but now you pay tax of only $700 (35% of $2,000) on the net short-term gain. When you sell the long-term gain stock in 2014, the tax will be only $2,250 (15% of $15,000), assuming no other changes. Total tax: $2,950 ($700 + $2,250).

In other words, this strategy saves you $2,000 ($4,950 – $2,950).

Tip: Don’t let the “tax tail wag the dog,” but factor taxes into investment decisions.

The Affordable Care Act and Your Taxes

Mark Steber for the HuffPo writes: There's a lot of information floating around about the Affordable Care Act (ACA), and it is increasingly difficult to understand what the tax implications are -- and there are many. Beginning in 2014 there are two important tax implications of the ACA:

• A Tax Credit to help you pay your insurance premiums, if you qualify
• Tax Penalties if you do not have health insurance

What does that mean? Your health insurance is now tied to your taxes. The Premium Tax Credit is a refundable credit to help offset the cost of health insurance premiums for qualifying taxpayers, beginning in 2014. There are two options for claiming the credit. You can choose to take an advance payment of the advanced credit based on your estimated income and family size for the year. An equal portion of the estimated credit is paid directly to the insurance company each month during the tax year. When tax time comes around and you file your return, you must compare the prepaid credit against the actual credit allowed. If the there is a difference in the prepayments and the actual credit (i.e. if your income or family size is different than what you expected at the beginning of the year), you could be owed more premium tax credit, which would increase your refund. However, you could also be required to repay to the IRS the amount of any excess prepaid credit. In other words, if you do not use all of your credit, you may get more back when you file your tax return. Alternatively, if you take too much credit during the year to pay for your health insurance premiums, you may owe money back to the IRS when you file your tax return. You can also choose to pay your premiums out-of-pocket each month and collect the full credit when you file your taxes.

The amount of credit available for prepayment is calculated by the new Health Insurance Marketplaces (also known as exchanges). To qualify for the credit, your income must meet certain guidelines. For some people, if their income is below a certain level, they may be eligible for coverage under their state's Medicaid program, which is free. These taxpayers would not be eligible for the tax credit. Taxpayers who are enrolled in an insurance plan through their employer would also not be eligible for the credit.

Because the prepayment of the credit is based on estimated income and family size as reported to the insurance marketplace, taxpayers should notify their state's marketplace if there is a change in household income or in family size that could affect the amount of their actual credit. Changes in family size can include the birth or adoption of a child, a child moving out of the household, parents moving into the household, marriage or divorce. The Premium Tax Credit is not allowed if the taxpayer files using the Married Filing Separately status. Like the Child Tax Credit, the parent who claims a child's dependent exemption will include the child in the family household size when determining the amount of credit.

Sound confusing? It is. However, you don't want to ignore the requirement to purchase insurance because of the confusion, because if you don't have insurance after February 15, 2014, you may be assessed a tax penalty. The Shared Responsibility Provision allows a penalty assessment on certain taxpayers without insurance coverage and qualified employers who do not offer insurance. But I'll get into how the penalty works next week.

The ACA seeks to help millions of Americans without health insurance obtain affordable coverage. But it can be confusing. If you do not pay attention to the rules you could miss out on benefits or worse, owe a big payment back to the IRS in the future. Now is the time to choose a tax return preparer that can not only help you with your tax return, but can answer all your tax questions including those pertaining to the ACA tax rules and regulations. Do not miss out on the benefits and more importantly do not take credits and benefits without knowing the rules. Some additional work or a trusted advisor on the front end of enrollment can save you a great deal of money early on or prevent a big headache later.

Qualifying for Tax Breaks by Controlling Your Adjusted Gross Income

Mike Piper The Oblivious Investor writes: As we discussed a few weeks ago with regard to the Retirement Savings Contribution Credit, if you’re careful to pay attention to the applicable income limits (and how your income compares to those limits), you may be able to adjust your retirement account contributions slightly and in the process either make yourself eligible for the credit or increase the percentage used to calculate the credit.

As a few readers correctly pointed out, similar planning can be used to qualify for other tax breaks as well. (To which I would add that it can also be used to avoid being subject to certain negative tax provisions.)

For example, whether you are eligible for (or subject to) each of the following tax provisions depends (in part) on your adjusted gross income (i.e., your taxable income before subtracting your exemptions and standard or itemized deductions) or your modified adjusted gross income:

• The Lifetime Learning Credit,
• The American Opportunity Credit,
• The student loan interest deduction,
• The earned income credit,
• The child and dependent care credit*,
• The Affordable Care Act credit for health insurance purchased on one of the new exchanges,
• The personal exemption phaseout,
• The “Pease” limitation on itemized deductions, and
• The 3.8% tax on net investment income.

Admittedly, given that each of these tax provisions has its own income limit, it’s quite cumbersome to keep them all memorized such that you can always tell whether you’re close to qualifying for any other tax breaks.

For uses like this, tax software can be super helpful. You can simply try modifying your most recent return by bumping up pre-tax contributions of some sort (e.g. 401(k) or HSA contributions) by a few different amounts to see what happens with each change. Do any new tax credits or deductions appear? Or does anything else interesting happen, such as having some of your long-term capital gains or qualified dividends fall into a lower tax range such that they go from being taxed at 15% to not being taxed at all? (The catch, of course, with such experimentation is that tax software for the 2012 tax year will not account for tax provisions that are new in 2013.)

A Point of Caution

When trying to qualify for a given tax break, it’s important to check whether eligibility depends on your adjusted gross income (AGI) or your modified adjusted gross income (MAGI). Your modified adjusted gross income is your adjusted gross income, with a certain deduction (or a few deductions) added back in. But which deductions are added back in when calculating MAGI varies depending on which tax break we’re talking about. In other words, there are several different definitions for modified adjusted gross income.

The reason this is important is that you would not want, for example, to try to qualify for a given tax break by increasing your traditional IRA contributions if the tax break you’re trying to qualify for uses a definition of MAGI in which traditional IRA contributions are added back into AGI.

*Your eligibility for this credit is not actually a function of your AGI. Rather, theamount of the credit is a function of your AGI.