Xero Finally Adds Purchase Orders; Quotes to Come Next Year

Sholto MacPhearson for BoxIT writes:  Xero has plugged one of the largest holes in its cloud accounting software with today’s update which added the ability to create purchase orders. Xero had promised purchase orders, a standard feature on desktop accounting software, for several years.

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The purchase order feature created customisable purchase orders that could be emailed to suppliers and copied into bills or sales invoices for on-charging.

Xero had replicated the approval workflow from invoicing for purchase orders, which could be managed and searched from their own dashboard. Users could attach documents directly or uploaded to Xero Files, its online document storage.

Xero released a video showing how purchase orders worked.

Xero users were still waiting on core accounting functions such as quotes and better inventory control which wouldn’t arrive until next year. Another weak area, reporting, had been updated with GST reports the first to receive the new look. Xero was “completely rewriting all reports” with an improved reporting engine and more options, Xero product manager Andrew Tokeley said in a blog post.

Xero added more details about purchase orders and minor additions in its release notes.

Xero also revealed the projects on which its development team was already at work. Multiple email addresses for contacts was top of the list followed by email attachments to your files inbox and US payroll. A complete overhaul of the reporting framework to allow greater flexibility and control over reporting was also planned, with new aged payables and receivables reports the next on the agenda.

Xero was also spending more time on UK development with sales lists, reverse charges and acquisitions further down the pipeline.

Comments:  (visit the site to comment)

margaret carey

4 hours

so far it looks pretty comprehensive – you can match one PO to multiple bills and multiple bills to one PO as required. You can raise FX POs, include delivery dates, addresses and instructions. The columns in the list can all be sorted and you can customise the template. Looks like it was worth the wait

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Much Ado About Adviser Compensation / Confusion about adviser fees and regulation can cost investors

Daisy Maxey for the Wall St Journal writes:  Few investors truly understand how financial advisers get paid. And that confusion could cost them.

At the heart of the confusion: disagreement over what signifies proper use of such common terms in the business as "fee-only" and "fee-based"—and whether some advisers and broker-dealers are forthright enough in their disclosures to clients about their compensation.

Generally speaking, the term "fee-only" means that an adviser charges a flat fee or percentage of assets under management annually, an hourly fee or a fee per task. A fee-only adviser might charge 1% of the assets he or she advises on per year, for example.

The term "fee-based," meanwhile, has been adopted by many brokers amid defections of many clients from brokers to registered investment advisers, a flight driven by a perception that RIAs have fewer conflicts of interest than brokers because brokers are paid per transaction, and thus have an incentive to sell products. Fee-based, by industry standards, means the brokers charge a fee in addition to collecting commissions.

Fee Checking

But some in the industry say the term "fee-based" is trying to ride on the "fee-only" coattails, and should be replaced by "fee and commission." They believe "fee and commission" more clearly describes these brokers, who commonly charge commissions on transactions they perform for clients.

"There's been a perpetuation of this notion that fee-only is superior so people are trying to get on that bandwagon," says Kevin Keller, chief executive of the Certified Financial Planner Board of Standards. "That's why the public is confused between 'fee-only' and 'fee-based.' … We believe that 'commission and fee' is a more accurate and understandable term than 'fee-based.' "

The confusion isn't just confined to compensation. In addition, many investors don't understand how their advisers are regulated, an issue that affects whether the adviser is legally required to work in the client's best interest—known as being a fiduciary—and must divulge everything about his or her compensation.

The term "investment adviser" refers to an individual or firm that gives investment advice and perhaps manages a portfolio of investments for clients. Investment advisers operate under a fiduciary duty, requiring them to disclose conflicts of interest and costs to clients. They must register with the Securities and Exchange Commission unless they manage less than $100 million, in which case they must register with a state securities agency.

Not Fiduciaries

In contrast, broker-dealers, businesses that buy and sell securities and that may also give investment advice, are primarily overseen by the Financial Industry Regulatory Authority. Brokers don't operate under a fiduciary duty, except within a few states. As a result, while many are required to ensure that their investment recommendations are suitable for the client, they needn't divulge all compensation arrangements and conflicts of interest.

Broker-dealers are required under certain circumstances, such as when making a recommendation, to disclose material conflicts of interest to their customers, in some cases when a transaction is completed. In addition, federal securities laws and Finra restrict broker-dealers from participating in certain transactions that may present acute potential conflicts of interest.

But even investors who grasp these nuances may be hard-pressed in practice to distinguish between RIAs and brokers. Consider that many fee-only RIAs also have licenses that permit them to receive commissions through a broker-dealer. Such individuals are registered with the SEC and overseen by Finra as a broker. They fall under the fiduciary standard when giving advice, and Finra's rules when doing commission work. It's enough to make an investor's head spin.

"It's really confusing," says Sophie Schmitt, senior analyst on the team that researches wealth management at Aite Group, a Boston research firm. "An adviser might say they're an RIA, but perhaps they're working for a broker-dealer and mostly doing work through the RIA—10% to 20% of their business might be commission."

Industry Squabble

Differences over what it means to be a "fee-only" adviser are at the center of a very public industry squabble.

The National Association of Personal Financial Advisors, an association of fee-only financial advisers, describes fee-only advisers as those who are compensated solely by the client, with neither the adviser nor any related party receiving compensation contingent on the purchase or sale of a financial product. But it does permit its members to own up to a 2% stake in a financial-services company, even one that receives transaction-based compensation.

The CFP Board of Standards, meanwhile, stipulates that advisers may not use the term "fee-only" if they're affiliated with a broker or insurer that charges commissions—even if the adviser doesn't charge a commission. If the adviser has such an arrangement, he or she must describe his compensation as "commission and fee," the board says.

The CFP Board last year found that Alan Goldfarb, its then-chairman, had violated its rules on these issues. Mr. Goldfarb resigned in November 2012, and in June a board disciplinary panel issued a letter of admonition against him. The problem in the board's view was that the accounting firm that owned Mr. Goldfarb's RIA firm also owned a broker-dealer subsidiary, in which Mr. Goldfarb had an ownership interest. Mr. Goldfarb, the accounting firm that employed him and its broker-dealer subsidiary could potentially receive commissions related to his clients, the board found.

Mr. Goldfarb rejects the board's finding. In an interview, he says that the board alleged he made a misrepresentation, and that he and his attorneys were using the definition of "fee only" as they understood it. He says it was inappropriate for the CFP Board to sanction anyone until the definition is cleared up.

The CFP Board says that its rules are clear, and that it's up to each professional to understand them.

Claims and Counterclaims

Meanwhile, in a similar case, a Florida adviser and his wife, both certified financial planners, in June filed a lawsuit against the CFP Board over a disciplinary case the board brought against them in 2011. Jeffrey Camarda, chairman of Camarda Wealth Advisory Group in Fleming Island, Fla., and his wife, Kimberly, the firm's president, described their compensation as fee-only when they also owned Camarda Consultants, a commission-based insurance agency, which the CFP Board asserts is a violation of its rules. The advisory group and the insurance agency had a "mutual referral fee arrangement," the board found.

The Camardas appealed, but the CFP Board found against them.

In their lawsuit, filed in District of Columbia District Court, Washington, D.C., the Camardas claim that the board failed to present or consider any evidence as to whether Camarda Advisors or Camarda Consultants were separate entities and whether any clients of the advisory or the insurance agency were misled.

They charge also that the CFB Board ignored its own governing rules and fashioned its own definition of a fee-only adviser, relying on outdated rules.

The CFP Board denies that Camarda Advisors and Camarda Consultants are functionally separate entities and that it failed to present or consider any evidence as to whether they were and whether any clients were misled. It also denies that it ignored its own governing rules and fashioned its own definition of a fee-only adviser.

Mr. Keller, the board chief executive, says he can't comment on the case.

Fourth Largest Tax Prep Business In The Country Shut Down By Feds

Kelly Phillips Erb for Forbes writes: Instant Tax Service (“ITS”), the fourth-largest tax preparation business in the United States, has been ordered by a federal court judge to shut down its operations.

U.S. District Judge Timothy S. Black found that ITS had a culture of “fraud and deception.” The order, which was quite extraordinary, was said to be “necessary to protect the public and the Treasury.”

According to the complaint (downloads as a pdf), ITS engaged in a pattern of false and deceptive practices in all facets of its operations – from marketing the franchises to the preparation of returns and the offering of loan products.

ITS marketed its franchises to practically anyone who could afford to pay the fees, no matter whether they were otherwise qualified. According to the complaint, ITS touted its franchise to potential owners as so simple that, “[n]o tax experience [is] necessary!” ITS claimed that it would train franchisees all they needed to know: they received just seven hours of training related to tax instruction. ITS also ignored its own background checks, setting up a franchise in at least one case with a known felon.

It’s alleged that franchisees did what ever it took to maximize charges to customers. The complaint further charges that ITS tacked on a number of junk fees to its invoices including bogus charges for “service bureau,” “document preparation,” “refund estimate,” “technology/software,” “account set up,” “check printing,” and “Efile/electronic transmission.” Those fees, together with tax prep fees pushed charges to an average of $400–$500 per return; fees could run “as high as $1,000 or more for as little as 15 minutes of return preparation.” Franchisees were accused of failing to disclose all fees and increasing fees without the customer’s consent; often, customers never know the total amount of fees charged because their fees were deducted from the taxpayer’s refund check – without explanation – before the check was made available.

Many of the questionable fees were related to loan products such as Instant Cash Loans (ICLs) and Refund Anticipation Loans (RALs), marketed to ITS customers. Those products were run through Tax Tree, LLC, which is owned by Fesum Ogbazion, who also owns Instant Tax Service, even though customers are given the impression that Tax Tree is an independent, third-party lender.

Tax Tree has an extremely high denial rate for loans but doesn’t share that information with its customers. In fact, ITS did just the opposite: franchisees encouraged customers to apply for loans that they might not be eligible for in order to charge them junk fees. The loan denial rate is bolstered by certain pre-denial criteria set by Ogbazion and his staff: for example, single males who file head-of-household and customers with expected refunds under $2,000 are categorically turned down – but not before paying related fees. Adding insult to injury, in a prior tax season, some taxpayers who met the criteria for loans were issued bad checks.

It wasn’t only the customers who were lied to: the complaint indicated that ITS had a written “IRS Audit Guide” to distribute to franchisees which encouraged lying to the IRS in the event of an audit. For example, the guide recommended telling Internal Revenue Service auditors that corporate policy prohibits filing tax returns based on paycheck stubs rather than forms W-2 (which is not allowed by the IRS per Publication 1345); in reality, the practice was common at ITS franchisees. The guide also encouraged franchisees to lie to the IRS about their tax preparation fees, claiming that tax preparation fees range from “FREE to $140″ (by now, you already know that fees at ITS average over $400).

The result of these behaviors was an “environment where fraudulent tax return preparation and violations of federal tax laws flourish.” A laundry list of illegal activities related to tax preparation was alleged including:

(1) preparing fabricated W-2s;
(2) preparing phony Forms Schedule C depicting fabricated businesses and income;
(3) falsely claiming education and dependent care credits to which their customers are not entitled;
(4) improperly claiming false filing status;
(5) reporting fictitious income and deliberately circumventing due diligence requirements in order to fraudulently maximize the Earned Income Tax Credit; and
(6) filing federal income tax returns without the taxpayer’s consent and fraudulently omitting certain sources of reportable income.

The feds argued that the powers that be at ITS “knew of and has reason to know of this pervasive illegal conduct, but did virtually nothing to stop it, and, at times, directly or indirectly encouraged it.” In at least one case, the government says that Ogbazion knew that a franchisee’s operation resulted in, from his own words:

[E]very tax return being done is pretty much fraudulent.

Ogdazion, however, did nothing to stop the fraud. In other situations, Ogbazion promoted employees suspected of fraud – once even awarding an accused fraudster with his own ITS franchise.

And how much did these behaviors cost taxpayers? The IRS randomly sampled 2010 tax returns prepared by five ITS franchisees and found that over half of the over 24,000 tax returns prepared by those franchises were non-compliant. The estimated tax loss to the government from those franchisees alone exceeded $16 million in 2011. Yes, from five franchisees.ITS boasts “hundreds of locations to choose from in 30 states” – the government believes that the losses at those locations would be just as significant.

At trial over the summer, evidence seemed to bolster the government’s claims. In a flurry of post-trial filings, ITS argued that the evidence presented focused on isolated incidents and were not representative of the company as a whole. The company further argued that it was making efforts to resolve these outstanding issues, a charge that the government disputes.

The judge was not convinced by ITS’ protestations, entering a permanent injunction ordering ITS Financial LLC, the parent company of the Instant Tax Service franchise, to close all operations. The injunction also bars Ogbazion “from operating or being involved with any business relating to tax-return preparation.” Tax Tree LLC and TCA Financial LLC were also ordered to cease operating.

And the judge didn’t mince words, writing that the harm to the public was “extensive and egregious, indeed appalling.”

The court further stated: “Defendants’ repeated attempts at trial and in argument to downplay the gravity of their lawlessness was stunning.”

That attitude was, the court found, the reason for “putting the Defendants permanently out of business.”

Ouch.

In its heyday in 2009, Instant Tax Service was ranked #1 on Entrepreneur Magazine’s Top New Franchises list; #1 lowest cost franchise in the United States and #3 as the fastest-growing franchise. Those honors remain predominantly displayed on the company’s home page – right next to a copy of the preliminary injunction against the company from October 2012(downloads as a pdf).

It pays to take action now on finances, taxes

ROBERT DIGITALE for THE PRESS DEMOCRAT writes: As the year winds down, wealthier taxpayers are examining whether they can avoid higher federal tax rates for 2013, while those with more modest incomes are pondering whether they can qualify for subsidies for Obamacare health care premiums next year.

Meanwhile, married same-sex couples are preparing for their first opportunity to file federal tax returns as married people next year. And teachers, retirees and those going through foreclosure are looking at tax breaks that may not be extended beyond 2013.

Fall is a natural time for year-end tax and financial planning. And local accountants and financial planners are encouraging their clients to examine their finances and to make changes now to improve their bottom lines.

“Do nothing is the worst planning you can do,” said Bruce Dzieza, CEO of Willow Creek Wealth Management in Sebastopol.

Maria Thomas, a CPA and partner at Phillips & Thomas in Santa Rosa, said the year-end planning offers clients the chance to reduce their tax liability but also to prepare if they may owe extra taxes next April.

“Then they have four or five months to plan for it, rather than to find out a month before that they owe $10,000,” said Thomas.

This year features some noteworthy tax changes, especially for higher-income taxpayers.

The highest tax rate has been raised for 2013 to 39.6 percent from 35 percent for married couples with at least $450,000 in taxable income and for individuals with at least $400,000.

Capital gains taxes for Americans in that highest tax bracket have jumped to 20 percent, up from 15 percent.

As well, the Affordable Care Act, also known as Obamacare, places a 3.8 percent tax on married couples with at least $250,000 of income and for individuals with at least $200,000. Those with similar incomes also are subject to an added Medicare Tax of 0.9 percent.

Experts said high-income taxpayers should avoid spikes in capital gains and other income this year that will push them into the highest bracket.

“If they're close, they don't want to trip on that 20 percent tax” for capital gains, said Dzieza.

One possible strategy is to delay income until 2014.

However, another group of taxpayers may be seeking ways to reduce their income in 2014. Those are Americans who want to qualify for the subsidies that will become available next year under the Affordable Care Act.

Individuals earning up to $45,960 and families of four earning up to $94,200 next year may qualify for a subsidy, according to a report by tax analyst CCH of Riverwoods, Ill.

The Kaiser Family Foundation in September estimated the cost savings for a husband and wife, both aged 60, nonsmokers and with an annual household income of $25,000. It concluded the couple could receive a monthly subsidy of $1,271 for a health care policy that would cost $1,365.

As an example, Dzieza said, some seniors under 65 might choose to postpone the start of their pension or their Social Security benefits in order to qualify for the subsidy.

For business owners, one key tax break that will shrink dramatically next year involves the purchase of certain capital equipment. The deduction limit is $500,000 this year, but is scheduled to fall to $25,000 in 2014.

“If you're going to purchase equipment anyway, this is a good year to do it,” said Judith Glenn, a CPA and partner at Glenn, Guattery, Gunn & McAravy in Santa Rosa.

Another group of tax breaks, often called “extenders,” will go away unless Congress acts to extend them.

Included is a $250 deduction for teachers for unreimbursed classroom expenses. And without congressional action, retirees aged 70 and older in 2014 would no longer be able to donate up to $100,000 tax-free to charity from an IRA rather than take an itemized deduction.

Also slated to end is the exclusion for canceled debt from a principal residence. Without the exclusion, many homeowners who go through foreclosures or short sales are required to report the canceled debt as income. (In a short sale, the home is sold for less than the amount owed on the mortgage.)

Thomas noted that a similar exclusion ended last year for homeowners paying California state taxes. Even so, she encouraged those who can to complete their foreclosure or short sales by Dec. 31.

As a result of the U.S. Supreme Court decision last summer striking down key parts of the Defense of Marriage Act, the IRS announced it would recognize same-sex marriages nationwide. For 2013 tax returns, same-sex spouses generally must file using a status of married filing separately or jointly.

Same-sex spouses who were legally married in past years may consider whether they would benefit by amending eligible returns by instead filing with a new status of married separately or jointly.

While noting the many changes for 2013, the experts also pointed to a few areas that most taxpayers should consider. The first has to deal with planning for the future.

Glenn said she asks clients, “Are you maximizing your contribution to your retirement plans?”

At a minimum, Dzieza said, workers should match the 401(k) contributions offered by their employers. Many workers at local companies could receive an added 3 to 5 percent of their income specifically designated for retirement.

“We see way too often that they're not even doing that,” he said.

Taxpayers with stocks, bonds and other capital assets should decide whether they will sell any before year's end. Those who do may have capital gains or losses that can affect the taxes they pay. One strategy is to offset gains by selling poorly performing assets at a loss.

The experts even noted one bright spot on capital gains. Those in the 10 or 15 percent tax brackets — up to about $72,500 of taxable income for a married couple filing jointly — continue to pay no taxes for capital gains.

Thomas said that benefit is worth exploring, especially for those whose income next year may rise into the next tax bracket. In that case, the capital gains tax would jump to 15 percent.

Taxpayers should consider speaking to a tax professional about their unique situations, the experts said.

Dzieza, a certified financial planner, said he often encounters those who are unnecessarily worried after hearing vague news about how some tax rule may affect them. Some good advice from a CPA or other tax professional can clear up the concern.

“Nine out of 10 times it isn't as bad as you think it's going to be,” he said.

2014 individual income tax brackets

Kay Bell writes:   Good news compulsive tax planners! You now can get to work on your 2014 federal income taxes.  The Internal Revenue Service has issued updated information for the 40 or so tax code provisions affected by inflation.  To get the tax party started, below are tables of the 2014 individual income tax brackets.

Single

Taxable income:	Tax rate:
Up to $9,075	10 percent
$9,076 to $36,900	15 percent
$36,901 to $89,350	25 percent
$89,351 to $186,350	28 percent
$186,351 to $405,100	33 percent
$405,101 to $406,750	35 percent
$406,751 or more	39.6 percent

Head of Household

Taxable income:	Tax rate:
Up to $12,950	10 percent
$12,951 to $49,400	15 percent
$49,401 to $127,550	25 percent
$127,551 to $206,600	28 percent
$206,601 to $405,100	33 percent
$405,101 to $432,200	35 percent
$432,201 or more	39.6 percent

Married Filing Jointly and Surviving Spouses

Taxable income:	Tax rate:
Up to $18,150	10 percent
$18,151 to $73,800	15 percent
$73,801 to $148,850	25 percent
$148,851 to $226,850	28 percent
$226,851 to $405,100	33 percent
$405,101 to $457,600	35 percent
$457,601 or more	39.6 percent

Married Filing Separately

Taxable income:	Tax rate:
Up to $9,075	10 percent
$9,076 to $36,900	15 percent
$36,901 to $74,425	25 percent
$74,426 to $113,425	28 percent
$113,426 to $202,550	33 percent
$202,551 to $228,800	35 percent
$228,801 or more	39.6 percent

Remember, these income ranges apply to your 2014 earnings.

For your 2013 tax filings due on April 15, 2014, you'll use the information in the table below.

2013 Income Tax Rates, Tax Brackets

Tax Rate	Single	Head of Household	Married Filing Jointly or Surviving Spouse	Married Filing Separately
10%	Up to $8,925	Up to $12,750	Up to $17,850	Up to $8,925
15%	$8,926 to $36,250	$12,751 to $48,600	$17,851 to $72,500	$8,926 to $36,250
25%	$36,251 to $87,850	$48,601 to $125,450	$72,501 to $146,400	$36,251 to $73,200
28%	$87,851 to $183,250	$125,451 to $203,150	$146,401 to $223,050	$73,201 to $111,525
33%	$183,251 to $398,350	$203,151 to $398,350	$223,051 to $398,350	$111,526 to $199,175
35%	$398,351 to $400,000	$398,351 to $425,000	$398,351 to $450,000	$199,176 to $225,000
39.6%	$400,001 or more	$425,001 or more	$450,001 or more	$225,001 or more

Whether you're focusing on your 2013 taxes, getting a head start on your 2014 tax planning or both, these tables should help.