Best Accounting Software to Help Make your Business a Million Bucks: SageOne / Freshbooks / Harvest / Zoho / Less / FreeAgent / WorkingPoint / Xero / Kashoo

BRITTANI SPONAUGLE writes: Are you an accountant looking to make your life easier? Or are you a business owner without the fondest idea of how to keep your businesses finances in order? Either way, account management is incredibly important to the vitality of a business. For a detailed accounting overview this introduction to financial accounting course is great. The whole point of working for yourself is to make money, right? So, it’s super important you find a tool that will help you do that fast, safe and efficiently. We’ll go over some of the more popular options here.

Sageone

SageOne is a cloud based accounting system based on the web. It provides businesses the organization to track projects, manage expenses, and invoicing. It doesn’t have a lot of room for customizations, but that’s okay, because it makes up for it with its reasonable price and 5GB of cloud storage. This is primarily for very small to small business who need a little bit of help. You can integrate all of your banking information to SageOne to keep track of financial trends. There are a few catches to SageOne that can complicate things for business owners. You can import business information from other systems except for contacts, but, you can set up ledgers. Pre-ledgers do exist, that way each time income or expenses are recorded in a category, they are assigned to the transaction. The report options are limited to aged invoices, balance sheets and profit and loss. However, they have a message on the reports page that is open to suggesting more types of reports to include in the system.

The short:

Online payroll

Three types of reports

Banking integration

Import contacts

Support from the SageOne team

Cloud based with 5GB space

Expense tracking and invoice creation

Free trial

Freshbooks

Don’t be intimidated by accounting. Yeah, it sounds really complex but Freshbooks and their cloud accounting web-based system will make everything crisp and clear. They also offer live help should you need to call in a question. That’s pretty much unheard of these days! Since they operate on the cloud, all of your data and work is backed up, all the time. It’s not going anywhere, but if you do, you’ll be able to access it – no problem. It’s also encrypted with a 256-bit encryption so you don’t have to worry about security issues.

You can accept payment by credit card, PayPal or any of the other twelve payment options. You’ll be able to track time at your desk and import important information with the click of a button. FreshBooks lets you customize your invoice, send late payment reminders, and has high-level expense tracking and time tracking. It will also draw up profit and loss reports, accounts again and balance sheets.

The short:

Free trial

Cloud Accounting System (automated back-ups)

14 different payment gateways

Encrypted 256-bit encryption

Send customized invoices and reminders

Profit and loss reports

Starting at $19.95/mo

Harvest

Simple to use. Simple to access. Simple to deploy. You can be using Harvest within minutes. There is nothing to install so you don’t have to wait through lengthy downloading queues. You can manage employees, or have Harvest automatically remind employees to send in time sheets – from anywhere, and on any device. Doesn’t get much easier than that. Harvest offers desktop time tracking integration and an invoice that automatically pulls in project hours and expenses. It will actually retrieve and organize all your billable hours – so you don’t have to.

Curious about how your business is doing? Harvest creates organized and easy-to-understand reports that export to Excel, Google Docs and more. Your workflow will be streamlines as estimates and accepted estimates can be sent, real time, through Harvest to get the project started immediately. Everything is customizable. You can edit your labels, defaults, categories, and messages. (You can add your logo and company info to the header). All of your receipts can be stored digitally and you can analyze expenses in fast and accurate reports. If you’re starting a business and want to understand more about accounting, take this Introduction to Small Business Accounting tutorial to get ahead.

The short:

Free trial

Automatically remind employees of time sheets

Desktop time tracking

Project management

Reports that export to PDF and google docs

Workflow streamline

Digitalized receipts

SSL encrypted connections

$12, $49, or $99 a month plans available

Zoho

 

“The best small business accounting software” – Zoho

Well, we are looking for the best so let’s talk Zoho. Zoho is an online accounting system with the standard dashboard layout. This dashboard gives you insight into your finances by showing you an aging summary, accounts watch list, and a summary of your bank and credit card accounts. As for the money coming in, you can keep track of your invoices, credit notes and create quotes. You are also able to accept online payments, track payments, have automated follow-up’s and thank you emails. Whoa, that’s nice. You won’t lose track of money, anywhere, because Zoho has a “trail your money’s exit” feature and ensures you won’t ever lose money on reimbursable expenses.

Then you have the project management side of things. This will help you track time and log hours and customize access to users. You also get profit and loss reports, classified reports, and all the sales and customer reports you could want.

The short:

Dashboard view

Multi-user capabilities

Project and time management features

Customized reporting

Automate bank and credit card feeds

Bill scheduling

Aging summary of bills and invoices

Create quotes

Globally friendly

$24/mo

Less

Less Accounting is really trying to get you to leave Quickbooks. They say they are the easy solution to all of your accounting needs. They’ve got a fun landing page for the website which is indicative of their software. You can do all of your book keeping, add your accountant as a user, categorize expenses, manage invoicing and it has bill scheduling features. They also have a really nice contact management system that helps you keep track of all of your clients and contacts. You can import from places like Gmail, Basecamp and other web apps.

Of course, importing data is of the utmost importance. >Less integrates with thousands of domestic US banks and a few hundred international. Chances are, they will fit with your needs. You can upload QIF and QFX files, too. In addition to all of these awesome things, they have fun features like keeping track of trip mileage. You can also create custom reports to keep track of your accounts payable, receivable and payroll. Oh, and you can accept payments via PayPal. Really nice.

The short:

Custom reporting

Bill scheduling and management

Sleek and fun design which is nicely organized

Contact management system

Customizable categories

Multi-user functioning

It’s not QuickBooks

Freeagent

FreeAgent helps you keep track of your finances. No if’s, and’s or but’s. It is a web-based system that gives you the standard dashboard view summarizing all of your financial information. If you’re concerned about it being web-based, don’t worry. FreeAgent has bank level security and data protection. This system lets you create estimates and proposals, in a number of different currencies. You can automatically generate invoices from unbilled time, generate reports in PDF, and integrate with desktop time tracking widgets (for ultimate control).

You’re bank feeds automatically into the transaction data each day and you can reconcile invoices and bills made in FreeAgent. It keeps coming. FreeAgent draws up profit and loss charts, multi-user access, and you don’t have to worry about accounting jargon – it’s all laid out in plain English. You can get a free trial but it’ll cost you $24 a month to use every day. Not bad.

The short:

Expense tracking

Back up features

Profit and loss charts

Report in PDF

Bank level security

$24/month

Account integration

Project creation

Working Point

WorkingPoint is an account and contact management system online that small and medium sized businesses can use to manage their finances and customers.  This site will generate invoices, create reports including an income statement, balance sheet and cash flow statement.  WorkingPoint has an interface that is easy to use and organized in a manner that will make sense to a lot of new users. You even get your own custom site (domain.workingpoint.com) if you want to showcase your company’s profile. Hey, free advertising, I’ll take it. You’ll be able to view upcoming bills and bills that have been paid on the “Bills” page. The Accounts page will show you a set of predefined account categories – if you want to customize these, you’ll have to cough up some of that cash money.

The short:

All-in-one account and contact management

No experience required

Banking account and e-commerce integration capabilities

Online accounting

Personal domain

Free or paid membership

Xero

Xero is a New Zealand born accounting application (don’t worry if you’re in the U.S. you can still use it) that has partnered with major financial service providers like PayPal and ADP. It’s a web-based system that offers a lot of competitive features like, being double-entry (without the heaviness of standard double-entry programs), monthly management reports, and exporting to familiar extensions like PDF and Google Docs.  Don’t have a background in accounting? That’s okay. Xero makes it easy for you to get started with no complicated equations required. If you’re looking for some extra help, Xero has a lot of self-help on the website to make you a master at using their interface in no time. Xero is really sleek and well organized which helps orient you with using it. You can manage your inventory, timesheets and job placement and a zillion other add-on’s that add ease of use to the comprehensive accounting system. This system is used for small business or bookkeeping, but you can purchase a personal finance version for $34/mo. Trying to understand how business finance and accounting works? A course in finance and accounting for start-ups might fill your desire to learn.

The short:

Monthly Management breakdowns in reports

Export to Excel, PDF, Google Docs

Mobile and tablet sync

Send invoices and get paid online

Manage cash flow with scheduling bill payments

Sleek interface

Fixed Assets

Kashoo

Let me start off by saying that Kashoo only works with Canadian based payroll. If you are running a business in the U.S., at this time, Kashoo is not for you. For those of you that are running Canadian businesses – great! Kashoo is going to win you over with its intuitive and lightweight design and vast functionality. One of the best features of this software is the “change log”, or audit trail, that only QuickBooks Online offers. Additionally, it offers functions like managing income and expenses downloaded from financial institutions, paying bills and invoicing customers, great visual graphs and cash flow reports. Kashoo also supports over 100 currencies. Yes.

One of the fun things about Kashoo’s platform is where you start off. Most accounting and money management systems have you operating from a “dashboard” but they decided to take a different route. Their version of the dashboard shows your account totals, net income, taxes and links to pages containing more data. Sounds about the same? There’s more. The majority of the screen is actually a workspace! You can start filling out invoices and transactions right away. Downside? No U.S. payroll, and you can’t categorize transactions.

The short:

International platform that supports 100 currencies

Download transactions from over 1000 financial institutions directly to Kashoo

Cash flow reports and graphs

Pay bills

Invoice customers

Change log

Ipad optimized

Unlimited collaborators

Pay as you go or $192 flat

You’ll notice that a lot of the software has basically the same functionality. Some have cleaner interfaces, and some offer a ton of add-on’s that will make them worthwhile. Since a lot of these have free trials, I suggest going with your gut. If one of these guys stood at to you for a feature or just because they look nice, go check it out. Their websites are incredibly informative and will guide you every step of the way. I know we didn’t discuss Quicken or QuickBooks and that’s because there is already so much information out there about them. These are the underdogs and that’s admirable. If this article has piqued your interest about the accounting and finances of a small business, this online small business and managerial accounting training might give you a better idea of what it takes.

Comparison Of The Top Financial & Accounting Apps [INFOGRAPHIC]

Christophe Primault for GetApp writes: Let´s face it: accounting is an ongoing task that every business needs to get done. Having the right tool in place is crucial but finding it can be a tough process.  This accounting software infographic seeks to compare the most important accounting and financial cloud applications in an attempt to ease the decision making process small businesses or freelancers need to go through.

What Will You Find In This Infographic

The graphic explains the different functions that accounting and financial apps cover, it pictures the countries each of the apps work with, its functions, integration with important platforms, and eventually lets you verify if the app that suits you also works with your mobile device.

This Infographic Is Clickable

Feel free to hover over the app names and get directed to a dedicated page for the app with full information or compare it with more accounting apps for small businesses. Once you have found your app you will be glad you did it because you will reduce accounting stress and save money. Enjoy!

Our infographic includes: FreeAgent, Fusebill, NetSuite Financials, Wave Accounting, Xero, FreshBooks, Kashflow, LivePlan, Zoho Books, Zoho Invoice, FinancialForce Accounting, Zoho Reports, BillQuick, MYOB, Brightpearl, Saasu, Intacct, Arithmo, Online Payroll (Intuit), Payment Evolution, QuickBooks, ZenCash.

Press Release Below:

GetApp, the largest independent marketplace for business apps has released an infographic comparing the most important web-based accounting and financial apps to help businesses choose the right product for their needs.

The infographic seeks to compare the most important accounting and financial cloud applications in an attempt to ease the decision making process businesses need to go through.

It works as a guide to help businesses understand their needs and find the application that fulfills them the best.

It uses publicly available information to explain: 

•      What are the different functions covered by accounting and financial apps: financial reporting, payroll, billing, invoicing, budgeting, accounts receivable, accounts payable, debt collection
•     Which apps are available by country: USA, Canada, UK, China, Japan, Latin America, Australia
•     How apps can be categorized by functionality: best of breed for single function, multi-function, business suites
•     Which ones integrate with main platforms: Google Apps, Salesforce and Intuit Quickbooks
•     Availability of a dedicated app for mobile platforms: iOS, Android

“Accounting is an ongoing task that every business needs to get done. Having the right accounting tool in place is crucial but finding it can be a tough process,” said Christophe Primault, CEO of GetApp “ This infographic will help businesses choose the right solution for their needs.”

Key highlights of the Infographic:

•      The research carried out by GetApp highlights 21 of the most important solutions in this space including: Arithmo, Billquick, BrightPearl, FinancialForce, FreeAgent, FreshBooks, Fusebill, Intacct, Kashflow, LivePlan, Intuit Online Payroll, Myob, NetSuite Financials, Payment Evolution, QuickBooks Online, Saasu, Wave Accounting, Xero, ZenCash, Zoho Books, Zoho Invoice, Zoho Reports.
•     A wheel-chart introducing the different functions of accounting and financial apps.
•     A map of the world showing apps availability by country.
•     Three table comparing the solutions in the single function, multi-function and business suite     categories.
•     Two diagrams positioning vendors in terms of integration and mobile apps availability.

To view the infographic online visit the following link: The Most Important Financial & Accounting Apps

For a more comprehensive list of accounting and financial apps, businesses can check GetApp’s online accounting software directory.

Intuit has selected Splunk Enterprise 6 as an enterprise-wide platform for operational intelligence.

Splunk Inc. (SPLK), provider of the leading software platform for real-time operational intelligence, today announced that Intuit has selected Splunk Enterprise 6 as an enterprise-wide platform for operational intelligence. Intuit recently inked an Enterprise Adoption Agreement that vastly expands its use of Splunk Enterprise 6, and includes Hunk™: Splunk Analytics for Hadoop, the Splunk App for Enterprise Security, the Splunk App for VMware and the Splunk App for PCI Compliance. Intuit has been a Splunk customer since 2008, using Splunk products to collect, monitor, analyze and visualize the machine data generated by its leading business and financial management solutions including QuickBooks®, Quicken® and TurboTax®, among others.

“Splunk software is one of the cornerstone technologies that helps Intuit continue to innovate and deliver the world’s leading business and financial management solutions,” said Tayloe Stansbury, chief technology officer, Intuit. “Combining Intuit’s machine data into Splunk software will help us establish a more collaborative environment and provide operational visibility across the company. Our core business groups already rely on Splunk software, and this expansion will help broaden that understanding by correlating and visualizing the data across our infrastructure, consumer and business groups.”

“With Splunk as their enterprise-wide platform for machine data, Intuit will empower their business units to gain operational visibility across the company by creating a centralized location where Intuit employees can gain key insights,” said Vishal Rao, vice president of Americas, Splunk. “The addition of Splunk Apps like the Splunk App for Enterprise Security, the Splunk App for VMware and the Splunk App for PCI Compliance will again enable another layer of insight, and by adopting Hunk, Intuit is embracing the ability to conduct rapid, exploratory analytics on data already in Hadoop.”

Download Hunk today for a free 60-day trial with no caps on data size or number of Hadoop nodes and go to the Splunk website for more information on Splunk Enterprise 6, the Splunk App for Enterprise Security, the Splunk App for VMware and the Splunk App for PCI Compliance.

About Splunk Inc.

Splunk Inc. (SPLK) provides the engine for machine data™. Splunk® software collects, indexes and harnesses the machine-generated big data coming from the websites, applications, servers, networks, sensors and mobile devices that power business. Splunk software enables organizations to monitor, search, analyze, visualize and act on massive streams of real-time and historical machine data. More than 6,400 enterprises, universities, government agencies and service providers in over 90 countries use Splunk Enterprise to gain Operational Intelligence that deepens business and customer understanding, improves service and uptime, reduces cost and mitigates cybersecurity risk. Splunk Cloud™ is a service that delivers Splunk Enterprise in the cloud for large-scale production environments. Splunk Storm®, a cloud-based subscription service, is used by organizations developing and running applications in the cloud. Hunk™: Splunk Analytics for Hadoop is a fully integrated analytics platform for Hadoop that enables everyone in an organization to interactively explore, analyze and visualize historical data in Hadoop.

To learn more, please visit www.splunk.com/company.

Ebankbooks : Free Accounting App & alternative to freshbooks, xero, quicken, wave accounting, intuit and zoho.

eBankbooks Accounting was built for consultants, contractors and professionals on the move. eBankbooks Accounting allows you to access your data and to work on any device, anywhere and anytime. Impress clients and suppliers with your professionalism, timeliness and technology. Our sales and purchasing processes include job costing, contacts, suppliers, quotes, invoices, budgets, cash flow, business health check, graphing and email - this list is not exhaustive and is growing. Enable Jobs module and make the complexity of managing jobs simple. Discover job profitability with a single click. Jobs can contain multiple expenses, invoices, quotes and progressive payments plus a comprehensive job profit report. eBankbooks gives small business big business capability.

This super JavaScript app is built from the ground up to be a touch application so it works with a directness and fluency on your iPad, Android tablet, smartphone, MAC and PC. As ebankbooks is a web app, there is no 'App Trap' locking you in to specific hardware or OSs. Setting up is a breeze. You will be up and running in no time. eBankbooks multi-user security allows business to be more flexible and scalable as you can outsource or distribute your work. So with ebankbooks you can easily integrate online bookkeepers, accountants and sales seamlessly with little or no effort. Easily manage and watch your business with our advanced business tools - the list of functions is growing every day. Everything is easy and accessible and designed to take the guess work out of your financial position.

Register your free account now & join our growing online accounting community. 
Viva la revolution, Viva la people!
Find ushttp://www.ebankbooks.com/mastermsb/

Download @ CNET
http://download.cnet.com/eBankbooks-Accounting/3000-2066_4-75937079.html

YouTube Videos on ebankbooks
http://www.youtube.com/user/eBankBooks


ebankbooks is the free alternative to freshbooks, xero, quicken, wave accounting, intuit and zoho.

Top 5 tax credits & deductions for 2013

Teresa Smith writes: Tax season is never a time that anyone really relished, with many folks leaving it till the very least second before rushing to compete their annual duty. The problem that tends to create is that people will often overlook money that is owed to them, simply because they don’t have the time to fill out their forms properly, or because they cannot afford to hire someone to do the job for the. Sometimes finding the top tax credits for2013 means having someone in the know ask the right questions. What follows are 5 of the top tax credits that you may be eligible for, yet know nothing about:

1. Student Loan Debt – Getting a good education is an absolute must, but college students are often left feeling the pinch once they graduate, with the weight of students loans often holding them down. It is possible to write off as much as $2,500 per year in the interest payments made on those loans.

2. Dependents – Everyone is well aware of the nice child tax deductions that are available when you have children, but that can actually also extend to your parents. You can get an exemption of $3,800 if your parent makes less than that amount annually, and if you and your siblings pay more than half of their bills.

3. Housing – The mortgage tax deduction is a pretty common one and the recent economic issues led more than a few families to look at refinancing their home rather than losing it. If you had your lender forgive a portion of your mortgage debt, the amount that you saved does not have to be listed as income on your tax return, assuming that this was done on your primary residence. You might also be able to deduct any private mortgage insurance that you paid, although you may have to have put down a minimum of 20% on your home in order for that to apply.

4. Charity – If there is one good thing about tax return software, other than the convenience factor, it is that itemizing your charitable donations can get you a bigger deduction. Rather than being given a flat rate for your donation, you can itemize each article and piece of clothing in order to get a “fair value” when adding it to your tax forms. That said, you will need to have receipts and other paperwork handy in order to go that route. If you do regular charity work that involves the use of your car, you may also be entitled to a 14 cent per mile tax deduction.

5. State Sales Tax – This one is actually dependent on where you live, and likely won’t be applicable to folks that live in high-tax states such as California. If, on the other hand, you live in a state such as Florida where there is no income tax, you can choose between deducting state income tax and state sales tax. That can add up to a very nice deduction if you purchased a big ticket item during the year.

Ring in the 4 Tax Savings Before You Ring out the Year

Bruce Givner for Accounting Today writes: With only weeks remaining in 2013, many Americans have finalized their financial planning for the year, thinking they’ve done all they can to maximize tax savings. But many do not know there are still a number of opportunities to do some last-minute finagling to save as much as possible.

CPAs may have tipped off their taxpaying clients about several ways to stave off taxes as they come due in April 2014, but many may be so mired in year-end details they have forgotten to advise clients of some important strategies—whether their clients are individuals or business owners. The following four tips might help save a little or a bundle:

1. Make a charitable contribution deduction, even if you don’t know who the beneficiary will be.  There are a number of ways to make a charitable contribution deduction, such as a charitable lead annuity trust, a charitable limited liability company and a charitable reminder trust. But even if you haven’t determined who the ultimate beneficiary will be, you can still open a donor-advised fund at a community foundation (e.g., the California Community Foundation) and receive the deduction this year while you decide on the beneficiary next year.

2. Invest in oil and gas drilling partnerships.  These types of partnerships offer 90 to 100 percent deductions for the investment, and may provide distributions of 5 to 9 percent in gas, or 15 percent in oil, over decades. They can also be legacy assets for heirs. Gas prices may be at historic lows right now, but as the U.S. opens up its export market to a hungry global marketplace, prices are likely to increase over the coming decades.

3. Form a Section 831(b) captive insurance company.  For closely held businesses, this can be the largest deduction available to you as the first $1.2 million of premium can be received tax free by the captive. It’s typically owned by you (the operating business owner) or by a trust that benefits your heirs. Currently permissible in 30 states, formation can be complicated and captive managers may charge a hefty fee. Nonetheless, the overall advantages—to asset protection, risk mitigation, and income and estate tax benefits—can be stunning.

4. Make sure you have a defined benefit pension plan.  Skewing the benefits to the owner-employee is still the safest and second biggest deduction available to businesses with 30 employees or less. Enlisting a skilled tax attorney to work with the actuary can help you achieve a very favorable result.

Five tips for year-end tax planning / Financial planning resolutions for 2014

Barry Glassman for CNBC writes:   Financial planning resolutions for 2014

With a new year fast approaching, CNBC's personal finance reporter Sharon Epperson has some tips on how you can begin 2014 with some attainable and profitable financial goals.

The good news about tax planning this year versus recent years is that tax brackets are no longer temporary (at least for now). With Congress focused on other things, year-end tax planning depends more on your individual or family's situation.

Here are my top year-end tax tips to consider:

Watch out for capital gains: For the first time in a long time, we may see capital gains from mutual funds. Some of the biggest culprits may be those that are not performing well this year. (That means emerging markets.)

Many mutual funds have used up their carry-forward losses from 2008 and 2009 and are now rebalancing or satisfying redemptions. Individual investors may find themselves in the same situation having used up their personal carry-forward losses as well.

So what can an investor do? 

My advice is to know what to expect from the funds you own. At my advisory firm, we spend a lot of time calling fund companies to prepare for these distributions, but individual investors can find this information online from each fund website. 

If the gains are significant, consider selling the fund before these are distributed or at least hold off on new purchases until after.

Changes in income: If you know that your income will change this year to next, there are some planning opportunities.

If your income is set to decrease because of an event like retirement and you anticipate that your income in future years will be much less, use the higher income tax bracket this year as an opportunity to donate more to charity. If you're not quite ready to choose the charities, use a donor-advised fund that will allow you to take the large deduction this year at a higher tax bracket and direct the funds to your charities in the future.

If you started a business or have had little or no income but expect it to rise next year and into the future, consider using the temporary lower tax bracket to your advantage by converting an IRA to a Roth. You may pay little or no tax due to the low income, yet enjoy tax-free growth and avoid Required Minimum Distributions (RMDs) later on.

Consider a Roth 401(k): Most companies don't announce the addition of a Roth 401(k) to their plan lineup with balloons and streamers, but if your employer added one, it may be an opportunity to save in a different way.

According to outsourcing firm Aon Hewitt's 2013 Trends and Experience in Defined Contribution Plans survey, 50 percent of employer plans now allow Roth contributions, up from 11 percent in 2007, but only 9.6 percent of eligible employees elect to save in a Roth. 

If you have the Roth option, you can contribute to both the traditional 401(k) and the Roth, or, if your plan allows conversions, you can convert to a Roth if you think your tax bracket will be higher in the future.

Set up auto rebalancing: I am a huge fan of this buy low/sell high strategy that automatically rebalances your account either quarterly, semi-annually or annually.

With the stock market reaching new highs seemingly every day, U.S. stocks have far outperformed most asset classes, and your 401(k) is likely overweight U.S. stocks.This may be fine, but keep in mind that the risk may be higher than you originally intended.

Auto rebalancing sets up a discipline to keep risk in check. If you had this in place over the last seven years, your account would have been selling stocks leading up to the financial crisis, and buying them when they were cheaper during the downturn.

Offset gains with losses: You may have losses to utilize where you least expected it.That bond fund that has made you money because of reinvested dividends may in-fact have a tax loss.

How so? Simple: Because each and every reinvested dividend increased your tax basis.Take a closer look at these investments and their current basis and consider taking the loss to offset another gain in your portfolio.

Conclusion: Always plan ahead for tax issues. When you are done, plan some more.

Buy ETFs to Beat The Tax Man

David Fabien for NASDAQ writes: With less than six weeks until the end of the year, investors should start doing some tax planning on their taxable investment accounts to ease the burden of capital gains.  Many advisors recommend different strategies to tackle this situation ranging from selling losing positions to gifting investments.  The right strategy for you will ultimately depend on your individual mix of income, deductions, investment vehicles, and other factors. 

Mutual funds have also begun to forecast their year-end income and capital gains distributions which may end up being higher than previous years.  A recent Morningstar article pointed to the majority of large mutual fund companies such as Vanguard and Fidelity posting estimates in the 5-12% range for capital gains for 2013.  These are typical of funds with a modest turnover rate and above-average gains for the year. 

However, there are instances of mutual funds with large outflows that will be posting excessive distributions that can hurt investors that aren’t expecting it.  The Calamos Growth Fund (CVGRX) is forecasting a distribution that will amount to nearly 25% of its NAV based largely on investor redemptions that forced it to sell appreciated positions.  Other situations that can lead to large distributions are from funds that have changed managers or strategies.  Often times a new manager will want to clean house and implement new holdings that will lead to a big tax bill at the end of the year. 

Investors that are considering buying a mutual fund for their taxable accounts between now and year end should check with the fund company to see if they will be susceptible to any large distributions.  The last thing you want to do is enter a new position, only to see it hit you right off the bat with short and long-term capital gains that you will have to declare on your 2013 tax return.  This is even more critical for investors in the top tier tax bracket that will see their capital gains rates increase from 15% to 20% this year.

The most obvious way to avoid this situation is to purchase a mutual fund in a tax-deferred account such as an IRA or 401(k) where the distributions have little to no effect on the owner.   If that is not a feasible solution, another option to consider is swapping that mutual fund for an exchange-traded fund.  One of the benefits of owning a passively managed ETF is that they do not have a high degree of portfolio turnover and are less susceptible to large year-end distributions.

Both Vanguard and iShares have recently posted preliminary capital gains estimates that include only a small percentage of funds that are mostly fixed-income related.  The widely held iShares Aggregate Bond ETF (AGG) and Vanguard Total Bond Market ETF (BND) are on the list with very minimal capital gains distributions that amount to only a few pennies. 

A look back at equity oriented ETFs such as the iShares S&P 500 ETF (IVV) or the Vanguard Total Stock Market ETF (VTI) shows that neither of these funds has paid a distribution other than ordinary dividends for as long as the company has posted data.  This is mainly due to the fixed nature of the underlying index which dictates that the ETF hang onto the same stocks for long periods of time.  This makes them extremely tax efficient for your portfolio no matter when you purchase them.

Even an actively managed ETF such as the PIMCO Total Return Fund (BOND) which has a much higher degree of portfolio turnover, is only anticipating a short-term capital gain of $0.41 per share.  That equates to just 0.39% of its current NAV. 

While the majority of ETFs are tax efficient, it still pays to research your options and key in on any potential red flags.  One of the hidden pitfalls of investing in certain commodity-related ETFs is the tax ramifications of their legal structure. What I am talking about here is the difference between an ETF that is structured as a trust that generates a 1099 vs. being structured as a partnership that generates a K-1.  The addition of a K-1 creates a headache for taxable accounts that must be dealt with on your year-end tax return.  To avoid that mess, you can often times find a similar commodity index in an exchange-traded note. 

I never recommend investing solely with taxes in mind, but it does help to understand some of the ramifications that can occur without solid due diligence.  It’s all about the right timing and security selection to meet your goal and avoid any unintended tax burdens.   For the most part, ETFs offer an efficient way to reduce the impact of long-term capital gains for new money that you are looking to put to work this year.