Monday, December 30, 2013

H&R Block: A comeback company helps you navigate Obamacare

Michael Stantoli for YahooFinance writes: For close to 60 years, Americans have trusted H&R Block Inc. (HRB) to help them navigate government mandates, seeking the company's guidance in figuring what they owe in taxes or are entitled to in refunds and credits.

With the Affordable Care Act now taking effect, a vast new set of complex, government-ordered responsibilities and benefits is in place, largely enforced through the tax-filing process – and H&R Block is well-situated to usher consumers through it all. 



CEO Bill Cobb points out that, for a company in the business of helping citizens comply with government rules, “complexity is opportunity.” And this is just one factor shifting in the company's favor as we head into the new year; Block shares have already gained more than 50% in 2013, winning an honorable mention in Yahoo Finance’s comeback stock of the year feature.

The Kansas City-based company isn’t banking on Obamacare to become a big, instant growth business in 2014. Still, “it looks like it will be a net benefit to H&R Block,” Cobb said in an interview this month, after an annual meeting with institutional investors – at which most of the Q&A centered on healthcare.

Navigating the ACA
Under the ACA, individuals without employer-provided health insurance must buy coverage, either directly or through an online exchange. Those with incomes below a certain level will be eligible for a subsidy – whose amount will be set and verified through the tax-filing process, and is technically an “advance tax credit.”

Cobb says that, by the company’s initial estimates, more than a third of H&R Block clients “seem to be eligible for a subsidy.” Important, too: Everyone receiving a subsidy will be required to file a tax return, whether they have worked the prior year or not, expanding the pool of potential Block tax-prep customers.

Those who fail to enroll in a qualified insurance plan will have to pay a penalty, also administered through the tax-reporting process and, in many cases, paid via reduced refund.
The company entered a partnership with GoHealth LLC, an online health-insurance platform, to enable individuals to shop for insurance plans. The service carries no additional fee for users, with Block and GoHealth simply sharing a commission on new policies purchased. H&R Block has also introduced the somewhat cutesy tag word “Helpth,” combining “help” and “health,” to offer health-plan assessment and enrollment services. 

In the healthcare realm, 2014 will mostly be an exploratory, groundwork-laying year for the early-2015 tax season, when subsidies and penalties will be sorted out in earnest for the first time.

It’s a bit ironic that vexing bureaucratic complexity is a plus for H&R Block’s business, given that its results and share price have been revived over the past year by Cobb’s efforts to simplify the company’s once-confused structure and strategy. 

A simplified restructuring
Cobb was hired as CEO in May 2011, as H&R Block was struggling under some costly bets made years earlier in an effort to become a sort of financial supermarket encompassing mortgage lending, stock brokerage and business tax services. He set about refocusing the company on its core tax-preparation franchise and products directly linked to individual tax-filing services, such as its Emerald prepaid debit card and, now, health-insurance planning.
The company is awaiting Federal Reserve approval to shed its mortgage-origination subsidiary, a move that will free up more capital and allow Block to buy back ts shares more aggressively.

Cobb brought to Block deep experience in consumer branding and digital commerce, having worked at eBay Inc. (EBAY) from 2000 to 2008 (including as chief of its huge Marketplace division) and before that as a marketing executive for Yum Brands Inc. (YUM) and its former parent Pepsico Inc. (PEP). In Block, he saw “a terrific brand, great financial architecture, low capital [needs] and a remarkably resilient business.”

For what is essentially a 12-week-per-year business, H&R Block has a vast business footprint, with 10,000 branches across all 50 states. Cobb likes to point out it has more retail locations than either Dunkin’ Brands (DNKN) or Walgreen Co. (WAG) and indeed the ubiquity of the Block brand is important in remaining top-of-mind for clients around tax time. Block prepares about one of every seven individual returns, and its customers account for about a quarter of all federal refunds disbursed.

Though tax-prep services are commonly viewed as a potential victim of technology, thanks to cheap and broadly available software, the percentage of Americans who seek assistance in filing taxes has remained remarkably stable near 60% for the past decade. Young people, in particular, have little confidence about doing their own taxes. And, in any case, the ever-shifting tax code means demand for help will not likely subside quickly.

Cobb says, “We’d like to be agnostic” about the particular means by which clients use the company’s services, whether through a $40 online-assisted return from home or a $140 in-office filing. Indeed, Block’s market share in online filings rose to 14.2% last year from 12.5% three years earlier, while Intuit Inc.’s dominant (INTU) TurboTax has ceded some ground. 
For many Block clients, their annual tax refund is the most significant financial event of the year, and the company now encourages them to have the money loaded onto the Emerald prepaid, reloadable debit card.

The prepaid-debit market has ballooned in recent years as banks have added fees on smaller accounts, while acceptance of non-bank cards has soared. The Emerald card essentially offers all a bank-account card does, such as online statements and bill-pay, and direct deposit. The H&R Block Emerald MasterCard was one of only three prepaid cards rated as a "very good" deal by Consumer Reports. The company also offers “tax-refund advance” loans marketed ahead of Christmas, which is often a prompt for folks to make a prep appointment in the New Year.

One larger drag on Block’s revenue in recent years has been the sluggish job market and, in particular, the decline in the labor-force participation rate from 66% in 2008 to below 63% last October. (A further decline is possible following the recent cessation of emergency unemployment benefits for 1.3 million people.) Unemployed workers quitting the hunt for a job or involuntarily retiring early have meant fewer tax filers. This trend is showing signs of bottoming as payrolls have expanded at a somewhat quicker pace over the past several months, which should mean a stable to slightly rising customer pool for Block in coming tax seasons.

This, of course, is the best of reasons to have more people paying H&R Block to help with their taxes.
Posted on 4:45 PM | Categories:

11 Tax Questions To Ask Yourself Before The New Year

Alden Wicker for Forbes writes: Beware the ides of April.  That’s when many of us procrastinators find ourselves in a frenzy, trying to cram a year’s worth of tax planning into the span of a few days. But the act of paying Uncle Sam shouldn’t be treated like finals. After all, it’s not just a letter grade that’s at stake anymore—it’s your time, your peace of mind and, most important, your money.

To clue you in on the tax moves that could lower your overall bill for the year—and help you avoid an all-nighter come April 14—we’ve put together some of the most important questions you should ask yourself now. It may seem like a pain to gather the records and receipts that you’ll need to answer some of them, but you’ll thank yourself later.

1. Do I need an accountant?
Before you do anything, you should decide whether you need the help of a professional. This is especially important to consider if your financial situation became more complicated this year. If you went through a big life change—like getting married, having a baby, buying a home or starting your own business—or if you exercised stock options, you should probably hire an accountant. Unsure? Take this quiz.


2. Should I contribute more to my retirement funds?
The short answer: yes, if you’re not already maxing out your contributions. Tax considerations aside, the more you can save now, the better off you’ll be in retirement. For 2013, you can put away up to $5,500 ($6,500 if you are 50 or older) into your traditional or Roth IRA, and you can contribute up to $17,500 ($23,000 if you are 50 or older) pre-tax to your 401(k). There are also some limits to how much you can contribute based on other factors, such as your income.
The longer answer: Your age and your overall progress toward retirement should factor into your decision to up your contributions. Go here for some helpful guidelines when it comes to determining how much you should save.

Additionally, if you’d like to contribute more than the limits set by the I.R.S., including what’s known as a nondeductible IRA, you have options—but you won’t see current year tax benefits. Read more about them here.

3. Should I convert from a traditional IRA to a Roth IRA?
There are some basics to consider first. For one, the main difference between a traditional and a Roth IRA is not whether you pay taxes, but when you pay them. “If you do a traditional IRA, you get an immediate tax deduction, but when you take that money out later, it’s all taxed,” explains Fred Freifeld, a CPA based in Davie, Florida. “If you contribute to a Roth IRA, you are taxed on the contributions right away, but the advantage is that you won’t be taxed on it forever more.”
Bottom line: If you convert your traditional IRA to a Roth, you’ll pay income taxes on those funds now. So why make a move that means you have to pay more in taxes this year? Because a little pain now could mean a lot less of it later. “If you’re younger, and you’re in a lower income bracket right now,” adds Freifeld, “then it won’t really hurt you.” And you don’t need to convert the whole thing, he adds. If converting your whole traditional IRA to a Roth would push you into a higher tax bracket, or if you don’t think you’ll have enough money set aside to pay taxes on the entire amount, just do a portion.

4. Should I sell any of my investments?
Freifeld warns against just considering taxes when making big financial decisions. “Don’t let the tax tail wag the dog,” he says. However, all other things being equal, there are some tax considerations that may inform your decision to either hold onto or sell investments, such as stocks, mutual funds or real estate. For starters, if you’ve held an investment for less than a year and you sell it, you’ll be taxed at a higher rate on any capital gains—the profit—you made on that investment. So if you can, hold off on selling for a little longer.

Also, if you have investments that have tanked since you bought them, you may consider selling. Those losses can be deducted to offset your capital gains and up to $3,000 of ordinary income. If you have no interest in keeping them in your portfolio, you could sell the investments permanently. But if you think that the investments will eventually go up in value, you could sell them, and then buy them back after 31 days (the I.R.S. won’t allow the tax deduction if you do so under the 31-day time frame).

Just remember that this is still a gamble: It’s possible that you could sell your investment, and then watch it skyrocket over the next 30 days. To combat this, some financial advisers suggest that you sell the loser and reinvest the proceeds in an index fund or similar stock that might have the same potential for gain without being so similar that it would be disallowed by the I.R.S.

5. Are there charitable contributions I haven’t made yet?
You should know that you can’t deduct charitable donations if you’re taking the standard deduction in lieu of itemizing your deductions. So making big donations now won’t help you tax-wise—although it is good for the soul! (Find out if itemizing deductions is a better option for you here.)

If you’re itemizing this year, and think that the food pantry in your community could use some help, or you want to donate to a charity in a loved one’s name for the holidays, then upping your giving at the end of the year is something to consider. But keep in mind that a deduction is used to offset the amount of income on which you’re paying taxes. So “if you’re in a very low tax bracket this year, and may be in a higher tax bracket next year,” you may want to hold off on donating until after the New Year, says Gail Rosen, a C.P.A. who owns a New Jersey–based accounting firm.

6. Will I get better tax benefits if I donate in ways other than cash?
Let’s say that you’re thinking about giving $1,000 to a charity. You could write a check for $1,000 or you could give $1,000 worth of stock. “[Donating] is a way to give and get,” Rosen says. “If you donate appreciated stock,” which is stock that has gone up in value since you bought it, “you get the deduction at the fair market value of the stock, and you avoid paying taxes on the capital gains.” It’s kind of like getting a 10%–39.6% discount, depending on your tax bracket, on your charitable gift! (Just don’t give away stock that has done poorly since you bought it. You’ll probably want to sell it, as covered in question 4.)

For those who are able to donate a fairly significant amount, another option is what’s known as a donor-advised fund or DAF. It’s like a mutual fund for money that you want to give to charity, and it can be nationally or locally focused. “You can put the money in now, and get a deduction for it now, even if you may not give it to a charity until the future,” Freifeld says. Some financial services firms, like Vanguard and Fidelity, have launched independent charitable arms that run DAF programs.

A DAF can come in handy if you haven’t yet decided on a chosen charity. It also works well if you find yourself with a high income this year and want a deduction now, but you also want to spread out your donations over several years. And since DAFs are managed by public charities, they will handle the paperwork. Just check the minimum amount required to start a DAF (they vary by fund), and that the charity you want to give money to can handle this sort of donation—many small ones cannot.

7. Do I have HSA or FSA money that I still need to use before the end of the year?
A Health Savings Account allows you to drop money into it pretax to pay for medical expenses. You need to have an eligible health care plan to have an HSA, but the good news is that you don’t have to use all of the money—it rolls over indefinitely. Actually, if you have spare money, and you’ve topped out your retirement savings contributions, you could consider putting more in a HSA before the end of the year—it’s almost like another retirement plan, but for medical expenses. (More on an HSA here.)

However, if you have a Flexible Spending Account (FSA), which you can use for medical expenses, day care and other qualified expenses, you could lose any money you have left in there after December 31. In 2013 your employer is allowed (but not obligated) to either let you roll over $500 or offer you a two-and-a-half-month extension. Double-check with HR to see if your company is taking advantage of either option.


8. Is it a good idea to make moves that either lower or raise my income this year?
It depends on whether you expect your tax situation to change much between this year and next. If you work a salaried, nine-to-five job, and you expect to stay in that job, you don’t really need to stress over this question.

But if you are self-employed, there are times when it could make sense to accelerate or defer your income. Accelerating means moving some of your income from next year into this year. So, for instance, if you are a consultant, you can bill clients now for future work, and deposit those checks before the New Year, instead of waiting until 2014.

“It would only make sense to accelerate income if you are in a lower tax bracket this year,” Rosen says. “So if you got fired, and you have a new job for 2014, you might do that.” Another opportunity, say Freifeld, is if you’re anticipating moving from a low-tax state to a high-tax area in 2014—say, Florida to New York City—and want to take advantage of the lower tax rate that you have now.

Likewise, it only makes sense to defer income if you anticipate being in a lower tax bracket next year. For example, if you know that you’ll get an unusually large year-end bonus that could result in a high tax bill for you this year, you could ask your employer not to cut that check until January.

As you can tell, accelerating or deferring income requires a lot of guesswork (not to mention staying abreast of whatever changes Congress is pondering for the tax code), so it’s a good idea to consult a professional about either strategy.

9. Am I overlooking any deductions?
There could be a few lesser-known deductions that you can take advantage of, such as charity miles or medical miles, Rosen says. If you’re driving around town in your car doing things for a 501(c)(3) non-profit, you can deduct 14 cents per mile. If you are driving to and from medical appointments, you can deduct 24 cents a mile. You can also deduct expenses that you incur on behalf of a charity, if you’re not getting reimbursed.

For teachers, Freifeld points out that the educator expense deduction, which let’s you deduct up to $250 of classroom supplies—even if you’re not itemizing—is expiring in 2013. So buy any school supplies before the end of the year.

If you refinanced your home, look at the HUD form that came with the paperwork. You may be able to deduct some of the taxes or closing points you paid. And Rosen adds that if you’re thinking about energy-efficient improvements to your home, like replacing your windows, do it before the end of the year because those tax credits may expire—there’s no guarantee Congress will extend them.

And if you expect mortgage debt on your home to be forgiven (because of a foreclosure or short sale, for example), complete the process now. In 2014, you will be taxed on that forgiven debt, which is considered income to the debtor.

Did you start your own business this year? Even if you sold just a $3 trinket, it means you have to report your income and expenses. So keep track of everything that you spent and earned. In the first year, it’s quite possible you realized a loss anyway, which means lower taxes. And if you hired an independent contractor to do work for your business, like designing your website, make sure to send them a W-9 form. Any business-related employee compensation and professional fees are deductible.

10. Do my same-sex partner and I need to redo our taxes from last year?
The I.R.S. now treats same-sex couples who were married legally as married for federal tax purposes, even if they live in a state that does not recognize same-sex marriage. So if you’re based in North Carolina and got married in New York, you can still file jointly, like any other married couple. (Registered domestic partners don’t count.) Freifeld says that you can also refile your tax returns as far back as the 2010 return that you filed in 2011, if you previously filed separately. Ask your preparer to run the numbers and see if that would ultimately save you money.

11. Should I gift money to family members?
These days it’s not uncommon for parents to give a little bit (or a lot) to their kids right out of school. But be careful: If you give any single person more than $14,000 a year (without expecting to be paid back), you’ll create more work for yourself and have to file a gift tax return, says Freifeld. You won’t be penalized financially, but that generosity will count against the total amount you can give over your lifetime without incurring the gift tax. For 2013, that lifetime total is $5.25 million.





Posted on 4:44 PM | Categories:

Forget the bypass trust? Not so fast / These arrangements still offer significant advantages. A tale of two tax breaks: In the past, wealthy individuals often re­­duced their exposure to federal estate tax liability by combining two tax breaks.

Business Management Daily writes: Due to the federal estate tax ex­­emp­­tion “portability” provision for married couples, some estate planners say that the bypass trust, previously a staple of estate planning, has been rendered obsolete. Portability was permanently extended by the Ameri­­can Taxpayer Relief Act of 2012 (ATRA).

Strategy: Don’t junk the bypass trust concept just yet. These arrangements still offer significant advantages.

A tale of two tax breaks: In the past, wealthy individuals often re­­duced their exposure to federal estate tax liability by combining two tax breaks.
  1. The unlimited marital deduction: As a general rule, any transfer between spouses, whether it is made during one’s lifetime or upon death, is completely exempt from federal estate and gift taxes.
  2. Estate tax exemption: Transfers to a nonspouse beneficiary may be sheltered by the federal estate tax exemption. Under ATRA, the exemption amount is $5 million adjusted for inflation ($5.34 million for 2014).
Therefore, by leaving your entire estate to your spouse, and vice versa, you wasted the exemption of the first spouse to die under the old rules that existed before the estate tax exemption portability deal. Upon the death of the surviving spouse, assets valued above the exemption amount were subject to the federal estate tax.

The bypass trust strategy was created to avoid this result. Typically, the trust was funded with assets equal to the federal estate tax exemption amount available at death. A surviving spouse could be an income beneficiary. As long as the trust was properly drafted, the value of the trust’s assets was included in the deceased spouse’s estate for federal estate tax purposes—where it could be sheltered by the deceased spouse’s federal estate tax exemption. The bypass trust’s assets were not included in the estate of the surviving spouse when he or she passed on.

However, the portability provision mitigates the tax reason for using a bypass trust. Under the portability provision—introduced by the 2010 Tax Relief Act and permanently extended by ATRA—the executor of the estate of the first spouse to die can elect to pass along any remaining federal estate tax exemption to the surviving spouse. That way, the surviving spouse can effectively have up to two full exemption amounts (up to $10.68 million for 2014) to shelter estate tax.  

Nevertheless, a bypass trust may still be helpful for the following reasons.
  • Assets of the trust are generally protected from creditors of the surviving spouse. Also, if the surviving spouse remarries, a spendthrift provision would protect the bypass trust assets from the new spouse’s creditors.
  • Assets passing directly to a surviving spouse could appreciate in value or be subject to the estate tax upon the surviving spouse’s death. A bypass trust avoids this problem for appreciating assets held in the trust.
  • The amount of the deceased spouse’s unused estate tax exemption is determined in the year of death. It isn’t adjusted for inflation. As a result, a bypass trust may be a good “parking spot” for assets likely to appreciate.
  • With a bypass trust, you can protect against assets subsequently being directed to a person, or persons, whom you do not wish to benefit.
  • The deceased spouse’s unused federal estate tax exemption passed along to the surviving spouse may be forfeited if the surviving spouse remarries.
  • To elect portability, an estate tax return must be filed, even if no estate tax is due. This may not be required with a bypass trust.
  • A bypass trust may be beneficial in avoiding or minimizing the generation-skipping tax (GST). Although a GST exemption is linked to the amount of the estate tax exemption, the GST exemption isn’t portable.
Posted on 4:44 PM | Categories:

Intuit Inc. (INTU): This Company Is Moving Towards a Sustainable Healthy Future

Mihir Mehta, Mehta | for The Motley Fool writes:  The woes of small businesses with respect to accounting, sales, resource management, etc, have been discussed in scores of articles across various publications. An answer to such problems lies in products provided by a company that has positioned itself as a huge player in the personal finance and business management space, Intuit Inc. (NASDAQ:INTU).The company has consistently exhibited strong performance despite tough competition from entities like H & R Block Inc (NYSE:HRB) and JTH Holding Inc (NASDAQ:TAX).
Intuit Inc. (NASDAQ:INTU)
A player for all seasons
There is no denying the fact that Intuit has achieved a commendable position in the accounting space for small business. However, its series of acquisitions over the last few months, including the most recent Docstoc deal, clearly show that the company aims to become an indispensable and dominant force in this segment.

The numbers from Intuit Inc. (NASDAQ:INTU)’s previous quarter exhibit the strong momentum building up in this segment, which is attributable to the explosive growth of cloud-based Quickbooks. A Healthy growth of 11% in the small business segment testifies to the need for reasonable expansion in this area, which management is pursuing.

Quickbooks’ online subscriber base grew a phenomenal 29% in the quarter, crossing the 500K mark. The company seems to have acknowledged the fact that future growth will come from a full-fledged adoption of cloud power. Going ahead, the company has well-placed plans of rolling out Quickbooks online to a larger audience.

A change for the better
The seasonality factor in the consumer tax business definitely affects the overall results of the company. Investors should appreciate the way Intuit Inc. (NASDAQ:INTU) has offset the slow growth in this segment by enhancing growth in small business financial and management solutions. The company is in a transitional phase wherein it is making important changes to its core competencies by pursuing the target of becoming an operating system for small businesses.

Intuit has spent a considerable time in the business management space but now, it is attempting to expand its positioning to include scores of services that are required by small entities. Hence, it can be expected that a major portion of its revenue and growth would come from this segment in the future.

If the company can efficiently manage the consolidation of its operations, though this will be challenging, then it would go a long way in establishing a robust business model.

Making it tough for peers
Besides the pursuit of becoming an operating system for SMBs, Intuit Inc. (NASDAQ:INTU) is also putting reasonable efforts into its tax preparation software, TurboTax, which is a market favorite. The success of TurboTax has caused considerable damage to the operations of H&R Block, which has been struggling with its numbers due to an unfavorable movement in tax filing trends. The company has been working on launching a simplified interface for electronic tax filing with the intent of making the most out of the coming tax season.

Additionally, H & R Block Inc (NYSE:HRB) has encountered a visible stall in the exercise of unloading its banking division after Republic Bancorp, Inc. KY (NASDAQ:RBCAA) called off the deal to buy this business. Though the company highlighted some progress in this area in the earnings call, nothing seems to be conclusive. However, the management laid a lot of emphasis on the company’s readiness for the 2014 tax season, which prima facie conveys a strong intention of generating the optimum gain during that period. Investors surely need to watch out for H&R Block’s performance in the 2014 tax season.

Another entity becoming a big player in the tax filing business is Liberty Tax Service, which is a unit of JTH Holding Inc (NASDAQ:TAX) and threatens to eat into the market share of both Intuit Inc. (NASDAQ:INTU) and H&R Block. This fast-growing kid (though a veteran in terms of tenure) has also initiated full-fledged preparations for the 2014 tax season, and the numbers that management announced in the earnings call give substantial evidence of a big season.

Last year, the tax preparers went into a bit of shock when the expected level of growth in the number of tax-filers did not materialize. While management is optimistic and certain about the numbers this time based on its survey, it also sounded a note of caution with regard to franchise-fee revenue for the coming quarters. One of the reasons for the possible decline in revenue is the franchise model itself, wherein the company does not get any revenue when a franchisee opens a second office in an already-owned territory.

Stay put with Intuit
A management accounting concept advocates viewing an organization as a group of core competencies that generate constant revenue for the company. If we analyze Intuit from this perspective then it is quite clear that the company is making a tectonic shift in its core business model, and hence, this will require time and trust from its investors. Intuit has been successful in fostering innovation and it has established a firm foothold in the consumer tax business with its cash cow TurboTax. Another of Intuit’s highly successful products, Quickbooks, is growing at a considerable pace and with the power of the cloud, it can boast of better connectivity and efficiency for its customers.

Final words
Intuit Inc. (NASDAQ:INTU)’s financials are also in good shape and they outweigh the industry numbers. For instance, the debt to equity ratio of Intuit is quite low at 0.22 compared to the industry, which leaves room for more capex spending in the coming quarters. In light of such strong financials and robust fundamentals, Intuit has the potential to generate good returns for your portfolio over the long run.
Posted on 1:46 PM | Categories:

2014 HSA (Health Savings Account) Contribution Limits


An HSA (or Health Savings Account) is a tax-advantaged savings account that belongs to you and is paired with a qualified high-deductible health plan (HDHP). You can make HSA contributions for the 2014 tax year until April 15, 2015. Maxing out the 2014 HSA limit set by the IRS will reduce the amount the employee pays in federal income tax.

2014 HSA Contribution Limits

  HDHP Minimum Deductible HDHP
Maximum
Out-of-Pocket
HSA
Contribution Limit
HSA 55+ additional contribution amount
Single $1,250 $6,350 $3,300 $1,000
Family $2,500 $12,700 $6,550 $1,000

Compared to the 2013 HSA contribution limits:
  • The HDHP minimum deductible did not change.
  • The HDHP maximum out-of-pocket amount increased $100 for a single, and increased $200 for a family.
  • The HSA contribution limit increased $50 for single, and increased $100 for a family.
  • The "catch-up" amount for those age 55+ did not change.
If you use an HSA to pay for unqualified medical expenses in 2014, the tax penalty is 20% of the HSA distribution.

Once deposited, all HSA contributions belong to the individual, regardless of who made the contribution. As such, any distribution and/or removal of funds from the HSA has to be authorized by the individual (not the employer). Many other requests related to the account (such as a request for a new debit card or request for an address change) can only be made by the individual.

The 2014 HSA rules and regulations were released in IRS Revenue Procedure 2013-25 (source).

Background on HSAs

A Health Savings Account, or HSA, is a financial account established by an individual or family to pay for qualified medical expenses. U.S. federal regulations require you to have a minimum deductible on your health insurance plan in order to make tax-deductible contributions to a Health Savings Accounts (HSA).

HSAs combine the benefits of both traditional and Roth 401(k)s and IRAs for medical expenses. Taxpayers receive a 100% income tax deduction on annual contributions, they may withdraw HSA funds tax-free to reimburse themselves for qualified medical expenses, and they may defer taking such reimbursements indefinitely without penalties.
HSAs are explained in IRS Publication 969.
Posted on 10:36 AM | Categories:

Intuit TurboTax will start accepting e-filed federal tax returns on January 2, 2014

On December 18, 2013, Intuit Inc. (Intuit) reported that TurboTax, its online tax preparation service, will start accepting e-filed federal tax returns on January 2, 2014, following Internal Revenue Service (IRS) declaration to begin processing tax returns on January 31, 2014. Intuit informed that taxpayers can file early with TurboTax to be first in line for their maximum tax refund. According to the Company, TurboTax will securely hold and submit customers' tax returns to the IRS as soon as the agency begins accepting returns. "More than 80 percent of taxpayers get a tax refund. Last year, federal tax refunds averaged almost $3,000. At TurboTax, we recognize how important that money is to our customers," said David Williams, Chief Tax Officer at Intuit. "It's why we're encouraging people to file as soon as they can. Anyone can get started today with TurboTax. There is no faster way for taxpayers to get their tax refunds."
Posted on 9:12 AM | Categories:

7 Best Free Tax Software Options Compared / What Tax Help Do You Really Get?

Shelley Emblad for About.com writes: Compare the top free tax software to find out what you really get with each. All software listed come with accuracy guarantees, and most offer a highest tax refund guarantee as well as a state tax return, but usually at an additional cost. U.S. service members should look over the free tax software for military members
  Tip: Free tax software is typically offered only an option for new customers. If you used free tax software last year and you want to use the same software this year, you will probably have to pay for it, or you'll have to choose another free tax software to use this year to avoid charges.

1. H&R Block At Home Free Edition

H&R Block At Home Free Edition online income tax prep software.H&R Block At Home Online Free Edition
HRB Digital LLC
H&R Block At Home Free Edition covers many common tax deductions and only occasionally reminds you that you could update to a paid version. At Home Free Edition users can ask tax questions online and have them answered by tax professionals.

What You Get:
  • H&R Block Worry-free Audit Support (tax professional will assist you if you're audited).
  • Step-by-step guidance for completing your taxes.
  • Covers common deductions related to owning a home, charitable contributions, etc. and tax credits.
What You Don't:
  • Does not import last year's tax data, 1099 or W-2 forms.
  • No DeductionPro.
  • No investment support other than dividends or capital gain distributions.
Visit H&R Block At Home Online
 
 

2. TaxACT Free Edition

Life Event introduction in TaxACT Tax SoftwareTaxACT Life Events Feature
2nd Story Software
Any income tax return can be filed with TaxACT Free Edition, a claim that can only be made by one other online tax preparation solution, IRS FreeFile Fillable Forms, which has nowhere near the same features.
What You Get:
  • Supports more complex returns.
  • Use online, or on your desktop with free download.
  • TaxACT Answer Center for answers to tax questions and help with using TaxACT.
  • For the college-bound: TaxACT's Federal Student Aid Tax Worksheet makes completing the FAFSA easier.
What You Don't:
  • No import for W-2 income data, capital gains information and last year's tax data.
  • Does not provide TaxACT Donation Assistant for placing a value on non-cash donations or help with life changes that may impact income taxes.
  • No free state return. $14.95 cost to add.
Visit TaxACT
 

3. TurboTax Free Edition

TurboTax Free Edition online tax softwareTurboTax Free Edition
Intuit Inc.
TurboTax Online Free Edition has some decent tax help features, and this year includes unlimited help from a tax adviser for free.
What You Get:
  • Audit Support Center download.
  • Life Events Expert tool find life changes in the past year may impact taxes.
  • Repeated reminders for upgrading to a paid version.
What You Don't:
  • If you need to file any form other than a 1040 EZ, you probably can't use TurboTax Free Edition.
  • TurboTax Free Edition does not import W-2 or other income data, or last year's TurboTax return.
  • No integration with ItsDeductible Online or support for other common tax deductions.
Visit TurboTax Online Free Edition
 

4. CompleteTax Online Tax Software

Filling out a tax return using CompleteTax tax software.CompleteTax Tax Interview
CCH
For tax year 2011, CompleteTax made some significant improvements to how the tax software works, based on customer comments and use trends. CompleteTax Basic is free at the time this is written.
What You Get:
  • Support for single and married filed jointly or separately statuses.
  • Lots of guidance for various tax credits.
What You Don't
  • A free state return. CompleteTax State is $29.95, which includes state e-file.
  • Support for itemized tax deductions.
Visit CompleteTax
 
 

5. IRS Free File

IRS.gov FreeFile program provide free tax software for filing income tax returns.IRS FreeFile
IRS.gov
The IRS Free File program offers access to over a dozen free online tax software providers, or Free File Fillable Forms. The second option, which is light on features, simply offers a way to fill in tax forms online and then submit your return via free e-File. Free File Fillable Forms includes no guidance for completing your tax return, but does some calculations.
What You Get:
  • Free federal electronic filing.
  • Everyone can use Free Fillable Forms.
What You Don't:
  • The free tax software with more features offered by IRS Free File has eligibility requirements, such as a maximum adjusted gross income and you may not qualify.
  • Free Fillable Forms isn't available for state income tax returns, only federal returns.
Visit IRS Free File
 
 

6. eSmart Tax Basic Edition

eSmart Tax Basic is free tax software.eSmart Tax
from Liberty Tax
eSmart Tax Basic is probably the only free tax software that imports last year's tax return from competitors (TurboTax, H&R Block At Home and TaxACT), so you have fewer opportunities to make errors.
What You Get:
  • CPA will help you if you're audited.
  • Imports data from W-2 and 1099 forms.
What You Don't:
  • No support for dependents.
  • You'll have to pay for tax help, higher versions include this.
  • No itemized deductions support, can only file a 1040 EZ.
  • No free state return, cost starts at $19.95.
Check out eSmart Tax Basic online
 
 

7. TaxSlayer Free Edition

TaxSlayer free tax software.TaxSlayer Tax Software
TaxSlayer
TaxSlayer paid versions are the least expensive tax software you can find. There's a fully-featured free Military Edition offered to active duty military personnel, but we're taking a look at TaxSlayer Free Edition, which is only useful if you file a 1040EZ.
What You Get:
  • Step by step help with finding tax deductions (see below).
  • Life Events Wizard identifies possible tax implications of life events that occurred over the year.
What You Don't:
  • Support is limited, although adequate for simple returns.
  • Deduction support is useless since you can only file a 1040 EZ.
  • No free state return, $17.90 for one state and $7.95 for additional states.
Check out TaxSlayer.com Free Edition
 
Posted on 9:05 AM | Categories:

Know IRA rules when planning future

Dan Moisand for FloridaToday writes: QUESTION: I have money in a 401(k) plan at work and an traditional IRA. I turned 70½ this year and will retire in March. Is it true I don’t have to take any money from my retirement accounts until I retire?

The RMD is based on the value of the IRA on December 31, 2012. Failure to distribute enough for the year results in a penalty of a whopping 50 percent of the shortfall. That doesn’t mean you need to panic but… you may wish to hurry.

Why not panic this late in the year? Since you turned 70½ in 2013, you can wait as late as April 1, 2014 to take that first RMD from the IRA. So if you can’t get it done by 12/31/13, you can still avoid the penalty.

Why might you want to hurry? Good tax planning involves trying to put more taxable income from these distributions into the tax year with the lowest taxable income. You will have a 2014 RMD due out in 2014 from the IRA based on the IRA’s 12/31/13 value. Then a 2015 RMD based on the 12/31/14 value and so on every year. Only that first year allows waiting until April 1.

If you delay, you will have two RMDs coming from the IRA in 2014. If two RMDs, or anything else that arises in 2014, causes your 2014 income to be high enough to put you in a higher tax bracket, getting your 2013 RMD from your IRA on or before December 31, 2013 might be advantageous. On the other hand, if retiring causes your income to drop substantially, delaying into 2014 could be better.

On the 401(k), the rules look similar in that once you retire, you will be subject to an RMD each year based on the prior year-end value. And you may delay that first RMD to April 1 of the year after the year you stop working for that employer. After that first year, a new RMD is required each year from the 401(k).
Posted on 8:58 AM | Categories:

Intuit QuickBooks vs Sage Peachtree: Small Business Online Accounting Software Comparison

Naresh Kumar for The Professional Point writes:   Intuit QuickBooks vs Sage Peachtree: Small Business Online Accounting Software Comparison

Are you searching for best accounting software for your small/medium business? There are a lot of online free and cheap small business accounting software packages available but we would recommend you to pay some dollars to get a good accounting software for your business. We have shunted out two good accounting software solutions for you: Intuit QuickBooks and Sage Peachtree. We will provide a brief comparison of features of Intuit QuickBooks and Sage Peachtree. We will help you to decide which accounting software is the best option for you? Which accounting software package (Intuit QuickBooks or Sage Peachtree) best matches your accounting and financial demands?

As a small business owner, your to-do list is a mile long. It’s stressful enough handling customer demands or vendor requests, but then there’s day-to-day administrative tasks that must be completed as well. While accounting software programs can’t keep tabs on your new competitor down the street, they can at least make one part of your job a little easier.

Sage Peachtree and Intuit QuickBooks own major share of the small business accounting software market. They both provide excellent solutions to many, if not all of a small business’s bookkeeping conundrums. 

QuickBooks is usually considered the easiest accounting software to implement for someone without an accounting background but the competitor Sage Peachtree also offers intuitive features like Setup Advisor and Sage Advisor, a tool that follows user activity while explaining how the software can handle different tasks.

When it comes to tracking financials, there are simply no substitutes for accuracy, usability or quality reporting. While you can certainly find basic accounting and financial management solutions for little or no cost online, these bare-bones programs typically offer few if any real capabilities. And it’s in usability and depth that QuickBooks and Peachtree both really shine.

Intuit QuickBooks

QuickBooks boasts a well-developed and easy to use invoicing system dubbed the Collections Center. QuickBooks Premier includes the ability to track data from different departments, locations or funds, all in one report. Batch invoicing is another new feature that QuickBooks offers, allowing one invoice to be created and applied to everyone in a group.

From top to bottom, QuickBooks has updated their offerings to keep pace with software and technology trends enabling easier online integration. For example, all versions of QuickBooks can be used in conjunction with your online banking and web-based email account (e.g., Gmail, Hotmail, Yahoo! Mail). They can also be connected via QuickBooks Sync to Intuit’s online servers, making information seamlessly available.

Sage Peachtree

Peachtree, on the other hand, is great for loads of specific small business tasks and offers a very customizable tool set. Each version of Peachtree can deftly manage workflow analysis, volume pricing, complicated inventory concerns (e.g., multiple warehouses) and vendor reports. Peachtree has also teamed up with business intelligence firm Alchemex to provide Excel-based business intelligence summaries for Complete and Premium users.

With Peachtree you can keep an eye on cash flow with preset alerts that send email notifications when inventory amounts get too low or an account’s balance passes a predetermined threshold. Perhaps the most valuable tool that Peachtree offers is its Internal Accounting Review that audits your data to detect common accounting mistakes. This makes sure that your hard earned money doesn’t slip through the cracks.

Conclusion

These are slightly different products being catered to slightly different crowds, and they aren’t cheap, but they are well worth the investment in terms of both dollars and hours saved. In fact they will allow you to get back to the really fun tasks of running a small business. You can visit official websites of Intuit QuickBooks and Sage Peachtree to learn more.
Posted on 8:57 AM | Categories:

Amazon is Doubling Ecommerce Webstore Fees in 2014

Melanie Williamson for Josic.com writes:  While Amazon webstores have enjoyed relatively low fees, this will soon change. In 2014, they will be raising their fees considerably after the first of the year. The monthly fee for webstores will be doubling. Additionally, the webstores that also take advantage of the Sell on Amazon program will have their current transaction fees doubled.
These increases reflect Amazon’s stability and driving force within e-commerce. While there may be some merchants that close down their webstore services, most will not due to the lucrative nature of the arrangement. Amazon can guarantee traffic.

Currently, the monthly fee for a webstore is $39.99. That will go up to $79 per month on February 4th. Currently the transaction fee for webstores that also Sell on Amazon is 1%, and that will go up to 2% on February 4th.

The new cost structure will eliminate the $39.99 monthly Pro Merchant fee. Now pro-merchants and webstores will both pay the $79.99 monthly fee. Webstore merchants will also be charged a 30-cent transaction fee plus a 2.9% fee on all transactions.

Amazon webstores have allowed companies like Fruit of the Loom and Marks & Spencer set up ecommerce-enabled stores with little to no effort. Amazon technology has everything set and ready to go for these companies. In addition to these larger merchants, many small businesses utilize Amazon webstores as their e-commerce platform.

The Amazon webstore program integrates the services of Fulfillment by Amazon and Checkout by Amazon to make the shopping experience easier for consumers. Additionally, merchants that sell their products through their own websites powered by the Webstore program and also sell their products directly on Amazon.

In addition to these fees, Amazon will be raising its FBA Fulfillment by Amazon services to merchants starting February 18, 2014. The exact amounts of these increases have not been disclosed yet; only that they are coming.
Posted on 8:57 AM | Categories: