Gary Gordon for ETF Trends writes: A leading non-partisan tax policy researcher, The Tax Foundation,
estimates that your first 111 days belong to the U.S. government. When
the estimate includes the effect of federal borrowing, the date moves to
May 6. In other words, you work for Uncle Sam in your first 125 days of
a given year, while the remaining 240 belong to you.
The effect of federal borrowing cannot be understated. Right now, you
work an extra 14 days to pay the interest on the country’s debt. On the
other hand, the Federal Reserve’s zero-interest-rate policy coupled
with quantitative easing (”QE”) has kept the borrowing costs for the
U.S. exceptionally low. If rates returned to “normal,” the current 6.4%
of tax dollars going toward interest on sovereign debt would likely jump
to 12.5%. Instead of working until May 6 to reach “Tax Freedom Day,” you may need to wait until June approaches.
Keep in mind, I haven’t mentioned the probability that tax rates for
families are likely to climb. Consider Congressional Budget Office (CBO)
data that shows the trend of an increasing burden on the top 20%
earners, not just the much-maligned 1%. The Wall Street Journal, citing
the CBO data, explained that increased taxation of a couple with two
children making more than $150,000 has jumped from 65% in 1980 to more
than 90% by 2010.
Think increases in taxes will only hit the top 20% of income earning
families? Then you must not be paying attention. Due to a lack of savings
by “Boomers” and “Gen Xers,” as well as an increasingly aging
population and new entitlements, the U.S. will need to collect as much
as 25% more tax revenue above the average percentage (17.4%) of gross
domestic product (GDP). Yet half of Americans effectively contribute
zero dollars to the present tax system. Indeed, one does not need to be
psychic to foresee the onerous tax hikes ahead.
Granted, there are scores of legitimate ways to reduce a tax
albatross. One family might look to shift some W-2 earnings to 1099
income such that the side business activity offers deductible expenses.
Another family might move from a high-tax state to a lower-tax state.
Still, are there ways that a market-based investor can reduce the number
of days that Uncle Sam has commandeered?
The short answer is, “Yes.” Unfortunately, most people’s imagination rarely moves beyond tax
deferral in an employer-sponsored plan. Tax deferral is remarkably
beneficial in compounding the growth of a portfolio. On the other hand,
pushing one’s tax obligation out into the future is not the same as
shrinking it or eliminating it.
Enter the exchange-traded index fund. An ETF that tracks an
established index does not distribute significant capital gains the way a
traditional mutual fund might. For one thing, an index does not change
very much, if at all. Without the need to change what the ETF holds, the
lack of trading activity means there are less distributions to
shareholders for tax consequences. Similarly, outflows force the sale of
securities in mutual funds; the redemption process for an ETF is
different than the process for a mutual fund whereby the ETF structure
enhances tax efficiency.
According to a 2012 study at Morningstar, the 5-year average
distribution for a large-cap stock blend mutual fund was nearly 2%.
ETFs? 0%. For one who might have $200,000 in large stock mutual fund
exposure, that’d be four thousand dollars in capital gains distributions
annually. Five years of holding the large cap fund would cost $600 per
year at a 15% capital gains rate for a total of $3000. Simply selecting
iShares S&P 500 (IVV) in one’s brokerage account would eliminate the
levy.
Outside of the stock arena, distaste for capital gains distributions
morphs into disdain for the taxation of interest income. Those who find
themselves in a very high marginal tax bracket might do well to skip
straight to the no-tax world of municipal bonds. It is true that the
rapid rise in interest rates that followed the Fed’s tapering
announcement in May of 2013 served to punish munis mercilessly. SPDR
Nuveen Muni Bond (TFI) logged -3.9% last year.
However, last year’s muni bashing created opportunity for those who
wish to pursue income free from federal taxation. TFI quickly recovered a
technical uptrend, already garnering 4.5% year-to-date. For an investor
in the 35% tax bracket, the taxable bond equivalent yield is 4.0% — a
return that simply cannot be matched by intermediate-term investment
grade bond funds. Longer-term munis in Market Vectors Long (MLN) have
also been winners.
Obviously, investing in anything for tax benefits alone is likely to
bite in unexpected and undesirable ways. Nevertheless, one can consider
the favorable spreads that munis offer the high marginal tax bracket
investor. A fund that I like for taxable as well as non-taxable accounts
is PIMCO Short-Term High Yield (HYS). It may offer a 4.3% yield with
relatively low risk. Now consider Market Vectors Short-Term High Yield
Muni (SHYD) with a projected 3.9% yield net of fees. In a 35% marginal
bracket, a 6.0% taxable equivalent yield makes SHYD an attractive
prospect.
Founded by Daisuke
Sasaki and Ryu Yokoji in July 2012, freee aims to make bookkeeping and
accounting quick and easy. While the idea seems simple, no one seems to
have created an easy-to-use piece of accounting software for Japan.
For many years, Yayoi has been dominating the accounting software space
with over 60 percent market share in Japan. Sasaki says that Yayoi
follows the dual-entry bookkeeping method, which could prove to be
difficult and unnecessary for many small businesses. It functions okay
but it lacks invoicing or bank account integration. It is at best an
upgraded Excel spreadsheet.
On the other hand, freee’s offer is so much more compelling. It is built
on the cloud and is accessible via any web browser. Accounting entries
are highly automated. For example, if a payment was made to Softbank,
freee automatically turns it into a journal entry and classifies the
expense as a telco billing. All the accountant has to do is to approve
the bills.
Freee also helps small businesses generate tax reports in a few clicks
for tax submissions to authorities. Automation is made possible because
freee is integrated with over 1,600 banks in Japan.
(See: MergePay is Mint for business, making bookkeeping easier)
“Bank account integration has been around for many years but we are the
first to use it for business,” says Sasaki. “We want small and medium
businesses (SMBs) to just care about their expenses and invoices and
leave the accounting job to the software.”
freee-mobile
Business owners can also access freee on mobile.
Sasaki, a former Googler who was in charge of SMBs, realized that
technology literacy in small businesses in Japan is really low. Many of
them still use faxes along with pen and paper when doing their accounts.
“Something is wrong about Japan’s SMB market and I really want to solve
the problem. There are no tech products to help a SMB that is affordable
in the market,” adds Sasaki.
Since its official launch in March 2013, freee is now used by over
67,000 SMBs. Sasaki declined to reveal the number of paid users. Freee
charges individual self-employees US$10 a month, and $20 for corporates.
Rocky start
When the company was founded, Sasaki faced two problems. First, his team
was so passionate about the product that they cared too much about its
look and feel.
“We discussed a lot how the product should look like. Maybe too much. In
the first two months, we made no progress. We decided to stop and make
decisions fast and things started to move.”
The team was coding 15 hours a day, rushing for their launch. But when
the prototype was ready, Saski faced the second hurdle – skepticism from
the market.
“We showed our product to some potential users before launch. But they
looked at it with the traditional accounting mindset and thought we can
never disrupt the accounting industry,” he says.
freee-team
Despite the naysayers, freee launched in March last year to good
feedback. Sasaki says that happy freee users brought in more users. A
customer was so impressed with Sasaki’s accounting software that he even
wrote a book about tax filing using freee.
What we learned was that even though the initial feedback was not
good, it is important to just launch and see what the real customers are
saying. We are fortunate because we have early adopters who help to
give good reviews on the internet and other people followed.
(See: Despite the naysayers, Pixta became Japan’s biggest stock photo
marketplace)
Sasaki has also been pretty creative in distributing his accounting
software. He sold coupons on Amazon because, as he puts it, “people
actually search for accounting software on Amazon.” As credit card
spending is automatically tracked and recorded on freee, more owners are
happy to spend, knowing that freee will track the expenses. This in
turn makes the credit card companies more willing to promote freee for
free.
Other distribution methods include partnering with point-of-sales (POS)
services like Square and any retail iPads powered by POS software. Freee
also gets cozy with tax advisors, and has so far partnered with 300 of
them. “If they say that freee is good, then word will spread and it’s
good for business,” says Sasaki. Freee also offers its API so it is easy
for any application and POS to integrate with it.
We want one million SMBs to use our product and we aim to create a
network of SMBs who can easily make transactions within the freee
network. We also want to globalize our product. Right now, freee is only
in Japan. But once our product is more stable, we hope to enter other
Asia markets, hopefully starting next year.
Read more: This Japanese entrepreneur is freeing small businesses from their accounting nightmares http://www.techinasia.com/daisuke-sasaki-ryu-yokoji-freee-bookkeeping-accounting-software/
Read more: This Japanese entrepreneur is freeing small businesses from their accounting nightmares http://www.techinasia.com/daisuke-sasaki-ryu-yokoji-freee-bookkeeping-accounting-software/
Founded by Daisuke
Sasaki and Ryu Yokoji in July 2012, freee aims to make bookkeeping and
accounting quick and easy. While the idea seems simple, no one seems to
have created an easy-to-use piece of accounting software for Japan.
For many years, Yayoi has been dominating the accounting software space
with over 60 percent market share in Japan. Sasaki says that Yayoi
follows the dual-entry bookkeeping method, which could prove to be
difficult and unnecessary for many small businesses. It functions okay
but it lacks invoicing or bank account integration. It is at best an
upgraded Excel spreadsheet.
On the other hand, freee’s offer is so much more compelling. It is built
on the cloud and is accessible via any web browser. Accounting entries
are highly automated. For example, if a payment was made to Softbank,
freee automatically turns it into a journal entry and classifies the
expense as a telco billing. All the accountant has to do is to approve
the bills.
Freee also helps small businesses generate tax reports in a few clicks
for tax submissions to authorities. Automation is made possible because
freee is integrated with over 1,600 banks in Japan.
(See: MergePay is Mint for business, making bookkeeping easier)
“Bank account integration has been around for many years but we are the
first to use it for business,” says Sasaki. “We want small and medium
businesses (SMBs) to just care about their expenses and invoices and
leave the accounting job to the software.”
freee-mobile
Business owners can also access freee on mobile.
Sasaki, a former Googler who was in charge of SMBs, realized that
technology literacy in small businesses in Japan is really low. Many of
them still use faxes along with pen and paper when doing their accounts.
“Something is wrong about Japan’s SMB market and I really want to solve
the problem. There are no tech products to help a SMB that is affordable
in the market,” adds Sasaki.
Since its official launch in March 2013, freee is now used by over
67,000 SMBs. Sasaki declined to reveal the number of paid users. Freee
charges individual self-employees US$10 a month, and $20 for corporates.
Rocky start
When the company was founded, Sasaki faced two problems. First, his team
was so passionate about the product that they cared too much about its
look and feel.
“We discussed a lot how the product should look like. Maybe too much. In
the first two months, we made no progress. We decided to stop and make
decisions fast and things started to move.”
The team was coding 15 hours a day, rushing for their launch. But when
the prototype was ready, Saski faced the second hurdle – skepticism from
the market.
“We showed our product to some potential users before launch. But they
looked at it with the traditional accounting mindset and thought we can
never disrupt the accounting industry,” he says.
freee-team
Despite the naysayers, freee launched in March last year to good
feedback. Sasaki says that happy freee users brought in more users. A
customer was so impressed with Sasaki’s accounting software that he even
wrote a book about tax filing using freee.
What we learned was that even though the initial feedback was not
good, it is important to just launch and see what the real customers are
saying. We are fortunate because we have early adopters who help to
give good reviews on the internet and other people followed.
(See: Despite the naysayers, Pixta became Japan’s biggest stock photo
marketplace)
Sasaki has also been pretty creative in distributing his accounting
software. He sold coupons on Amazon because, as he puts it, “people
actually search for accounting software on Amazon.” As credit card
spending is automatically tracked and recorded on freee, more owners are
happy to spend, knowing that freee will track the expenses. This in
turn makes the credit card companies more willing to promote freee for
free.
Other distribution methods include partnering with point-of-sales (POS)
services like Square and any retail iPads powered by POS software. Freee
also gets cozy with tax advisors, and has so far partnered with 300 of
them. “If they say that freee is good, then word will spread and it’s
good for business,” says Sasaki. Freee also offers its API so it is easy
for any application and POS to integrate with it.
We want one million SMBs to use our product and we aim to create a
network of SMBs who can easily make transactions within the freee
network. We also want to globalize our product. Right now, freee is only
in Japan. But once our product is more stable, we hope to enter other
Asia markets, hopefully starting next year.
Read more: This Japanese entrepreneur is freeing small businesses from their accounting nightmares http://www.techinasia.com/daisuke-sasaki-ryu-yokoji-freee-bookkeeping-accounting-software/
Read more: This Japanese entrepreneur is freeing small businesses from their accounting nightmares http://www.techinasia.com/daisuke-sasaki-ryu-yokoji-freee-bookkeeping-accounting-software/
Founded by Daisuke
Sasaki and Ryu Yokoji in July 2012, freee aims to make bookkeeping and
accounting quick and easy. While the idea seems simple, no one seems to
have created an easy-to-use piece of accounting software for Japan.
For many years, Yayoi has been dominating the accounting software space
with over 60 percent market share in Japan. Sasaki says that Yayoi
follows the dual-entry bookkeeping method, which could prove to be
difficult and unnecessary for many small businesses. It functions okay
but it lacks invoicing or bank account integration. It is at best an
upgraded Excel spreadsheet.
On the other hand, freee’s offer is so much more compelling. It is built
on the cloud and is accessible via any web browser. Accounting entries
are highly automated. For example, if a payment was made to Softbank,
freee automatically turns it into a journal entry and classifies the
expense as a telco billing. All the accountant has to do is to approve
the bills.
Freee also helps small businesses generate tax reports in a few clicks
for tax submissions to authorities. Automation is made possible because
freee is integrated with over 1,600 banks in Japan.
(See: MergePay is Mint for business, making bookkeeping easier)
“Bank account integration has been around for many years but we are the
first to use it for business,” says Sasaki. “We want small and medium
businesses (SMBs) to just care about their expenses and invoices and
leave the accounting job to the software.”
freee-mobile
Business owners can also access freee on mobile.
Sasaki, a former Googler who was in charge of SMBs, realized that
technology literacy in small businesses in Japan is really low. Many of
them still use faxes along with pen and paper when doing their accounts.
“Something is wrong about Japan’s SMB market and I really want to solve
the problem. There are no tech products to help a SMB that is affordable
in the market,” adds Sasaki.
Since its official launch in March 2013, freee is now used by over
67,000 SMBs. Sasaki declined to reveal the number of paid users. Freee
charges individual self-employees US$10 a month, and $20 for corporates.
Rocky start
When the company was founded, Sasaki faced two problems. First, his team
was so passionate about the product that they cared too much about its
look and feel.
“We discussed a lot how the product should look like. Maybe too much. In
the first two months, we made no progress. We decided to stop and make
decisions fast and things started to move.”
The team was coding 15 hours a day, rushing for their launch. But when
the prototype was ready, Saski faced the second hurdle – skepticism from
the market.
“We showed our product to some potential users before launch. But they
looked at it with the traditional accounting mindset and thought we can
never disrupt the accounting industry,” he says.
freee-team
Despite the naysayers, freee launched in March last year to good
feedback. Sasaki says that happy freee users brought in more users. A
customer was so impressed with Sasaki’s accounting software that he even
wrote a book about tax filing using freee.
What we learned was that even though the initial feedback was not
good, it is important to just launch and see what the real customers are
saying. We are fortunate because we have early adopters who help to
give good reviews on the internet and other people followed.
(See: Despite the naysayers, Pixta became Japan’s biggest stock photo
marketplace)
Sasaki has also been pretty creative in distributing his accounting
software. He sold coupons on Amazon because, as he puts it, “people
actually search for accounting software on Amazon.” As credit card
spending is automatically tracked and recorded on freee, more owners are
happy to spend, knowing that freee will track the expenses. This in
turn makes the credit card companies more willing to promote freee for
free.
Other distribution methods include partnering with point-of-sales (POS)
services like Square and any retail iPads powered by POS software. Freee
also gets cozy with tax advisors, and has so far partnered with 300 of
them. “If they say that freee is good, then word will spread and it’s
good for business,” says Sasaki. Freee also offers its API so it is easy
for any application and POS to integrate with it.
We want one million SMBs to use our product and we aim to create a
network of SMBs who can easily make transactions within the freee
network. We also want to globalize our product. Right now, freee is only
in Japan. But once our product is more stable, we hope to enter other
Asia markets, hopefully starting next year.
Read more: This Japanese entrepreneur is freeing small businesses from their accounting nightmares http://www.techinasia.com/daisuke-sasaki-ryu-yokoji-freee-bookkeeping-accounting-software/
Read more: This Japanese entrepreneur is freeing small businesses from their accounting nightmares http://www.techinasia.com/daisuke-sasaki-ryu-yokoji-freee-bookkeeping-accounting-software/
Founded by Daisuke
Sasaki and Ryu Yokoji in July 2012, freee aims to make bookkeeping and
accounting quick and easy. While the idea seems simple, no one seems to
have created an easy-to-use piece of accounting software for Japan.
For many years, Yayoi has been dominating the accounting software space
with over 60 percent market share in Japan. Sasaki says that Yayoi
follows the dual-entry bookkeeping method, which could prove to be
difficult and unnecessary for many small businesses. It functions okay
but it lacks invoicing or bank account integration. It is at best an
upgraded Excel spreadsheet.
On the other hand, freee’s offer is so much more compelling. It is built
on the cloud and is accessible via any web browser. Accounting entries
are highly automated. For example, if a payment was made to Softbank,
freee automatically turns it into a journal entry and classifies the
expense as a telco billing. All the accountant has to do is to approve
the bills.
Freee also helps small businesses generate tax reports in a few clicks
for tax submissions to authorities. Automation is made possible because
freee is integrated with over 1,600 banks in Japan.
(See: MergePay is Mint for business, making bookkeeping easier)
“Bank account integration has been around for many years but we are the
first to use it for business,” says Sasaki. “We want small and medium
businesses (SMBs) to just care about their expenses and invoices and
leave the accounting job to the software.”
freee-mobile
Business owners can also access freee on mobile.
Sasaki, a former Googler who was in charge of SMBs, realized that
technology literacy in small businesses in Japan is really low. Many of
them still use faxes along with pen and paper when doing their accounts.
“Something is wrong about Japan’s SMB market and I really want to solve
the problem. There are no tech products to help a SMB that is affordable
in the market,” adds Sasaki.
Since its official launch in March 2013, freee is now used by over
67,000 SMBs. Sasaki declined to reveal the number of paid users. Freee
charges individual self-employees US$10 a month, and $20 for corporates.
Rocky start
When the company was founded, Sasaki faced two problems. First, his team
was so passionate about the product that they cared too much about its
look and feel.
“We discussed a lot how the product should look like. Maybe too much. In
the first two months, we made no progress. We decided to stop and make
decisions fast and things started to move.”
The team was coding 15 hours a day, rushing for their launch. But when
the prototype was ready, Saski faced the second hurdle – skepticism from
the market.
“We showed our product to some potential users before launch. But they
looked at it with the traditional accounting mindset and thought we can
never disrupt the accounting industry,” he says.
freee-team
Despite the naysayers, freee launched in March last year to good
feedback. Sasaki says that happy freee users brought in more users. A
customer was so impressed with Sasaki’s accounting software that he even
wrote a book about tax filing using freee.
What we learned was that even though the initial feedback was not
good, it is important to just launch and see what the real customers are
saying. We are fortunate because we have early adopters who help to
give good reviews on the internet and other people followed.
(See: Despite the naysayers, Pixta became Japan’s biggest stock photo
marketplace)
Sasaki has also been pretty creative in distributing his accounting
software. He sold coupons on Amazon because, as he puts it, “people
actually search for accounting software on Amazon.” As credit card
spending is automatically tracked and recorded on freee, more owners are
happy to spend, knowing that freee will track the expenses. This in
turn makes the credit card companies more willing to promote freee for
free.
Other distribution methods include partnering with point-of-sales (POS)
services like Square and any retail iPads powered by POS software. Freee
also gets cozy with tax advisors, and has so far partnered with 300 of
them. “If they say that freee is good, then word will spread and it’s
good for business,” says Sasaki. Freee also offers its API so it is easy
for any application and POS to integrate with it.
We want one million SMBs to use our product and we aim to create a
network of SMBs who can easily make transactions within the freee
network. We also want to globalize our product. Right now, freee is only
in Japan. But once our product is more stable, we hope to enter other
Asia markets, hopefully starting next year.
Read more: This Japanese entrepreneur is freeing small businesses from their accounting nightmares http://www.techinasia.com/daisuke-sasaki-ryu-yokoji-freee-bookkeeping-accounting-software/
Read more: This Japanese entrepreneur is freeing small businesses from their accounting nightmares http://www.techinasia.com/daisuke-sasaki-ryu-yokoji-freee-bookkeeping-accounting-software/
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