2013 Year-End Tax Planning in January of Year 2014

Brian Lovett & Ed Mendlowitz for The Partners Network write: Many considered December 31, 2013, the final date for year-end tax planning, but there are numerous planning actions that you can take in 2014 retroactive to 2013.  Here’s a quick and easy guide to help you with your planning.

Retirement Plans

• Conventional and Roth IRA contributions for 2013 can be made until the April 15 return due date for the payment to be attributed to 2013.
• Contributions for Keogh, SIMPLE and 401(k) can be made up until the due date of the return including extensions.  However, the Keogh, SIMPLE and 401(k) plans must have been established before the end of 2013 (Sept. 30 for SIMPLE plans), unlike the IRAs.
• SEP plans can be opened any time in 2014 until the tax return due date, including extensions, and/or payment delayed until then for the 2013 deduction to be allowed.

Stock Sales

• Wash sales occur when stock sold at a loss is reacquired within 30 days before or after the stock’s sale.  For sales made in December 2013 that had a loss, repurchasing the stock this month (within the 30-day prohibited period) will cause the 2013 loss to be disallowed and added to the basis of the January 2014 purchased shares.

Estimated Tax

• The final estimated tax installment is due Jan. 15; however, if that installment isn’t paid but the return is filed and the full tax is paid by Jan. 31 there will be no penalty for underpaying that installment.

Trusts, Estates and Foundations

• Distributions from trusts and estates that are made within 65 days after the end of the year can be attributed to 2013 if the appropriate box is checked on Form 1041 when it is filed for 2013.
• Private charitable foundations can make distributions related to 2013 income until the end of 2014.
• Grantor trusts that mistakenly obtained a taxpayer identification number can notify their banks, brokers and others of the future use of the grantor’s Social Security Number and the discontinuance of the TIN eliminating the need to continue filing trust tax returns.
• Estates for people dying in 2013 can elect the six months later alternate      valuation date on a timely filed estate tax return.
• Qualified disclaimers can be made within nine months of death for people that died in 2013, as long as the funds were not distributed or otherwise used by the beneficiary.
• Estates can make many elections retroactively on the estate tax returns up until the return’s due date.

Business Issues

• C corporations and personal holding companies (PHC) that pay dividends by March 15, 2014 can elect to have those dividends attributed to 2013 in order to avoid the imposition of the accumulated earnings penalty or PHC tax.
• Businesses that want to claim inventory devaluations of regular for sale items should consider 2014 sales at the reduced amounts prior to the filing of the 2013 tax return that will report the write downs.
• Businesses with a 2013 installment sale can elect out of the installment treatment if their 2013 tax bracket will be much lower than 2014 and later years are expected to be.  This decision can be made before you file your 2013 tax return.
• Last in – first out (LIFO) inventory valuation conversions can be done until due date of the 2013 tax return.
• People who had informal partnerships and joint ventures in 2013 should consider filing partnership tax returns and issuing K-1s to report those activities. Formal partnership agreements are not necessary to have a valid partnership for tax purposes.

Employee Issues

• Cafeteria plan and flexible spending accounts can make payments and reimbursements for 2013 salary-reduction amounts or applicable expenses incurred and paid through March 15, 2014 if the plan permits it.
• Compensation is generally reported when received or made available to the recipient; however, if it is paid by check and the delivery of the check is delayed or otherwise not made available for collection, then the income does not need to be reported until the payment is actually received.  For example, if a commission check is written at the end of 2013 and mailed to the  payee while the payee is traveling or on vacation until January, then the payee will not have to report the income until 2014 (the year of actual receipt) even though his or her Form 1099 would show the 2013 payment.  If this is the case, appropriate disclosure must be made on the 2013 tax return explaining why the Form 1099 amount is greater than the amount reported.  Alternatively you can report the entire amount on the 1099 and on a different line on the return show a subtraction for the amount not actually received, and provide an explanation.  Note that if the funds had been wired into the payee’s account by Dec. 31, it would be considered received because if they wished to withdraw it at that point, they could have.
• Credit card charges made in 2013 for deductible items are reportable on the 2013 tax return even though not paid until 2014 or later.
• Certain employer payments for deferred compensation plans are deductible in 2013 even though not paid until 2014, as long as they are paid by March 15, 2014.  In such a case, the employee would report the income when received.
• An employee who received employer-granted restricted stock or ISOs in December 2013 can make an election within 30 days after receiving the stock to report the income or AMT in the year the stock or ISO was      received rather than when the restrictions lapse.  This election is made pursuant to Internal Revenue Code (IRC) section 83(b).  A timely January election will have the income taxed on the 2013 tax return.
• Receipts for 2013 charitable contributions must be received by April 15, 2014 for such deductions to be allowable.  If qualified appraisals are necessary, they must be attached to the returns. The receipts and appraisals can be prepared in 2014 for the 2013 contributions.

The above are some items where post-2013 planning can affect the 2013 tax return. Many of these steps involve technical issues and it is suggested that a professional tax advisor be consulter prior to acting. Some of these actions will need to be done right away, while others allow some time.

After DOMA: Tax Filing FAQs for Same-Sex Married Couples

The National Women's Law Center writes: In 2013, the Supreme Court invalidated a portion of the Defense of Marriage Act (DOMA)—providing, for the first time, federal recognition and protections for same-sex, legally married couples. The IRS has since issued guidance about what the ruling means for same-sex married couples when filing their federal taxes. The following questions and answers are designed to give general information about tax issues that same-sex couples will be dealing with in tax year 2013 and beyond, and is not meant to be exhaustive. It is intended for general information purposes only.

To View or Download the Full Fact Sheet, Click Here

Market whizz-kid enjoys Kiwi lifestyle / Rod Drury, founder of XERO / Xero aims to be "the Amazon of internet software accounting",

Anthony Hubbard for The Dominion Post/Stuff.co.nz writes:   Rod Drury is the digital whizz-kid whose company is worth billions but has yet to turn a profit.  As a true internet entrepreneur, he runs his multinational firm Xero from his home in Havelock North (New Zealand).

Mr Drury is a very Kiwi kind of multimillionaire. He likes to pad around his house in informal gear. He Skypes in his board shorts. He and his wife took their kids back to the bay "so our kids would grow up in the provinces", he told a Hawke's Bay tourism magazine.

"In the bay the right things are important. We can go to the beach, swim, ride up the hill and eat outside with friends."

He said he could "work effectively from the bay a few days a week and spend time with my team in Wellington and Auckland most weeks or overseas."

Xero aims to be "the Amazon of internet software accounting", and in the last year has rocketed up the sharemarket tables.

It is now worth about $6.8 billion, putting it among the market leaders.

And it is yet to turn a profit. Mr Drury cheerfully acknowledges this, saying that the aim is to build up the business first. Xero was building a "long- term, highly profitable business and this will incur further losses".

Big United States investors have put their number into the firm, and it has major expansion plans. Last year its workforce grew from a bit under 400 to nearly 600. Mr Drury himself, a serial entrepreneur, is now estimated to be worth more than $700 million.

What is not so well known is that he is Ngai Tahu, and proud of it.

His father traced the tribal lineage, Mr Drury told the Ngai Tahu on-line magazine Te Karaka.

"For me, it shows you really belong in New Zealand. More and more I have this feeling of pride in New Zealand, and an awareness of the characteristics that make us different from anywhere else."

Mr Drury was raised in a middle- class family in Hawke's Bay and had only a vague notion of his Maori heritage.

In 2013 he was the Ernst and Young Entrepreneur of the year, and he has won high praise for helping other businesspeople in Wellington and elsewhere.

Wellington Employers' Chamber of Commerce chief executive Raewyn Bleakley told a newspaper reporter that Mr Drury's story of perseverance "is one we can all learn from".

"For someone who is running a multibillion-dollar company and 600 staff spread over four countries he has been very generous with his time in passing on his experiences, ideas, and advice to both the Chamber and to Business Central members, most recently in Whanganui and Hawke's Bay."

In 1995 he co-founded Glazier Systems, specialising in developing systems for Microsoft Windows. He sold it for $7.5m about four years later. Then there was AfterMail, an email package that won an international award. He sold the business for $45m.

"It was never designed to be a long- term business. We built it up to sell it to get some money," Mr Drury said. "The other thing we wanted to do was to prove that we could build world-class technology in New Zealand and be as good at developing products as anyone else," he told Te Karaka.

He has certainly proved that. Now the question is: How far can Xero go?

ShipWorks QuickBooks Integration, Sync, and Transfer : eCommerce Accounting Integration

Cloud Cart Connector, a SaaS based QuickBooks integration by JMA Web Technologies, added a ShipWorks integration today. Orders from ShipWorks automatically download into QuickBooks without installing any files. Customers and products associated with the orders will be created or matched automatically.

Cloud Cart Connector is compatible with QuickBooks Online and QuickBooks Pro, Premier, and Enterprise. Users can create Invoices, Payments, and Sales Receipts. Plans range from $49 – $99 per month and rely on the number of yearly transactions. For an online demo, please watch this video:

Quicken Deluxe 2014 : Review

KATHY YAKAL for PC Magazine writes: 

• PROS
  Comprehensive management of personal finances. Connects to numerous types of online accounts. Detailed transaction management. Good level of customizability. Online bill-pay. Easy navigation. Mobile versions can snap receipt photos and attach them.
• CONSToo much for many users. Can't access everything remotely.
• BOTTOM LINE
  Quicken Deluxe 2014 is a financial micromanager's dream. It faces the same remote access problems that all desktop software does, but its ease of use, comprehensive account access and flexible, detailed managing of transactions can't be found elsewhere.

Desktop-based Quicken remains the 800-pound gorilla of personal finance managers. Competitors like Microsoft Money have come and gone in the 20-plus years that the software has existed, but Quicken stands alone when it comes to tracking your financial accounts using a product that exists on your hard drive.

Personal finance tasks, though, continue to move onto mobile devices, and gorillas aren't very portable. Quicken is just too big to exist in its entirety on an iPhone. Intuit has added some mobile capability to the mix in its 2014 versions: You can now snap a photo of a restaurant receipt with your smartphone, for example, and attach it to a transaction in the mobile version of Quicken, which can then by synchronized via the cloud to your desktop version.

Quicken's overall feature development, though, has changed little over the last several years. It matured rapidly throughout the first decade of its life, and remains an impressive, comprehensive personal finance solution—if you like to micromanage your money. There isa Starter Edition that costs $29.99 that does basic chores like import and manage your bank accounts, create budgets and send bill-pay reminders, but Intuit's online product, Mint, does that and more for free (and in the cloud).

So it only makes sense to start with Quicken if you're going to use its advanced capabilities like debt reduction, planning and investments, or if you need highly detailed, flexible transaction management. If you're already using desktop Quicken, there's no compelling reason to upgrade to the 2014 version unless you absolutely must have the ability to take pictures of receipts with your smartphone.

An Impressive Palette of Tools
It would be easier to talk about what Quicken Deluxe 2014 doesn't do than what it does. For many years, it's helped manage every element of personal finance that can be done by an amateur. To do anything more, you'd have to visit an accountant.

Quicken Deluxe 2014, which I review here, lacks a few features found in the top-of-the-line edition, Quicken Premier, which is designed for users who need sophisticated investment performance-tracking tools and help understanding the tax implications of their portfolios. You can still set up and track your securities in Quicken Deluxe, and the software will display your current portfolio value. It also compares your performance to that of the market and tracks cost basis and capital gains.

You can set up several types of accounts in Quicken Deluxe:

• Spending and saving. Checking, savings, credit cards and cash
• Property and assets. Home, vehicle and miscellaneous assets
• Loans and debt. Loans, home equity loans (HELOC) and miscellaneous liabilities
• Investing and retirement. Brokerage, 401(k) or 403(b), IRA or Keogh and 529 plans

Since you can import, download or manually enter transactions from your accounts, Quicken uses that information to analyze your spending (by category) and calculate your net worth. If you sign up for online banking, you can pay bills electronically and get reminders of their due dates. Based on those obligations, Quicken projects your future balances.

Planning, tax tools and reports round out Quicken's stable of tools. You can define goals and use specialized calculators to gauge your ability to meet them. Quicken also helps you plan for personal income tax preparation by offering a tax estimator and help finding deductions and estimating capital gains. And it provides access to additional online tax resources. Reports and graphs include Spending by Category, Current Spending vs. Average Spending by Payee and Current Budget. 

Getting Around
Despite its depth, Quicken is easy to navigate, thanks to a user interface that has been cleaned up and streamlined throughout the years. Its default home page displays two simple, critical charts that tell you at a glance where your money has come from in the last 30 days and where it's been spent.

This content is customizable, though. You can select from a variety of mini-reports and graphs—things like Alerts, Calendar, Expenses and Income Year-to-Date—by clicking the Customize button. Each has its own set of options that can personalize your display. The data here is interactive: You can click on an entry to drill down into deeper detail. Quicken lets you create multiple Views containing different groups of content.

The left vertical pane lists all of your active accounts, along with your current net worth. The top toolbar has only three tabs in addition to the Home page: Spending, Bills and Planning. Links in the upper right provide access to information about your synchronization with mobile devices (you can send data to the Quicken Cloud, to be picked up remotely) and any active alerts (email and texts can alert you to events like Unusual Spending, Low Balance and Over Budget). You can initiate a synchronization right from this screen and select a budget to display on your smartphone or tablet.

Intuit has done a masterful job of tucking away access to the tools you'll need at the time you're likely to need them. So Quicken's look is deceiving at first glance. You don't know how much it can actually do until you start poking around. There's no real menu or program-wide navigational system that you have to keep revisiting (though there are some abbreviated menus that you may occasionally visit). Once you take off on a particular chore, you'll usually find its related activities within easy reach.

Exceptional Detail
The Spending tab give you access to the tools you'll need to manage and track your income and expenses (though you can set up a Home page view that gets you there, too). There's really very little visible here, just a view of either incoming or outgoing money that can be customized by date range and account.

But you can do tremendously detailed work on individual transactions. Highlight one in the list, and you can manage it in a number of ways. For example, you can change or add one or more categories to it, split it, enter notes and attach flags, void or memorize it, attach a file from your computer or one you've captured with your smartphone, etc. This excruciating level of detail sets Quicken apart from everyone else.

You'll only need to click on the Bills tab if you want to be reminded to pay specific bills or you plan to use Quicken Bill Pay to dispatch payments electronically, either through the Quicken software itself or the QuickenBillPay.com website. Intuit has offered this service since the mid-90s, so the process is easy to use and as secure as a bank website.

Quicken used to be the go-to program for anyone who wanted to manage their personal finances on a computer. As more people have gone mobile and begun to prefer cloud-based solutions, though, it's been eclipsed by applications like Intuit's own Mint.com. It still provides detailed, flexible answers to your money in/money out questions, and it interacts with online tools where it can. Its Apple and Android versions give you remote access to the data you'll most likely need when you're standing in line waiting to buy something.

But its core remains on your hard drive. If you micromanage your personal finances, it might well be worth the location limitations to have access to that detailed level of financial minutia. For basic account management, categorization of transactions, budgeting and real-time, insightful reports, though, Mint.com is a better solution, and our Editors' Choice for personal finance software.

Tax Strategies for Mutual-Fund Investors

Mike Piper for the Wall St Journal writes: What’s your most important tax advice for mutual-fund investors?

MIKE PIPER: By definition, tax planning is a case-by-case sort of thing, so it’s almost impossible to give a single piece of advice that would be helpful for everyone.
For mutual-fund investors who are investing via taxable brokerage accounts, the general goal is to lose as little of your return to taxes as possible. Strategies to consider would include:

• Making sure to tax-shelter your tax-inefficient funds (e.g., taxable bond funds with high yields, stock funds with high turnover, REIT funds) by holding them in 401(k) or IRA accounts before tax-sheltering your more tax-efficient funds.
• If you have to hold bonds in a taxable account, checking to see whether muni funds offer a yield that’s as high or higher than the after-tax yield on taxable bond funds with a comparable level of risk.
• Paying attention to tax-loss harvesting opportunities (or tax-gain harvesting, if you’re in the 10% or 15% tax brackets). These days with the multitudes of index funds and ETFs available, it’s generally very easy to find a suitable replacement for your portfolio after selling a fund to harvest a loss.

Most people, however, are not maxing out their retirement accounts. So, for them, tips for taxable account investing aren’t as relevant as tips for getting the maximum value possible from their retirement accounts. Things that will generally help in that regard would include:

• Not doing any saving for retirement via taxable brokerage accounts until IRA and 401(k) accounts are maxed out.
• Carefully considering whether Roth savings, tax-deferred savings, or a combination of the two is most likely to be advantageous.
• Resisting the temptation to cash out a 401(k) and spend it after switching jobs.
• Checking whether they’re eligible for the retirement savings contribution credit (or whether a modest pretax IRA or 401(k) contribution would make them eligible). 
•  
• GREG MCBRIDE : What’s your most important tax advice for mutual-fund investors?  Don’t let the tax tail wag the investment dog, meaning, don’t make investment decisions solely based on tax considerations. That being said, it is certainly prudent to invest in a tax-smart and tax-efficient way, by maximizing tax-advantaged retirement savings options such as 401(k)s and individual retirement accounts, on a Roth and/or tax-deferred basis, as suits your situation.
  Also, where you park certain investments can enhance your tax efficiency and net returns, by putting higher-taxed collectibles such as precious metals funds and income-producing bond funds in a tax-advantaged account, and holding those investments prone to long-term capital gains in a taxable account. Using any capital losses to offset short-term capital gains and up to $3,000 of income can also be a prudent strategy.
•  LARRY ZIMPLEMAN: What’s your most important tax advice for mutual-fund investors?  My most important tax advice would be to not be overly driven or focused on tax considerations at the expense of the long-term return of the portfolio. You always want to have the long-term return of your mutual fund portfolio be the #1 priority, and tax considerations would be #2.
  
  Remember, many of your investments–such as 401(k) accounts–are tax preferenced, so tax considerations are not an issue during the accumulation period. Make sure you have a financial or tax adviser who can offer you some insights on tax considerations–but never let that be a driver of your investment decisions.
•  
•  ELEANOR BLAYNEY: What’s your most important tax advice for mutual-fund investors?  It can be difficult to be tax-efficient using mutual funds as a result of two types of capital gains that are taxable to investors.
  
  The first type is straightforward and can be controlled by the investor–namely, the gain realized when the investor sells shares of the mutual fund at a higher price than when they were purchased. The second, however, is not as controllable: These are the annual capital-gain distributions that open-ended mutual funds are required to pay out in the year of their realization.
  
  The cost basis for these distributions do not reflect an investor’s purchase price, but instead are based on the fund’s internal purchases of given securities. Thus it is possible for an investor to have to pay taxes on gains that he never experienced. The most egregious example is when an investor purchases a fund today for $100 a share, and the fund then makes a $20 capital-gain distribution the following day. The NAV of the fund drops by a corresponding $20 to $80 a share, leaving the investor having to pay capital-gains taxes on a portion of his own contributed principal.
  
  The moral here: Before buying into a mutual fund, check on the fund’s distribution dates.  Buy after, not immediately before, the distribution.
  
  A certified financial planner professional with expertise in investment management can advise you on the tax implications of mutual funds. He or she can help you not only with your asset allocation in a portfolio of funds, but also with “asset location.” This involves determining which funds to put into your taxable accounts, and which are better held in your tax-deferred accounts, as part of an overall strategy to maximize your after-tax returns.
  
   CHRISTIAN MAGOON: What’s your most important tax advice for mutual-fund investors? Taxes in the U.S. appear likely to rise in the coming years. That is why it is more important than ever for investors to make sure they are maximizing tax-efficient vehicles and investment strategies within their portfolio. Tax-efficient mutual funds or the tax-advantaged structure of an exchange-traded fund are two simple ways to keep more investment gains.
  
  GEORGE PAPADOPOULOS: What’s your most important tax advice for mutual-fund investors? If you are getting ready to make a mutual-fund purchase, please check the mutual-fund company’s website to learn its year-end distribution dates. You should delay the purchase after this date (called the ex-dividend date) to avoid paying more taxes on an investment you just made.
  
  In addition, with the substantial recent market gains, if you are charitably inclined, do not sell the stock or mutual-fund shares first and then donate the cash. Instead, make arrangements with the particular charity to donate the appreciated shares. In this way, you will avoid paying taxes on the capital gains (assuming you have held the shares for more than a year) and at the same time receive a tax deduction equal to the appreciated value of the shares.
  
   GUS SAUTER: What’s your most important tax advice for mutual-fund investors?  Since taxes are inevitable, and likely to become even more inevitable, investors should focus on after-tax returns. You can’t live off of before-tax returns.
  For equity investors with a long time horizon, it is important to search for funds that have low annual distributions of capital gains. Grinding through the math, it turns out that a fund that realizes and distributes most of its capital gains annually would have to outperform a fund that distributes minimal capital gains by as much as 2% per year in order to provide the same long-term, after-tax return.  Funds that have lower turnover are a pretty good place to start looking for low capital-gain distributions.  Index funds are an obvious candidate.
  For fixed-income investors in higher tax brackets, municipal-bond funds can be an attractive alternative to taxable bond funds.
  
  
  MATT HOUGAN: What’s your most important tax advice for mutual-fund investors?   You still own mutual funds? Really? Are you still watching Ghostbusters on your BetaMax?
  You shouldn’t own mutual funds in taxable accounts. They are fine products for tax-deferred accounts. They play a key role in my retirement portfolio.
  
  But in taxable accounts, actively managed mutual funds are a tax disaster.  Why?  Because each year, actively managed mutual funds pay out billions of dollars in capital-gains distributions to their shareholders…gains that you have to pay taxes on.
  
  What makes this so horrific is that often, you have to pay taxes based on someone else’s activity. Let’s say you own shares in the Matt Hougan Actively Awesome Mutual Fund. I’ve managed the portfolio well, and delivered 25% gains last year. But last month, someone else who owned 20% of all the shares in the fund sold their stake. I had to sell a bunch of securities to pay him in cash…securities that had appreciated in value.
  
  At the end of the year, our friend is sitting on a beach in Hawaii smiling. But by law, I have to pay out those capital gains to all the remaining shareholders in the fund. That’s right: You have to pay taxes because Mr. Aloha sold his shares.
  
  It’s fundamentally unfair and creates a huge drag on returns.
  Actively managed mutual funds are for retirement accounts; ETFs  (and maybe index mutual funds) are for taxable accounts. Just remember that and you’ll be OK.
  

55 Tax Breaks Expired Last Year, What Boomers Need to Know

Casey Down for FoxBusiness writes: There is a long list of tax write offs Uncle Sam allows when it comes time to filing your tax returns, but it can be hard to keep up with them all. Just last week, 55 tax breaks affecting everything from taxes on charitable deductions to helping grandkids with college were allowed to expire.

It is possible Congress will renew most of them, but there is no way to know for sure when that might happen, which makes it hard for baby boomers to plan for their financial future.  

Jessie Seaman, a licensed tax professional at the Tax Defense Network (www.taxdefensenetwork.com) advises boomers to defer whatever taxes they can now since they may not be able to much longer.

"Tax rates are going up across the board and certain deductions/credits that were available may not always be available," Seaman says. "Boomers should also be conservative and plan for the worst-case scenario when it comes to available deductions and credits, the last thing you want to start a new year off with is a big fat tax bill."

I spoke to Seaman and she offered the following additional tax tips for boomers:

1. Helping grandkids with college? Boomers that are helping their children and/or grandchildren go to college may qualify for large deductions and possibly refundable credits (meaning the IRS pays you dollar for dollar on what you spend up to $4,000). But there are a few catches. The American Opportunity Credit has been extended through 2017, but the deduction for tuition and fees expired Dec. 31, 2013. Congress likely will reinstate this deduction, but there is no guarantee. Also. the payer must be able to claim the student as a dependent on their tax return, although they are not required to do so, and grandparents must pay the college directly. If a boomer wants to make a more substantial payment toward education, then contributing to a 529- plan is the path to take.

2. Taxes on charitable deductions. For charitable baby boomers looking to make a donation with funds from an IRA distribution, you will now have to pay tax on that distribution. The days of tax-free IRA distributions for charitable purposes are gone. Boomers should be prepared to get stuck with income tax on IRA distributions in 2014 if Congress does not reinstate this deduction.

3. Thinking about downsizing? Many retirees look into downsizing their primary residence to something more affordable, but boomers with upside-down mortgages can no longer exclude primary residence cancellation of debt from gross income. The debt forgiveness on paying income taxes on primary residences expired in 2013. This means a boomer walking away from a $350,000 mortgage will pay income tax on the full 1099-C, Cancellation of Debt, issued from the bank. If the cancelled debt is $150,000, a retiree is looking at a huge tax bill on "income" they never truly received. Let’s keep our fingers crossed that this deduction is renewed for 2014.

4. Evaluate your equity. On the flipside, baby boomers buying a new home or residence in a more tropical or favorable destination for their golden years will not be able to deduct new mortgage insurance premiums. Homeowners who have less than 20% equity typically pay for private mortgage insurance, which was deductible in 2012 and 2013. One of the most important things for boomers to remember though is don’t panic, says Seaman. The reality is many of the tax deductions that are set to expire will more likely than not be reinstated. Also on the upside, a given business or individual is usually only affected by a couple of the deductions, if that.

Bitcoin Tax Rules Needed for Clarity, Taxpayer Advocate Urges

Richard Rubin and Carter Dougherty for Bloomberg write: The U.S. Internal Revenue Service should give taxpayers clear rules on how it will handle transactions involving Bitcoin and other digital currencies, Nina Olson, the National Taxpayer Advocate, said today. 

Spending Bitcoins to purchase goods may trigger capital gains and losses or ordinary income and losses, which have different tax rates, Olson said in her annual report to Congress.

“It is the government’s responsibility to inform the public about the rules they are required to follow,” she wrote. “The lack of clear answers to basic questions such as when and how taxpayers should report gains and losses on digital currency transactions probably encourages tax avoidance.”

Olson, who runs an independent office within the IRS, listed digital currency as one of the 25 most serious issues encountered by taxpayers.
Atop Olson’s list was the absence of a clear set of taxpayer rights and the decline in IRS service and enforcement stemming from budget cuts, issues on which she has repeatedly urged change. 

Olson has a new audience this year in John Koskinen, who was sworn in as IRS commissioner Dec. 23.

“What taxpayers need and deserve is the transformation of the IRS from a traditional enforcement-focused tax agency to a forward-looking modern agency that embraces technology even as it recognizes the specific needs of taxpayers for personal assistance,” she wrote.

Virtual Currencies

Introduced in 2008 by a programmer or group of programmers under the name Satoshi Nakamoto, Bitcoin is the most prominent of a group of virtual currencies -- money that exists mainly as a string of code -- that have no central issuing authority. “Miners” unlock new Bitcoins by using ever-faster computers to solve complex mathematical problems, and transactions are recorded anonymously in a public ledger. 

Today, even with its young age and regulatory uncertainties, Bitcoin can be used to pay for T-shirts, food or an appointment with a Manhattan psychiatrist.

The IRS hasn’t offered guidance on Bitcoin, beyond saying that it is working on the issue and that it has been monitoring digital currencies and transactions since 2007.

‘These Risks’

The IRS “is aware of the potential tax compliance risks posed by offshore and anonymous electronic payment systems, and we are working to address these risks,” Steven Miller, then the acting IRS commissioner, wrote in the agency’s response to a May 2013 Government Accountability Office report. 

Miller was forced out later that month after the IRS disclosed that it had applied extra scrutiny to some small-government Tea Party groups based solely on their names.

According to Olson’s report, a big distinction for the IRS to make is whether Bitcoin is property, in which case capital gains rules would apply with a top basic rate of 20 percent. If it’s treated like a “nonfunctional currency,” ordinary income tax rates would apply with a top rate of 39.6 percent. 

The IRS can’t outlaw Bitcoin, said Joshua Blank, a tax law professor at New York University. It can use past experience to require information reporting about transactions.
Tax compliance rates are highest when there is third-party reporting, particularly with wage data that employers send to the IRS. Compliance rates are lowest with no such reporting, as with self-employment income. 

“The danger is the creation of an electronic black market, similar to the cash economy,” Blank said. “That’s what the IRS wants to avoid.”

Four Reasons Why QuickBooks Is Failing Your Services Business

Innovergent writes: QuickBooks was the best fit for your business when your company was in its infancy, but is it the right choice to drive success in the next stage of your

organization’s growth? QuickBooks claims more than 3.5 million users, so you’re

not the only one facing this question. 

Many services organizations arrive at a similar crossroads every year. Timing is

everything—if you replace QuickBooks too early, you may end up buying more

capability than you need. But if you wait too long, you could end up struggling

with inefficient business processes that hurt your project delivery, business

performance and future profitability and growth. 

Laboring ahead on QuickBooks may seem convenient, but at what point do

you start missing out on growth opportunities by maintaining the status quo?

When is the right time to make the move? NetSuite has been working for years

with businesses in the services industry that have reached the limits of QuickBooks.

While services businesses are diverse, the issues they face when reaching the limits

of QuickBooks are remarkably similar. 

This white paper draws on real-world stories of small and medium-sized

professional services organizations (PSOs) that have upgraded from QuickBooks

to NetSuite at critical junctures in their development. It also outlines four common

business process inefficiencies that you might see reflected in your own business—

the reasons why QuickBooks may be failing your services organization:

1.QuickBooks is a simple general ledger solution that doesn’t support

your entire company.  Fast-growing services organizations need solutions

that can create efficiency and reduce headaches across functions, instead of

addressing only accounting and finance.

2.QuickBooks restricts your visibility into business performance.

Companies using QuickBooks usually have siloed applications and data,

making real-time analysis and accurate business decisions virtually impossible.

3.QuickBooks’ limited functionality won’t scale with your business.

Because QuickBooks was built to support a narrow scope of processes and

business offerings, it severely limits companies from expanding their offerings

or offering new methods of service and payment.

4. With QuickBooks, you always have to worry about IT issues and costs.

On-premise software like QuickBooks and the applications that surround it need

monitoring and troubleshooting by your IT team, and can drive up personnel

and infrastructure costs. 

Click Here to View or Download the NetSuite Whitepaper

The Economics of Using Cloud Accounting Systems & a Free Webinar on Feb. 19, 2014

Smart CEO writes: Thought Leadership presented by Brittenford Systems.  Cloud-based accounting solutions offer several advantages over traditional on-site, on-premise software systems. As opposed to these more traditional systems, such as Quicken and Peachtree, cloud-based accounting solutions reduce total cost of ownership (TCO), improve return-on-investment (ROI), and shorten Payback timing, all while delivering other advantages in system performance, reporting, and worker efficiency.

Total Cost of Ownership: Cloud vs. On-Premise

When comparing the TCO of the cloud versus on-premise systems, it may initially appear that on-premise solutions provide a more cost-effective solution. For example, the start-up costs, on average, for software licenses is about 9% of the total IT expense as opposed to the initial subscription fee of cloud computing which can be 68% of the total IT expense. However, looking at all of the costs associated with each system shows there is more than meets the eye:

	On-Premise	Cloud
Initial Expense	Software licenses	Subscription fee
Additional Expenses	Customization and implementation Maintenance Software upgrades Data continuity and security IT resources Training	Implementation, customization and training

With on-premise software solutions, the majority of the ongoing costs become visible after the system has been implemented. With the cloud, the only ongoing costs include implementation, customization and training which require a less substantial ongoing investment. Because of this, businesses can actually save money with the cloud.  With lower total costs, Return on Investment (ROI) can often exceed triple-digit percentages, while Payback timing is typically a fraction of on-premise, averaging 3-6 months.

Cloud System Benefits

In addition to reduced on-going expenses, the cloud offers multiple benefits over on-premise systems including enhanced data security, reduced maintenance costs and easier workforce management.

Enhanced data security: Keeping sensitive financial data safe is paramount to any operation. Because a cloud-based system resides in a managed data center, the data are significantly more secure and stable that comparable on-site solutions. Offering 24-hour security, multiple redundancy and other forms of continuity, cloud-based systems significantly reduce the risk of theft, damage or other issues when compared to on-site, on-premise PCs within a central office.

Reduced maintenance costs: Cloud-based systems provide software upgrades that are automatically installed, which reduces the need to expend IT resources to install, reinstall or upgrade software programs. Additionally, because cloud-based software is monitored at a data center, any incompatibility issues have already been addressed and resolved before a new program is implemented. Cost savings are also realized due to reduced system downtime.

Easier workforce management: Cloud-based solutions enable software access from any computer. This makes it easier for business partners, such as auditing firms and outsourcing companies, to access relevant data more quickly. Companies also enjoy a greater degree of immediate control over data access when employees leave the company.

Flexibility and Scalability: cloud-based systems offer anytime data access from any computer, which optimizes the systems’ flexibility. Providing real-time data, reporting is more flexible with up to 13 dimensions and visibility for consolidated or multiple entities. Able to expand when needed, cloud-based systems are extremely scalable to suit the needs of an operation. Instead of having to procure user licenses and suitable hardware that is needed in traditional on-site installations, the cloud easily accommodates new users and  multiple entities, as well as multiple currencies through its central data center.

Cloud vs. On-Premise:  A Gift that Keeps Giving

When comparing the features of a cloud-based system to an on-premise system, factors such as enhanced data security, reduced maintenance costs and easier workforce management, as well as flexibility and scalability offer a significant improvement in performance over the long-term. Additionally, the greater costs and risks of on-premise systems associated with hardware, running software and maintaining data integrity make cloud-computing a much more appealing option.

To learn more, register for a FREE webcast titled, “The Economics of Cloud Financial Systems,” which will be broadcast on February 19, 2014 at 1:00 PM EST. The presentation will provide an in-depth look at the total cost of ownership and return on investment using cloud accounting solutions along with a demonstration of cloud accounting applications. Click here to register.

Is Your Services Company Outgrowing QuickBooks?
Learn why successful services companies upgrade to the cloud to support their growth. Growing services businesses often don’t realize how crucial business software is to company expansion. QuickBooks was most likely the best fit for your business when you first started using it, but is it the right choice to drive success in the next stage of your company’s growth?
This white paper draws on the real-world stories of small and medium-sized businesses that upgraded from QuickBooks to NetSuite at critical junctures in their business development and highlights the obstacles they faced before to making the transition.
Dowload this White Paper and learn The Four Reasons Why QuickBooks Is Failing Your Services Business…

1. QuickBooks Is a Simple General Ledger Solution That Doesn’t Support Your Entire Company
2. QuickBooks Gives You Limited Visibility into Business Performance
3. QuickBooks’ Limited Functionality Won’t Scale with Your Business
4. With QuickBooks, You Always Have to Worry About IT Issues and Costs

- See more at: http://innovergent.com/2014/01/08/four-reasons-quickbooks-failing-services-business/#sthash.uEb2nuer.dpuf

QuickBooks was the best fit for your business when your company was in

its infancy, but is it the right choice to drive success in the next stage of your

organization’s growth? QuickBooks claims more than 3.5 million users, so you’re

not the only one facing this question.

Many services organizations arrive at a similar crossroads every year. Timing is

everything—if you replace QuickBooks too early, you may end up buying more

capability than you need. But if you wait too long, you could end up struggling

with inefficient business processes that hurt your project delivery, business

performance and future profitability and growth.

Laboring ahead on QuickBooks may seem convenient, but at what point do

you start missing out on growth opportunities by maintaining the status quo?

When is the right time to make the move? NetSuite has been working for years

with businesses in the services industry that have reached the limits of QuickBooks.

While services businesses are diverse, the issues they face when reaching the limits

of QuickBooks are remarkably similar.

This white paper draws on real-world stories of small and medium-sized

professional services organizations (PSOs) that have upgraded from QuickBooks

to NetSuite at critical junctures in their development. It also outlines four common

business process inefficiencies that you might see reflected in your own business—

the reasons why QuickBooks may be failing your services organization:

1.

QuickBooks is a simple general ledger solution that doesn’t support

your entire company.

Fast-growing services organizations need solutions

that can create efficiency and reduce headaches across functions, instead of

addressing only accounting and finance.

2.

QuickBooks restricts your visibility into business performance.

Companies using QuickBooks usually have siloed applications and data,

making real-time analysis and accurate business decisions virtually impossible.

3.

QuickBooks’ limited functionality won’t scale with your business.

Because QuickBooks was built to support a narrow scope of processes and

business offerings, it severely limits companies from expanding their offerings

or offering new methods of service and payment.

4.

With QuickBooks, you always have to worry about IT issues and costs.

On-premise software like QuickBooks and the applications that surround it need

monitoring and troubleshooting by your IT team, and can drive up personnel

and infrastructure costs.

Is Your Services Company Outgrowing QuickBooks?
Learn why successful services companies upgrade to the cloud to support their growth. Growing services businesses often don’t realize how crucial business software is to company expansion. QuickBooks was most likely the best fit for your business when you first started using it, but is it the right choice to drive success in the next stage of your company’s growth?
This white paper draws on the real-world stories of small and medium-sized businesses that upgraded from QuickBooks to NetSuite at critical junctures in their business development and highlights the obstacles they faced before to making the transition.
Dowload this White Paper and learn The Four Reasons Why QuickBooks Is Failing Your Services Business…

1. QuickBooks Is a Simple General Ledger Solution That Doesn’t Support Your Entire Company
2. QuickBooks Gives You Limited Visibility into Business Performance
3. QuickBooks’ Limited Functionality Won’t Scale with Your Business
4. With QuickBooks, You Always Have to Worry About IT Issues and Costs

- See more at: http://innovergent.com/2014/01/08/four-reasons-quickbooks-failing-services-business/#sthash.uEb2nuer.dpuf

Is Your Services Company Outgrowing QuickBooks?
Learn why successful services companies upgrade to the cloud to support their growth. Growing services businesses often don’t realize how crucial business software is to company expansion. QuickBooks was most likely the best fit for your business when you first started using it, but is it the right choice to drive success in the next stage of your company’s growth?
This white paper draws on the real-world stories of small and medium-sized businesses that upgraded from QuickBooks to NetSuite at critical junctures in their business development and highlights the obstacles they faced before to making the transition.
Dowload this White Paper and learn The Four Reasons Why QuickBooks Is Failing Your Services Business…

1. QuickBooks Is a Simple General Ledger Solution That Doesn’t Support Your Entire Company
2. QuickBooks Gives You Limited Visibility into Business Performance
3. QuickBooks’ Limited Functionality Won’t Scale with Your Business
4. With QuickBooks, You Always Have to Worry About IT Issues and Costs

- See more at: http://innovergent.com/2014/01/08/four-reasons-quickbooks-failing-services-business/#sthash.uEb2nuer.dpuf