CPAs-turned-Registered Investment Advisors make statement with sheer numbers at the 2014 AICPA Personal Financial Planning Conference / shows that accountants that keep wealth management in-house are now flamboyantly growing.

Tim Welsh for RIABIZ.com writes: Once an outlier and a research prediction, the 2014 AICPA Personal Financial Planning Conference shows that accountants that keep wealth management in-house are now flamboyantly growing.

Look out RIA industry, here come the accountants — in a spirit of competition more than coopetition.

As tax preparation has largely become commoditized, more and more CPAs are branching out into offering financial planning and investment management to increase revenues and provide a broader set of services.

This growing trend was on full display here in Las Vegas this week at the American Institute of Certified Public Accountants (AICPA) Personal Financial Planning (PFP) conference. See: The AICPA gets down with advisors in Vegas — well, as much as accountants can.
Over 1,250 CPAs, exhibitors and industry experts gathered for three days of non-stop tax and financial planning action at the fabulous Aria hotel and resort. What is notable about this figure is that it has been growing rapidly over the years as more and more CPAs enter the wealth management industry. It also portends a growing threat to RIAs who historically have relied on accountants to humbly collect a small bean-counting fee then let the financial advisor walk away with a more handsome take. See: Opinion: Why NAPFA’s CFP-only approach is a slap in the face of many financial advisors.

Bean counters on a roll

“We’ve doubled the number of members attending the conference since 2009,” said Lyle K. Benson, chair of the AICPA’s Personal Financial Planning Division’s Executive Committee and principal of L.K. Benson and Co. “This success is largely attributable to the growth of the financial planning profession among accountants.”
For those not familiar with the AICPA PFP, it is a section of the mammoth 127-year-old AICPA association’s 394,000 members. Currently, there are 8,800 CPAs in the PFP division, a distinct membership category that has its own financial planning designation, the PFS, that 5,100 CPAs possess. CPAs who offer investment and financial planning services typically affiliate with an independent broker-dealer or form their own independent RIA. See: How 10 top groups define 'fiduciary’.
Lyle Benson: This success is largely
attributable to the growth of the
financial planning profession among accountants.
The accountants who make an appearance in Vegas is, too, a show of larger underlying growth in headcount.
“Our PFP division has been growing at 32% [over the last five years] as it is becoming more and more important to provide integrated tax and investment advice after the many recent changes to the tax laws,” Benson noted.

Waxing Roth

This tax and investing integration theme flowed throughout the agenda, with many sessions focused on the technical issues involved in minimizing the tax hit for wealthy investors. See: Structuring to optimize tax-efficiency.

“The American Tax Payers Relief Act was signed into law at the end of 2012 and now we are starting to see the implications,” Benson says. “For many investors, they will see a 10% to 20% increase in their taxes due to raised rates on dividend income, capital gains, and the Medicare surtax, along with others.” See: What you need to know about gifting as the Bush tax cuts near their sell-by date.

Advisors can no longer do tax planning for a single year at a time, Benson argues.
“There are now multi-generational and multi-year strategies that need to be put in place in order to shift income into various years to minimize the tax hit.” As an example, Benson points to Roth IRA conversions as a powerful tool to flexibly recognize income in lower-tax-rate years. See: One killer Roth conversion strategy in seeking a single-digit tax return.

Wealth-management aspirations

While CPAs may have an advantage over certain advisors when it comes to tax planning, they have much to learn in terms when it comes to operating a wealth management business. Many CPAs are still in the process of building out their advisory practices and need the technologies, operational methods and marketing approaches of the best RIAs. See: Why making partner at Deloitte Touche helped convince a CPA to join a $2 billion DFA RIA 2,300 miles away.
Deborah Fox took attendees on a
deep dive into the many facets
of managing a wealth management firm
during the pre-conference sessions.
As a result, the agenda also featured a healthy dose of technology, business management and marketing content. During the pre-conference sessions, attendees took a deep dive into the many facets of managing a wealth management firm, gaining insight and guidance from industry experts Deborah Fox of the Fox Financial Planning Network and technology guru Joel Bruckenstein.

“Forty-two percent of CPAs are using Microsoft Outlook as a CRM, and Outlook is not a CRM,” Bruckenstein pointed out in his opening remarks during a CRM panel discussion. This well-attended panel featured Greg Friedman, chief executive of Junxure, Brian McLaughlin, CEO of Redtail and Andy Wang of TD Ameritrade.

Friedman, McLaughlin and Wang talked in detail about the many nuances of making CRM the hub of an advisor’s practice that features advanced workflows for not only efficiencies, but also for profitability.

Not all CRMs created equal

“While many advisors sometimes consider CRM as a cost, CRM has been a profit driver in my firm since we started,” said Friedman. See: Greg Friedman is set to finally bring Junxure to the cloud and beat back the Salesforce-ification of the industry.

Bruckenstein advised the crowd that when considering which CRM to invest in, they should first ask their custodian. “Integration matters and not every CRM system integrates equally with each of the various custodians.” See: How one RIA’s faith in Salesforce’s sophistication led to cut-and-paste hell and a major rethinking.

Another telling session was led by Amy Mcilwain, president of Financial Social Media on how to get started in social media for advisors. This session was very popular and focused on the basics.

“Before doing any social media, the number one priority to get started is to have a professional website,” said Mcilwain. This thought was echoed by comments from the crowd, such as “most CPAs have terrible websites.”

Accountants test the odds

Along with the growth of the PFP conference is the growth of the exhibit hall. Over 40 technology firms, custodians Independent broker-dealers, asset managers and other professional services companies jammed into a sold-out exhibit hall in the Aria’s convention center to highlight their products and services.
Vendors in the exhibit hall were
excited to have another growing channel
of advisors entering the independent advisor
space to market to.
The hall was very busy during the breaks and networking receptions as CPAs were eager to learn about running an efficient and profitable business and the vendors were excited to have another growing channel of advisors entering the independent advisor space to market to.

The evenings of the conference featured short cocktail receptions followed by the crowds dispersing into the many restaurants at the City Center, the new complex of hotels and shopping venues recently erected in the middle of the Las Vegas Strip. There were even sightings of CPAs energetically giving the craps and blackjack tables a go late into the night, defying the typical “shy accountant” stereotype.

As the 2014 conference season gears up with upcoming events hosted by TD Ameritrade next week in Orlando and the T3 technology conference in Anaheim a couple of weeks later, the AICPA PFP is quickly becoming a “must attend” event not only for CPA advisors but also for the broader RIA industry as well.

To learn more about what went on at the AICPA PFP conference, check out the many tweets under the #AICPAPFP hashtag on Twitter.

Timothy D. Welsh, is president and founder of Nexus Strategy , a leading consulting firm to the wealth management industry, and can be reached at tim@nexus-strategy.com or on Twitter @NexusStrategy.

H&R Block or TurboTax (Intuit): Which is the Better Bet?

Tabitha Jean Naylor for Benzinga writes: 2014 is here, and with it comes the annual tax filing scramble. The U.S. tax code is so big, archaic and hard to understand that literally hundreds of millions of dollars are spent every year by consumers -- who’d prefer to let a professional handle it for them. There are a number of companies which handle individual taxes, with H&R Block being among the largest. Their chief rival, Jackson Hewitt, is no longer a publicly traded company. So let's compare H&R Block with do-it-yourself tax software maker Intuit (NASDAQ: INTU) –- producers of TurboTax, the country’s most popular self-file program.

Tax companies live for the beginning of the year. Between late January and mid-April is when they see the majority of their yearly revenue.

Personal and small business tax giant H&R Block began January 2013 trading at $19.00. The company’s stock price did seem to track decidedly higher as tax season 2013 wore on, trading in the $28.00 range as of April 15th – the deadline for tax filing. But the stock was not done there. It continued its winning ways, hitting a high of nearly $32.00 on August 1st. Though the stock never ventured higher than this early August peak, it closed the year strong at $29.00, amounting to a 53 percent increase for the year.


TurboTax producer Intuit began 2013 trading at $60.00. After jumping to an early high of $68.00 in early March, the stock sold off dramatically, falling to a low of $55.54 on April 25th. Investors rode out the volatility, and would have been happy that they had stayed in the stock past its April fall. Intuit stock would use the summer to regain its footing, before shooting up in the fall and winter.

Closing the year at $76.00, Intuit gained 26 % for 2013. This put the stock right in line with the Dow, and slightly behind the S&P for the year.

H&R Block and Intuit compete in the personal and small business tax markets. 2013 saw H&R Block stock completely dominate the market averages, while Intuit had a respectable showing which was right in line with major market returns. The 2014 and 2015 revenue prospects for both companies seem to be encouraging. With the advent of Obamacare, Americans are more likely to need professional help in filing their taxes in the near future. This seems to bode well for H&R Block – more so than TurboTax, considering the tax implications of the law are new to the tax code.

Filers may be hesitant to trust themselves, or even well-built software, to help them navigate the new waters.

Amending Tax Returns for Same-Sex Couples / It’s worthwhile to calculate whether you’d come out ahead as married filing jointly on past federal tax returns & IRS Same Sex FAQ

Kimberly Lankford for Kiplinger writes: Is it worth the hassle for legally married same-sex couples to amend old tax returns to claim the “married filing jointly” status?

 

If you were legally married anywhere that sanctioned such unions in 2010, 2011 or 2012, you have the option to amend your federal tax returns from those years to file jointly rather than as two single filers.

 

You aren’t required to amend the returns, but it’s worthwhile to calculate whether you’d come out ahead as joint filers, especially if there’s a big difference in your incomes. “When there is a disparity in income, especially if you have a nonworking spouse, there will be a benefit,” says Jean Nelsen, an enrolled agent in San Francisco. (Enrolled agents are licensed to represent taxpayers before the IRS.) If both spouses work and have similar incomes, they are likely to be hit with the “marriage penalty,” she says, providing little or no benefit to amending the returns. And if both spouses have capital losses or rental real estate losses, deductions for those losses can be limited when couples file joint returns. Nelsen also points out that if one spouse has adopted the other spouse’s children, he or she would lose the adoption credit with an amended return.

 

TurboTax can help you run the numbers with its free TurboTax DOMA TaxCaster tool.

You have until April 15, 2014, to amend a 2010 return; until April 15, 2015, to amend a 2011 return; and until April 15, 2016, to amend a 2012 return. You need to file a Form 1040X for each year you are amending a return. Nelsen says the procedure is to choose one of the returns that was previously filed as single and use those numbers as the “previously filed amounts” required on the amended return, and add the other spouse’s numbers in the adjustment column.

 

“Document, document, document,” she says. “The more information you can give the IRS as to why you are doing the amended return, the better.” Include details about the change in filing status in the explanation of changes section of the amended return. For more information, see the IRS’s Answers to Frequently Asked Questions for Individuals of the Same Sex Who Are Married Under State Law.

Below is the IRS's Same Sex FAQ

Answers to Frequently Asked Questions for Individuals of the Same Sex Who Are Married Under State Law

The following questions and answers provide information to individuals of the same sex who are lawfully married (same-sex spouses). These questions and answers reflect the holdings in Revenue Ruling 2013-17 in 2013-38 IRB 201.

Q1. When are individuals of the same sex lawfully married for federal tax purposes?

A1. For federal tax purposes, the IRS looks to state or foreign law to determine whether individuals are married. The IRS has a general rule recognizing a marriage of same-sex spouses that was validly entered into in a domestic or foreign jurisdiction whose laws authorize the marriage of two individuals of the same sex even if the married couple resides in a domestic or foreign jurisdiction that does not recognize the validity of same-sex marriages.

Q2. Can same-sex spouses file federal tax returns using a married filing jointly or married filing separately status?

A2. Yes. For tax year 2013 and going forward, same-sex spouses generally must file using a married filing separately or jointly filing status. For tax year 2012 and all prior years, same-sex spouses who file an original tax return on or after Sept. 16, 2013 (the effective date of Rev. Rul. 2013-17), generally must file using a married filing separately or jointly filing status. For tax year 2012, same-sex spouses who filed their tax return before Sept. 16, 2013, may choose (but are not required) to amend their federal tax returns to file using married filing separately or jointly filing status. For tax years 2011 and earlier, same-sex spouses who filed their tax returns timely may choose (but are not required) to amend their federal tax returns to file using married filing separately or jointly filing status provided the period of limitations for amending the return has not expired. A taxpayer generally may file a claim for refund for three years from the date the return was filed or two years from the date the tax was paid, whichever is later. For information on filing an amended return, go to Tax Topic 308, Amended Returns, at http://www.irs.gov/taxtopics/tc308.html.

Q3. Can a taxpayer and his or her same-sex spouse file a joint return if they were married in a state that recognizes same-sex marriages but they live in a state that does not recognize their marriage?

A3. Yes. For federal tax purposes, the IRS has a general rule recognizing a marriage of same-sex individuals that was validly entered into in a domestic or foreign jurisdiction whose laws authorize the marriage of two individuals of the same sex even if the married couple resides in a domestic or foreign jurisdiction that does not recognize the validity of same-sex marriages. The rules for using a married filing jointly or married filing separately status described in Q&A #2 apply to these married individuals.

Q4. Can a taxpayer’s same-sex spouse be a dependent of the taxpayer?

A4. No. A taxpayer’s spouse cannot be a dependent of the taxpayer.

Q5. Can a same-sex spouse file using head of household filing status?

A5. A taxpayer who is married cannot file using head of household filing status. However, a married taxpayer may be considered unmarried and may use the head-of-household filing status if the taxpayer lives apart from his or her spouse for the last 6 months of the taxable year and provides more than half the cost of maintaining a household that is the principal place of abode of the taxpayer’s dependent child for more than half of the year. See Publication 501 for more details.

Q6. If same-sex spouses (who file using the married filing separately status) have a child, which parent may claim the child as a dependent?

A6. If a child is a qualifying child under section 152(c) of both parents who are spouses (who file using the married filing separate status), either parent, but not both, may claim a dependency deduction for the qualifying child. If both parents claim a dependency deduction for the child on their income tax returns, the IRS will treat the child as the qualifying child of the parent with whom the child resides for the longer period of time during the taxable year. If the child resides with each parent for the same amount of time during the taxable year, the IRS will treat the child as the qualifying child of the parent with the higher adjusted gross income. 
 
Q7. Can a taxpayer who is married to a person of the same sex claim the standard deduction if the taxpayer’s spouse itemized deductions?

A7. No. If a taxpayer’s spouse itemized his or her deductions, the taxpayer cannot claim the standard deduction (section 63(c)(6)(A)).

Q8. If a taxpayer adopts the child of his or her same-sex spouse as a second parent or co-parent, may the taxpayer (“adopting parent”) claim the adoption credit for the qualifying adoption expenses he or she pays or incurs to adopt the child?
A8. No. The adopting parent may not claim an adoption credit. A taxpayer may not claim an adoption credit for expenses incurred in adopting the child of the taxpayer’s spouse (section 23).

Q9. Do provisions of the federal tax law such as section 66 (treatment of community income) and section 469(i)(5) ($25,000 offset for passive activity losses for rental real estate activities) apply to same-sex spouses?

A9. Yes. Like other provisions of the federal tax law that apply to married taxpayers, section 66 and section 469(i)(5) apply to same-sex spouses because same-sex spouses are married for all federal tax purposes.

Q10. If an employer provided health coverage for an employee’s same-sex spouse and included the value of that coverage in the employee’s gross income, can the employee file an amended Form 1040 reflecting the employee’s status as a married individual to recover federal income tax paid on the value of the health coverage of the employee’s spouse?

A10. Yes, for all years for which the period of limitations for filing a claim for refund is open. Generally, a taxpayer may file a claim for refund for three years from the date the return was filed or two years from the date the tax was paid, whichever is later. If an employer provided health coverage for an employee’s same-sex spouse, the employee may claim a refund of income taxes paid on the value of coverage that would have been excluded from income had the employee’s spouse been recognized as the employee’s legal spouse for tax purposes. This claim for a refund generally would be made through the filing of an amended Form 1040. For information on filing an amended return, go to Tax Topic 308, Amended Returns, at http://www.irs.gov/taxtopics/tc308.html. For a discussion regarding refunds of Social Security and Medicare taxes, see Q&A #12 and Q&A #13.

Example. Employer sponsors a group health plan covering eligible employees and their dependents and spouses (including same-sex spouses). Fifty percent of the cost of health coverage elected by employees is paid by Employer. Employee A was married to same-sex Spouse B at all times during 2012. Employee A elected coverage for Spouse B through Employer’s group health plan beginning Jan. 1, 2012. The value of the employer-funded portion of Spouse B’s health coverage was $250 per month.

The amount in Box 1, “Wages, tips, other compensation,” of the 2012 Form W-2 provided by Employer to Employee A included $3,000 ($250 per month x 12 months) of income reflecting the value of employer-funded health coverage provided to Spouse B. Employee A filed Form 1040 for the 2012 taxable year reflecting the Box 1 amount reported on Form W-2.

 

Employee A may file an amended Form 1040 for the 2012 taxable year excluding the value of Spouse B’s employer-funded health coverage ($3,000) from gross income.

 

Q11. If an employer sponsored a cafeteria plan that allowed employees to pay premiums for health coverage on a pre-tax basis, can a participating employee file an amended return to recover income taxes paid on premiums that the employee paid on an after-tax basis for the health coverage of the employee’s same-sex spouse?

A11. Yes, for all years for which the period of limitations for filing a claim for refund is open. Generally, a taxpayer may file a claim for refund for three years from the date the return was filed or two years from the date the tax was paid, whichever is later. If an employer sponsored a cafeteria plan under which an employee elected to pay for health coverage for the employee on a pre-tax basis, and if the employee purchased coverage on an after-tax basis for the employee’s same-sex spouse under the employer’s health plan, the employee may claim a refund of income taxes paid on the premiums for the coverage of the employee’s spouse. This claim for a refund generally would be made through the filing of an amended Form 1040. For information on filing an amended return, go to Tax Topic 308, Amended Returns, at http://www.irs.gov/taxtopics/tc308.html. For a discussion regarding refunds of Social Security and Medicare taxes, see Q&A #12 and Q&A #13.

Example. Employer sponsors a group health plan as part of a cafeteria plan with a calendar year plan year. The full cost of spousal and dependent coverage is paid by the employees. In the open enrollment period for the 2012 plan year, Employee C elected to purchase self-only health coverage through salary reduction under Employer’s cafeteria plan. On March 1, 2012, Employee C was married to same-sex spouse D. Employee C purchased health coverage for Spouse D through Employer’s group health plan beginning March 1, 2012. The premium paid by Employee C for Spouse D’s health coverage was $500 per month.

 

The amount in Box 1, “Wages, tips, other compensation,” of the 2012 Form W-2 provided by Employer to Employee C included the $5,000 ($500 per month x 10 months) of premiums paid by Employee C for Spouse D’s health coverage. Employee C filed Form 1040 for the 2012 taxable year reflecting the Box 1 amount reported on Form W-2.

Employee C’s salary reduction election is treated as including the value of the same-sex spousal coverage purchased for Spouse D. Employee C may file an amended Form 1040 for the 2012 taxable year excluding the premiums paid for Spouse D’s health coverage ($5,000) from gross income.

 

Q12. In the situations described in Q&A #10 and Q&A #11, may the employer claim a refund for the Social Security taxes and Medicare taxes paid on the benefits?

A12. Yes. If the period of limitations for filing a claim for refund is open, the employer may claim a refund of, or make an adjustment for, any overpayment of Social Security taxes and Medicare taxes. The requirements for filing a claim for refund or for making an adjustment for an overpayment of the employer and employee portions of Social Security and Medicare taxes can be found in the Instructions for Form 941-X, Adjusted Employer’s QUARTERLY Federal Tax Return or Claim for Refund. Notice 2013-61 provides special administrative procedures for employers to file claims for refunds or make adjustments for overpayments of Social Security taxes and Medicare taxes paid on same-sex spouse benefits.

Q13. In the situations described in Q&A #10 and Q&A #11, may the employer claim a refund or make an adjustment of income tax withholding that was withheld from the employee with respect to the benefits in prior years?

A13. No. Claims for refund of overwithheld income tax for prior years cannot be made by employers. The employee may file for any refund of income tax due for prior years on Form 1040X, provided the period of limitations for claiming a refund has not expired. See Q&A #10 and Q&A #11.

Employers may make adjustments for income tax withholding that was overwithheld from an employee in the current year provided the employer has repaid or reimbursed the employee for the overwithheld income tax before the end of the calendar year.

Q14. If an employer cannot locate a former employee with a same-sex spouse who received the benefits described in Q&A #10 and Q&A #11, may the employer still claim a refund of the employer portion of the Social Security and Medicare taxes on the benefits?

A14. Yes, if the employer makes reasonable attempts to locate an employee who received the benefits described in Q&A #10 and Q&A #11 that were treated as wages but the employer is unable to locate the employee, the employer can claim a refund of the employer portion of Social Security and Medicare taxes, but not the employee portion. Also, if an employee is notified and given the opportunity to participate in the claim for refund of Social Security and Medicare taxes but declines in writing, the employer can claim a refund of the employer portion of the taxes, but not the employee portion. Employers can use the special administrative procedure set forth in Notice 2013-61 to file these claims.

Q15. If a sole proprietor employs his or her same-sex spouse in his or her business, can the sole proprietor get a refund of Social Security, Medicare and FUTA taxes on the wages that the sole proprietor paid to the same-sex spouse as an employee in the business?

A15. Services performed by an employee in the employ of his or her spouse are excluded from the definition of employment for purposes of the Federal Unemployment Tax Act (FUTA). Therefore, for all years for which the period of limitations is open, the sole proprietor can claim a refund of the FUTA tax paid on the compensation that the sole proprietor paid his or her same-sex spouse as an employee in the business. Services of a spouse are excluded from Social Security and Medicare taxes only if the services are not in the course of the employer's trade or business, or if it is domestic service in a private home of the employer.

Q16. What rules apply to qualified retirement plans pursuant to Rev. Rul. 2013-17?

A16. Qualified retirement plans are required to comply with the following rules pursuant to Rev. Rul. 2013-17:

1. A qualified retirement plan must treat a same-sex spouse as a spouse for purposes of satisfying the federal tax laws relating to qualified retirement plans.
2. For purposes of satisfying the federal tax laws relating to qualified retirement plans, a qualified retirement plan must recognize a same-sex marriage that was validly entered into in a jurisdiction whose laws authorize the marriage, even if the married couple lives in a domestic or foreign jurisdiction that does not recognize the validity of same-sex marriages.
3. A person who is in a registered domestic partnership or civil union is not considered to be a spouse for purposes of applying the federal tax law requirements relating to qualified retirement plans, regardless of whether that person’s partner is of the opposite or same sex.

Q17. What are some examples of the consequences of these rules for qualified retirement plans?

A17. The following are some examples of the consequences of these rules:

1. Plan A, a qualified defined benefit plan, is maintained by Employer X, which operates only in a state that does not recognize same-sex marriages. Nonetheless, Plan A must treat a participant who is married to a spouse of the same sex under the laws of a different jurisdiction as married for purposes of applying the qualification requirements that relate to spouses.
3. Plan B is a qualified defined contribution plan and provides that the participant’s account must be paid to the participant’s spouse upon the participant’s death unless the spouse consents to a different beneficiary. Plan B does not provide for any annuity forms of distribution. Plan B must pay this death benefit to the same-sex surviving spouse of any deceased participant. Plan B is not required to provide this death benefit to a surviving registered domestic partner of a deceased participant. However, Plan B is allowed to make a participant’s registered domestic partner the default beneficiary who will receive the death benefit unless the participant chooses a different beneficiary.

Q18. As of when do the rules of Rev. Rul. 2013-17 apply to qualified retirement plans?

A18. Qualified retirement plans must comply with these rules as of Sept. 16, 2013. Although Rev. Rul. 2013-17 allows taxpayers to file amended returns that relate to prior periods in reliance on the rules in Rev. Rul. 2013-17 with respect to many matters, this rule does not extend to matters relating to qualified retirement plans. The IRS has not yet provided guidance regarding the application of Windsor and these rules to qualified retirement plans with respect to periods before Sept. 16, 2013.

Q19. Will the IRS issue further guidance on how qualified retirement plans and other tax-favored retirement arrangements must comply with Windsor and Rev. Rul. 2013-17?

A19. The IRS intends to issue further guidance on how qualified retirement plans and other tax-favored retirement arrangements must comply with Windsor and Rev. Rul. 2013-17. It is expected that future guidance will address the following, among other issues:

1. Plan amendment requirements (including the timing of any required amendments).
2. Any necessary corrections relating to plan operations for periods before future guidance is issued.

Q20. Can a same-sex married couple elect to treat a jointly owned and operated unincorporated business as a Qualified Joint Venture?

A20. Yes. Spouses that wholly own and operate an unincorporated business and that meet certain other requirements may avoid Federal partnership tax treatment by electing to be a Qualified Joint Venture. For more information on Qualified Joint Ventures, see the tax topic “Husband and Wife Business” at http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Husband-and-Wife-Business.

Q21. In the situations described in FAQ #10 and FAQ #11, may the employee claim a refund for the social security and Medicare taxes paid on the benefits if the employer will not?

A21. Yes. If the period of limitations for filing a claim for refund is open and the employee has not been reimbursed by the employer for the Social Security and Medicare taxes and has not authorized the employer to file a claim for refund of those taxes on his or her behalf, the employee may claim a refund. The employee should seek a refund of Social Security and Medicare taxes from his or her employer first. However, if the employer indicates an intention not to file a claim or adjust the overpaid Social Security and Medicare taxes, the employee may claim a refund of any overpayment of employee Social Security and Medicare taxes by filing Form 843, Claim for Refund and Request for Abatement. The requirements for an employee filing a claim for refund of the employee portions of Social Security and Medicare taxes can be found in the Instructions for Form 843. Employees should write “Windsor Claim” in dark, bold letters across the top margin of Form 843.

Q22. Is an employer that repays or reimburses an employee on or before Dec. 31, 2013, for an overpayment of Social Security and Medicare taxes and income tax withholding with respect to same-sex spouse benefits provided in 2013 required to obtain a written statement from the employee confirming the employee did not make a claim for refund of the overcollected taxes (or the claim was rejected) and will not make any future claim for refund or credit of the overcollected taxes?

A22. No. An employer using the first special administrative procedure under Notice 2013-61 (i.e., employer repays or reimburses an employee for 2013 overpayments of taxes on or before Dec. 31, 2013, and corrects the overpayment on the fourth quarter 2013 Form 941) does not need to obtain the written statement from its employee with respect to the 2013 overpayments. However, an employer using the second special administrative procedure under Notice 2013-61 (i.e., employer does not repay or reimburse an employee for an overpayment of taxes on or before Dec. 31, 2013, and corrects the overpayment on a Form 941-X) is required to obtain such written statement from each affected employee.

Q23. If an individual employed his or her same-sex spouse to perform domestic (household) services in the individual’s private home, can the individual get a refund of Social Security, Medicare and FUTA taxes on wages that the individual paid to the spouse for such service? If so, which forms should the individual use to claim refunds?

A23. Yes, if the period of limitations for filing a claim for refund is open, the individual can get a refund of Social Security, Medicare and FUTA taxes paid on remuneration for domestic services in the individual’s private home that were performed by his or her same sex spouse as the individual’s employee. If the taxes for these services were reported on Schedule H (Form 1040), Household Employment Taxes, and taxes were paid in connection with the Form 1040, the individual should file an amended Form 1040 to claim refund of those taxes together with an amended Schedule H. For information on filing an amended return, go to Tax Topic 308, Amended Returns, at http://www.irs.gov/taxtopics/tc308.html. If the Social Security and Medicare taxes for the domestic service were reported on Form 941, Employer’s QUARTERLY Federal Tax Return, the individual employer can use Form 941-X, Adjusted Employer’s QUARTERLY Federal Tax Return or Claim for Refund, to claim a refund of these taxes. The requirements for filing a claim for refund or making an adjustment of the employer and employee portions of Social Security and Medicare taxes can be found in the Instructions for Form 941-X. Notice 2013-61 provides special administrative procedures for employers to file claims for refunds or make adjustments for an overpayment of social security taxes and Medicare taxes on same-sex spouse benefits. If the FUTA taxes for the domestic service were reported on Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, the individual employer can file an amended Form 940 for the prior year to obtain a refund. The previous year’s Form 940 should be used to claim a refund of FUTA taxes for that prior year. (Forms 940 for prior years may also be found at IRS.gov.)

Related Items:

• Forms and Publications
• IR-2013-72, Treasury and IRS Announce That All Legal Same-Sex Marriages Will Be Recognized For Federal Tax Purposes; Ruling Provides Certainty, Benefits and Protections Under Federal Tax Law for Same-Sex Married Couples

Page Last Reviewed or Updated: 20-Nov-2013

Don't Tax Yourself: Key Numbers For 2013 Returns, According To The IRS

Fox News Latino writes: Numbers to know when filing your 2013 tax returns, according to the Internal Revenue Service:

PERSONAL EXEMPTION:
—Each personal or dependent exemption is worth $3,900.

STANDARD DEDUCTION:
—$12,200 for married couples filing a joint return, and qualifying widows and widowers.
—$6,100 for singles and married individuals filing separate returns.
—$8,950 for heads of household.
Taxpayers who are 65 or older or who are blind may be eligible for a higher standard deduction.

PHASEOUT OF PERSONAL EXEMPTION AND ITEMIZED DEDUCTIONS
—Begins at $250,000 for individuals, $275,000 for heads of household, $300,000 for married filing jointly.

ALTERNATIVE MINIMUM TAX THRESHOLD:
—$80,800 for a married couple filing a joint return, and qualifying widows and widowers.
—$51,900 for singles and heads of household.

INCOME TAX BRACKETS:
—10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, 39.6 percent.

EARNED INCOME TAX CREDIT:
To qualify income can be no greater than:
—$46,227 ($51,567 married filing jointly) with three or more qualifying children.
—$43,038 ($48,378 married filing jointly) with two qualifying children.
—$37,870 ($43,210 married filing jointly) with one qualifying child.
—$14,340 ($19,680 married filing jointly) with no qualifying children.
Investment income cannot be more than $3,300 for the year.
Maximum credit
—$6,044 for taxpayers filing jointly who have 3 or more qualifying children.
—$5,372 with two children.
—$3,250 with one child.
—$487 with no children.

CAPITAL GAINS:
—0 per cent if taxpayer is in the 10 percent or 15 percent income tax brackets.
—15 percent top rate if taxed below the 39.6 percent rate.
—20 percent if taxed at the 39.6 percent rate.

ESTATE TAX
—Exclusion of $5.25 million for individual estates of people who died in 2013.

IRA CONTRIBUTIONS:
—Traditional IRA contribution limit: $5,500.
—Additional contribution if over 50: $1,000.

DEFERRED RETIREMENT ACCOUNTS
— 401(k), 403(b),: $17,500.
—Additional contribution if 50 or older: $5,500.

STANDARD MILEAGE RATES:
—Business use: 56.5 cents a mile.
—Medical reasons or qualified move: 24 cents a mile.
—Charitable purposes: 14 cents a mile.

Intuit Dangles Up to $200 For TurboTax Referrals

TurboTax®, the nation’s leading online tax preparation service from Intuit Inc. (Nasdaq: INTU) is now rewarding customers for recommending TurboTax to their friends and family. A new Refer-A-Friend program (http://refer.turbotax.intuit.com) offers customers the opportunity to earn up to $200 in Amazon.com Gift Cards and give their friends 20 percent off TurboTax Online Federal products at the same time.

“We have 26 million TurboTax customers who are already our very best advocates. It just makes sense to reward them for recommending TurboTax to their friends,” said Christine Morrison, social media strategist for TurboTax. “Our customers can get up to $200 a year with this exciting new rewards program. It’s an easy way for them to introduce TurboTax to the people they care about.”

Here’s how the program works:

• Get it: Only TurboTax customers get the opportunity to refer a friend. This offer is available within TurboTax products and via a special email invitation.
• Share it: Invite friends to try TurboTax and they will receive 20 percent off a Federal TurboTax Online product.
• Enjoy it: For each new-to-TurboTax friend who files their tax return with TurboTax, the referring customer will receive a $10 Amazon.com Gift Card. TurboTax will reward referrals for up to 20 friends per year.

The TurboTax Refer-A-Friend program is a free, customer-centric referral program that rewards loyalty and promotes sharing. A referral is valid, and the reward is sent, once the new customer, a qualified taxpayer who has never before used TurboTax, has completed and filed their 2013 return with TurboTax Online using their special Refer-A-Friend invitation or link at the end of the product.

For more information and complete program terms, visit the TurboTax Refer-A-Friend web site at http://refer.turbotax.intuit.com.

11 Questions To Ask When Hiring A Tax Preparer

Kelly Phillips Erb for Forbes writes:  I’m constantly asked if I can recommend the perfect tax preparer. The truth is that I can’t. You’re the only one who can find the perfect tax preparer for your taxes: there’s no one size fits all in this business. I can, however, offer you a few tips to help you figure out how to find the best tax preparer for you. The key, as with hiring any professional, is to ask questions. Lots of questions. And not just about pricing. Here’s a list of 11 questions that I recommend you ask a potential tax preparer:

1. Do you have a PTIN (preparer tax identification number)? This should be your first question. Anyone who prepares federal tax returns for compensation must have a valid 2014 PTIN before preparing returns. Without a PTIN, the preparer is not allowed to prepare your return – this isn’t something you want to find out at the end.
2. What is your tax background? A slew of letters following a name on a business card doesn’t necessarily mean more qualified. It can mean that the person has passed certain tests or has specific tax training. So ask what those letters mean – and how they would relate to the preparation of your return. Don’t be blinded by the alphabet soup. Here’s a quick guide to help you sort it out in advance:
   • A certified financial planner (CFP) is a designation for financial planners given by the Certified Financial Planner Board of Standards. A CFP must meet certain education requirements, pass an exam, have experience in the field, pass fitness standards and pay a certification fee. While a CFP may have tax experience, he or she is not required to demonstrate tax competence.
   • A certified public accountants (CPA) is certified by the state to act as a public accountant. A CPA is the only licensed qualification in accounting. To be certified, candidates are required to pass an exam. Most states also require an ethics exam or course as well as continuing education credits. A CPA may specialize in tax but not necessarily: there’s a wide range of CPA services including accounting, auditing, financial planning, technology consulting and business valuation.
   • An enrolled agent (EA) has earned the privilege of representing taxpayers before the Internal Revenue Service by either passing a three-part comprehensive IRS test or through experience as a former IRS employee. EA status is the highest credential the IRS awards. EAs must adhere to ethical standards and complete 72 hours of continuing education courses every three years.
   • A JD is a law degree. An LLM is a Masters in Law – it could be in taxation but other areas of the law also offer an LLM. As with a CPA, candidates are required to pass an exam, an ethics exam or course and take continuing education credits. Having a law degree or two doesn’t necessarily mean that an attorney prepares returns. For example, I have a J.D. and an LL.M. Taxation but I no longer prepare returns: I do planning and focus on areas of tax compliance. Other lawyers might have very little in the way of tax experience (you don’t have to demonstrate competence in tax law to pass the bar in most states). Avoid a lawyer who promises to do your taxes, get you out of that DUI and help you with your divorce: it’s all too much.
   • A Volunteer Income Tax Assistance (VITA) volunteer is trained by the IRS to prepare basic returns.
   • Other accountants, bookkeepers and tax preparers may be able to demonstrate competence but may not have formal credentials. That doesn’t mean you shouldn’t give them a look. Ask about what they do and why they’re qualified to do it.
3. Have you prepared a tax return before for (fill in the blank)?Remember when I said that there’s no one size fits all in this business? That’s because tax returns are not all the same. Some tax preparers can do forms 1040-EZ in their sleep. Others are fluent in Schedules C (business) and/or E (rentals). Some may focus on pass-through entities, tax exempt organizations or fiduciary returns. Tax preparers may focus on international taxpayers or small businesses. There are as many variations as there are schedules and forms. It’s not uncommon for tax preparers – especially those that have been around for awhile – to have a pretty wide scope of knowledge. But nobody can do it all and don’t trust anyone who tells you otherwise. If you have special circumstances because of your investments, occupation or residency status, find a tax preparer who has experience with your specific situation.
4. Do you know the requirements of the states and localities where I am required to file? Yes, federal income taxes know no boundaries – those rules don’t change from one state to the next. But that’s not true when it comes to states and localities. Your state or locality may have quirky filing requirements, especially for business owners. It can get even more complicated if you’ve moved from state to state during the year or if you live in one state and work in another. You may also need special guidance if you own a business or real estate in a state outside of your residency or if you are the beneficiary of a trust or estate in another state. Make sure that your preparer knows – and can handle – all of those filing requirements.
5. What records and other documentation will you need from me?While you shouldn’t be expected to haul in the contents of your entire home office, a reputable preparer should insist that you provide your forms W-2, 1099, 1098 and other verification of income and expenses in order to prepare a proper return. You shouldn’t use a preparer willing to e-file your return just by using a pay stub (that’s against IRS rules). A tax preparer should be able to explain what will be needed for special schedules, forms or circumstances. If a preparer isn’t inclined to do the necessary due diligence (especially for something like the Earned Income Tax Credit) in the beginning, it should give you pause about what other corners the preparer might be willing to cut later – at your expense.
6. How do you determine your fees? Note the wording on this one. I didn’t say ask how much the fees would be, rather I said ask how the fees are determined. Prices may vary based on the complexity of your return, whether you require additional schedules (such as dividend and interest on Schedule B, business information on Schedule C, capital gains and losses on Schedule D and/or rental income and losses on Schedule E); supporting forms (such as those for the child tax credit or additional charitable donation information); or whether your return has “out of the ordinary” line items (like Roth IRA conversions or homebuyer credit repayment). Avoid preparers who base their fee on a percentage of your anticipated refund: they have a financial incentive to encourage inappropriate credits and deductions.
7. Can I file electronically? More than 1 billion individual tax returns have been processed since the debut of electronic filing in 1990. It’s the fastest way to get your refund and tends to result in fewer math errors. It may also be required: a paid preparer who prepares and files more than ten client returns must file electronically unless the client opts out.
8. Who will sign my return? This is a biggie. Remember that your preparer must have a PTIN (see again #1). The PTIN and the preparer’s signature need to appear on your tax return. Don’t trust a preparer who refuses to sign a return. And be wary of any preparer or service who won’t tell you in advance who will actually be preparing the return.
9. When will I receive a copy of my return? It’s not unreasonable to leave your preparer’s office without a copy of your completed return; assembly may be required. However, you should receive a complete copy of your return within a reasonable amount of time following your appointment. If your preparer can’t offer a window of time to expect the copy, it might be indicative of a time management problem. If your preparer can’t promise you a copy at all, run, don’t walk away: you will need a copy for your own records.
10. How do I find you if I have a question or a problem after tax season is over? I’m not a fan of those tax preparation shops that pop up on street corners during tax season and then go missing for half the year. Clients often receive requests from taxing authorities for additional information in October or November and can no longer locate their tax preparer. Make sure that you know how to contact the tax preparer after your return has been filed. If your tax preparer won’t be around, consider taking your business elsewhere.
11. What happens if I get audited? Nobody wants to think about an audit when filing a return. But you need to ask about it now so that you don’t end up in a pickle later. Find out how the tax preparer handles audits or examinations from IRS: will he or she respond to those questions? Represent you in front of IRS or Tax Court? (Remember that not all tax preparers are allowed to represent clients before the IRS or in court.) And what about the cost to fix any mistakes? How is that calculated?

I know. It looks like a long list. But most of these questions require pretty simple answers. And better to ask now than later, right? Choosing a good tax preparer does require a little bit of research and effort on your part but it’s worth it. And admit it: you asked at least these many questions when finding a hair dresser or a pediatrician. Just as you stick with other professionals from year to year, the goal here isn’t just to fill out a form but to create a relationship. A good tax preparer won’t mind answering your questions.

21 Ways Manufacturing, Distribution, and Service Companies Can Tell They Have Outgrown QuickBooks and Are Ready for ERP

JLee for e2b Enterprise writes: We have been working with manufacturing, distribution, and service companies for many years, and we have found one thing to be true. Many companies who begin with QuickBooks eventually find themselves busting the seams of the software due to their growth, and that can lead to some serious headaches.  Starting with QuickBooks is great for companies that are just getting started, but QuickBooks was not designed to handle the complex requirements of companies who grow beyond a certain point.

Are you at that point yet? If you are familiar with the following scenerios, it may be you have outgrown QuickBooks and its time to make the switch…

1. You use a lot of spreadsheets to manage your data.
2. You have a lack of control and visibility over and into your financial data.
3. You have more add-on software solutions than ever before and things are just    getting messy.
4. You can’t get reports on a timely basis.
5. You need more specific reporting capabilities.
6. Your employees are wasting time doing redundant data entry.
7. Compliance and quality has become an issue due to complex and specific reporting requirements that is very difficult or impossible in QuickBooks.
8. You’re dealing with multi-currency transactions.
9. You need more control over security and the ability to make some users read-only while others have full access.
10. You need audit controls.
11. You need to pull in data from outside systems.
12. The number of transactions you process has increased.
13. You require revenue and expense tracking.
14. It takes much longer than it should to bill clients.
15. Month-end closing takes a very long time because you cannot capture the data you need.
16. You need more users (generally more than 5).
17. You require double-entry accounting to comply with government regulations, industry standards, and quality initiatives.
18. QuickBooks itself just doesn’t seem to be working quickly. Generally you will notice this when the file size reaches 250MB , your number of transactions exceeds 32,000, or when your lists (customers, vendors, employees) goes beyond 10,000.
19. See errors in reporting due to manual procedures.
20. Lack audit procedures.
21. Need real-time visibility into revenue, profitability and costs.

If you see a reflection of your processes and your struggles in many the above statements, it may be time for you to ditch QuickBooks and find an ERP system that is better suited for your company’s current size and future goals.There are a number of things to know about making this move, from cost considerations, making a proper budget,keeping in mind your return on investment, deciding if you need a small, medium, or large system, and much more.

We have taken all of that and put it into one comprehensive guide for manufacturing, distribution, and service companies who are ready to make the leap from QuickBooks to a more robust ERP system. The guide answers common questions asked by companies moving from QuickBooks to ERP and discusses topics including:

• Accounting and ERP system cost comparison.
• Entry- level accounting systems.
• Entry-Level ERP systems.
• Mid-Market ERP systems.
• Enterprise ERP systems.
• ERP budgeting tips.

The white paper also provides links to additional resources and tools that will be helpful in making the move including our ERP Return on Investment Calculator, a powerful tool developed to calculate ROI based on a company’s sector, whether it operates in manufacturing, distribution, services, or financials.

The white paper is available here for free download.

ERP Budget & Cost Considerations: Moving from QuickBooks to ERP /  A Guide for manufacturers and distributors who have outgrown QuickBooks