Got student loans? Filing income taxes? The federal government wants to talk to you

Brian Smith for MLive writes: If you have both student loan payments and file your income taxes online, the federal government is trying to talk to you.

The U.S. Department of Education and the U.S. Treasury are partnering with Intuit, makers of the popular TurboTax income tax filing software, to increase awareness of income-based repayment plans for federal student loans, the departments announced in a joint news release Friday.

Intuit will include advertising banners in the online version of its TurboTax program linking to the education department's repayment calculator, according to the release. From there, users will be able to compare repayment options and sign up for a different repayment plan.

“As student loan borrowers file their taxes this year, I’m pleased that many of them will have an opportunity to determine if they can lower their monthly student loan payments through an income-driven repayment plan,” U.S. Secretary of Education Arne Duncan said in the statement.

An estimated 18 million filers used the online TurboTax service last year to submit returns to the IRS, according to the statement.

The Treasury Department will also include a message on the backs of tax refund check envelopes explaining how to examine repayment options, according to the statement. The government estimates 25 million envelopes will be sent through the 2014 tax season.

“Tax filing season is an opportunity for borrowers to take a big-picture look at their personal finances and check their eligibility for repayment options, including income-driven plans, and enroll in one that meets their family’s needs. Our collaboration with Intuit Inc. will help the Administration reach millions of tax filers with that message," Treasury Secretary Jacob Lew said in the statement.

QuickBooks integration for Shipwire (allows online Merchants To Outsource Shipping And Order Management)

Lauren Jow for Shipwire writes: The wait is over! We’re excited to share a new integration between QuickBooks and Shipwire.

Cloud Cart Connector is built by Shipwire Partner JMA Web Technologies and is a QuickBooks integration that syncs orders between Shipwire and QuickBooks. Customers, inventory, orders, and products can be exchanged in both directions.

Here are some features of the Cloud Cart Connector:

• Sync orders between your order management solution and QuickBooks
• Send orders to Shipwire from QuickBooks
• Send orders to QuickBooks from Shipwire
• Intuitive UI
• Customer and product mapping

For complete information about the integration, see the listing on the Intuit App Center and read more about connecting QuickBooks to Shipwire via Cloud Cart Connector here.
 

7 tech tools to make tax prep less frustrating

Kelli B Grant for CNBC writes: Just as e-filing has taken over mailed-in tax returns, other tech tools are making tax prep faster and easier. Translation: There's just no excuse for handing your preparer an unsorted box of receipts and other documents.

"There's a lot of opportunity now with consumer tools that your average taxpayer could use to get themselves more organized," said certified public accountant Brian Tankersley, tech editor for CPA Practice Advisor.

Some of the most useful tax-related technologies employ apps. "A smartphone is easy for snapping a picture of a receipt and filing that away," said Brad Spirrison, managing editor of app-review site Appolicious. But the information won't live on your phone: Once users digitize their receipts and other papers, most programs let them track expenses across platforms and sync them with other productivity or tax-specific software.

Possible organization benefits are threefold. Missing fewer deductible expenses may reduce tax liabilities. A pulled-together tax file requires less of your time sorting and tracking. Plus, less time on a preparer's end, which could reduce fees. According to the National Society of Accountants, the average tab for an itemized 2013 federal and state return will be $261; $152 for non-itemized.

But even with newer technologies, taxpayers still face some work scanning, monitoring and tracking. "It's like home exercise equipment," said Tankersley. "If you don't use it, it doesn't matter what you bought."

MileBug

Miles driven for medical appointments, charitable endeavors and business meetings (if unreimbursed) may be deductible--assuming you remember to write down the details. Apps such as MileBug, for iOS, Android and Windows Phone, make it easier to track qualifying trips as you take them. Users can opt to have their trip tracked via GPS, or manually enter odometer readings to conserve battery life, said Spirrison. The $2.99 version of MileBug uses more detailed GPS tracking than the free, lite version. Estimated reimbursement is based on current IRS per-mile rates--and don't forget tolls and parking.

IRS2Go

The Internal Revenue Service's free app for iOS and Android offers news updates and tax tips from the agency, but the real draw is its refund tracker, said Tankersley. Last year's government shutdown has prompted the IRS to push back the opening of filing season from Jan. 21 to Jan. 31, delaying some refunds. "Tracking your refund online is going to be important," he said.

Shoeboxed

Instead of handing over a box of papers to your preparer, hoarders of receipts can send them all to Shoeboxed. "You actually sent the company your receipts, and they scan the documents for you and upload them," said Danielle Cassagnol, a spokeswoman for the Consumer Electronics Association. (Users can also email documents, or send pics from their phone or tablet using the free iOS or Android app.) From there, add docs to accounting software or forward to your tax preparer. Prices range from $9.95 to $99.95 per month depending on the volume of documents and turnaround speed.

Slice Shopping

At its heart, this free iOS, Android and web app is meant to monitor your online purchases, monitoring your email for receipts to help you budget and to track the status of orders. But Slice is also a stealth tax tool--"It aggregates emailed receipts that might otherwise be forgotten," said Spirrison. For example, charitable donations made online, or Amazon orders that included deductible items.

FileThis

Receiving electronic statements may save paper, but the tax pitfall is that many financial institutions make only the last few months' worth available--making it tougher to track back over the early part of the year for deductible expenses and other notable transactions, said Tankersley. Free cloud service FileThis, currently in beta, calls itself a "digital filing cabinet" for statements, bills and other documents. "It goes out and checks to see if there are statements available," he said. Users can access those PDFs through Evernote, Dropbox, Google Drive or other avenues.

ItsDeductible

What's the going rate for a bag of gently used clothes, an old vacuum cleaner and a handful of hardcover books? Preparers say people tend to underestimate. Intuit's free web and iOS app uses IRS guidelines to assign a fair-market value for noncash donations, as well as track cash donations and deductible mileage, said Cassagnol. Upload data to TurboTax, or export the data to send to a preparer.

Fujitsu ScanSnap

Scanning receipts and other tax documents as you accumulate them can lessen the load in your filing cabinet and make it easier at tax time for a preparer (or you) to sort through, Tankersley said. ScanSnap models start at $199; there's a $495 version that syncs with productivity app Evernote, and includes a year of premium access and storage. Another selling point: "The ScanSnap jams less than any other scanner I've used," he said.

Which IRA Is Best for You: Roth or Traditional?

Kelly Campbell for US News World Report writes: One of the most common and widely available investment tools for retirement is the individual retirement account. When it comes to choosing an IRA, there are two options: the traditional IRA and Roth IRA. You probably know something about each of these IRA options and understand the basic differences between them, but at the end of the day, you might still be wondering, “Which is best for me and my retirement plan?”

The traditional IRA. You can contribute a maximum of $5,500 annually in 2014, and if you’re age 50 and older, you contribute an extra $1,000, which is called a “catch-up contribution.” All contributions for the 2013 tax year must be made by April 15, 2014. These contribution limits and deadlines are the same for a Roth IRA as well.

The contributions you make to your traditional IRA may be tax deductible, depending on your income, tax filing status and participation in an employer-sponsored retirement plan.

For example, if you’re a single filer, an active plan participant and earn up to $60,000 a year, your IRA contributions are fully deductible. If your earnings fall in the $60,001 to $69,999 range, only part of your contribution is deductible, and anything over $70,000 is not eligible for a deduction. Any earnings accrued in this account are tax-deferred.

That covers the contribution part, but what happens when you reach retirement, and are ready to start taking withdrawals? Traditional IRAs offer you the benefit of tax-deferred growth, meaning you won’t pay taxes on your account until you begin making withdrawals. Keep in mind that if nondeductible contributions were made, each withdrawal is taxed.

The concept of tax deferment is appealing if you know you will have a lower income in retirement. This decrease in income could place you in a lower tax bracket, meaning that your withdrawals could be taxed at a lower rate. The appeal of tax deferment comes from the ability to have compounded gains over a prolonged period of time and not pay taxes on the gains. This is what makes the traditional IRAs a valuable tax management tool for individuals planning for their retirement.

Be cognizant of the fact that you cannot withdraw money before you reach age 59½, or you will be penalized 10 percent plus pay ordinary income taxes on any withdrawals made before that time. There are several exceptions to the early withdrawal rule. The most common are:

• You can take out up to $10,000 to purchase your first home.
• You can make a withdrawal to cover medical expenses and health insurance premiums if your expenses are over a certain percentage of your income.
• The IRA owner becomes disabled or dies (in which case, the IRA transfers according to beneficiary designation).

These exceptions are often referred to as Rule 72(t) provisions, as referenced in the Internal Revenue Code section 72(t).

Always remember that with a traditional IRA, you must take your required minimum distributions in the calendar year that you turn 70½, or you will be assessed a 50 percent penalty on the amount you should have withdrawn. Also keep in mind that these required minimum distributions are considered ordinary income and are subject to taxation. Required minimum distributions are an important factor to consider in retirement because they increase every year. As the owner of your IRA, you typically have greater control over the account investments.

Roth IRA. Contributions that are made to a Roth IRA are made with after-tax dollars (none of your contribution is tax deductible), so withdrawals from the amount contributed are always tax-free. This is the main difference between the traditional IRA and Roth IRA.  

The same contribution rules that apply to traditional IRAs also apply to Roth IRAs. There is a $5,500 annual contribution, and those age 50 and older pay an extra $1,000. Accrued earnings can also be withdrawn free of tax after they have been held in the account for more than five years.

It’s important to keep in mind that your ability to contribute to a Roth IRA is contingent on your income.

You cannot make contributions if your income exceeds $129,000 (single) or $191,000 (joint). If investors reach those limits in a given year, they have the ability to recharacterize their contributions to a traditional IRA without penalty, as long as it’s completed by the tax filing deadline for that tax year. Your ability to contribute to a Roth IRA is not affected by your participation in an employer-sponsored plan.

Unlike the traditional IRA, all qualified distributions from a Roth IRA are tax-free. In order for a distribution to be considered qualified, it cannot be taken out until five years after you set up your Roth IRA, the owner is age 59½, using the withdrawal to make a first-time home purchase ($10,000 limit), becomes disabled or dies, in which case the beneficiary collects. The importance of tax-free qualified distributions cannot be understated, and that makes the Roth IRA a very attractive vehicle for retirement savings.

A new breed of accounting firm / Xero's perspective

Lucy Danon for Xero writes: In my role as Associate Account Manager for Xero UK, I deal with a large number of new Xero Accounting Partners in the early stages of their move to the cloud. In recent months I’ve noticed an interesting trend – more and more of these firms are being run primarily as businesses, not traditional accounting practices.

The subtle difference in many cases is the owner I talk to (or one of the owners) is not necessarily a qualified accountant but instead a business person/entrepreneur looking to take advantage of cloud disruption.

Firms which are built as a partnership between accountants and entrepreneurs are thriving with the entrepreneur driving the business side and the accountant doing what they do best: providing expert advice to clients.

With the direction of the firm no longer driven primarily by someone with a background in doing traditional accounting work (such as annual accounts and tax preparation), the focus moves to marketing and business growth.

As these practices become established with Xero they move on to Senior Account Managers (SAM’s). The feedback I get from the SAM’s is that having a different profile of person at the helm of this new breed of accounting practice also has flow on effects to how the rest of the practice operates.

The firm’s owners don’t tend to have the traditional portfolio of clients to deal with – instead they focus on running the business, making sure existing clients are happy and attracting new clients. This has had a noticeable impact on three main areas that are all interconnected:

1. The skill set accountants are hired on now includes client service skills. With more of the firm’s staff having face time with clients this skill set has become increasingly important.
2. Marketing messages are shifting from establishing professional credibility to “certainty of fees”, or “proactive help to grow your business”. Behind the ‘fee certainty’ message is often a fixed fee bundled service offering – so this changes the pricing model.
3. Fixed fees has lead to eliminating timesheets – reducing admin on staff and freeing them up to focus on the priority of delivering client service.

As clients expect more from their accountant and more for their money, being able to advise them in real time, and the ability to manage all clients in one place, is increasingly important.

I know from talking to my peers on the front line across the global Xero team, this new breed of firm is emerging everywhere. And given the UK has historically been considered a more conservative market it appears the time has really come for change in the profession.

How is your firm adapting to the changing environment and client needs? Talk to your Account Manager about how you can work with Xero to create the cloud strategy for your firm. Email partnerteam@xero.com.

John MacPherson
25 January 2014 #

This is exactly our business model at Immersed Accounting and something we often talk about with our clients.

As soon as an ‘owner operator’ becomes and ‘owner manager’ everything changes and we believe it’s vital to focus on strengths and avoid weaknesses. Managing a business successfully is an art and has a completely different skill-set to operations, sales, marketing, IT and indeed accounting.

I embrace working with colleagues or partners that are more experienced and qualified in certain areas than myself as I learn from them every step of the way.

Many small businesses are formed through workplace progression by someone who is excellent operationally in their trade but may have less experience in running a company. In this instance, bringing someone in at Director level (even if only part-time or even freelance) has huge advantages and as the founder is likely the shareholder, they retain ultimate control.

Excellent article, really positive to read.

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