Saturday, February 15, 2014

TurboTax Deluxe 2014 (Tax Year 2013) REVIEW

Kathy Yakal for PC Magazine writes: It's not a dearth of competition that has made TurboTax the market leader in tax preparation software and websites for many years. Though numerous tax-preparation applications popped up once it was possible to support them on the web, Intuit has hung onto its dominance. As we did last year, this year we reviewed the online version of TurboTax Deluxe. The results, however, were a little bit different than in past years.
  • PROS
    Exceptionally well-designed user interface. Top-notch preparation management through its wizard-like interview tool. Excellent navigation and review process. Free phone or chat support.
  • CONSSupport system weaker than last year's. Answers from non-tax pros in some help files. Must use more expensive extra application for many tax situations.
  • BOTTOM LINE
    TurboTax Deluxe remains a powerhouse online tax preparation solution. But its help system continues to move away from professionally-penned content, and you must spend more to buy extra tax applications to support what TaxACT Ultimate Bundle does for much less.

Intuit has continued to tinker with an already-excellent user interface, paring it down some while making fonts and graphics larger. In fact, that's one of the only two significant changes since last year. The other is a change in the help system. The old TurboTax Support page, which I thought served users well the way it was, has been replaced with the TurboTax AnswerXchange.
Returning users should find that their 2013 tax chores are easier because of the data that's moved over. And the new home base, My TurboTax, provides access to previous returns as well as a personal guide to the Affordable Care Act.
As usual, the competition among the top three tax-preparation websites was tight. But the new approach to user support that Intuit took this year, along with the fact that the company requires independent contractors and even very small businesses to purchase a $99.99 federal product plus $39.99 for state ($74.99 and $36.99 if purchased within the introductory period) makes this a different race this year. TaxACT Ultimate Bundle$17.95 at TaxACT ($17.99 for federal and state, plus an optional $7.99 for unlimited phone help) wins our Editors' Choice among the Deluxe versions for the 2013 tax year.
A Smooth Walk-Through
Intuit claims that TurboTax Deluxe searches through 350+ deductions and credits to help you claim everything that you can according to the IRS tax code. You'll believe this once you've explored the wizard-like interview that walks you through the tax preparation process.
TaxACT Ultimate Bundle and H&R Block Deluxe$29.95 at H&R Block work much like TurboTax Deluxe does. Since they're online applications, you can enter every bit of tax-related data you have in any of the three before paying. You're only charged when you file your return. These solutions have all turned the 1040s and their own supported groups of forms and schedules into a one-step-at-a-time interview process. It's something like going to a tax preparer who asks questions about your financial situation and collects the form you've brought in. Sometimes there's one question on a page, and sometimes there's a small multi-item table for you to complete.
TurboTax Deluxe 2014 Import
TurboTax Deluxe and its competitors then take the information you've provided, do the required calculations and drop your answers into the correct fields on IRS forms and schedules. That goes on in the background. All you see is a succession of screens asking you questions and providing ways for you to answer (i.e., entering data in fields, selecting options from lists). You move forward and back in the interview by clicking buttons.
Top-Notch Navigation
TurboTax Deluxe provides navigational guidance for you in many ways. Your federal review is divided into three major sections. At the beginning of the first two, Wages & Income and Deductions & Credits, TurboTax asks if you'd like extra assistance, more thorough explorations of your situation, as you move through the interview, or whether you want to go it alone by tackling topics from the lists provided. (The third section, Other Tax Situations, only offers the topic list). Either way, you're guided through the tax preparation process seamlessly by following the provided prompts.
There are other ways to navigate through the site. Click on the Tools icon in the left vertical pane, and a small window containing four links opens. You can search for a topic in a lengthy list (forms and schedules by number and letter, and topics like child care credit and interest) or see the list of topics covered on the site in alphabetical order. Click on a topic, and TurboTax takes you to that screen. You can also create a flag on a page if you want to remind yourself to come back later and fill in missing information. The fourth link displays your fees.
Unlike H&R Block Deluxe, which insists that you finish a required screen before going on to the next, TurboTax Deluxe lets you move forward and back. When you think you're entered everything, TurboTax and its competitors review your return and reveal any errors or omissions you made, one at a time. TurboTax Deluxe does an excellent job here. It displays the relevant portion of an actual form or schedule and provides a field for your answer.
Voluminous Help
When you enter a word or phrase in the search box on a preparation screen, TurboTax Deluxe often displays an official answer that looks like it was generated by Intuit. You'll also see several other sometimes-misspelled and badly punctuated questions from users, which are answered by people often identified with monikers like TurboTax, Super User, and TurboTax Employee. Depending on your question or phrase, some of these questions may be only tangentially related to your original one.
Other help: Throughout the interview process, you'll see words and phrases that are hyperlinked, or separate links that say Learn More. When you click on one, a small window opens containing a clear, well-written explanation. Click on See More Help, and a second window slides open, displaying questions from other TurboTax users. Clicking on one takes you to another page that contains similar questions from other users and responses, part of the TurboTax AnswerXchange. You can even add your own answer here, which seems like an unwise option to build into the site.
And if you click See All Questions, the comprehensive Answer Xchange opens. Your original question is probably answered here at least once, but there are numerous unrelated Q&As there, too. You can type a word or phrase in the search box to get a more focused list. Depending on how general or specific your phrase is, your might get many thousands of responses. TurboTax uses filters to help pare that number down. You can search by a date range, post type or state, product or tag. The sheer volume of content here may be helpful if you're trying to track down a very minute detail, but the AnswerXchange seems like overkill.
In the meantime, you have several browser windows open.
In its early days, TurboTax only included guidance written by the IRS or interpreted by tax professionals. Now it appears that some of the answers are coming from other users, based on screen names that are not affiliated with Intuit. H&R Block Deluxe only presents tax-related help that's generated by its tax professionals, leaving the community sharing of information outside the walls of the product itself, and TaxACT doesn't use community content at all.
If you use TurboTax Deluxe, it's probably wise to just stick with the first level of help windows and submit a specific question via chat if you can't find your answer.
Mobile Apps, Too
Intuit also offers five mobile personal income-tax related products:
  • SnapTax. For very simple returns (W-2, interest income, unemployment income and student loan interest only).You can take a picture of your W-2 with your smartphone, and SnapTax grabs the data and drops it in the right fields on the form. Or you can enter it yourself. Federal e-file plus state is $14.99 (introductory price; may increase). Taxpayers living in states with no income tax can file their federal returns free. Available in Spanish. iPhone, iPad, iPad Touch, Android
  • TurboTax for iPad. Just what the name says. Federal, $29.99; state, $14.99 (limited time offer) iPad
  • MyTaxRefund. Free app that provides the status of your e-file and estimates when your refund will arrive. iPhone, iPad, Android
  • TaxCaster. Estimates your tax refund based on basic information you enter. iPhone, iPad, Android
  • ItsDeductible. Free app designed for year-round tracking of charitable donations; will import into TurboTax. iPhone
Given its exceptional navigation tools and user interface, thorough walk-through of the 1040s and their related forms and schedules, and just-right review tool, TurboTax Deluxe could be a smart choice if you need preparation help with the most common tax situations (W-2 income, interest income, mortgage interest, child and dependent care costs, charitable contributions, etc.), but don't have freelance income and expenses or a small business, capital gains or losses, profit or loss from a farm, or other complex scenarios.
TurboTax Deluxe presents the most state-of-the-art user experience, and it matches or exceeds the actual tax prep tools provided by competitors. But its revamped help and its prohibitive cost for small business support keep it from winning Editors' Choice for the 2013 tax year. TaxACT Ultimate Bundle, with its inclusion of every federal and state form and schedule that can be e-filed; its solid, professional help system; its reasonable price and its excellent navigation and review tools, takes the crown this year.
Posted on 9:11 AM | Categories:

How to Figure Out Your Cost Basis / It's important to know when it is time to sell / Did you sell an investment held in a taxable account last year?

Laura Saunders for the Wall St Journal writes: Did you sell an investment held in a taxable account last year?
If so, prepare for a struggle—or at least a brush—with a crucial but confusing area of the tax code.
It goes by the name "cost basis," and it is the starting point for measuring profit or loss on the sale of an investment, whether it is a stock, bond, house, artwork or other asset.
Many investors find it baffling.
"If I say 'cost basis,' some people think baseball and others think chemistry class," says David Lifson, a certified public accountant at Crowe Horwath in New York. "Sometimes they just look at me like I have two heads."
Recent rule changes can make it more confusing, he says.
At its simplest, cost basis is the original price paid for an investment. If a taxpayer buys a share of XYZ Co. for $20 and sells it for $25, his cost basis is $20 and his taxable gain is $5. If XYZ's price falls to $12, his cost basis remains $20 and his loss is $8.
Yet cost basis often isn't that simple. Changes such as stock splits, reinvested dividends and even home improvements can change an investor's basis, and taxpayers who don't make these adjustments risk overpaying or underpaying Uncle Sam.
For example, if that share of XYZ going for $25 splits into two shares priced at $12.50 each, then the investor who bought it for $20 has two shares that each have a cost basis of $10.
If he later sells one of these for $22 and doesn't make an adjustment, then he would pay tax on $2 instead of $12 of gain—and be liable for unpaid taxes and penalties if the Internal Revenue Service catches him, Mr. Lifson says.
On the plus side, putting a $100,000 addition onto a home would raise its cost basis, as could reinvesting dividends from a stock or fund into new shares. Taxpayers who forget to make an adjustment when reporting a sale could overpay Uncle Sam by reporting too much profit.
Many taxpayers struggle with cost-basis record keeping, especially when it involves assets held for decades. Jonathan Horn, a CPA practicing in New York, says his toughest case involved Consolidated Edison ED +1.17% shares that had been inherited and then gifted once over four decades before they were finally sold.
"We had to use Social Security death records and old stock reports to find the correct cost, but we did it," he says.
Not all taxpayers are so diligent. "Historically, some people have been very creative" with cost basis, says Stevie Conlon, a cost-basis specialist at Wolters Kluwer Financial Services in Chicago. "If there's no one with a radar gun, some people really speed."
Experts say the IRS rarely questions or audits cost-basis data, except in abusive tax shelters. To help the confused and discourage cheating, Congress passed a law in 2008 requiring financial firms to track cost basis for certain assets and report it both to customers and the IRS after a sale.
In the short run, these rules might add to taxpayers' confusion while they phase in. For now, they cover some assets but not others. If you are facing a cost-basis conundrum, here are some tips:
Find out if your brokerage or fund firm can help.
Current law requires brokerages and fund firms to track and report cost-basis information for sales of stocks bought in 2011 and after, mutual funds and dividend-reinvestment plans bought in 2012 and after, and some bonds and options bought beginning in 2014.
Yet some firms track cost basis for assets acquired before those dates, making them a good place to start.
Be sure to correct reporting errors.
What if there is a mistake on your firm's 1099 report of cost basis to the IRS? If it is difficult or impossible to get a corrected 1099, tax pros advise reporting the erroneous information and then making an adjustment correcting it, rather than simply reporting the correct amount.
"This is what the IRS wants you to do, and it avoids a computer mismatch notice," Mr. Horn says.
Take advantage of research tools.
Some publicly traded companies offer online information about prices and splits. AT&T,T -1.02% for example, has a calculator that can help people who received stock because of the firm's breakup in 1984. Companies' investor-relations departments may offer further help.
In addition, mass preparers such as TurboTax and H&R Block HRB +1.11% offer some clients access to professional cost-basis services.
If the precise date of purchase isn't clear but the year is, some preparers pick a midrange price as a reasonable estimate, especially if the total selling price is 10% or less of the taxpayer's income.
Understand the rules for inherited and gifted assets.
The cost basis of an inherited asset is usually its value on the date of the original owner's death. So if a mother bought shares of Acme Co. for $10 each that were worth $80 when she died and left them to her son, his basis becomes $80 a share. If he sells the shares for $90 each, his gain is $10 a share.
Assets received as a gift, however, retain the giver's cost basis. If the mother gives her son Acme shares selling for $80 each that she bought for $10 a share, his cost basis in those shares remains $10.
Experts say gifted stock causes many cost-basis headaches—especially when someone gave the taxpayer a few shares annually, say for a birthday, because it is necessary to know the price the giver originally paid.
Hold on or donate.
There are two tax-favored options for taxpayers who can't determine the cost basis of an asset. One is to hold it till death, when cost basis resets to the market value as of that date.
The other is to donate it to a tax-exempt charity. The donor gets a deduction for the full market value for such gifts, within certain limits, and cost basis is often irrelevant.
But what if you sold an asset before thinking it through? Says Mr. Lifson: "Pay tax on the entire value, grit your teeth and move forward."
Posted on 9:11 AM | Categories:

Australian Startup Maestrano Serves SMB Cloud Apps À La Carte / Front Accounting

Chris Burt for WHIR writes: Australian startup Maestrano may not be well known, but it is well-funded and growing fast. It may be positioned to be one of the next breakthrough IT service companies after receiving $1 million from investors including former Microsoft executive Gary Jackson, according to a report by BRW.
Founded in October, Maestrano sells cloud business apps, but is set apart by its focus on small and medium sized enterprises and its pricing model.Maestrano offers 33 open-source cloud apps, such as Front Accounting, SugarCRM, Collabtive and WordPress. Customers sign up for each app at one of three levels of service, paying either hourly or monthly rates depending on usage.
Each package includes an unlimited number of app users registered, with all bandwidth and memory needs included in the subscription. A premium service package with 12-hour turnaround time is available for monthly plans at a 25 percent markup, and Maestrano will also customize packages.
By offering the apps without fixed contracts or limited licenses, Maestrano seeks to address the problem of small businesses locking into a siloed contract for each different area of need, according to BRW.
“It is our technology which hosts, secures, integrates and dynamically prices them that adds value. When a small-business owner has to go and install an application themselves they haven’t solved the problem of having to pay for an IT guy,” co-founder Stephane Ibos tells BRW.
By targeting the same kind of business apps service to SMBs that companies like Salesforce provide to large companies, Maestrano has attracted heavyweight investors. Former Microsoft executive Gary Jackson and eServGlobal founder Ian Buddery bought in after the company pitched The Indus Entrepreneurs.
Maestrano uses 128 bit SSL encryption and is level 1 PCI compliant, and offers a free one-month trial.
If SMBs see the promised savings from running everything through apps on an as-needed basis, then Maestrano will take some of this large market.
Posted on 9:11 AM | Categories:

Where to invest after maxing out 401k, IRA, and HSA?

Over at Bogleheads we came across the following disucssion: Where to invest after maxing out 401k, IRA, and HSA?


Hello Board,
My wife and I are 28 years old and are getting to the point where we will be maxing out both of our IRA's, 401k's, and our joint HSA. Looking ahead into the future, I was curious as to what other options are out there as our income increases? Should I consider buying non-tax advantaged index funds or are there other good tax-advantaged ways to invest? I could also choose to just pay the mortgage off early, which is a 30-year term, $170,000 @ 3.99%, though the low rate makes me think our money could be better invested elsewhere. Currently our IRA's and 401k's are both Roth, with the exception of the 4% match each of us receives from our companies which is traditional. Thanks for the help.
Posts: 2
Joined: 13 Feb 2014

Re: Where to invest after maxing out 401k, IRA, and HSA?by Laura » Thu Feb 13, 2014 9:39 pm

The next step is taxable investing.


4-Step Rule for Tax Efficient Fund Placement:
1. Put your most tax-inefficient funds in 401ks, 403bs, Traditional IRAs and similar retirement accounts. When full..
2. Put your next most tax-inefficient funds in your Roth(s). When your Roth(s) are full-
3. Put what's left into your taxable account.
4. Try to use only tax-efficient funds in taxable accounts.
Here is a list of securities in approximate order of their tax-efficiency. (Least tax efficient at the top.):
Hi-Yield Bonds
Taxable Bonds
TIPS
REIT Stocks
Stock trading accounts
Balanced Funds
Small-Value stocks
Small-Cap stocks
Large Value stocks
International stocks
Large Growth Stocks
Most stock index funds
Tax-Managed Funds
EE and I-Bonds
Tax-Exempt Bonds



1. Invest as much as possible in your tax-deferred and tax-free accounts.
2. Put the most tax-inefficient funds in your tax-deferred and tax-free accounts.
3. Use only tax-efficient funds in taxable accounts.
4. If all else is equal, put funds with higher expected returns in tax-free (Roth) accounts in preference to tax-deferred (traditional 401(k), 403(b), traditional IRA) accounts.
By placing some international in taxable you can also benefit from the foreign tax credit. We usually suggest holding Total Intl Stock Market and Total Stock Market in taxable.
Laura
Posts: 6293
Joined: 19 Feb 2007

Re: Where to invest after maxing out 401k, IRA, and HSA?by dharrythomas » Thu Feb 13, 2014 10:57 pm

The only I have to add to what Laura said is that paying down the mortgage is not a bad option. 3.99% is not a bad risk free rate. You'll probably do better, but no guarantees.
Good Luck!
Harry
Posts: 470
Joined: 19 Jun 2007

Re: Where to invest after maxing out 401k, IRA, and HSA?by retiredjg » Thu Feb 13, 2014 11:21 pm

The next step is usually either taxable investing or paying more on the mortgage. Or a combination.


Another possibility is to see if your 401k plan(s) offer the possibility of after tax "employee contributions". This is something different from Roth 401k and many people don't know about it, including many people who have it available. Ask your plan admins and look at your plan documents. If you have this available, more discussion can occur then. Short story is you can save more and it may roll out to Roth IRA (if not, you don't want to do this).



But....
ElectricalEgrMWB wrote:Currently our IRA's and 401k's are both Roth, with the exception of the 4% match each of us receives from our companies which is traditional. Thanks for the help.
If you are saving this much, you may be making a lot of money and in a high tax bracket. If that is the case, Roth 401k may not be your best choice. Do you know your marginal tax bracket?
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Joined: 10 Jan 2008

Re: Where to invest after maxing out 401k, IRA, and HSA?by DTSC » Thu Feb 13, 2014 11:35 pm

If you have children or plan to have children, or go back to school yourself, consider putting money in a 529 plan
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Joined: 20 Oct 2008
Location: Illinois

Re: Where to invest after maxing out 401k, IRA, and HSA?by ElectricalEgrMWB » Fri Feb 14, 2014 12:35 am

We are currently in the 28% tax bracket. We don't have any kids yet so I have not started a 529 plan yet, though I plan to start when we do have kids.
I am not sure if my 401k plan allows for the after-tax employee contributions above and beyond the $17,500 limit/person, but this does seem to be an interesting option. From what I have read, the interest on the after-tax contributions would be taxable, but if I switch companies (which allows me to roll my Roth 401k into my Roth IRA), the interest earned on the excess money I was able to contribute would no longer be taxable?
Posts: 2
Joined: 13 Feb 2014

Re: Where to invest after maxing out 401k, IRA, and HSA?by airahcaz » Fri Feb 14, 2014 12:53 am

ElectricalEgrMWB wrote:We are currently in the 28% tax bracket. We don't have any kids yet so I have not started a 529 plan yet, though I plan to start when we do have kids.
I am not sure if my 401k plan allows for the after-tax employee contributions above and beyond the $17,500 limit/person, but this does seem to be an interesting option. From what I have read, the interest on the after-tax contributions would be taxable, but if I switch companies (which allows me to roll my Roth 401k into my Roth IRA), the interest earned on the excess money I was able to contribute would no longer be taxable?



Plenty on the topic of after tax contributions and roll over to Roth:


1) Invest you must 2) Time is your friend 3) Impulse is your enemy 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course. (Plagiarized, but worth stealing)
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Re: Where to invest after maxing out 401k, IRA, and HSA?by retiredjg » Fri Feb 14, 2014 11:32 am

ElectricalEgrMWB wrote:We are currently in the 28% tax bracket.
In the 28% tax bracket, you should consider traditional 401k in my opinion. It is likely that you will be in a lower bracket in retirement. Why pay 28% now when you could pay less than 28% later?
From what I have read, the interest on the after-tax contributions would be taxable, but if I switch companies (which allows me to roll my Roth 401k into my Roth IRA), the interest earned on the excess money I was able to contribute would no longer be taxable?
You're headed down the wrong track with the second part of that statement. This has nothing to do with changing companies or rolling Roth 401k anywhere.
As for the first part...If you can make the after tax contributions and if you are allowed to roll that money out to Roth IRA while still working, you will pay tax on the earnings that have occurred. If you do the transfers regularly, there should not be a lot of earnings so the tax is not too great.
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Joined: 10 Jan 2008

Re: Where to invest after maxing out 401k, IRA, and HSA?by NorCalDad » Fri Feb 14, 2014 2:04 pm

If you are dead-set opposed to taxable investing, I would split between mortgage paydown and a 529. You can start a 529 now in your name and change the beneficiary once your child arrives. If you are already in the 28% bracket and assume no major drop in income, you'll probably end up paying full price for college.
I agree with retiredjg that you should consider a traditional 401k in the 28% tax bracket, especially if you have state income tax on top of that.
Posts: 435
Joined: 26 Mar 2012
Location: Northern California

Re: Where to invest after maxing out 401k, IRA, and HSA?by feh » Fri Feb 14, 2014 2:53 pm

When we ran out of tax-advantaged space, we did 2 things: began taxable investing and paid ahead on our mortgage.
Personally, the thought of having a 30 year long obligation makes me queasy.
Posts: 383
Joined: 15 Dec 2012

Re: Where to invest after maxing out 401k, IRA, and HSA?by letsgobobby » Fri Feb 14, 2014 3:26 pm

retiredjg wrote:
ElectricalEgrMWB wrote:We are currently in the 28% tax bracket.
In the 28% tax bracket, you should consider traditional 401k in my opinion. It is likely that you will be in a lower bracket in retirement. Why pay 28% now when you could pay less than 28% later?
I agree with retiredjg, this is really important.
The chances that you'll pay 28% on every dollar you withdraw in the future is very low. Chances are that some of your withdrawals will be in the 0%, 10%, 15%, and 25% tax brackets. Thus by choosing Roth over traditional you are voluntarily choosing to overpay taxes.
re: your question, you may find this thread helpful:
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Joined: 18 Sep 2009

Re: Where to invest after maxing out 401k, IRA, and HSA?by Kevin M » Fri Feb 14, 2014 3:32 pm

One more vote for carefully considering traditional 401k. Suggest you read these two blog posts by forum member tfb (Harry Sit):


Note that some of Harry's assumptions about tax code changes in the second blog post did not materialize, so factor that into your thinking.
Also another vote for considering using 529 now. That gives you more Roth-like space, increasing the sensibility of using traditional 401k. I especially like the Colorado 529 Stable Value Plus plan, which currently yields 2.64%. Hard to beat that rate for an extremely low-risk, potentially tax-free return; it gets into the ballpark of the after-tax return on paying down your mortgage, while retaining more liquidity. Due to the high limits, you can pump a lot of money into a 529 plan.
Even if you withdraw the money for non-qualified expenses, you only pay taxes and a 10% penalty on earnings, hence the comment above about liquidity. Unless you have a good stable value fund in your tax-advantaged plans earning more than 2.64%, you could use the CO SV fund for much of your fixed income allocation. You could then use another 529 plan with the best stock funds for additional contributions. Of course if you live in a state that offers a tax deduction for 529 contributions, your state plan might be a good choice for at least some of your 529 money.
Harry also published a blog post about the Stable Value Plus plan: Colorado Stable Value Plus 529 Plan: 2.64% Return Guaranteed Through December 31, 2014
Nothing wrong with taxable investing using tax-efficient investments after all of your tax-advantaged space is filled. And as others have pointed out, a 3+% risk-free, after-tax return on paying down a mortgage is hard to beat in the current environment. SEC yield on Vanguard Long-Term Tax-Exempt fund is 3.2%, and although it is not risk-free, some forum members have argued that as long as the duration of the fund (in this case, 7.7 years) is less than that of your mortgage, the risk is comparable.
Kevin

Posted on 9:11 AM | Categories:
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