Intacct Solidifies Its Position as the Growth Leader in Cloud Financial Software with $45 Million in New Financing

Intacct, a leader in cloud financial management and accounting software, today announced it has secured an additional $45 million of financing in a combination of venture funding and a debt package. The new funds will be used to further invest in company growth and expanded product capabilities.

The majority of the new financing was secured through a $30 million venture funding round led by Battery Ventures, a new Intacct investor. Chelsea Stoner, a general partner at Battery Ventures, has also joined the Intacct Board of Directors. The round featured all existing active investors, including Bessemer Venture Partners, Costanoa Venture Capital, Emergence Capital, Sigma Partners, and Split Rock Partners, as well as new investor Morgan Creek Capital Management. The remainder of the funding came in the form of a $15 million debt package from Silicon Valley Bank.

“As the fastest growing mid-market cloud financial software vendor, Intacct has already established itself as a major player in the largest business application software segment,” said Robert Reid, CEO of Intacct. “Our continued success in the industry, along with increased market share, has attracted additional capital for the company. This new round of funding will enable us to further accelerate our growth, drive new product enhancements, and reach into new markets.”

“We already have the backing of several top venture firms and the addition of Battery Ventures and Morgan Creek Capital Management in this round is further proof of our market position and strong execution,” added Reid. “I’m pleased to welcome Chelsea Stoner to our Board of Directors, and look forward to leveraging her experience in helping companies deliver accelerated results while staying committed to customer success.”

Stoner has been at Battery Ventures since 2006 and specializes in investments in the software-as-a-service (SaaS) and healthcare-IT sectors. “Battery has a long history of backing innovative SaaS companies, and we were drawn to Intacct because of its brisk growth and strong product focused on the mid-market,” said Stoner. “We are seeing CFOs adopt cloud solutions at an increasing pace, and we believe Intacct and its top-notch management team are well positioned to accelerate growth even further.”

“As Intacct continues to grow, this additional financial support will give the team added flexibility to pursue their ambitious goals,” said Joan Parsons, executive vice president of Corporate Banking for Silicon Valley Bank. “Our mission is to increase the probability of our clients’ success and when we see our clients, like Intacct, reaching new stages of business growth, it is particularly rewarding.”

Intacct Delivers Record Fiscal Second Quarter

Showcasing its track record of strong growth, Intacct today also announced record results for its second fiscal quarter, ended December 31, 2013. For the quarter, Intacct increased overall bookings by nearly 40% year-over-year. The quarter was highlighted by a nearly 60% growth in new customer acquisitions through Intacct channel partners.

Intacct and its channel partners continue to see the largest growth coming from companies looking to switch off of outdated on-premises financial systems from Microsoft and Sage to Intacct's modern, cloud financial software. These companies have struggled with software designed well over 25 years ago (pre-Internet) that requires multiple add-ons, extra hardware, costly expert customization, and ongoing IT support just to keep up with their constantly changing business needs.

With Intacct, companies gain a flexible, cloud-based system designed to streamline processes, increase business visibility, and enable them to manage their business the way they want now and in the future. Intacct's best-of-breed approach also allows customers to choose the best solution for each part of their organization at each stage in their growth, instead of being locked into a monolithic suite from a single vendor. Adopting this approach not only gives a CFO access to deeper functional capabilities, it enables them to rollout the functionality more quickly, at a lower cost, and with less risk.

Additional Resources:

• Visit www.intacct.com
• Follow Intacct on social media: Facebook, Google+, LinkedIn, Twitter, and YouTube
• Follow the Intacct blog

Accounting Software Maker Intacct Takes On $45M To Pick Up The Pace

Alex Konrad for Forbes writes: Financial management software may seem a sleepy area in tech, destined for a back office and without the buzz of more consumer-facing business products like Dropbox or Square. But there’s major money to be had in riding the space, as longtime accounting software company Intacct reaffirmed Tuesday. The company has raised $45 million in new funding, $30 million from venture investors and $15 million in debt from Silicon Valley Bank.

The round is led by Battery Ventures, and newly-promoted general partner Chelsea Stoner joins Intacct’s board. Return investors in the late-stage round include Bessemer Venture partners, Sigma Partners and Emergence Capital. Also returning are Costanoa Venture Capital and Split Rock Partners, while Morgan Creek Capital Management joins in.

Intacct has been around for a long time, founded in 1999. As standard for software-as-a-service companies, it’s not profitable, but the company says it has increased bookings by nearly 40% year-to-year, with quarterly new customer growth of almost 60%.

Click here to read the rest of the story @ Forbes.com

Exact Unveils Partner Program for QuickBooks Accountants and Resellers

(Exact has no relationship or connection with us, ExactCPA)  Exact, the business software provider for small business manufacturers and wholesale distributors, today announced a partner program for QuickBooks-savvy accountants, resellers and IT consultants seeking new growth opportunities with manufacturers and wholesale distributors. The program includes exclusive content, expertise and incentives that will enable partners to immediately leverage the Exact Online software to grow their businesses and bring more value to existing clients and customers.

"Our software enables accountants to differentiate themselves and enter an industry that is rapidly growing," said Steve Leavitt, GM of U.S. Cloud Solutions at Exact. "Not only does the software integrate seamlessly with QuickBooks, it integrates the customer's business processes with their financials giving our partners the opportunity to build or enhance a consulting practice around valuable data integration. By leveraging an easy-to-use cloud delivery model, we streamline and simplify a once complex process for our partners and their customers, to offer a more collaborative approach to managing their business."

By the end of 2013, manufacturing activity delivered its fastest growth in nearly three years, indicated by The Institute for Supply Management's poll of purchasing managers (PMI(TM)) which came in at 57%. As this industry continues to grow, Exact Online will help resellers and consultants stand out among the rest, enabling them to gain domain expertise in manufacturing and distribution, which in turn allows for recurring margin and more billable hours.

Exact Online bridges the gap between common manufacturing and wholesale distribution tasks and traditional accounting functions. It streamlines tasks such as production and inventory management, logistics and CRM. Ultimately, the software replaces disparate systems and manual processes, giving users and their trusted accounting advisors a 360-degree view of a business.

"With the capabilities that Exact Online enables, from detailed job costing to inventory management and CRM, I can offer a more comprehensive solution to my customers in manufacturing," said James Cliame, owner of Net Result. "As an Exact partner, I am able to access new customers in a rapidly growing segment of the marketplace, and this provides an entirely new avenue to grow my business."

To learn more about the Exact partner program, please visit http://www.exactonline.com/partner-with-us/business-partner

Exact Online is a product of Exact, a global company with 30 years of experience in manufacturing and wholesale software, serving more than 100,000 customers worldwide and 10,000 in the U.S. Exact Online recently passed Intuit's rigorous technical, security and market reviews and the application is now available for download through the Intuit App Center at http://apps.intuit.com/.

About Exact

Exact is your trusted advisor and a leading provider of business solutions for small- to medium-sized (SMB) manufacturing and distribution companies. Since 1984, Exact has been serving SMBs with information technology to launch and grow their businesses. As a global solution provider with more than 1,800 employees worldwide, Exact helps more than 100,000 local and international companies run their business every day. Exact is headquartered in Delft, the Netherlands and has been listed on the NYSE Euronext Amsterdam since June 1999. The company's revenues in 2012 amounted to EUR217.1 million. In the U.S., Exact's business unit, Cloud Solutions, is headquartered in Newton, MA.

Exact Online offers the advantage of flexible cloud delivery to enable customers to quickly and cost-effectively streamline time-consuming tasks such as logistics, CRM, production and inventory management, so business owners can focus on growing their businesses. The platform, available via affordable monthly subscription, integrates seamlessly with QuickBooks.

(Exact has no relationship or connection with us, ExactCPA) 

The Future of Accounting: How to Thrive in a Post-Compliance World

Sholto MacPherson for Box Free IT writes: The humble tax return has long been a mainstay for many accounting firms. After all, everyone has to pay their taxes. But tax returns aren’t likely to remain a regular source of revenue and leads. The times are changing fast.

The Australian Taxation Office has pledged to automate 4.5 million tax returns for individuals, starting with the first 1 million in 2014. Employees in the PAYG system rarely have many changes to make at year’s end.

In a recent speech ATO commissioner Scott Leeper gave an indication of where compliance in Australia is headed. “Scandinavian countries such as Denmark and Norway send nearly three quarters of tax returns to the taxpayer, and in Norway since 2008 there is silent acceptance – if you do not respond, the tax return is treated as final,” Leeper said.

Company returns are also becoming easier and faster to complete thanks to pre-fill features in cloud accounting software and the federal government initiative to digitise tax returns and other forms.

And the growing trend of outsourcing data entry and accounting services to South East Asia and India is picking up pace. Cloud accounting software makes it simple for an accountant anywhere in the world to log on and reconcile accounts.

Where does this leave accounting firms for whom compliance is their primary source of revenue? How can they change their businesses to be more efficient at processing returns? Where will accountants find replacement revenue streams?

These tough questions will be debated at the inaugural Future of Accounting forum, a panel discussion presented by BoxFreeIT in conjunction with the Institute of Public Accountants and sponsored by Reckon and Saasu.

The made-for-broadcast event will take place on Wednesday 2 April from 8.10am to 11am on the 26th floor of the AMP building in Circular Quay, Sydney and streamed online for those outside the Sydney CBD.

On the panel you will hear:

• Imminent threats to accounting firms and the greatest opportunities from IPA CEO Andrew Conway
• Competing philosophies for future accounting business models from Reckon strategic director Dan Rabie and Saasu CEO Marc Lehmann
• Detailed descriptions from two leading Reckon and Saasu accountants about how they streamlined their tax business and shifted into more lucrative services

There will also an be opportunity for questions from the audience. If you want to stay in business in 2014 and beyond you can’t afford to miss out.

About the author:  Sholto Macpherson is a business technology journalist specialising in cloud software. He lives and works in Sydney, Australia, you can read him @ BoxFreeIT here.

6 Reasons Your Tax Return Might Get Audited

 Kathryn Buschman Vasel for Fox Business/Money Tree writes: No one really knows what will trigger an audit by the IRS, which causes many taxpayers to live in fear — and that’s exactly what the agency wants.

“The IRS isn’t going to give you a list of all the things that will definitely trigger an audit. They want filers to file their taxes as honestly as possible,” says Laurie Ziegler, an enrolled agent and director of the National Association of Enrolled Agents.

She says the IRS audits less than 1% of all individual returns annually, and it’s important to know that a letter from the IRS doesn’t necessarily mean an audit is coming.

There are three types of IRS inquiries: matching, examination and the dreaded audit. “They might just need a certain document to verify an income claim -- that’s a matching request. They are saying, ‘we received this information, but we don’t see it on your return.'”

An examination would occur when the agency just needs more information validating a deduction or claim.

While it remains unclear exactly what triggers an audit, tax experts say there are some common factors that can increase your chances of ending up in the hot seat.

You didn’t disclose all your taxable income. The IRS gets copies of W-2s and 1099s and knows a filer's income, so make sure to report it all. "[The IRS] will work to match all reportable items to your return, any mismatches can raise the red flag,” Ziegler says.

You’re claiming the Earned Income Credit. This credit is applied to low to moderate income filers and can be worth up to $6,044, making it one of the most fraudulently-claimed credits, according to Ziegler. “Because sometimes people get back more than they earn with this credit, the IRS pays extra close to attention to returns claiming this return, especially if it’s based on self-employment income.”

Robert Zeigen, director at CBIZ MHM adds, “Any time the government is giving away free money, they are going to look at that return very closely.”

You filed a Schedule C. Most self-employed filers fill out Schedule C to report how much money they made or lost in a business. “If there is a presence of this form that shows many years of business loss, the IRS is going to want to look at your so-called business to make sure 'hobby' isn’t a better label,” says Zeigen.

Filers must report any income earned from a hobby, but they can’t deduct losses. “The IRS likes to see a profit two out of five years to consider a business legit,” Ziegler says. “If you have a loss for five years, you can still say it’s a business, but you better be prepared to prove it with things like advertisements, promos and things like that.” She adds that filers who have a full-time job outside of the business they filed the Schedule C for are going to have a harder time proving it’s not a hobby.

You were really charitable.  According to Zeigen, the IRS is cracking down on charitable deductions and wants documentation proving donations higher than $250. “They want to see the canceled check and a receipt from the charity confirming they got it.”

He adds that non-cash donations, especially those higher than $500, will draw attention. “The IRS wants to make sure that what you donate were in good shape, not worthless stuff you were going to throw away anyway. If you donate anything in excess of $5,000 make sure you get an appraisal because it’s likely to be looked at.” 

Car donors used to be able to write off the fair market value of car, but the IRS now only allows the donor's claimed value of the gift and how the charity uses the vehicle to be claimed.

You have a very large home office. Because home offices used to be a major audit trigger, according to Zeigen, the IRS created a limited safe harbor that allows filers to take a deduction of $5 per square foot up to 300 square feet. “Those in excess of the simplified method may trigger more scrutiny.”

You mortgage deduction seems too big. Zeigen points out that the IRS knows each filers income, making it able to know how much a typical mortgage should be. “If you are claiming a mortgage deduction that is above the average for your income, the IRS might do a double take.”

Ziegler adds that many homeowners wrongfully try to deduct their entire home equity lines of credit. “There are limits of how much interest can be deducted from a mortgage or refinancing,” she says. “It can’t be more than $100,000 unless it’s based on the original debt in the home.”

Follow the author  Kathryn on Twitter @kathrynvasel

How To Write Off Medical Expenses as a Tax Deduction What You Need to Know About the Tax Deduction for Medical Expenses

Elizabeth Davis for About.com writes: Preparing your income taxes?  You’re probably looking for as many tax deductions as possible. Medical care is expensive, so if you can write off the cost of your health care, you can potentially lower your tax bill.

However, IRS rules are complex and detailed. You need to understand whose medical expenses are tax deductible, what types of expenses are deductible, and whether or not you have enough tax-deductible medical expenses to make it worth your while.

Two Ways to Write Off Medical Expenses

There are two ways to write off medical expenses:

1. Claim them as a tax deduction when you itemize your deductions.

This is how the vast majority of people will write off their expenses. You must use Schedule A of Form 1040. If you take the standard deduction rather than itemizing your deductions, you can’t write off your medical expenses unless you qualify to use the second way.

1. Claim them as an adjustment to your income.

This lowers your adjusted gross income making it look like you made less money. Medical expenses that can be written off this way are less common but may include the cost of health insurance premiums for the self-employed.

Do You Have Enough Medical Expenses to Make It Worth Your While?

In order to claim a medical expense tax deduction on schedule A, your expenses have to add up to at least 10% of your adjusted gross income. You only get to deduct the expenses that exceed this 10% threshold. For example, if your adjusted gross income is $100,000 and you have $12,000 in qualified medical expenses, you’ll get a $2,000 tax deduction.  The first $10,000 of your medical expenses is used to meet the 10% threshold. The remaining $2,000 can be claimed as a tax deduction.

If you or your spouse is 65 or older, the IRS sets the threshold at 7.5% of your adjusted gross income through 2016. In 2017, your medical expense deduction threshold will increase to the more common 10% level.

Which Medical Expenses Count?

Your opinion about what constitutes a medical expense may differ from the IRS’s opinion. According to the IRS, “Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation.” To read the law yourself, check out Internal Revenue Code section 213.

You can’t claim expenses that your health insurance company paid, or expenses reimbursed by your pre-tax flexible spending account or health savings account.

If you received medical care one year, but paid for the care in a different year, you claim the expense in the year you paid for it, not the year you received the service. For example, if you received treatment in autumn of 2012 but didn’t pay for that treatment until January of 2013, you’d claim the medical expense on your 2013 taxes, filed by April 15, 2014.

In some cases, you can claim the cost of health insurance premiums as a tax-deductible medical expense. Learn more in “Is Health Insurance Tax Deductible?”

A short list of common tax-deductible medical expenses includes:

• Your health insurance deductible, copayments, and coinsurance.
• Your out-of-pocket costs for prescription drugs. (This doesn’t include medical marijuana or prescription drugs shipped into the country illegally.)
• Unreimbursed psychotherapy or psychoanalysis expenses.
• Bandages and Band-Aids.
• Contact lenses and glasses used to correct vision.
• Contact lens solution.
• Hearing aids and hearing aid batteries.
• Breast pump supplies.
• In vitro fertilization costs.
• Pregnancy test kits
• Long-term care expenses (qualifying rules apply) and some long-term care insurance premiums.

 For the IRS’s list of qualified medical expenses, check out IRS Publication 502.

Whose expenses Count?

Generally, you can claim a tax deduction for your own medical expenses, your spouse’s expenses, and your dependents’ expenses.

Tax planning for future sale of your home

Brittany Dehaven Hall for BusinessSavannah.com writes: There are tax implications to consider when you sell your home. Even if you’re not planning to sell in the near term, proper planning can help you down the road when you do find yourself in such a situation.

Gain on the sale of a home is considered a taxable capital gain. This is calculated as the excess of the sales price over your basis in the home. Basis is generally the amount you originally paid plus eligible closing costs, but as we will discuss later, there are ways to increase your basis.

If you acquired your home other than by purchasing it, your basis calculation could be complicated and you may want to consult your tax adviser for help.

The good news is there is an opportunity to bypass federal income taxes on up to $250,000 of gain when you sell your residence if you file your return as a single taxpayer and up to $500,000 if you are married and file a joint return (MFJ).

This can create considerable tax savings if you have planned properly.

Basic requirements

The full $250,000 ($500,000 MFJ) exclusion of gain mentioned above is available for a home only if you owned and used it as your primary residence for at least two years out of the five years before you sell it.

Additionally, you can only claim the exclusion once every two years. You may be eligible for a reduced exclusion if you sell the home because of a change in your place of employment, health or certain unforeseen circumstances.

You may lose some of the benefit of the capital gain exclusion if you sell a residence you used as a vacation home or rental property. Under a rule that took effect in 2009, the portion of your gain that is allocable to the time you didn’t use the home as your principal residence may be taxable.

Maintain records

Each dollar you spend on capital improvements to your residence increases your basis in the home. The higher your basis, the lower your taxable gain (if any) when you sell the home.

Capital improvements such as installing a fence or adding a bonus room can significantly increase your basis over the years. Keep receipts for these types of expenditures in a file with your other home-related records.

Expenses to maintain your home such as repainting, repairing gutters or pruning tree limbs are not capital improvements and do not increase the basis of your home. If your improvement is a replacement (for example removing old carpet and replacing it with new carpet), then you must remove the cost of the replaced property from the basis of your home.

If you own more than one home, it’s important to have a record of the time you spend in each location. The home you use for the majority of the time during the year is considered your principal residence for that year.

Only your principal residence qualifies for this gain exclusion; there is no exclusion available when you sell a second or vacation home. It is still important, however, to keep detailed records and receipts of capital improvements you’ve made to your second home over the years in order to maximize the amount you can claim as basis.

Adjustments to the Exclusion Amount

Married couples may take advantage of the full $500,000 exclusion on a joint return if:

• Both spouses have used the home as a principal residence for at least two of the five previous years;

• Either spouse has owned the residence for at least two of the five previous years; and

• Neither spouse has claimed the gain exclusion on a residence sale within the prior two years.

When a couple doesn’t meet one of these conditions, the maximum exclusion amount is calculated separately for each spouse.

If you are planning to get married and sell one or both of your homes, you should consider the tax implications. It may be possible, for example, for each of you to exclude as much as $250,000 of gain on the sale of your individual residences on a joint return, assuming you meet the basic requirements.

The $500,000 ceiling is available only to married individuals who file a joint tax return (with the exception of a surviving spouse who sells the residence within two years of his/her spouse’s death).

If you intend to sell your home because of an impending divorce and the gain may be more than $250,000, it may be advantageous from a tax standpoint to complete the sale in a year when you file a joint return.

These are just a few of the considerations that could affect your tax planning. Let your tax preparer know if you intend to sell your residence so they can help you achieve the best tax results.

Brittany DeHaven Hall is a senior accountant at Hancock Askew & Co. LLP. She can be reached at 912-234-8243 or bhall@hancockaskew.com.

When a home is owned by an LLC / deducting the interest on the loan the same way we would if the home were in our names and we had a traditional personal mortgage?

James A. Lawrence for NorthJersey.com writes: Q. My home is in the name of an LLC, with my wife and me as the members of the LLC. We have a commercial mortgage on the property. Can we deduct the interest on the loan the same way we would if the home were in our names and we had a traditional personal mortgage?

In general, interest can be deducted only by the person (or persons) liable for the underlying debt and who holds the title to the property. If you transferred title of your home to the LLC, you may have jeopardized the tax benefits of homeownership. You still may be entitled to a deduction for the mortgage interest payments, but only if you are the legal or equitable owner of the property.

Taxpayers become the equitable owners of mortgaged property (allowing them to deduct the mortgage interest on that property) when they assume the benefits and burdens of ownership. To determine whether these benefits and burdens have been transferred to a taxpayer, the IRS often considers whether the taxpayer:

* Has the right to possess the property and enjoy its use, rents or profits
* Has a duty to maintain the property
* Is responsible for insuring the property
* Bears the property's risk of loss
* Is obligated to pay the property's taxes, assessments or charges
* Has the right to improve the property without the consent of the owner (the LLC)
* Has the right to obtain legal title anytime by paying the balance of the purchase price.

If you don't meet these seven qualifications, you would probably not be able to take the payments as qualified mortgage interest deductions on your personal tax return. You may also lose other federal tax benefits available to you as an owner of a principal residence, such as the real estate tax deduction and the $500,000 capital gains exclusion for a married couple upon sale of the home.

However, the state of New Jersey allows you the normal personal tax benefits, such as a residential deduction on your New Jersey personal tax return, a homestead rebate and the state tax freeze program. This could be accomplished only if you held the majority of the ownership in the LLC, which you do. However, when it comes to selling your home, New Jersey follows the federal tax position, meaning you could lose your $500,000 exclusion.

You might consider putting the LLC in just one of your names. If a residence is owned by a single-person LLC, the LLC could be treated as a "disregarded" entity, which is treated as if it is an individual taxpayer, for all federal tax purposes. The homeowner benefits (such as interest, tax deductions, and capital gain exclusions) may apply to a residence owned by a single-owner entity.

James A. Lawrence is a certified public accountant with Traphagen Financial Group in Oradell and a member of the Bergen County Chapter of the New Jersey Society of Certified Public Accountants. Chapter members are volunteering their time to answer readers' tax questions until April 15.

Taxing Digital Goods and Services: The What, Where, and How

Gail Cole for Taxrates.com writes:  When we hear the word ‘cloud’ today, it could just as easily be referencing an interconnected network of computers as cumulus, stratus, or cirrus.

Cloud computing has revolutionized the transfer of goods and services. Back when clouds were only made of water droplets, people typically purchased goods by going to a store. Eventually, goods could be purchased by mail or phone order, and later still, over the internet. The process was much the same for the purchase of a service, such as the use of an attorney’s advice, and accountant’s accounting, or a hair stylist’s talented hands.

Thanks to the world of cloud computing, we can collaborate on a Google Drive document with a colleague on the opposite coast. We can watch movies and television shows on demand, share photos with friends and family through Dropbox, and access more songs than we have time to hear. We can even create a virtual world and purchase virtual goods with virtual money like Bitcoins.

Increasingly, individuals and businesses are discovering the advantages of using cloud-based services, like software as a service (SaaS). Calculating sales tax rates in multiple jurisdictions, managing exemption certificates, and having updated customer records on mobile devices are just some of the digital services available.

If this has led some folks to wonder where all the vinyl has gone, it has also caused state taxing authorities to wonder where some of the sales tax revenue has gone. The taxation of physically goods and services is not without its complexities (consider how candy is defined and taxed), but at least physical goods and services are known entities. Digital goods and services, on the other hand… exactly what are they? How can something so nebulous be taxed?

Under construction

The taxation of cloud-based goods and services is a work in process, both in the United States and abroad. Many states have yet to decide if digital goods and services should be subject to sales tax. Other states tax some and exempt others. And then there’sMassachusetts, which enacted a sales tax on cloud computing services and then repealed it 6 weeks later.

Businesses that sell cloud computing services and digital products tend to be relatively young and may have yet to face a state tax audit. The more these businesses come under scrutiny, the more tax issues will arise. According to Bloomberg BNA, sales tax will attract the initial attention. Income tax will undoubtedly follow.

What is that?

Cloud computing and digital product providers face a unique sales tax audit issue: their transactions are sometimes characterized as taxable telecommunications, sometimes as data processing, and sometimes as information service. How they’re characterized impacts which taxes apply to what transactions.

Where is that?

Determining “where a service is ‘delivered,’ benefited from,’ or ‘used’ also impacts sales tax. Yet time-honored practices often don’t work in the cloud. Is it appropriate to source a sale based on the location of the server when the buyer is located in another state? It may be. Then again, it may not.

How do mobile devices fit in?

If applying sales tax to digital services purchased from a computer based at home or a business is complicated enough, applying sales tax to digital services purchased from a mobile device takes it to a whole new level. When sales tax is imposed, it is typically imposed “at the location of the customer”—a practice called the destination regime (Bloomberg BNA).

“The legislative destination regime that we have today doesn’t work in a mobile environment,” says Stephen Kranz of McDermott Will & Emory LLP. “For example, if a person makes a cloud purchase remotely in Denver, but the billing address that the cloud provider has for the purchaser is in Washington, D.C., the District may collect the tax on the purchase even if that’s not what the law says should happen.”

Double dipping

Reporting on results of a survey on the taxation of cloud computing, Bloomberg notes that “the method by which most cloud computing providers source sales of cloud computing services for sales tax purposes varies by state or by the type of service provided.” The survey suggests that “inconsistencies in state law, coupled with the nomadic nature of many cloud and digital product services, provides the potential for more than one state to tax the same transaction for sales tax purposes.”

For example, a cloud service that relies on a server located in Texas to perform a task for customer in New York could trigger sales tax in both Texas and New York. Which state has the right to tax what? Where should the seller appeal?

A federal solution

Kranz believes federal legislation will be necessary to sort out the complexities of taxing digital goods and services. The Digital Goods and Services Act (S. 1364 / H.R. 3724) currently being considered, addresses sourcing rules and the impact of such a tax on state budgets, among other issues.

Don’t let the where, what and how get you down. Learn more about the taxation of digital goods and services.

Visit TaxRates.com here.

Increased Tax Rates and the Net Investment Income Tax – A Galactic Collision of Forces

Maury Cartine, CPA, JD, for AllAboutAlpha.com writes: Researchers predict that the Andromeda Galaxy will collide with our very own Milky Way Galaxy in approximately four billion years.  When that happens, life on Earth will be eliminated for certain. “So what”, you say with a smile.   Well, time sneaks up on all of us and as 2013 becomes only a memory, investment managers and investors will face a tax collision of galactic proportions on their 2013 income tax returns.

Last year at this time we were all warned that we would begin to feel the full weight of Obamacare and a budget that is simply out of control.  Now as investment managers and investors face the prospect of paying income tax balances due for 2013 and estimated tax payments for 2014, the increased tax burdens will become a reality.    A simple analysis of what has happened to upper middle income taxpayers should bring that reality into focus.  The analysis illustrates the effects of the 2013 increase in federal income and employment taxes on married taxpayers filing joint returns with the same income and itemized deductions for 2012 and 2013.

In the first illustration, the married taxpayers are assumed to have $600,000 of income comprised of wages in the amount of $200,000, qualified dividends in the amount of $100,000 and long-term capital gains in the amount of $300,000.

In the second illustration, the married taxpayers are assumed to have $1,000,000 of income comprised of wages in the amount of $600,000, qualified dividends in the amount of $100,000 and long-term capital gains in the amount of $300,000.

In the third illustration, the married taxpayers are assumed to have $600,000 of income comprised only of wages.

In the fourth illustration, the married taxpayers are assumed to have $1,000,000 of income comprised only of wages.

As you can see, both married couples with investment income are paying significantly more federal income tax in 2013 on the same amount of income.  The illustration does assume that the taxpayers somehow during their lifetime were able to build a fairly significant investment portfolio, perhaps through gifts from parents, an inheritance, previously exercised stock options, or just some very astute investing over many years.

However, the married taxpayers with $600,000 of wages and no investment income are paying only a small amount of additional federal income tax in 2013, but far more in federal income taxes than the taxpayers with $600,000 comprised of wages in the amount of $200,000, qualified dividends in the amount of $100,000 and long-term capital gains in the amount of $300,000.

Finally, the married taxpayers with $1,000,000 of wages and no investment income are paying significantly more federal income tax in 2013 on the same amount of income and they are also paying significantly more in federal income tax than the taxpayers with $1,000,000 of income comprised of wages in the amount of $600,000, qualified dividends in the amount of $100,000 and long-term capital gains in the amount of $300,000.

The moral from these illustrations?   Maybe we should not work as hard as we do and hope we have rich parents who will bequeath to us a significant investment portfolio.   And maybe those rich kids with the significant investment portfolio should not bellyache about the amount of additional taxes they are paying.  Is all of this fair?  It depends on where you sit.  But one thing is certain; the seat was a lot more comfortable for most taxpayers in 2012.

Increases in the highest federal income tax rates for ordinary income from 35% to 39.6% and increases in the federal income tax rates on net long-term capital gains from 15% to 20% have a lot to do with the additional tax imposed on investment managers and investors.   However, the greatest impact may come from the new 3.8% percent tax on unearned income to fund Medicare.   This new tax, part of the Obamacare legislation, is dubbed the “net investment income tax”.

The net investment income (“NII”) tax will likely have the greatest long-term impact on investment managers and investors since it does not discriminate in favor of any type of passive income.   Dividends, interest, short-term capital gains, long-term capital gains and even a non-materially participating limited partner’s share of partnership profits from a bona fide trade or business activity are subject to the tax.  The Internal Revenue Service recently issued final regulations for NII tax.   These regulations resolve a number of concerns expressed by tax practitioners and perhaps create a few more.

One very interesting loophole exempting certain limited partnership income from both the self-employment tax and the NII tax remains intact.  If a limited partner materially participates in the business activities of the limited partnership, the limited partner’s share of partnership income is excluded from both the self-employment tax and the NII tax.  Only a limited partner’s guaranteed payments for services rendered to the limited partnership are subject to self-employment tax.   Thus, as if almost by design, the NII tax statute fails to close the glaring loophole that has permitted materially participating limited partners the ability to avoid self-employment tax for many years on their share of partnership profits.    Investment managers should think carefully about the benefits of this loophole and if their management companies are organized as limited liability companies they should consider the prudence of restructuring their management companies as limited partnerships.   The applicability of this seemingly timeless loophole to limited liability companies is now even more suspect than it was before.

The proposed regulations did not permit losses to offset gains for traders since gains and losses were computed separately and losses could never be less than zero.  The final regulations make it clear that both traders and investors in securities will be able to net gains against losses in computing NII.  Thus, it was possible for a trader to have an NII tax attributable to gains even though losses exceeded the gains.   The final regulations provide that a trader making a mark-to-market election may offset mark-to-market losses against other categories of NII.   Thus, the mark-to-market election provides yet one more benefit to investors in a trader fund that has not fared well.

One curious result under the proposed regulations for the NII tax has been confirmed in the final regulations.  The deductions allocable to a materially participating partner in a trader fund are first applied against other self-employment income of that partner and any deductions in excess of self-employment income can then be applied against NII for that partner.  This regulation may not be consistent with the self-employment statute which seems to indicate that in computing net earnings from self-employment only deductions attributable to the income that is includable in computing in net earnings should be taken into account.    The obvious impact of this regulation is an overall increase in federal income tax since a deduction against net earnings reduces the self-employment tax, which is 50% deductible by a taxpayer.  There is no similar deduction for the NII tax.  On the other hand, these deductions could prove to be valuable for an investment manager who has had a bad year.  Assuming the investment manager’s NII is below the threshold for taxation ($250,000 for taxpayers filing joint returns), the investment manager will at least be able to use the deduction to reduce self-employment tax that is attributable to management fee income without any other adverse effect.

The final regulations for the NII tax also provide guidance for a number of other transactions affecting investment managers and traders.  Draft instructions for completing the new Form 8960, Net Investment Income Tax – Individuals Estates and Trusts were only first issued on January 6, 2014.   Complications are sure to arise when tax preparers compute this tax for the first time.

2013 was a very good year for many hedge fund managers.  The illustrations above are only the tip of the iceberg for 2013’s most successful investment managers and investors and their tax collision may be far worse.  Higher federal income tax rates and the net investment income tax will probably be with us for a very long time.   They may not survive the collision of the Andromeda Galaxy with the Milky Way, but neither will we!  Until then, we must continue to navigate around the many tax meteors that Congress throws our way.

Intuit Continues Australia Expansion; Creates Country Manager Position

High-achieving, Multi-faceted Executive to Lead Growth, Customer Care

SYDNEY – 18 February 2014 – Intuit Inc., the maker of QuickBooks, has appointed Nicolette Maury to the newly created position of country manager and managing director for Intuit Australia to lead its rapidly expanding presence in Australia.

Recognised for recruiting and developing high-performing teams, Maury heads Intuit’s fast-growing sales, marketing and customer care team, which is expected to double in size this year to meet strong demand from Australian small businesses, accountants, bookkeepers and partners.

Most recently director of strategy and customer programs at eBay, Maury has led a variety of workgroups involved in new business development and incubation, social innovation and customer experience.

In 2013, Maury won an AFR Boss Young Executive of the Year award. Before joining eBay in 2006, she was a strategy consultant with the Boston Consulting Group where she helped grow the customer base of the Sydney Symphony Orchestra. 

"Intuit’s QuickBooks is building a great reputation in this country, so it’s exciting to get in on the ground floor of a company with such a strong growth trajectory,” Maury said.

Brad Paterson, Intuit’s vice president and managing director for Asia-Pacific said: “Nicolette is a high-achieving, multi-faceted executive who has the capability to broaden Intuit’s reach and depth of customer experience. She is a great asset for our growing Australian operation.”

Maury earned a Bachelor of Science degree in industrial chemistry at the University of New South Wales (Sydney) and is currently studying part time for an MBA through the Australian Graduate School of Management.

App of the Week: Kashoo Accounting

KIMBERLY HEGEMAN for constructionpros.com writes; Kashoo Accounting is simple, cloud accounting software designed for small businesses. Kashoo users also have the free Kashoo Accounting mobile app at their disposal which allows them to access their account anywhere, anytime with an iPad.

With Kashoo Accounting, contractors can access banking information and record expenses in real time. The app allows lets users scan and attach receipts using the iPad’s camera and create and send professional looking invoices. App users can synchronize their offline data on the iPad with online information at Kashoo.com.

  The mobile app features three dashboards allowing contractors to organize by profitability, vendors and customers. The dashboards allows users to view a snapshot of their business performance, month-to-month income and expenses, and important account balances like cash, bank, credit cards, receivables and payables.

Additional applications features can be purchased to enhance the user’s app experience including:

• Access Kashoo via any web browser
• Add multiple users and sharing
• Import company files from QuickBooks
• Download and reconcile your bank statements
• Add your own company logo to invoices
• Keeps your business records private on your iPad with a PIN code

The newest updates to the Kashoo Accounting mobile app include a new general ledger report with improved detail of transactions, a new journal report and new chart of accounts report.

According to developer, one of the biggest benefits of the mobile app is its instant feedback. The app allows the user to see how every entry impacts the bottom line and the user’s income.

Another benefit of the Kashoo mobile app is the ability to share. Contractors can share their accounting with their accountant or business partners because of the app’s cloud-based platform.

App features:

• Access banking information
• Create invoices
• Record expenses
• Review transactions automatically imported from band and credit card accounts
• View status of billing and collections
• See unpaid bills
• View account details in general ledger
• View four basic reports from the iPad
• View data offline and sync from an Internet connection

Intuit QuickBooks To Host Major Event- October 22-23; San Jose, CA

Gary DeHart / Murph @ the Intuitive Accountant writes: Apparently the rumors are true. Today, we confirmed that on October 22-23, 2014 in San Jose, California, Intuit QuickBooks will host, for the first time ever, a major event that brings together the key constituents of the their ecosystem: accounting professionals, developers and small businesses. Intuit depends heavily on active, empowered involvement of all three members of its ecosystem.

While Intuit stands to benefit greatly from the facilitated interaction between the three groups, the real winners of a show like this will be the attendees as Intuit will be providing educational content that equips all three groups to be more successful and better serve their customers.  In my opinion, Accounting Professionals will be a key component of the event, in that they are equipped to support Intuit’s small business customers with both technology consulting and accounting services, and they are often a powerful channel for software developers to reach small business owners.

Intuit is promising to announce the name and venue, as well as a detailed agenda, very soon.  Shortly thereafter registration will be opened to participants.

I recently had the opportunity to ask Joe Woodard, host of Scaling New Heights, an Intuit-centric training event for QuickBooks ProAdvisors, what he thought about an Intuit-hosted event like this. Joe told me, “I am very excited about this Intuit QuickBooks event in the fall of 2014. Intuit has a powerful and highly engaged ecosystem of small business owners, accounting professionals and software developers.  It will be great to see all of these groups under the same roof – and at a corporate event hosted by the leader in this space, Intuit.”

At the same time, I asked Joe if he was in any way concerned that the new Intuit event might slow the growth of his own June conference.  Joe responded that, “Scaling New Heights continues to thrive, in large part due to Intuit’s continuing partnership with us.  Scaling New Heights will again be ‘conducted in cooperation with Intuit,’ and their participation in and support of our June 15 thru 18, 2014 conference in San Antonio is stronger than ever.  Intuit will again send executives, including President and CEO Brad Smith, to serve as the keynote speakers.

In total, over 100 people from Intuit will be present at Scaling New Heights, including dozens of executives, directors, and product managers.  As for the continued growth of Scaling New Heights, the ProAdvisor Program has tens of thousands of members, and we believe the market is large enough for both Scaling New Heights and the fall 2014 Intuit QuickBooks event to thrive.”

Both Scaling New Heights and the Intuit QuickBooks event in the fall will both focus on in-depth technical education and practice development training. Both will be world class events designed to empower advisors with the skills, knowledge and resources to better serve small business clients.  As soon as Intuit publishes more information about their event, Intuitive Accountant will compare and contrast the two events, and while it is safe to assume there will be distinctions between the two events, each event will have plenty to offer to our readership.  I will be highlighting aspects of both Scaling New Heights and the new Intuit event in future articles.

You can read the Intuitive Accountant by clicking here.