Best Accounting Software in 2015

Saundra Latham for The Simple Dollar writes: The Best Accounting Software, is part of an ongoing Small Business Toolkit series, here at The Simple Dollar. Parts 1, 2, and 3 covered the Best Cloud Storage Providers,Best Email Marketing Services, and Best Project Management Software. Now we turn our attention to a crucial task for all small businesses: accounting.

The variety of small business accounting software and platforms is staggering, mostly driven by an exploding number of cloud-based startups. Cloud-based accounting software has been challenging downloadable accounting software with slick, convenient, easy-to-use services that can be accessed from anywhere — your phone, tablet or browser — not just the aging desktop computer in your back office. In fact, experts say software companies have seen the writing on the wall, and are focusing largely on cloud-based platforms going forward. It might not even be terribly long before your traditional software goes extinct.

The Simple Dollar’s Top Picks

In this article, I take a look at the best accounting software, cloud-based accounting platforms, and free accounting software. I’ll also discuss whether you should make the jump to cloud-based accounting or stick with your downloadable accounting software, and I’ll give you a rundown of essential features for any small business accounting solution.

First, here’s a quick look at my top picks for the best small business accounting software:

Best Traditional Accounting Software

• Best overall: QuickBooks Pro
• Runner-up: Sage 50

Best Cloud-Based Accounting Software

• Winner: Xero
• Runners-up: QuickBooks Online and FreshBooks

Best Free Accounting Software

• Winner: Wave
• Runners-up: NolaPro and GnuCash

Best Downloadable Accounting Software: QuickBooks Pro

QuickBooks has dominated small business accounting since launching in the early ’90s. QuickBooks Pro, its entry-level offering, offers all the basic accounting services small businesses need for $299 (as of this writing, the software was on sale for $229).

The software is easy to use, even for true accounting neophytes. Step-by-step setup and new-user video tutorials help users gain confidence from the start, and a recently streamlined dashboard lets users easily keep an eye on crucial tasks.

Experts say standout features include billing, invoicing, and integration with third-party applications. Needless to say, the software plays nicely with other Intuit products such as TurboTax.

However, some say customer support is lacking, while others are frustrated that limited inventory management features require many users to upgrade to more expensive software.

Runner-up: Sage 50

Sage 50 goes toe-to-toe with QuickBooks Pro on most core features. In fact, it offers more powerful inventory management tools than its competitor. It’s also priced at $299 (as of this writing, the software is on sale for $269). Sage 50 boasts a convenient customizable dashboard, so you can add shortcuts for functions that your business uses the most.

Experts also give an edge over QuickBooks Pro to Sage’s customer service, which includes one-click chat and unlimited phone support.

However, new small business owners without accounting or bookkeeping experience may not find Sage 50 quite as easy to use as QuickBooks Pro. Experts also say installation isn’t quite as seamless and the software is simply a bit harder to navigate for beginners.

Best Cloud-Based Accounting: Xero

Xero has a loyal following, and it has many of QuickBooks Online’s main strengths. Xero has an elegant, easy-to-use interface, and it integrates with your bank and a wide range of third-party apps that tackle everything from time tracking to payroll. Mobile apps are also a strong point, making it easy to crunch numbers on the go.

Reviewers sing the praises of Xero’s customer service, which seems to be a weak point for QuickBooks Online. Xero has also made it easy to import QuickBooks files for customers who are making the switch.

Xero mostly matches QuickBooks Online’s features, though experts say it falls behind on quotes and inventory support. Experts say Xero is best suited for service-based small businesses, and some complain it’s too reliant on third-party apps for features such as project tracking and inventory management.

Xero’s basic plan, Starter, runs $9 a month and includes limited billing, invoicing, and bank integration. The mid-level Standard plan is $30. It removes caps on billing and invoicing while adding payroll for five employees. For $70 a month, the Premium plan throws in payroll for 10 employees and increased tax functionality.

Runners-up: QuickBooks Online and FreshBooks

QuickBooks Online

QuickBooks Online offers a formidable blend of value and power for a variety of small businesses. Though it isn’t as fully featured as its traditional software counterpart, QuickBooks Pro, users still benefit from parent company Intuit’s dominance in the industry.

For example, QuickBooks Online integrates with a staggering number of apps, including customer relations and inventory management tools. Accounting professionals will find the interface familiar (this might not be the case with other cloud accounting platforms) and small businesses making the switch from traditional QuickBooks software will find importing data very easy. However, beware that a significant number of reviewers complain about poor customer service. Others say server downtime and technical glitches have prevented them from doing crucial work.

Features in the base level platform, called Simple Start, include invoicing, check printing, and bank integration. You’ll have to step up to more expensive versions for features including bill payment scheduling, purchase order management, and inventory tracking. Simple Start is $9.99 a month, while the mid-level Essentials version is $19.99 a month. QuickBooks Plus, the most fully featured of the three, is $29.99 a month. Payroll is an add-on for $39 a month.

FreshBooks

FreshBooks dominates a niche for smaller service-based business who mainly need easy-to-use invoicing and project management software. In fact, whether FreshBooks should call itself accounting software or invoicing software is up for grabs — some experts insist that too many key functions are missing for FreshBooks to be a true accounting platform, including double-entry bookkeeping.

For users satisfied with FreshBooks’ capabilities, reviewers say there’s much to like: They rave about customer service, ease of use, and mobile tools. FreshBooks also integrates with many third-party apps as well as other accounting software, so some small businesses may take advantage of FreshBooks’ strengths while using another program to fill in the gaps.

FreshBooks’ base level platform, Seedling, is $19.95 a month. You can manage only 25 clients at this level. With Evergreen, $29.95 a month, you can add account access for one other staff member, manage unlimited clients and gain project management and team timesheet and expense reporting. The Mighty Oak platform, $39.95, allows account access for five additional staff members.

Best Free Accounting Software: Wave

As long as your business is truly small — we’re talking under 10 employees — cloud-based Wave could be a viable accounting solution. Features include invoicing, expense tracking, receipt scanning, and integration with bank accounts and online platforms such as PayPal.

Advertising keeps Wave free, but payroll and payment tools are premium services that do require a fee to use. Experts say the interface is intuitive and easy to use, even for beginners, and several reviewers say Wave is better than some of the cheaper paid cloud accounting options.

Unsurprisingly, there are some hiccups: Some users have reported glitches with bank information not syncing reliably, while others say customer service can be very slow to respond to problems. (Wave does offer premium customer service starting at $9 a month.)

Runners-up: NolaPro and GnuCash

NolaPro operates much like Wave: It’s a free, cloud-based platform, but there are some add-ons that cost money. Billing, payables, and customer tracking are among the free features. It supports bigger businesses and reviewers say the browser-based interface is easy to navigate for beginners.

NolaPro does feel dated, however, especially compared to Wave. Premium services include inventory and payroll management. Unlimited email customer support is a hefty $199 a year.

GnuCash could be a good pick for a more advanced small-business user who wants a powerful accounting platform without shelling out a dime. Wave and NolaPro are “freemium” (you use the core service for free, but pay for upgrades), but GnuCash is completely free because it’s open-source software — anyone can download and share it. Features include customer and vendor tracking, invoicing, bill payment, and budget management.

However, reviewers say GnuCash isn’t as intuitive as other options, so it’s best for users who already have some accounting knowledge. Also, there’s no live support — if you can’t find help using online tutorials and FAQs, you may be out of luck.

Traditional or Cloud-Based Accounting: Which is Best?

As I mentioned above, most innovation in small business accounting software has headed online. That doesn’t mean that traditional accounting software is dead yet — right now, it’s still the standard for the majority of small businesses. If you’re wondering whether your small business should make the leap to cloud-based accounting or stick with tried-and-true traditional software, here are some pros and cons to consider.

Traditional Software

Small businesses have relied on traditional accounting software such as QuickBooks for years. Longevity means a large number of expert users, support guides, and other documentation that can keep you up to speed. Experts agree that desktop programs are usually more feature-rich and powerful than cloud-based competitors, and you don’t need a fast Internet connection (or any Internet connection at all) for most features. Finally, this is a one-time expense. You pay for your software and can use it indefinitely without shelling out more cash (at least until you need to upgrade to a new program).

Of course, one major con of traditional accounting software is that access is limited to wherever you’ve installed it. This can also make it hard to use collaboratively — this is typically a one-user-at-a-time scenario for small businesses. You have to be extra careful to back up your data, which could be swallowed up in the black hole of a computer crash or malware attack. Finally, you’ll need to periodically check for software updates to keep things running smoothly and take advantage of new features.

Cloud-Based

One of the biggest advantages of cloud-based accounting is accessibility. As long as you can get online, you’ll be able to access your account. Because the software lives online, you won’t have to worry about updates and backing up your work — that’s all automatic. You’ll also be able to collaborate more easily with others, and can even work simultaneously if your platform allows multiple users. You can link up your account with your bank or other cloud-based applications such as PayPal, which can save you from some tedious data entry.

Still, since cloud-based accounting is relatively new, you may find there are fewer experts to guide you, and industry-specific platforms are rare. Depending on your needs, you may also find some advanced features are missing, such as customer relations management or purchase order control. Price can also be a big downside here: You’ll have to pay month after month for a cloud-based service. At roughly $20 a month (the price of a low- to mid-tier cloud accounting solution) it will take you about a year to equal what you might pay for basic traditional accounting software — however, you’ll still keep paying after that, and prices for premium cloud accounting run $30, $40, or even more a month.

What About Security?

Many small-business owners have been reluctant to put their financial data online because of security concerns. Certainly, no one wants their account numbers in the hands of hackers. However, most experts agree this concern is overblown, and shouldn’t dissuade you if you’re thinking of moving your accounting to the cloud. After all, your data is probably more at risk on your old desktop or laptop, whether that’s from a computer crash, a virus, a theft, or even something like a fire. In contrast, cloud accounting companies know their own businesses are at stake in the event of a major data breach, so they spend a lot of time and money keeping their security top-notch.

Bottom Line

If you need features or truly industry-specific support that you can’t find in cloud accounting, it may still be best for you to choose traditional accounting software. Otherwise, it probably makes the most sense to head online. As one expert notes, the reasons to stay with traditional software will lessen considerably after a few more years of innovation.

How to Shop for the Best Small Business Accounting Software

Once you’ve decided whether to stick to traditional software or move your data into the cloud, you’ll want to keep the following considerations in mind as you shop.

• Do you really need accounting software? If you’re a one-person operation with little inventory and just a handful of customers, an old-fashioned spreadsheet may serve you just fine.
• What are your must-have features? Take a hard look at your business’ specific needs to determine what matters most to you. Do you have a lot of inventory to manage? Invoices to tame? Do you need time tracking or project management? Do you need a better way to start keeping track of customers so you can keep their loyal business? Small-business accounting software can do all of these things, but never assume a certain feature is included before buying. Also, in the case of cloud-based platforms, make sure you know whether the feature you want is included in the base price or is a premium add-on.
• Ask around. Find out what software your competitors are using. Pick their brains if they’re game. What do they like? What’s limiting? If you have an accountant, you’ll want to ask for their advice, too. They may want you choose a program that’s compatible with what they use — it will make everyone’s lives a little easier, especially at tax time.
• Think about third-party integration. You’ll probably want to integrate your bank account with your software, so make sure that functionality is supported at both ends. If you rely on any other apps or programs — PayPal, Square, and Salesforce are just a few common examples — look for software that integrates with them, too.
• Can your software scale with you? There’s always a chance you’ll outgrow software that’s limited to a certain number of users or tracking a limited number of customers, or platforms that don’t include certain features that you may not need now, but possibly will later. At the very least, you should be able to export data easily if you decide to switch providers down the road.
• Try before you commit. Many cloud-based companies offer users a free trial these days, making it easy to try a couple or more providers before getting entrenched. If you’re going with traditional software, check for a money-back guarantee. Both QuickBooks Pro and Sage 50 give you 60 days to decide whether you like the product.

How I Chose the Best Accounting Software

To narrow down a pool of products to look for in my search for the best accounting software, I combed through sales lists (such as best-sellers on Amazon.com), articles, comparisons, and single-product reviews to identify the most popular options on the market today.

From that point, I made a list of criteria that would be easy to evaluate myself. Examples include price, included features, number of users allowed, and capacity to upgrade the software or add on features.

However, the more important criteria for this category, and those I weighed more heavily, were ease of use, customizability, and customer service. For evaluations of these more intangible considerations, I relied on expert reviews and comparisons as well as customer reviews. I paid special attention to detailed, head-to-head product comparisons, and discounted any analysis that seemed biased or thinly researched.

Starting Your Search

Accounting can be an intimidating chore for newer small business owners, and an exhausting one for more seasoned merchants. The best accounting software should make this important task a little less of a grind, if not the pleasure some companies claim.

However, remember that you can still get in trouble with even the easiest-to-use programs if you don’t bring at least some basic accounting knowledge to the table. There are plenty of online tutorials that can help you get your feet wet, boost your confidence, and increase your chance of successfully navigating your software. You’ll also be able to make a better pick for your needs from the get-go.

Getting Divorced? 8 Things You Must Know about Taxes

Emma Johnson for Forbes writes:   Getting divorced? You have a lot going on. In fact, when you divorce, nearly every vertical of your life changes — including your taxes.

If your marriage is ending, address these tax concerns now. Below are the nuts and bolts of divorce and tax law. But if you are currently negotiating your split, or have a open dialogue with your ex, sit down with a tax professional to explore arrangements that could reduce the tax burden for both of you.

Filing status. If you were still legally married on Dec. 31, 2014, you can still file jointly with your soon-to-be ex. If you divorced during 2014 and you have agreed with your ex to claim any children as dependents, or they lived with you for more than half the year, you can file as single head of household, which allows you a bigger tax break. 

Who claims the kids. If the kids lived with you more than half the year, you claim them. However, regardless of your custody arrangement, you and your ex can agree out of court who claims the children as dependents. If the higher-earner makes too much (if they qualify to pay the Alternative Minimum Tax), he or she can allow the other parent to claim the kids, at $3,950 per child for tax year 2014.  SNIP, the article continues @ Forbes, click here to continue reading....

How Much Will it Cost to Have a Tax Professional Prepare Your Tax Return this Year?

SavingToInvest.com writes: I have received variations on this question over the last few years and when I saw this article in the WSJ I had the answer to my question.  The national average fee for 2014 returns will be $273, according to a survey by the National Society of Accountants. This fee is based on filing for the basic and most common form 1040 plus Schedule A (for itemized deductions such as mortgage interest and charitable donations), plus a state return. This year’s average fee is 11% higher than two years ago, the last time the survey was conducted.

But the rates vary greatly by state and complexity of the return. As the graphic below shows rates also vary significantly by region with the north-east and pacific having the highest average rates for professional tax preparers. The mid-west has the lowest rates. This regional variation in rates is correlated to income levels and complexity in state tax rules. E.g. California and Pennsylvania have among the most complex state tax rules. 

A lot of people of course have more complicated tax returns than just a Form 1040 and the NSA provided a breakdown of the cost of filing additional tax components/forms. You can add these up to get an estimate of the average cost of filing your return and see how your tax professional compares.

$174 for Schedule C (business)
$115 for Schedule D (investment gains and losses)
$126 for Schedule E (rental income)
$158 for Schedule F (farm)
$634 for Form 1065 (partnership)
$817 for Form 1120 (corporation)
$778 for Form 1120S (S corporation)

Another tip from the survey: You could save over $100 if you are organized with your tax return documents, since the survey found that professional tax preparers charge an average fee of $114 for dealing with disorganized or incomplete records.

And finally, one of the biggest benefits of going with a tax professional is assistance during an IRS audit. But this costs money and the average hourly rate for a tax professional is $144 to help respond to the IRS audit.

If all this sounds expensive and you have a straightforward tax return then I recommend going with a leading tax software provider which can easily handle and guide you through a standard return at a much lower cost (and free in some cases).

A Guide to Tax Loss Harvesting & Robo Advisors

Roger Berger for Dough Roller writes: Tax loss harvesting is one of the few free lunches in the world of investing. With a little planning, you can reduce or even eliminate your capital gains in any given year. In some cases, you may also get a deduction from ordinary income of up to $3,000.

Tax Loss Harvesting, sometimes abbreviated TLH, has come into its own tanks to robo advisors. Services such as Betterment and Wealthfront have promoted their automated investment services with the help of TLH. They promise to increase your effective returns by harvesting losses on a daily basis. The promised benefits exceed the cost of their services, which I recently compared.

Today we’re going to talk about tax loss harvesting. We’ll cover how it works, its benefits, its limitations, and how you can use it to defer taxes. We’ll also look at the implications for those who use robo advisors that offer TLH services.

Capital Losses

The basic concept is simple. Let’s assume you invest $25,000 in an S&P 500 index fund.  Following a down market, you sell the investment a year later for $20,000.  The result is a loss of $5,000.

The loss can reduce your tax liability in one of three ways:

1. First, the loss can be used to offset any realized gains during the year. If you had sold a second investment for a $5,000 gain, the loss would offset the gain, eliminating any tax liability.
2. Second, after gains have been eliminated, any remaining capital losses can be applied to ordinary income up to a maximum annual deduction of $3,000.
3. Finally, if you still have capital losses after offsetting gains and $3,000 of ordinary income, the losses can be carried forward to future tax years.

Now to some complications.

Wash Sale Rule

There are times when we sell investments at a loss for reasons that have nothing to do with taxes.  Perhaps we need the cash and the investment just happens to be down. In other instances we’ve decided to change or investment plan.

With tax loss harvesting, the sale of losing investments is strategic.  We are selling specifically for the tax benefits.  Enter the wash sale rule.  SNIP - the article continues @ Dough Roller, click here to continue reading....

Bitcoin and Tax Season: Accounting for Capital Gains – and Losses

Clay Michael Gillespie for Inside Bitcoins writes:  It’s been nearly one year since the United States Internal Revenue Service (IRS) laid the framework for the tax treatment of cryptocurrency, categorizing bitcoin and all other “virtual currencies” as property.

“If a virtual currency is listed on an exchange and the exchange rate is established by market supply and demand, the fair market value of the virtual currency is determined by converting the virtual currency into U.S. dollars (or into another real currency which in turn can be converted into U.S. dollars) at the exchange rate, in a reasonable manner that is consistently applied,” said the IRS notice.

Some day traders make it their full-time job to watch trends and place quick bets. Along with that, are groups of day traders that utilize bots for automatic trades. Needless to say, record keeping can be quite a chore. According to Colin Mackie, creator of the tax tool BitcoinTaxes, formerly known as Bitcointax.info, anyone coming to tax season with little or no documentation is still responsible for reporting their transactions.

“The responsibility does, unfortunately, fall on the taxpayer to keep records,” Mackie told Inside Bitcoins. “If they were audited, this burden of proof is on them to show what they are claiming is valid and correct.”

Fortunately, most exchanges and wallets have been implementing tools for customers to receive the needed documentation. Still, users without any obtainable records should seek professional tax advice, says Mackie, and they are likely going to need to estimate their tax liability from the records they have on hand.

Capital gains and losses

As with any investment, bitcoin traders need to account for capital gains and losses. For example, if someone purchased one bitcoin at an exchange rate of $600, they would need to report when they sold that bitcoin, the market value at the time of the sale, as well as whether it was at for a gain or a loss.

“This year is going to be a complete reversal of what we saw from last, where those reported gains and capital gains taxes will be somewhat undone by the filing of losses generated in 2014,”

According Mackie, capital gains and losses are going to be a study in contrasts for tax year 2014 as compared to 2013, considering the price declined from near $1000 to almost $300 — with plenty of ups and downs in between.

“This year is going to be a complete reversal of what we saw from last, where those reported gains and capital gains taxes will be somewhat undone by the filing of losses generated in 2014,” Mackie told Inside Bitcoins. “Since wash sales don’t apply to Bitcoins, there was likely a large number of people selling off during December in order to create tax losses for their 2014 filing. Even those that didn’t may well be thinking about it right now whilst we watch the downward trend continue.”

His interest is in how the IRS will respond to the mass amount of capital losses following a year of such high capital gains. According to a recent IRS report to Congress, taxpayers this year are likely to receive the worst levels of taxpayer service since 2001, resulting in the closing of very few audit cases in the coming year. Mackie wonders if the IRS has more important things to worry about than losses, but still believes it could be an issue.

“2013 was probably a revenue windfall for the IRS with the unexpected extra capital gains taxes from the large increases over the year,” Mackie explained. “However, this year, some of those people might well be undoing a lot of those paid taxes with losses. Fortunately for the IRS, the income deduction is capped at $3,000 for investors, although they can be carried forward into 2015 and beyond. A warning, however, if you try and file as a ‘trader’ to avoid that cap is it will likely raise an audit flag.”

Tax tools to lend a helping hand

BitcoinTaxes has an alternative to the bookkeeping mess, for anyone from day-traders to businesses and regular users. People can go to their site and import their trades, income and spending transactions. By obtaining a comma-separated values file (CSV) from exchanges such as Bitfinex, Bitstamp, Kraken or Coinbase, users can input their bitcoin transactions and let the tool create their report. It even has options for the bitcoin core wallet and Blockchain.info.

Similar to the process that BitcoinTaxes uses, LibraTax handles tax accounting as well. It allows for importing transactions from Blockchain.info, Coinbase and CSV files and calculates capital gains and losses.

“Our primary objective is to have approachable, convenient software that simplifies the end-user experience associated with taxpaying — ultimately saving users precious time and money. We’ve accomplished that without a doubt,” said LibraTax CEO Jake Benson, in a product release statement last summer.

Questions on future taxation still linger

While the tax guidelines in place certainly set the groundwork for how the government will handle cryptocurrency, there’s a lot of questions that remain unanswered.

“This was really a minimum and there are still areas to be clarified,” Mackie said, rattling off a list of unanswered questions. “How is the income of mined coined determined if there is no direct USD market? Are consumers really expected to record every purchase they make with Bitcoin and report it as a sale of asset? Do alt-coin trades benefit from like-kind treatments?”

All of these questions have no answer for the 2014-2015 tax season. Assuming that the IRS is still concerned with taxing all cryptocurrencies, it’s expected that a revised guideline will emerge after the upcoming tax season. Any quick changes could lead to less tax revenue to the IRS, making it difficult to put anything into place until audits are challenged and new rules are constructed.

10 Ways to Tax Proof Your Portfolio

Charles Sizemore for finances.com & charlessizemore.com writes: We just started the new year, and it’s already time to start thinking about taxes. W2 forms will start arriving within the next few weeks…followed by 1099s, K1s, and 1098 mortgage interest forms. For the next four months, all things related to federal income taxes will hang around your neck like an albatross.

At this point, there’s not a lot you can do to lower your tax bill or boost your refund, other than perhaps topping up your IRA or HSA account. What’s done is done for tax year 2014. But it’s still early enough in 2015 to get your affairs in order so that this time next year you’ll have a smaller tax bill to look forward to.

Let’s take a look at some common-sense moves to make to tax proof your portfolio.

1. Dump high-turnover mutual funds. Mutual funds that constantly buy and sell stocks create taxable gains that get pass on to you, the investor.

Don’t worry, this is not a tirade against actively-managed funds. While low-cost index funds have outperformed most active managers in recent years, there is still room in your portfolio for an active manager that adds value.  Even better if that active manager’s fund tends to zig when the market zags. But my advice here would be to avoid “closet indexers,” or mutual funds whose performance very closely tracks that of the S&P 500 but with higher turnover. Or at the very least, hold those kinds of funds in a tax-deferred account like a 401k plan or IRA.

2. Here’s a no brainer: Max out your 401k plan or come as close as possible. Every dollar of savings in a 401k plan is a dollar not subject to taxes. So assuming you have enough cash on hand for emergencies, you should plow every free dollar of savings into the 401k. In 2015, you can contribute $18,000, not including employer matching, and $24,000 if you are aged 50 or over. If you’re in the 35% tax bracket, you’re looking at tax savings of $6,300 to $8,400.

Not everyone has the financial flexibility to forgo $18,000-$24,000 in paycheck income. But if you can make it work, it’s in your best interests to do so.

3. Along the same lines, consider an IRA or Roth IRA if you income allows it. The contribution limit for both in 2015 is $5,500 or $6,500 for those 50 and older. You will get no tax break for a contribution to a Roth IRA, but at least you won’t be paying taxes on any dividends, interest, or capital gains earned on your investments. Roth IRAs—unlike 401k plans and traditional IRAs—also have no required minimum distributions. So, after age 70 ½, you won’t be forced to take money out and generate taxable gains in the process. Roth IRAs give you a lower potential tax footprint down the road.

For individual taxpayers, your ability to contribute to a Roth IRA starts to get phased out at the $116,000 level. For married couples filing jointly it’s $183,000.

If you’re looking for an immediate tax break, the traditional IRA is the way to go. But if you are covered by a retirement plan at work—such as a 401k plan—your ability to deduct your contribution starts to get phased out at $61,000 for individuals and $98,000 for married couples filing jointly.

4. If your health insurance plan offers the ability to contribute to a Health Savings Account (“HSA”), go for it. In 2015, the contribution limits for single taxpayers and family plans are $3,350 and $6,650, respectively. And if you’re aged 50 or over, you can tack on another $1,000.

There is a lot of misunderstandings about HSAs. To start, unlike some similar health plan, there are no “use it or lose it” provisions. Excess funds above and beyond what you need for current out-of-pocket medical expenses can be kept as cash or often times invested in mutual funds. If you change jobs and your new insurance plan is not compatible with an HSA account, no worries. Your existing funds are safe. In a lot of ways, HSAs are not too different from IRAs, with the big exception that HSAs come with a debit card for use at the doctor’s office.

If you’ve already maxed out your 401k plan and any IRAs you might qualify more, you can use your HSA as an additional tax-deferred investment vehicle.

5. Take advantage of your company’s deferred compensation plan if they offer it. Under a deferred comp plan, your employer diverts part of your pay into a tax-deferred variable annuity. Unlike 401k plans, which are pretty ubiquitous these days, not all companies offer deferred comp plans. And even if they do, they only make sense if you’re already maxing out your 401k. If your salary is high enough to allow you to max out your 401k at today’s higher levels, a deferred comp plan is the next obvious step.  Deferred comp plans will vary from company to company, but typically your employer will divert a portion of your pay to a variable annuity, where the funds can be invested in underlying subaccounts. You’ll pay taxes when you pull your funds out, but they can grow and compound tax free for years or even decades.

6. If you want to help a child or grandchild save for college, an Educational Savings Account (“ESA”) or 529 plan are the most tax efficient options. As is the case with Roth IRAs, there is no tax break for contributions, at least at the federal level. But your dividends, interest and capital gains can compound tax free. If your child or grandchild uses the funds for qualified college expenses, the withdrawals are tax free.

ESAs have very modest contribution limits—$2,000 per account per year—though 529 plans allow for much larger contributions. There is really no practical limit on most 529 plans, though any contribution by a single taxpayer over $14,000 would be subject to gift taxes in 2015. Still, a married couple could contribute a combined $28,000 with no tax consequences.

7. Giving to charity is a noble endeavor. But it pays to be smart about how you do it. Selling stock to generate cash for a gift to charity is a horrendously inefficient tax move. Yes, you might get a tax break for the gift itself. But you’ll be paying taxes on the capital gains.

A better move is to gift the stock itself. As a tax exempt entity, the charity can sell the stock and pay no capital gains taxes.

Think of it like this: Every dollar you avoid in taxes by using a strategy like this is an additional dollar you have available to give to charity. I don’t know about you, but I’d rather give that dollar to a cause I care about than to a wasteful government.

8. Move your assets around so as to make your portfolio as tax efficient as possible. For example, index funds generate very little in taxable income. Dividends received are often qualified and thus taxed at a lower rate. And capital gains are very infrequent. These sorts of funds should be held in a taxable account. At the other end of the spectrum, bond interest is fully taxable at your marginal tax rate, and collectibles are taxed at a special 28% tax rate. Tax inefficient investments like these should be held in IRA or 401k accounts to the extent you can.

9. Don’t forget about capital losses from prior years. We all hate losing money, but if you do have an investment that goes bust on you, you might as well use the tax write off. With the S&P 500 near all-time highs and the last bear market a distant memory, you probably have fewer saved-up capital losses than you might have had a few years ago. But if you sold any oil and gas investments recently, you may have some fresh losses to put to work. You can only write off net $3,000 in capital losses per year. So, if you manage your portfolio in a tax efficient way, one bad loss might last you several years.

10. And finally, I’ll give you a little trading advice. Tax avoidance should never be your primary motive in timing an investment sale. I can’t tell you how many times I’ve seen someone hold on to a stock for an extra month or two in order to qualify for long-term capital gains…only to see those gains evaporate as the price cratered. It doesn’t matter if you are value investor, a momentum investor or anything in between: When your investment methodology tells you to sell, you need to sell. I’d prefer to pay higher taxes on larger gains than no taxes on no gains.

That said, you sometimes have to do selling for other reasons, such as rebalancing or generating cash for living expenses. In these cases, it might pay to watch the calendar. To the extent you can, try to hold on to your investments for at least a full calendar year in order to benefit from the lower capital gains rate, which is 15% or 20% depending on your tax bracket.

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog.

Savant’s Big Hedge Play: Buying a CPA Firm

Digital Kreations writes: Savant Capital Management didnt just buy an accounting firm — the $4 billion RIA also bought a hedge against future revenue risk, says CEO Brent Brodeski.

The deal to buy Green, Plagge Shaw, a St. Charles, Ill.-based, accounting, tax and payroll firm, was directly influenced by the increasing commoditization of  investment management, Brodeski says.

Its going to be very difficult to get away with charging 1% of assets under management within five years if people are used to paying 25 to 30 basis points for investment advice from robo advisors or Vanguard Direct, Brodeski says. Advisory firms will be facing significant fee pressure to attract and retain clients. Weve offered tax services for the past two years and clients love it. Now well have much deeper tax planning and estate planning and be able to offer a more robust value proposition which will also differentiate us from the competition.

The CPA firm, known as GPS, was bought for cash, notes and shareholder equity in a deal valued at a multiple of revenue, which is usually 1% or less, Brodeski says; the deal closed at the end of 2014 and was announced this week. The firm will be a fully owned subsidiary of Savant and eventually folded into the parent firm.

Financial planning clients will pay a separate fee for tax preparation. Meanwhile, the accounting groups 140 accounting clients, many of them physicians and dentists, will be encouraged to bring their wealth management business to Savant as well.

PHENOMENAL ACQUISITION STRATEGY

Its a phenomenal acquisition strategy, says Ryan Shanks, chief executive of Finetooth Consulting, a Longmeadow, Mass.-based firm specializing in providing transition, practice and succession planning advice to RIAs and IBDs. The valuation multiple for a CPA firm is less  than an RIAs. And an acquiring RIA can tap into  the accounting firms  clients for investment related work and significantly boost their revenue and get a very nice return on their investment.

The economic outlook for the advice industry also makes accounting firms attractive acquisition targets, says Dennis Dolego, research director for Optima Group, a consulting firm in Fairfield, Conn.

If people are gravitating to robo firms and Vanguard is the benchmark for investment management costs, then I can see where [RIAs] are concerned, Dolego says. They probably already work with accountants in some capacity, and for firms with clients who have between $500,000 and $3 million in assets, this strategy looks like the way to go.

COMPETITIVE STRATEGY

Brodeski, a member of the elite aRIA study group and considered one of  the industrys savviest executives, says he doesnt expect to compete against mom-and-pop CPAs or HR Block. Rather, he thinks that Savant and GPS eight accountants can compete for higher-end clients and charge less than large accounting firms.

What they dont want you to know is theyre not doing tax planning, he says. They do tax compliance. We can be far more proactive, add value and charge between a few hundred and a few thousand dollars, depending on the complexity of the work.

Whats more, adding more accountants to the firm will relieve Savants financial advisors from doing tax preparation work during tax season, Brodeski adds.

GPS principals Chris Plagge and Rene Shaw will become members of Savant. After working with Savant and doing an extensive review and due diligence, the two executives decided  that that this was the right fit at the right time, they said  in a prepared statement.