Xero pays $10M NZD for US online payroll company Monchilla / Xero acquisition of Monchilla accelerates payroll expansion / Learn About Monchilla

Tina Morrison for NZ News UK writes:  Xero, the cloud-based accounting firm, paid the equivalent of $10 million in cash and shares for US online payroll company Monchilla to help drive its expansion in the world's largest economy.

Xero paid US$4.1 million in cash and issued 238,490 shares valued at $20 apiece to acquire Seattle-based Monchilla from founders Jack Couch and Nanjuan Shi, who will continue with the firm, the Wellington-based company said in a statement. Half of the shares are restricted from trading for two years, the company said.

The software developer wants a million customers, and is targeting growth in the US market where it sees the potential to take market share of an estimated 29 million small to medium sized business owners. The company last year raised $180 million in new capital to fund its US growth plans and is eyeing a US listing after it reaches annual revenues of US$100 million, expected in this financial year, and has tapped former Microsoft chief financial officer Chris Liddell as chairman.

"Over the last year, with Australia and United Kingdom markets performing well, we have been focussing on delivering the best business software for the US market," said Xero chief executive Rod Drury. "The cloud accounting market is just beginning in the US and our proven speed of delivery and the ability to quickly integrate complementary technologies into our platform positions us strongly to take a share of this large market as it develops over the coming years.”

Integrating Monchilla with Xero provides improved business-to-government connectivity and the opportunity to deliver electronic filing and payments of payroll taxes, with calculation support, across the US in 2015,the company said.

Xero said it will support Monchilla's current customers and transition them to Xero's platform over time. Shares in Xero rose 0.9 percent to $16.65, and have shed 49 percent so far this year.

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Xero acquisition of Monchilla accelerates payroll expansion

 

Xero acquisition of Monchilla accelerates payroll expansion in the U.S.

Xero Limited (XRO) announces that it has acquired Seattle-based online payroll company, Monchilla Inc. The company’s payroll expertise and technology will enable Xero to rapidly accelerate the extension of its payroll offering across the U.S.

“We were really impressed by the Monchilla team and how they have approached filing and payment of payroll taxes in the U.S. Combining this capability with the work our own team are doing will allow us to develop a world-class payroll experience for the U.S. over the next 12 months,” says Xero CEO Rod Drury.

Integrating Monchilla with Xero provides improved business-to-government connectivity, and the opportunity to deliver electronic filing and payments of payroll taxes, with calculation support, across the U.S. in 2015.

“We’re thrilled to join the Xero team and work together to deliver a world-class, online payroll solution for small businesses in the U.S. market” says Monchilla co-founder and CEO, Jack Couch.

Xero purchased Monchilla from founders, Jack Couch and Nanjuan Shi, whose continued involvement will complement Xero’s U.S. product development teams and support Xero’s payroll strategy to drive further growth. The total purchase price for Monchilla is comprised of US$4,127,688 in cash together with 238,490 Xero Limited ordinary shares to be issued to the founders at closing (50% of which are subject to trading restrictions and other terms as set out in more detail in the Notice of Allotment (NZX) and Appendix 3B (ASX) filed today).

Monchilla, as an early start-up, has solved the complexity of electronic payroll state filing and was in the initial stages of launching and building a customer base. With the acquisition, Xero will continue to support Monchilla’s current customers and will transition them over time to the Xero platform.

Drury says “Over the last year, with Australia and United Kingdom markets performing well, we have been focussing on delivering the best business software for the U.S. market. The cloud accounting market is just beginning in the U.S. and our proven speed of delivery and the ability to quickly integrate complementary technologies into our platform positions us strongly to take a share of this large market as it develops over the coming years.”

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Oliver Furniss from the Xero blog writes:

The family is growing – Monchilla joins Xero

We have some exciting news to share: Xero has acquired Monchilla to accelerate the rollout of payroll in the US. Monchilla is an online payroll provider that focuses on small business in the US.

Although this was a big decision for us, it wasn’t a difficult one to make. Before deciding to extend an offer to Monchilla, we’ve spent a lot of time looking at how we can accelerate bringing online payroll to all states in the US. And I can say without a doubt, Monchilla will enable us to accelerate our goals in the US but also add experience in building our global platform with best of breed government connectivity.

Integrating Monchilla’s advanced technology with Payroll in Xero will offer Xero’s small business customers the ability to calculate and electronically file and pay payroll taxes across the US. But that’s not the only reason we’re excited about adding them to the Xero family. Our companies actually have a lot in common and are aligned on making the lives of small business owners better and making payroll as stress-free as possible.

“It was an obvious choice for us to join Xero to bring our experience in the US to Xero. No other company is building a beautifully designed and full featured global integrated payroll and accounting system. This is something small businesses around the world, but particularly in the US are begging for.” said Jack Couch, co-founder of Monchilla. “We’re excited to be joining Xero and for what the future holds for small business.”

“We’re working to improve the financial lives of small businesses by bringing them the latest tools.” says  Rod Drury, Xero CEO. “This acquisition will further support our customers and accelerate growth in the US.”

The Monchilla team will be joining Xero with Jack and Nanjuan, the Monchilla co-founders, taking up leadership positions within the payroll team. Existing Monchilla customers will be fully supported as we roll out payroll to more states in Xero. We’ll transition Monchilla customers to Xero over time.

US Payroll in Xero

We launched US Payroll in Xero to make it easier for small businesses to manage their payroll, file taxes, and pay their employees while reducing the hassles and costs associated with having separate payroll and accounting software solutions. Early in 2014 we made the decisions to pause the rollout to more states while we built a solid foundation on which to grow and scale our platform and improve the overall experience.

Monchilla is a natural complement to our technology and we’re all excited by the opportunity this brings for us to accelerate towards our vision of supporting payroll in all states with full electronic services. The acquisition of Monchilla comes on the heels of our recent releases of Federal e-file, e-pay and with W-2 forms and filing being released next week. It’s part of our ongoing commitment to deliver beautiful seamless payroll and accounting to the US.

By providing a more complete online payroll solution, even more small businesses will have the chance to experience the joy of online payroll and accounting working as one.
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To Learn More about Monchilla, Click this Link!

IRS Commissioner Predicts Miserable 2015 Tax Filing Season

Ashlea Ebeling for Forbes writes:Internal Revenue Service Commissioner John Koskinen warned that close to half the people trying to reach the IRS by phone might not get through during the upcoming 2015 tax filing season. “Phone service could plummet to 53%,” he told an audience of tax practitioners at the AICPA National Tax Conference in Washington, D.C. today. That would be down from an already unacceptable 72% during the 2014 filing season. The average hold time projection: 34 minutes! What’s to blame? Budget woes. “All we can do is try to maximize our services as well as we can; as well as we can is still going to be miserable. You really do get what you pay for,” he said.

Koskinen’s remarks followed National Taxpayer Advocate Nina Olson who was even gloomier:“The filing season is going to be the worst filing season since I’ve been the National Taxpayer Advocate {in 2001}; I’d love to be proved wrong, but I think it will rival the 1985 filing season when returns disappeared.”

There are five key factors at play – complicating the upcoming filing season (that’s when you file your 2014 tax return). The IRS agency budget is the number one challenge, Koskinen said. The House has voted to cut the IRS budget for 2015 by $341 million, and the Senate has proposed to increase it by $240 million—that would still be 7% below 2010 funding levels.

In the meantime, Congress keeps passing laws that the IRS has to implement, namely the Affordable Care Act (“ACA”) and the Foreign Account Tax Compliance Act (“FACTA”). For example, Koskinen said the IRS requested $430 million in 2014 from Congress to implement the ACA but got zero, forcing it to take money out of enforcement and taxpayer services budgets.

This will be the first filing season with two major provisions from the Affordable Care Act –the premium tax credit and the individual shared responsibility payment–on Form 1040. National Taxpayer Advocate Olson said she’s very concerned about the IRS receiving accurate information from the health exchanges. It won’t be the IRS’s fault, but taxpayers will likely put the blame on the IRS. Koskinen touted the web pages that the IRS has created to help explain the ACA tax provisions.

Olson expects that implementation of FACTA, which affects taxpayers with accounts overseas, will also cause trouble this filing season. A new withholding requirement will mean there will be an issue with taxpayers trying to get refunds back in a timely manner. “If they are overseas, who are they going to call? There is not toll free number,” Olson said.

Then there are the tax extenders, 50-plus laws whose fate is uncertain. Congress has vowed to vote on the future of these laws in the upcoming lame duck session. But Koskinen warns that if the uncertainty continues into December, it could delay the start of the filing season and delay tax refunds. [snip].  The article continues @ Forbes, click here to continue reading....

Tax Tips: Bankruptcy and taxes

Barry Dolowich for the Monterey Herald writes: Question: Unfortunately, I just filed for personal Chapter 7 bankruptcy. I have not filed income tax returns for the last three years because I knew I owed and could not afford to pay. Can I claim my tax debts as liabilities in my filing and avoid paying the taxes using bankruptcy protection?

Answer: Debts are divided into two categories: dischargeable and nondischargeable. Dischargeable debts are those that the debtor is no longer personally liable to pay after the bankruptcy proceedings are concluded. Nondischargeable debts are those that are not canceled because of the bankruptcy proceedings. The debtor remains personally liable for their payment.

As a general rule, there is no discharge for you as an individual debtor at the termination of a bankruptcy case for most taxes, or for taxes for which no return, a late return filed within two years of the filing of the bankruptcy petition, or a fraudulent return was filed. However, claims against you for other taxes predating the bankruptcy petition by more than three years may be discharged. Payroll taxes are fiduciary taxes and are nondischargeable.

Simply, if the income tax debt meets all five of the following rules, then the income tax debt is dischargeable in Chapter 7 and Chapter 13 bankruptcy petitions:

• The due date for filing a tax return is at least three years ago.

• The tax return was filed at least two years ago.

• The tax assessment is at least 240 days old.

• The tax return was not fraudulent.

• The taxpayer is not guilty of tax evasion.

The fact that you may qualify for Chapter 7 bankruptcy protection indicates that you may be a prime candidate to file an "Offer in Compromise" with the IRS to negotiate a palatable deal for the open (not canceled) years along with the unpaid payroll taxes.

If a debt is canceled or forgiven, other than as a gift or bequest, the debtor generally must include the canceled amount in gross income for tax purposes. A debt includes any indebtedness for which the debtor is liable or which attaches to property the debtor holds.

There are several exceptions and exclusions from the inclusion of canceled debt in income. The exceptions include:

1. The cancellation of a student loan for a student required to work for certain employers.

2. The cancellation of debt (accrued mortgage interest) that would have been deductible if paid.

3. The reduction of a debt by the seller of property (foreclosure) if the debt arose from the purchase of the property (nonrecourse debt).

4. The reduction or discharge of debt on a principal residence pursuant to the Mortgage Debt Relief Act of 2007.

The following are "exclusions." You do not include a canceled debt in gross income if any of the following situations apply:

1. The cancellation takes place in a bankruptcy case under the U.S. Bankruptcy Code.

2. The cancellation takes place when you are insolvent (your liabilities exceed the fair market value of your assets) and the amount excluded is not more than the amount by which you are insolvent.

3. The canceled debt is qualified farm debt (debt incurred in operating a farm).

4. The canceled debt is qualified real property business indebtedness (certain debt connected with business real property).

Generally, the debts, if discharged in bankruptcy, will have no income tax consequence to you. As per the above, you will need to file all your back tax returns, and then wait two years to file bankruptcy in order to have the taxes discharged.

How to Work Around Intricate 'Kiddie Tax' Rules

Julien Block for AccountingWeb.com writes: The Tax Reform Act of 1986 introduced the complicated "kiddie tax" rules. They drastically restricted the ability of higher-bracket parents and grandparents to shift investment income from themselves to their lower-bracket children and grandchildren by gifts of cash, stocks, mutual fund shares, real estate, money and other inc[sniome-generating assets. It's possible to work around them, but you have to know all the ins and outs.

How did Congress clamp down on income-shifting maneuvers? Our lawmakers targeted children under the age of 14 who received investment income. The 1986 act imposed theparent's top rate on such income. But children who had attained the age of 14 were unscathed by that year's version of tax reform. The legislation retained the old rules for those children. It said they should continue to be taxed at the children's rate.

When did the 1986 measure apply parental rates to children's income? When a child underthe age of 14 received "unearned" income. This meant investment income from interest, dividends, capital gains from sales of assets or distributions from mutual funds, rents, and other kinds of unearned income.

The act authorized some relief from kiddie taxes. They kicked in only when a child's investment income exceeded a specified threshold that subsequently was adjusted annually, as explained below. No relief, though, for earnings that were generated by money or other assets received by the child from persons other than parents—grandparents or aunts, for example.

The rules introduced by the 1986 act have been amended several times. But previous versions and the one on the books for 2014 are consistent. They generally tax the excess income at the parent's top rate, which can be much higher than the child's. For instance, they tax interest income at the rates for salaries, pensions, profits from self-employed ventures, and other kinds of ordinary income.

For 2014, those rates go as high as 39.6 percent, versus a top rate of 20 percent for dividends from stocks and stock funds and for long-term capital gains from sales of individual stocks, shares of mutual funds and most other assets. Note that 2014's maximum rate is more than 39.6 percent for individuals subject to: the Medicare surtaxes on investment income or earnings; or phase-outs for dependency exemptions and certain itemized deductions because their adjusted gross incomes surpass specified amounts.[snip]  The article continues @ AccountingWeb, click here to continue reading...

4 Reasons Intuit Is Killing Old Quickbooks In Favor of Quickbooks Online

Ramon Ray for SmallBizTechnology.com writes

: Most small businesses use Quickbooks – you installed the software on your computer 10 or 20 years ago and it’s humming along.

But today, face it – Quickbooks is bloated, outdated and sometimes a pain to work with. Sure, your accountant loves it – but you don’t.

Intuit executives know this and have been on a steady campaign to make Quickbooks Online the default financial operating system for small businesses.

At a recent conference an Intuit executive said:

“Our mission is to make accounting seem invisible for small businesses by leveraging the power of the cloud so that the time-intensive work of keeping the books organized happens automatically every time an invoice is sent, a customer makes a payment, or an employee gets paid,” said Dan Wernikoff, senior vice president and general manager of Intuit’s Small Business Group. 

1. The old Quickbooks, installed on your computer is no longer relevant a cloud based world.
2. You can’t access it via your cell phone – it’s NOT mobile
3. It’s not intuitive and easy to use
4. Files can get corrupted and it’s not easy to move from one computer to another.

These are joust four reasons why Intuit’s battle cry is to move small businesses, it’s current customers and new customers to Quickbooks online – a much better, more visual, easier to use cash flow management service for small businesses.

What’s the competition saying?

Xero‘s going directly after those businesses ready to leave the old Quickbooks. Sage is offering a slew of new solutions for small businesses – including Sage One. Shopkeep and other iPad based point of sale vendors have built in solutions for their customers – or can connect their systems to 3rd party accounting solutions. GoDaddy’s financial service (bought from Outright) and Frshbooks offer a nice set of services for solo entrepreneurs and very small businesses.

While I’m not sure if I’ll ever think of accounting or cash flow as being “fun” – I know that cloud and mobile based solutions are getting easier and easier and easier!

Ramon Ray, Marketing & Technology Evangelist, Smallbiztechnology.com & Infusionsoft. Full bio at http://www.ramonray.com . Check him out on Google Plus, Twitter or Facebook

Receipt Bank attends QuickBooks Connect

Ellan McAnn Tomlin for ReceiptBank.com writes: The Receipt Bank team were delighted to have the opportunity to be a part of QuickBooks Connect last week in California. Myself, Alexis & Adam headed to San Jose for this, the first QuickBooks event of its kind. With over 4,000 delegates, this was an enormous opportunity for small business owners, accountants & bookkeepers, developers, & add-ons alike, to network & learn from other industry professionals.

For Receipt Bank, this event also came at a particularly exciting time for our US expansion, coinciding with the appointment of Damien Greathead as Vice President – Business Development, North America.

And what an event it was! As well as catching thought-provoking talks from world leaders in entrepreneurship, such as Arianna Huffington & Marc Andreessen, our Receipt Bank representatives had the pleasure of catching up with new & existing partners from around the world.

But it wasn’t all work & no play. There were some familiar faces in attendance from the accounting software eco-system, from Practice Ignition, to Spotlight, to Fathom, to Vend, & it was a joy to catch up. To top it all off, Wednesday night ended with a bang. There was a fantastic (and somewhat interactive) party with Grammy Award winners Train, complete with on-stage singalongs & karaoke input from the crowd!

The overarching theme of the conference was innovation & technology; how to carve out a successful business in today’s climate, & how to stay ahead of the curve & constantly adapt to remain relevant. Receipt Bank, as a rapidly expanding small business, was humbled to be a part of this important conversation.

Now is an exciting time for accountants & bookkeepers globally. The shift to new ways of working is in full swing. Access to real time information through compliance-cost-reducing tools such as Receipt Bank is giving advisors the opportunity to focus on high value work, & expand their client base not just locally, but globally.

The endorsement of a hugely successful global accounting software company such as QuickBooks in this technological shift, through innovative events like QuickBooks Connect, is further indication of the necessity for accountants & bookkeepers to ‘keep running’, as speaker Kevin Clearly aptly pointed out.

We look forward to doing it all again next year…

2015 Tax Brackets & Standard Deductions Increased

G.E. Miller for 20somethingfinance.com writes: The IRS just released it’s 2015 tax brackets and standard deduction amounts, and there will be a number of inflation adjustments over the 2014 tax brackets and standard deductions.

As I noted in my open enrollment post, this would be a good time to estimate what your modified adjusted gross income might be next year and adjust your tax allowances so that you don’t end up getting penalized for owing too much in taxes or getting too large of a refund (which is basically lending your money to the government, interest-free).

Before getting to the tax bracket changes, it’s important to know that the highlighted rates represent the income tax rate you owe for the portion of your taxable income that falls into that bracket. As an example with the below rates, if you are married filing jointly and your combined taxable income is $78,000. Your tax tax rate on your first $18,450 of taxable income is 10%, while taxable income between $18,450 and $74,900 is taxed at 15%, and your income from $74,900 to $78,000 is taxed at 25%.

Many incorrectly assume that if your total income peaks at the 35% tax bracket, for example, all of your income is taxed at that rate – not so. The United States federal income tax system is a “progressive” system and the result is your actual tax rate is less than the tax rate in the top bracket you are in. With that in mind, here are the 2015 tax brackets.

2015 Tax Bracket Rates

2015 Tax Brackets for Singles:

10% – $0-$9,225 (up from $9,075)
15% – $9,225-$37,450 (up from $9,075-$36,900)
25% – $37,450-$90,750 (up from $36,900-$89,350)
28% – $90,750-$189,300 (up from $89,350-$186,350)
33% – $189,300-$411,500 (up from $186,350-$405,100)
35% – $411,500-$413,200 (up from $405,100-$406,750)
39.6% – $413,200+ (up from $406,750)

2015 Tax Brackets for Married Filing Jointly:

10% – $0-$18,450 (up from $0-$18,150)
15% – $18,450-$74,900 (up from $18,150-$73,800)
25% – $74,900-$151,200 (up from $73,800-$148,850)
28% – $151,200-$230,450 (up from $148,850-$226,850)
33% – $230,450-$411,500 (up from $226,850-$405,100)
35% – $411,500-$464,850 (up from $405,100-$457,600)
39.6% – $464,850+ (up from $457,600)

2015 Tax Brackets for Married Filing Separately:

10% – $0-$9,075 (up from $0-$9,075)
15% – $9,225-$37,450 (up from $9,075-$36,900)
25% – $37,450-$75,600 (up from $36,900-$74,425)
28% – $75,600-$115,225 (up from $74,425-$113,425)
33% – $115,225-$205,750 (up from $113,425-$202,550)
35% – $205,750-$232,425 (up from $202,550-$228,800)
39.6% – $232,425+ (up from $228,800+)

2015 Tax Brackets for Head Of Household:

10% – $0-$13,150 (up from $0-$12,950)
15% – $13,150-$50,200 (up from $12,950-$49,400)
25% – $50,200-$129,600 (up from $49,400-$127,550)
28% – $129,600-$209,850 (up from $127,550-$206,600)
33% – $209,850-$411,500 (up from $206,600-$405,100)
35% – $411,500-$439,000 (up from $405,100-$432,200)
39.6% – $439,000+ (up from $432,200+)

2015 Standard Deductions

Standard tax deductions will lower your taxable income by the following, if you don’t decide to itemize taxes. The 2015 standard deductions have also increased due to inflation adjustments:

• $6,300 for single filers (up from $6,200)
• $6,300 for married, filing separately (up from $6,200)
• $12,600 for married filing jointly (up from $12,400)
• $9,250 for head of household (up from $9,100)
• $1,050 for dependents (up from $1,000)

CoinReport : Bitwage Launches Bitcoin Payroll for Individual ( individualized Bitcoin payroll services )

Ben Isgur for CoinReport.com writes: Bitwage sent out a press release today announcing the launch of a beta for a new feature: individualized Bitcoin payroll services. The new feature and service they’re adding is called zero-click Bitcoin payrolls – it’s an automated way to instantly, near-frictionlessly, and effortlessly convert a set percentage of your direct deposit paycheck into Bitcoin. This service has a lot of potential for helping to add consistent purchasing power to the Bitcoin price, by making it possible for anyone – regardless of their employer or nationality – to receive any percentage of their paycheck in Bitcoin instead of in their usual currency. How it works is simple: by running overtop of your direct deposit.

Rather than receiving your regular direct deposit of $1000, you could choose to split your pay by whatever percentages you’d like. The percentage you allocate to Bitwage.co’s new system will get converted directly into Bitcoin and sent to you (free of charge, at least currently, although some of their other services carry a small fee!). The best part? It doesn’t matter who your employer is – it could be an anti-Bitcoin lobbying group – they have no say in the matter. This is the most important aspect of Bitwage’s new program – it’s employer-agnostic. By allowing any member of the workforce to get paid in Bitcoin, Bitwage is showing just how disruptive Bitcoin has the potential to be. It’s busy giving choice back to individuals.

In the process of creating this service, Bitwage also solved a very commonly discussed problem regarding Bitcoin: taxes. Their new service promises, in partnership with Gocheto Financials, to provide easy capital gains reporting for employees or employers in just a few clicks. This is a big one: the current reporting rules for Bitcoin are needlessly complicated, but once properly understood and programmatically implemented, are nowhere near as big of an issue. Bitwage promises to have done so, and given my previous interactions with them, I’m inclined to be quite excited.

What other benefits does this service provide? Two groups in particular stand to benefit from it, once they are shown how to use it: the un-(under-)banked and individuals in countries whose national currency suffers from a very high inflation rate.

The former group – the unbanked – can use Bitcoin as a way to escape the predatory check cashing, payday loan, and prepaid debit card industry. Predatory is far from an understatement in this case – these individuals who are among society’s most vulnerable are frequently extorted to an extreme degree in order to merely receive access to the money they have worked hard to earn. Bitwage.co can solve this by having their direct deposit go directly to Bitwage, freeing them from needing to own a bank account, and sending them Bitcoin instead. The Bitcoin they receive can then either be sold in-person via a service like LocalBitcoins.com (which provides them cash-in-hand at a usually higher rate than offered on exchanges) or by using a service like Gyft.com to purchase gift cards at what amounts to a 3% discount for whatever goods they need to buy. It’s not a perfect solution – not yet, anyway – but it can certainly help. But I hear the criticism coming from readers already: Bitcoin is all well and good if you have money to spare, but it’s very risky. How can you be recommending a highly risky investment product to people who live paycheck-to-paycheck, and struggle to get by?

Two reasons. First, by using services like Gyft and LocalBitcoins, they can avoid the exchange rate risk for the most part. As soon as they get paid, they can convert the Bitcoin back into USD or gift cards, and not suffer the volatility of BTC. Second, even if they don’t do so, they’re still better off – usually. What’s worse, high volatility, or guaranteed loss? Let’s walk through some math.

A person works at minimum wage, 40 hours a week, and gets paid every two weeks. Each pay period, they receive about $500. A check cashing service will charge between $15 and $25 – at least, on average – to cash each check. Let’s call it $40 for the two checks. A prepaid debit card service? Those average fees of $30 a month in total. So imagining they need to use both – a relatively likely possibility, given that not everything in life can be paid for in cash – they might be looking at fees of $70. Out of their $1000, that’s 7%. So it’s already fairly certain that a well-used combination of Gyft and LocalBitcoins could serve their needs better. But even if they hold the money in Bitcoin for a period of time, the price would have to decline 4-5% before it became worse than the check-cashing service alone. It’s likely that some of the under-banked will still need to use reloadable debit cards with Bitcoin, but some of them may be able to avoid it, either through the clever use of services, a better version of Xapo that may come along, or simply companies accepting Bitcoin. But past that, any consideration of the downside of volatility must also consider the upside – Bitcoin simply has to not lose more than 5% of its value to be acceptable to those injured by the predatory financial services industry, but it can have a very significant impact on the lives of the poor when rather than losing 5% of its value it gains 5%.

The latter group – those whose home currencies have high inflation rates – can benefit in much the same way. Their check cashing and prepaid debit card fees are likely even worse, and converting their cashed check into dollars or another, more stable currency is just one more fee tacked on. Using Bitcoin instead frees them from several of these issues – making it easier for them to succeed with a deck stacked against them.

Ultimately, that’s what Bitcoin – and Bitwage.co – are doing: reshuffling a deck that was stacked against the poor centuries ago. The truth is, the poor aren’t that much worse at playing the game – it just looked that way.

So, will you be taking a portion of your pay home in Bitcoin? I take 100% that way.

You can read the full press release here.

How to Ease Your Client’s Tax Burden

John Nersesian  for Financial-Planning.com writes: The 2012 American Taxpayer Relief Act (ATRA) and the Affordable Care Act (ACA) instituted higher rates and eliminated deductions and exemptions at high income levels, which caused many Americans to experience “sticker shock” at their increased tax obligations.

As we know, ATRA raised the top ordinary income tax bracket and increased the maximum rate on capital gains and qualified dividends. It revived and permanently reinstated the phase-out of both itemized deductions (Pease Limitation) and Personal Exemptions Phase-out (PEP). In addition to changes from ATRA, the ACA introduced the 0.9% Medicare Hospital Insurance (HI) and the 3.8% Surtax on Net Investment Income (NII). A summary of the implications of these taxes for a married couple, filing jointly, is below.

ATRA and ACA add complexity, but with smart planning, you can ease that burden for your clients. The following is a brief discussion in four different tax planning areas: 1) income management, 2) recognition of capital gains and qualified dividends, 3) charitable contributions and 4) family gifting.

INCOME MANAGEMENT

Determine if income deferral or deductions/credit acceleration will help reduce your client’s tax bill or be beneficial in the future. When considering whether to accelerate or defer items of income, it is important to be confident that the strategy will maximize after-tax income for the taxpayer, not only for this year, but the forthcoming years as well. To increase deferred income, consider some of these strategies:

• Defer billings and collections
• Receive bonuses earned for 2014 in 2015
• Sell appreciated assets in 2015
• Declare any special dividends in 2015
• Delay Roth conversions to 2015
• Defer debt forgiveness income if possible
• Execute like-kind exchange transactions
• Take corporate liquidation distributions in 2015

To increase deductions and credit acceleration, consider these ideas:

• Bunch itemized deductions into 2014/Standard deduction into 2015
• Accelerate bill payments into 2014
• Pay last state estimated tax installment in 2014 instead of 2015
• Minimize the effect of AGI limitations on deductions/credits
• Maximize net investment interest deductions
• Match passive activity income and losses
• Accelerate charitable giving via CRT or donor advised fund
• Re-characterize your Roth IRA conversion

RECOGNITION OF CAPITAL GAINS AND QUALIFIED DIVIDENDS

Loss harvesting helps minimize investment gains. Losses can be used, dollar for dollar, to offset realized gains and up to $3,000 of earned income. Any unused losses can be carried forward indefinitely. When a loss is carried forward it retains its character of “long-term” or “short-term,” meaning losses carried forward to the next tax year are used first to reduce long or short-term gains. One limit on loss harvesting is the wash-sale rule, which prohibits the purchase of a specific security within 30 days prior to or after the date at which the same security is sold for a loss.

Qualifying dividends must meet stock holding period requirements. To qualify for reduced qualified dividends rates, individuals must hold the stock for at least 61 consecutive days during a 121-day period that begins 60 days before the ex-dividend date. For example, if the ex-dividend is April 15th, the 121 day period begins on February 16th and ends on June 14th. This holding period applies to common stock and to stock mutual funds.

Certain dividends may not be eligible for reduced rates. Dividends used to calculate investment income, against which an investment interest deduction is taken, are not eligible for reduced rates. The taxpayer must decide whether to forego the reduced dividend rate to offset investment interest expense or keep the reduced dividend rate and carry forward any excess investment interest expense.

CHARITABLE CONTRIBUTIONS

Know your limits. In general, there are limitations on the amount of the charitable contributions that are deductible based on the type of property being donated and whether the receiving charitable organization is public or private. The general limitations for public charities are: 50% of AGI for cash gifts, 50% of AGI for gifts of ordinary income property, and 30% of AGI for capital gain property. For private charities the general limitations are: 30% of AGI for cash gifts, 30% of AGI for ordinary income property, and 20% of AGI for gifts of capital gain property.

Leverage the value of the gift with appreciated stock. When it comes to making charitable gifts, the method many individuals think about first is writing a check to the charity. However, those owning appreciated securities may find gifting these assets to charity a better strategy, especially when compared to selling securities on which capital gains tax must be paid to generate cash for the gift. The gift (and the charitable deduction) is valued at the fair market price of the stock on the date of the gift, which may be significantly more than the cost basis.

Utilize a donor-advised fund. Increased rates coupled with appreciated securities and large unrealized capital gains make a DAF an attractive vehicle. Capital gains taxes are not paid on donated appreciated securities and appreciation within a donor-advised fund is not taxable. Additionally, contributions are tax deductible in the year made, allowing for control over timing of deductions and this can create a family wealth education opportunity.

FAMILY GIFTING

Utilize the annual exclusion. In 2014, an individual can make gifts up to $14,000 per recipient per year, free from gift taxes. A married couple can give gifts of $28,000 per recipient per year, without exceeding the annual exclusion. To put this into context, a married couple with three children can reduce their taxable estate by $84,000.

Take advantage frontloading a 529 Plan. A 529 plan is a tax-advantaged savings plan designed to encourage saving for future college costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code. The donor has the option to ‘frontload’ contributions without paying a federal gift tax. A maximum of $14,000 per year can be contributed, or the donor can elect to make five years of contributions ($70,000) in one year.

Pay certain expenses directly. Unlimited payments for qualified medical and educational purposes can be made on behalf of another person without generating gift tax, enabling investors to accelerate their gifting strategies. These gifts must be made directly to the respective medical or educational institution to qualify for exclusion.

John Nersesian is managing director of wealth management services at Nuveen Investments in Chicago and the Chairman of board of directors at IMCA.

US Savers Advised To Plan Now To Gain Tax Credit

Mike Godfrey for Tax-News.com writes: The US Internal Revenue Service (IRS) has reminded low- and moderate-income workers that they can take steps now to save for retirement and earn a special tax credit in 2014 and in future years.

The IRS noted that the saver's credit helps offset part of the first USD2,000 workers voluntarily contribute to individual retirement arrangements (IRAs), 401(k) plans, or similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver's credit is available in addition to any other tax savings that may apply.

The agency pointed out that eligible workers still have time to make qualifying retirement contributions and obtain the saver's credit on their 2014 tax return. The credit can increase a taxpayer's refund or reduce the tax owed.

Workers have until April 15, 2015, to set up a new individual retirement arrangement or add money to an existing IRA for 2014, but elective deferrals (contributions) must be made by the end of the year to a 401(k) plan or similar workplace program.

The saver's credit can be claimed by married couples filing jointly with incomes up to USD60,000 in 2014, or USD61,000 in 2015; heads of household with incomes up to USD45,000 in 2014, or USD45,750 in 2015; and married individuals filing separately and singles with incomes up to USD30,000 in 2014 or USD30,500 in 2015.

However, a taxpayer's actual credit amount is based on his or her filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs.

In tax year 2012, the most recent year for which complete figures are available, saver's credits totaling USD1.2bn were claimed on more than 6.9 million individual income tax returns. Saver's credits claimed on these returns averaged USD215 for joint filers, USD165 for heads of household, and USD127 for single filers.

The saver's credit also supplements other tax benefits available to people who set money aside for retirement. For example, most workers may deduct their contributions to a traditional IRA. Normally, contributions to 401(k) and similar workplace plans are not taxed until withdrawn.