2015 Tax Changes for Retirement Plans

Pessin Katz Law P.A.  for JS Supra writes: On October 23, 2014 the Internal Revenue Service announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2015.  Many of the pension plan limitations are changing due to an increase in the cost of living index, but some will remain unchanged. Some of the more significant changes include the following:

• The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.
• The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000.
• The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500.  The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
• The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014.  For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000.  For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000.  For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
• The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014.  For singles and heads of household, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000.  For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
• The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $61,000 for married couples filing jointly, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000; and $30,500 for married individuals filing separately and for singles, up from $30,000.

Effective January 1, 2015, the limitation on the annual benefit under a defined benefit plan remains unchanged at $210,000.

The limitation on contributions for defined contribution plans is increased in 2015 from $52,000 to $53,000.

The limitation on the exclusion for elective deferrals is increased from $17,500 to $18,000.

The annual compensation limit taken into account for plan contributions is increased from $260,000 to $265,000.

The dollar limitation concerning the definition of key employee in a top-heavy plan remains unchanged at $170,000.

The limitation used in the definition of highly compensated employee is increased from $115,000 to $120,000.

The compensation amount regarding simplified employee pensions (SEPs) is increased from $550 to $600.

The limitation regarding SIMPLE retirement accounts is increased from $12,000 to $12,500.

The limitation on deferrals concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $17,500 to $18,000.

The applicable dollar amount for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $96,000 to $98,000.  The applicable dollar amount for all other taxpayers (other than married taxpayers filing separate returns) is increased from $60,000 to $61,000.  The applicable dollar amount for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.  The applicable dollar amount for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $181,000 to $183,000.

The adjusted gross income limitation for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $181,000 to $183,000.  The adjusted gross income limitation for all other taxpayers (other than married taxpayers filing separate returns) is increased from $114,000 to $116,000.  The applicable dollar amount for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.

Five Tax-Shaving Strategies for the Next 60 Days

Richard E Brand for Profitable Investing writes: It's that time of year again. The clock is ticking down on 2014, and on December 31 at midnight, your last opportunity to save on this year's tax bill will expire. Don't be discouraged, though. There's still plenty of time to act. Here are five easy strategies you can put to work right now, with the potential to shave off hundreds or even thousands of dollars in taxes before the band strikes up Auld Lang Syne on New Year's Eve.

Tax Shaver #1: Top Off Your Retirement Contributions

This may be the simplest piece of tax advice you'll ever hear, and the most often repeated. Yet, according to a recent survey by Capital One Sharebuilder, nearly a quarter of Americans in the workforce aren't setting aside anything for retirement.

More's the pity, because Uncle Sam dangles some pretty enticing carrots for people who want to build up a retirement fund. If your employer sponsors a 401(k) plan, you can kick in as much as $17,500 this year if you're under 50, and $23,000 if you're over 50. Since 401(k) contributions chip away at your adjustable gross income, a worker over 50 in the top federal tax bracket can save more than $9,000 a year by shoveling the maximum amount into a 401(k).

Many people don't realize it, but you can set up an IRA and contribute to it even if you already have a 401(k) at work. For 2014, you can funnel up to $5,500 into either a Traditional or a Roth IRA ($6,500 if you're age 50 or older). With a Traditional IRA, your contributions are tax deductible, but your withdrawals are taxed as ordinary income. With a Roth, there's no tax deduction on the way in, but no taxes on the way out.

The government does impose income limits for contributing to a deductible Traditional IRA or a Roth. For traditional IRAs, the deduction phases out once your "modified adjusted gross income" climbs above $60,000 ($96,000 for couples). For Roths, the phaseout begins at $114,000 ($181,000 for couples). You can check all the fine print in IRS Publication 590.

A final incentive: Most leading discount brokers, such as Fidelity, Schwab and TD Ameritrade, charge no setup or annual maintenance fee for IRAs. What are you waiting for?

Tax Shaver #2: Offset Your Capital Gains with Losses

I don't know about you, but I've tried to avoid harvesting a lot of capital gains here in 2014. It doesn't make much sense to ring up a taxable gain when you think market prices are probably headed higher. Still, many of us will face a big tax tab when Kinder Morgan Inc. (NYSE: KMI) absorbs Kinder Morgan Energy Partners(NYSE: KMP), a member of our Incredible Dividend Machine. The transaction, considered a sale for tax purposes, is expected to close before year-end.

To minimize the bite when you've got a large gain, book some losses. The tax code even lets you use up to $3,000 in net capital losses per year (losses in excess of gains) to shrink your ordinary income.

Where will find losses to offset your gains? Some may be obvious, such as when you see a minus sign on your monthly brokerage statement. Others may take a little sleuthing. I noticed, for example, that I own a municipal bond fund that has generated a solid positive return for me over the past 10 years (the account is worth much more than my original investment). Yet the fund shows a capital loss for tax purposes. I plan to swap to a similar fund, run by the same manager, before December 31 to capture the tax loss.

Often, a tax swap gives you a chance to upgrade the quality of your investment. By switching to a stronger company in the same industry, or a better-managed fund in the same sector, you can put yourself on a path to improved returns. For a couple of suggested swaps in the bond area, see the box on the next page.

Tax Shaver #3: Make a Charitable Gift of Stock

If you've got a heart for charity, you can make your dollars go further by giving appreciated assets—such as stock that has risen in value—rather than cash. As long as you've held the asset at least a year and a day, you can take a deduction for the current market value, rather than your original purchase price. (Note, however: Master limited partnerships don't qualify for this generous treatment.)

What if you're not sure just yet which charities you want to help? Open an account with the charitable gift funds sponsored by Fidelity (www.fidelitycharitable.org) or Schwab (www.schwabcharitable.org). Both of these funds will let you start with cash or securities valued at $5,000 or more. You get an immediate tax deduction when you establish the account, and you can dribble out the gifts at your leisure. Meanwhile, your money will be invested in a mutual fund (or mix of funds) of your choice.

Tax Shaver #4: Make Tax-Free Gifts to Loved Ones

Enid and I have made liberal use of this technique in recent years. Under current law, each of us can give up to $14,000 a year to each beneficiary without eating into our lifetime exemption from estate or gift tax.

If you've got a child or grandchild you wish to help on the road to higher education, consider opening a 529 college savings account. The same gift-tax savings I mentioned above apply here. In addition, for really big givers, our dear Uncle allows you to bunch together up to five years' worth of gift-tax exemptions.

Thus, a husband and wife could channel as much as $140,000 into each of their children's 529 accounts, without affecting the lifetime exemption. Any earnings accumulate tax-free inside the account, and there's no tax on withdrawals for legitimate educational expenses (tuition, fees, room and board, books, etc.).

Many states offer good 529 programs. One of my favorites is the TD Ameritrade plan, sponsored by the state of Nebraska. (You don't need to be a Nebraska resident to qualify.) TDA accepts accounts of any size. No annual maintenance fee.

Best of all, the TDA plan gives you wide investment flexibility. You can choose among four age-based investment options; three "static" options that invest in a fixed blend of mutual funds; and 17 individual stock and bond funds. Something in this pot is sure to please even the fussiest investor's taste!

Tax Shaver #5: Boost Your Business Writeoffs

If you own a business, you can pull any number of strings to reduce your taxes. For instance, you can contribute up to $6,550 to a Health Savings Account for your family ($7,550 if you're 55 or older). That sum comes "off the top" of your adjusted gross income, so it's one of the most efficient tax breaks available.

Thinking about purchasing new office equipment? Do it this year, and with so-called Section 179 expensing you can write off the entire cost up to $25,000. The Code also lets you deduct up to $5,000 in organizational expenses for a start-up business as long as the business begins operations this year. Because this deduction phases out once your expenses top $50,000, you'll want to plan your spending so that you don't exceed the limit this year.

In short, this is the season to nail down tax benefits you may have overlooked. By early December, the rush will be on. Get in touch with your tax advisor now and find out which of the breaks I've mentioned here will deliver best results for you.

Richard E. Band is the newsletter world's #1 authority on investing for low-risk growth. His flagship Total Return Portfolio has quintupled in value since its inception in 1990, while taking far less risk than the popular stock market index funds.  Click here to visit the website of Richard E. Brand.

3 Serious Mistakes to Avoid When Offering Tax Advice to Clients

David Duval for TaxAudit.com for CPA Practice Advisor writes: When advising clients about important financial decisions, tax advisors have a tremendous responsibility to think about all aspects of transaction in the context of a client’s specific situation. A lack of thoroughness can lead to poor advice, which can be extremely costly to our clients, and even put them into financial jeopardy for years. What follows are three serious mistakes to avoid when advising your clients, and what the right advice should be for each situation.

Mistake #1 – Failure to Fully Explain and Follow Through on Roth IRA Conversions

When determining whether a client should convert their traditional IRA accounts to Roth IRAs, consider the following:

[snip].  The article continues @ CPA Practice Advisor, click here to continue reading....

2014 Year-End Tax Planning For Individuals TRADITIONAL TAX PLANNING

Lawson, Rescinio, Schibell and Associates writes: Traditional year-end tax planning techniques remain important for 2014. As always, tax planning requires a combination of multi-layered strategies, taking into account a variety of possible scenarios and outcomes. These income deferral/exclusion and deduction/credit acceleration techniques may be used to reduce your income tax liability:

Income Deferral/Exclusion:

• Receive bonuses earned for 2014 in 2015
• Minimize retirement distributions
• Postpone the redemption of U.S. Savings Bonds
• Delay Roth conversions to 2015
• Offset tax losses against current gains (loss harvesting)
• Sell appreciated assets in 2015
• Make tax-free gifts of $14,000 per recipient ($28,000 for married joint filers)
• Execute like-kind exchange transactions
• Complete installment sales to defer gain
• Defer billings and collections
• Declare any special dividends in 2015
• Defer corporate liquidation distributions until 2015

Deductions/Credit Acceleration:

• 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
• Make an IRA contribution before April 15, 2015 of up to $5,000 per individual (with catch-up contributions of an additional $1,500 available to individuals age 50 and older)
• Maximize net investment interest deductions
• Match passive activity income and losses

In addition to traditional year-end tax strategies, the following issues may also impact your year-end tax planning:

Income Tax

The current tax structure includes income tax rates of 10, 15, 25, 28, 33, 35, and 39.6 percent. For 2014, the threshold amounts for these rates are:

Additional HI (Medicare) Tax

Higher income individuals are subject to an additional 0.9 percent HI (Medicare) tax on wages received in connection with employment in excess of $200,000 ($250,000 for married couples filing jointly and $125,000 for married couples filing separately). To avoid an underpayment penalty related to this tax, you can instruct your employer to withhold an additional amount of federal income tax from your wages before year end.

Itemized Deduction Phaseout (Pease Limitation)

The Pease limitation on itemized deductions (named for the member of Congress who originally sponsored the legislation) reduces itemized deductions for higher-income taxpayers. For 2014, itemized deductions are reduced when AGI exceeds the following threshold amounts:

• $305,050 for married taxpayers filing jointly and surviving spouses;
• $279,650 for heads of households;
• $254,200 for single filers (other than surviving spouses and heads of households); and
• $152,525 for married taxpayers filing separately.

Personal Exemptions

The personal exemption phaseout requires higher-income taxpayers to reduce the amount of their personal exemptions when their AGI exceeds certain threshold levels. The same threshold limits used in the Pease limitation above apply to the personal exemption phaseout.

If the personal exemption phaseout kicks in, the total amount of exemptions that may be claimed is reduced by two percent for each $2,500 ($1,250 for married couples filing separately) or portion thereof, by which adjusted gross income (AGI) exceeds the applicable threshold.

Kiddie Tax

The net unearned income of certain children under the age of 24 can be taxed at the parent’s marginal tax rate. This tax at the parent’s rate is commonly referred to as the “kiddie tax.” If the child’s unearned income is less than an inflation-adjusted ceiling amount, the parent may be able to include the income on the parent’s return, rather than filing a return for the child.

For tax years beginning in 2014, the inflation-adjusted amount used to reduce the net unearned income reported on a child’s return that is subject to the kiddie tax is $1,000. The child’s income can be reported on the parent’s return if the child’s gross income is more than $1,000 and less than $10,000.

TAXES ON INVESTMENTS

Generally, taxable investment accounts are accounts other than retirement accounts, insurance contracts and annuities. When managing investments held in taxable accounts, the measure of success is the net return after taxes, rather than the gross return. The following taxes must be taken into account in order to achieve that objective:

Capital Gains Tax

Capital gains are taxed at a rate of zero percent for taxpayers in the 10 and 15 percent brackets; the 15 percent rate for taxpayers is applicable to those in the 25, 28, 33, and 35 percent brackets; and higher-income taxpayers that are subject to the 39.6 percent income tax rate pay 20 percent.

Tax on Dividend Income

Qualified dividends received from domestic corporations and qualified foreign corporations are taxed at the same rates that apply to capital gains. Certain dividends do not qualify for the reduced rates, including dividends paid by credit unions, mutual insurance companies, and farmers’ cooperatives.

Net Investment Income Tax (NIIT)

The net investment income tax (NIIT) is a Medicare surtax of 3.8 percent imposed on the lesser of net investment income (NII) or modified adjusted gross income (MAGI) above a specified threshold. Distributions from IRAs, pensions, 401(k) plans, tax-sheltered annuities, and eligible Code Sec. 457 plans are excluded from NII and from the NIIT.

NII includes the following investment income reduced by certain investment-related expenses, such as investment interest expense, investment brokerage fees, royalty-related expenses, and state and local taxes allocable to items included in net investment income:

• Gross income from interest, dividends, annuities, royalties, and rents, provided this income is not derived in the ordinary course of an active trade or business;
• Gross income from a trade or business that is a passive activity;
• Gross income from a trade or business of trading in financial instruments or commodities; and
• Gain from the disposition of property, other than property held in an active trade or business.

Individuals are subject to the 3.8 percent NIIT if MAGI exceeds the following thresholds (not subject to inflation adjustment):

• $250,000 for married taxpayers filing jointly or a qualifying widower with a dependent child;
• $125,000 for married taxpayers filing separately; and
• $200,000 for single and head of household taxpayers.

NIIT is not imposed on income derived from a trade or business, nor from the sale of property used in a trade or business. Therefore, you should carefully differentiate income derived from an active business from passive investment income in order to shield the business income from the NIIT.

ALTERNATIVE MINIMUM TAX

You should not ignore the possibility of being subject to the AMT, as doing so may negate certain year-end tax strategies. For example, if income and deductions are manipulated to reduce regular tax liability, AMT for 2014 may increase because of differences in the income and deductions allowed for AMT purposes.

The alternative minimum tax (AMT) exemption amounts are annually adjusted for inflation. For 2014, the AMT exemption amounts are:

• $82,100 for married taxpayers filing jointly and surviving spouses;
• $52,800 for unmarried taxpayers and heads of household, other than surviving spouses; and
• $41,050 for married taxpayers filing separately.

Exemptions for the AMT are phased out as taxpayers reach high levels of alternative minimum taxable income (AMTI). Generally, the exemption amounts are phased out by an amount equal to 25 percent of the amount by which an individual’s AMTI exceeds a threshold level. For 2014, the threshold levels for calculating the exemption phaseout are:

• $156,500 for married taxpayers filing jointly and surviving spouses (complete phaseout at $484,900);
• $117,300 for unmarried taxpayers and heads of household, other than surviving spouses (complete phaseout at $328,500); and
• $78,250 for married taxpayers filing separately (complete phaseout at $242,450).

The AMT rates are 26 percent, and 28 percent on the excess of alternative minimum taxable income (AMTI) over the applicable exemption amount. For tax years beginning in 2014, the taxable excess income above which the 28 percent tax rate applies is $182,500 for married taxpayers filing jointly and unmarried individuals other than surviving spouses; and $91,250 for married taxpayers filing separately.

EXPIRED TAX BENEFITS

The following temporary individual tax benefits, known as “tax extenders,” expired on December 31, 2013. These benefits are likely to be extended, probably for two years, as in the past. However, if Congress fails to act, some of the benefits that will not be available in 2014 are:

• Above-the-line deduction of up to $250 for certain expenses of elementary and secondary school teachers, including books, supplies, computers, and software
• Above-the-line deduction for qualified tuition and related expenses
• Credit for residential energy property
• Credit for two- or three-wheeled plug-in electric vehicles
• Exclusion from gross income for discharges of indebtedness on qualified principal residences
• Exclusion from gross income of qualified charitable distributions from individual retirement plans for individuals aged 70½ or older
• Itemized deduction for mortgage insurance premiums as qualified residence interest
• Itemized deduction for State and local general sales taxes in lieu of State and local income taxes
• Special 100 percent exclusion of gain on sale of qualified small business stock acquired after 09-27-2010 and before 01-01-2014
• Special 60 percent exclusion for gain on sale (attributable to periods through 12/31/2018) of qualified small business stock of an empowerment zone business (empowerment zone designations expire 12/31/13)
• Special rules for contributions of capital gain real property made for conservation purposes

In addition, the alternative motor vehicle credit for qualified fuel cell motor vehicles is set to expire at year-end, so there may be little time to take advantage of this energy-driven benefit.

TAX BENEFITS FOR FAMILIES

You should review your family’s situation annually to make sure that you take advantage of any applicable child- or education-driven benefits, such as:

• Adoption credit
• Exclusion for adoption assistance programs
• Child and dependent care (CDC) credit
• Child tax credit (CTC) and the refundable (additional) CTC
• Earned income credit (EIC)
• American Opportunity Tax Credit (AOTC)
• Coverdell Education Savings Accounts (ESAs)
• Exclusion for educational assistance programs
• Scholarship programs
• Student loan interest deduction

SHARED RESPONSIBILITY PAYMENT

Beginning in 2014, some of the most far-reaching provisions of the health care reform legislation became effective:

• the requirement to carry “minimum essential health coverage” for yourself and your dependents (known as the “individual mandate”);
• the ability to obtain coverage through an insurance exchange; and
• for qualified individuals, a special tax credit to help offset the cost of insurance.

If you fail to comply with the individual mandate to carry minimum essential health coverage, you are required to pay a penalty, called a “shared responsibility payment,” for each month of noncompliance. The rules stipulate that a person has minimum essential coverage for a month if the person is enrolled under a plan providing such coverage for at least one day during any calendar month.

Some individuals are exempt from the individual mandate, including, but not limited to:

• individuals covered by Medicaid and Medicare;
• incarcerated individuals;
• individuals not lawfully present in the United States;
• health care sharing ministry members;
• members of an Indian tribe;
• members of a religion conscientiously opposed to accepting benefits;
• individuals whose minimum cost for the annual premiums is more than eight percent of their household income;
• individuals who are without coverage for fewer than 90 days (although only one period of 90 days is allowed in a year); and
• individuals with employer-provided health insurance that satisfies minimum essential coverage and affordability requirements.

The shared responsibility payment amount is either a percentage of the individual’s income or a flat dollar amount, whichever is greater. The amount owed is 1/12th of the annual payment for each month that a person or the person’s dependents are not covered and are not exempt. For 2014, the payment amount is the greater of:

• One percent of the person’s household income that is above the tax return threshold for their filing status; or
• A flat dollar amount, which is $95 per adult and $47.50 per child, limited to a maximum of $285.

If you qualified for the tax credit that helps to offset the cost of coverage, you may have taken an advance payment of the credit. If so, you must reconcile the amount you received up front with the actual credit computed when your 2014 tax return is prepared.

The rumor is Intuit is going to require those who file Partnership and Schedule D returns forms with their returns to upgrade from deluxe to primer. Is this true?

Over at the Intuit TurboTax Forum we came across the following:   The rumor is Intuit is going to require those who file Partnership and Schedule D returns forms with their returns to upgrade from deluxe to primer. Is this true?

Intuit Replies: VolvoGirl

• SuperUser
 
• 13 hours ago

Yes.  Starting in 2014 the Desktop program has changed and you may need to use a higher version.  They do not all have the same forms as before.  See
https://ttlc.intuit.com/questions/2567637-2014-turbotax-personal-cd-download-software-product-guide

See this FAQ for 2014 Online Product Lineup
https://ttlc.intuit.com/questions/1899289-turbotax-online-product-guide

Fathom announces QuickBooks Online Integration / Fathom is an easy to use management reporting and financial analysis tool, which helps you to assess business performance, monitor trends and identify improvement opportunities.

This past Monday Fathom announced its integration with Intuit’s QuickBooks Online (QBO). This integration provides more than 600,000 QBO users with access to beautiful performance reports and insightful business intelligence. Fathom is also now featured on Apps.com.

By using Fathom with QBO, gaining the insights you need to make better business decisions has never been easier. Fathom helps QBO users to assess business performance, monitor trends and identify improvement opportunities.

By integrating Fathom with QBO you get:

• Deeper insights — See exactly how well your business is performing using a suite of in-depth analysis tools and key financial indicators.
• Beautiful reports and dashboards — Whether presenting to a client, reporting to the bank, or updating your management team, you’ll always impress with Fathom’s stunning visuals and reports.
• On-the-fly benchmarks — Easily compare, rank, and benchmark your companies, clients, or franchisees.
• Consolidated reporting — Create consolidated reports for a group of companies - and do so with exceptional efficiency.
• Alert Monitoring — Use a single, centralised dashboard to monitor each of your companies or clients.

“We love creating beautiful and usable BI software that provides insight and understanding, and today we are excited to offer Fathom to the QuickBooks community” said Geoff Cook, co-founder of Fathom.

Using both QuickBooks Online and Fathom to better measure and track financial performance, SMBs can navigate a course towards better profit, cash flow and business value. In addition, consultants and QuickBooks ProAdvisors can use the dashboards in Fathom to provide virtual CFO services to their clients.

Got QuickBooks Online? Get insights with Fathom. Start today with a free 14-day trial.

The details

Find out more about Fathom for QuickBooks Online at www.fathomhq.com/quickbooks.

Pricing varies by region. Plans start from USD$39/month in USA, GBP£29/month in the UK, and AUD$49/month Australia and other regions. You can find out more about the Fathom pricing here.

Fathom Applications created Fathom (www.fathomhq.com), the financial reporting and business intelligence tool that killed the boring management accounting spreadsheet. Fathom helps advisers and small-business owners to make better business decisions, and integrates seamlessly with Xero, MYOB, and, now, QuickBooks Online.

Fathom HQ is located in Brisbane, Australia. Contact us by phone (+61 7 3333 2239), or email.

Xero acquires Seattle's Monchilla in $4.1 USD million deal / Startup Spotlight: Monchilla looks to take on Quickbooks

Leon Spencer for ZD Net writes: New Zealand-headquartered cloud accounting software provider Xero is expecting to boost its US online payroll presence with the acquisition of Seattle-based cloud accounting startup Monchilla.

The deal sees Xero cough up $4.13 million cash for the online payroll and cloud accounting software provider, along with 238,490 Xero Limited ordinary shares.

At the time of writing, Xero Limited's New Zealand Stock Exchange-listed ordinary shares were valued at NZ$17.10 each, or about $3,146,600 — bringing the total value of the deal to around $7.27 million.

The New Zealand company, which is dual-listed publicly in New Zealand and Australia, told investors that it had bought Monchilla from its founders, Jack Couch and Nanjuan Shi, and would continue to support the cloud startup's current customers.

However, Xero also said that Monchilla customers would eventually be transitioned from the US company's platform to the Xero platform, netting the New Zealand company a bevy of new US Xero users.

Couch and Shi will remain involved with the operation, and are expected to complement Xero's US product development teams and support its payroll strategy to further its growth in the market.

"We're thrilled to join the Xero team and work together to deliver a world-class, online payroll solution for small businesses in the US market," said Monchilla co-founder and CEO Jack Couch. [snip]  The article continues @ ZD Net, click here to continue reading....

We've previously posted this on ExactCPA about Monchilla

Monchilla offers new cloud-based accounting and payroll option / Startup Spotlight: Monchilla looks to take on Quickbooks with new accounting service / Wave Accounting vs PlanGuru Basic vs Monchilla

Posted on 9:08 AM by L.A. Smith

We keep a close on on the Quickbooks alternatives and are familiar with ContaAzul & Cheqbook and indeed have commented about them here.  Today someone suggested we look at "Monchilla" - and as we have never heard of "Monchilla"....we are!   Isaac M. O'Bannon for CPA Practice Advisorwrites: A new, completely cloud-based, accounting system is about to give small business owners an alternative to QuickBooks, and some experts think even public accountants will prefer it over other bookkeeping systems.

Monchilla.com announced its beta release at the 2012 Sleeter Accounting Solutions Conference. The Monchilla.com beta includes an entire suite of services including small business accounting, payroll, invoicing, billing, time tracking, electronic payments, and direct deposit for employees.

“We are thrilled to share Monchilla.com with the world.  We know this will help thousands of small businesses, bookkeepers and accountants manage their businesses better and with a lot less work” said Jack Couch, Monchilla.com’s CEO. “By taking advantage of new technology, Monchilla.com makes your life easier, but it also gives you a great dashboard that gives you insight into the health of your business.”

Monchilla.com downloads transactions from your bank and uses repeating transactions to provide future financial data while reducing time spent keying in transactions. Large businesses have separate departments to deal with payroll, financial accounting (historical records) and management accounting (forward looking accounting). The idea behind Monchilla is to bring all of these together into one package so that small businesses can get some of the benefits big businesses already enjoy.  

Monchilla.com also provides something it calls “turn-by-turn business navigation.” This allows users to do “what-if” analysis to see how your business will be affected if you hire a new employee or take on a small business loan. The “write-up” feature is also unusual for a cloud solution, as it allows fast, keyboard only data entry so accountants can quickly update the books before filing taxes.

Randy Johnston, a widely-respected thought leader for the profession and one of the most popular speakers at ASC2012, said “One of the interesting things about Monchilla.com is that it has payroll integrated at such a low cost. I think this and its management accounting provide a solid revenue opportunity to small business consultants and accountants.”  

For businesses that would like to keep QuickBooks they can still take advantage of the impressive dashboard by simply uploading their QuickBooks backup file. The Monchilla dashboard has all of the major financial statements (income, cashflow, balance sheet, etc) including a very interesting cash balance report that will alert you to a cash shortfall. Because it is completely cloud based, it is easy to share these reports with clients or other support staff.

Monchilla’s employee time tracking features can also be used with QuickBooks - good news for small businesses that have been forced to pay for a third party time tracking solution after Intuit discontinued it’s time tracking solution in December.
Monchilla.com is a self funded startup of 11 that already boasts over 1000 small businesses that signed up through it’s inviation only beta.

During Beta testing, Monchilla.com is available free of charge by going to www.monchilla.com and clicking on the “sign-up for a free account” button. When Monchilla releases the final version early next year it will charge users $5 per employee per month for payroll. Businesses that don’t use the payroll service will not be charged. According to the Monchilla.com website, the average company of five will save $800 pear year when switching from QuickBooks.

Startup Spotlight: Monchilla looks to take on Quickbooks with new accounting service

Mikey Tom for GeekWire.com writes: If you’ve ever taken an accounting course or have run your own business, you know that accounting is a huge pain.  Sadly, it’s a necessary evil for every business.  But Monchilla is looking to make it a a little more tolerable.

The self-funded team of eleven has spent the past 2.5 years building an accounting platform from scratch, including features such as payroll, time tracking, invoicing, electronic payments and bank integration. It’s biggest rival is Intuit’s Quickbooks, not to mention some up-and-coming startups such as Indinero, Xero and WaveAccounting.

In fact, the company formed because the founders struggled with using Quickbooks in their own software startup and weren’t too impressed when they gave other services a try. ”We had used Quickbooks, but it made us hate our lives because it is so hard to use,” said Monchilla’s Nanjuan Shi.

We caught up Monchilla’s Shi and Jack Couch for this installment of Startup Spotlight:

Explain what you do so our parents can understand it : “We make accounting easy so business owners can make smarter decisions.”

Inspiration hit us when: “We were four guys writing code and we had a full time bookkeeper just to manage payroll and invoice customers and we still didn’t have a clue how much money we would have in three months.  We looked at everything and nothing worked for us.  Then we talked to all of our friends that owned business and found out some of them already made business killing mistakes because they couldn’t see clearly.  That’s when we knew we could do something that would make a big difference.”

VC, Angel or Bootstrap: “Self funded.  This isn’t our first start-up and some of those earlier successes have given us the capital to build Monchilla. We are open to outside funding, we just haven’t needed it yet.”

Our ‘secret sauce’ is: “We completely rethought double-entry bookkeeping to make it more intuitive without sacrificing any benefits.  Its all ham and no burger (we promise we are better at accounting than jokes).”

The smartest move we’ve made so far: “ We tackled the hardest problems first.  Instead of worrying about powder blue versus periwinkle we worked hard for 2+ years on building an engine that could handle everything from payroll taxes to depreciation and now that is paying off.

The biggest mistake we’ve made so far: “When we first started we thought we could just build additional features on top of QuickBooks and we spent several months and a lot of money trying to make that work.  Eventually we realized it was like trying to build a house on sand because every version update would break us and the database wasn’t normalized.  We really didn’t want to have to start from scratch, but we should have figured that out sooner.”

Would you rather have Gates, Jobs, Zuckerberg or Bezos in your corner:“Bezos because he has a very similar outlook on business and the good that it can accomplish, which is what drives us to push through the difficult stuff.  Helping every small business owner be more successful is the most significant thing we can do to make the world a better place and I think Bezos would agree.  I’m also not sure Bill doesn’t hold a grudge for the time he tripped on my console cable and my laptop slid across my desk and hit him on the way down – I know his security guys are still keeping an eye on me.”

Our world domination strategy starts when: “When small business owners have more fun running their businesses because of Monchilla.  We have already seen the kind of gratitude and word of mouth recommendations that comes from that and we can’t wait
to see that happen on a larger scale.”

Rivals should fear us because: “We are ready to spend the next 20 years attacking this problem with everything we have.  And we have the only online service that actually does everything a business owner would expect, including payroll and time tracking, built in.”

We are truly unique because: “We love accounting.  Many accountants don’t even love accounting, but for us there is something amazing about the moment when everything is clear and people are empowered to make smart moves.  As business owners we have sailed the same stormy seas as our customers so we have a good grasp of what is helpful and what isn’t.”

The biggest hurdle we’ve overcome is: “Finding the right team of fanatics.  Software people that are truly passionate about accounting are few and far between.

What’s the one piece of advice you’d give to other entrepreneurs just starting out: “ First, care about other people.  Then find a problem that is so irritating to you that you are willing to sacrifice to solve it for them.  When we started we could see all the time, money and life wasted because of bad tools and we couldn’t help but do something.  We knew we could fix it and we felt like it would have been wrong to ignore it.  Find something like that and you will enjoy getting out of bed and busting your butt.

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Wave Accounting vs PlanGuru Basic vs   Monchilla