Posts Tagged ‘Tax’

Tax officials suggest many wait until April 3 to file

March 25th, 2014

Minnesotans entitled to share in $49 million of new individual income tax breaks should wait a week and a half to file tax returns, state revenue officials say.

“It will allow them to get their refunds quicker,” Assistant Revenue Commissioner Terri Steenblock said Monday.

If taxpayers who qualify for one of 10 new breaks file returns now, Revenue Commissioner Myron Frans added, it could be months before they get their refunds. If they wait to file until April 3, tax officials expect software and tax preparers to be ready to handle law changes state legislators and Gov. Mark Dayton approved Friday.

April 15 remains the income tax deadline.

On Friday, Frans urged people to wait until Monday to file returns if they might qualify for new tax breaks. On Monday, he and Steenblock said that waiting for everything to be ready is in the best interest of taxpayers and their department.

Steenblock said that even if taxpayers wait until April 3 to file, “we cannot guarantee every software vendor will be able to update their software.”

After April 3, she said, taxpayers filing returns electronically via software that does not include updates from the new law will be notified quickly that their returns were rejected. Returns will not be rejected if filed before April 3, but any refunds due taxpayers could be delayed for months.

Frans said he hopes to have a better idea Thursday about how long his department will need to finish the work reviewing tax returns for missed breaks.

In many cases, Revenue Department employees hope to make changes themselves and increase refunds for those who qualify, without taxpayers taking any further action.

In other cases, the department will notify taxpayers they must file an amended return to take advantage of the law.

“This is a very complex task we are undertaking,” Steenblock said.

Steenblock said the Revenue Department is working to change tax forms and instructions and briefing software venders on the changes. Next, she said, internal department processes will be updated, eventually followed by the department reviewing returns already filed to see if taxpayers may qualify for the new tax cuts.

The tax bill lawmakers passed and Dayton signed on Friday set aside $1 million for the department to undertake the job.

While tax cuts overall amounted to $443 million, just $49 million of them affect individual income tax returns being filed now.

“About 1 in 10 taxpayers probably will be able to benefit,” Frans said, meaning that up to 275,000 people will split the $49 million in new tax breaks.

Taxpayers who do not qualify for the new tax breaks can go ahead and file returns now.

Frans said that he expects Minnesotans to have a lot of questions, so his department is increasing the number of operators at its call center: (651) 296-3781 and (800) 652-9094.

Minnesotans will benefit from two tax changes when filing returns next year, Frans said.

A working family credit for people earning up to $40,000 a year was expanded a bit this year, but Frans said that it expands much more next year.

Also, he said, about half of Minnesota taxpayers will benefit next year from a change in how the state treats married couples. The change comes when the state conforms to federal law that gives married couples a tax break.


Free Online Tax Software Offers for Nonprofits

February 7th, 2014

Small nonprofit organizations who need to file a Form 990-N can do so for free using Aplos Software, the company has announced. Prior year returns can be filed for $19.99 each.

Form 990-N is a short electronic return for organizations whose annual receipts are normally $50,000 or less. Aplos e-File takes the tax-exempt organization through the form step-by-step, provides relevant tips and guidance, and ensures that all needed information is included. When complete, Aplos e-File submits the return electronically to the IRS and provides a copy of the return for their records.

“Our mission is to make managing a nonprofit simple and that starts with required IRS returns to maintain their tax-exempt status,“ said Tim Goetz, co-founder of Aplos Software. “The majority of the nation’s nonprofits are small, so we made Form 990-N free and simple. As a result, these organizations can confidently submit their return and continue with their mission.

The deadline for submitting Form 990-N is the 15th of the fifth month after the close of the organization’s tax year. Nonprofits that start a new fiscal year on January 1 are now eligible to submit their 2013 return and their Form 990 filing deadline is May 15, 2014. If an organization fails to file the form three years in a row, the organization will automatically lose its tax-exempt status with the IRS. There are no penalties if a Form 990-N is submitted late.


Avalara bets on its sales-tax software — and orange

December 27th, 2013

Scott McFarlane has always found the idea of accounting and sales tax boring, but that didn’t stop him from starting a business to “make sales tax less taxing” for other businesses.

That business is Bainbridge Island-based Avalara.

With thousands of sales-tax rules, more than 10,000 tax jurisdictions in the U.S. and the rise of the Internet, figuring out how to tax something in the moment a customer hits the ‘buy now’ button, is complicated. That is, McFarlane says, unless that company has an automated sales-tax solution included in its software — a solution like AvaTax.

“Orange juice is taxed 300 different ways in the United States,” said McFarlane, the CEO of Avalara. “So you have to know how to calculate the tax on it, and not just one time but in every local jurisdiction around the country.”

What started as a 12-person company on Bainbridge Island in 2004 has grown into a multimillion-dollar company with more than 500 employees in eight offices around the world.

In the last year alone, Avalara has added almost 200 employees. And from 2008-2012, the company’s revenue grew 411 percent.

McFarlane attributes the company’s success to its quirkiness. With bright-orange walls in the office — even orange toilet paper at one point — a tiki bar in the break room, beer Fridays, and employees walking around in anything from an orange jacket to orange shoes, jeans or glasses, the company has branded itself and nothing about it says “typical office,” McFarlane said.

“I knew I could create a culture around being a business that was slightly quirky in a world that had a perception of being ‘stay between the lines’ kind of people,” he said. “And the sales-tax concept is not rocket science, but it is something that nobody had ever been able to do before.”

He and his friends did it.

The idea for automating sales-tax calculation came from McFarlane’s business partner Rory Rawlings. He, McFarlane and Jared Vogt all live on Bainbridge Island, and the three joined forces in 2003.

Vogt and McFarlane had worked together previously, founding Seattle-based MetaInfo, a software-development firm, before selling it to Check Point Software Technologies in 1998. They teamed up with Rawlings because they knew he had come up with a great idea they could build into something big, McFarlane said.

AvaTax aggregates more than 100,000 sales-tax rules, 10,000 U.S. tax jurisdictions, 150 million addresses and countless other sales-tax regulations around the world — everything from the tax rate of a pair of high heels in Atlanta to a weeklong retail tax holiday in Texas — and attaches them to a company’s sales-management system.

Then, the appropriate tax is calculated and applied automatically to a transaction in less than a second — which McFarlane calls the “magic moment.”

Taxware and Vertex, both tax-calculating solutions, were on the market when Avalara was created, but both were limited to larger companies, McFarlane said. Small and midlevel businesses, on the other hand, had to calculate sales tax in accounting systems manually, creating the demand for AvaTax, and the opportunity for the company to grow, he said.

Microsoft Dynamics GP was one of the first companies Avalara wanted to collaborate with. The business-accounting software has always worked with independent software vendors, like Avalara, that complement its own program.

“We know we can never write all the software that customers need,” said Jeff Edwards, director of partner strategy at Microsoft. “Entrepreneurs are critical to what we do.”

Avalara’s AvaTax has been certified by Microsoft for Microsoft Dynamics, which Avalara can use to promote its solution. It is basically a Microsoft seal of approval, Edwards said.

An Enterprise Resource Planning, or ERP, system, like Microsoft Dynamics, is business-management software a company can use to store and manage data from every stage of its business. For those businesses that need to calculate sales tax, Edwards said a program like what Avalara offers is very convenient.

Currently, Avalara’s tax solution is integrated into hundreds of ERP and e-commerce software systems that serve small to medium-sized businesses across the country. Those include Intuit, which operates TurboTax and QuickBooks, and Intacct, which partners with popular e-commerce websites like GrubHub and Kayak.

Avalara sells its tax solution to companies through a subscription model based on the number of transactions the customer anticipates, which can range from a couple hundred dollars per year to thousands of dollars per year.

Even as Avalara has continued to grow, the headquarters has remained on Bainbridge Island, something the co-founders don’t want to change even though growing a company on an island doesn’t seem normal, McFarlane said.

But nothing about Avalara is normal. It has been that way since the company’s first trade show in June 2004.

When everyone else showed up in a suit and tie with blue poster boards displaying their company’s pillars to business, Avalara showed up with a tiki bar, margaritas and bright-orange shirts. Everyone who walked onto the showroom floor saw them and took notice, McFarlane said.

Even though Avalara signed only five companies in its first year of business, everyone in the industry remembered the guys in the orange shirts, and the next year Avalara was signing more and more businesses.

“A culture was born in that moment in time,” McFarlane said.

In 2012, Avalara was approached by Battery Ventures, which has since invested between $20 and $30 million in the company.

“When the fifth CFO in one of our board meetings mentioned they were using Avalara, we started calling the company,” explained Chelsea Stoner, a Battery Ventures partner in the California office. “When you hear of something a couple of times, you realize it is something you should pay attention to.”

Stoner paid attention. She said Battery Ventures realized quickly they should invest after discovering Avalara had little competition. Then, after meeting McFarlane and his team, Battery Ventures grew excited about the culture that comes with Avalara.

“The orangeness definitely played into our decision on the deal itself,” she said.

Avalara could find itself with even more business if Congress passes the Marketplace Fairness Act, which could require online retailers to collect state sales taxes wherever their products are shipped, not just where the company is located.

But for now, McFarlane jokes that the current plan for is simply to continue growing until a Crayola crayon is named after the company: Avalara Orange.

Ideally, McFarlane says he would like the company to be involved in every sales transaction in the world, but if the company can get even a tenth of that, he says they will get a crayon named after them.


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