Xero TaxTouch Review
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- Date Established
- Suited for freelancers
- Well-designed UI
- Cheap monthly cost
- Easy to use
- Not accounting software
- Limited mobile apps
- Limited support materials
- Limited tax support
- No basic accounting reports
Xero TaxTouch Overview
Are you self-employed? Looking for a way to manage your expenses? Do you need an easy to use tax solution?
There’s an app for that.
Xero Tax Touch was designed specifically with the self-employed in mind. Drawing from over 10 years of accounting software expertise, Xero recently set off to create the next great app for people who didn’t need the whole accounting package. In March 2016, the company launched Xero TaxTouch as an iPhone app.
This app allows users to differentiate between personal and business expenses and categorize their expenses and income into IRS categories. You simply swipe business expenses right, and personal expenses left, which is a pretty fun game—or at least that’s what the Barlow Research committee thought when they gave Xero TaxTouch the Barlow Research’s 2016 Monarch Innovation Award. The app automatically calculates estimated taxes and creates a Schedule C for users to file when tax time rolls around.
While this tax tool seems marked for greatness, it hasn’t quite reached its full potential yet. At this point, there are some serious oversights that could lead to miscalculated estimated taxes and missed deductions, as well as a few major glitches in the app. All those things—paired with limited customer service—keep the app from being of much use in its current form.
For some independent contractors, this may still be a useful tool (especially considering its unbeatable pricing). But before you make any commitments, you should make sure you understand where this app falls short so you don’t end up falling with it during tax season. Read on for a comprehensive review of Xero TaxTouch.
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Table of Contents
Xero TaxTouch offers a free 3-month trial (a smart move for creating hype and a nice freebie for freelancers). No credit card information is required, and you can cancel it at any time. After that, you can opt for the monthly plan or a yearly subscription. Both plans offer the exact same features and support.
- $5.99/mo (or $64.99/yr)
- Categorize transactions
- Mileage deductions
- Personal and business account management
- Live bank feeds
- Estimated quarterly taxes
- Track income tax paid
- Schedule C
Xero TaxTouch is currently offering a first-year discount where you can get the software for $29.99, which saves you $41.89.
Web-hosted or Locally-Installed
Both. You have to download and install the app on your iPhone. After that, the app runs in the cloud.
Hardware or Software Requirements
Xero TaxTouch is an iPhone app that requires iOS 9+. The software is also compatible with iPod Touches and iPads, but it is optimized for iPhone use and may not function as well on other devices. There are no Android or web-based version of Xero TaxTouch at this point.
Specific Size of Business
Xero TaxTouch is designed to appeal to freelancers and the self-employed. If you need help estimating taxes and filing a Schedule C (come tax time), then Xero TaxTouch may be for you. (To learn more about what it means to be self-employed, your best source will be the IRS Self-Employed Tax Center.)
The software supports a single user and a single company. Each Xero TaxTouch account generates a single Schedule C, so if you need to register for multiple businesses, you will have to create separate accounts and be very careful when you’re categorizing your expenses.
Ease of Use
Xero TaxTouch is incredibly easy to use. At first, I disliked the fact that the software was only available in app form (and then only for iPhones). However, after seeing firsthand how the app operates, I wouldn’t want it any other way.
- Setup – The Xero TaxTouch setup process will probably seem incredibly familiar if you’ve ever put an app on your phone before. After downloading the app from iTunes, you simply create an account and activate it through a confirmation email, and you are good to go. To use Xero TaxTouch to its full extent, you’ll want to set up live bank feeds. (You can always add transactions manually if you want, but that can be a slow and tedious process).
- Organization – Xero TaxTouch has a clean design that is both easy to navigate and pleasant to use. The app is divided into four tabs listed on the bottom of the screen: Transactions (your home screen), Search, Report, and Account (a settings menu where you can enable touch identification, view bank and credit card accounts, view tax details, FAQs, and more). It is really easy to find what you are looking for most of the time, though figuring out how to edit transactions may be a bit tricky. You can edit transactions, but first you have to go to the Search section. You can never delete transactions though; you can only label them as personal to keep them from affecting your business numbers.
- Instructions and Guidance – It’s a good thing that Xero TaxTouch is so easy to use because customer support is almost nonexistent. There is an FAQ section you can turn to if you have questions; question mark icons scattered throughout the app also provide information. If you can’t get answers from either of those sources, the community forum is a decent place to ask questions, or you can email the company directly (though response times can be unnecessarily long).
- Problems – While I like Xero TaxTouch’s design and ease of use, there are a few major flaws that keep me from loving the app wholeheartedly.
- Major Glitches – During my trial, I experienced a few smaller bugs and one major glitch that rendered the app completely useless. And due to slow customer support, this issue is still unresolved, even after days of waiting.
- Estimated Taxes Apply to Wrong Year – For the self-employed, the deadline for filing estimated taxes for the final quarter of any given year is January 15 of the following year. But, for example, if you pay your 2016 taxes on January 13, 2017, Xero TaxTouch applies that payment to your 2017 records. The real issue is that there is no way to adjust the year at all.
- Missing Common Deductions – If you’re self-employed, you’re most likely paying for health insurance. Health insurance premiums are a deductible expense, even though they do not show up on your Schedule C. Since they aren’t a consideration on a Schedule C, Xero TaxTouch seems to ignore them completely. Unfortunately, that means that your estimated taxes are going to be completely off. Additionally, Xero TaxTouch only has three preset sizes for home offices—100 sq. ft., 200 sq. ft., and 300 sq. ft. Not being able to customize the exact dimensions of a home office could keep some freelancers from their full deduction.
- No Customization – There is no way to customize expense and income categories at all. This small feature could make a huge difference, especially considering that Xero TaxTouch has decided to use their own terminology for some of the categories, rather than employing the proper Schedule C categories recognized by the IRS. For example, Xero TaxTouch’s “office supplies” category might seem analogous to the IRS’s “supplies” category. Instead, you are somehow supposed to know that “office supplies” equals “office expenses” and “supplies” equals “materials.” It wouldn’t be hard to follow the actual IRS categories, and it’d save a whole lot of trouble.
- No Asset Depreciation – There is no way to record asset depreciation, which again means fewer tax breaks.
- Needs More Instruction – While I appreciate an app that is designed to help freelancers, I wish it did more to teach people about filing self-employed taxes. My worry is that people will go into the app thinking it will do everything for them and will miss key deductions or fail to realize their estimated taxes are skewed.
Since Xero TaxTouch is a tax solution, you won’t find typical accounting functions. You will find a few awesome tax support tools, but the software is still new and limited in terms of features (see Ease of Use section above). Here are the features currently offered by Xero TaxTouch:
- Transactions – Xero TaxTouch is designed for live bank feeds. The software imports your recent bank and credit card transactions. To organize these transactions, you simply swipe left for business transactions and swipe right for personal. Before swiping business transactions, make sure you categorize the income or expense transactions by selecting the circular blue icon. Transaction categories include advertisement, contractor, car and truck, income tax paid, insurance, loan interest, legal fees, office supplies, materials, meals and entertainment, rental car and equipment, rental property, repairs, taxes and licenses, travel, utilities, other, personal, and business income. You can split transactions into two or more categories as needed and enter a custom amount for each split category. Unfortunately, there is no way to customize these categories. The app does, however, attempt to automatically categorize expenses for you and remembers past categories. If you aren’t a fan of live bank feeds or your bank is not supported, you can manually enter transactions. This is easy to do, but far more time-consuming than simply using live bank feeds. You cannot split income items. Like almost all software using bank live feeds, Xero TaxTouch partners with Yodlee, which may violate some banks’ Terms and Conditions. Consult with your bank to see whether live bank feeds are a good choice for you.
- Personal Account – As mentioned briefly above, you can swipe left for personal transactions. Transactions organized as personal will not affect your business reports in any way. There really aren’t any other features for managing your personal account, but being able to quickly see which expenses are actually business related is a huge plus. Check out this video to see Xero TaxTouch in action.
- Mileage – When you go to add a new transaction you have the choice of selecting Spent, Received, or Mileage. And—you guessed it—mileage will take you to a screen where you can enter your miles. The software will automatically calculate the monetary deductions you should receive according to the year’s IRS standard rate.
- Report – Instead of offering accounting reports, Xero TaxTouch provides a freelance-specific report on how your company is doing. The report section lists your total Income, Expenses, Income Tax Paid, Estimated Taxes Due, and Take Home pay. There is no way to list these things by specific account (i.e. debit card versus credit card or cash).
- Tax Support – Underneath the report section, there is a place to add your tax information. This section is not as thorough as some self-employed users will need, but you can enter your filing status, loan interest, exemptions, additional income, car expenses, and home office size. This information, along with your organized transactions, is used to calculate your estimated taxes and construct your Schedule C for the year.
- Importing/Exporting – The main import in Xero TaxTouch is live bank feeds. You can export your Schedule C as a .pdf via email. In addition to the Schedule C, you’ll receive a list of transactions, total spending/income by category, and a list of trips for your own records.
Customer Service and Support
In the past, I have always been blown away by the quality of Xero’s customer service. Unfortunately, I was incredibly disappointed by Xero TaxTouch. Not only are the customer service options incredibly limited, email response times are slow. (I experienced a glitch that rendered the software completely useless, so the slow response times were a huge problem for me.) Hopefully, as the app grows the customer service options will increase. Currently, those options are as follows:
- Email – Contact support at email@example.com.
- FAQ Section – There is an FAQ section of about 60 articles both within the app and on the Xero TaxTouch website. This is the main source of support for Xero TaxTouch, but I would really like to see more information. With any luck, this feature will improve in time.
- Freelancer Resources – The Xero TaxTouch website is detailed, helpful, and full of sources for freelancers. It’s more than worth checking out.
- Xero TaxTouch Community – There is a Community where you can interact with other Xero TaxTouch users and ask questions. (Currently, there are no questions or answers posted.) There is also a feature request section. It currently has 16 feature requests, and the Xero team is surprisingly responsive to these requests.
- Blog – The Xero blog provides resources for small business owners and news on what Xero is up to. There aren’t a lot of articles related to Xero TaxTouch specifically, but it is still a decent resource.
- Social Media – Xero has Facebook, Twitter, and LinkedIn accounts. None of these are specific to Xero TaxTouch, but Xero responds fairly quickly to inquiries, especially on Twitter.
Negative Reviews and Complaints
As the app was only released in March 2016, there are hardly any reviews. The few reviews that can be found are positive across the board (with the possible exception of the feature requests in the Xero TaxTouch community forum). So the following drawbacks are a combination of those requests and my own observations about where the software doesn’t cut it.
- Lack of Banks – The majority of feature requests were asking for certain banks to be supported. Xero TaxTouch was responsive and added over 100 banks.
- Poor Customer Service – I experienced poor customer service. Not only are response times long, there is also a severe lack of support options.
- No Android App – I anticipate this being a big problem for a lot of potential customers.
- Not Full Tax Support – While Xero TaxTouch does a great job at helping the self-employed categorize their transactions for a Schedule C, there are certain very necessary tax features that Xero TaxTouch overlooks. The app leaves out several IRS categories and renames some of them—for kicks and giggles, apparently. You can’t deduct health insurance premiums or accurately deduct your home office. There is also no way to mark depreciable assets, which is a huge oversight on the company’s part.
Positive Reviews and Testimonials
Xero TaxTouch receives 4.5/5 stars on iTunes based on 16 users’ experiences (this is one of the only reliable sources of reviews). Here are some of the most common things people praise, augmented with my own favorite aspects of the app:
- Makes Taxes Easy – As I’m sure you know, taxes can be scary. Xero TaxTouch users love that the app takes the fear out of tax season and that their estimated taxes and Schedule C are calculated for them.
- Easy to Use – The most common praise of Xero TaxTouch is that it is simple and easy to use. The app makes it quick to categorize expenses and gives freelancers more time to do what they love.
- Designed for the Self-Employed – I only know of a few other software options that are designed specifically for the freelancer and independent contractor. The needs of the self-employed vary significantly from those of business owners seeking typical accounting software, so it is nice to see something geared toward freelancers.
Integrations and Add-Ons
Xero TaxTouch is not an accounting or invoicing solution; it’s simply a tax tool. As such, there are no typical integrations available. The software does connect with banks to enable the live bank feeds feature.
Xero TaxTouch uses the same safeguards as Xero proper, which means you don’t have much to worry about in terms of security. Xero has a reputation for some of the strongest cloud security out there. Security measures include data encryption, 2-step authentication, and 24/7 monitoring at multiple locations. Data is backed up daily across various servers, and regular security audits are performed. Xero also boasts an impressive record of 99.97% uptime.
For more details about Xero’s security, go here.
While Xero TaxTouch does bring some awesome features to the table (like personal/business account differentiation, automatic expense categorization, and a beautiful interface), you should bear in mind that there are also quite a few shortcomings.
Freelancers: Before throwing in your lot with Xero TaxTouch, I highly recommend that you do your research about the taxes you’re expected to pay. This information is neither difficult to find or hard to understand. A great place to start is the IRS Self-Employed Taxes page.
After you’ve done your research, take Xero TaxTouch for a spin and keep your eyes open for any future updates. The app is still just a lad; once it’s full-grown, we may see greatness yet.
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Need A Simple Accounting Solution?
This easy-to-use and feature-rich software is ideal if you have no bookkeeping experience and want top-notch customer support. Get Started.