Accounting education

The Treasury Department's decision to take over Fannie Mae and Freddie Mac and put them under conservatorship has prompted questions about the implications for accountants and their clients.

Successful small-business owners tend to be hard-working, tenacious, smart and highly focused. They have to be. According to a study by Dun & Bradstreet, businesses with fewer than 20 employees have only a 9 percent chance of surviving a decade.Yet even those that are successful fail miserably when it comes to planning for their financial future. In fact, it’s their proclivity to hone in so intensely on their business — certainly an attribute of being successful — that often gets in the way of their personal financial planning.

CAR DONATIONS PLUMMETAutomobile donations have sharply declined since 2004, when Congress tightened the tax rules for claiming charitable deductions, according to an analysis of IRS data by Grant Thornton. Before 2005, taxpayers who donated a vehicle were allowed to deduct its fair market value. Tax legislation enacted in 2004 changed the rules to generally limit vehicle donation deductions of over $500 to either the actual proceeds from a vehicle’s sale or the vehicle’s fair market value, whichever is less.

RULING MAY INCREASE INSURANCE STOCK REFUNDSWashington, D.C. — A recent court ruling by the U.S. Court of Federal Claims could increase claims for tax refunds by insurance policy-holders who sold stock in insurance providers that went public.

By now I am sure you might have heard about the wildly successful inaugural financial planning conference held in July in Chicago by this publication under the Accountants Media Group umbrella. Although the idea for the conference started back in March (a rather short period of time to get the word out), it was nevertheless a huge success and brought in attendees from all over the country wanting to know how to move upwards in the financial planning niche. Interestingly enough, two-thirds of the attendees were not already in financial planning but were looking for how to enter the field; only one-third were already in practice. Four major companies saw the opportunity in such a topic to sponsor the conference: Five Star Financial Solutions, Rochdale Investment Management, Honkamp Krueger Financial Services, and Oppenheimer. The speakers came from the upper tiers of financial planning from Stuart Kessler and Rebecca Pomering as keynote speakers to Sidney Blum, Gale Crosley, Garrett D’Alessandro, Mitchell Freedman, Jim Files, Gene Garrelts, Keith Heichel, James Herrig, Peter Jaworski, Bernard Kiely, Michael Parness, Larry Swedroe, Enrique Vasquez, Troy Waugh, Clare Wherley, Stephen Wild, and Stuart Zimmerman. The topics were wide-ranging from why financial planning makes sense to selecting the right business model to marketing and selling such services to success stories (including costly false starts and failures) to the importance of critical strategic partners to financial planning software to best practices. You can see where this was heading. The results from the attendees, sponsors, and speakers were highly laudatory, so much so that we are now looking at a conference for next year that will go into this area even more deeply with some nuts and bolts tactics such as exactly how to go about getting licenses and stories from those who just started up a financial planning practices with their personal pros and cons. If you wish to be on the mailing list for advanced information, by all means e-mail me.

Comparatively few universities will be educating students in international accounting standards this academic year, despite plans by the Securities and Exchange Commission to impose the new standards on U.S. companies.

Technology hurdles are forcing the Internal Revenue Service to again delay the effective date of a revenue ruling that gave employers guidance on the use of smart cards, debit cards and credit cards to provide transportation fringe benefits to employees.

Generation X millionaires give nearly twice as much to charity on average compared to older generations, according to a new survey.

Investment research firm Glass Lewis has named former Comptroller General Charles A. Bowsher as chairman of its advisory council.

The American Institute of CPAs has written a letter to the Labor Department supporting a proposal to require retirement plan sponsors and administrators to annually disclose fees and expenses to participants.

Howard Hook, CPA, CFP, is a retirement distribution planning expert with Access Wealth Planning. the wealth management firm with offices in Roseland and Princeton, New Jersey. He maintains that with the coming shift from employment to retirement, many Baby Boomers will be on their own when it comes to making decisions that could have a major effect on their retirement lifestyles. He points out that in talking to a goodly number of clients who are happily retired as well as counseling those who are thinking about packing it in, he has found that those who have worked through three specific issues prior to departing their full-time jobs have achieved the most post-retirement satisfaction. So, what are the three things to think about before you hand in your retirement paper? First of all, do you know how you are going to pay your bills when you are no longer receiving a salary? It seems rather obvious on the surface, but Hook says that many people kind of ignore the matter of how much income will actually be needed without that salary. In other words, it’s not as obvious as it sounds. He suggests that people should prepare a detailed list of exactly the expenses that are being paid and then a separate column on how much income is being received. He cautions that all expenses should be included. For example, consider income taxes. That’s going to come out of your revenue base; the employer is no longer paying or deducting it from your paycheck. And consider medical insurance. Who’s paying for that and what’s it cost? Hook points out that all income must be listed. For instance, consider Social Security. He says that many people don’t realize that a portion of Social Security is subject to federal income tax and that a spouse who is still working can cause up to 85 percent of the retired spouse’s Social Security income to be subject to income tax. Next, go back to those medical expenses. How you going to pay for them? Upon retirement, decisions and responsibilities will fall on the retiree. A break in coverage could result in extended waiting periods for those with certain pre-existing conditions. You don’t want coverage to lapse even for a moment. One has to consider when Medicare comes into play or if not, what are the options? Also, what about COBRA which requires most employers who offer group health plans to provide temporary continuation of such coverage to employees who do qualify? And what about a spouse’s medical plan at their place of employment for the retiring spouse? Each medical plan has unique advantages and disadvantages. In fact, some plans require a supplemental drug plan to be purchased to cover prescription medication, while other plans include drug coverage. And again, watch those waiting periods carefully! Finally, and perhaps most importantly, how are you going to spend your free time? All this free time certainly changes the parameters of your life. With people living longer, the average retiree could live upwards of 25 years or longer. Do you have a game plan? Keep in mind that in many instances more free time can also lead to increased spending. Having a plan for keeping busy, says Hook, can help ensure a smooth transition and ease the difficulty of managing large blocks of free time. He says that the idea is not to take out a calendar and full out each day with a different planned activity but rather to make a list of the things you would like to do and an approximate time frame for doing them. Naturally, Hook says that answers to these questions may differ because people are different. The key, he concludes, is to make appropriate decisions now that will allow you the flexibility to adjust those decisions in the future without compromising your lifestyle. Howard Hook can be reached at hhook@awplan.com.

The National Association of State Boards of Accountancy is looking into administering the Uniform CPA Examination outside the U.S.

According to recent surveys, Americans are lacking in preparation for retirement. In fact, many have little or absolutely no idea of how to achieve certain goals. To the rescue comes WealthRidge which is offering a free retirement planning White Paper to help people get on track to financial well-being in retirement. "Facts You Need To Know About Retirement Planning" can be obtained via www.wealthridge.com. Wealthridge points out that more than 65 percent of all retirees have saved less than $100,000, and they find that is nowhere near enough money for retirement. Michael Snowdon, CFP®, financial planning partner in WealthRidge says, "It's not uncommon to live in retirement for 20 or 30 years. Finding the funding to support those years has become, for many, an exercise in futility." Why? Here's an example he cites. An individual who wants to have an income of $75,000 per year in retirement, plans to retire in 15 years, and to live for 30 more years, may need as much as $2 million to fund the desired retirement income. How so? Because health care expenses represent a significant factor. A recent study suggests that a couple who reaches age 65 will need more than $200,000 to pay for their retirement health care expenses. With fewer company pensions, and living expenses at all-time highs, saving enough money for retirement can seem to be an almost impossible task. There are solutions, notes Wealthridge, and people can achieve their goals. They say that the retirement planning White Paper provides answers to how much money will be needed for retirement, how much healthcare will cost, and how much retirees can safely withdraw from their retirement portfolio to make sure it lasts as long as they do. The White Paper also identifies the tools that are available to save for retirement, along with some cautions about what not to do. For additional information, feel free to contact Michael Snowdon at (888) 326-5557. WealthRidge is an independent fee-based financial planning firm in the Denver metro area.

The American Institute of CPAs is helping to promote a movie on the financial challenges facing the U.S. today.

The Securities and Exchange Commission unveiled its next-generation system for online financial filings, IDEA, the successor to its EDGAR database.

The Securities and Exchange Commission said it would distribute millions of dollars to investors harmed by market-timing trading violations in mutual funds managed by Putnam Investment Management and Janus Capital Management.

Will health issues force your clients to retire earlier or spend their nest eggs quicker than they planned?Four in 10 Americans retire sooner than they expected. Of those, 40 percent do so because of health issues or disability, according to the Employee Benefits Research Institute.

HOUSE CONSIDERS MANDATING EMPLOYER IRA PLANSThe House Ways and Means Select Revenue Measures Subcommittee held hearings on bills that would encourage employers to automatically enroll their employees in individual retirement account plans. One bill is aimed at creating automatic payroll deposit IRAs for workers who do not have access to employer-sponsored pension plans.

Few people actually know what a credit score represents. For example, less than one-third of Americans understand that credit scores indicate risk of not repaying a loan and not knowledge of, or attitude toward, consumer credit. That is what has come out, among other things, from a new survey commissioned by the Consumer Federation of America (CFA) and Washington Mutual Bank, the guys you call WaMu. Moreover, the survey reflects the fact that most Americans fail to understand that one’s credit score shows only how they use credit and does not include factors such as income and age. Those that have obtained their scores are generally the most knowledgeable, says the survey. But if you have clients who have low credit scores, what can you advise them about raising such scores? Here are some ways they can do it:

An Ernst & Young partner has teamed up with a movie studio accountant to produce an online comic book based on the TV series and recent movie Get Smart that provides an overview of tax deductions for the film and TV industry.