Financial reporting

The Internal Revenue Service's new rules for qualified retirement plans went into effect on March 28, but the ripple effect from the rules has yet to play out.

With limited exceptions, the tax on married couples filing jointly usually has been lower than the combined tax on married couples filing separate returns.

Financial services conglomerate Fidelity Investments has extended its partnership with the American Institute of CPAs to assist CPAs in establishing an investment advisory practice. As part of the extension to the five-year-old program, institute members will receive several new benefits, including low minimum asset requirements and discounts on marketing materials through PracticeMark, Fidelity's online marketing program. Originally sealed in 2000, the pact designates Fidelity as the exclusive, preferred provider of custody and clearing services to AICPA members. Information about the Fidelity program is available at http://pfp.aicpa.org/Resources/Investment+Planning.

While college costs continue to rise faster than the level of inflation, parents and grandparents now have more tools than ever before to better afford this cost years before a child graduates from high school.To most parents, saving for their children's higher education costs can seem like a daunting task, which makes planning all the more critical.

A homeowner may exclude up to $250,000 of gain from the sale or exchange of a home if he owned and used it as his principal residence for at least two of the five years before the sale or exchange took place.The maximum exclusion is $500,000 for joint filers, if certain conditions are met. A taxpayer who uses a property partially as a principal residence and partially for business purposes is treated as using the entire property as his principal residence for purposes of the two-year use requirement if the residential and business parts are within the same dwelling unit. The exclusion doesn't apply, however, to the gain resulting from depreciation taken for partial business use of the residence after May 6, 1997.

No matter what else may happen in 2005, the markets for personal financial planning are set to explode. It's not just the Bush administration's announced plans to overhaul both Social Security and the income tax systems. Nor is it just that an economic upswing and low interest rates are pushing the stock markets back up to pre-2000 levels.There are certain fundamental changes taking place in the software industry, and in the markets for financial planning software in particular. Three trends are notable at the beginning of this year: * The software is going online. In addition to traditional application software provider eMoneyAdvisor, MoneyTree and EISI have both moved strongly into Web-based services. Other software vendors must carefully weave between the obvious advantages of an online service and the wishes of subscribers, who may not want to move so quickly onto the Internet. But the trend has an air of inevitability about it.

The constant headlines of regulators' actions against broker/dealers recall the image of falling dominoes.

AARP, the high-profile lobbying group for the roughly 36 million Americans over 50, has come out swinging in the fight over Social Security reform with the release of a poll showing a lack of support for President Bush's plan to allow investors to divert some of their Social Security taxes into private accounts.

Some of your clients may not yet have made their contributions to traditional or Roth IRAs for 2004, but plan to make them before filing their 2004 income tax returns. Others may be planning to contribute the maximum amount possible to their IRAs for 2005 as soon as possible.

FPA AWARDED FOUNDATION GRANT: The Financial Planning Association has received a $252,468 grant from the Foundation for Financial Planning - the largest grant ever given by the foundation.

A startling 90 percent of Americans are worried about their retirement savings, even prior to President Bush unveiling his sweeping second-term agenda, which includes a series of reform measures topped by revamping the Social Security system. Some 57 percent of consumers participating in a survey by banking and financial services conglomerate Wachovia Corp. said that they often worried or sometimes felt worried about how well they will be prepared for retirement, while 32 percent said that retirement savings was an occasional worry. Wachovia's survey -- conducted prior to the election -- included 2,100 consumers with household income or investments exceeding $75,000. It was conducted last fall, before Bush won re-election. 36 percent admitted that they weren't saving enough for retirement, while another 11 percent were worried but were confident that they were pursuing the right course of action. Just 16 percent of the survey participants expressed confidence that they would receive Social Security benefits when they retired. And 50 percent were skeptical of the president's plan for private accounts, saying it was too risky for their retirement savings.

The American Institute of CPAs has joined with the Labor Department's Women's Bureau in an initiative to help educate women about personal financial management. The partnership will combine the financial education efforts of both organizations -- the AICPA's 360 Degrees of Financial Literacy, and the Women's Bureau's Wi$e Up. The joint effort would provide Labor's Wi$e Up program with the institute's financial experts to support its on-line program and teleconference calls, as well as financial education workshops and conferences. The AICPA's 360 Degrees of Financial Literacy was launched last year with the support of state CPA societies. The program encourages CPAs to volunteer to help educate the public on various financial topics.

George W. Bush's presidency will be remembered for many things - and if the president has his way, one of those things will be an overhaul of the venerable Social Security system.

For years, the $7 trillion mutual fund industry had escaped major reform. But that was then, and this is now.

Many of the country's wealthiest people have not taken basic steps to protect their assets or mapped out an estate plan, according to a recent survey by wealth management firm PNC Advisors.

How would you like to be the primary financial coordinator for the wealthy families in your community? How would you like to be earning a healthy fee for this advice, a fee that goes far beyond completing tax returns? Does this sound too good to be true for small to midsized accounting?

In my last article, I discussed the above-the-line "education deduction" available for many individual taxpayers for qualified tuition and related expenses. Taxpayers eligible to take the education deduction often will also be eligible to take either the Hope Scholarship or Lifetime Learning Credits for the same expenses.

IRS ISSUES GUIDANCE FOR AUTOMATIC ROLLOVERS: The Internal Revenue Service has issued Notice 2005-5 providing guidance on the new automatic (or default) rollover rules for qualified retirement plans.

In his State of the Union address this week, President Bush pushed his plan to overhaul Social Security and add optional private accounts for younger workers, as the White House unveiled some new details of how that plan would work.

American Express Co. said that it will spin-off its American Express Financial Advisors unit to shareholders to focus on its credit cards, charge cards and travel services businesses.