Tax-free Withdrawals of Stimulus Payments

Economic stimulus payments directly deposited into IRAs and other tax-favored accounts may be withdrawn tax-free and penalty-free, according to the IRS. This relief is designed to help taxpayers who may have been unaware that by choosing direct deposit for their entire regular tax refund, they were also choosing to have their stimulus payment directly deposited as well.

If a taxpayer elected a split refund, however, their stimulus payment will be paid by a paper check.

This relief is available for amounts withdrawn from these tax-favored accounts that are less than or equal to a taxpayer’s directly deposited stimulus payment.

Eligible tax-favored accounts include traditional and Roth IRAs, health savings accounts, Archer MSAs, Coverdell education savings accounts and qualified tuition programs, also known as QTPs or 529 plans.

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Communication with Audit Committees Concerning Independence

The PCAOB voted to adopt Rule 3526, Communication with Audit Committees Concerning Independence, to enhance communication between audit committees and registered firms regarding the firm’s independence.

Rule 3526 will require a registered public accounting firm, before accepting an initial engagement pursuant to the standards of the PCAOB, to describe in writing to the audit committee all relationships between the firm or any of its affiliates and the issuer or persons in a financial reporting oversight role at the issuer that may reasonably be thought to bear on the firm’s independence.

Registered firms will also be required to discuss with the audit committee the potential effects of any such relationships on the firm’s independence. Rule 3526 will require firms to make a similar communication annually for continuing engagements.

If approved by the SEC, Rule 3526 will supersede the PCAOB’s interim independence requirement, Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, and two related interpretations.

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China—The World’s Hottest Market

Doing business in China? Thinking about it? Thinking about thinking about it? Then check out the 2008 Asia Business Forum: China—Strategic Implications, Challenges of Doing Business in the World’s Hottest Market.

CalCPA’s Peninsula Silicon Valley and Silicon Valley San Jose chapters, in association with Ascend and the South Bay Chapter of the Haas Alumni Network, present this Silicon Valley Forum event, which will address tax and accounting issues; venture capitalism; and cross-border financing solutions, among other topics.

Register today.

Bay Area Counties Have Led California for 35 Years

The statewide median income for all personal income tax returns rose to $35,390 (3.7 percent over 2005), while the median income listed on joint returns rose to $66,810 (5.1 percent over 2005), according to the FTB. Four Bay Area counties again top California’s 2006 median income report: Contra Costa, Marin, San Mateo and Santa Clara counties have consistently reported the highest median incomes.

California taxpayers filed 15.1 million 2006 state income tax returns reporting $1.2 trillion in adjusted gross income, a 9.4 percent increase over 2005 figures.

Marin County still has the highest median income for joint returns, reporting $116,626, an increase of 8.1 percent over 2005. Santa Clara County ranked second this year with $95,457, San Mateo County ranked third with $95,394, Contra Costa County ranked fourth with $87,478, and El Dorado County ranked fifth with $78,489.

Los Angeles County taxpayers filed 25.5 percent of all 2006 income tax returns in California. They reported median incomes of $30,822 for all returns, and $57,725 for joint returns, ranking 39th and 31st, respectively.

LLC Fee Refunds Based on Northwest Decision

In a recent decision on Northwest Energetic Services (NES), LLC v. Franchise Tax Board, the California Court of Appeal, First Appellate District, held that assessing an LLC fee to an entity that had no income attributable to business conducted in California was unconstitutional as applied to NES, and the fee should be refunded.

Because the NES decision about the LLC fee is now final, it is possible to take action on claims for refund filed by LLCs that had no income attributable to activities in California. Some claims don’t provide enough information, however, to determine whether the LLC that filed the claim has the same facts as those involved in NES.

If you file, or have filed claims for your clients based on the facts in NES, you should provide the following information:
• The LLC’s name, address, and the name and phone number of the managing member or designated contact person.
• The LLC’s Secretary of State file number or Franchise Tax Board temporary LLC number (for unregistered entities) and Federal Employer Identification Number.
• Taxable year(s) involved.
• A statement that the LLC did no business in California for each of the taxable years for which the claim is being filed.

Learn more.

High Quality CPE in a Resort Location

You choose the location, we’ll provide the CPE. CE Weeks are a great opportunity for attendees to combine high-quality CPE and relaxation at a luxury resort with top instructors.

• Lake Tahoe, Harvey’s Resort and Casino: June 9-13, 2008
• San Diego, Paradise Point Resort and Spa: July 7-11, 2008
• Monterey Embassy Suites, Seaside: Aug. 4-8, 2008
• San Luis Obispo, Embassy Suites: Oct. 27-31, 2008
• Palm Springs, Rancho Las Palmas Resort and Spa: Dec. 1-5, 2008

Register today!

Correction: CPA Focus

On Page 3 of the Spring 2008 issue of CPA Focus, sentence, “While examining your options, keep in mind that you can’t enroll in a Medigap policy if you don’t enroll in Part D, but you can enroll in Part D without having a Medigap plan” should have read Part B, not Part D, in both instances.

Mobility Update

Legislation sponsored by the California Board of Accountancy, AB 2473 (Niello/Ma), to allow “accountancy mobility” was pulled off the agenda of the Assembly Business and Professions Committee April 9. Go to www.calcpa.org/mobility to stay updated on this issue and learn some myths and facts surrounding the issue.

The mobility issue is still alive and of import in California, making your attendance at CPA Day at the Capitol critical.

Are You Connected to Your Local Chamber?

The support of California businesses is critical to achieving CPA mobility. If you’re connected to your local chamber of commerce, please let us know at editor@calcpa.org. We will send you materials to help secure your local chamber’s support.

Thanks in advance for your help.

Disclosures About Derivative Instruments and Hedging Activities

FASB has issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities, to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures that enable investors to better understand their effects on an entity’s financial position, financial performance and cash flows. It’s effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008.