Volume 12 Number 2

From The Corner Office By Mitchell Freedman, CPA/PFS

Have you fed the pig today? If you haven't already heard, read, or seen the new ad campaign, co-sponsored by the American Institute of CPAs (AICPA), the Ad Council, and CalCPA you soon will. The new campaign, launched October 25, 2006, is to provide public awareness of the failure of young Americans to save and the need for them to spend wisely for satisfying lives and secure retirements.

For those unfamiliar - The Ad Council is a 60 year old not-for-profit organization consisting of the advertising and media industries, whose members provide public service announcements. I'm sure that you recall Smokey the Bear and can identify slogans such as "a mind is a terrible thing to waste," or "Friends don't let friends drive drunk." During World War II, to make sure people had the security of the country on their minds they created the slogan, "loose lips sink ships." Your grandparents should remember that era's Rosie the Riveter, a campaign to recruit women into the work force when millions of men were serving overseas in the armed forces. The AICPA has 330,000 members who provide services to clients and employers throughout the U.S.

As long time readers know, I have been involved in the financial literacy effort for about a decade. I'm particularly pleased to see this joint AICPA/Ad Council/CalCPA initiative, which should create increased public awareness of the problem of financial illiteracy and will hopefully have the impact of changing behaviors. While the ad campaign is targeted to 25-34 year olds I believe that all age groups will understand and relate to the messages.

The new slogan is "feed the pig." Benjamin Bankes (a life-size friendly pig- symbol of a childhood friend - your piggy bank) was introduced to the AICPA Council on October 24, 2006. He is an amiable and non-threatening character. I'm privileged to have met and had my picture taken with Benjamin.

Tips & Alerts Gift Cards...Blessing, or a Potential Nightmare? By Brian Switaj

As the holiday season approaches, people are getting into the gift giving mood. Many people start asking the question, "what would this person like or need this year?" Gift cards have always been a favorite choice for purchasers who feel unsure about the desires of the recipient of the gift. I have always enjoyed receiving gift cards because they give me the freedom of choosing something at my leisure.

Over the past few years, gift cards have become a commonplace commodity for gift purchasing. Banks and credit card companies have jumped into the industry and have created cards that carry their corporate logos. These are particularly useful, since they aren't tied to a specific store or chain. However, consumers should become aware of the strings that might be attached to giving gift cards that are issued by a bank. For instance, a fee might be assessed on a monthly basis if the card isn't redeemed within a certain time frame. This could be problematical for those who stick the card in their wallet and try to use it a year down the road and find out that the value of the card has decreased or has "zeroed out" due to such bank fees. My observation is that these fees seem to only be generated on cards that can be used universally as opposed to gift cards from a single retailer such as Starbucks. So, buy that gift card - but make sure the gift recipient understands any constraints that may be built into it.

Tax Notes Pass Me The Tylenol (California Semi-Conformity Causes Headaches) By Tom Trent, EA

California tax law in general conforms to Federal tax law, except when it doesn't. For instance, because of a Federal law change, the so-called Kiddie Tax (which mandates that children under a certain age compute their tax on unearned income using their parent's rate, unless the child's rate is higher) will apply to children under 18, rather than age 14, which was the law prior to 2006. But California didn't conform to the age change, so, unless the state legislature changes it, for California purposes, the Kiddie Tax will be eliminated at age 14. Here at MFAC, we've gotten used to having to deal with things like this. We absorb the issue and move on.

But they keep making it harder. California SB 1827 which was signed into law on September 30, 2006 mandates that beginning in 2007, California Registered Domestic Partners will have to file their state tax return using either the "married filing joint" (MFJ) or "married filing separate" (MFS) status. For those couples, the "single" or "head of household" filing statuses aren't an option anymore. The headache is that the California tax return starts with the Federal return, and the Federal tax system doesn't allow same-sex couples to use either the MFJ or MFS filing statuses. Not even the Franchise Tax Board, who administers the state's tax system, has figured out how to handle this problem. Thankfully for our clients, this is our headache, not theirs. Now, if I can just find that bottle of Tylenol.

Medicare Part B (Part of the Big Fix!) By Janet Gardner

There are Medicare changes that go into effect January 1, 2007. The premiums for Part B, which is the portion that is deducted from the monthly Social Security check and helps to pay for routine medical care, doctor visits, outpatient physical therapy, etc., will be going up. Due at least in part to the new Part D prescription benefit, Congress has approved an increase in the monthly premiums from the current 2006 amount of $88.50. However, unlike in years past where everyone paid the same flat amount, this time the increases will be based on the Adjusted Gross Income (AGI) from your most current tax return. Actually it will be based on your Modified AGI, which is AGI plus any tax exempt interest, Series EE Savings bond interest used for education expenses, and any excluded foreign-earned income.

While the Social Security Administration claims that "the majority of Medicare beneficiaries will not be affected" the 2007 increase can and will be quite steep for higher income beneficiaries. Under the new formula, recipients will pay 28% to 80% of the cost of their coverage. Monthly payments will range from $93.50 to $161.40 for 2007 (See the chart below for rates). While the 2007 increase for someone earning under $80,000 is less than 6% higher than the 2006 rate, for a single person earning over $200,000 that increase is more than 82%! It gets even worse by 2009, when those "at the top" will be paying more than twice what "most" beneficiaries pay.

Adjusted Gross Income		Estimated Monthly Premium
Single	Married	2007	2008	2009
$80,000 or less	$160,000 or less	$93.50	$104.30	$116.30
$80,001 to $100,000	$160,001 to $200,000	$105.80	$132.20	$163.00
$100,001 to $150,000	$200,001 to $300,000	$124.40	$173.90	$232.90
$150,001 to $200,000	$300,000 to $400,000	$142.90	$215.60	$302.80
Above $200,000	Above $400,000	$161.40	$272.82	$372.60
Amounts after 2007 are estimated at an annual increase of 11.6%, the average since 2002.

Even if you're not affluent (under the government's definition) you could be ensnared by these higher rates if you have a one-time financial event such as the sale of stock, an IRA to Roth conversion, etc. It's possible for your one-time event to throw you into the next premium bracket, or even higher. There is an appeals process available with Medicare but so far little is known just how it will work; how much; if any, will be returned; or how long the process will take from start to finish. As usual when dealing with Medicare, it might be an extremely labor intensive process to get your funds returned.

Medicare will be notifying all beneficiaries officially in late November or early December, which isn't much notice if you have to do some planning.

According to Medicare, a beneficiary who pays the highest possible premium of $1,936.80 per year is estimated to receive an average of $4,363 in Part B benefits. If you do not receive an official notice, you can contact Medicare directly to inquire what your rate will be.

One can only hope that their Medicare Part D prescription savings will help to offset this increased cost. If you are not already enrolled in Part D, there is open enrollment from November 15th through December 31st, 2006. The next enrollment period will not be for another year. If enrolled this year coverage will start January 1, 2007.

Heard in the Hall

In the October 1, 2006 issue of Accounting Today,for the second year in succession Mitch Freedman was named one of the "Top 100 Most Influential People" in the accounting profession. Considering that there are over 600,000 CPAs in the nation and more than 330,000 members of the American Institute of CPAs that is quite an accomplishment.

Tad Jakes, Eva Meza, and Mitch attended the Schwab Solutions 2006 Conference in Newport Beach, CA on July 19, 2006. Mitch attended a California Jump$tart Coalition Board of Directors meeting at the San Francisco Federal Reserve Bank, Los Angeles Branch on July 26th. He also attended a CalCPA Communications Advisory Committee meeting in Redwood City on August 8th and a CalCPA Personal Financial Planning Committee meeting in Oakland on September 8th. Tad and Mitch attended a Fidelity Best Practices Conference in Beverly Hills on September 13th and they both attended the Schwab Connect 2006 Conference in La Quinta on September 28th and 29th.

Accounting Today featured Mitch in an article titled, "States, Lawmakers Target Ways to Combat Elder Abuse," in the October 1, 2006. Mitch appeared on KABC7 Eyewitness News, with Carlos Granda on September 20th discussing the performance of the NASDAQ Index and other investment matters.

On September 24, 2006 Tad Jakes participated and completed the Carpenteria sprint distance triathlon benefitting the city's parks and youth programs. Proceeds will assist in supplying scholarships and additional equipment for the programs. You go, Tad!