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IRS advises on removing stimulus payments from IRAs

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WASHINGTON (5/8/08)--The Internal Revenue Service (IRS) released guidance for taxpayers and financial institutions about withdrawals of 2008 tax rebates that are directly deposited into individual retirement accounts (IRAs), Coverdell education savings accounts (ESAs), and health savings accounts (HSAs). Taxpayers who told the IRS on their 2007 income tax return to deposit all tax refunds into a tax-advantaged account--such as an IRA, Coverdell ESA, or HSA--have discovered that the IRS also deposits their tax rebate to the same account. Announcement 2008-44 permits taxpayers in this situation to withdraw from the IRA, Coverdell ESA, or HSA an amount less than or equal to the Economic Stimulus payment tax- and penalty-free. A withdrawal of the tax rebate from an IRA or HSA must be made by the filing deadline for the 2008 federal income tax return, plus extensions. The withdrawal deadline for a Coverdell ESA is May 31, 2009 or the designated beneficiary’s extended filing deadline, whichever is later. Unlike other withdrawals of contributions prior to the filing deadline, the income attributable is not computed or withdrawn under this rule, according to Dennis Zuehlke, compliance manager for CUNA Mutual Group, which serves 80% of credit unions offering IRA programs. Credit unions receiving direct deposits of tax rebates and their subsequent withdrawals should report the contribution and withdrawal in the usual manner:
* The deposit will be reported as a regular contribution on Form 5498; and * The withdrawal will be reported as a regular withdrawal (distribution code 1, 3 or 7) on Form 1099-R.
Taxpayers will be required to follow the instructions in their Form 1040 package to report the withdrawal and avoid taxes and penalties on the amount withdrawn. By not requiring a separate reporting scheme, credit unions will not have to incur additional expenses to adapt their data processing systems to report these one-time distributions, and members will be able to withdraw their tax rebates with relative ease, said Zuehlke.

Treasury wants ideas to improve financial education

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WASHINGTON (5/8/08)--The Department of the Treasury wants public comments about how to improve financial education efforts in the United States. The President’s Advisory Council on Financial Literacy will use the comments to advise President George W. Bush and Treasury Secretary Henry Paulson on the state of financial literacy, means to improve financial education efforts and strengthen financial education programs. Specifically, the council wants to know:
* Youth Financial Literacy: How can financial literacy among young people be improved? * Financial Education in the workplace: How can financial education be provided in the workplace? What financial education issue should be addressed in the workplace? * Financial access for underserved markets: How can access to financial services be increased in underserved markets? What markets are underserved for financial services? * Financial literacy research: What question should be answered to provide a thorough understanding of the current state of financial literacy in the country? What are the gaps in existing research on financial literacy? * Outreach and awareness: What are the best ways to communicate to those who lack awareness of financial education resources?
Comments are due May 23 and can be e-mailed to financialliteracycouncil@do.treas.gov, or mailed in triplicate form to the President’s Advisory Council on Financial Literacy, Office of Financial Education, Room 1332, Department of the Treasury, 1500 Pennsylvania Ave NW, Washington, DC 20220.

Inside Washington (05/07/2008)

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* WASHINGTON (5/8/08)--Matthew Feldman was appointed Tuesday as president/CEO of the Chicago Federal Home Loan Bank (FHLB) after serving as interim president. On April 11, Mike Thomas, FHLB Chicago’s previous CEO, resigned after merger discussions with FHLB Chicago and FHLB Dallas ended. Feldman previously worked as vice president of operations and administration. He joined the bank in 2003 ...

Indiana credit unions back winners in primaries

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INDIANAPOLIS (5/8/08)--Two incumbent Congressmen won elections in the Indiana Primary Tuesday with support from the Indiana League and Hoosier credit unions. In Indiana’s 5th Congressional District Republican Primary, Congressman Dan Burton won by 52% to 45%. With the Indianapolis television and radio media covering his remarks live, he thanked credit unions within the first few sentences of his victory speech.
Congressman Dan Burton, left, and Indiana League President John McKenzie. (Photo provided by the Indiana Credit Union League)
League President John McKenzie attended the Burton Campaign’s election night gathering and said, “Credit unions had an opportunity to help his campaign in an unusual year when his re-election was not assured, so it was great to be able to help such a strong credit union supporter.” The league held a luncheon with Burton in March, where the Burton Campaign was able to raise significant campaign funds from representatives of credit unions and the league. Burton is one of only three current members of Congress who was an original co-sponsor of the Credit Union Membership Access Act (H.R. 1151) in 1997 and is now an original co-sponsor of the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537). In Indiana’s 7th Congressional District Democratic Primary, Congressman Andre Carson won a tough four-way race. Carson holds a seat on the House Financial Services Committee which was previously held by the late Julia Carson, his grandmother. Indiana credit unions supported Andre Carson before the special election he won in March, and again in the primary. “When we met with him in February prior to the special election, and since he began serving in Congress these past few months, Rep. Carson has expressed support for credit unions and has responded very positively to our views during legislative developments,” said McKenzie. “We look forward to building further on our good relationship with him.” The Credit Union Legislative Action Council gave each campaign $10,000.