In this issue:

New "Kiddie Tax" Rules for 2008
The 2007 Small Business Act contains changes which may impact college-aged children beginning in 2008. For a child subject to these rules, the child’s unearned income over $1,700 will be taxed at the parent's tax rate, which is presumably higher.

For children under age 18, nothing has changed. However, the new law expands the kiddie tax to apply to children that turn age 18 during the tax year, or turn age 19-23 if the child is a full-time student. These older children are exempt from the new kiddie tax rules if their earned income exceeds one-half of their total support for the year.

There are several tax planning strategies to avoid or minimize the effects of the new law. If your client has a child who is or will be age 18 to 23 and is a full-time student in 2007, consider taking any unrealized long-term capital gains in 2007. Also, to avoid the higher kiddie tax in the future, consider having the client move any income-generating securities into tax-free funds, growth stocks that do not generate dividends, or companies that pay qualified dividends. And finally, starting in 2008, consider having a self-employed client hire their child to work in their business. Remember—if the child’s earned income exceeds one-half of their support, the child will not be subject to the kiddie tax.

Coming later this summer: updates to Tax Corresponder and TaxTools with new letters and modules to help you better explain the new kiddie tax rules to your clients and better plan their tax strategies.

Form W-2 Changes
The IRS has made several changes to the 2007 Form W-2. Most importantly, the location of the employee's Social Security number was moved from box d to box a. This was done to prevent the SSN from being seen when the form is in a window envelope. On Forms W-2 and W-3, the location of the form ID number has also been changed to improve processing efficiency.

The new versions of Forms W-2 and W-3 are available from CFS in red scannable format. We also have blank, perforated stock for printing scannable black forms and window envelopes to fit the new forms. Order today from our online store and receive a 20% discount!

Forms are on their way!
The 2007 red forms are in, and we have begun shipping forms orders. If you have not yet ordered your red forms, blank form stock, envelopes and other supplies, now is the time, while you can still get a 20% discount! Order today from our online store.

2-for-1 Specials on Select Programs
Purchase the 2007 and 2008 versions of the following programs for one low price:

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