| CROW, SHIELDS & BAILEY, PC |
ISSUE 2 |
June 2000
|
| CROW, SHIELDS & BAILEY, PC |
ISSUE 2 |
June 2000
|
From the Editor
Welcome to the first edition of our quarterly newsletter. We’re excited about it and hope you find it useful.
Please don’t be shy about giving us ideas for future editions. The newsletter itself is a client’s idea, so your opinion is important to us and we’ll do our best to respond to your suggestions.
As most of you know, we have offices in Mobile and Gulf Shores. The names of our employees are shown in this publication, along with their e-mail addresses and "team" designation. If you need to reach us by phone, you can now use our toll-free number from outside the area.
1-800-347-8583
We’ll tell you more each quarter about our employees in the "Team Member Profile" section. This quarter features Jimmy Hartman.
We Need A Name
One thing we need your help with immediately is a name for our newsletter. Ideas so far include "CSB News" and "Financial Forum". Names already rejected by our editorial team include "Bean Counter’s Quarterly", "A Pencil Pusher’s Perspective" and "More Bad (and Boring) News from my Accountant". So send us your suggestions. If you win, we’ll give you a gift certificate to a fine restaurant. And we’ll recognize you in the next edition.
Now that’s a deal!
Newsletter:
By postman or e-mail?
You can designate on the enclosed form how you prefer to receive the newsletter, and tell us about any address changes. Or you may simply call, fax or e-mail us your preference.
-JRS
Team Member Profile
JAMES W. HARTMAN, III (JIMMY)
Jimmy is married to Catherine Spotswood Hartman. She works part-time as a neonatal nurse practitioner at USA Children’s and Women’s Hospital. They have three children: Megan, 13, Kendall, 10 and Wil 4. The Hartmans belong to St. Ignatius Church and the children attend St. Ignatius School.
Jimmy graduated from Auburn University with a degree in accounting in 1985. He received his Certified Public Accounting designation in Alabama in 1987 and Florida in 1993.
He joined Smith, Dukes & Buckalew, CPA’s in April, 1985 and became a partner in 1993. Jimmy’s primary responsibilities were in the areas of auditing and business taxation. He left the firm in 1995 to become CFO of Midtown Restaurants Corporation, a large Burger King franchise with forty restaurants in four states.
Jimmy was instrumental in the growth of Midtown Restaurants to sixty-nine restaurants in less than five years through building and acquisitions. His primary responsibilities included strategic planning, forecasts and projections, financing and acquisitions. He also supervised the accounting, payroll, human resources, insurance and data processing
departments. The company was sold in October, 1999. Jimmy was intimately involved with all aspects of the sale and divestiture of the company.
Jimmy’s hobbies include saltwater fishing and boating and an occasional round of golf. He has served as President and Treasurer of the Coastal Conservation Association at the local and state level and as President of the Mobile Auburn Alumni Association.
Jimmy joined our firm the first of the year to head our business development unit. And even though he graduated from Auburn, we welcome Jimmy to our team!
Building A Vision
We have spent the past several months working on the development of our firm’s vision. A vision is the "creative force that drives the never-ending quest for success and greatness." We feel that our vision gives us the framework for all planning, decision making and action. With input from all team members and countless revisions, we are proud to publish our vision in the first edition of our newsletter.
We’ve Got Mail ..... E-mail, That Is!
Auditing Team
Eric Kennedy
Joey Bailey
Julie Stanley
Bookkeeping Team
Carrie Montgomery
Janice Morrow
Kathy Alford
Ruthie Carpenter
Consulting Team
Jimmy Hartman
Kenny Crow
Financial Planning Team
Glynda Mathis
Melissa Scott
Trey Mayhall
Tax Team
Gina Russell
J.D. Martin
John Shields
Rachael Smith
Support Team
Barb Frerman
Carolyn Reed
Deborah Martinsen
Stephanie Morton
Did You Know?
The Wall Street Journal reported that if your adjusted gross income was at least $227,546, your’s ranked among the top 1% of individual income tax returns (1996 figures). To rank in the top 5%, a return had to show adjusted gross income of $101,141 or more. Tax payers in this top 5% group accounted for 30.4% of total adjusted gross income and 51% of total income taxes paid.
Making Your Business "Fly"
You can’t steal second base and keep one foot on first.
Unknown
Big companies are small companies that have succeeded.
Robert Townsend
Is your business as profitable as it can be?
Do you have more free time now that you’re the "boss"?
Do you have a plan of succession to eventually retire and sell your business for a fair price?
Do you know what your business is worth?
Do you spend most of your time working "on" your business (like a boss should) or do you constantly work "in" it?
More often than not we get "NO" answers to all of these questions. We started our Business Consulting unit to help you turn each answer from "NO" to "YES".
We define "business development" as helping our clients create the businesses they wanted when they set up the business in the first place. Most people start a business to gain freedom and financial independence, to be their own boss, to take vacations when they want to, and so on. The sad reality is that the opposite usually happens. They become so involved working IN the business that they become consumed by it.
Few businesses ever achieve their full potential, for a variety of reasons. In most cases, they fail to focus on things that are really important because they lack the correct systems and reporting procedures. In other words, there is a real lack of planning and control in the business.
We have developed a process to help our clients work ON their business rather that IN it, helping plan for the future and think strategically about where the business is going.
Jimmy Hartman is heading up this area of our practice and he brings a wealth of knowledge to the table (see the "Team Profile" for more on Jimmy). He has over 15 years of accounting experience, 5 of those as chief financial officer of a large company and the other 10 in public accounting. Jimmy will be focusing exclusively on business consulting and we’re giving him the time and resources to do his job. In other words, our firm is committed to the process of helping you improve your business.
How can we do that? Good question.
We have been through extensive training with Results Accountants’ Systems (RAS), a worldwide consulting firm which specializes in improving businesses. After this training, and with the help of many resources provided by RAS, we proceeded to implement their business development processes in on our own accounting firm. After hundreds of hours and months of testing in-house, we are now ready to help other businesses, possibly yours.
And we feel very qualified to do that, because as accountants we have been consulting with businesses like yours for years. Not to mention running a business of our own.
Skeptical? You should be. We certainly were before we went through the RAS training and implementation process.
Furthermore, this service is not for everyone. It’s not intended to be.
But if it sounds interesting - if you can’t answer "YES" to the above questions but you want to - maybe you should call us. There’s no obligation on your part and no fee for an initial consultation.
Average Itemized Deductions
As reported in the Wall Street Journal, the RIA Group, a New York based publisher of tax and other business information, calculated average itemized deductions by categories, based on adjusted gross income (1997 figures).
The Wall Street Journal states that RIA emphasizes that these are merely averages and not what anyone at the IRS considers reasonable; average deductions may vary from state to state because of differing state tax laws; and medical deductions are omitted because few people have enough to qualify.
Income
(-000) Donations Taxes Interest
$ 15-30 1,506 2,225 5,496
$ 30-50 1,600 3,013 6,028
$ 50-100 2,113 4,956 7,336
$100-200 3,573 9,449 11,065
$ 200 + 19,032 35,231 22,003
Upcoming Deadlines
Here are the main IRS and Alabama tax filing deadlines. If you would like a complete listing we’ll be glad to send it to you. Or you may refer to IRS Publication 509 (10-99) - Tax Calendars for 2000, or visit the IRS web site at www.irs.gov, and the Alabama website at www.ador.state.al.us. Call us if you need information on other states (we have forms and instructions for all fifty).
March 15, 2000
Calendar year corporations and S corporations - file Form 1120 or 1120S (20C and 20S for Alabama) corporate income tax returns. File Form 7004 for automatic six-month extension to September 15 to file. If tax is due, it must be paid by March 15 to avoid interest and penalties. Alabama accepts the Form 7004 unless tax is due, in which case a Form 20E is filed, along with payment. Federal payments must be deposited at a bank using Form 8109 or using the Electronic Federal Tax Payment System (EFTPS*).
Corporations, S corporations and LLCs - file Form PSA - Alabama Business Privilege Tax Return, Corporate Shares Tax Return, and Annual Report**. A six-month filing extension is allowed to September 15 by filing Form PSE, but payment is due March 15.
S corporation election - file Form 2553 to choose to be treated as an S corporation beginning with calendar year 2000.
April 17, 2000
Individuals - file Forms 1040 and 40 and pay any tax due. File Forms 4868 and 4868A for a four-month extension until August 15 to file (not pay).
Household employers - if you paid cash wages of $1,100 or more in 1999 to a household employee, file Schedule H with your Form 1040 . If you paid more than $1,000 in any one quarter in 1999, you should have filed an Alabama Form UCCR-4 quarterly.
Individuals - pay first installment of 2000 estimated federal and state income taxes, if you are paying estimated taxes (Forms 1040ES & 40ES). You should be paying estimates if your withholdings are not sufficient to cover your tax liability.
Partnerships (and LLCs taxed as partnerships) - file Form 1065 and provide each partner with a Schedule K-1.
Corporations - pay the first installment of estimated federal (deposit with 8109 coupon or by EFTPS) and Alabama (Form 20-CD) income taxes for 2000.
Individual Retirement Accounts (IRA’s) - must be established and contribution made for calendar year 1999. No extensions allowed.
Simplified Employee Pension (SEP/IRA) - for self employeds, April 17 is deadline, but can delay setting up and funding of SEP/IRA if extension is obtained for filing individual return to August 15.
June 15, 2000
Individuals - Pay the second installment of estimated federal and Alabama income taxes due.
Corporations - Pay the second installment of estimated federal and Alabama income taxes due.
* Electronic deposits of taxes are required for 2000 only if you deposited more than $200,000 in federal depository taxes in 1998 ("depository taxes" include social security, Medicare, withheld income, excise, and corporate income taxes). Electronic deposits are voluntary if you do not meet the $200,000 threshold, even if you had to deposit electronically before 2000 under a previous threshold.
** New this year! The Alabama Franchise Tax was repealed late in 1999, and replaced by the Privilege Tax. The old Shares Tax is still around, but is now combined with the Privilege Tax on one form. Note that Limited Liability Companies (LLCs) are subject to the Privilege Tax (LLCs were previously exempt from both the Shares Tax and the Franchise Tax).
Tax Facts
IRS standard mileage rate for 2000 - 32.5 cents per mile, up 11/2 cents. Driving for charity 14 cents, and medical 10 cents, unchanged from 1999.
IRS per diem allowances for 2000 - for lodging, meals & incidentals $124 per day; $201 in 31 "high cost" areas. For meals & incidentals only - $34 per day ($42 in high cost areas). Employers may use $124/$201 per diems to reimburse employees. Self-employed taxpayers can use per diems to substantiate meals, but must use actual expense for lodging.
Imputed interest rates - for below market rate loans, the blended annual rate for 1999 was 4.94%. The rate is published monthly; the blended annual rate for 2000 is not yet determined.
Estate tax lifetime exemption - increased to $675,000 for 2000, up from $650,000. Goes to $700,000 in 2002, $850,000 in 2004, $950,000 in 2005, $1 million in 2006 and forward.
Annual gift exclusion - stays at $10,000 for 2000. Increases with Consumer Price Index (CPI), but only in $1,000 increments. The CPI is not up enough yet to increase to $11,000.
Generation-skipping tax exemption - up to $1,030,000 for 2000, from $1,010,000 in 1999.
Equipment "Section 179" expense limit - $20,000 for 2000, up $1,000 from last year. This is amount you can expense all in one year versus depreciating over 5 or 7 years. Applies to most furniture and equipment, and vehicles such as certain SUVs and trucks.
F.I.C.A. wage base - $72,600 for 1999 and $76,200 for 2000. This is the amount subject to the 6.2% tax for old-age, survivors, and disability insurance (OASDI). All wages are subject to the 1.45% medicare tax.
Social Security recipients’ earnings limits - Under age 65, can earn $10,080 for 2000; for each $2 earned over that, benefits reduced $1. Age 65 through 69, can earn $17,000; benefits reduced $1 for each $3 over that. No earnings limit if age 70 or older. As we write this, there is legislation in the works to eliminate earnings limits. We’ll let you know if it becomes law.
Standard deduction 2000 1999
Married filing jointly (MFJ) $ 7,350 $ 7,200
Head of household (HH) $6,450 $6,350
Single (S) $4,400 $4,300
If you are 65 or older, standard deduction amount increases $850 for married individuals (same for 1999 & 2000). For head of household and single taxpayers, amount increases by $1,050 in 1999 and $1,100 in 2000.
Personal exemption - for you, your spouse, and each dependent - $2,800 in 2000, $2,750 for 1999. Exemption phases out* in 2000 by 2% for each $2,500 of adjusted gross income (AGI) above $193,400 for MFJ, $161,150 for HH, and $128,950 for S (1999 AGI phaseout amounts were $189,950 MFJ; $158,300 HH; $126,600 S).
Itemized deductions - phase out *3 cents for each dollar of AGI above $128,950 for 2000 ($126,600 for 1999) for all taxpayers. Applies to deductions for taxes, mortgage interest, charitable contributions, and miscellaneous, but doesn’t affect medical, casualty loss, or investment interest deductions.
Estimated tax rules - changed again! If AGI exceeds $150,000 in 1999, for 2000 estimated taxes you must pay either 108.6% of the1999 tax amount or 90% of 2000 taxes to avoid a penalty. If AGI is $150,000 or less, can pay either 100% of 1999 tax or 90% of 2000 tax to avoid penalty.
Individual Retirement Accounts (IRAs) - if you’re covered by a qualified plan, your IRA deduction begins phasing out* for year 2000 if AGI is above $52,000 for couples and $32,000 for singles; both up $1,000 from 1999. If only one spouse is covered, other spouse can deduct $2,000 if combined AGI is under $150,000 (unchanged from 1999).
401(k) & 403(b) maximums - employees can defer up to $10,500 for 2000, $10,000 for 1999. Qualified plan compensation limit amounts increased to $170,000, up $10,000 from 1999.
* Phase outs are a sneaky way that Congress has "come in the back door" and increased your tax rates without changing the stated rates. For example, married taxpayers with 1999 AGI of $250,000, three dependents and regular itemized deductions would be in a marginal federal tax bracket of 36%, their "stated" rate according to the tax tables. But phase outs cause them to lose $6,875 of their exemptions and $3,702 of their itemized deductions, effectively increasing their marginal federal tax rate to 43.2%, a whopping 7.2% increase. Add to this the 1.45% medicare tax on wages over the FICA wage base, and the marginal rate goes up by 8.65% to 44.65%. Tack on state income taxes at 5% and you’re almost to a 50% marginal tax bracket.
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