| CROW, SHIELDS & BAILEY, PC |
ISSUE 1 |
Winter 2001
|
| CROW, SHIELDS & BAILEY, PC |
ISSUE 1 |
Winter 2001
|
Congratulations
Congratulations to Gina Russell, CPA for becoming a shareholder of the firm effective January 1, 2001. Gina has been with the firm since 1997 and specializes in business valuations, litigation support, and tax work. Also congratulations to Trey Mayhall, CPA, CFP for being named a partner in the firm effective January 1, 2001. Trey has been with the firm since 1993 and his focus is on retirement, estate, and financial planning.
E-Filing
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IRS e-file is fast, accurate and secure. The IRS sends back automatic proof that your paperless return is accepted within 48 hours and there is a reduced chance of receiving an error notice from the IRS.
It's time to e-file now. Come or call us today.
Team Member Profile
CHARLES R. MAYHALL III (TREY)
Trey began working with our firm in 1993 and became our newest partner in January of this year. Working primarily with estate and financial planning clients, Trey helps these clients achieve their financial goals. He earned his Certified Financial Planner (CFP) designation from the College of Financial Planning in Denver, Colorado in 1999. Trey is also known as the local Quick Books expert.
A graduate of Spring Hill College with an undergraduate degree in accounting and a master's in business administration, Trey is married to Emma Melazzo Mayhall, a computer programmer with McAleer Computers. He currently serves as Vice President of the Spring Hill College Alumni Association, and during his free time Trey enjoys water skiing, kayaking, and just spending time on the water with Emma, friends, and family. Always willing to lend a hand and go the extra mile for both clients and coworkers, we congratulate Trey on becoming a partner in the firm.
Ask the Tax Man
Dear Tax Man,
You remember that old country song about being on the "backside of forty, the short side of time, tired of the rat race, with quittin' on my mind..."? Well that's how I feel. That's right. At the ripe old age of 47 I'm already thinking about retirement. My brother-in-law, a.k.a. Mr. Know-it-All, says I can start drawing on my $200,000 IRA now without paying any penalty. I think he's crazy. I always thought my IRA was "locked up" until age 59 1 /2, and if I messed with it before then I'd be looking at a big fine, or maybe even jail time.
As usual, I'm confused. Who's right here? We've got six cold ones riding on your answer.
Your Buddy, Bubba
Dear Bubba,
The bad news is that Mr. Know-it-All is right, so go buy him that first beverage. The good news is that you'll save a lot more than the price of a six pack from this advice. Here's the scoop:
If you withdraw all of your IRA now at age 47, you are generally subject to the 10% early distribution penalty plus federal and state income taxes. Depending on your tax bracket, this can result in your actually receiving less than half of your IRA, with the rest going to the IRS and state.
As with most tax rules, however, there are exceptions. One is that withdrawals made in "substantially equal periodic payments" are not subject to the 10% penalty.
So how much can you withdraw without incurring a penalty? It may be more than you think. There are at least three methods to choose from, and you need the IRS life expectancy tables to do the math. At age 47, the tables give you a remaining life expectancy of 35.9 years. So here's how much you could withdraw annually under each of three methods, using an 8% assumed interest rate:
a) Recalculated Life Expectancy $5,571
b) Amortization Method $16,857
c) Annuity Method $17,069
You would owe income tax on the distribution each year, but not the 10% penalty, provided you continue such distributions until reaching age 59 1 /2, which in your case will also exceed the required 5-year minimum. If you violate this by taking out too much or too little in a year, you might be subject to the 10% penalty for all back years.
Bubba, these rules can be complicated and I've only covered the basics, so please get professional advice before taking any early distributions. You can mix up your song lyrics without doing any harm, but mixing up these IRA rules can cost you a lot of cold ones.
Dear Tax Man,
I'm turning 70 this month. In addition to my IRA, I've got a lot of other investments that generate more than enough for me to live on, and I'm in good health and still work part time. Besides that, I go to the boats in Mississippi a good bit and usually win. Anyway, my financial advisor is telling me that I must begin taking distributions from my IRA this year, even if I don't need it. Is this true? If it is, how much am I required to withdraw? When? And what if I choose not to withdraw it?
Sincerely yours, Lucky Seven
Dear Lucky,
A winner at the boats! That is amazing. If I may ask, are you also a winner at tax time? Strange as it may seem, in all my years of doing tax returns, I've never seen a Form 1040 that showed net gambling income.
But, back to your questions. And what a loaded bunch of questions you have.
Addressing the last one first, not taking the required IRA withdrawal at age 70 1 /2 subjects you to a whopping 50% penalty. Wow! So you obviously want to take at least the required minimum distribution.
Now, when should you take that first distribution? You are required to do it by April 1st of the year following the year you turn 70 1 /2. Since your birthday is in the first six months of 2001, you will turn 70 1 /2 this year and your first required distribution is due no later than April 1, 2002. However, distributions each year thereafter are required by December 31st. So I would advise you to consider taking your first distribution by December 31st of this year. Otherwise, you will be doubling up on your distributions in 2002 (that is, you'll be taking the first and second distributions both in the same year - 2002).
Finally, how much do you need to withdraw? Well I'm glad you asked such a timely question. The Treasury Department recently published proposed regulations that substantially change (and hopefully simplify) the rules. You and other IRA owners are now provided with a simple, uniform table to determine the minimum distribution required during one’s lifetime. This makes it far easier to calculate the distributions because unlike the old rules, now:
a) you no longer need to determine a beneficiary by the required beginning date,
b) you no longer need to decide whether or not to recalculate life expectancy each year to determine the required minimum distribution, and
c) the required minimum distribution during lifetime can be calculated without regard to the beneficiary's age (except when required distributions can be reduced by taking into account the age of a beneficiary who is a spouse more than 10 years younger than the employee).
The new table, which again applies to all lifetime distributions, looks like this (age followed by the minimum distribution divisor):
| 70-26.2 | 75-21.8 | 80-17.6 | 85-13.8 | 90-10.5 | 95-7.8 | 100-5.7 | 105-4.1 | 110-4.1 |
| 71-25.3 | 76-20.9 | 81-16.8 | 86-13.1 | 91-9.9 | 96-7.3 | 101-5.3 | 106-3.8 | 111-2.6 |
| 72-24.4 | 77-20.1 | 82-16.0 | 87-12.4 | 92-9.4 | 97-6.9 | 102-5.0 | 107-3.6 | 112-2.4 |
| 73-23.5 | 78-19.2 | 83-15.3 | 88-11.8 | 93-9.8 | 98-6.5 | 103-4.7 | 108-3.3 | 113-2.2 |
| 74-22.7 | 79-18.4 | 84-14.5 | 89-11.1 | 94-8.3 | 99-6.1 | 104-4.4 | 109-3.1 | 114-2.0 |
So if you have $100,000 in your IRA at 12/31/00, your required minimum distribution for 2001 is $3,817 ($100,000/26.2). Next year, the minimum is the IRA value at 12/31/01 divided by 25.3. And so on. These tables and the regulations are proposed to be effective for distributions for calendar years beginning on or after January 1, 2002. For distributions for the 2001 calendar year, IRA owners are permitted, but not required, to follow these proposed regulations in operation, notwithstanding the terms of the IRA document. IRA owners may therefore rely on these proposed regulations for distributions for the 2001 calendar year.
Petis Bois Island is quite peaceful this time of year, despite the cold. Very few boats, the alligators are in hibernation, and the fishing is good between cold snaps. With Spring approaching, Tax Man knows the big sow trout will soon be patrolling the island. Presently, he is settled on a fallen tree observing a pair of red birds. Have these creatures stopped here for a rest before heading further south on their annual migration? Tax Man is not sure - a result of spending too many years under a flourescent light and too little time outdoors. The male bird is a brilliant red. Is there anything else quite this magnificent in color? The male Wood Duck is perhaps the red bird's closest rival.
Between bird watching, fishing and doing nothing at all, Tax Man is now working on his new hobby of Island golf, after finding a washed up golf bag on the beach. Never much of a golfer, he amuses himself by making up his own rules. For example, when a ball in flight is headed for a sand trap (nearly every shot on this beach course), Tax Man cups his hand to his mouth and loudly hollers "GORE" to warn unsuspecting sand crabs. Then, if the ball is buried in the sandy fairway, with only a dimple or two showing through, Island rules permit a nudge or two (or even three or four) to better position the ball for the next shot. There are no penalty strokes, and recounts are permitted on selected holes as many times as necessary to get the desired score.
Despite all these activities and there being much area on the Island left to explore, Tax Man is growing restless.. He is contemplating a canoe trip to Chandeleur Islands to the south. More on this next quarter. First he needs to build a canoe.
Vision Statement
Our firm’s objective is to maximize our clients’ wealth. We strive to be the premier accounting and consulting firm in our area by offering a complete range of quality services to our clients. We will employ only the best people and ensure outstanding training and long-term career opportunities.
Our Team Members
Auditing Team
Deborah Smith deborahs@csbcpa.com
Eric Kennedy erick@csbcpa.com
Joey Bailey joeyb@csbcpa.com
Bookkeeping Team
Kathy Alford kathya@csbcpa.com
Ruthie Carpenter ruthiec@csbcpa.com
Jana George janag@csbcpa.com
Marites Rogers maritesr@csbcpa.com
Business Development Consulting Team
Kenny Crow kennyc@csbcpa.com
Danny Rickert dannyr@csbcpa.com
Financial Planning Team
Lindsey Stuardi glyndam@csbcpa.com
Trey Mayhall treym@csbcpa.com
Randy Bolden randyb@csbcpa.com
Debbie Muller debbiem@csbcpa.com
Tax Team
Gina Russell ginar@csbcpa.com
J.D. Martin jdm@csbcpa.com
John Shields johns@csbcpa.com
Rachael Smith rachaels@csbcpa.com
Steve Hellman steveh@csbcpa.com
Eric Dayton ericd@csbcpa.com
Alicia Spencer alicias@csbcpa.com
Support Team
Barb Frerman barbf@csbcpa.com
Deborah Martinsen deborahm@csbcpa.com
Jill Shinault jills@csbcpa.co
Anna LaFleur annal@csbcpa.com
Mobile
334/343-1012
800-347-8583 Fax: 334/343-1294
Gulf Shores
334/968-4337 Fax: 334/968-8995
Client Profile
AMERICAN CROWN, INC.
If you have ever been to a trade show or a company picnic and received a hugger, stress ball, pen, pencil, or coffee cup, you may be surprised to know that it was manufactured in Mobile. In fact, it may have been made by one of our newest clients, American Crown, Inc. American Crown manufactures promotional products such as those discussed above, as well as over 200 other items. Bob Bickert purchased the company in 1995. Bob started with only 6 employees and after the first 6 months was not sure if he had made a mistake. However, by June of 1996 the company began to turn a profit and from then on success has followed Bob and his now over 90 employees. With sales of 5.2 million in 1999 and double that in 2000, Bob and American Crown continue to look toward expansion with a new facility and increased sales.
American Crown has been recognized on both a local and national level for their tremendous growth. Crown was rated 140 of Inc. Magazine's 500 fastest growing private companies in America. American Crown was also awarded The Mobile Chamber of Commerce Future 30 Award for being one of the 30 fastest growing companies in Mobile and Baldwin County. Crown's success is due to hard work and a customer service motto of "whatever it takes.” Bob also attributes Crown's success to his wife Lisa, production manager Brian Bush, and the fantastic group of employees they have assembled. Crow, Shields & Bailey is pleased to be associated with a company who shares our commitment to success, teamwork, and excellent customer service.
The Deadline is When??
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.
March 15, 2001
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 17 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 17 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 2001.
Team Member News and Braggin’ Rights
Randy Bolden joined the firm in February and is a member of our financial planning team. Randy comes to us with over 20 years of investment experience, having previously worked at Regions Investments and Morgan Keegan. He is also the Director of Music at St. Dominic Catholic Church. Randy graduated from the University of Alabama with a Bachelor of Arts in Music and Organ Performance and is a member of the American Guild of Organists.
Anna LaFleur joined the administrative team in December. She recently moved to Mobile from Opelousas, Louisiana and has that wonderful, distinctive Louisiana accent! Anna has over ten years of administrative experience. She has one daughter, Sydni, who is 9 years old.
Debbie Muller joined the firm in January and is working on our administrative team. Debbie is an administrative professional with over 17 years of executive-level support experience. She is married to Roger Muller and they have one daughter, Natalie, who is 18 months old. Debbie currently serves as a Director of Children of the World, Inc. Adoption Agency in Fairhope.
Alicia Spencer, CPA is working with the tax team through April 15th. Alicia graduated from the University of South Alabama with a Bachelor of Science in Accounting. She most recently served as Director of Corporate Accounting for a large local health services organization. Prior to that she worked for Price Water House and KPMG and has over 14 years combined experience in industry and public accounting. Alicia is married to John Spencer and they have one daughter, Christina, who is two years old.
Eric Kennedy recently announced his engagement to Jenny Phillips. Their wedding date is set for October 20, 2001. Eric is on our accounting and auditing team and Jenny is a music teacher.
Eric Dayton and his wife Holly proudly announce the birth of their daughter Mattie Elizabeth. Mattie was born on December 14th and weighed 7 lbs. and 3 ozs.
Gina Russell was named McGill-Toolen Catholic High School Alumna Volunteer of the Year. Additionally, Gina has completed all requirements to earn the designation of Certified Valuation Analyst or "CVA." She has completed several valuations already, and is available to assist clients in valuing business interests in many situations, including: buy/sell agreements; estate tax valuations; divorce and litigation support.
John Shields passed the exam to become a Certified Financial Planner. He joins fellow team members Kenny Crow and Trey Mayhall who also have earned the CFP designation. We offer comprehensive financial planning services through our affiliate, First Financial Group.
Steve Hellman and Eric Kennedy both passed parts of the CPA examination given last November. Congratulations to these team members for a job well done!
Tax Tidbits
“It's income tax time again, Americans: time to gather up those receipts, get out those tax forms, sharpen up that pencil and stab yourself in the aorta.”
- Humorist Dave Barry
How we file. If past years are any indication, more than half of us will file before April 1st. In fact, last year, the IRS received 70.2 million returns by March 31st, or 55% of the 128.4 million returns filed through Dec. 22, 2000. About 7.7 million taxpayers, or about 6%, filed for extensions in 1999, the latest year for which data were available.
“The best things in life are free, but sooner or later the government will find a way to tax them.”
- Unknown, from the Tax Analyst
Policy Center Website
We live to pay. The Tax Foundation, a tax-exempt educational group that studies taxation, says Americans spend more money per capita on taxes ($10,447) than on food ($2,713), clothing ($1,436) and shelter ($5,913) combined.
When we're done paying. The Tax Foundation also reports that Tax Freedom Day fell on May 3 last year. That's the day that the group calculates Americans, working from the first of the year, pay off their collective local, state, and federal income tax bills and start working for themselves.
What does it take to be at the top? The short answer is: a lot. Tax Foundation data show:
“The hardest thing in the world to understand is the income tax.” - Albert Einstein
Who pays the taxes? Yes, the rich do pay more. The averages: