Sitzberger Widmann & Company S.C.

Personal Tax Advice: Double Up on Deductions

admin — Mon, 16 Nov 2009 13:06:42 +0000

by Carl Marzolf, CPA

As a taxpayer, knowing when to pay tax deductable expenses can significantly lessen your individual tax burden.

When computing your taxable income, the IRS gives taxpayers two options: take the standard deduction set by the IRS, or itemize your deductions (which includes items like real estate & state taxes, mortgage interest, and charitable contributions paid in the current year).

Taxpayers have considerable discretion as to the timing of payments of certain itemized deductions. Items like real estate taxes and estimated state tax payments can be paid before or after December 31^st and charitable contributions can be concentrated in a more beneficial year as well. In Wisconsin you can even prepay your entire estimated taxes for the up coming year by filing Form A-115.

A way to reduce the amount of total tax owed is to accelerate enough itemized deductions into the current year to make the subsequent year’s itemized deductions below the standard deduction (or vice versa). This way of reducing your taxes is called “doubling up” or “bunching.”

As an example, assume the following:

You and your spouse both make $50,000 in wages totaling $100,000 for a given year
Throughout a normal year, you and your spouse have $15,000 of itemized deductions comprised of the following:
- $7,500 in real estates taxes due January 15^th of the following year
- $5,000 in state estimated payments; which can be prepaid in the prior year
- $2,500 in charitable contributions

If you and your spouse pay all of your itemized deductions in the year that they are due (assuming 2008 rates & exemptions for subsequent years), you will pay a total of $48,776 in federal taxes over a four year period:

Typical itemized deductions schedule.

By accelerating itemized deductions into the current year and taking the standard deduction in the subsequent year, you will pay a total of $43,740 in federal taxes over a four year period:

The benefits of doubling up your itemized deduction.

In four years by doubling up your deductions in certain years and taking the standard deduction in subsequent years, you could save $5,036 in federal taxes all by timing when you write checks for expenses that you are already paying.

The doubling up technique is most effective for taxpayers who have little or no itemized deductions for mortgage interest expense, due to the difficultly of shifting mortgage interest from one year to another.

A detriment of doubling up your real estate taxes is a reduction in WI’s Homeowner’s School Property Tax Credit, usually $300 per year for homeowners. The credit is allowed for homeowners in the year real estate taxes are paid for their principal residence. In the doubling up technique, real estate taxes are paid in certain years and not in others. By doubling up you forgo the credit in the years in which no real estate taxes are paid.

If you are subject to alternative minimum tax (AMT) doubling up your deductions will not reduce your total tax liability. Items such as real estate taxes and state income taxes are not deductable in computing AMT, so shifting them from one year to another has no effect on the total tax you will pay. People who are most susceptible to AMT have many personal exemptions and/or substantial itemized deductions. High income individuals are also susceptible to AMT due to certain phase outs, which start at $150,000 for married couples filing joint and $112,500 for single and head of household filers.

As with any tax issues your specific situation may vary. Please contact one of our professionals to see if doubling up can help you.

Biography - Randy R. Brinkmann, CPA

admin — Wed, 01 Jul 2009 23:47:03 +0000

: Randy Brinkmann, CPA

rbrinkmann@sitzwidmann.com

Randy brings a wealth of public accounting experience to Sitzberger, Widmann & Co. and has worked extensively with manufacturing firms, not-for-profit, governmental, and audit engagements.

Upon graduating from UW-Oshkosh, Randy worked on the audit staff at Deloitte & Touche, spending an impressive amount of time serving clients out of the office. Randy has also worked as senior manager at other Milwaukee area public accounting firms in addition to being a controller in the private sector. He joined Sitzberger, Widmann & Co. in 2004 and has recently become a shareholder.

Randy resides in Waukesha with his wife, Melissa, and their two children, Britta and Collin.

Professional Designations and Affiliations

Certified Public Accountant, 1992
Member, AICPA
Member, WICPA

Education

University of Wisconsin-Oshkosh
Bachelor of Business Administration – accounting, 1988

Community Activities

Waukesha Area Chamber of Commerce
Treasurer & Board Member, Mount Calvary Lutheran Church
Board Member, Camp Phillip (Wautoma)

Biography - Andrew H. Ferber, CPA

admin — Wed, 01 Jul 2009 22:57:40 +0000

Andrew H Ferber, CPA

ahferber@sitzwidmann.com

Andrew brings an extensive background in both tax and audit to Sitzberger, Widmann & Co. after running his own accounting practice for many years in the Milwaukee area.

He began his accounting career in 1964 with a major national accounting firm working in audit and management advisory services.

Andrew and his wife, Carole, reside in Elm Grove.

Professional Designations and Affiliations

Certified Public Accountant, 1969
Member, WICPA

Biography - Ralph Redlin, CPA, CVA

admin — Wed, 01 Jul 2009 21:09:01 +0000

Ralph Redlin, CPA, CVA

rredlin@sitzwidmann.com

Ralph has had a long, distinguished career in public accounting which began upon graduating from the University of Wisconsin-Milwaukee and his first job with the IRS in 1968. He spent four years at the IRS where he became a Revenue Agent. Ralph also served in the US Army from 1970 to 1976. He has been an Owner/Partner in the practice of Public Accounting since 1972.

His extensive accounting background and intense experiences lent Ralph the fortitude to withstand combative lawyers in the courtroom. Since 1976, Ralph has testified as an expert witness in numerous legal matters involving business valuation and consultation in actions around divorce, contract dispute, patent infringement, estate valuation and other issues.

Ralph merged with Sitzberger, Widmann & Co. in 2005 where he continues to work diligently today. He is active in community affairs and has also been appointed and served on local government oversight commissions.

He and his wife, Donna, live in Hartland, and his two adult children live in the area. He is active in his local church and has served as a group leader and Sunday school teacher for many years.

Professional Designations and Affiliations

Certified Public Accountant, 1974
Certified Valuation Analyst, 2007
Member, NACVA
Member, AICPA
Member, WICPA
Member, Metropolitan Builders Association

Education

University of Wisconsin-Milwaukee
Bachelor of Business Administration

Community Activities

Past president, local Lions and Rotary Clubs
Board of Directors, various not-for-profit agencies

Awards and Press

Received the Milwaukee Magazine’s 2009 Five Star Award – Best in Client Satisfaction Wealth Manager

Biography - Mark A. Widmann, CPA

admin — Wed, 01 Jul 2009 15:38:23 +0000

Mark A Widmann, CPA

markw@sitzwidmann.com

Mark joined Sitzberger, Widmann & Co. in 2000 bringing along his excellent reputation of personal service, talent and expertise.

He graduated from UW-Milwaukee in 1977 and began his public accounting firm at Alexander Grant & Company, and later became a partner at Donald Tushaus & Company public accounting firm. He owns an impressive array of accounting, tax and advisory services to individuals and closely held businesses.

Mark and his wife, Joan, reside in Hartland.

Professional Designations and Affiliations
• Certified Public Accountant, 1981
• Member, AICPA
• Member, WICPA
• Member, Metropolitan Builders Association

Education
• University of Wisconsin-Milwaukee
• Bachelor of Business Administration – accounting, 1977

Community Activities
• Member, Metropolitan Builders Association
• Member, Brookfield Chamber of Commerce
• Past Chairperson, Waukesha Practitioners WICPA Group

Accounting and Assurance

admin — Wed, 18 Mar 2009 07:30:42 +0000

Maximize your profits while minimizing your risk with Sitzberger Widmann

Financial consultation and analysis

We provide our clients valuable financial analysis and consultation to achieve and maintain maximum profitability. We take a great amount of pride in knowing that we are working to positively impact their bottom line

Preparation of financial statements

Each month you’ll receive a detailed report on your financial activity and results. This allows for easy review and organization.

Audits
Reviews
Compilations
Internal control reviews

Make sure you are getting the most out of your internal controls. Let Sitzberger Widmann & Company S.C. conduct an unbiased and thorough internal audit. We’ll let you know what’s working, what’s not, and how to ensure your controls are protecting your business.

Review of business policies and plans

Are you mapping your road to success? Do your policies work to achieve the financial goals of the company? At Sitzberger Widmann & Company S.C., we help our clients ensure their policies and plans are current, understandable, and clear. This service helps many small companies deal effectively with today’s ever-changing business climate.

Maintenance of property, equipment and depreciation schedules

Turnkey maintenance of property, equipment and depreciation schedules keeps your company’s asset valuation current and accurate.

Payroll processing and reporting

Take another administrative burden from your staff and let our team process your entire payroll. We’ll also maintain all of your records and provide monthly reporting. Our integrated software is designed to manage all payroll related employee data. It assembles and documents the appropriate files, and puts it into easy to read formats to facilitate easier management. We process employee paychecks and mail, deliver, or deposit them.

Management Consulting

admin — Wed, 18 Mar 2009 07:30:31 +0000

If you are considering a new initiative, merger or even a startup, Sitzberger Widmann & Company S.C. can help you maximize your efforts and avoid costly pitfalls.

When you steer a ship, you don’t want to be alone. With our experience in the tried and true management methods, along with the efficiencies of new technologies now available, we can help you navigate your business through the roughest of waters. At Sitzberger Widmann & Company S.C., our clients’ success is our number one motivation.

Strategic business planning
Business and practice management
Business valuations
Litigation support
Assistance in obtaining financing
Inventory management and control
Cost accounting
Operational audits
Merger and acquisition assistance

Tax Consulting / Compliance

admin — Wed, 18 Mar 2009 07:30:10 +0000

Sitzberger Widmann and Company, S. C. is here to personally guide you through the tax reporting process and navigate intimidating tax codes

For every action there is a consequence. In the business world, there is a tax consequence for virtually everything your business does or doesn’t do. Sitzberger Widmann & Company, S.C. specializes in personal advisement to help your business make decisions as they relate to the complex world of taxes. Not every company is large enough to have its own tax and compliance department, and that’s why we’re here. When you contact a Sitzberger Widmann & Company S.C. representative, you’ll have personal involvement and commitment. Tax consulting and compliance services include:

Tax planning
Tax return preparation & review
Form of business entity selection
Real estate planning
Retirement/ pension planning
Annual compliance reporting for retirement plans
Merger and acquisition planning

Deduction for Qualified Production Activities

admin — Wed, 18 Mar 2009 06:09:51 +0000

Frederick J. Sitzberger

The American Jobs Creation Act of 2004 has created a new tax deduction for businesses that engage in production activities in the United States. This deduction will provide a significant tax break for many businesses.

The new deduction for domestic production activities is available to corporations and individuals for taxable years beginning after December 31, 2004. Qualifying businesses are allowed to deduct a percentage of their “qualified production activities income” (QPAI) from taxable income (for corporations) or adjusted gross income (for individuals). The deductions are as follows:

Years	% of QPAI
2005 and 2006	3%
2007, 2008, and 2009	6%
2010 and thereafter	9%

The deduction will also be effective for state tax purposes, although it remains to be seen whether any states decide to “decouple” from the federal deduction in order to avoid a loss of business tax revenue. According to the Wisconsin Department of Revenue, the state of Wisconsin usually waits until later in the year to make decisions, and as of yet, the American Jobs Creation Act has not been adopted.

The determination of whether you will qualify for the deduction depends on the nature of your business. The most important and difficult thing to determine is a taxpayer’s domestic production gross receipts (DPGR). Certain business activities are expressly listed in the legislation and the gross receipts from those activities are considered DPGR. They are as follows:

Any lease, rental, license, sale, exchange, or other disposition of:

- Qualifying production property that was manufactured, produced, grown, or extracted (MPGE) by the taxpayer in whole or in significant part within the United States.

- Any qualified film produced by the taxpayer

- Electricity, natural gas, or potable water produced by the taxpayer in the U.S.

Construction of real property or substantial renovations performed in the United States
Engineering and architectural services performed in connection with U.S. construction.

DPGR does not include, however, gross receipts from:

The sale of prepared food at a retail establishment
Property leased to a related party
The transmission or distribution of electricity, natural gas, or potable water
The performance of services

The first category of economic activity qualifying for the deduction, which should benefit the most businesses, is also the category that will be the most difficult to apply. The IRS recognized that certain areas required further definition and, therefore, released Notice 2005-14 which is intended to provide interim guidance regarding the new deduction while the regulations are being written. The IRS has stated that the “qualifying production property” that is eligible for the new deduction includes: (1) tangible personal property, (2) computer software, and (3) certain sound recordings.

Once DPGR is known, a taxpayer’s QPAI can be found. QPAI is determined on an item-by-item basis and is calculated as follows:

Domestic production gross receipts (DPGR)

- Cost of goods sold

- Directly allocatable expenses

- A ratable share of the taxpayer’s unallocated expenses

Qualified production activities income (QPAI)

x Applicable rate of deduction

= Qualified production activities deduction*

* Limited to 50% of W-2 wages

In general, gross receipts and costs for the year must be properly recognized using the taxpayer’s accounting method for federal income tax purposes and if a taxpayer exclusively manufactures qualifying production property in the U.S. and has no other income, QPAI should be equal to taxable income.

In keeping with the legislation’s theme of job growth, the actual deduction is limited to 50% of the taxpayer’s W-2 wages paid to employees for the taxable year. This can be complicated because the definition of W-2 wages takes many factors into consideration and there is no one box on Form W-2 that meets the definition of W-2 wages for this deduction. There are three methods that can be used to determine W-2 wages, and you should speak with a tax advisor for assistance in utilizing one of the methods for the calculation. Because the underlying theme of the legislation is to encourage U.S. job formation, this limitation could prevent businesses that rely primarily on contractors, or require only a small employee base, from taking full advantage of the new deduction.

As you can see from above, the new deduction is broad in scope and has the potential to reduce the taxes of many businesses. It also contains many traps, but with proper planning, most businesses and individuals that are involved in production and have employees can benefit from this deduction. Businesses should structure their activities so that they take maximum advantage of the new law. A coordinated approach to tax planning will allow many businesses to become more competitive.

The Banker is Your Best Friend IV

admin — Wed, 18 Mar 2009 06:07:07 +0000

Frederick J. Sitzberger

Many times during the year-end planning for our clients they ask me, “Fred, is there one item I should concentrate on for my financials for the bank?” Since I am paid by the hour, I say, “Let me ponder this.” What is most important, current ratio, inventory turnover, aging of accounts receivable, days sales in accounts receivable, days of inventory on hand, etc.? I believe it is the “staying power” of your business. This is measured by net worth %,

This is calculated by the following:
Equity/Total Assets
I illustrate this to my clients in the following manner:
Percent

Banker’s Response
0-20% The banker will seldom return your call the same day.
21-30% The banker will call you once a year and every second year take you out to lunch.
31-40% Lunch and one ball game
40-50%+ Lunch, golf, ball games, birthday cards, you name it you got it.

The banker is in the business to lend money risk free. At higher percentages, his risk is greatly reduced as your staying power increases.

As you begin building your business, build your net worth. It allows the staying power for the future and will allow your banker to be a trusted semi-equity partner without risk to them, which makes them happy.