Call Us: 414-545-1890

15    16    17

Hammernik & Associates BBB Business Review

Monthly Archives: June 2016

How State Tax Impacts Salary

The NBA draft went down last night, and some of these kid’s lives are forever changed. The amount of money they will make on their first contract is more than most Americans will make in their lifetime. While I am a huge sports fan and enjoy the draft for what it is, I also like to look at the tax implications involved. When you dissect everything, it is eye opening to see how State tax rates can have a larger effect on the amount of money that they make than the slot that they are drafted.

Let’s take a deeper look into the draft so I can show you what I am talking about. I am a Marquette basketball fan, so we will begin with analyzing the local kid, Henry Ellenson.

henry1

Henry was picked with the 18th overall pick by the Detroit Pistons. Michigan has a top state tax rate of 4.25%. A native of Rice Lake, WI, Henry escapes the WI top tax rate of 7.65 to the friendlier Michigan rate. However, let us take a look at the financial impact of Henry being drafted at #18 instead of one pick earlier at #17.

grizz

 

Above are the projected guaranteed 2 year contracts that each slot in the draft will receive. The difference between being selected #17 and #18 is only $183,240…which isn’t monumental when you are talking about millions of dollars. However, Memphis is in the state of Tennessee, which is NO STATE TAX. Taking the 4.25% Michigan state tax off of Henry’s contract with the Pistons results in a total tax of $148,109. So that difference of $183,240 suddenly becomes a difference in salary of $331,349.

Now, let’s take a look at how getting drafted  5 picks later actually benefited one of the draftees from a financial standpoint. We will focus on the 25th pick by the LA Clippers and the 29th pick of the San Antonio Spurs. The Clippers took Brice Johnson from the University of North Carolina and he is projected to make $2,605,080 in guaranteed salary. The Spurs took Dejounte Murray from the University of Washington with the 29th pick and he is projected to make $2,413,320 in guaranteed salary.

spurs

The simple math here tells us the Johnson will make $191,760 more than Murray. However, San Antonio is in Texas which also has NO STATE TAX. Whereas, Brice Johnson will become a California resident which has the highest state tax in America with a top rate of 13.3%. This state tax will result in a cut off Johnson’s salary of $346,475, thus, Dejounte Murray will actually make $154,715 more than Johnson as he resides in the state of Texas.

It is important to remember that all athletes are subject to the “jock tax”. This means that they are taxed by each state for the number of days that they are working (playing) in each individual state. Therefore, none of the athletes are completely free from paying state taxes. However, the majority of their income is taxed in their state of residency.

All in all, the major hype around drafts is usually about how high an individual is drafted, but there is more to the financial story when you dig deeper into the numbers. All of these athletes have reached their childhood goal and are now in position to be financially secure for life if they manage their money in the proper way. Unfortunately, a large percentage of athletes eventually go broke due to mismanagement or bad advice with their finances. I just find it fascinating how the state tax rates can have a large effect on total take home pay for each individual.

If you are a sports fan or not, I hope that you enjoyed digging into the impact of state tax. There is a reason that many retirees move to Florida, and it is not just because of the great weather!

*All figures are based on NBA slotted projections. Calculations do not take into account federal taxes and other income and deductions that these individuals may have.

Our summer newsletter is now out, check it out! Summer 2016 Newsletter

P.S. Inside the newsletter you will find out about our contest that we are running through 7/1/16. Let us know what you think about Hammernik & Associates. Post a review on  Google or Yelp and be entered into our contest to win a $100 VISA gift card. Your opinion matters to us, don’t keep us a secret!

 

Nicholas Hammernik, EA

Nick is Talking Tax To Milwaukee. Combing the boring topic of tax with the latest news in pop culture and sports.

Nick is Talking Tax To Milwaukee. Combing the boring topic of tax with the latest news in pop culture and sports.

 

What To Do When You Receive An IRS Phone Call

One of the most common phone calls that we get at our office is clients calling to say that the IRS called them and told them that they need to pay them immediately. These are IRS scam phone calls that have been going on for almost two years. Want to know what to do if you receive one of these call or an email from the IRS?

Watch Nick Hammernik and Lori Beck tell you what to do:

What To Do If The IRS Calls You

If you have any questions or concerns about identity theft our financial scams, please call our office at 414-545-1890

 

How To Avoid IRS Interest

The IRS has decided they want more of your money! As of the second quarter of 2016, they have raised their interest rate from 3% to 4%.

Do you want to know how to avoid paying the IRS that interest? We help Milwaukee and Waukesha with tax issues.

Watch This Video

Blog Special: Schedule a tax planning session with your Hammernik & Associates adviser by 6/17/16 for only $59. Our normal tax planning rate is $175/hr, so don’t miss out!

If you need a Tax Cleanse with some IRS debt, schedule a complimentary consultation to see how we can help you out.

We will be trying to do video blogs every other week. Please let us know if there is a certain topic you would like to see discussed!

 

Until next time,

 

Nicholas Hammernik, EA

Sweet Tooth Taxes

A couple of recent topics have given me a tax sweet tooth. The Soda Tax and National Doughnut Day.
I am not huge on sweets, but I know a lot of you out there are! Grab a free doughnut today and enjoy that soda while it is still tax-free 😉
REMINDER: Our educational event ” The Future Looks Bright” is coming up on JUne 9th. Please contact Lori at lbeck@hammernikassoc.com to reserve your spot ASAP. Spots are filling up. This event will educate you on the current financial status of the market and what the future of the market looks like.
Image
Today, June 3rd, is National Doughnut Day. It seems like everyday is National “something” Day…Anyways, Krispy Kreme is giving away FREE doughnuts and also trying to raise money for the Salvation Army in the process. Check out the details and the tax implications of donating to a charity here:
Image
The easiest way for a city or a state to make money is to TAX it’s residents. We here in Milwaukee know that all too well with the Miller Park stadium tax that we pay.
Well, the Mayor of Philadalephia has proposed to put a tax on soda ( or “pop” as some regions of the country call it). Now, this tax is a two-fold agenda. Soda is one of the most popular refreshments…it is also pretty bad for your health. Try pouring a can on something rusty and see what happens.
There is a large volume of soda purchased in the United States, therefore a tax would produce a large revenue stream for the City of Philadelphia. Also,this increase in price may drive residents of Philly to consume less soda. Thus, making Philadelphia a healthier city in that regards.
Do I think this will pass? No. However, if it works in Philadelphia, don’t be surprised for it to spread to other cities.
Read the full article here:
Milwaukee, Waukesha, Brookfield, New Berlin, Wauwatosa tax preparation and tax planning