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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.

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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.

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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.

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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.
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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:
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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

Tax Breaks For The Troops

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As Memorial Day weekend approaches, it is time to pay our respects to those that lost their lived serving for our country. However, it is also a good time to celebrate those that have served, or are currently serving our country.

I have massive respect for our service members. I have a few friends and a few clients that have served our country. I’m not sure I could physically or mentally do what they do/did. However, I can help them with some tax advice….


Talking Tax to Milwaukee’s Military:

For Business Owners: Milwaukee business owners have the opportunity to employ veterans and get a credit for it. Not only are you helping out a veteran, but you are also helping your business.

  • Short-term Unemployed: A credit of 40% of the first $6,000 of wages (up to $2,400) for employers who hire veterans who have been in receipt of unemployment insurance or compensation for at least 4 weeks or who have received assistance from a supplemental nutrition assistance program under the Food and Nutrition Act of 2008 for at least a three month period during the 15-month period ending on the hiring date
  • Long-term Unemployed: A credit of 40% of the first $14,000 of wages (up to $5,600) for employers who hire veterans who have been in receipt of unemployment insurance or compensation for longer than 6 months (whether or not consecutive) in the one-year period ending on the hiring date.

For Military Spouses: Military spouses are strong individuals. They are responsible for taking care of a lot different things. Moving around from different bases is very common, and the IRS recognizes this.

  • Prior to 2009 there wasn’t much relief for military spouses. They generally had to pay income taxes to the states where their spouses were stationed. Under the Military Spouses Residency Relief Act signed into law on November 11, 2009, military spouses who earn income in the state where their spouse is stationed may be able to claim either the state they are located in or their spouse’s legal residence (if they have established residence there as well) for tax purposes. This only matters if the spouse has income of their own. That could generate big savings if their spouse’s legal residence has lower tax rates — or no income tax at all.

For Veterans or Surviving Spouses: This credit is specific to the State of Wisconsin.

Veterans and Surviving Spouses property tax credit?

The veterans and surviving spouses property tax credit is a credit equal to the amount of property taxes paid during the year on an eligible veteran’s or surviving spouse’s principal dwelling. The credit is claimed on the Wisconsin income tax return. Before claiming the credit, the veteran or surviving spouse must obtain verification of his or her eligibility for the credit from the Wisconsin Department of Veterans Affairs (WDVA). A copy of this verification must be attached to the Wisconsin income tax return for the first year that the credit is claimed.

 

These are just a few of the tax breaks that I have come across while serving some of my clients. There are also a variety of other tax deductions, credits, and breaks that are available to current or former military members. If you know of someone that may be able to take advantage of these deductions, please have them contact our office. We help Milwaukee, Waukesha, New Berlin, Brookfield, Wauwatosa with all tax preparation needs.

While you are out enjoying this weekend with friends and family, remember the reason you are able to enjoy the (hopefully) beautiful Milwaukee weather… The Troops!

 

 

Happy Memorial Day!

 

Nicholas Hammernik, EA

Milwaukee Bucks Players’ Identity Stolen

Yesterday, news broke that a Milwaukee Bucks employee released the W-2 information for the players of the Bucks to a phony e-mail address. This means that someone has access to the identity of multi-millionaires such as Jabari Parker and Giannis Antetokounmpo. Having the basketball stolen from them is nothing new, but their identity is unexpected.

Scary, right?

Well, this is nothing new. Identity theft has been the hot button in the tax industry over the past 2 years. Last year, the IRS came out with a statement that their transcript website was hacked and there was the possibility that millions of taxpayers may have been affected. I personally was one of the taxpayers who received a letter notifying me of this. Last year, Katrina Cravy at Fox 6 featured my Dad in a story about ID theft.

Identity theft comes in many different forms. However, from the tax viewpoint there are two main forms. The IRS scam phone calls ( REMEMBER: THE IRS WILL NEVER CALL YOU) and the filing of tax returns under someone else’s social security number. Having access to someone’s social security opens up a lot of possibilities for a thief.

Getting back to the Bucks’ situation, this shows how easy it is for thieves to access important information. An organization such as the Bucks should have top notch security to avoid situations like this. As I mentioned before, it is scary to see it happen to such a large organization.

After hearing horror stories in the past, and stories like this, it is a good time to point out to our clients how we have taken steps to make sure this does not happen to them.

Nowadays, e-mails can easily be intercepted and hacked. That is why Hammernik & Associates has implemented a client portal system. All sensitive client information will be sent through this secure portal. This process ensures that situations like the Bucks’ will not happen at Hammernik & Associates.

However, this story is a reminder to make sure you always take steps to protect your identity. If you do believe your identity has been compromised, be sure to contact our office so that we can help you fill out an Identity Theft Affidavit.

Read the entire Bucks article here: Sources: Bucks players’ financial data compromised in scam

 

Until Next Time,

Nicholas Hammernik, EA

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Milwaukee tax preparation and tax planning

Why You Should Always Be Tax Planning

This past weekend I took a trip down to Louisville, KY to experience something that I always have wanted to see…the Kentucky Derby. The stereotypes of the Kentucky Derby are mint julips, big hats, and bright colored clothing….and they are all true. I opted to go with a baby blue colored coat and some coral colored dress pants. Leading up to the trip, I tried to learn as much about horse racing as I could. Now, I am a huge sports fan, but horse racing is not my forte’. Therefore, I opted to place my trust in the “experts” for their opinions on which horse would win.

I ended up placing my money on Gun Runner, who led most of the race, but faded to third place in the end. The winner of the race was the favorite, Nyquist.  I did not end up cashing in any winning tickets and a few of my friends only won a couple hundred dollars.

However, let’s go ahead with the scenario that I dreamt up in my head…

Zack Bacon riding Grand Cherokee, Sam Padilla riding Sauxsoe, Don Proctor riding Suntana and Marcus Chet Delorme riding Mucho Mite try to catch Don Herber riding Dudon as they make their way around the final turn Sunday at Pari-Mutual Horse Races at the Brown County Fairgrounds in Aberdeen. Herber and Dudon won the race. Photo by Dawn Dietrich-Sahli taken 5/17/09.

“Oh my gosh, I just won $10,000 on this Trifecta bet! What am I going to do with all of this money?!?”

Step #1 : Enjoy the night in Louisville as a high roller.

Step #2: Call Hammernik & Associates to see how this effects my tax situation.

Now, I know in reality that calling up your tax guy is not in the forefront of your mind on a daily basis. However, when any life changing event takes place, or is about to take place, I cannot stress how important it is to give us a call to set up a tax planning meeting.

It is a guarantee that every year we will come across tax returns that could have benefited significantly from some quick tax planning. Don’t let this happen to you this year. If you are getting married, divorced, having a child, switching jobs, getting a raise, taking money out of a retirement account, won a bunch of money, etc. these are all reasons to do some tax planning.

We all make sure to brush our teeth as best as we can the night leading up to our dentist appointment, right? Does that really do anything? No, we are still going to get called out for not brushing enough either way. It’s too late…

The same holds true with your tax return. If you wait to address something that can affect your tax return, it is going to be too late to help.

Brush your teeth throughout the whole year!

So now that I covered everything from horse racing to dental appointments, give us a call to set up your tax planning check-up….before it is too late!

 

P.S. Kentucky does not have any state tax, so all my dream would have had to worry about would be how much federal and WI taxes to pay.

 

Until next time,

Nicholas Hammernik, EA

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Did Prince Die Without A Will?

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I was browsing through my Twitter feed the other day and came across a tweet from one of my favorite follows, @taxgirl, that was instant click bait. @taxgirl, better known as Kelly Phillips Erb, provides a unique take on the world of tax and how it relates to pop culture. Here is the link to her article, Sister Says Prince Died Without A Will: What It Means And Why You Shouldn’t Let It Happen To You . It would be shocking to think that someone with so much worth would not have a plan in place to pass that worth on.

This article brings up some great points that Dave Biskup touched on in our December 2015 newsletter. Now, we don’t all have the assets that Prince had, but it is important to have a direction for what assets that we do have. Just this week we have been notified that two of our clients have passed away. Death is a subject, especially for me, that is very hard to think about or talk about it. The mindset is to block out any thoughts of death that may circulate in our heads while lying in bed at night. However, death is inevitable. Not having a will is almost a selfish act when you think about it. The time, money and stress it could cause your loved ones is simply not worth not having a plan in place. A couple hundred dollars can save your loved ones from having to deal with any repercussions.

…when a person dies without a will, things become more complicated. Since there’s no named executor, the Register of Wills or probate court will appoint a person to serve as administrator (more or less an executor with a different title). The court doesn’t just pull a name out of a hat: in most states, if an executor isn’t named, any person of interest – including creditors – can apply to serve as administrator. Yes, that means that, in theory, your credit card company or your mortgage broker could end up administering your estate.

Save your loved ones the time and stress involved by having a plan in place.

Our goal at Hammernik & Associates is to provide you with more than just a filled out tax return. We want to make sure that you are set up in the best financial situation in the present and in the future.

We have outlined a “Love Letter To My Family” which outlines steps to make sure everything is properly taken care of with your estate.

Love Letter To My Family

 

As always, if you have any questions regarding this topic, feel free to contact our office!

Until next time,

Nicholas Hammernik, EA

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

Milwaukee, Waukesha, Brookfield, Wauwatosa tax preparation