1 INTERNATIONAL HOUSEWARES REPRESENTATIVES ASSOCIATION ® The REPorter Corner Member’s January 2005 A primer on the Alternative Minimum Tax by Stanton B. Herzog, IHRA CPA & Accounting Consultant, principal in the firm of Applebaum, Herzog & Associates An up, down and sideways year by Steve Grossman, CPMR Former IHRA President and Chairman W ell another year has passed. I f you are reading this you have survived another year in a profession that is hard, gives one a lot of freedom and can be very profitable. This year has been tough for me, partly because of accounts changing direction and partly because I forgot one of the major functions of being a rep which is to keep prospecting; either within present accounts or by finding new ones. I always find it interesting approaching a new account, and if in my mind I can make it a game of hunt and seek, it can be fun. I recently called a prospective account and asked for the buyer. I was told by the receptionist that she did not have a buy- ers’ list. So I asked her how do I present a new product and she gave me a fax number and told me to address it to the sunglass buyer. Does anyone want to give me odds on when I get contacted? You just have to love this business. I have one overall complaint of the busi- ness environment, mainly on the side of the supplier or manufacturer. They are operating so thin today because of cost cutting. It is hard to get answers for quotations in order to get orders. Samples are limited, people are limited. It is just another level of resistance we have to overcome to be the professionals we need to be, in order to give value so we keep our place in the chain of procurement. As I have written in past years, we need to take the time to thank the middle people: secretaries, assistants, sample people, shipping dispatchers, customer continued on page 2 The Subject is Taxing! IMPORTANT Hotels Reservation Information on Page 4 . . . For the March 2005 International Home & Housewares Show & the 2005 Concurrently Held Las Vegas Gourmet Housewares and National Hardware Shows: May 17 - 19, 2005 HAPPY NEW YEAR! A watchdog committee annually advises Congress on problems with the tax code. This spring, it decreed the Alternative Minimum Tax (AMT) as the WORST problem in the code. The AMT arrived at this exalted status because of lower regular tax rates, including capital gains, and because exemptions, tax brackets and other items are automatically adjusted upward for inflation. The AMT is impervious to these changes; there have been no change in rates since its inauguration, and only one small adjustment for inflation. It began as an attempt to impose some tax on high-income individuals who were then legitimately reducing their taxes to nearly nothing. You’d think, therefore, that the AMT is no longer needed. Alas, the national budget, dripping in red ink, provides for increased revenue from the AMT. So Congress is afraid to increase the debt by greatly changing the AMT. Perhaps they think people won’t notice. As if you wouldn’t notice the fly in the ointment of the rich has grown to become the Monster Bug for Everyone. To begin to understand this law, it is important to recognize that it is a separate tax calculation. The first line of form 6251, the AMT calculation form, is federal taxable income, the line on which the regular income tax is computed. There are a whole series of adjust- ments, most of them increasing taxable income and a few decreasing it, then a tax calculation. If that tax exceeds your regular tax, you’ve been AMT’d. Some of the changes are rather esoteric, so let’s concentrate on the primary ones. ALL taxes and miscellaneous items listed as itemized deductions are added back to income. Included are state income taxes, real estate taxes, professional and salespeople expenses listed on form 2106, and legal fees. The medical expense exclusion is increased from 7.5 percent to 10 percent. The standard deduction, if used, is added back, as is the deduction for exemptions. Income from certain tax-exempt securities (e.g., securities used by municipal entities to fund industrial development) is added back. Often over- looked is the interest expense on proceeds from mortgage or home equity loans that are not used to buy or improve the residence. There continued at bottom of column one - page 2
Transcript
1
INTERNATIONAL HOUSEWARES REPRESENTATIVES ASSOCIATION
®The REPorter
Corner
Me
mb
er’
sJanuary 2005
A primer on the Alternative Minimum Taxby Stanton B. Herzog, IHRA CPA & Accounting Consultant,principal in the firm of Applebaum, Herzog & Associates
An up, down andsideways yearby Steve Grossman, CPMRFormer IHRA Presidentand Chairman
Well another year has passed.I fyou are reading this you havesurvived another year in a
profession that is hard, gives one a lot offreedom and can be very profitable. Thisyear has been tough for me, partlybecause of accounts changing directionand partly because I forgot one of themajor functions of being a rep which is tokeep prospecting; either within presentaccounts or by finding new ones.
I always find it interesting approaching anew account, and if in my mind I can makeit a game of hunt and seek, it can be fun.I recently called a prospective accountand asked for the buyer. I was told by thereceptionist that she did not have a buy-ers’ list. So I asked her how do I presenta new product and she gave me a faxnumber and told me to address it to thesunglass buyer. Does anyone want togive me odds on when I get contacted?You just have to love this business.
I have one overall complaint of the busi-ness environment, mainly on the side ofthe supplier or manufacturer. They areoperating so thin today because of costcutting. It is hard to get answers forquotations in order to get orders. Samplesare limited, people are limited. It is justanother level of resistance we have toovercome to be the professionals we needto be, in order to give value so we keep ourplace in the chain of procurement.
As I have written in past years, we needto take the time to thank the middlepeople: secretaries, assistants, samplepeople, shipping dispatchers, customer
continued on page 2
The Subject is Taxing!
IMPORTANT Hotels Reservation Information on Page 4 . . .
For the March 2005 International Home & Housewares Show &
the 2005 Concurrently Held Las Vegas Gourmet Housewares
and National Hardware Shows: May 17 - 19, 2005
HAPPY NEW YEAR!
A watchdog committee annually advises Congress on problems with the tax code. This spring, it decreed the Alternative Minimum Tax (AMT) as the WORST problem in the code. The
AMT arrived at this exalted status because of lower regular tax rates,including capital gains, and because exemptions, tax brackets andother items are automatically adjusted upward for inflation. The AMTis impervious to these changes; there have been no change in ratessince its inauguration, and only one small adjustment for inflation. Itbegan as an attempt to impose some tax on high-income individualswho were then legitimately reducing their taxes to nearly nothing.You’d think, therefore, that the AMT is no longer needed. Alas, thenational budget, dripping in red ink, provides for increased revenuefrom the AMT. So Congress is afraid to increase the debt by greatlychanging the AMT. Perhaps they think people won’t notice. As if youwouldn’t notice the fly in the ointment of the rich has grown to becomethe Monster Bug for Everyone.
To begin to understand this law, it is important to recognize that it isa separate tax calculation. The first line of form 6251, the AMTcalculation form, is federal taxable income, the line on which theregular income tax is computed. There are a whole series of adjust-ments, most of them increasing taxable income and a few decreasingit, then a tax calculation. If that tax exceeds your regular tax, you’vebeen AMT’d.
Some of the changes are rather esoteric, so let’s concentrate on theprimary ones. ALL taxes and miscellaneous items listed as itemizeddeductions are added back to income. Included are state incometaxes, real estate taxes, professional and salespeople expenseslisted on form 2106, and legal fees. The medical expense exclusionis increased from 7.5 percent to 10 percent. The standard deduction,if used, is added back, as is the deduction for exemptions. Incomefrom certain tax-exempt securities (e.g., securities used by municipalentities to fund industrial development) is added back. Often over-looked is the interest expense on proceeds from mortgage or homeequity loans that are not used to buy or improve the residence. There
continued at bottom of column one - page 2
2Field Sales Professionals Serving the Home • Housewares • Hardware Industries
Herzog (from page 1)
IHRA REPorter® January 2005
continued on page 3
may be an add-back for depreciation because assetsmust be depreciated over a longer period for AMTpurposes. At least this last one turns around in the laterstates of depreciation, and an AMT reduction can result.There are a number of other less commonly used items,but this should suffice for this overview.
From the above additions, there are some deductions.If itemized deductions were reduced because of ad-justed gross income in excess of certain income amounts,that shortage is a permitted reduction of AMT. If a statetax refund appeared on page 1 of form 1040, it can bededucted from AMT. Finally, there is a flat deductionallowed, which replaces the exemption deduction. Thatamount for joint returns is $58,000 less 25 percent ofAMT income more than $150,000. For single people, it’s$40,250 less 25 percent of AMT income more than$112,500. Like regular exemptions, this exemptionamount could be reduced to zero.
Who wanted a flat tax? Well, this is it. Basically, the taxrates are a flat 26 percent of AMT taxable income up to$175,000, and 28 percent above that. However, capitalgains and dividends are treated to 15 percent alternatetax, similar to regular tax law. Remember, though, thatregular tax rates start at only 10 percent, compared tothe AMT’s 26 percent. As you can now understand,someone with regular taxable income in the 25-percentand 28-percent brackets could easily be exposed to thistax.
Finally, what can you do about it? If you own municipalbonds, make sure they’re not subject to AMT. If you aretrying to fend off only one year, you can hold off onpaying state taxes (make sure that state penalties don’texceed the AMT savings). If miscellaneous expenses(such as legal bills) are causing the problem, perhapsconsider paying them over two years. Escaping fromthis tax if you’re mired in it can practically require you tochange your lifestyle.
Stanton B. Herzog, CPA, principal in the firm ofApplebaum, Herzog & Associates, Deerfield, Ill., servesas IHRA’s accountant and is a regular contributor toThe REPorter®. He participates in Expert Access, theprogram that offers telephone consultations to IHRAmembers.
Call him at: (847) 405-0400
service representatives, etc. Even though the “buyer”gives us the order, we cannot get it done without thebehind-the-scenes people who support our efforts. Weall know what happens when we do not get their support.
I wish all of you a prosperous New Year and safetravels wherever they may lead you. [email protected]
Grossman (from page 1)
Laurence Kaufman
eMail Newslettersby Laurence Kaufman,IHRA Public Relations ConsultantChairman of Kaufman Ryan Stral Inc.
For all the years I've been conversing, writing andlecturing in the rep environment, I've probably never
been as tuned out as when I talk about newsletters. Ithought 20 years ago (as I still do today) that it makessense for manufacturers' reps to communicate regularly- beyond the one-on-one communications involved di-rectly in the sales process - with their principals, dis-tributors, customers and staffs. And the ideal vehicle forthose communications is still a newsletter.
In fact, I discussed e-mail newsletters in the March2003 issue of The REPorter. The subject was rekindledrecently when I attended a seminar on the subject. Withabout hundred people in the audience, from some prettysophisticated B2B advertiser companies, I concludedthat the smart money thinks e-mail newsletters are notonly viable but valuable. Given the new ideas gleanedfrom that seminar and picking up on other recent dis-cussions of "spam" and other e-mail problems, it seemsworthwhile to give you an update on my original article.
The following are the major points I noted at the semi-nar:• E-mail newsletters designed to produce leads tend todo so two weeks faster than "snail mail."• The new spam legislation we hear so much about per-mits communications to people with whom you have anexisting business relationship and also allows prospect-ing (as long as you clearly offer an opt-out and honorit).• Don't use the company name in the FROM slot - use apersonal name that your recipients will recognize.• Most e-mail newsletters are not meant to directly fos-ter a sale but are meant to enhance relationships. Thus,they should state explicitly what you bring to the tableto help the relationship flourish.• E-mail facilitates dialogue in a way we never expectedfrom snail mail newsletters. Thus, it's important that theysolicit interaction (e.g., by incorporating a mini-surveyin each newsletter). Hey, I didn't need the seminar forthat one - we learned that point from Jack Berman longago!• Include links in your newsletter to your Web site or toa principal. And instead of having the link go to the homepage, have it go directly to the specific area in whichyour reader is interested.• Develop evaluation measures in terms of unique visitsand time spent, rather than clicks or leads. But be aware
Public Relations
3
IHRA REPorter® January 2005
IHRA RepresentativeMember Ads
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of what you should and should not measure. Avoid analysis pa-ralysis. Because it costs nothing to add names, don't use totalcirculation as your measurement benchmark, only the results withyour targeted audience.
As I sit here at my keyboard and articulate this message, I canhear the chorus in the background - the same cop-out I heard 20years ago - "Everybody gets too much junk mail. Nobody will readit." Friends, 20 years ago, we didn't know what junk mail reallywas! Every morning, for every envelope opened and read, youmight have thrown a dozen envelopes into the "circular file" un-opened. (And, chances are, none of those unopened envelopesoffered an opportunity to "meet someone hot" or informed youthat you had been "approved for a new mortgage," or ... well, youknow the rest.) Today, you'd probably be more vociferous in tell-ing me that, in a world full of spam, no one will read it. And, justlike 20 years ago, you'd be wrong.
Your communities still have the same need to know, and youstill have the same obligation to keep them informed. An e-mailnewsletter takes the cost out of communicating, except for thesweat equity involved in producing it (much of that goes awaywhen any given issue can be as long or short as you want it tobe).
I probably get about 400 spam e-mails a day. Three hundredare filtered out before they hit my in box, but the other 100 aredeleted by the enormous power of my right pinkie. But I don'tdelete the newsletters I get from B2B Marketing, Knowledge atWharton, Electronic News or Sales & Marketing Management, toname a few. And I wouldn't delete yours either, if I thought for amoment it had something to tell me that might be useful to know.
Maybe the bad word here is "newsletter." The issue is not somuch a regular formatted online publication as it is an instrumentof being in touch. Remember, e-mail lets you penetrate deeperinto the organizations you're involved with than you can person-ally on a regular basis. Project yourself as a communicator, andproject the idea that you bring more to the party than what's onyour line card. That's the professional way to sell your organiza-tion, and the way to "sell the system"!
Laurence Kaufman is chairman of Kaufman Ryan Stral Inc.,a marketing communications firm with expertise in industrialdistribution, electronics and not-for-profit associations, andpartner in BigWorld Communications, which designs andmaintains Web sites for trade show, rep firm, association andcorporate clients. He also participates in Expert Access,IHRA's telephone consultation program. You can reachLarry Kaufman at 312-649-9410, or fax him at 312-649-9418,or e-mail him at [email protected].
Kaufman (from page 2)
Mark your calendar:During the International Home & Housewares Show
YES! IHRA will have a members-only block of rooms — March 17 - 23, 2005 —
for the 2005 International Home & Housewares Show!But, you must reserve early to be assured of getting a room just steps off North Michigan Avenue
Radisson Nightly Room Rates:(All rates plus applicable taxes)
5 Night minimum: Single: $123; Double: $133Less than 5 nights: Single: $128; Double: $143
For reservations, call the Travel Desk toll-free:
(800) 752-1052Say you would like to book a room from the
“International HousewaresRepresentatives Association room block”
Radisson Hotel & Suites Chicago160 East Huron Street, Chicago Illinois 60611
Telephone: (312) 787-2900 Fax: (312) 787-5158
$2 Million Dollar Renovation Now Complete!Just steps away from all that Chicago has to offer: * World Class Shopping on Michigan Avenue * Water Tower Place * John Hancock Building * Navy Pier * Northwestern Memorial Hospital
Enjoy thoughtful touches like pillow-top mattress,High-Speed Internet Access and dual line telephones.
Enjoy a rejuvenating workout surrounded by panoramiccity and lake views on the 40th floor.
Make the Radisson Chicago your home away fromhome during the 2005 International Home and House-wares Show. Show dates are March 20 - 22.
AND - During the 2005 Concurrently Held Las VegasGourmet Housewares and National Hardware ShowsA room block in the Deluxe West Towerof the famed Stardust Resort & Casino
on the Las Vegas StripIf you are attending — or might be thinking of attending —either or both of these 2005 industry shows, you should takeadvantage of these special prices on deluxe accomodations forIHRA members. The Hotel is conveniently located to the LasVegas Convention Center (The Gourmet Show and HardwareShow location) and the Sands Expo & Convention Center (TheHardware Show location, only).
Show dates are May 17 - 19, 2005
Field Sales Professionals Serving the Home • Housewares • Hardware Industries
May 14 - 17Int'l Contemporary Furniture Fair (ICFF)New York, New York
May 15 - 18National Stationery ShowNew York, New York
May 17 - 19Las Vegas Gourmet Housewares ShowLas Vegas, Nevada
May 17 - 19National Hardware Show with Lawn & Garden WorldLas Vegas, Nevada
May 23 - 25Kehe ShowChicago, IL
JulyJul 15 - 18The Gift Fair in AtlantaAtlanta, Georgia
Jul 22 - 25California Gift ShowLos Angeles, California
Jul 24 - 27Washington Gift ShowWashington, DC
AugustAug 6 -10San Francisco Int'l Gift FairSan Francisco, California
Aug 7 - 11Canadian Gift and Tableware AssociationToronto, ON, Canada
Aug 13 - 18New York Int'l Gift FairNew York, New York
Aug 15 - 19ASD/AMD Trade ShowLas Vegas, Nevada
Aug 27 - 31The Seattle Gift ShowSeattle, Washington
SeptemberSep 17 - 19Dallas Int'l Gift & Home Accessories MarketDallas, Texas
Sep 24 - 26Los Angeles Gift & Home MarketLos Angeles, California
OctoberOct 15 - 17Coffee Fest SeattleSeattle, WA
7
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Products: ComboClean - A steam cleaner & vacuumcleaner, all-in-one! 16% commission and advertising allow-ance to qualified accounts. ComboCleanComboCleanComboCleanComboCleanComboClean is the consumerversion of a product designed for industrial use. It combinesthe function of a hi-quality steamcleaner and a baglessvacuum cleaner. It steams and vacuums at the same time.A complete line of steamers is also available.• Already sold in USA • Bagless vacuum cleaner • Ship FOB NJ
EXPORTUSA545 E. 14th St - #mfNew York NY 10009(212) 979-7142 • Fax: (508)374-0269
Manufacturers Seeking IHRA Field Sales Professionals
This is an IHRA service to keep members advised of lines available. The listing of a manufacturer should in no way be construed as anendorsement of that line by IHRA, it being the obligation of each member to make their own evaluation of the line.
Find them quickly, easily andcost-effectively with IHRA’s threeexclusive marketing services . . .
The IHRA LocatorA directory of field sales professionalsby territories covered, type of productshandled, type of customers sold to/throughand complete details about their companies.
Instant HOT LinesA onetime eMail or fax that
provides immediate informationon your line, only, to reps in
specific territories or throughout the world
Lines AvailableA special page (or pages) of listings in theIHRA Monthly Newsletter - the REPorter -of manufacturers seeking representatives.
2004 /2005 IHRA Officers; Directors & StaffOfficersChairman: Jim AdamsPresident: James AyottePresident-Elect: David Silberstein
Senior Vice PresidentsIndustry & Membership: David FriedmanLegal & Education: Kent KulovitzFiscal: Mark GlotterDelegate to MRERF & AMRA: Steve Grossman, CPMRExecutive Director: William M. Weiner
Home • Housewares • HardwareMultiple-Line, Field Sales Professional:
If you’re not a member of IHRA, youowe it to yourself to join the organizationthat is your voice in the industry and themanufacturers’ resource for findingWell-Qualified, Performance-Committed,Field Sales Professionals.
For complete information about “first-timer”membership and an application, contact:
INTERNATIONAL HOUSEWARES
REPRESENTATIVES ASSOCIATION
175 N. Harbor Drive • Suite 3807Chicago, Illinois 60601
Want to know more about group insuranceavailable through RepCare?
Just find your business home state and call Pat Brown orJohn Doyle.
Call PAT BROWN at 800-854-4636if your business is in:
Arizona Minnesota OregonArkansas Missouri South DakotaCalifornia Montana TexasIdaho Nevada UtahIllinois New Mexico WashingtonIowa North Dakota WisconsinKansas Oklahoma Wyoming
Call JOHN DOYLE at 888-243-0174if your business is in:
Alabama Maine North CarolinaConnecticut Maryland South CarolinaColorado Massachusetts TennesseeDelaware Michigan VirginiaFlorida Missouri VermontGeorgia New Hampshire W.VirginiaIndiana New JerseyKentucky New York
