Kutchins Robbins & Diamond: CPA and CFP, Chicago, IL- Newsletter

When Joe Kainz walked out of Sweeney's Gas Station and food mart on the afternoon of May 9 with 10 lottery tickets in his pocket, he never imagined that one of those tickets held the five winning numbers to the biggest jackpot in the history of the Lottery‑$185 million. In fact, he thought Just the opposite.

"I play the lottery all the time," says the owner of Barrington Ventures, a manufacturer representative of medical equipment. and the CEO of the Wild Onion Brewing Company, a microbrewery owned and operated by Joe and his three sons, Mike, John and Pat. "I normally spend $5 to $7 a week; this time I decided to go for $50 worth of tickets because the jackpot for The Big Game was so big. I walked out of the store and remember thinking, 'Another $50 bucks gone.' But if you don't play, there's no pay."

On Wednesday morning, Joe got up early and read the newspaper at his desk. He spread out his lottery tickets to see if any of the numbers matched. The first five tickets were duds. Then he looked at the sixth ticket. "Every number matched!" he says excitedly. "I called my wife and asked her to check the paper too. She's a skeptic and never thought it was possible to win anything in the lotto. She confirmed the numbers, but because the letters 'QP' appeared after the last number, she thought I might have won $ 100. After I hung up the phone, I turned on the radio. When I heard the news that the winning ticket was purchased at Sweeney's in Lake Zurich, I knew I was a winner. But I still didn't know what 'QP' meant, so I called the Lottery people and they said it stood for Quick Picks. I called my wife back and told her the good news. Then, we took the winning ticket over to the brewery to show it to our sons. They looked at the numbers and went into shock. None of us could quite believe it."

Interestingly, Joe stopped at Sweeney's on May 9 just out of curiosity. Sure enough, camera crews from several local TV stations were on hand. By that time, word had gotten out that the winning ticket was sold at Sweeney's. Ironically, as Joe got out of his car, a reporter approached him and asked what he thought about somebody winning that much money. Not ready to reveal his identity, Joe quietly replied, "I know it will enrich the lives of the people who won and I hope they do something good with it."

Joe, Susan and their three sons spent the next ten days working with their accountant, Bruce Robbins, and their attorney in preparation of claiming the prize money. On May 17, Joe went to KRD's office in Northbrook where Bruce called the Illinois Lottery Office and informed them that his client held the winning ticket.

"Bruce was a great help throughout the entire ordeal," emphasizes Joe. "He put together the Kainz Family Partnership (lottery winning entity) for us. I had great confidence that he would get it done for me the right way."

Bruce and the professional staff at Kutchins, Robbins and Diamond handle all of the accounting and tax work for Barrington Ventures, Wild Onion Brewing Company, Blackcat Beverage (wholesale beer distributorship) and the Kainz Family Partnership. Bruce and Joe met at a party. "My previous accountant had retired and Bruce fit the mold of what I was looking for in a new accountant," says Joe. "He appeared to be sincere, honest and forthright and I liked his style. He does great work, and through the years he has become a friend as well as our accountant."

The Brewmaster

In 1987‑'88, Mike Kainz served as a member of the United States Peace Corps in North Africa. While there, he became interested in the small craft brewing industry. "In the late 1980s, brew pubs were becoming more popular," says Mike. When he returned home, he got a job at a winery in Sonoma County, California, and then he worked in a brew pub in Chicago. Later, he attended the Siebel Institute of Technology, one of only two brewing schools in the U.S. In 1995, be began formulating plans to start a family microbrewery, and in March he and his brothers single‑handedly converted an empty warehouse into a brew house. Wild Onion Brewery opened its doors for business in July 1997.

"Our first year in business, we did just kegs," says Mike, who is president of the company. "In 1998, we transitioned into bottled products and bought an old bottling line that had been used as early as the 1950s. Last year, we did some refinancing and bought a more modem, high‑speed bottle packing line." Bottled beer accounts for about 80 percent of the company's sales.

Wild Onion's flagship beer is called, Paddy Pale Ale. Recently, a golden lager and a Jack stout have been added to the line, which is sold to liquor stores throughout the Chicagoland area as well as in Milwaukee and Madison, Wisconsin. "Our first customer was the Biloxi Grill in Wauconda," says John Kainz, who is in charge of sales and distribution. "They've been very loyal to us‑they have kept our stout, lager and pale on tap for three years."

In 1998, Blackcat Beverage was created. "When you give your brand to a big distributorship, you tend to get lost in the shuffle," explains John. "So we decided to do our own distribution."

And while 'Papa Joe' is the CEO of Wild Onion, he delegates the responsibility of the day‑to‑day business operations to his sons, of whom he is very proud.

"I am not a micromanager," he asserts. "Mike is an excellent brewmaster and we've got a really great product. Good beer makers stick to four basic ingredients: water, yeast, barley and hops. Nothing else can go into our beer to be true to its integrity."

A Capital Intensive Business

Perhaps the most often asked question of a lottery winner is: So what are you going to do now? That was an easy question for the Kainz family to answer because they plan to do what they've always done‑work hard to make their businesses successful.

Says Mike: "The lottery money (about $62 million after taxes) will allow us to grow at a faster rate. To build inventory, you need cash and now we have it. We are buying more equipment, bringing in additional employees, and going full speed ahead‑. We aren't doing anything different than before we won the lottery; it's just happening a lot faster. When you have a labor of love, like the brewery, the last thing you want to do is give it up."

John agrees: "'Me lottery has given us an opportunity to get our businesses up and running and to establish our beer brand. All our dreams of making this brewery a success are now going to become a reality. We've put too much into it to shut it down."

And Joe echoes his sons' views: "We are not going to go wild with the money; we are going to do everything based on sound business principles. I've spent my entire life the medical field. My customers have become my friends and my work is fun to me. I would miss that if I retired‑besides, I play lousy golf."

Joe adds, "There is a sense of accomplishment one gets from building a business that money can't buy. We put too much blood, sweat and tears into these businesses to let them go."

Wild Onion Pub and Brewing Company

Prior to winning the lottery, the Kainz family was negotiating for a piece of land in Lake Barrington on which they wanted to build a pub. Now, that dream is about to come true. Plans are now on the drawing board to build a casual restaurant/pub on a 20‑acre piece of land which includes a small lake about two miles from the Wild Onion Brewery. Pat Kainz, who has a background in the construction industry, will act as general contractor for the project, which is earmarked for completion in spring or summer of 2001.

The Media

Under the rules of the Illinois State Lottery, winners must make themselves available to the media and participate in interviews. The Kainz family was no exception. According to Joe, newspapers and television networks worldwide carried their story. The family was invited to be on many national talk shows including David Letterman. They turned them all down. "I am not one who likes celebrity," says Joe. But he has one regret. "In retrospect I wish I had accepted Diane Sawyer's invitation to appear on Good Morning America." The family did agree, however, to film a segment on lottery winners for The Discovery channel.

As for the future, the family is establishing a charitable foundation called the Joseph and Susan Kainz Foundation, which will be headed up by Susan Kainz. In conclusion, Joe says: "The money allows us to expand our businesses, have some fun and do some good. But it won't change us; we're still the same people."

TAX AND BUSINESS NEWS FROM KRD

Time is a precious commodity for anyone who owns or operates a business. Here are 10 ways to manage your business time more productively:

1. Organize and prioritize responsibilities. Use a notebook or your calendar as a "to‑do" list. At the end of each day, write down the next day's activities and prioritize them. Cross off your list things you accomplished during the day and acknowledge your successes.
2. Give yourself deadlines. Estimate how much time you will need to complete a task and block out the hours or days on your daily planner or calendar.
3. Determine your peak productivity period. Keep a log of your activities, hour by hour. Plan on doing the most difficult or important tasks during your most productive hours.
4. Make use of your commuting and waiting periods. Listen to taped notes while traveling to and from your office. If you don't drive yourself, read work related material instead of a newspaper. Carry a cassette recorder or notepad with you so you can record random ideas and thoughts. And when you have a moment before a meeting, or while waiting on hold, you can sort through the mail or read a few memos.
5. Set aside time each day for planning and thinking. Close your door or go to an unoccupied room for complete quiet and privacy. You'll be amazed at how much you can accomplish if you are not distracted or interrupted. Some people find that the most productive "quiet time" is before/after business hours.
6. Hold productive meetings. Circulate an agenda in advance to all who attend, and require everyone to come prepared. Then stick to the agenda and finish the meeting within the allotted time frame.
7. Delegate effectively. When appropriate, assign less important duties to others and free yourself to do more important tasks. The employee's time spent on a project may be less costly to the company than yours. Or, delegate a task to someone more qualified.
8. Don't procrastinate. If faced with a complicated project, try to divide it into a series of smaller jobs. Set deadlines to complete each portion. Then force yourself to tackle the first part. Getting started is the hardest part.
9. Detour mental blocks. When your creativity stalls, take a short break to clear your mind. If that doesn't work, switch to the next priority project.
10. Combat clutter: Reserve your desktop, nearest drawers and cabinets for the items you use regularly. And don't let paper pileup get the best of you. Once you take paper in hand, do one of four things: Act on it, pass it on to someone, discard it, or file it appropriately for future reference or response.

House Passes Measure to Expand IRA and 401 (k)
Salary Deferral Plans A measure that boosts contribution limits to 40 1 (k) savings plans and Individual Retirement Accounts was overwhelmingly approved by the House in July. The final vote was passed by a veto‑proof margin of 401 to 25, with 182 Democrats casting their votes for the bill. The Senate plans to send a compromise bill to the president in early fall.

Under the bill, the annual contribution limit to IRAs would gradually rise to S5,000 from S2,000 by 2003. Yearly salary, contribution limits to 40 1 (k)‑type plans would rise from $10,500 at present to $15,000 by 2005. The limit would be indexed for inflation after that. The bill would also increase the portability of 401 (k) plans and shorten the vesting period from five years to three.

The implementation phase of both the pension and IRA contribution caps is stepped up for workers over the age of 50 since they have fewer years to take advantage of the savings plans. For those 50 and over, the IRA limit of $5,000 would take effect in 2001. For individuals age 50 and up, the 401(k) limit of $15,000 increases to $20,000 by 2005.

The House bill, authored by Rep. Rob Portman (R‑Ohio), will also streamline pension regulations and make it easier for more small businesses to provide pension programs to their employees. "Over the past 20 years, Congress has made pensions less generous by lowering the contribution and benefit levels, while also making pensions more costly to offer by increasing the number of rules and regulations on employers," Portman reportedly said in floor debate on his bill. Information for this article came from The Wall Street Journal, CNN and other news sources.

Take Control of Your Life In an article that appeared in Parade Magazine, Dr. Joyce Brothers says that life today seems to be moving at the speed of sound. She says that major changes, instead of taking 10 years to occur, happen overnight. To protect ourselves, we try to do everything. The pace gives many people the feeling that their lives are out of control. Dr. Brothers suggests that control is about making choices and having the courage to let certain things go. To do that, she asserts, you need to achieve a sense of focus and discover what your true goals are. She recommends selecting three or four goals out of your list that are the most meaningful to you and that have the best chance of thriving. The goals should be major ones‑‑ones that affect your sense of wellbeing and goodness of life. Other goals should be allowed to die. Letting go of goals that cannot survive can produce a tremendous sense of relief, she says. More on how to work on your selected goals in the next newsletter.

No matter how many employees you have, the government requires that you withhold income tax and remit it when due. Employment taxes are withheld income tax, FICA contributions and backup withholding on reportable payments. Generally, an employer must make either monthly or semi‑weekly deposits during a calendar year based upon the aggregate amount of employment taxes paid during the "look back" period. The look back period for each calendar year is the 12month period that ended the preceding June 30. Thus, an employer's obligation to make deposits in 2000 will be based upon the aggregate employment taxes paid during the period July 1, 1998, through June 30, 1999. (New employers are considered to have an aggregate tax liability of zero for any calendar quarter in which the employer did not exist.)

Monthly Deposits. Monthly deposits are required if the aggregate amount of employment taxes reported by the employer for the look back period is $50,000 or less. Monthly deposits are due on the 15th day of the following month in which the payments were made.

Semi‑Weekly Deposits. An employer is a semi‑weekly depositor for the entire calendar year if the aggregate amount of employment taxes during the look back period exceeds $50,000. No matter when the pay period ends, an employer will always have at least three banking days in which to make the deposit.

One‑Day Rule. If an employer has accumulated $ 100,000 or more of undeposited employment taxes, then the taxes must be deposited by the close of the next banking day.