Announcer:
It’s time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered Representative Securities Offered through Cambridge Investment Research Incorporated, a broker dealer, member FINRA, SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now here’s today’s Financial Focus program.
Nate Kreinbrink:
Good morning, and welcome to this week’s Financial Focus, brought to you each and every Wednesday morning right here on KOS. Well, this is Nate Kreinbrink. Have Andy Ferguson with me. We are July 4th Weekend.
Andy Fergurson:
July 4th, or tomorrow.
Nate Kreinbrink:
It’s tomorrow.
Andy Fergurson:
That’s unreal.
Nate Kreinbrink:
I don’t know-
Andy Fergurson:
That’s unreal.
Nate Kreinbrink:
They say you get through the July 4th weekend, and it seemed like summer then just flies even faster.
Andy Fergurson:
Yeah.
Nate Kreinbrink:
And we’re there.
Andy Fergurson:
Feels like July today though. It’s hot.
Nate Kreinbrink:
It is. We kind of had a nice little reprieve, from that little stretch there in June, where it was just 95 and just baking. And a couple nights to open up windows was kind of nice. And looks like we’re going to get maybe a little sticky and steamy again. So…
Andy Fergurson:
Get back to the air conditioner now. So…
Nate Kreinbrink:
It is. It’s that time of the year. This is what we want. This is what summer is. This is those shoveling days, and ice days, and everything, you’re like, gosh, I wish it was nice, hot. Well, we’re here, so…
Andy Fergurson:
Yeah, it’ll be nice to have a day off though, and barbecue, see your friends and family, have those fun parties, and go see all your friends. So it’d be good to have a day off. I wish it wasn’t in the middle of the week.
Nate Kreinbrink:
I know.
Andy Fergurson:
It’s kind of a bummer.
Nate Kreinbrink:
Kind of puts a little, just kind of stop to it, with Friday and then weekend again. But…
Andy Fergurson:
That’s all right. I think I can make it through one day back. I’ll find something to do.
Nate Kreinbrink:
I know you will. I know you will. So getting into today’s program, I know Andy usually joins us the third Wednesday of every month. We had a little scheduling changes just to accommodate, so Andy’s coming in today. But talking a little taxes. And I know, again, when we do this, it goes quick, and there’s always so much to get through in the tax world, either changes, planning, all that type of stuff.
But let’s just throw it over to you, and what are you seeing? What is going on in tax world, July 3rd this time of year?
Andy Fergurson:
Well, first of all, I’ll say that next week I’m going to what is known as the Burning Man, or Sturgis of the tax world. I’m going to the IRS tax Forum in Chicago next week, and those tax people know how to party.
Nate Kreinbrink:
I am sure that gets rowdy.
Andy Fergurson:
Yeah, they’re rambunctious crowds. So it’ll be interesting to see some of the things that come out of that. So the next time I talk to you, I’ll probably have a ton.
Nate Kreinbrink:
We’ll have content for the rest of the year.
Andy Fergurson:
Yeah, I’ll probably have a binder full of stuff that we can talk about, that will rivet our audiences to this show.
Nate Kreinbrink:
Well, I know it always amazed me when you come back from those, you bring back the stack of papers that’s an inch or two thick. Right? And I always say like, “Oh man, that’s everything?” He’s like, “These are just the changes.”
Andy Fergurson:
Yeah.
Nate Kreinbrink:
To the tax code. This isn’t the tax code itself, these are the changes, or amendments, or modifications to the code. Rick, it’s crazy.
Andy Fergurson:
Yeah, just the thing we want to pay attention to. An interesting thing happened last week, maybe the week before, the Taxpayer Advocate Service made their midyear report to Congress. And in that midyear report, so the Taxpayer Advocate Service is an independent function of the IRS.
So they are kind of a watchdog service inside the IRS, and they are supposed to guard the taxpayer’s rights from the operation that is the IRS. And so they audit the IRS’s processes, they audit the things that the IRS is doing, make sure that the taxpayer’s being taken care of, and that the IRS is doing the things that they say they’re going to do.
And that report was pretty interesting. They found some interesting things. They found that all the people that are suffering with identity theft, some of those processes, I think that the reports said there’s more than 4 million people that are in that process right now.
Some of those processes are taking more than 22 months to resolve. And that’s too long. The advocate says that’s not acceptable, they got to fix that. They found that the IRS has been reporting on their telephone statistics. If you remember back in COVID 2019, 2020, the IRS customer service levels were just atrocious. If anybody had to call the IRS during that time, it was just awful.
Nate Kreinbrink:
Right.
Andy Fergurson:
And so the IRS focused on fixing that. And the last couple of years they’ve been reporting, “Hey, we’re great. We’re doing a good job.” If you call the IRS, it’s like calling a bank or something, you get top level customer service. And those of us in the industry have kind of been going, “I don’t know if it’s as good as they say it is.” But their reporting has been that the IRS has been on top of the world. And the advocate came out with this report and says, “It’s not exactly what you’re portraying.”
And what they found is that the IRS is reporting only some of those statistics. So they’re segregating the phone calls and saying, “We’re going to count all the customer service in these certain categories as customer service levels that we want to report, but they’re not counting everything. And so the IRS is reporting like 88-89% customer service level satisfaction, or not satisfaction, but attentive customer service levels.
And the advocate says it’s more like 39%. So that’s a big deal. And so that report will go to Congress. We don’t know how the IRS will respond to that yet, but the advocate will make some recommendations. Another interesting thing in that report was that the IRS has developed a paperless portal, where you can upload a document. Instead of mailing it in or faxing it in, you can upload a document. And what the taxpayer advocate found is that the IRS is still treating that like a paper submission.
And so it goes into the portal, but then it still gets processed like it’s on paper. And the advocate said, “What’s the point of the portal then? All you’ve done is saved the time that travels in the mail. You haven’t changed anything.” And so some interesting things. It’ll be interesting to see at the IRS tax forum, if the IRS addresses that specific report from the taxpayer advocate, or if the advocate comes out and doubles down on their report, and puts the screws to the IRS a little bit and to see what they do.
So it’s an interesting thing. I like it when the taxpayer advocate stands up to the IRS and says, “You guys got to get better. You’re a function of the federal government, and you have an important job, and you have a responsibility to the taxpayer.” So that’s good news. And so that was an interesting read this week.
Nate Kreinbrink:
No, it sounds like it. And I think like you said, it’s good for everybody. I think accountability and all that that goes along with it is a great thing to go with that. And again, as you see some of those things, what they’re looking at, what they’re doing to improve, is only going to improve the experience for us as the individuals, as the tax filers that we’d go with it.
When we’re looking at things like that too, we always look at this time of year, as far as what is a tax prepared doing? And what are some of the things that are continuously coming up? Again, we always talk tax planning, tax planning, tax planning. And you and I have coordinated a lot of those meetings with people, just trying to give them their biggest bang for their buck.
And again, how can we do that? And how can we improve that experience? And maybe just hit… We’ve got a few minutes left here, some of the key things that continuously come up in that planning and that kind of service and offering to our clients.
Andy Fergurson:
Sure. Well, that’s what we do right now. This time of year, we’re focused on amendments, extensions, and planning. In the planning process, what I’m seeing is, as I go through and plan for people, and what are the things that they can do to control their tax exposure, some of the biggest opportunities that I’m seeing is people aren’t necessarily contributing as much as they can through 401k, or their other, their 403b, their 457, whatever it is that they have through their employer.
They will tell me that they are making a maximum contribution. And what that means to them is they are putting in as much as they can to maximize the employer’s contribution.
Nate Kreinbrink:
Match. Yeah.
Andy Fergurson:
So they’re getting the maximum match, but they’re not making the maximum contribution. And so they may be putting in $7,500, $8,000 a year into their employer sponsored program, but they could be putting in $22,000-$23,000, if they’re sub 50. If they’re over 50, they could be putting in $31,000. There’s no better way to reduce your tax bill than putting the money into that pre-tax account.
Nate Kreinbrink:
Right. And I think that what you just said is another thing. It’s not just that you’re saving for your retirement, which obviously is an ultimate goal that you want to accomplish anyways, but you’re potentially reducing income, reducing your tax that you’re paying, while saving for retirement. So there’s that win-win that you’re looking at with it.
Andy Fergurson:
Yeah. Another opportunity that we’ve discovered recently, as far as when the Iowa tax law changed, is the idea of a Roth contribution. If you’re under 55 in the State of Iowa, putting money into a Roth, may be wise. If you’re over 55, or if you live in the State of Illinois, you may want to consider putting money into a traditional, and then converting it to a Roth.
Because if you put the money into a Roth, straight away at your employer, what happens is that money stays in your adjusted gross income, which means you pay tax on it at the state level. And if you put it into a traditional account first, it comes out of your adjusted gross income. And then when you convert it, because you live in Illinois, or because you’re over 55 and live in Iowa, you don’t pay the tax on it at the state level. So you can save the tax rate, just with that simple-
Nate Kreinbrink:
Essentially getting it to the same place.
Andy Fergurson:
Yeah, you’re-
Nate Kreinbrink:
You’re just taking the roundabout way to get it there, while essentially gaining the state tax.
Andy Fergurson:
Yeah, you move it into that same Roth account in about three steps instead of one step, but you save the four, four and a half percent, or 5% in the state, or 4.95% in Illinois, or 4% in Iowa. So that’s a big opportunity.
The last one I would say is that we run into people who are not taking advantage of QCD. That’s an opportunity that comes to people that are over the age 70 and a half, that are taking distributions from their IRA, and making charitable contributions. And so that’s something to talk to your advisor about. If you are making contributions to any nonprofit, or church, or any 501C3 charitable organization, if you’re making a contribution, and you have IRA money, and you are over the age of seventy and a half, you need to talk to your advisor about QCD. Doesn’t matter how much that amount is.
Nate Kreinbrink:
It’s all great stuff. And again, just looking to maximize what it is that we have and the key part of what we’re doing. So questions on that, give him a call. Be happy to do that. Sit down, go over your individual situation.
Did want to mention real quick, before we run out of time, that every Friday, NelsonCorp Wealth Management and NelsonCorp Tax Solutions are wearing jeans for charity. Money raised in the month of June will be donated to the Clinton Humane Society.\
As always, Andy, great time.
Andy Fergurson:
Thanks.
Nate Kreinbrink:
Great info. Time flies. Andy Ferguson with NelsonCorp Tax Solutions, Nate Kreinbrink with NelsonCorp Wealth Management, bringing you this week’s Financial Focus. Thanks for tuning in and have a great rest of your week, and a safe 4th of July holiday.
Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in the show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered Representative Securities Offered through Cambridge Investment Research Incorporated, a broker dealer, member FINRA, SIPC. Investment Advisor Representative Cambridge Investment Research Advisors, incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.nelsoncorp.com.