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 representatives, 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 KROS. Well, this is Nate Kreinbrink bringing you today’s show. We are second Wednesday of March. David Nelson was on last week for the monthly, first Wednesday of each month, 30-minute live session. Talked a lot about current economy, some of the events globally that have been in the headlines, impacting markets, and where that goes to. Prior to that, Mike Steigerwald from [inaudible 00:01:17] with me, and we were hitting social security a little bit, talking about the different claiming strategies, how you should look at it, how you should approach it, how it fits into the big overall comprehensive planning as far as from a cashflow standpoint. Again, when we look at all these different topics, understand that each one of these, obviously, we’re touching on a pretty high level for time constraints for the show for each week. But again, understand that all of these decisions do fit together.
As we get into the month of March here, it is showing signs of where we are, March in the Midwest. Obviously, weather-wise, we’ve had some little taste of that 60, 70 degree temperature, open up the windows, air everything out again. And then, obviously, some of the storms we had overnight last night and possible snow flurries this afternoon. Again, it’s changing, but we are getting closer to turning the corner, hopefully, and getting to those warmer spring temperatures. I know a lot of the spring sports locally are getting close to underway, if not underway. I know there were some indoor track meets last night and that will continue. I think those that play spring golf, their seasons will be getting underway here within the next week or two. A lot of the area schools have a spring break next week, so hopefully, it is nice so they can get out and enjoy a little bit of that. Again, understand where we are. If you don’t like what’s happening, just wait an hour because it’s probably changing.
This time of year, we’re also obviously into tax season. I know usually the third Wednesday of every month, we have Andy Ferguson or Mike Van Zuiden from our tax office in with us talking on some of those topics with being in the middle of March, seeing another big influx of people coming through the doors, getting their taxes done, picking up their taxes. Again, wanted today for the topic, just touch on just general returns, outcomes, and what you, as the taxpayer and those returns getting back to you, how you can look at those results and what you can do to maybe improve them for, I guess you would say, 12 months from now when you file your taxes for 2026.
I think when people look at their taxes, there’s always that uncertainty as far as how they’re going to turn out when they come in or they drop it off, and not knowing what those results are going to be. Obviously, look at it from a good or bad return based off of if they get a refund back or if they have to pay in. I know we’ve talked about, and Andy has mentioned quite a few times on shows that we’ve done, is, again, that refund that you’re getting back is essentially your own money that you are getting back. You overpaid the amount of taxes throughout the year based off of what your income showed, so they are just returning your own money back to you. Again, it works the other way. If you have to pay in, you did not pay in enough taxes throughout the course of the year. You have to settle up with the IRS that tax time to, again, settle up with your tax bill based off of your income that you had.
Now again, sometimes these change throughout the course of the year. You get a raise, you get a status change, whatever the case it may be. Again, we want to make sure that we adapt to what those new laws are, how our new situation is. Again, if you look at it now, we are second week of March. If we do make any changes to any withholding or whatever the case it may be, we do have plenty of time throughout the course of the year yet for those changes to take hold and change that result that we’re maybe be looking for. Because with enough planning, I mean, you can get that tax return, as far as a refund or having to pay in, pretty close to where you want it to be based on some simple adjustments. The longer time that you have to make those adjustments, the more they won’t be as severe as far as any of those changes that you make.
Again, when you look at those tax returns, and a lot of times, changes occur whether it’s withholding. They’ve been withholding from a smaller amount, maybe got a decent pay raise or something, and never really updated their withholdings. If you’re looking at multiple jobs, this is a big one that Andy always hits on, if you just fill out a normal tax documents starting a new job, that new job is going to assume when if you hit single or married filing jointly, as far as your tax filing status. It is not asking you on the tax forms, as far as if you are married, it’s asking you how you want your taxes to be withheld, which is a common misconception that a lot of people do is, again, if they have multiple jobs and they hit married filing jointly, each of those individual jobs is going to assume that they’re going to take out the whole standard deduction for a married-filing-jointly couple.
Now again, if you have multiple jobs times two, times three, you’re not getting two or three standard deductions, you’re only getting one. That’s where sometimes that adjustment on the withholding needs to happen, is simply by changing that box on the tax forms, or just voluntarily withholding a little bit more each paycheck to offset that. Again, those are some simple changes that you can look at doing.
A filing status, if you were single and you got married last year, your tax brackets are going to change. If you’re withholding from a single tax filer previously, you may be withholding a little bit more than what you need to, so that may need adjusted. Vice versa, if you were separated and are now filing as a single tax filer, but you were withholding taxes as married filing jointly, you may need to adjust that, otherwise, you may have a big tax bill when you’re looking at that.
When you look at it from a refund standpoint, and again, that’s ideal. People feel better when they leave their tax meeting and they’re getting a refund back. Understandable, there’s a big psychological difference between getting money back versus having to write that big check to the IRS at tax time. But again, if that happens, what are you using that for?
There’s obviously a bunch of different ways of thought, I guess, as far as what people are looking at on that refund, if they’re getting something back. Some people just simply put it to a vacation or they pay down debt or they do some home improvements, which is all great. I mean, it’s all coming out of the same pot anyways. But again, if you want to look at that and maximize that refund that you’re getting, it’s a great way to use that money to make possible retirement account contributions.
The one thing that people need to keep in mind is that you actually do have up until the tax deadline, April 15th, to make a prior year contribution into any IRA or Roth account for that year. Again, if you income-wise are eligible to contribute to a Roth or contribute to an IRA account, you do have up until that April 15th deadline. Now, if you end up filing an extension till October, that deadline does not follow you with that extension. That deadline to make a prior year contribution is still April 15th, so keep that in mind. But again, it’s great time to use that if you still have room to max out any IRA or Roth contribution and income levels allow you to do that. Taking that refund money, putting it into a retirement account for you, and putting it away for a future savings is a great way to go about doing that.
Now, with that, there is things to keep in mind. If you’ve already filed your tax return for the prior year and you make a contribution to an IRA account, it is going to change the outcome on your tax return so you will need to file an amendment with that to adjust accordingly for any contributions. If you make a contribution to the Roth, it essentially does not change your outcome on your tax return. It can be accounted for, but again, really no amendment is necessary due to there’s no deduction for putting the money into a Roth account like there is with a IRA account. Again, it’s a great way to use those funds, get ahead of the game.
If you’re not maxing those things out and you’re putting a chunk in last year versus this year, go ahead and look at it. It may make sense to put money in a prior year contribution if you’re eligible, and then that way you have the full amount for 2026 to be able to put in which, again, you would have until April 15th of 2027 to make a 2026 contribution into an IRA or Roth account. Now again, understand this does not apply to 401k accounts, retirement accounts, those things through your employer. It is those individual ones, the traditional IRA or the Roth account, that this may make sense to.
A lot of things to kind of look at, but again, looking at where your outcome is, understanding the general concepts. If it’s not the coming out the way you want, talk to your preparer, talk to someone to say, “Hey, this is what happened this past year. I don’t want this to happen 12 months ago. What do I need to do to make changes?” If you’re getting that huge refund back, we may be beneficial to make some changes so you get that money paid to you maybe throughout the year instead of in one big chunk coming in at the end.
Again, a lot of changes a lot of times, but this time of year, taxes seem to be forefront on people’s mind, either one, gathering still documents to get turned in, setting up an appointment or getting them back, and understanding what it was. New tax law changes obviously impact that a lot too. Over the next couple of years, if it changed, those are going to, more than likely unless there’s any other changes, be the rules that we have to play with. Understand them, have questions, talk to someone, and let’s see and make them come out more favorable the way you would like.
Got questions, give us a buzz. Did want to mention here before we run out of time that every month, NelsonCorp Wealth Management is featuring a charity of month. For March, we are looking at the Little Bellies Big Love program at the YWCA here in Clinton.
Again, this is Nate Kreinbrink bringing you this week’s Financial Focus. Thanks for tuning in, and have a great rest of your week.
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