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 KROS, what is the third Wednesday of April. I do have Andy Ferguson with NelsonCorp Tax Solutions on with me this morning. He has a big smile on his face and I think I probably have a pretty good reason why. April 18th deadline has passed, which means it is technically after tax season.
Andy Fergurson:
That’s right. It’s the best time of the year.
Nate Kreinbrink:
I could see it starting to creep in late yesterday afternoon on you. Again, been hitting it pretty hard, obviously, over the past few months, going through as many returns and meeting with people and all that through it. So I can only imagine the just exhale and just feeling of relief that you guys are all feeling today.
Andy Fergurson:
Well, there’s a little bit of pressure taken off. There’s still a lot of work to do. You still got to check in and get the job done. I got stack of folders on my desk still, but it’s nice to have the deadline pressure come off. Well, not come completely off, but it’d be relieved. So now, I’ve got six months to do what has to be done next.
Nate Kreinbrink:
As far as for those individuals that are extensions and all those things with it.
Andy Fergurson:
Absolutely.
Nate Kreinbrink:
So we’ve talked again on the show as far as the last couple of years. I think the only thing consistent as there’s been really nothing consistent, and I think this tax year, things kind of reverted back, which made for some changes. Maybe touch on a couple key takeaways, I guess, from tax season that you just went through.
Andy Fergurson:
Yeah. So the first thing I’ll say is there are changes all the time, but what we need to understand about changes is that a lot of times, those changes can create some opportunities. They can create some strategic things that are possible. They can also mess things up a little bit for you depending on what your situation is and what the change is. We saw a lot of that this year where there were people who had an expectation coming into their preparation and got a very different result than what they were expecting. People tend to forget what happened two or three years ago and they only remember what happened last year.
And so last year was one of those years where everything was inflated and puffed up through either stimulus money or additional credits or expanded parameters for those credits, and so we heard a lot of, “Well, last year, I got X and this year, I have to do Y,” and they don’t understand. They don’t understand where it comes from. A lot of people don’t understand what’s going on with taxes, and why would you? Think about all the training in your adult life that, or even start of high school, all the training that you got on how taxes work, and that is a very small amount. I went through school for accounting and got one class on taxes, and so there’s just not a lot of training that you get going through high school and college to prepare you for a major part of your adult life.
Nate Kreinbrink:
Right. And so a part of that is, again, you look at, okay, maybe their tax return didn’t turn out maybe quite how they wanted it. We kind of talked a little bit on the way up here though as far as now is middle of April, we still got two thirds, basically, of the year left over, looking at your pay stub and understanding what is being withheld and what should I possibly change to maybe make the outcome 12 months from now more desirable to maybe what I want it to be.
Andy Fergurson:
Absolutely. Taxes, although they are daunting, are very controllable. There are things that you can do to prepare for taxes before you prepare your taxes. There are opportunities and strategies that you can put in place depending on your situation, but more than anything, I think we need to understand what’s happening. If you’re in the point of your life where you’re employed and you’re making wages, you need to understand what’s happening on that paycheck. Now that we live in an age where everybody gets their money direct deposited or electronic funds transfer, very few people are seeing a paycheck stub anymore, and if you’re not seeing a paycheck stub, you may want to go look at it.
I had a lot of people this year who were just shocked when they saw how much withholding was coming out of their check. They had no idea what was being withheld and maybe they made 25 or 40 or $50,000 and only had two or four or $700 withheld. Well, that’s not enough, and they didn’t understand what was causing it and now is the time to look, not when you get your W2 because once you get your W2 in January, that year’s done and you’re either staring down the barrel of a balance due or there’s nothing you can do at that point, and so we got to take a little more ownership of our stuff.
You can’t expect your employer to check your paycheck and make sure that they’re withholding enough because that’s not their job. They’re not doing that, and if you work somewhere where there’s a lot of employees, they’re for sure not going through each paycheck and saying, “Hey, did we withhold enough money on Nate’s check? Is he going to be okay?” They’re not looking at that. There’s only one person who cares whether you’re going to be okay or not at tax time.
Nate Kreinbrink:
That’s you.
Andy Fergurson:
And it’s you. So you got to own that a little bit and if you look at your paycheck and you don’t understand, then you got to take another step. It’s the same thing I tell people all the time. When you get into a project at your house, you’re fixing something on the outside or repairing something or you’re into plumbing or electricity, as soon as you get to a point where you don’t know what you’re doing, it’s time to get some help, and that help may come from a neighbor, it may come from a friend, it may come from YouTube. I don’t care how you get your help, but don’t just guess and don’t say, I’m just going to figure it out. You wouldn’t do that if you were fixing your toilet. Why would you do that with taxes?
Nate Kreinbrink:
It’d be very important to get that professional advice and I think another, expanding and taking that concept to the next level is you and I share a lot of joint clients as far as with what we do and looking at it from a planning perspective, now we can switch gears and look forward to the rest of this year, and obviously, January 1st of 2023, there was some tax law changes and presenting some opportunities to individuals that, okay, maybe now, you can, again, you’re still finishing up the 2022 filing and all that, but it’s time to look forward now to 2023 and what can we do? What are the new tax laws? How do they impact me, and possibly, what opportunities are out there for me?
Andy Fergurson:
And that’s the thing, there’s always something. The tax law doesn’t change for no reason. There’s always some benefit to some group of people. What you have to do is identify if you’re in that group of people and what do you need to do to take advantage of it. The recent tax law changes in Iowa that make it to where retirement income is going to be exempt from tax, that’s a big deal. That’s going to create some opportunity for people, but that opportunity isn’t going to just happen. There’s some things that you may want to do to take full advantage of that. It’s also important that you understand the law.
One of the things that snuck up on me on that law is you have to be 55 for that law to benefit you. So if you’re 50 and retiring, you’re like, “Sweet, I can start taking money out,” well, you’re not going to get the exemption because you have to be 55 and the money has to classify as the right kind of retirement money. The other thing is if your retirement is baseball cards and you go to cash in your baseball cards, that’s not retirement money, that’s a different kind of money, and so it just is important to understand what’s going on, and again, there’s no better way to do that than to talk to somebody professionally.
Nate Kreinbrink:
And I think one of the items that goes along with that is, again, people start a new job, they have some additional income coming in, filling out the tax forms and it’s always that question, well, how do I fill this out and married, filing jointly, single, all that kind of stuff, not necessarily a question regarding your actual status. That question is referencing how you want taxes withheld and that’s, I think, confusing to a lot of people when they fill out those forms.
Andy Fergurson:
Absolutely. Well, the Iowa form says right on it, if you do this wrong, there are serious consequences and everybody thinks they’re going to jail, but the serious consequences that are happening are tax. That’s what the serious consequences are, but you’re absolutely right. Your W4 needs to be considered. The more income streams you have coming into your household, the harder it is to make that W4 do what it’s supposed to do as far as withholding on your paycheck or your pension or your social security, and think about that. You go into retirement and you have five streams of income. You’ve got an annuity, you’ve got a pension, you’ve got a 401(k), you’ve got social security, and you may still be working a little bit. Then multiply that times two spouses.
If you have 10 different reporting documents, the W4 is going to not be able to do what you want it to do. You’re going to have to do some calculations on your own because that form is not designed for somebody that has 10 income streams. Same thing if you have multiple jobs. So let’s say you’re working. If you and your spouse are working and you both change jobs early or late in the year, now we’ve got four income streams, possibly unemployment in there as well and all those income streams are causing ripples in your withholding process, and so you just got to be careful. You got to make sure that you’re getting enough withholding in there or you got to be prepared to pay the tax, and tax isn’t that bad if you’re ready for it. It’s when you come into my office and you’re expecting an $800 refund and I tell you you got a $1,500 tax bill.
Nate Kreinbrink:
That’s a big-
Andy Fergurson:
That’s the one that we got to get the tissue box out for.
Nate Kreinbrink:
All great stuff, and again, I’m sure we’ll have time now over the next few months on a regular to expand a little bit more on some of these topics. Again, glad to see that smile back on your face and again-
Andy Fergurson:
I smiled the whole season.
Nate Kreinbrink:
Yeah, most of the time. It just was a different smile that I think I saw, but looking forward to talking now a little baseball with you, although Cardinals-
Andy Fergurson:
I don’t want to talk about it.
Nate Kreinbrink:
My reds, not looking good for them this year, so you haven’t missed anything up until this point, but did want to mention real quick before I run out of time that every Friday, NelsonCorp Wealth Management, NelsonCorp Tax Solutions are wearing jeans for charity. Money raised in the month of April will be donated to the Juneteenth celebration, which is sponsored by Living Peace 365. Again, 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.
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 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. For more information, visit our website at www.nelsoncorp.com.