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. Well, this is Nate. You got Mike Van Zuiden with NelsonCorp Tax Solutions. Hard to believe it is the third Wednesday in July already. It is flying right by, so that means talking tax.
Mike Van Zuiden:
It sure does. And talk about flying by…
Nate Kreinbrink:
Oh, goodness.
Mike Van Zuiden:
… it certainly is.
Nate Kreinbrink:
It is crazy how quickly it’s gone. And I joke with my kids and every year that you get through the 4th of July and it’s pretty much back to school because summer goes fast anyways, but after the 4th of July, it just seems like it’s on fast-forward where it just, next thing you know it’s getting back in that school routine again.
Mike Van Zuiden:
And it’s not a real happy time around my house. And you probably know because you’re married to a teacher. Yeah, I have two adult kids now, so that doesn’t impact them so much, but married to a teacher and yeah, where the summer goes, starts creeping in about this time of year.
Nate Kreinbrink:
Very, very quickly getting the classroom ready, getting this and supplies and all that. I know it goes by quick. I know in Iowa you have the state softball, state baseball going on. I know Northeast, local team, fought hard, close extra inning game to number one Seton yesterday, fell four to three, but great season. Lot of local area teams kind of blazing on that tournament trail. Transitioning now to fall, it’ll be fall season starting back up here shortly. Camps and all that fun stuff to cram in yet in these last couple of weeks. So enjoy the summer while it’s here. It will go by quick.
Mike Van Zuiden:
That’s good advice.
Nate Kreinbrink:
So again, being the third Wednesday of each month, we do like to kind of focus on taxes, and having Mike Van Zuiden with NelsonCorp Tax Solutions on today. I know Andy has hit on it a couple times, and obviously this time of year is a little bit different than that time period from basically about February 1st up until usually about mid-April. There’s a lot of different things that are kind of going on now, things that you see on a more regular basis. And again, one of them was what you brought up the other day was these notifications that get sent out by the IRS. I think you referred to them as CP notices. Maybe talk a little bit about what those are and if you do get one, maybe what the kind of general steps are to kind of follow up with those.
Mike Van Zuiden:
Absolutely. So on occasion, as a taxpayer, some people will get a CP notice from the IRS and basically there’s some discrepancy a lot of times with what the IRS shows versus what the tax return might’ve shown. So you’ll get that in the mail. And I think people’s first instinct is, “Oh no, I got mail from the IRS.” And I think the best process for that, once you get that, is to contact your tax preparer, “Hey, I got this. I’m not sure what’s going on. I know I’ve gotten a few calls like this throughout the past few months.” And it’s something that could be handled and taken care of. But I think the first step is to bring that piece of paper to your tax preparer, let them look into what’s going on. Actually, a couple of them that I’ve seen this year have been resolved through simple phone call. They can be resolved through letter writing.
So I guess the biggest advice I would give is don’t panic when you get something like that. It’s something that can be taken care of. Sometimes that notice will say, “You owe X amount of money.” Don’t send a check right away. Talk to a professional, talk to your tax person and let them look into it. I’ve had people get these notices saying they owed some money and when I look into it, I don’t see the same thing. So either a phone call or a letter written to the IRS. And sometimes you have to send proof of, let’s say I’ve had clients that there’s a payment that we’ve reported that the IRS isn’t showing, and we’ve been able to produce the evidence of that and mail it in and resolve that. So yeah.
Nate Kreinbrink:
I think…
Mike Van Zuiden:
Don’t panic.
Nate Kreinbrink:
That’s a big, I think, kind of point right there is just don’t panic. I mean, there was just a difference in what they’re showing versus what was paid. Let’s just reconcile this and go to it. And again, I think with that part too, knowing that this is the time of year when maybe those letters are getting hit. I know it always becomes an issue as far as scams, as far as stuff coming out along with those, because again, the people that are doing the scamming, I guess you would say, know that this is a time when people are getting these letters, so it’s a more realistic time that maybe this would maybe go through. But those letters, like you said, from the IRS are always sent by mail. Correct?
Mike Van Zuiden:
Correct.
Nate Kreinbrink:
The IRS is not going to call your phone number or anything having you do that stuff. So again, if it’s something that seems urgent or, “Hey, you have to take care of this by tomorrow at two o’clock.”
Mike Van Zuiden:
You don’t.
Nate Kreinbrink:
Take a step back, and again, let’s slow down and not maybe overreact to some of this stuff. And again, this time of year as well, again, we had the tax deadline mid-April. Those that are on estimates, we have some of those payments that are coming due. So again, if you are on an estimate schedule, don’t forget it.
Mike Van Zuiden:
Don’t forget it. Yeah. The third quarter estimate is due on September 15th, and then the final estimate for the 2023 tax year is due on January 16, 2024. So yeah, just be mindful of that. We’re halfway through the, well, we’re beyond halfway through the tax year, but we’re halfway through the estimated payment schedule. So yeah, that date will sneak up on you. And a lot of people are in that boat that need to make those payments.
Nate Kreinbrink:
Well, and I think with the estimates like that is is it’s easy to forget them. I mean, everyone kind of knows, oh, it’s April, mid-April, I’ve got to have my taxes done. The estimates, especially if you’re new to having to do estimates, you’re not in that normal schedule of having to pay them. So make sure you set a reminder on your phone or your calendar, whatever the case may be, give yourself plenty of time to be able to get those sent in.
Mike Van Zuiden:
And it’s in the forefront of my mind because I make those payments now. So it’s a date that I’m reminding myself of, putting on my calendar and just being aware of.
Nate Kreinbrink:
And this time of year too, I know part of what you and Andy do, and I think part of what separates what you guys do maybe from others is I think the planning process. Normally, when people think of taxes, they think of taxes kind of like the dentist. When they go in and they’re just like… Because they don’t know what’s going to happen. They don’t think it’s going to be good. They have no idea when you guys put your numbers into their program, what that bottom number’s going to be.
What you and Andy do a great job with, I think, is the planning process. Obviously, when it’s tax season you’re filing from the previous year, there’s not really much that you can do to change the numbers that have already happened. This time of year, I think is when you guys really like and sit down with people and saying, “Hey, this is what happened last year. This is what we can do now. We’re still in July. Yes, year’s moving pretty fast, but we’ve still got enough months left in the end of the year yet where if we need to make changes to change that outcome coming up here in April of 2024 for ’23, we still have time to do that.”
Mike Van Zuiden:
Yeah, that’s true.
Nate Kreinbrink:
But sitting down this time of year with people and doing that planning I think is a big part of what you guys do. And maybe talk a little bit as far as what you guys are looking at, some of the stuff now this time of year, conversion, saving in this bucket versus this bucket and how that’s going to impact that bottom line come next year for taxes.
Mike Van Zuiden:
Sure. One of the big conversations we have this time of year is people looking to convert money from their pre-tax into a Roth and just paying the tax now thinking it’s more advantageous for them to do that now rather than in the longer term, down the road. So we can zero in on the benefit of that, what it would cost them to do that this year versus what the cost of that would be if they just took the money five, 10 years down the road. So it’s a really good opportunity to do that.
We have some people that are hitting the age where they’re eligible to do things like qualified charitable distributions and things like that. So QCDs are a big deal where there’s some tax savings to be done. So those are things that as we go through planning with people we work through and try and go the right direction on those things. So some people, their tax returns the same every year and there’s not a whole lot of room to do that, but there’s plenty of people that there’s some value in sitting down and going through that whole tax planning process. And this is the best time of year for that…
Nate Kreinbrink:
Because you have time.
Mike Van Zuiden:
… as far as our schedules go because we’re not filing tax returns dust to dawn and vice versa.
So there’s value in that for a lot of people. Some people call and ask for that. I think we initiate with some people as well that we’ll do the tax return, say, “Hey, we should get back together in July or August and let’s put the pencil to paper and just see what else is out there to minimize the tax burden and smartly plan for the future as well.”
Nate Kreinbrink:
And I know I had a call-in the other day that we’re probably going to be sitting down with some kind of mutual clients that we have with their employer plan is now offering a Roth 401(k) option, being able to put money into that. And obviously, we talked Roth and the benefits of that. But there’s a trade-off as far as that tax deduction that you get in the year you put it in. So we were kind starting to run some numbers that they would like to put some into the Roth 401(k) through their company plan.
Mike Van Zuiden:
Sure.
Nate Kreinbrink:
But I warned them, “Okay, that’s going to change your taxes because you’re used to dropping your income by what you’re putting into your 401(k). You’re not going to get that benefit now. You’re going to get the tax-free nature that a Roth provides, but you’re not going to get that immediate tax deduction. So before we just go from swinging the pendulum from all into pre-tax to all into Roth, maybe we want to look at this a little bit from a tax to make sure that, okay, you’re okay with this. Okay? There’s still benefit to doing it and maybe we go that route, but I want you to have those answers for the test.”
And I always joke that again, this tax planning that we do basically gives you the answers to the test when you go to do your taxes in tax season because you’re getting it pretty close to what that outcome’s going to be. You’re basically just coming in, reviewing and signing and submitting, but you already know pretty much what the answers are going to be.
Mike Van Zuiden:
It’s a good conversation to have. It absolutely will cost some tax at tax time. So it’s probably even a conversation, let’s look at what your withholding is and maybe let’s pay some of that. Let’s adjust your withholding to compensate for that now…
Nate Kreinbrink:
Now.
Mike Van Zuiden:
… rather than getting the bigger tax bill when you go to file your taxes, because it does, yeah.
Nate Kreinbrink:
It changes it.
Mike Van Zuiden:
There’s a huge difference.
Nate Kreinbrink:
And again, it’s just having these discussions. And again, you have questions, doing something you want to sit down and run it by anybody, give Mike himself a call in his office. They’d be happy to kind of sit down, go over things with you, see maybe where there could be some opportunities, and again, make taxes kind of your friend, not feared, I guess you could say.
Mike Van Zuiden:
Not like a trip to the dentist.
Nate Kreinbrink:
Trip to the the dentist. We want to get away from that narrative. So before I do run out time here, did want to mention that NelsonCorp Wealth Management, NelsonCorp Tax Solutions are wearing jeans for charity every Friday for the month of July. Money donated will be given to The Grove Pocket Park in Clinton.
Mike, appreciate you joining me today. Mike Van Zuiden, NelsonCorp Tax Solutions. Nate Kreinbrink, Nelson Corp 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 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. For more information, visit our website at www.nelsoncorp.com.