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 Inc., a broker dealer, member FINRA, SIPC. Investment advisor, representative Cambridge Investment Research Advisors Inc., 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. This is Nate Kreinbrink. I have Andy Ferguson joining me today. Third Wednesday in June.
Andy Fergurson:
Third Wednesday in June already?
Nate Kreinbrink:
Time to start school shopping again, isn’t it, already?
Andy Fergurson:
I’m still swimsuit shopping.
Nate Kreinbrink:
Well, it’s finally going to be warm this weekend, so you may need one.
Andy Fergurson:
Yeah. Warm is an understatement.
Nate Kreinbrink:
I know we were joking that the first kind of late May into even early June, it just never felt like summer. It felt like fall and just, not complaining. The windows open or whatever, but…
Andy Fergurson:
And then summer, just came all at once.
Nate Kreinbrink:
Summer’s going to just be like… It didn’t just open the door and slowly creep in, it just busted the door down and mid-90s this weekend.
Andy Fergurson:
Humid.
Nate Kreinbrink:
Humid.
Andy Fergurson:
Gross. Yeah.
Nate Kreinbrink:
Fun.
Andy Fergurson:
Yeah, summer.
Nate Kreinbrink:
Yeah. Hopefully we get a little more rain, maybe calling for it today just to kind of-
Andy Fergurson:
Tease us.
Nate Kreinbrink:
… moisten the ground a little bit.
Andy Fergurson:
That way that there’s plenty of humidity in the air for when it gets hot. That moisture can come back out of the ground and make it nice and soupy for the next couple of days. That’ll be great.
Nate Kreinbrink:
Love it.
Andy Fergurson:
Fat guys love soupy weather. It’s a common misnomer that we don’t, but there’s nothing like in reality, sweating all the way to work.
Nate Kreinbrink:
Yes. Fun, fun. But we complain in the winter when it’s cold, we complain when it’s too windy, too dreary, too whatever.
Andy Fergurson:
Yeah, that’s true.
Nate Kreinbrink:
Now, it’s going to be too hot. But enjoy it.
Andy Fergurson:
Just got to-
Nate Kreinbrink:
Stay cool, stay hydrated.
Andy Fergurson:
And you get to do all the fun stuff still.
Nate Kreinbrink:
River should be fairly busy, I would assume, this weekend. And if you have any activities planned for outside with kids, family, friends, whatever, enjoy it.
Andy Fergurson:
Yeah, it’ll be a good time. The vacations are coming and travel season and all that, so it’s a great time of year. It’s one of my favorite times.
Nate Kreinbrink:
Have plenty of bug spray, shadfly spray. Be prepared.
Andy Fergurson:
Yeah.
Nate Kreinbrink:
Today’s program, I know again, third Wednesday of every month we have Andy on or Mike from the tax offices on with us and talking taxes. Obviously there’s through tax season into kind of the tax planning stages, but there’s one thing that it’s not even tax season, but taxes are front and center headlines.
Andy Fergurson:
Yeah, taxes are in the news right now. Everybody wants to know how the Big Beautiful Bill is going to impact them. And what’s funny is that people’s perspective on that Big Beautiful Bill a lot of times, lines up with their political leanings. And so some people are fearful, some people are optimistic. The main thing is it’s not a law. Nothing has passed yet. There has been a version that’s passed the House, nothing’s passed the Senate. We’re watching it very closely.
But no, you should not stop withholding on your Social Security. It is still taxable. Your tips are still taxable, your overtime is still taxable. All that stuff is still under current law, so don’t make any drastic changes there. But at the same time, keep your ear to the ground, keep paying attention to what’s going on because things could very well change. I don’t know how they’re going to change exactly, and I don’t know when they’re going to change.
The other thing to consider is even if a bill passes, it’s likely not going to take effect immediately. Maybe it will, but I find it hard to believe that they’re going to say, “Okay, for half the year your Social Security was taxable and for the other half it wasn’t.” So, my guess is that there’s going to be some start date to that. Maybe it’ll be retroactive, maybe it won’t. But that’s something to pay attention to. And we don’t want to pull any strings too early, so just pay attention. But know that the time to act is not yet, the time… Or what we should be doing right now is paying attention and watching for what opportunities come from this.
One thing’s for sure, planning opportunities are going to come from whatever law passes. Because the law will change, and when the law changes, planning opportunities come. Because we’ll find a way to use the law to our advantage to make sure that we get the best benefit from the current tax law.
Nate Kreinbrink:
Well, I think too, like you said, I think the goal was to have something on the President’s desk by July 4th for him to sign and to do that. Well, that’s again-
Andy Fergurson:
Two weeks away.
Nate Kreinbrink:
… two weeks away. And again, to have to go through the Senate. And the way it sounds that there’s got to be some concessions going back and forth with what the verbiage is inside of that bill. To have that all done by July 4th and on his desk ready to move forward, every day we go by is that’s less likely to even happen. And again, looking at some of the concessions that are inside of there or some of the changes in there, it’s important for you to also keep in mind that it sounds like there’s going to be a lot of ifs. There’s a lot of restrictions, there’s a lot of, if you qualify. So the Social Security thing, again, it’s not looking like it’s going to be just not taxed, but there looks like there’s going to be an additional deduction.
Andy Fergurson:
There’s going to be thresholds, yeah.
Nate Kreinbrink:
An additional deduction that if you’re 65 or older and your income is below this amount or in between these amounts, you’re going to get an X amount of dollar of an additional deduction on your tax return.
Andy Fergurson:
Yeah. One of the things I’m confident in is, it’s not going to be a cut and dry thing. It’s not going to be easy. Which is good for me because-
Nate Kreinbrink:
Because it makes it…
Andy Fergurson:
… I will spend the time to figure it out because nobody else, or not nobody else, but a lot of people won’t understand it. And there’ll be thresholds. There will be, if you make so much money outside of this or that, then you qualify or you don’t. Or you have to be this old or you have to put your pants on this way or whatever. There’s going to be qualifications that make it to where you can or cannot take advantage of this particular part of the code.
And so, it’s not going to be a one-page memo that comes out. It’s going to be hundreds of pages of law that are related to tax. And the full understanding of that, even if it lands on the President’s desk on July 4th, full understanding of that law is going to take some time. So, don’t call me on July 5th and ask me what to do, because I won’t know the answer yet. And I’m on vacation on July 5th, so don’t call me that day.
Nate Kreinbrink:
So again, just keep an eye on it. Obviously, that will be a hot topic on our shows moving forward, if and when that does get passed and approved through, depending on what actually to what extent it is. So again, we will keep you in loop with it. But again, just don’t take any drastic changes now because like Andy said, it is technically not a law yet.
Andy Fergurson:
It’s not a law.
Nate Kreinbrink:
So as we move on, I look at this time of year too. And it’s again, summer jobs, additional jobs, adding another job, workers, maybe younger workers working for the first time. But that also brings along tax forms and the confusion as to what you should mark, how you should mark it. Do I need to withhold? Will I need to file? Am I withholding enough? Again, if you have multiple jobs, are you coordinating the filing of those tax forms in unison with each other? A lot of questions for, again, maybe they’re only making a couple of thousand dollars in these couple of months. You still got to file that tax form, but then does that mean you have to file taxes? And I think as with anything, it depends.
Andy Fergurson:
It definitely… My favorite answer is, it depends. It definitely depends. So summer jobs for kids, people call me all the time and say, “Should I have my kid go exempt on their W-4? Should I have them withhold?” And the real answer to that question is, it depends. If they go exempt, what that means is that their check is not going to withhold any money to pay tax, and so there’ll be no withholding. Well, the benefit to that is if they get to the end of the year and they have no tax liability, they don’t have to file a tax return. They don’t have to file a tax return because there’s no reason to. There’s nothing, they don’t owe tax, they’re not getting any money back. If they withhold and they don’t owe any tax, they still have to file a tax return to get that money back.
And so a lot of times we tell people to go exempt, but there’s a couple of things to consider. I would say if you live in Iowa, generally the money that a kid’s going to make across the summer is not going to be enough to cause them to have a tax liability. If that’s their only income for year, it’s not going to be enough to cause a tax liability. They can likely go exempt and not have to worry about it because their exemption is going to match the federal exemption. Almost none of these kids, until they make 10,000, 11,000, maybe $12,000 are not going to have to pay a federal tax.
State tax will follow suit in Iowa. In Illinois, not quite so high. In Illinois, it only takes a couple of thousand dollars and now you have a tax liability. And consequently, if you live in Illinois and have a summer job and you’re going to make more than a couple of thousand dollars, I would say you probably should withhold. So, don’t go exempt on that. And then you may or may not have to file a tax return to settle that debt or liability with the state.
Important to remember that when you are considering which state you’re going to play by the rules, people don’t always realize this, but you pay tax in the state you live in, not in the state you work in. So if you work in Illinois but live in Iowa, you play by Iowa rules. If you work in Iowa but live in Illinois, you play by Illinois rules. You pay income tax to the state you live in, not the state you work in. Now, in some cases, in other states, you also pay in the state you work in. But you always pay to your home state. You don’t pay to the state you work in. And that’s just a great rule of thumb. If you ever get a letter from a state that you worked in but you didn’t live in and they tell you you owe tax, take that to a professional because they may be mistaken.
Nate Kreinbrink:
So, a lot of good stuff. But again, ask questions. Again, nobody’s situation is exactly the same as their friends or their neighbors or their family members or the person they work with. So again, make sure that you’re making decisions based on you, not something that you may or may have gotten from somebody else. Again, we are out of time. Taxes are fun, taxes make time fly by.
Andy Fergurson:
Time flies when you’re talking about fun stuff. That’s why tax people parties go so fast.
Nate Kreinbrink:
That’s right. That’s exactly right.
Andy Fergurson:
When I go to the IRS parties, you know, it just, snap, it’s midnight.
Nate Kreinbrink:
Boom, it’s over with. On that note, I want to make sure that I do mention that every Friday, NelsonCorp Wealth Management and NelsonCorp taxes are wearing jeans for charity. Money raised in the month of June will be donated to the Brantley’s Wings program. As always, Andy, thanks for joining me.
Andy Fergurson:
You bet, buddy.
Nate Kreinbrink:
Nate and Andy, with 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 of 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.