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, got a special guest joining me today. It’s not the third Wednesday of the month, but Andy Ferguson, NelsonCorp Tax Solutions is filling in this morning. Appreciate to join me. Hard to believe, this is the last show of June.
Andy Fergurson:
Last day of June, isn’t it? In three days, it’s the 4th of July. I can’t believe it, it’s crazy.
Nate Kreinbrink:
As everything always goes, it’s just flying right along and I’m excited for the 4th of July weekend and then celebrating and everything that, that means. But it also is that point of summer, where it almost feels like it’s downhill into the end of summer from this point on.
Andy Fergurson:
Yeah, we’re halfway there. I can’t believe it.
Nate Kreinbrink:
It is. And July will be busy, get back to August, start thinking back to school already and back into that routine.
Andy Fergurson:
Unreal. It feels like we just got here.
Nate Kreinbrink:
I know. We will continue to enjoy it and every bit that goes along with it. But as I mentioned, Andy here today, obviously want to talk a little bit of taxes while we have him in this morning and there’s a lot to cover. One of the main topics, and I know we’ve mentioned it a couple of times on the last couple of programs, but it continues to still come up and that’s the child tax credit and what that means and should I do it? Should I opt-out? Will I be getting any of it? How does it affect me now, versus when I file my taxes?
Nate Kreinbrink:
Still a lot of questions out there, but essentially what it is, is just the prepayment of that child tax credit that individuals normally would get on their tax return. Depending on the ages of your child, will determine the amount that you will be getting. And that is just starting here in July and then every month, you would just get a prepayment back of some of that credit. Essentially, if you get all of the payments back in the next six months, you would essentially get half of that child tax credit that you would get on your tax return, paid back to you over the coming months. But again, still a lot of questions that go into that.
Andy Fergurson:
Yeah, it’s on everybody’s mind. Everybody’s worried about it. Everybody’s talking about it in the news. And the other thing is, there’s not a lot of information out there.
Nate Kreinbrink:
Right.
Andy Fergurson:
If you have specific questions, the IRS has some great frequently asked questions, tools, on their website that can help you get specific answers to your specific questions. It is, it’s weird, it’s an increase to the child tax credit. So it’s more than you would normally get if you qualify, according to the income limitations and all that stuff. And so it’s going to be interesting how it all works out. The good news is, if you do nothing, the money should start to come to you, if you qualified for it on your 2020 tax return.
Andy Fergurson:
And in that case, the money will come first, whether or not you’re entitled to it in 2021 is another question, but there’s things that can be done to help you understand that better. And worst-case scenario, if the money comes to you, you can always set it aside and hold that money in case you have to pay some of it back. So, there’s definitely some issues there, there’s some questions. We’ve been fielding, a lot of calls, and we’re giving specific advice to people, based on their specific situation. So it’s real hard to give general advice to people just because it’s so complex.
Nate Kreinbrink:
Right.
Andy Fergurson:
There’s a lot that goes into whether or not you’re going to qualify for the extra. I guess, one thing that we could talk about that’s pretty, I don’t know if everybody understands, that is if you for some reason, don’t qualify for the additional child tax credit, you will still qualify for the original amount, the $2,000 that you would have gotten in a normal year-
Nate Kreinbrink:
Right.
Andy Fergurson:
… if you’re over the income amount that gets you to the extra child tax credit. That is for this year only. So that’s one thing. The other thing to consider is, that there’s just a lot of complexity to it. And the best thing to do, if you want to decide on whether you’re going to opt out for future payments, it’s too late to opt-out for the July payment. That deadline has passed, it passed yesterday. But if you want to opt-out of future payments, there’s a tool on the IRS website that you can do it, but you should talk to your tax professional about it.
Nate Kreinbrink:
Well, and I think it’s just an understanding too, I mean, the child tax credit is not any new, additional money that you’ll be getting. It’s just a prepayment of that credit that you would already have been getting on your tax return, should you have qualified when you filed your 2020 tax return.
Andy Fergurson:
Correct.
Nate Kreinbrink:
And I think that’s where people get a little bit confused as far as, “Well, I’m going to take it and why would I not want to take it?” You’re not getting anything additionally, it’s just a prepayment of that credit. And again, if you want to opt-out, it’s not like you’re saying, “No, I don’t want that tax credit.”
Andy Fergurson:
Yeah, it’s just you’re getting it later.
Nate Kreinbrink:
It’s just, you’re opting out of getting the prepayments to you.
Andy Fergurson:
Right.
Nate Kreinbrink:
You’re just saying, “No, I don’t want the prepayments. I want to take all of that credit on my tax return.” And that’s some of the confusion too, I think of people, as far as, “What am I opting out of? Yes, I want it so I’m just going to take it.” You don’t have to take the prepayment. You can just take the full credit, if you qualify on your tax return, as well.
Andy Fergurson:
Yeah. That’s what we go through with people when we’re talking to them about whether or not they should opt-out? We look at their tax return and we determine how much of their child tax credit plays into their refund or their balance due. If there’s somebody who gets a big child tax credit because they have three, four, five kids, and they have a small refund, we’re telling people to opt-out and use that child tax credit to pay your tax bill like you normally do. Because if they take half of their child tax credit and there’s somebody who only gets a couple hundred dollars of refund, they’re probably paying in.
Nate Kreinbrink:
A pretty decent amount possibly, too?
Andy Fergurson:
Yeah. And that’s a scary proposition for people. And so that’s what we’re considering, is how does that child tax credit impact your bottom line on your tax return? And that’s the decision that you have to make. If you’re somebody who gets a big child tax credit and gets a big refund, it’s not going to matter.
Nate Kreinbrink:
You may just not get as big of a refund, possibly.
Andy Fergurson:
Right. You might lose a couple of hundred dollars or something on your refund, but you’re still going to end up with a refund. But if you’re one of those people that has a small child tax credit and, or a small refund or a big child tax credit and a small refund. Because you’ve listened to our other advice all year long, where we tell you not to prepay in and not to get that big refund back, if you’re somebody who’s done that, you want to strongly consider whether or not you’re going to take this advanced money. Because that advanced money is coming off that refund.
Nate Kreinbrink:
Right. And again, it’s just understanding some of those things. And as we said, if you do nothing and you qualify, you will automatically get the payments starting here, middle of July and then every month, till the end of the year. If you don’t want to do that, as Andy mentioned, you have to physically go into the IRS website, they have a child tax credit portal, where you have to follow some steps and basically, unenroll and say, “No, I do not want to do that.” So again, understanding some of those things, a lot that goes into it. Questions, give myself or Andy a call and run your numbers and see how that qualifies for you.
Nate Kreinbrink:
Just understanding why you’re making the decision and how it will impact you when you make your taxes. I know Andy, we always talk too, this time of year, we transition from your tax preparation, to the tax planning phase. Starting to hit a lot of that, I think with people, as far as some of the meetings that I’m running. Starting to look at Roth conversions.
Andy Fergurson:
Sure.
Nate Kreinbrink:
How things are going to look at withholdings and everything going into that. So again, as we transition to that time, you enjoy sitting down with people this time of year-
Andy Fergurson:
Yes, I do.
Nate Kreinbrink:
… and do that planning and seeing how you can better their situations.
Andy Fergurson:
Absolutely, that’s my favorite thing, tax planning is the best part of the job. This year’s an interesting year too, because last year we didn’t have to take RMD. Right?
Nate Kreinbrink:
Absolutely.
Andy Fergurson:
So, it’s hard to just look at last year and determine where your tax liability is going to be in. So you really need to have somebody look at it and say, “Okay, you’re going to have RMD, and what else is going to play into this?” You may have additional child tax credit. You may have other factors that are going in there. This past year 2020, there was no premium tax credit, or I’m sorry, advanced premium tax credit for the Obamacare premiums. So there’s a bunch of things that have changed. A lot of people last year may have had unemployment and won’t have it this year. So, there was a lot of moving pieces in last year and so that’s going to carry over into planning for this year. And you need to just make sure that you’ve got a good understanding of what’s happening and the more effort you put into planning now, the happier you’re going to be with your tax return come April next year.
Nate Kreinbrink:
Well, I always say, I mean, the more planning you do now, you essentially go into filing your taxes with the answers to the test. And there’s no surprises when you go and actually file your return for 2021.
Andy Fergurson:
Right.
Nate Kreinbrink:
Because you did a lot of the planning coming up. And I know always this time of year, too, you have your classes looking at the new tax laws-
Andy Fergurson:
Yeah.
Nate Kreinbrink:
… new legislation that’s coming down. There’s obviously been something in the news the last couple of weeks, as far as some proposed legislation that could be coming down. And as always, we’ll continue to keep an eye on that. And then as it gets closer to whatever bill or whatever gets passed, obviously look at how that affects people, as well.
Andy Fergurson:
Yeah. That proposed legislation is always a hard thing. They’re always trying to change the tax law.
Nate Kreinbrink:
Yeah.
Andy Fergurson:
I don’t know why. But it changes, it seems like every couple of months and so we got to keep on it. So you’re right, we got about 36 hours worth of training coming in the next couple of months, to make sure that we’re up to date and what training will do, will train us on the law that exists. It won’t train us on anything that is possible to change.
Nate Kreinbrink:
Yep.
Andy Fergurson:
And so, if they change it again in the middle-
Nate Kreinbrink:
We’ll figure it out.
Andy Fergurson:
… we’ll figure it out and make sure we know it so we can help you make good choices and do the things that are necessary to put you in a good position.
Nate Kreinbrink:
All good stuff and as always, Andy’s always looking to sit down. So any of the stuff that we covered today, questions on anything else, feel free to give himself, Mike a call, be happy to sit down with you guys up there and then go through that situation. Did want to mention real quick, that every Friday, NelsonCorp Wealth Management is wearing Jeans for Charity, money raised in the month of June will be donated to the Quantis Club of Clinton. Andy, appreciate your joining me this morning. We’ll do it again here in a couple of weeks when it actually is the third Wednesday of the month.
Andy Fergurson:
Sounds good.
Nate Kreinbrink:
It’ll be July then.
Andy Fergurson:
All right.
Nate Kreinbrink:
Nate Kreinbrink with NelsonCorp Wealth Management, Andy Ferguson, NelsonCorp Tax Solutions, 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 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.