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, it is the third Wednesday of the month. We have Andy Ferguson with Nelson Corp Tax here with us. March is moving right along. First baseball game was yesterday.
Andy Fergurson:
Yeah, I heard.
Nate Kreinbrink:
Major League baseball game.
Andy Fergurson:
Yeah, I didn’t see it obviously.
Nate Kreinbrink:
March Madness officially started last night.
Andy Fergurson:
Yeah, I didn’t see either of those games, but I heard that they happened. I heard that the Cubs will not be able to go wire-to-wire in first place in the central.
Nate Kreinbrink:
No, because they lost.
Andy Fergurson:
Yeah.
Nate Kreinbrink:
They’re officially…
Andy Fergurson:
They’re officially in last place.
Nate Kreinbrink:
They’re half way back. Yes.
Andy Fergurson:
Everybody who hasn’t played is in front of the Cubs right now.
Nate Kreinbrink:
Oh, for you Cardinal fans, that’s all you…
Andy Fergurson:
It’s probably the only time the Cardinals will be in front of the Cubs this year.
Nate Kreinbrink:
No, March is moving right along. Had another pleasant day yesterday. A little rain, something coming I think maybe tonight into tomorrow.
Andy Fergurson:
The wind’s definitely blowing pretty hard today.
Nate Kreinbrink:
It’s here.
Andy Fergurson:
Yeah.
Nate Kreinbrink:
The winds of March. Ides of March. In like a lamb, out like a lion.
Andy Fergurson:
The good news is though, it’s the last day…
Nate Kreinbrink:
Grass is starting to green.
Andy Fergurson:
It’s the last day of winter. The last official day of winter is today.
Nate Kreinbrink:
That’s the winter.
Andy Fergurson:
Spring officially starts tomorrow and that means we can get our swimsuits out.
Nate Kreinbrink:
That’s right. Shorts every day.
Andy Fergurson:
All right, let’s do it.
Nate Kreinbrink:
So we are moving right along. And that also means a tax season is flying right by. You said on the way up here we are less than four weeks from the deadline.
Andy Fergurson:
Yeah, four weeks was yesterday. So that also means if you are planning to meet with an accountant and to get your taxes done by April 15th, you better have that scheduled. If you don’t have it scheduled, you better call today because if you call tomorrow, you are likely not to get an appointment before the tax deadline. You are likely to be dropping that return off or filing an extension. That means if it’s important for you to sit and talk to somebody, you need to take care of that right now because the time is far spent.
Nate Kreinbrink:
Yes, because it is. It’s flown by. It’s hard to believe. I know probably not for you, but I know from our side of it, again, you got into that routine and people started coming in and now next thing you know, you said you’re less than four weeks away and the countdown clock has started.
Andy Fergurson:
Yeah, it’s two-thirds over. There’s 27 days left. We got to crank it into high gear and push them through.
Nate Kreinbrink:
Good stuff. So with taxes and again, with filing or whatever, thing that you brought up when we were talking about what we were going to do today for the show, and again, one of the, what I think is should be straightforward isn’t always that way and that’s withholding. And again, when you look at your pay stubs that you get, a lot of times your paycheck is directly deposited anymore. You don’t have that physical paycheck with the pay stub to look at withholdings, to look at all that stuff. It’s directly deposited. And usually if you’re getting a pay stub, it’s emailed to you. And so when you look at that, you need to still look at those to see what withholdings are being taken out of each paycheck and making sure that they’re appropriate.
Andy Fergurson:
Yeah. Gone are the days when we were young or teenagers and we would get our check and we’d be like, “Oh, I made all these dollars per hour and then we get home…”
Nate Kreinbrink:
You’re holding it in your hand. You were physically holding it.
Andy Fergurson:
And then you’d go screaming to your dad and be like, “Who is this guy taking all… Who’s FICA, taking all my money out of my check?” And gone are those days where you’re looking at that and seeing that on a piece of paper in your hand. However, we still need take the time and look at those things. It is not good enough to just accept whatever number is coming to you each week. I have seen, and our team has seen this year, so many people who get to the end of the year and they see their W-2 and they may have made $40,000 and they had $200 withheld. That is not enough. That is not enough withholding. And at the point that they see it on their W-2, now it’s too late. And they want to tell me that their company did something wrong. Well, their company did whatever you filled out on your W-4.
So you need to pay attention to that withholding. You need to understand where you should be and where you are. And if you are not where you should be, you need to make a change. If you’re a married couple and you probably should be withholding 10 to 13% per paycheck. So if you have four different paychecks coming into your house because everybody has multiple jobs or you have Social Security and you have paychecks and you have IRA or whatever, you need to make sure that you’re covering 10 to 13% of your income with withholding. And if you’re high income, that number may need to be 18 to 25%.
So you just need to make sure that you’re covering your needs with withholding. Otherwise, you get bad news at tax time. And a lot of times people can see it when they get their W-2, but at that point it’s too late. So take a minute and look at your paycheck, especially if you’re ever asked at work to fill out a new W-4. If they say, “Hey, we are just updating our system. There’s a new form. We want you to fill out this W-4.” That’s fine. Fill out your W-4, but then look at your next paycheck stub, compare it to your last paycheck stub, and see if it’s different. If you are taking home more money, you didn’t get a raise, something changed and it’s probably going to bite you on tax day.
Nate Kreinbrink:
Well, and two, again, most people just recently filed their taxes and it’s a good time too. If you’re getting a big refund, you may be withholding too much at this time. You can dial it back. If you had to pay in a big amount this filing season, okay, that’s a sign that you need to withhold more. Now you can go in and do that. And again, we are only in March, so you still have nine more months left in the year to make that change in order for it to go into effect. So maybe that doesn’t repeat itself the following tax year.
Andy Fergurson:
And understand that the changes that you make, again, because we’re in March, if you sit with your tax preparer and you’re a $1000 short and then you divide your $1000 by how many paychecks you get in a year and you increase your withholding by that much, understand that we’re in March and you’ve missed six paychecks.
So that means next year you’re still going to be a little bit short because you missed those paychecks. Yeah, it is a good time to fix it, but there’s no better time than when it’s happening to just pay attention to your paycheck stubs. You should have access to them. Get in there and look at them periodically and make sure they look the way you want to. Do a little bit of math. That’s why everybody had to go through math in school. Just do a little bit of math that says, what’s 10% of $1000? It’s $100. Are you covering that amount? Or are you close? If it’s not 10%, do you need to freak out? No, you don’t need to freak out. If it’s 9% or 8%, you’re pretty close. If it’s 1%, we need to do something. If it’s zero, we need to do something.
Nate Kreinbrink:
So again, take a look at those items and make sure you’re in line with where that is. The other item that you had listed here as far as to go over today is, again, if you have not received your tax document by now you need to be calling or trying to find out where they are because they’re not lost in the mail anymore.
Andy Fergurson:
Yeah. And we want to tell people or remind people that a missing document does not mean that that income is not taxable this year. Every year somebody will tell me, I’ll say to them, “Hey, I don’t see this document from your pension fund.” Or, “I don’t see this document from Social Security.” Or, “Hey, your W-2 isn’t in this stack of documents.” And they’ll say, “Well, they didn’t send me one.” And did you get paid? Did you get Social Security? Because if you got those things, it’s still taxable. So just because they didn’t send it to you or it didn’t make it to you through the mail system, we still got to go get those forms because we can’t file without them.
Nate Kreinbrink:
Right. And again, looking at how that is done anymore as well. Do you see more and more companies that aren’t physically hard copy mailing those to you anymore? If you have a login, they were maybe emailed to you. You have to log to your site and print them off yourself physically. But again, if you have not gotten those, you need to be looking at them because again, like you said, time is running out. And when we’re looking at taxes and you go through all this, and then a lot of times, again, people, they bring all these documents in assuming that it’s all the same. And it’s not. Income is taxed in different ways, whether it’s ordinary income, capital gains income, interest, dividend. There’s a bunch of different incomes. And if you can control it and make that income a little more favorable to you, it’s only going to be better for you.
Andy Fergurson:
Yeah, we’ve seen that a lot this year. This was a great year for interest. So 2024 was a great interest year. We saw CD rates go up. We saw interest rates, as a whole, were much higher. Well, that created a lot of interest income for people, and that’s great on the front end. But interest is ordinary income. And ordinary income is an income that comes into you. It’s like a wage only there’s no withholding against it. So if you had a big investment year and you received a big number through your ordinary dividends or your interest or short-term capital gains or things like that, you may be looking at a big tax bill. Because that income, nobody’s withholding against it, nobody’s guarding against that. And so there’s some planning opportunities there. Tax is, you’re going to be taxed on ordinary income, but there are opportunities to shift that income to more favorable income.
You mentioned long-term gains. A long-term gain treatment is better than ordinary income treatment. And sometimes you can make the same income from an investment and just have a different treatment on it. And if you can do that, you can get a better tax rate. But that doesn’t just happen. That is something that has to be planned. And there are opportunities for that, especially if you’re somebody who’s experiencing taxable Social Security, you might get a double bonus from that by just shifting your income from say, CD income to another tool. That’s definitely something to consider with your tax preparer. Something to consider with your wealth advisor. Make sure that you’re getting the best opportunity for you in those situations.
Nate Kreinbrink:
All great stuff. We are running out time, but again, I appreciate you taking time out of this time of year.
Andy Fergurson:
Yeah, awesome.
Nate Kreinbrink:
It’s winding down, starting to see that smile.
Andy Fergurson:
I’m pretty sure the next time I talk to you, it’ll be the day after tax season.
Nate Kreinbrink:
It will.
Andy Fergurson:
I’m going to be wearing a tank top and Bermuda shorts and flip-flops when I talk to you.
Nate Kreinbrink:
Can’t wait. I can’t wait. I did want to mention real quick before we run out of time, that every Friday, Nelson Corp Wealth Management and Nelson Corp Tax are wearing jeans for charity. Money raised in the month of March will be donated to the Children’s Discovery Center here in Clinton. As always, this is Nate and Andy 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.