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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 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. 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 Kreinbrink. I have Andy Ferguson joining me today. Usually taxes are the third week, but we had to do a little rescheduling.
Andy Fergurson:
Yeah, I don’t remember why we had to reschedule.
Nate Kreinbrink:
Schedule says-
Andy Fergurson:
Oh, I was out of town. That’s why. I was going somewhere.
Nate Kreinbrink:
And so we get to talk taxes today with you. Hard to believe it is the last Wednesday of November already.
Andy Fergurson:
It is the beginning of the end, my friend. The beginning of the end of-
Nate Kreinbrink:
That’s what you keep saying. It’s a downward trend after Thanksgiving.
Andy Fergurson:
It’s the beginning of the end of the calm season.
Nate Kreinbrink:
Yes.
Andy Fergurson:
Because we all know that as soon as Thanksgiving happens, you go to sleep one night and then the next night it’s like Christmas and then as soon as Christmas is over, the year is over and then taxes are upon us.
Nate Kreinbrink:
Yeah. It’s crazy how it is flying by, as we say, every year. Again, obviously Thanksgiving a little bit later this year than what it has been. I think this contribute a little bit to that. Again, next week, we start the show. First week of December, Christmas programs start, holiday seasons, high school…
Andy Fergurson:
Basketball.
Nate Kreinbrink:
Even middle school, whatever. Winter sports are in full swing. So Tuesday, Friday, Saturdays are done for three months.
Andy Fergurson:
Yeah.
Nate Kreinbrink:
Four months.
Andy Fergurson:
Yeah, for sure. It’s a fun time of year. It’s fun to go inside and watch sports for a little while though when it starts to get cold. So I love it when it turns to fall because I like the crisp weather when you’re watching those sports outside, but then when it starts to get cold at the end, I’m like, “Hell, yeah, I could sit inside for a little while.” So it’s nice.
Nate Kreinbrink:
It is. And I think looking at the next few days, we do have a little cold front coming in, I said down in the single digits, teens. I know Iowa has their annual football game with Nebraska on Friday, and it is a night game this year, and I think it’s supposed to be in the teens to single digits during game time.
Andy Fergurson:
That sounds like a good one to watch on TV and from the comfort of your living room.
Nate Kreinbrink:
Yes. But again, it is Thanksgiving weekend, Thanksgiving tomorrow. Hopefully, everyone has a very happy Thanksgiving. Enjoy it with friends, family, and really take the time to really appreciate, I think what that holiday is and be thankful for everything that you do have and those…
Andy Fergurson:
Yeah. Hopefully, you’ve got your turkey thawed already in the fridge.
Nate Kreinbrink:
You better.
Andy Fergurson:
If not, you better put it in the bathtub tonight because it won’t thaw overnight.
Nate Kreinbrink:
All fun stuff. But let’s talk a little taxes and as is every year, taxes change. There’s always new things that they want to bring up, they want to focus on. Again, you watch sports in the beginning of the season. They always say, “Hey, we’re going to do a points of interest or areas of interest.” And taxes are really no different when they’re looking at certain things like that. You went to a conference yesterday and maybe talk a little bit about some of those topics that we can get into today.
Andy Fergurson:
Yeah. Sure. Yeah. So the first one I’ll mention is that a lot of people don’t know, but the end of the electronic filing season happens actually on Saturday. And so most people don’t realize that the IRS kind of shuts down their reception of electronic files. That happens on the 30th, this year on the 29th, whatever Saturday is. And from that time until they open the 2024 tax e-filing, or it happens in January 2025, they won’t receive any electronic files. So they take that time to update their systems, do all the technological maintenance and stuff that they need to do. But basically, if you have a tax return that’s not been filed yet, and you don’t file it by Saturday, the only way to get it into the process is to paper file it. That doesn’t mean that they’re going to work on it. It means that that’s how you get it out of your hands and into the IRS’s hands. And now you have many years paper filed a return after this deadline and then come the spring opening, electronically filed it also and electronically it’s been done faster than the paper one.
So that may not be the case. The IRS will still have employees there, but the electronic process is closed. Now, that doesn’t mean you can’t make payments. It doesn’t mean you can’t call and ask questions. It just means you can’t electronically file anything. So you can still do all those other functions. You can still ask questions. You can still make payments. They’ll still send you letters. They’ll still try to correct previous returns. Their systems are still up and they’re still functioning. They’re just not receiving new electronic files.
Nate Kreinbrink:
Well, again, with that, there’s other areas that we go into. We touched on this a little bit last year, and obviously, the growing, I guess you would say popularity or just everybody’s doing it now is Venmo and PayPal and how you’re tracking some of those transactions.
Andy Fergurson:
Sure.
Nate Kreinbrink:
And again, a lot of times, it’s just simply a reimbursement, “Hey, I don’t got cash on me. What’s your Venmo? I’ll send it to you.” But that is being used as means of payment as well.
Andy Fergurson:
Right.
Nate Kreinbrink:
And again, that’s becoming more and more of a topic when you file taxes, how to track that, what you need to do. Maybe talk a little bit on that.
Andy Fergurson:
Sure. So for the last couple two or three years, the IRS has been threatening this 1099-K coming out to or coming from the third party payment provider. So that’s going to be your Venmo, your PayPal, all those cash apps that you have on your phone or on your electronic device. And the IRS has been saying, “If anybody issues you more than a couple hundred dollars on this app, that provider is going to then send you a 1099.” And every year for the last couple of years, they said, “We’re going to do this.” And then they said, “Oh, we’re not ready to do it.” And so they backed it off. Well, this is the year. It’s happening. 2024 is the year that you’re going to get that 1099. And that means if you get one of those 1099s, it’s a 1099-K, that means that income has to be reported. It doesn’t mean that that income is taxable.
Nate Kreinbrink:
It may be.
Andy Fergurson:
It may be taxable. It may not be taxable. The third party provider doesn’t generally know whether it’s taxable or not. You would have to determine whether or not that income is taxable. Like you said, Nate, if it’s a reimbursement, it’s not taxable. If you bought concert tickets for somebody and they paid you back through Venmo, that’s not taxable. But if you sold a piece of furniture to somebody who sold a couch and they paid you back for it, it could be taxable if you sold that couch for more than you paid for it initially. And that’s a gain on an asset. More than likely you sold it for less than you paid for it, so it’s probably a loss and then it wouldn’t be taxable. And so there’s just a lot of different variables to be involved there.
Now here’s where it gets really fun, if you use Venmo for everything. So you sold the couch, and you did the concert ticket, and you sent your kid money at school, and you did this and you did that, and all of that’s going to come in one number to you on a 1099. And you’re going to have to be able to tell your tax provider what’s inside that number and help them determine what part of it is taxable so that they can accurately report that on your return and help you not pay tax on what you shouldn’t pay tax on. So I expect it’s going to be very exciting this year for people who get these letters.
Nate Kreinbrink:
Well, and as there is anything when there’s change, it’s going to be a first year discussion that you’re going to have with many of the people that you meet with. And it’s going to be a lot of, I think, headaches the first year because people really probably don’t keep track of that detailed transaction reports. But again, now starting for next year after they meet with you and they know they have to, I think that’s going to be a regular thing where people are going to have to keep track of where those are at.
Andy Fergurson:
And here’s where I think it’s going to be really fun is a lot of these providers, the big sell that they have is that they’re convenient.
Nate Kreinbrink:
Right.
Andy Fergurson:
And so everything is digital. Everything’s on your phone. There’s no paper transaction. And so I think it’s likely that they may send you an email correspondence which goes into your junk mail folder that says, “You got to go out to our site and pick up this form and print it yourself.” Well, then you’re not even going to see the form.
Nate Kreinbrink:
Right.
Andy Fergurson:
You’re going to file your return and you’re not going to have reported this income. And what’s going to happen then is you’re going to get a letter. You’re going to get a letter in August after you filed a return that says, “Hey, you owe us more money.” And at that point, we’re going to have this mass freakout from everybody who gets a letter from the IRS because they think they’re going to jail.
Nate Kreinbrink:
Right.
Andy Fergurson:
So there’ll be a line at the door at NelsonCorp of people trying to get a talk in.
Nate Kreinbrink:
“Hey, we need to get this.”
Andy Fergurson:
We’ll say, “Well, here’s what we got to do. We got to go out and get that information and we’ll make it right.” But you can avoid all of that by being proactive and seeking out that information because I am concerned that some of these providers aren’t going to send it to you in the mail.
Nate Kreinbrink:
It’ll be you’ll have to download it off the site.
Andy Fergurson:
Yeah. And you’re going to have to go get it to answer the information. So it’s important to try and head that off and get that information in. Like I said, it’s probably not taxable. It’s probably going to end up being a net zero to you on your tax return, but it won’t be a net zero if it causes you some lost sleep in the summertime or if there is some taxation on it, causes you interest and penalty for not reporting or something like that.
Nate Kreinbrink:
Another topic and we’re getting close to time, but again, as the growing popularity of sports gambling and you see these sites come up, whether it’s again, FanDuel, DraftKings, there’s all these sites and now you hear it more and more. They’re actually bringing it into the broadcast on TV and it’s become more accepted. Again, that needs to be on your tax return as well.
Andy Fergurson:
Right.
Nate Kreinbrink:
That’s another thing that I think will be overlooked…
Andy Fergurson:
It absolutely…
Nate Kreinbrink:
And not necessarily thought of because it hasn’t been something in the past.
Andy Fergurson:
Yeah. And you may not get 1099 or your W-2 G is what that would be. You may not get a W-2 G from that institution, but gambling income is ordinary income. It needs to be reported, and a lot of people want to net their gambling income. Well, gambling income actually is transactional. So you think about it in terms of like a slot machine. When you hit a big slot machine, when you get a W-2 G that says what you win, and then you have to go figure out what you spend ahead of that to counter it with losses.
Nate Kreinbrink:
To get the win.
Andy Fergurson:
And that’s the way it works with the online betting. So if you hit a big win, you’ve got to report that income and then you can offset it with losses. It’s a different offset. The offset comes in a different place, and it’s not dollar for dollar, but again, it’s going to be important to report and they’re going to… If you don’t get a W-2 G, it’s harder for the IRS to track that you made that income, but it’s still income and you need to get in the habit. If that’s something that you partake in, you got to get in the habit of reporting that income and reporting all of that income because they’re going to figure it out, and you want to get good habits built in place.
Nate Kreinbrink:
Get ahead of that. Well, and again, as technology changes, things change. Again, this is another part of it with filing that we want to make sure, again, we’re trying to stay ahead of. We’ll continue to hit some of these topics on future programs. I did want to mention though, before we run out of time, that every Friday, NelsonCorp Wealth Management and NelsonCorp Tax are wearing jeans for charity. Money raised in the month of November will be donated to the retired and senior volunteer program of Clinton County. As always, Andy, time flies.
Andy Fergurson:
Yeah.
Nate Kreinbrink:
Appreciate you joining me.
Andy Fergurson:
You bet. Happy Thanksgiving, everybody.
Nate Kreinbrink:
Happy Thanksgiving to everybody. Again, Nate, Andy bringing you this week’s Financial Focus. Thanks for tuning in and have a great rest of your week.
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.