Announcer:
It is 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. It is the third Wednesday of October.
Andy Fergurson:
Which kind of snuck up on me because it’s only the 15th. And that-
Nate Kreinbrink:
I know.
Andy Fergurson:
It’s not enough days to be the third.
Nate Kreinbrink:
But it is.
Andy Fergurson:
It is. It’s tax day too.
Nate Kreinbrink:
It is tax day. Start to Medicare open enrollment.
Andy Fergurson:
It starts Medicare open enrollment too?
Nate Kreinbrink:
It does.
Andy Fergurson:
Oh, my gosh. What a busy day.
Nate Kreinbrink:
And it’s my middle son’s birthday.
Andy Fergurson:
Oh, my gosh.
Nate Kreinbrink:
It’s just a crazy day today.
Andy Fergurson:
That’s bananas.
Nate Kreinbrink:
But it is kind of fun and exciting. I mean, the fall sports season is winding down, football season for college, NFL High School-
Andy Fergurson:
Yeah, all that.
Nate Kreinbrink:
… is in there. Playoff baseball, even if you don’t have a team in it, it’s still…
Andy Fergurson:
It’s hard for me.
Nate Kreinbrink:
Games means something.
Andy Fergurson:
It’s hard for me when there’s, I mean, it’s hard to root for the Dodgers or the Brewers.
Nate Kreinbrink:
I’m going for the Mariners. Mariners are my team. We used to be affiliated with them down in the Lumber Kings down here. So that’s my team.
Andy Fergurson:
I don’t really have a horse in the fight. I love that the Yankees are out. And so yeah, I could be on board with the Mariners. There’s the other one over there, Toronto. I could be on board with them too. I like Toronto and…
Nate Kreinbrink:
So we’re going to-
Andy Fergurson:
… it’s hard to cheer for Milwaukee because I cheer against them so much. But at the same time-
Nate Kreinbrink:
I would take them over.
Andy Fergurson:
… I could stand it. Yeah, Dodgers probably the number four out of four on that group.
Nate Kreinbrink:
Dodgers won again last night. They’re up 2-0. Going back to LA.
Andy Fergurson:
I think I’m going to have to have an American League team this year.
Nate Kreinbrink:
So again, year’s flying right by. And some of the headlines that we’ve seen of late that have dominated the headlines is a government shutdown.
Andy Fergurson:
Yeah, that’s big deal.
Nate Kreinbrink:
… and that obviously impacts a lot of what we do.
Andy Fergurson:
Yeah, it’s a big deal. It’s funny, I got on the IRS website yesterday to upload a document and right there in a big bubble at the top, it’s like the government shut down, expect longer than normal waits for things to happen. And I was like, “What would a normal wait be?” Because I feel like that’s six months. So I don’t know. Yeah, it’s a hard thing. They’re saying there may be delays even trying to call. When I went to the IRS tax form this year, one of the things they put a lot of emphasis on was creating your online individual tax account. Because if you create that online individual tax account, you may not have to call the IRS anymore. You may be able to get all the information you need, answer your questions, see letters, see your balance, see transactions. There’s also an online chat feature on there where you can chat.
The first stop would be a bot, but they’re going to be able to look up anything on your account. But then you get directly to an agent who’s going to be able to answer your questions, but you don’t have to wait in the hold queue. So it’s just something where this might be the time, kind of like COVID made everybody figure out how to do things remotely. This government shutdown may make us figure out how to go on and do our online accounts.
Nate Kreinbrink:
And again, a lot of stuff are going that way, whether it’s taxes, whether it’s social security, that type of thing. They’re pushing for these online accounts. So again, if you can create one, you might be able to get a lot of your information that you need from that. I know where we’re looking at this time of year always kind of also lends itself to looking at what next year is going to bring. And the recent tax brackets came out and they jumped up a little bit again, just like we anticipated them.
Andy Fergurson:
Yep, they moved up. And it’s important to remember that those are for tax year 2026. So those tax brackets are going to have effect when you’re filing taxes in 2027. So don’t get 2026 brackets confused with 2025 or the deductions or anything like that. The stuff that is being released right now is for the spring of 2027 when you’re filing your tax return. It’s good news though, everything moved up. So you get a bigger deduction, you get a bigger bracket. So ideally there’d be less tax, but how inflation works, it doesn’t always work. It doesn’t always feel that way, but it’s good that the numbers moved up. That helps.
Nate Kreinbrink:
And when we look at those tax brackets, again with the new tax bill that came out on July 4th, I mean those tax brackets as far as 10%, 12%, all those going forward became permanent. And that is important to a lot of what we were talking about with planning, not knowing if the end of this year was going to be the sunset of the current brackets. They were going to revert back to what they were the tax cut and jobs act, but they’re permanent now.
Andy Fergurson:
Yeah, all our planning has up to July. Our planning was always with the expectation that the brackets were going to sunset. And so some of us, we were pushing for maybe bigger conversions or realizing income now so that we could get it in the 12% or maybe even the 22% bracket because those numbers were better than what we would see if we went back to 2017 bracket numbers, or I’m sorry, bracket percentages, which were 15% in 25%. And so 12 and 22 was better. We were going after that. But now that that’s permanent, now that those 12 and 22% and 24% brackets are permanent. Now maybe we got to throttle back our strategy.
If we were doing large conversions to get traditional IRA money converted into Roth money, well now maybe we can do it a little bit more cheaply by maybe only filling up the 12% bracket instead of going all the way up to the Medicare line in 22% bracket. So it just means that your strategy needs to be tweaked. We tend to build these strategies with a couple of year mindset out, “Hey, we’re going to do this, and then we’re going to do this, and then we’re going to do this.” Well, when the law changes, now we got to shift a little bit. We just got to adapt and be able to keep our eye on the ball and watch it if it’s moving a little bit.
Nate Kreinbrink:
Well, and that’s exactly it. And I think when we looked at it, I mean 12% is for a lot of people that we work with, probably the cheapest that they’re ever going to get distributions out of those tax-deferred accounts knowing that it was going to potentially end, now it’s not. Again, 12% now, 12% 10 years from now. Again, what are you gaining as far as keeping it in tax-deferred versus Roth? And that’s where we need to look at. But with them becoming permanent, that’s a good thing for a lot of people as far as what they’re going to be paying in taxes going forward. And again, I’m looking at your bullet point list here, and we’ll never get through all of this, but we are getting closer. But I think you’ve mentioned it just briefly, the last month we were in, and again, when you look at online accounts, that’s what they’re trending to. One thing that is going to happen is no more paper checks for anything coming from the IRS.
Andy Fergurson:
Yeah, so we talked about it last month. We’ll probably talk about it if I get my way, we’ll talk about it every month until the tax deadline. But yeah, no more paper checks. So no more paper checks in, no more paper checks out. So paper checks out isn’t as big of a deal. I think people can handle that when the IRS is putting money into your account. But now we got to find a different way to pay them.
A lot of people like writing checks, they like using the postal system. They also know that those ways are less reliable. There’s more chance for error. There’s more time delay in the postal system. And so they’ve gone away from accepting paper checks. So here we are on tax deadline day, and as I file a couple of returns today, people are going to owe money and they’re going to want to send a check, and I’m going to have tell them, “Well, you can’t really send a check anymore.” Now, my sneaking suspicion is that the IRS is going to take your money. So if you send them a check for a little while yet, they’re probably still going to accept that check. But it’s not the preferred treatment. And technically the law changed on September 30th. So last time I was here, we said, “Hey, this is coming.” Well, now-
Nate Kreinbrink:
It’s here.
Andy Fergurson:
It’s here. You’ve got to use an electronic form of payment. The IRS has some other options. There’s ways that you can pay through online, I’m sorry, not online. There’s ways that you can pay cash through local realtor, or not realtors, but local commercial businesses. You can go to Dollar General and pay your taxes. There’s some ways to do that. But there’s fees for that. There’s limits on how much you can pay. I think the limit’s like 500 bucks. So if you owe $50,000, that’s a lot of payments through Dollar General. And so there’s just things that are different. You’re going to have to find a different way other than pulling out the checkbook, sticking in an envelope and sending it off on tax day.
That’s not going to work anymore. You’re going to have to figure out how to pay it online. And people have concerns about paying the IRS online, and I think that comes from the insecurity that surrounds online payments for anything. But the long and the short of it is, it’s probably the most secure way to pay them. The postal system is not as secure as it used to be, and the tracking that comes with an online payment is far superior to anything else. And so it’s just the way things are going. We’re going to have to figure out a way to do it. It’s not my rule, it’s not my law, but you have to-
Nate Kreinbrink:
Follow it.
Andy Fergurson:
Yeah, it’s what we got to do. And so people are going to be mad at me this year when I tell them, “Hey, you can’t write a check anymore.” But it’s not up to me.
Nate Kreinbrink:
It’s with everything else. I mean, everything is trending that way, where you have to make an online payment. And for them to kind of accept that model isn’t a surprise. But again, that peace of mind to know that I can track, to know that they received it or that I received it.
Andy Fergurson:
And if you have Disney Plus or Netflix or shoot, the electric company and the water company, I mean, you’re probably paying online already-
Nate Kreinbrink:
Doing online anyways.
Andy Fergurson:
… with a lot less reliable companies than the IRS. Just things that you need to be aware of. It’s changing. I’m going to harp on it every time we talk because I don’t want you screaming at my people when they tell you you can’t write a check anymore.
Nate Kreinbrink:
All great stuff. And again, time goes quick when we start talking taxes, but again, a lot of important stuff that we try to cover during this time period. So you got questions, end of the years coming up, tax planning time, let them know. Go over your stuff, see if there’s anything you can take advantage of before the end of the year. Before we run out of time here, I did want to mention that every Friday NelsonCorp Wealth Management is wearing jeans for charity. Money raised in the month of October will be donated to the REACH 848 program. Again, 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.