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 Kreinbrink. Got Andy Ferguson joining us today again with NelsonCorp Tax Solutions. I’m sure we have some earth-shattering tax insight to go over. But we were talking on the way up. The World Series is set-
Andy Fergurson:
I know.
Nate Kreinbrink:
… and it’s crazy thing,
Andy Fergurson:
But it’s almost November already. It’s the [inaudible 00:01:12].
Nate Kreinbrink:
I know. But the crazy thing is it’s two teams. Two years ago, each one of those two teams that are in the World Series that is starting on Friday lost over a hundred games.
Andy Fergurson:
That’s amazing.
Nate Kreinbrink:
And two-year turnaround, a hundred losses to the World Series.
Andy Fergurson:
That’s fantastic. I mean, now I’m not sure who I can root for because as they were going in and the Phillies and the Astros look set to go in, I was like, “Man, if those two teams make it, I’m going to have to not watch it ’cause the villains would’ve been in it,” in my opinion. And so now, the good guys both made it. Now, it’s like…
Announcer:
It’s hard to root against either one of them. It’s the way they play, the way they… Again, rooting the underdog and then everything through itself.
Andy Fergurson:
Now who’s going to be the underdog now? Can they both be underdogs?
Nate Kreinbrink:
I think it’s still the Diamondbacks. They’re still the underdog.
Andy Fergurson:
Yeah.
Nate Kreinbrink:
Rangers are there. But again…
Andy Fergurson:
Rangers hit a lot of home runs.
Nate Kreinbrink:
Yes. They do. Exciting and it’s fun.
Andy Fergurson:
And it’s good pitching too, so.
Nate Kreinbrink:
And it’s fun, so.
Andy Fergurson:
Yeah.
Nate Kreinbrink:
Crazy to think that we’re there. It’s like the sports overload time period right now.
Andy Fergurson:
It is.
Nate Kreinbrink:
We have football.
Andy Fergurson:
It’s the super season.
Nate Kreinbrink:
You have baseball, you have basketball, you have hockey. Everything is going on right now.
Andy Fergurson:
Everything is going. Yeah. All the fall sports are ending.
Nate Kreinbrink:
Yes.
Andy Fergurson:
And then their playoffs, all the winter sports are starting. And yeah, it’s a fun time if you’re a sports fan.
Nate Kreinbrink:
And so again, fall high school athletes, I know the couple of them, area athletes, qualified for the state cross country meet.
Andy Fergurson:
Yep.
Nate Kreinbrink:
Area teams for football, volleyball teams still in it, want to continue them with the best of luck as they continue down the tournament trail. But let’s talk business, okay.
Andy Fergurson:
All right.
Nate Kreinbrink:
You have a tax newsletter that you get every week that before we come into the program you are circling and highlighting and crossing and whatever.
Andy Fergurson:
That’s what tax nerds do, Nate.
Nate Kreinbrink:
One of the items that continues to keep coming up is again, from the IRS warning people of scams. And You have times of tragedy, you have times of natural disaster, you have times where, again, the people that are doing these scams attack emotions. And that time is kind of now again, so they said to beware.
Andy Fergurson:
Yeah. Well, and this time of year especially. So this is the time of year where people get out their checkbooks and think, “Oh, I want to make a donation. I want to help somebody.” And the IRS has said, “Be real careful because when bad things happen in the world, bad people come out of the woodwork to take advantage of the good people.” And so what happens is charities pop up that say, “Hey, we’re going to send aid to Maui or we’re going to send aid to Israel or we’re going to send aid to this place or to that place.” And they say, “Send us some money and we’ll send it over there and take care of them.” And the IRS is saying, “Just be real careful. Make sure you vet those organizations because if you send money to an organization that is not a qualified charity, not a 501(C)(3) or other qualified charity, you make sure you understand that that money’s not deductible.
So If you’re doing it for the tax deduction and you’re doing it to take care of some, or take advantage of that tax benefit, just to understand that if it’s not a qualified charity, you’re not going to get the deduction. Likewise, helping an individual or somebody like that on a Facebook post or a GoFundMe type of thing. If the individual is not a charity, that is not a charitable deduction, okay. It is charitable and you may get into heaven by doing it, but it’s not going to be deducted from your taxes. If you want to deduct it from your taxes, you have to give it to an organization that can then give it to an individual, but you can’t give it straight to the individual. You can give it to the church first and the church can give it to an individual, but you can’t give it to your neighbor and count it as a charitable deduction. Just like you can’t give it to your kids and call it a charitable.
Nate Kreinbrink:
A charitable. Although it does feel like it.
Andy Fergurson:
Although that is very charitable. And helping people in need… I tell people all the time, it’s a good way to get into heaven, but you can’t get the deduction unless you go through a charitable organization.
Nate Kreinbrink:
A charitable way with that. And again, we always say they attack emotions and elderly and then people calling posing to be grandkids or that they’re in stress or they need money sent directly. Again, take a deep breath basically and realize, like, “Is this legit?” And then double check on that before you just go ahead and immediately send money and going with that.
Andy Fergurson:
And you used to be able to deduct, even if you got defrauded like that, that’s considered theft and used to be able to take some deductions for having an experience with theft. But now, those requirements are really hard to meet and so you’re not going to get any benefit even on your tax return if you get defrauded. I have a client who called and said, “Hey, what do I got to do to record this? I got defrauded and I want to make sure I put it on my taxes.” I was like, “Well, there’s nothing really we can do.”
Nate Kreinbrink:
Nothing do anymore.
Andy Fergurson:
You got scammed and it stinks but that’s what happens.
Nate Kreinbrink:
That’s what happens. So again, this time of year we also talk about tax planning. And again, you and I start to see on our calendars popping up. Mike and I have a lot of joint meetings in the next month and a half where we’re going to be doing a lot of this tax planning and looking at what needs to be done from a tax standpoint before that 1231 deadline. And again, a lot of it that comes into it is Roth conversions is the big thing. They have the 1231 deadline contributions to an IRA can’t have until the tax deadline, but we want to make sure we get that in and people need to start looking at those things.
Andy Fergurson:
Yeah. It’s the season for evaluating your income and seeing where the advantages are, especially if you’re looking at conversions. It’s important to consider the impacts that happen. A lot of times people will want to make conversions, just understand that that conversion usually comes with a cost and the costs can be hidden sometimes depending on how much impact there is on your income. So it’s not just additional tax, sometimes it impacts Medicare premiums, sometimes it impacts your health insurance through the marketplace, sometimes it impacts other benefits that are associated with your adjusted gross income. Maybe it’s the qualified credits that you may get maybe impacted by changes to your income. And so you just want to make sure that you’re planning with a professional and that you’re looking at where are your most advantageous places to take on that extra income so that you’re not creating a more expensive conversion than you would otherwise. Make sure you have an idea of where that safe pocket is.
Nate Kreinbrink:
Well, and I think too, it’s important when we go through some of these, just giving people the explanation of sometimes that $1 of income costs you $2. Or again, looking at, “Okay, what is my income this year? What is that going to impact elsewhere?” Whether it’s Medicare premiums or whatever it may be with your income. So it’s not just as cut as dry as, “Well, I’m just going to take it this year and I’ll just pay the tax.” Well, yes, you’re going to pay the tax, but you also then are going to be affected by this and this and this and this.
Andy Fergurson:
Right.
Nate Kreinbrink:
So again, understanding what it’s going to do, what it’s going to impact, and having a plan so that we don’t have any of those unexpected big tax hits or big income and where that goes with it when we are looking at that.
Andy Fergurson:
And not only that, there’s other things that come into play too. So it’s not just about your income. There’s things that change in your life. I mean, the way that that strategy works changes depending on your age, it changes depending on what state you live in, it changes depending on your life situation. There are strategies that we talk about sometimes where if you’re single versus if you’re married, if your spouse is healthy versus if they’re not healthy. There are opportunities sometimes to take advantage of Roth conversions that you might not take otherwise. Then there’s other times when you go in and look at the Roth conversion and you go, “You know what? Really, you probably shouldn’t.”
Nate Kreinbrink:
Right.
Andy Fergurson:
Because in this situation, you might be able to get the money out of that IRA without paying as much tax. And so sometimes a big conversion makes sense, sometimes no conversion makes sense or a small conversion. Because when you get to that RMD age, maybe, that RMD isn’t going to be very big and you’ll be in a very low bracket and you can effectively get it all out at 10% or 12% as opposed to paying 22% now or 24% now. So there’s just a lot to consider there. It is a very complicated equation that it goes into figuring out what is the best situation for you. And so not something that you should just throw a number up there and try and figure it out. It’s definitely something you want to work with your professionals on. You want to work with your wealth advisor, you want to work with your tax advisor and make sure that you’re lining those things up so that you’re getting the best bang for your buck.
Nate Kreinbrink:
And again, we say it all the time, there’s any decision that we make from a tax side or from an investment side impacts the other, and they’re so intertwined anymore that you need to have that coordination with it to make sure you’re doing the right thing. In end of the year planning, we’re not going to touch on it much today. This will be an upcoming program, but it is Medicare open enrollment period. October 15th to December 7th. So if you’re of age or currently enrolled and want to look at what else is out there. If you’ve got a time period where you’ve got questions to look at it, let us know and happy to help with tax planning, anything that comes into it. So time of year. And it goes quick.
Andy Fergurson:
It does go quick. It’s the last-
Nate Kreinbrink:
It is the 25th. We are two months from Christmas.
Andy Fergurson:
Yeah. Which means that we’re about three months from tax season. So this time of the year definitely does go quick. So we enjoy it while it’s here. We’re getting the last of our training in, and then before we know it’s going to be crazy time.
Nate Kreinbrink:
It’s go time. Before we do run out of time 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 special athletes of Clinton County. Andy, thanks for joining me today. Andy Ferguson, NelsonCorp Tax Solutions. Nate Kreinbrink, NelsonCorp Wealth Management, 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 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.