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, Inc, a broker-dealer, member of 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. I got Andy joining me today. It’s not the third Wednesday, but you’re doing a little pinch hitting and filling in today, so we get to talk taxes again. And I enjoy this because you always bring up letters and pamphlets and brochures and we’re going to talk about this, this, this, this, and like Andy, it’s only a 10-minute show.
Andy Fergurson:
Well, there’s not enough Wednesdays in the month.
Nate Kreinbrink:
There are not enough third Wednesdays of every month to…
Andy Fergurson:
We could talk about taxes every single day and we still wouldn’t have enough time.
Nate Kreinbrink:
So that’s good. So I enjoyed doing that. Again, hard to believe October is flying right by. You had a little tear yesterday, playoffs baseball started and you said baseball season is over for me.
Andy Fergurson:
Yeah, I told Nate yesterday, I’m in unfamiliar terror territory. I’m not used to not knowing what to do at the beginning of playoff baseball. Usually my Cardinals have got at least some kind of leg in there or some kind of fight left in them and this time I’m a free agent. I don’t know. He told me that the trick to it, as an experienced free agent come playoff time, is that you just got to pick a team and-
Nate Kreinbrink:
On each side.
Andy Fergurson:
You pick a team on each side and-
Nate Kreinbrink:
Underdog.
Andy Fergurson:
Just run with them.
Nate Kreinbrink:
And just run with them and then it gives you that buy-in.
Andy Fergurson:
So I checked in on a couple of games last night and did that and was pleasantly surprised with how interested I could be in teams that I normally would not care about.
Nate Kreinbrink:
It’s fun. It’s fun watching, obviously all 162 count, but playoff baseball has a little different feel to it.
Andy Fergurson:
Little more fun. Yeah.
Nate Kreinbrink:
Again, you’ve got football season underway, hockey season’s underway, basketball season’s going to be kicking off here before long. It’s one of those overlapping time periods where there’s a lot going on, if that’s what your interest is.
Andy Fergurson:
Yeah, everything. I went from-
Nate Kreinbrink:
Soccer?
Andy Fergurson:
I went from a soccer game to a soccer practice to a basketball practice last night, so there’s a lot going on.
Nate Kreinbrink:
85 last Friday, maybe high of 55 this Friday so I think summer’s changing.
Andy Fergurson:
Yeah, I think the summer’s over.
Nate Kreinbrink:
So again, with that, again, also, we are getting into the middle of October and the extended tax deadline is basically upon us.
Andy Fergurson:
Yeah, it’s here. You’ve got two weeks.
Nate Kreinbrink:
Yes.
Andy Fergurson:
So if Mike said something that I think is, it’s a pearl of wisdom from that old Dutch fax preparer over there. He said, “Make sure everybody remembers that they are not the only procrastinator in the world. So if you have yet to get your stuff to your tax preparer and you are expecting to hand them your stuff on the 13th and have it done by the 15th, you should understand that you are not the only procrastinator in the world and what’s going to happen is more than likely they’re doing that on a first come, first serve basis. So the sooner you get it to them, the better.” We’re starting to see people come in and say, “Hey, oh yeah, remember, it’s tax time,” and we’re like, “Yeah, we remember because-”
Nate Kreinbrink:
Yeah, we knew it.
Andy Fergurson:
“We reminded you, remember?” So get that stuff in, get it done, and get it done today. And if you can’t get it done today, do it tomorrow. It needs to be your focus until it’s done because if you wait until the 15th, you’re going to be late.
Nate Kreinbrink:
And then another item, again, that you were mentioning from a newsworthy standpoint is the employee retention tax credit. And it’s been in the headlines a lot, and maybe give a quick brief summary as far as what that is and what you were looking at…
Andy Fergurson:
Yeah, so in 2020, the COVID relief that came, a part of that COVID relief that came was an employee retention tax credit. And this is the credit that you hear advertised on the radio where employers can get up to $26,000 per employee in this relief for taxes that they’ve paid, employee taxes that they paid, and there’s a ton of companies that are out there. And because the money is so big from the credit, these companies are offering to do all this work and all they want is a percentage of what you get back. But some of them are getting 20, 25% of what’s coming back. Well, you get a hundred grand back, and all you got to do is give them 25. Well, they get $25,000, great news for the company and you still get 75. You feel like you just won the lottery.
Well, the problem is these companies are incentivized by that and they are making a bunch of false claims. So the IRS has come out and said that they are going to scrutinize those very closely. And what I’ve been telling my clients that I don’t think qualify for that credit is that we’re not doing it, we’re not getting involved in that, we’re not going to submit those false credits. My concern is that they’re going to get a credit and then the IRS is going to come back in 18 months or two years and say, “You owe us all this money back, plus the money you paid that company, plus interest, plus penalty,” and now the company’s going to be in a worse situation than if they hadn’t even taken the credit.
So there’s just a lot of risk to the company. The IRS has said that they’re going to stop paying the credits if you file at this point or in the future, it’s going to take you 18 months to get the money. They are going to audit and scrutinize those credits because they believe there’s a lot of fraud involved in that process. And I believe there is also, because I know of or have heard of people that are getting the credits that I am really confident do not qualify for that credit. So it just is one of those things where it’s the wild wild west that came along with COVID where everybody was getting everything and it seemed like there was a bunch of free money.
Remember what happened with unemployment where it seemed like everybody was getting unemployment? I knew people that had full-time jobs that were getting unemployment and it just seemed like there was no regulation, there was no rule of law, it was just everybody was getting the money. So the IRS is catching up with it and they’re going to pull back, and now the teeth will come out and the people that got the free lunch may now have to pay the piper, so they’ll be washing dishes in the back because the free lunch wasn’t free.
Nate Kreinbrink:
You get always stuff to keep an eye on and actually understand what it is that’s happening to go with that. And again, I know the last few years it’s always been waiting on some end of the year tax laws or changes or something maybe tweaking by the end of the year or something that’s going to go into effect, January one, obviously big news with the speaker coming out, that maybe changes if we’re looking at any of that by the end of the year.
Andy Fergurson:
I think it does. Yeah. In the past couple of years, we’ve had some pending legislation hanging over our head, whether it was the Tax Cuts and Jobs Act or the new SECURE Act, we were waiting for the hammer to drop on these things and what exactly they were going to look like. With the speaker of the House being voted out yesterday, it feels like they’re going to have a hard time passing any legislation over the next couple of weeks and months. So, for legislation to get passed before the end of the year that impacts tax law, I think is going to be a really tall order. They’ll be focused on the budget and getting a new speaker and who knows what’ll happen with that? Maybe I’ll be pleasantly surprised and everybody in Washington will get along for about a week and they’ll make a decision. But I think this is going to big out a little bit. I think when things don’t go according to plan and people don’t agree, everybody thinks they have a lot of power. And so when everybody thinks they have a lot of power-
Nate Kreinbrink:
Nobody has any.
Andy Fergurson:
Nobody has any power. So we’ll see, but I don’t see any pending legislation to deal with. So what that means is we should be able to plan, because the laws are what they are. They’re not going to change between now and the end of the year, more than likely. We know what is on the table, we know what is going to impact your tax return for 2023, we know what’s going to impact it for 2024, more than likely. So we should be able to make decisions and plan and now’s the time to do that.
Nate Kreinbrink:
And I think too, people that are working have a good idea as far as what their income is going to be. Some of those Roth conversions, 401K contributions, have that 12.31 deadline. They don’t extend out to the tax deadline and April like contributions to Roth accounts or IRA accounts do. So again, if we have a pretty good idea and a pretty good understanding of what tax law is, what it’s going to be, that allows that planning that you always said to take place at the end of the year to really dial that in right now and really maximize what it is that we have given current tax rates, current brackets, current tax law, what it all means, and see how we can maximize that.
Andy Fergurson:
And there’s some interesting strategy that can come, especially with Roth and traditional 401Ks. There’s something that you should consider, if you’re over 55 and live in Iowa, or if you live in Illinois, you should be talking to somebody about whether or not you’re making those contributions to a Roth or to a traditional IRA, because the state taxes are implemented differently, and it may be ill-advised to make the contribution to the Roth as opposed to the traditional if you fit into those categories. So something to talk to your advisor, your wealth advisor, or your tax advisor about.
Nate Kreinbrink:
A lot of great stuff. And again, hitting that 10 minute mark. Wanted to mention, before we did run out of time, that every Friday, NelsonCorp Wealth Management and NelsonCorp Tax Solutions are wearing jeans for charity. Money raised in the month of October will be donated to the Clinton County Special Athletes. As always, Andy, it goes by quick.
Andy Fergurson:
I told you, there’s not enough time in the day.
Nate Kreinbrink:
Thank you for sharing your ultimate wisdom on taxes and hitting some of these key topics. Because I know it’s just a dire topic that people are waiting on pins and needles to hear about each week.
Andy Fergurson:
When people ask me about taxes, you should see the people who know me roll their eyes and evacuate the room.
Nate Kreinbrink:
Uh-oh.
Andy Fergurson:
They’re like, “Oh, you guys opened Pandora’s Box. Get out of here.”
Nate Kreinbrink:
All great stuff. We appreciate your time. Nate Kreinbrink, NelsonCorp Wealth Management, Andy Fergurson, 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 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, Inc, a broker-dealer, member of 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. For more information, visit our website at www.nelsoncorp.com.