Rederick Terry:
It’s time now for 4 Your Money. We’re joined by James Nelson, a financial planner at NelsonCorp Wealth Management. James, welcome back.

James Nelson:
Thanks Rederick. Good to be here.

Rederick Terry:
Absolutely. We’re glad you’re here. So we’re quickly approaching the end of the first quarter of the year and since it’s still pretty early, people do have those taxes on their minds, obviously. The deadline to file a little over a month away now. So what would you suggest people do in order to start saving on some of those future tax bills?

James Nelson:
Yeah, so there’s a few basic things and I think we’ve got our first graphic coming up here that people should keep in mind. If you’ve already filed your taxes in 2019 you probably have a pretty good idea of where you’re going to be for 2020. So the big thing is to adjust the tax withholding. If you’re paying and there’s a payment due to adjust your withholding so you don’t run into any penalties come next year.

James Nelson:
Likewise, if you have a big refund coming back, probably doesn’t make a whole lot of sense. Adjust the withholding down a little bit so you have more of that money throughout the year. The second one is make estimated tax payments. This is more for self-employed individuals and individuals with investment income. Make sure those estimates are pretty close, not just a wild guess. Again, just to avoid that penalty when you come to the end of the year. Consider Roth IRA conversions. You’ll be thankful down the road when retirement when you’ve got a tax free bucket of money to draw on.

James Nelson:
And then make use of the tax advantage accounts like the HSAs and the FSAs. This, the HSA, your health plan needs to allow it. It has to be a high deductible plan, and it acts very much like an IRA, as far as the investments go. FSA, you have to do a little bit more planning. It’s a use it or lose it. If you don’t use it in the first year, you can’t carry it forward. So, you got to know when you’re going to need that money.

Rederick Terry:
Absolutely. And of course everyone’s always trying to find any savings that they can when it actually comes to filing their return. So is there anything that people can still do from now and April 15th that actually can reduce their bill for 2019?

James Nelson:
Yep. A few last minute items. Then that’s the second chart here. Contribute to a tax deductible retirement plan. That’s a traditional IRA. Make those deposits. If you’re age 50 and older, you can contribute $7,000. If you’re under the age of 50 it’s six. Health savings account, again, your plan has to allow it, but for an individual you can contribute $3,500. If it’s a family plan, you can contribute $7,000. So that has the same deadline as the IRA, April 15th. And then make last minute estimated tax payments if needed. If you know you’re going to pay taxes this year when you file your return, might as well get a check off in the mail now so you don’t run into more penalties.

Rederick Terry:
Good advice. So, late last year we also saw new legislation make some big changes to the tax code. Specifically pertaining to those retirement accounts. Was there anything that people should keep in mind as they prepare to file for this year under those changes?

James Nelson:
Yeah, so the SECURE Act came into law January 1st of 2020. A couple of big changes would be if you’re age 70 and still working, you can now contribute to a traditional IRA. That never used to be the case. The other big item is the required minimum distribution age, when the IRS says you have to start taking money out at age 70 and a half. That’s been bumped to age 72. So if you’re 70 and a half this year, you’re not obligated to take that required minimum distribution. It’s age 72 now.

Rederick Terry:
Great information as always, James. Thanks for joining us.

James Nelson:
Thank you.

Rederick Terry:
Absolutely. And if you missed any part of our discussion, we’ll make it available to you on OurQuadCities.com.