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 representatives 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, it is the third Wednesday of the month, but it is a special third Wednesday of the month.
Andy Fergurson:
It’s new year’s.
Nate Kreinbrink:
It’s new year’s as Andy calls it. Tax season I guess is kind of over.
Andy Fergurson:
Well, yeah, it’s a new season. It’s not really over, so that’s why we call it new year. So that’s why we [inaudible 00:01:10] season of everybody trying to get done up under the wire. That’s over. And now we get a breath of fresh air, we get a little relief.
Nate Kreinbrink:
You get a breath of fresh air. Again, just coming in, that little extra pep in your step I guess you would say…
Andy Fergurson:
Yeah.
Nate Kreinbrink:
… coming in. And again, now you can… Because I have blamed our kind of weird weather pattern on you because you always say I hope it snows the whole tax season and then it does it. And so now we can finally have nice weather. You’re good with it?
Andy Fergurson:
Yeah, let’s bring it on. Let the sun shine.
Nate Kreinbrink:
Okay. So you heard it, it’s going to start getting nice.
Andy Fergurson:
Yeah. I have discovered that I get much less done in an eight-hour day than I do in a 14-hour day. So I’ve got to get readjusted to how much I can get done in a day. And when I make my plan, it’s just not quite the same. I got to limit my expectations a little bit more.
Nate Kreinbrink:
So when… We just said this, as far as on talking on the way up here, again we hit the tax deadline. And again, people look at that deadline and they assume that it means certain things and it applies to certain things, and that’s not necessarily the case. You have that deadline and it’s not necessarily the federal and state are the same that kind of go along with that.
Andy Fergurson:
Yeah. Each state has their own deadline. So Illinois and the federal deadline are the same. Many of the states are the same. But if you’ve got other states involved in your return, their deadlines may be different. Iowa, for example, their deadline is not until the end of the month, so the 30th. So if you owe tax to Iowa, you don’t have to pay it by the 15th. You can pay it on the 30th and still be on time. There are other states… I’ve seen states that have deadlines that are in May. So everybody’s a little bit different. Tax day is always referenced as the 15th, but that is in reference to the federal tax day. States are their own animal.
Nate Kreinbrink:
When they come into that one. And I think too, another misconception is, again, you don’t have to file by the 15th, but you have to file an extension to file by the 15th. And when that goes into it, that doesn’t absolve you of delaying any money that you may owe for your tax return. You still have to pay by the 15th.
Andy Fergurson:
Right.
Nate Kreinbrink:
It’s just an extension to file your taxes by that point in time.
Andy Fergurson:
Yeah, so there’s a couple of things at play there. The extension is an extension to file. There’s a couple of things that the IRS can charge you if you don’t file and pay. They can charge you a penalty for not filing on time, and then they’re going to charge you interest if you don’t pay on time.
The extension can absolve you of the penalty for not filing. It’s automatic. It gives you six more months to get your act together and get filed. But it does not absolve your responsibility to pay. So if you owe money, that interest will begin accruing on the 15th of April for the federal government. Same with the state deadlines. If you owe money to a state, that interest begins accruing on the state’s deadline regardless of extension.
So the other thing that is interesting about that is the deadline is for filing and for paying if you owe a tax. If you don’t owe a tax, there’s no penalty for not filing. There’s no penalty for not paying because obviously you don’t owe anything.
Nate Kreinbrink:
Because they’re going to be sending you a check or a refund deposit.
Andy Fergurson:
And actually if you end up filing your return after April 15th and they owe you money, they’ll pay you interest on the money that’s owed. So yeah, it’s just something to consider. The deadline is a deadline for those that have a tax liability.
Now, if you’re not sure, you should always beat the deadline, and the deadline’s good for a lot of other things too because it keeps everybody on a schedule. Because what happens is on April 16th, taxes go to the back of everybody’s mind and they don’t remember again until October 15th when that six month deadline is up and now they’re six months laying on a payment if they owe. And so if you owe a thousand dollars, you got six months of interest on top of it.
Nate Kreinbrink:
So good stuff with that one. And I know when we had talked a little bit too with having to pay in. Obviously, it used to be you got your taxes filed, they’d say this as much you owe, here’s a voucher, you write a check, you send it in, you got it paid, it applied to it, you hoped, and life was good. Now you’re able to set up there where you can do an ACH to payment of that amount that you owe, and you’ve seen that it might be recommended to kind of go that route going forward.
Andy Fergurson:
Yeah, I like ACH direct debit. The thing that I like about it is the traceability. So if you go direct debit when you file your return, what happens is you create permission for them to pull the money from your account on the due date. Now, sometimes it takes them several weeks. I’ve seen it take two weeks before they pull the money out of somebody’s account, and that’s okay because you gave them permission to pull it on time. That means you’re on time.
I have seen on rare occasions somebody will give that permission and then they pull it late and I’ve seen them get letters because the IRS says, “Hey, your payment is late.” And if that happens, you have evidence that you gave them permission to pull it on time because you gave them an ACH. And that basically absolves you of that. You write them a letter and they’ll send you a nice little apology note that says, “I’m sorry we screamed at you and you don’t actually owe this extra money.”
And so that leads me to the next thought, and that is that with tax season coming to a pseudo close here with the majority of people being filed, the other thing that comes is letters. So now as the IRS starts to process all these returns, there will be letters that come as they find discrepancies or if they find something that they don’t like exactly, you may get a letter.
The best advice there is don’t react to that letter until you’ve taken it to your tax professional. Let them look at it. A lot of those letters are generated by a computer. Sometimes they’re right. A lot of times they’re right, but sometimes they’re wrong. Sometimes you don’t owe what they say you owe. Sometimes a letter crosses a payment in the mail or a letter crosses a payment even, or an extension or an amendment or something like that that is reducing the amount of payment. And so it’s important to understand that.
Let somebody that knows your situation look at it before you just jump in and pay it. Everybody’s worried that the IRS is coming to their door the day after they get the letter, and that’s not happening. So let somebody look at it before you go crazy and pay that payment.
Nate Kreinbrink:
Well, I think too then the flip side of that is just be aware of scams. I think when you start having letters be frequently sent out by the IRS, you start hearing stories of telephone calls or anything like this that are, again, pretending to be the IRS, pretending to just create that urgency that you need to take care of this immediately. And that’s where, again, just be aware if you get anything like that, if it seems too good to be true or just seems off, like you said, make sure you’re talking to somebody to make sure that it is the legit.
Andy Fergurson:
Yeah. And a couple of things to remember there too. The IRS will never call you unless you ask them to call you. So if you call them and ask for a call back, they’ll call you. But other than that, they move at a government pace. So they’re going to get your return, they’re going to evaluate it, and they’ll make a decision. But it’ll take weeks for them to communicate to you because they’re going to send you a letter. They’re not going to call you two days after you file and say, “Hey, you’re $200 short. Send us some Apple gift cards.” Right?
Nate Kreinbrink:
Yeah.
Andy Fergurson:
So just be aware, the IRS is not calling. They’re not sending the sheriff to come get you because you were a couple hundred dollars short. If something’s wrong, they’re going to send you a letter, then they’re going to send you another letter, then they’re going to send you another letter. I mean, they’re not going to take any real action for months. So nothing is immediate with the IRS. And so just be advised that anybody who’s pressuring you to do something right now is not the IRS.
Nate Kreinbrink:
All good stuff. And again, you made it through another tax season and we kind of joke as far as how you regroup now, but we talked too as far as tax preparation and tax planning. And now you’re starting to transition, excuse me, into that next season. And again, if you don’t like the result that maybe was on the return, now is the time to kind of start transitioning to say, “Hey, what do we need to do to change that so that it is a more favorable return to what they have?” Because we do still have eight months left in the year to make changes on any withholding or any contributions or anything like that and still have it take a hold and have an impact for the rest of the yeah.
Andy Fergurson:
Absolutely. Not only that, your year is going to change, right? There’s going to be something that’s different this year. Are you working more? Are you working less? Are you retiring? Are you turning on Social Security? Do you have a kid that’s leaving the house? Do you have a kid that’s turning 17? Did you have a new baby? Is somebody getting married? Are you moving? Are you changing states?
I mean, things are changing all around you. And most of our returns are the same year after year, but anytime you have any of those life events, it’s going to change the way things work. And compound that with this year we have other things that are happening. The Iowa’s tax law is changing, right? So as the Iowa state tax reduces, well, guess what else is going to reduce? They’re going to reduce the withholding on your paycheck. Are they going to reduce it the right amount? I don’t know. Usually that reduction on your withholding is more than what your tax reduces. And so there’s just a lot of moving pieces and it’s important to understand what’s moving so you can prepare for it.
Nate Kreinbrink:
All great stuff. Did want to mention that every Friday, NelsonCorp Wealth Management is wearing jeans for charity. Money raised in the month of April will be donated to the Clinton MercyOne Foundation. Andy, I appreciate it. Good to have you…
Andy Fergurson:
Awesome.
Nate Kreinbrink:
… joining us again. Andy Ferguson, NelsonCorp Tax Solutions, Nate Kreinbrink, NelsonCorp Wealth Management, bringing you this week’s Financial Focus. Thanks again 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 representatives 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.