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 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. 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. Third Wednesday of the month, it is time to talk taxes again and Mr. Andy Ferguson with NelsonCorp Tax Solutions has a bigger smile on his face today than he did last month. And obviously we made it through the initial tax deadline there. Good time of the year for you-
Andy Ferguson:
Yeah.
Nate Kreinbrink:
… and kind of the take a deep breath, regroup.
Andy Ferguson:
Yeah, the weight of the world has come off our shoulders and the deadlines have all moved out into the distance. And so it’s a fun day to be a tax guy.
Nate Kreinbrink:
It is. And well, and again, now I think he can fully switch a little bit more concentration onto his beloved Cardinals, who he hasn’t stopped talking about since the deadline, and then how well they’ve done and talking baseball and all that, but…
Andy Ferguson:
Yep. And move on to coaching soccer and tee ball and softball and all those activities, track. Get to go see the kids do some stuff. So all that fun stuff that you do in the spring, now I can do some of that.
Nate Kreinbrink:
You can enjoy it and be a part of that with it then. Yeah, again, we say that in kind of jokingly or whatever, and obviously every year you kind of hit these deadlines. This year has been a little bit different than the last two, just for the simple fact, is that the actual tax deadline remained the actual tax deadline this year.
Andy Ferguson:
First time in three years. Yeah.
Nate Kreinbrink:
We didn’t have the extensions as far as what they added on for one for COVID and then last year kind of the catch up one for that [inaudible 00:02:16].
Andy Ferguson:
Yeah. And that caused a lot of people to, I think the tax deadline snuck up on a lot of people because they have kind of been conditioned for a little bit of extra time. And so we did a lot of extensions this year. I imagine most, there were a lot of people that did do extensions. That with, coupled with some documents coming out late this year. But just a reminder that if you extended your tax return, remember that’s an extension only to file. It’s not an extension to pay. So if you end up owing taxes, they’re going to start, the IRS is going to start charging interest on the tax date, not on the extension date.
Andy Ferguson:
And then another reminder that Iowa is a state that has a later tax deadline. And so Iowa taxes actually aren’t due until the end of this month. And so there’s some opportunity there still to get in under the Iowa deadline. And you just, if you expect you’re going to owe, you definitely want to get that done and not wait until October. Because if you get to October and you owe a couple thousand dollars, there’s going to be interest on that money starting in April.
Nate Kreinbrink:
Right. Again, we’ve kind of talked a little bit over the last shows or whatever. I mean the last couple years have been different anyways, with reporting of stimulus money, unemployment money, different types of credits that kind of continued on this year. And we kind of got introduced to the new handling of the child tax credit and how that kind of played into it. And I’m sure that came up in a lot of your meetings where it applied to, and maybe talk a little bit as far as how that impacted it. Maybe as much or less than you maybe thought it was going to kind of going into the tax season.
Andy Ferguson:
Yeah. So we saw some, we saw a frequency of some repeated mistakes, if you will. There were those stimulus monies… Now to be fair, a lot of people got their letters, held onto their letters, brought their letters in. And then there were several that didn’t have letters, or didn’t get those letters, or they moved, or whatever circumstance caused them to not receive the document from the IRS. And the common thing that we saw was it was hard for people to remember that they got money. I mean, if you remember back when the stimulus, the $1,400 stimulus came out, if you remember back to that time, in January we had gotten $600 a person. And then in March we got $1,400 a person. And then sometime in between those, you also got your tax refund.
Andy Ferguson:
And so there was just money coming from every which direction. And we ended up with a lot of people not remembering that they got that stimulus money. Those that had it direct deposited, it was an easy enough check to go and say, “Hey, check your bank account. We think right around this day.” And they’d go look at their bank account and sure enough, they got that direct deposit. But if you got a check or you got a card in the mail and that didn’t go through your bank account, it was hard to see it.
Andy Ferguson:
And we’ve seen that that’s caused some letters that are coming back from the IRS at this point. There’s some people that were positive they did not get that money. And the IRS says they did. And they’re getting letters back. And that stimulus is coming off their tax refund. And that makes a significant difference. If you remember, it was $1,400 a person. And $1,400 a person coming off your tax refund, that’s a lot of money. And it can be shocking. And in a lot of cases, it’s flips them from a refund to balance due. And so there’s just some concerns about that. There’s nothing we can do about it at this point. We just got to deal with the letters.
Andy Ferguson:
Child tax credit, we didn’t have near as much trouble with that. The people that had children I think were well prepared. I think that’s a tribute to the people in the media and stuff that were saying, “Hey, you got to watch this one. Be careful.” And it seems like everybody that had children really paid pretty close attention to that number and got the right number reported. Another thing we saw this year, that I feel like I’ve seen a little bit more this year than I have in the past, is a lot of people had their teenage kids file their own tax returns. They went out onto TurboTax or 1040.gov, or some other apparatus. Credit Karma or something, to go out there and file their individual returns for free. And what ended up happening is those kids claimed themselves as independent. And that caused a lot of trouble, caused a lot of-
Nate Kreinbrink:
Because they were still being claimed from the parents return.
Andy Ferguson:
Well, the parents should have been claiming them, yes. And so I left parents with a decision to make. Do you paper file the return to get the money that you’re due, which may cause the child’s return to be reevaluated? Do you take the kid off and just eat the difference? And generally what happens is the child that claimed themselves don’t get near as much benefit from claiming themselves as the parent would’ve.
Nate Kreinbrink:
As the parent.
Andy Ferguson:
Because a lot of those benefits are tied into tax and kids that are working generally don’t have as much tax. And so a parent or two parent family that’s got two incomes generally has plenty of tax to use all those benefits that come from those credits. So it’s just something to be careful of in the future. You want to make sure that if your kid’s going to file an individual tax return, that they’re aware not to claim themselves, unless that’s what you guys have worked out. And maybe even wait to have them file theirs until after yours have been filed and accepted.
Nate Kreinbrink:
Well, and I think that kind of transitions into the next phase that you guys go into as well. Is again, you look back and say, “Hey, these were some issues that we seen come up moreso than not,” or whatever. Transitioning as we always say from the tax prep to the tax planning. Where preparation, we just kind of got through, you look backwards. Now let’s take that information and let’s start transitioning to tax planning. That’s another great case. And again, something that’ll probably come up as far as meetings with you going forward. Families and deciding on whether or not to have their child withhold taxes on any income that they may have, or if they even need to file, that’s decisions that we should start looking at now. Because there is still time left in the year to be able to make any changes and have it have some type of an impact on the return for next year.
Andy Ferguson:
Yeah. Absolutely. Planning in May has a lot more impact than planning in November. And so, and it’s time, it’s time to do that. I’m an advocate of planning. We talk about it all the time. I’d much rather people kind of control where their tax sits instead of reacting to it, and being a victim of whatever the form says in April. Because by the time it gets to me in February, March, April, there’s nothing I can do about last year, or there’s very little that we can do about last year. And so I’m a huge advocate of let’s plan for this. Let’s see what our tax is going to be. Let’s put it together, and try and estimate where it’s going to be, because if you can see it coming, it’s not that big of a problem. I mean, even if it’s a balance due, if you know, you’re going to owe a thousand dollars on April 18th, you can prepare for that. You can get yourself ready to pay that thousand dollars.
Nate Kreinbrink:
Is that unexpected needing that’s not [inaudible 00:09:34].
Andy Ferguson:
Yeah. It’s when you expect 2000 back and you owe a thousand, that’s when it’s hard.
Nate Kreinbrink:
So we kind of get into that a little bit and I think now your mode can kind of start slowly switching. There’s been a lot of talk as far as some of the tax law changes, specifically in the state of Iowa, coming up down the road. And maybe talk just again, big picture wise, kind of how that’s going to look at, and obviously as your mode switches, I’m sure you’re going to dive a little bit more specifically into each one of those sections and have more information. But just maybe some high level things, as far as what people can look at.
Andy Ferguson:
Yeah. There’s definitely some changes to be aware of. Especially when we talk about planning. Iowa’s recently passed a law that said that they’re not going to tax retirement income at a future date. I’m not sure exactly when that law goes into place. They’re going to gradual gradually get into a more of a flat rate. And so those things are going to have significant impact when we start talking planning. Especially when we talk about wealth planning, IRA conversions, and things like that.
Andy Ferguson:
There may be advantages to taking the conversion in 2022. There may be advantages to taking that conversion in 2023 instead of 2022. It’s just, there’s definitely some planning situations to consider there. Give us a chance to get versed in that law a little bit and understand it a little bit, so that we can help you make good choices. But yeah, it’s definitely something you want to consider. You may have made a conversion in ’21 and been perfectly happy with the result, but there may be a bigger impact that happens in 2023, which may make you want to delay doing it in 2022. There’s a lot of factors there that we want to look at.
Nate Kreinbrink:
Lot of stuff in play.
Andy Ferguson:
So we just want to make sure that we’re covering all those bases as we get into that planning portion.
Nate Kreinbrink:
All great stuff. Andy, I appreciate you joining me. Congratulations on checking off another season of this stuff and then getting into that fun planning time. Before we do run on time, I did want to mention that every Friday NelsonCorp Wealth Management and NelsonCorp Tax Solutions are wearing jeans for charity. Money raised in the month of April will be donated to the Clinton County Resource Center. Again, 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 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 www.nelsoncorp.com.