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, joined this morning by a Mike Van Zuiden, NelsonCorp Tax Solutions. It’s been a few weeks since the last time you were on the show again, but you’re starting to become a regular on here, Mike.
Mike VanZuiden:
Sure. Regular let’s go with that.
Nate Kreinbrink:
Well, another beautiful morning out there. We were finally starting to get some rain, which is definitely needed, although the storms and the reminder of the one-year anniversary of yesterday and what that all brought to the area 365 days ago is definitely being able to get through it without any of that this year was a sigh of relief. It was like déjà vu and that weather forecast yesterday morning came out and said, we may have a little bit this afternoon and be aware.
Mike VanZuiden:
Absolutely. We were out last night when the storm blew through and started and the wind was picking up and it was, it was a little bit-
Nate Kreinbrink:
A little eerie.
Mike VanZuiden:
Surreal. But instead of great tree branches in my backyard, I had little clusters of leaves and twigs.
Nate Kreinbrink:
Much more manageable to go to that. And it’s hard to believe we already are to almost the middle of August. I know my kids and I’m sure pretty much everyone else’s out there are dreadfully probably approaching the start of school year coming up. My wife, as a teacher, obviously she’s back in the classroom, starting to get that ready, getting in that school mode. And it’s really flying by, I guess you could say.
Mike VanZuiden:
Absolutely. My wife is also a teacher and they’re spending lots of time getting things put back together and organized and ready for kids to come back to school. So hopefully there’s a little more normalcy involved with this school year than what there has been the previous couple.
Nate Kreinbrink:
Crossing fingers, and we can only hope. So middle of the month, also as we had mentioned kind of in the last couple of times where we’ve had either Mike on or have had Andy from the tax portion on as well, is the child tax credit. And obviously, that started off last month where those that applied that had children under the age of 17, made below a certain income amount, were eligible to get a part of their tax credit, basically prepaid to them on the month of July, August, September, October, November, December throughout the course of the year. That is scheduled to hit again on the 15th. I believe that will be coming out for those that are eligible on Friday. So again, that child tax credit again is not an additional payment to those individuals that have kids. It’s just a prepayment of what they would normally get on their tax return.
Mike VanZuiden:
It’s prepayment. And you know, the amount is a little bigger for 2021, $3000 versus $2000. But yeah, it’s prepayment and a lot of questions come up about how do I sign up for this? And you don’t sign up for it. If you’re eligible, you get it. You have to opt-out. So, and that’s done through the IRS website and there’s several steps involved with that. Some have found it to be simple. Some have found it a little more difficult. It’s a little cumbersome to navigate through it. So it’s a process to opt-out. So, but yeah, that is going on. And yeah, the second payment will be hitting people’s bank accounts here in the next few days.
Nate Kreinbrink:
Right? And I think another point to go through it too, if you are, if you’re married and you’re wanting to opt-out, each individual spouse has got to go on separately and opt to opt-out of that program. You can’t just go in, sign in with one and then have both of you. You both have to go in and do it. And the only difference is if you don’t want to have that prepayment, you want to have all that credit applied to your tax return as opposed to having it prepaid to you. So again, if you have questions with it, you’re getting it, should you be continuing to get it? Should you opt-out? Talk to your tax professional and actually see how the impact will will be on your tax return with having that prepaid out? Because obviously if you get it prepaid to you, you’re not going to have as much a credit when you file for your taxes.
Mike VanZuiden:
It’s nice. You know, it’s probably a nice thing to have some cash in your pocket as the end of the year goes on. However, if you’re expecting a particular number at the end of the year, that’s probably going to be impacted by what’s happening now. So rather than be surprised, ask the question now. Get the information and see how it’s going to impact your tax returns.
Nate Kreinbrink:
And that, surprise, is probably not going to benefit you.
Mike VanZuiden:
It’s probably going to have your refund situation be a little bit smaller as a result.
Nate Kreinbrink:
So, and again, another thing that comes up and you guys continuing to field a few calls on this, but again is the delay in the processing that the IRS is still going through. And again, this is kind of an after thought of all the stimulus payments that were paid out, tax credits and filing and everything. They’re just, they’re behind. And they’re still telling people to be patient, if you filed and you’re supposed to be getting a refund back or something, and you haven’t, it’s still coming. They just haven’t gotten to you yet.
Mike VanZuiden:
That’s right. It is slower than we’ve seen it and continues to be that way. Continue to get the phone calls and the questions about, Hey, what’s going on with my refund. I was expecting this and I filed three months ago. It is a slow process. And as far as checking return status, once it’s accepted and is in the system and is being processed by the IRS, there’s really not a lot of recourse. There aren’t any updates that have been coming out. Attempts to try and reach the IRS by phone are very rarely fruitful. I mean, you can spend hours on hold and still not speak to someone. So, it’s a real, it’s an odd time.
Mike VanZuiden:
I think it’s frustrating for someone that’s waiting for that refund. Somebody that maybe is reliant on that refund, needs that money, and is waiting an extraordinarily long amount of time compared to what they’re used to see that happen. So it’s unfortunate and we just, I guess, preach patience. So it’s just preaching it is one thing, practicing it is probably a little more difficult so I understand that. But yeah, that’s the situation right now with the IRS. They’re terribly behind in that process and it’s slow as a result.
Nate Kreinbrink:
Going with that, and I know we talked to, as far as just wanting to hit on those two ones that you’ve been continuing to field questions on, or you continue to see in the news, but wanted to kind of bring it back a little bit and talk a little bit of taxes and tax planning. Again, when people think taxes, they are immediately, what comes to the mind is you flip the calendar year over to the new year, you start getting your tax information in. You gather it up, you bring it into your preparer. You see if you owe or you see if you’re getting anything back. And that’s what they think with taxes. And that’s a kind of what we call tax preparation, where you’re essentially looking backwards and just recording numbers that have already happened.
Nate Kreinbrink:
What we really preach and what to you and Andy and your guys area over there is that tax planning and trying to coordinate some of that tax planning with investments in social security and Medicare and every little aspect that goes into it, knowing that the decision that you make in one, is going to impact everything else.
Nate Kreinbrink:
And taxes is always a big part of that. And tax planning, isn’t necessarily just looking at what I’m paying in taxes, but looking down the road to say, okay, is it worthwhile for me maybe to pay a little bit more in taxes this year than what I would have to, to avoid paying more in taxes down the road and have other things that impacted that. Roth conversions and bracket management, I know you brought that term up on the way up here, is a big part of that. And I think that’s important for people to, again, start grasping that concept a little bit. Not have to understand everything, but know that again, if we can choose when we’re paying taxes on our money, managing those taxes through the bracket that we are currently in is going to be beneficial for them. And that’s the help that you help with people a lot of times.
Mike VanZuiden:
Absolutely. Yeah. You know, taxes are a reality. We all know that, but there are strategies to minimize what we pay to the government, right? So, and when we pay it. Does it make sense to convert some money now, pay the tax on it now, so we don’t have to pay it later when in all likelihood I’m going to be in a higher bracket and that sort of thing. So those are things that this time of year, it’s a great time for people to ask that question of their tax preparer, of their investment advisor. You know, what’s the best situation for me rather than just, yeah, at the end of the year bring everything over and we summarize it, we reconcile it with the government and move on.
Mike VanZuiden:
If there’s things that we can do to save money either now or 10 years from now, when retirement comes around and there’s strategies that make sense. And `we’d love to take the time to talk with clients and let’s run some different scenarios and we can put numbers to it all, and all things being equal. This makes more sense than this right now. And help people make these decisions to maximize their money and minimize their tax when it’s feasible.
Nate Kreinbrink:
Right. And I think it’s fairly common. I know you see it as well, that for the majority of people entering retirement, or as they’re going into retirement, the bulk of their liquid assets, as far as what they have saved is in traditional IRAs. Or they’re in 401ks that are pre-tax, meaning they got the deduction when they put money in, it grows tax-deferred. You’re going to have to settle up with the IRS when you start taking money out of there. And that’s where, again, people, they build this pile-up and they’ve done a great job-saving. They’ve done the heavy lifting. They’ve amassed this pile of assets, but what they forget is, okay, now, how do you unwind it? And how do you unwind it in the most tax-efficient way? And I think that’s where people are kind of left in the dark saying, huh, never really thought of that.
Nate Kreinbrink:
And taking money out of there impacts how much of your social security benefit is taxed. It may potentially impact how much you’re paying for your Medicare premiums and things like that is going to go around. And we talk all the time as far as planning for the worst and hoping for the best. But if you have an unfortunate circumstance where a spouse passes away, those assets get then transferred over to the surviving spouse. Now they still have to take money out of it, but they’re paying taxes as a single tax filer now instead of married, filing jointly. So there’s all these things, again, that again, we want to plan for the future to put everybody in the best situation possible with so many unknowns out there, but seeing where we can position them to put them in the best place.
Mike VanZuiden:
Absolutely. Absolutely. Makes great sense. It’s time well spent. This time of year or on the front end of things, to not pay the price later on.
Nate Kreinbrink:
So again, all good stuff. I know we get to, I always joke with Andy when we start talking taxes, timeshare flies, I guess when you’re having fun that it continues to fly by. But did want to mention real quick before we are out of time that every Friday, NelsonCorp Wealth Management is wearing jeans for charity. Money raised in the month of August will be donated to the MS Fest, which is sponsored by the Clinton MS Support Group. As always Mike, appreciate you joining me this morning.
Mike VanZuiden:
Thanks for having me again.
Nate Kreinbrink:
Again, Mike Van Zuiden with NelsonCorp Tax Solutions. Nate Kreinbrink with 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 at www.NelsonCorp.com.