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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, this is Nate. I’m joined this morning by Andy Ferguson with NelsonCorp Tax Solutions. So, Andy, I appreciate you coming up and doing the show with me this morning.
Andy Fergurson:
Good morning, Nate. Glad to be here.
Nate Kreinbrink:
Kind of a crazy time of the year and hard to believe we are already to this time of year as far as back-to-school.
Andy Fergurson:
It’s the most wonderful time of the year.
Nate Kreinbrink:
Depending on who you’re talking to, I think. If you’re a teacher, maybe not so much. But parents that are sending their kids back to school and getting them back into that routine, I think they can definitely echo that sentiment, I think.
Andy Fergurson:
Yeah, it’s a great time to be sending those kids back into, like you said, the routine is critical. It’s one of those things where they get in some bad habits of sleeping in and playing video games, and they need to be put back into real life.
Nate Kreinbrink:
That’s exactly it. I know a lot of the local schools starting this week, some of them I think Monday, then getting back to that first day. So again, want to wish all the teachers, students a very good year of school, and hopefully it all goes well for them. So, speaking of going back to school, Andy, I know you recently went back to school. You attended a conference, I think down in New Orleans, as far as talking about taxes for a few days, how the changes kind of impacted them. And I know you and I were talking a little bit before the show as far as what we want to kind of talk today, and one of the things that you brought up that you were surprised was such a focal point was scams, as far as dealing with taxes, social security, and things like that. Maybe touch a little bit on some of that stuff that they went over during the conference that you attended.
Andy Fergurson:
Sure, yeah. I went to the IRS conference or the IRS forum for accountants and financial preparers, and I’ve been to this forum for several years now. And we always have the opportunity to talk about fraud and the scams that are out there, and it’s just a good thing to remind everybody that, remember the IRS will never call you out of the blue. If you get a phone call that says it’s from the IRS, if you didn’t call them first and ask them for something, they’re not going to call you. They’ll communicate with you through a letter. They will not send you an email, so if you get an email that says the IRS is interested in talking to you, more than likely it’s a scam.
Andy Fergurson:
The local state tax departments do the same thing, so if you get an email from the Department of Revenue, it’s again something that should be questioned. Our office this week has gotten two phone calls. I think we got two phone calls yesterday that said that the police were looking for us because of some fraudulent activity on our social security number, and we needed to call them immediately. So, that’s clearly a scam. They’re not going to call you and talk to you that way because you can’t verify your identity on the phone very well. So, just be aware of those things. Make sure that those that you come in contact with, challenge everything. If you get any communication from the IRS, and you’re not sure, take it to your tax provider. Take it to your bank, or take it to somebody and say, “Hey, does this look real to you?” And let them help you figure it out. Don’t ever assume that it’s real. If it is, we’ll tell you, and you can deal with it accordingly.
Nate Kreinbrink:
Right. And I think that goes hand in hand with some of the stories we’ve heard from some of our clients as far as from social security. It’s the same way. The social security office is never going to call you unless you call them and schedule a phone appointment saying that you owe back social security benefits or something like that. Another thing you mentioned, as far as that they were saying, is that they were told when they were getting these calls that the cops are going to be waiting outside of the door and going to bring that into them. And again, that’s not going to happen either.
Andy Fergurson:
Yeah. We have to remember the government moves at a certain pace, and it is almost never going to be cops waiting outside. That process of them collecting money from you takes months and months and months. And so, we have to remember that they’re not going to be able to move that quickly to enforce something. They’re going to have to communicate with you, and there’s laws that require the IRS and even the state taxing agencies are required by law to follow certain protocol. And part of that protocol is several warnings, written warnings that are coming in the form of a letter, 30 day notices, 60 day notices. All these things are required by law for them to do. So, they can’t, out of the blue, just nail you to the wall and put you in prison.
Nate Kreinbrink:
The biggest thing is don’t panic. Don’t send money without talking to a professional, making sure it’s legit. Keeping this thing moving here, another topic that was important this year was just kind of reviewing how the first year went under the new Tax Cuts and Jobs Act, as far as how that impacted people with their withholding amounts and what it looked like when you did the people’s returns this past year.
Andy Fergurson:
Yeah, that was a great point. One of the things that we noticed more than anything this year, although people paid less tax, the majority of people paid less in tax, we also saw that also saw that almost everybody’s withholding decreased. And as with that withholding decreased, sometimes their tax bill went up. We saw withholding decrease at a greater pace than their tax decreased, and so that ended up in a net positive for them, ended up in them feeling like they were paying more tax because either their return went down, or their actual tax bill went up.
Andy Fergurson:
So, now’s a good time. You’ve got five months of the year left, four months of the year left I guess now, where you can do a checkup on your paycheck. Look at that paycheck stub, and make sure that your withholding is on pace to cover what it needs to cover. And you can look at that on your tax return. You can look at the line that talks about withholding, and make sure that you’re on pace to cover that same amount in 2019 as you did in 2018. If you’re on pace there, you’re in good shape. If it’s a little low, you’ve got time to change your withholding. Go to your employer and say, “Hey look, take an extra $20, $50 paycheck,” so that you can get that withholding up to where you want it to be. That’s the only number that you can really control on your tax return is how much is withheld. And so, that number can dictate what comes around in tax season.
Nate Kreinbrink:
Right. And I think there’s some misconceptions when it comes around to that return, where essentially yes, they may have gotten a smaller return, but essentially, they got more money back because they just got it paid back to them every paycheck that they got throughout the year with the tax brackets lowering. The 15% bracket going down to 12%. The 25 down to 22 and so on. So, again, the refund might have went down, but they essentially got more money back because of that more coming back per pay period. And I think also people [misconstrue 00:07:46] the success of a tax return by the refund that they get back, where essentially it’s not the refund because we could play around with the refund and make you get as much of your own money back that you want to. It’s the amount of taxes that you paid. And like you said, if that amount went down for the bulk of people, it’s just what they got back may have changed.
Andy Fergurson:
Yeah. Every year, we have this same conversation. Don’t look at the refund amount. Focus on the tax paid amount because that’s the thing that you want to see. Did it go up, or did it go down? Again, like you said, refunds are… You can withhold your entire check in withholding, and then they’ll just give it all back to you at the end of the year. It doesn’t mean you’ve got a better tax situation. It just means you loaned them the money all year.
Nate Kreinbrink:
Right. And I think lastly, the one topic that we wanted to touch on is just the need to continue to monitor your tax situation. I know a lot of times people think of their taxes as far as just from the working, how much they’re paying in. But understanding truly, when you have what we call life changing events, so obviously retirement, you start taking social security, you get married, you get divorced, you have kids. These life changing events all impact your tax situation. And again, sometimes positively, sometimes negatively depending on maybe changing from a different tax bracket, a different filing status, whatever the case that may be. But again, understand when you hit these events, you need to start talking to a professional.
Andy Fergurson:
Yeah, absolutely. It’s a good time to check your return, especially if you are going to experience any of… And those are life changing events. Those are things that are obvious and are easier to remember. But you also have to remember, there’s also tax form changing events, right?
Nate Kreinbrink:
Right.
Andy Fergurson:
So, when a child that is a dependent of yours turns 16, that’s going to change your tax return especially with the child tax credit having more impact on our returns now that it’s $2000 instead of $1000. The death of a spouse, that’s a life changing event, but it significantly impacts your tax return. And so, it’s one of those things where if you know those things are happening in your life, and again, that’s marriage, divorce, death of a spouse, death of a dependent, a birth, a child graduating college and no longer having the college benefit, or turning 17 and no longer having the full tax credit form. So, it’s important to think about those things the year that they happen instead of reacting to them the next year during tax season. So, if any of those things have happened to you, you should be making an appointment with your tax advisor to say, “Hey, this happened. How’s it going to impact my taxes? Do I need to make an adjustment to withholding to compensate for those changes?”
Nate Kreinbrink:
Great. Again, it’s all great stuff. And obviously it’s always changing. I know James and I talked a little bit about some proposed legislation with the Secure Act coming up, so again, this tax code, the tax laws that we have, it’s constantly evolving. So again, you need to get help. You need to understand how some of these things are going to change your situation. And I know talking with Andy all the time about taxes, I never thought I’d ever say this, but it is kind of interesting to sit here and talk taxes with you, Andy.
Nate Kreinbrink:
But I did want to mention real quick that every Friday, NelsonCorp Wealth Management is wearing jeans for charity. Money raised in the month of August will be donated to the Gateway Impact Coalition. Andy, as always, appreciate you joining me.
Andy Fergurson:
No problem. Glad to be here.
Nate Kreinbrink:
Again, this is Nate and Andy 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 this show are for general information only, and are not intended to provided 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.
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