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, Andy Fergurson with NelsonCorp Tax Solutions joining me today, third Wednesday of December, last radio program of the year.
Andy Fergurson:
Oh, my gosh.
Nate Kreinbrink:
Almost. I’ve got another one next week, but for you …
Andy Fergurson:
But it’s after Christmas, and so if it’s after Christmas, technically is it even in this year?
Nate Kreinbrink:
Yeah. I get you. I get you. You just round up at that point.
Andy Fergurson:
Right.
Nate Kreinbrink:
You round up to the next year.
Andy Fergurson:
Christmas is the technical end of the year. Right?
Nate Kreinbrink:
I think it’s here. I know a couple days there where we were hitting 50 degrees. It was maybe a little tough to get in the Christmas spirit. Not that anybody was probably really complaining.
Andy Fergurson:
But it’s not so tropical now.
Nate Kreinbrink:
But it’s not so tropical now. It looks like maybe a little bit warmer for anybody traveling maybe this weekend. We should avoid any major weather fronts, I guess, coming through there.
Andy Fergurson:
Yeah. I don’t even see any rain coming. Is there?
Nate Kreinbrink:
No, knock on wood.
Andy Fergurson:
All right.
Nate Kreinbrink:
Whatever we got.
Andy Fergurson:
Sounds good.
Nate Kreinbrink:
But it is, it’s a fun time of the year. I know a lot of the area schools either are out today, some of them may be half day or whatever tomorrow, but then it’s officially Christmas break. I’m sure all the teachers are just loving this last half day or day. It’s basically, if you don’t have finals, if you’re in the upper levels, probably just a party today.
Andy Fergurson:
Yeah. Everybody’s watching movies and having parties, except those poor high school and middle school kids who-
Nate Kreinbrink:
Have finals.
Andy Fergurson:
… are stressing out. Yeah.
Nate Kreinbrink:
Again, I wish everybody a very merry Christmas, have a safe holiday season, enjoy it with family, friends, and really appreciate the year as we transition into 2024. I know end of the year we’ve hit leading up to this point, some of the deadlines as far as end of the year. We’re kind of at that point for any Roth conversions, anything that has a 1231 deadline, kind of on best efforts at this point. It’s kind of pushing things through. If you haven’t made plans or done it now, you’re pretty much up to the end.
Andy Fergurson:
Yeah, because what happens after Christmas is tax season.
Nate Kreinbrink:
Yes. Your favorite time.
Andy Fergurson:
It’s weird. We start to get kind of excited about tax season and kind of anxious at the same time. It’s a weird feeling. It’s like getting amped up for a big race or a big test or something like that. You know it’s going to be miserable to go through it and to do the work, but you’re also going to feel a sense of accomplishment when you’re done with it and when you’ve succeeded and when you’ve completed it. I tell everybody, I feel like it’s running a marathon. Not that I’ve ever run a marathon, but I imagine that’s what people feel like.
Nate Kreinbrink:
Imagine it would be like.
Andy Fergurson:
I mean, if other people ran marathons, I’m sure that’s what they feel like. It’s a grueling process, but the satisfaction that comes from the end of it is pretty good. Because we do a lot of work to get ready to prepare ourselves and to make sure everything’s lined up, so that we can hit the ground running. So, as we cross over this Christmas season, we’ll start to make sure W-2s and all that stuff go out. And then we are going to be champing at the bit. We’re going to be like, “All right, let’s …” We’re going to be bouncing-
Andy Fergurson:
… on our toes at the starting line. We’re ready for the gun to go off.
Nate Kreinbrink:
It’s like there’s different phases of it. Right?
Andy Fergurson:
Yeah.
Nate Kreinbrink:
There’s that excitement for the first maybe month or two of it, and then you start hitting mid-March, and then-
Andy Fergurson:
Then it’s a grind.
Nate Kreinbrink:
… or early March, and it’s a grind.
Andy Fergurson:
Then you’re picking a point in the distance going, “Man, I just got to make it to Saturday,” and then you get to Saturday, and you’re like, “Man, I just got to make it to the next Wednesday.” And you just got to keep plodding along to get through it, and then all of a sudden you’re through it, and you’ve succeeded through another season.
Nate Kreinbrink:
Big news from your office as well. I heard a TJ from your office passed some big testing this week, which was a-
Andy Fergurson:
Yeah, she’s credentialed-
Nate Kreinbrink:
Big relief, and she can now enjoy her Christmas, and not have that hanging over her anymore.
Andy Fergurson:
Yeah. Good for her. Congratulations.
Nate Kreinbrink:
She had a bigger smile on her face yesterday when I told her Congratulations.
Andy Fergurson:
Yeah. She’s a big shot now, so good for her. She got her EA certification, so we’re proud of her. She put a lot of work in, and she’s ready to go.
Nate Kreinbrink:
Good stuff. Good stuff. We said end of the year deadline, 1231, Roth Conversion, that type of stuff. There’s another one once you flip the calendar to January, another deadline coming up that they hit a little bit, and people, I think, maybe misunderstand a little bit what that deadline actually is, January 16th for any tax estimates due at that point in time.
Andy Fergurson:
Yeah. Yeah. It’s been in the news lately. There’s the January 16th deadline. They’re warning, “Hey, make sure you hit your January 16th deadline.” That deadline is for the fourth quarter estimate payment. Estimates are voluntary payments that taxpayers make to prepay their tax liability. It’s like withholding for those of us that have waged jobs, when we pay withholding, that’s an estimated tax, and so we’re prepaying our tax, and then when we file our return, we get a refund if we’ve overpaid, or if we’ve underpaid, we pay a little bit more.
Estimates are for those that have income that isn’t withheld from, so those that are self-employed or those that have retirement incomes that aren’t taxed. Maybe you don’t withhold from your social security, or you have investment income that doesn’t have withholding in it, so you expect to have a tax due. If you have more than a thousand dollars due, and you haven’t prepaid your tax, you can be liable for an estimate at the State and at the Federal level. You can be liable for an estimate if you haven’t prepaid more than a hundred percent of last year’s tax or 90% of this year’s tax. There’s just some levels where they can dig you a little bit for a little bit more money if you haven’t prepaid. It’s called a failure to prepay penalty, and it’s assessed after your tax is established, and your liability is figured, that you pay your liability, and then you also pay a failure to prepay penalty if you have not met those minimum safe harbor thresholds.
Nate Kreinbrink:
Gotcha. And I think those prepayments too, I know you’ve sat with a couple of them that you can either go online, I think and make those payments. There’s vouchers that you can send in with however you want to do, and I know you always remind people that if you do make any prepayment, make sure you keep the receipt and turn that into your tax preparer because otherwise there’s no way that they’re going to know that you made that prepayment, and you’ll also end up obviously then at that point, double paying, and then have to worry about getting that money back then.
Andy Fergurson:
Yeah. There’s no form that you get that says that you’ve made these payments, so you got to keep track of it on your own. I had a client this year who made a payment, and has been fighting all year to try and get that payment back because it should have been part of their refund, and it was due to come to them in a check, and then they moved, and then there’s been a big fight to try and get that check reissued. Just make sure that your tax preparer knows that you’ve made that payment, so that they can include it, and it can go with your original return. And if you do direct deposit, that it can come back with the original refund.
Nate Kreinbrink:
Again, getting into next year, I guess, when we flip the calendar, there are some changes as far as retirement accounts, contribution limits that you can put in there. They went up again for 2024. Your standard IRA Roth accounts went up, if you’re over age 50, from 7,500 to 8,000 a year per individual, if you have earned income, and you meet all the qualifying conditions to be able to put money into those type of accounts.
One thing to keep in mind though, you do have up until the tax deadline to make a prior year contribution, but make sure you’re going by 2023 contribution limits, not just because you’re making the contribution in 2024 doesn’t mean you can put in more for last year. You still have that lower amount for ’23, as far as putting money into those type of things.
Andy Fergurson:
Yeah. In November, they released increased limits on all those things, the amount you can put into a traditional IRA, to a Roth IRA. The amounts you can contribute to your work 401k, or 403B, or Roth 401k or 403B, the amounts that you’re able to gift, all those limits went up in November, but they went up for 2024. So, it’s important that as you’re making decisions at the end of ’23, and for the contributions that you’re making in ’24 for ’23, you want to make sure that you’re using the right number, because if you over contribute, then you’ve got some rules that you’ve got to follow to make sure that you fix that contribution and not pay the excise tax that comes with it.
Nate Kreinbrink:
Then lastly, I know this time of year my kids are excited for us to get the mail because we get Christmas cards, a physical piece of mail that they can open. It’s not the norm, I guess, in today’s day and age, where you have a snail mail I guess they call it.
But there also was something that was sent out just recently from the IRS, as far as them sending out a notification that if you paid a penalty for failure to prepay a few years back, they’re going to forgive that if you have not yet paid that, or if you have paid it, they may be refunding that back to you.
Andy Fergurson:
Right. Yeah. Yesterday, the IRS released a notice that anybody that has a balance due from a failure to prepay penalty. That’s the penalty we were talking about with the estimates earlier, so that failure to prepay penalty, if you have a balance due from 2020 or 2021 tax years, so those would be penalties paid in ’21 or ’22, that they are going to forgive those penalties. And if you had a penalty that they sent you a notice on, and you already paid it. The article that I read in the Washington Post, the director of the IRS said that those payments will be refunded. So, anybody who made the payment for ’21, or I’m sorry, for 2020 tax year, in 2021 tax year will be refunded that failure to prepay penalty. That might be some good news. You might see a check in the next couple of weeks that just shows up and says, “This is your refund,” and you may not know where it’s from because that’s because you paid $37 two years ago for a failure to prepay penalty.
Nate Kreinbrink:
That they’re refunding back to you.
Andy Fergurson:
Yep.
Nate Kreinbrink:
All great stuff. We are running out of time. I did want to mention, though, that every Friday, NelsonCorp Wealth Management is wearing jeans for charity. Money raised in the month of December will be donated to the Sleep in Heavenly Peace Program out of Comanche.
Again, Andy Fergurson, NelsonCorp Tax Solutions, Nate Kreinbrink, NelsonCorp Wealth Management, wishing everybody a very merry Christmas. Enjoy the weekend. Have a great rest of your day and week, and we will talk to you-
Andy Fergurson:
Yeah. Merry Christmas.
Nate Kreinbrink:
… next week. Again, Nate Kreinbrink, Andy with NelsonCorp Wealth Management and Tax Solutions, 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 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. For more information, visit our website at www.nelsoncorp.com.