Announcer:
It is 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. This is Nate Kreinbrink bringing you today’s show. We had a little change in schedule. Normally the first Wednesday of every month, David Nelson is on with the 30-Minute live program. He had a little change in plans there, so he will actually be doing the 30-minute live program next Wednesday. So I’m on this week bringing in some of the topics that we’ve had throughout the week. We are into June. And again, we talked last week, had Mike Steigerwald on with me, talking about how fast the year is just simply flying by, obviously into the month of June here.
I think this is, I think, the last week for some of the last local schools that are still in session. Then it will officially be summer vacation. And as we get into summer, brings along some summer storms, which we’ve seen through the area last night. Hopefully everyone in the listening area made it through last night’s storms that came through. It looks like Quad City over across the river got hit a little bit, and hopefully everyone’s all right as they come through. But the grass definitely greened up this morning and those mowers will be fired back up as soon as it dries out and continue to mow three or four or five times a week, it seems like, to keep up with it. So fun time of the year, flowers are blooming, grass is growing, baseball, softball season’s in full swing for the youth, for area high schools on this side of the river. Exciting times, fun times, and hopefully Mother Nature warms up these temperatures here a little bit and stays warm so it starts to feel like summer. So exciting times, fun times. So again, get outside, enjoy it.
A lot of fun, exciting activities in the area planned in the upcoming future. Obviously, Tailgate N’ Tallboys down at the riverfront this weekend. Hopefully it’s a huge success and then a great showcase for our community and what we have to offer in this area, so enjoy it. Weather, knock-on-wood, hopes to be good for it and hopefully goes off without a hitch and great attendance and looking forward to it.
Getting into today’s show, I know, again, the third Wednesday of every month, I have Andy Ferguson on with me talking taxes, but wanted to hit that tax topic a little bit today just from a general planning session. I know there’s some new tax talk and new tax bill proposals and what’s going to be in that and whatever. When that does come out, and I’m sure Andy and I will spend a couple sessions hitting some of those key points to it, but when we look at tax planning, and I know when I have Mike or Andy on, they talk tax preparation versus tax planning, and now is the time to look at those tax planning. And again, looking at what your outcome was for your 2024 tax filing and understanding what it is that you have to do to make any changes to that, should they be warranted as your situation changes.
And I look at this and the big thing that I look at is withholdings and are we holding the appropriate amount for any income that we have. Whether you’re working or in retirement, are we withholding enough? If you have multiple jobs, do you have the withholding appropriately for every job that you have? Are you taking into account that you have multiple jobs? Some of those tax forms when you fill them out and when you get hired, when you fill those out, they are assuming that that is your only job. So they’re going to withhold the necessary amount based off of your income and the full standard deduction for that one job.
If you have another job, they’re going to do the same thing. So essentially, they’re taking into account multiple standard deductions and then basing their withholdings on that amount. Again, you only get that standard deduction one time on your tax return. You don’t get it for each job. It’s one standard deduction. So if each one is withholding taxes based off of that, you’re going to probably need to withhold a little bit more, or you’re going to be prepared to probably have to pay in a little bit when you file your taxes. So looking at that, making sure those tax forms are filled out correctly at each of your jobs to, again, look at it to say, “Am I withholding the appropriate amount?”
On the flip side of that, sometimes when we get into retirement, what we started withholding versus what the reality is now with any new tax laws, sometimes those change as well. And again, we want to make sure that we are continuously looking at that, so again, we’re not withholding too much more than what we necessarily need to. And I know everyone says, “I love getting that refund back when I file my taxes. I love doing this.” But again, when you look at that, that refund can be adjusted to whatever amount it is that you want it to be withheld, so that any money that you get back when you file your taxes is essentially your own money that you overpaid into the IRS throughout the course of the year that you are just getting back paid to you at tax time when you do that in the form of a refund.
So if we’re looking at retirement, and sometimes, again, with some of the laws that are currently in effect, Iowa specifically, and a lot of times Illinois, and depending on what state you’re in, retirement income isn’t necessarily subject to that state tax. So if you’re still withholding that state tax on all of that income, again, you’re withholding it just to get it back paid to you at tax time. So again, it does offset maybe something that you’re not having it. So again, it’s not a blanket statement, it’s not a one size fits all. But again, understanding if you are getting a big refund back, where’s that refund coming from? Do I need to get that refund back? Do I need to make any changes so that… Again, maybe it’s going to be more beneficial to you to not have it back paid to you at tax time in one lump sum as a refund, but maybe spread out throughout every month of the course of the year for you to be able to use. So again, it is looking at that way.
And sometimes when you’re looking at it with the standard deduction is where it is, especially, for example, for a married couple up over 32,000 for a standard deduction, their taxable income may be lower than what that standard deduction is. If you have a smaller pension than just social security income, maybe you have a smaller tax deferred accounts that your required minimum distribution or your RMD is relatively low, your taxable income may be below that standard deduction.
So if you’re still withholding like you were when the standard deduction was much lower, you’re withholding taxes, having to file taxes just to get your money back. You don’t have any taxable income to necessarily report because your taxable income is below your standard deduction amount. So your taxable income is at a 0% rate. It’s still taxable. It’s just taxable at zero. So again, there’s essentially not anything that you need to file with the IRS because you don’t have any taxable income, but when it comes tax time, you have to file to get your own money back that you were withholding, that you let the IRS hold for you throughout the course of the year to get your money back.
Sometimes people say, “Yeah, I want to pay to get my tax return done so I know that it’s done and I will get money back. I understand that, but I will pay for my tax return to get my own money back.” Some people look at that and be like, “Well, that’s kind of silly. Why would I need to file and pay to get my taxes done if it’s just to get my own money back? I stop my withholdings. I still have that taxable income of zero. So again, I don’t necessarily need to file taxes.” Again, we want to look at that every year. We want to make sure that that is still the case. Obviously with some of these new proposed law changes that are out there, again, is that still the situation? But when you take a look at that, again, understanding where that withholding is coming from? Where do we need to take it from? And again, do we need to continuously up that, change that or what it may be to do that?
Because as we say, that end-of-the-year tax planning is very crucial, but if we can do that end-of-the-year tax planning a little bit earlier with some of these things, it gives us more time to make sure that we get those changed. Again, if you’re looking at social security benefits, if you are withholding taxes, you can contact your social security office, but a lot of times there’s a pretty long line or a pretty long on-hold to be able to get through to get that changed. There is a form that you can submit, but again, I would suggest not waiting until the very last minute to get that submitted to go into effect if you need it in a hurry, because again, the processing times, you’re probably looking at a couple months.
So again, we have some time here before the end of the year to get all these changes implemented. So that way, again, if you’re wanting to change anything and have it be where I’m not withholding anymore, so I maybe don’t have to withhold taxes, again, you have to probably do that yet for 2025 as you’ve already had five, six months of withholdings already done. So you want to get those withholdings back if it falls into place. But as we transition over to January, you want to make sure that any changes that you have are into effect by January, so that way you have that clean slate of a full year to be able to do that.
So again, it’s a lot of stuff to look at the changes, and as we always say, “Once we get used to something, it seems like tax laws, tax codes, planning changes.” So again, we want to make sure we stay on top of this and make sure that, again, we look at what we are getting, have a decent understanding of why we are getting it, and is there anything that I need to do differently that would maybe look in that maximizing what it is that I’m getting.
We always joke, we always say, but it is pretty much the truth is it’s not what you have, it’s what you keep. And if we can look at it from a tax planning standpoint and be able to maximize the assets, maybe pay a little less in taxes, then we’re in a good spot and I think everyone would be all ears to do that.
So you got questions, give us a call. Be happy to go over and see where your situation is and have an understanding of why the tax return was what it was when it turned out that way. So give us a call. I’d be happy to do that. Running out of time here. But I did want to mention before we do is that every Friday, NelsonCorp Wealth Management is wearing jeans for charity. Money raised in the month of June will be donated to the Brantley’s Wings program. Again, this is 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 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.