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, Inc. a broker dealer member FINRA SIPC. Investment advisor, representative Cambridge Investment Research Advisors, Inc. A registered investment advisor, Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now here’s today’s financial focused 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. Nate joined this morning by Andy Ferguson with Nelsoncorp Tax Solutions. Andy, appreciate you taking time this morning to join us.
Andy Fergurson:
Good morning. Yeah, it’s great to be here.
Nate Kreinbrink:
Beautiful. A beautiful, beautiful morning out there. Getting out there today and seeing the sun come up and seeing that green grass, trees, it’s just always one of my favorite times of the year. I think just with all the blooming of the flowers and the mowing of the grass even. It’s an exciting time, although we can’t go back and forth with baseball a little bit this year, too-
Andy Fergurson:
As nice as it is outside, you wouldn’t know that we were under a pandemic or anything by looking out the window. It’s nice to, like you said, see the earth being renewed a little bit. I am also sad about baseball and I will be sad until they find a way to make it work.
Nate Kreinbrink:
Well sounds like they’re starting to get a little closer on that. Hopefully by July 4th weekend, I think hopefully is what date they’re coming up with. But getting into today’s show. I know James and I have kind of done it the last couple of weeks, but I know talking with Andy throughout the past month or so, seems to be getting a lot of questions regarding some of the changes to the tax code under the CARES Act and what that all comes along. Most notably and I think would kind of draw people’s most attention first off is just this the stimulus payments. I know you’ve been kind of getting some questions from people that may not have gotten theirs yet. Why haven’t I gotten mine? Maybe talk a little bit as far as the stimulus payments and when they should be expecting it, if they have not already gotten it.
Andy Fergurson:
Okay. Yeah. The stimulus payments definitely are on everybody’s mind right now. I would say of the phone calls that we take in our office, 60, 70% of the phone calls are questions regarding stimulus payments and how to track them and other things like that. Most people should have received their stimulus payment by now, if you are a person that is receiving your stimulus payment by check, you may not received it yet. And those are coming out in waves depending on your income. So if your income is higher, your adjusted gross income is closer to the limit on the stimulus payments. You may not have gotten your stimulus physical check yet, but those will be coming over the coming weeks. They could stretch into June or July though. So depending on how close you get to that cutoff amount could slow down your stimulus payment. But for the most part, people that have direct deposits set up through the government should have gotten their check by now.
Nate Kreinbrink:
I think another big question. And I think I’ve read and you see this all the time, as far as with people talking about, okay, I’ve gotten the stimulus payment, is it going to be taxable to me? And am I going to have to repay this? Is this a loan? How is that going to actually factor into people’s income in 2021 when they’re filing for their 2020 taxes, as far as how the stimulus will be accounted for on that return?
Andy Fergurson:
So the short answer to is it taxable is, no, it’s not taxable. The way the stimulus payment works is it is a refundable credit that is applied to your 2020 taxes. So if you are entitled to the stimulus and you get it, it’s just like if you’ve got the child tax credit or any other credit on your taxes, there’s no taxation for that money. It’s refundable to you. If for some reason, you are entitled to it and you didn’t get it, you should be able to realize that refundable credit on your 2020 tax return. Now where it gets exciting or interesting or-
Nate Kreinbrink:
Exciting.
Andy Fergurson:
… is where you have somebody who received the stimulus, who shouldn’t have gotten it got. Then it gets a little bit more complicated. As far as is that taxable, I don’t know exactly how that’s going to work. The guidance on that is coming out daily. There is reports coming out of the treasury and from the White House that say if you received the payment and you shouldn’t have received it, an example of that would be someone who passed away in 2018 or 2019, and then was issued a check or a direct deposit for the stimulus, that person wasn’t entitled to the stimulus. And there’s been guidance that says, you need to send that back.
Andy Fergurson:
I don’t know how they’re going to enforce that or how they’re going to find it. But I would imagine that’s borrowed money at this point. If you are one of those people who had a parent die and you received a stimulus because they passed away, but it was in their name. It’s entirely likely that the government’s going to have you pay that money back. How that mechanism is going to work that’s where-
Nate Kreinbrink:
A little tricky there.
Andy Fergurson:
… it gets interesting and exciting, because there’s just not a lot of guidance on that for us. Yeah.
Nate Kreinbrink:
Gotcha. I know another part, because I know you were saying this too, as far as just the extension of the tax deadline, now the normal tax year tax deadline is April 15th, unless you have to physically file an extension to get a little granted that extension on normal years. This year, as part of the CARES Act, that tax deadline was extended to July 15th. Now, is this something that people have to file for, or they’re automatically taking account into being eligible for that tax deadline of July 15th?
Andy Fergurson:
It is an automatic deadline. So what happened was when they changed that deadline at first, they took just a couple types of returns, 1040s and other personal returns and extended them from April 15th to July 15th. Now just about every return type that you have to file or that you would have had to file anytime after March 15th, if the due date was after March 15th and before July 14th, that deadline has been pushed to July 15th. Took a long time for us to get it there, from a tax perspective, because there were a couple of weeks there where certain returns were extended and other returns weren’t, but now everything is pushed to July 15th. There’s nothing you have to do for that. You don’t have to file an extension. It’s an automatic, the deadline has moved. So it’s not like you’re extending. The deadline is different. So you don’t have to file an extension. And it’s taken care of as far as that is concerned.
Andy Fergurson:
Now that being said, you should still file your taxes as soon as you can, because the extension deadline, which used to be, or last year, if you filed an extension on 4/15, you had until 10/15, you got a six month extension. It’s even called in the tax code an automatic six month extension. Well, that automatic extension this year is not six months because the deadline moved, now that automatic extension goes to still only October 15th. So it’s a three month automatic extension. So if you think you’re going to get an extra six months on top of July 15th, that’s not the case.
Andy Fergurson:
Right. So you just got to understand how those deadlines are moving and you really, you still only have til October 15th at this point.
Nate Kreinbrink:
At this point.
Andy Fergurson:
There’s talk in the house and in the Senate and even in the White House about moving those deadlines again, which would just stir up the pot a little bit more for us and make it again, the word I’ll use is exciting. Lots of things to take [crosstalk 00:08:57]-
Nate Kreinbrink:
But as of right now, just figure on July 15th and they don’t have to do anything as far as the-
Andy Fergurson:
Nope, it happens automatically, they’re there.
Nate Kreinbrink:
Gotcha. And lastly, I know James and I have kind of talked a little bit when we went over to some of the CARES Act provisions and how it comes into a tax point. I know Andy you and I were talking right before we got on a little bit, as far as taking that R&D, even though I may not have to, by doing Roth conversions and talk maybe how, as far as from a tax standpoint, if you already had that money budgeted into your account for the year, as far as income, how that may be beneficial for this year and then taking advantage of that.
Andy Fergurson:
Yeah. So there’s a couple of things that I can think of right off the top. Well, the market is down and so people are concerned about taking their money out, thinking if I take my money out, I’m taking it out at a period when it’s discounted, so I lose money. But they’ve already budgeted for this required minimum distribution. So what may be something to consider is talking with your financial provider about taking what you would have taken as an R&D and making that a Roth conversion. It’s not taking it out of the market, but now you’re moving money into a non-taxable format at a discount, which means as the market recovers, you should have the opportunity for it to recover on the tax free side instead of in a taxable account. So there’s a slight advantage there to considering whether you do that.
Andy Fergurson:
Especially since for everybody that’s taking R&D or most people that are taking R&Ds, they’ve already budgeted for that event. They’ve already budgeted for the taxes and they can use that prepared budget and just have this slight advantage of moving money into that non tax deferred account and reaping the gains of a recovery market without the tax.
Nate Kreinbrink:
Great stuff. Andy, we always get going and the time flies by. Once we start talking that exciting tax world and you always make it so interesting and trying to just take complicated stuff and then kind of simplify it down for people to understand, but we are out of time again. Andy, I appreciate you taking time this morning, once gain, join us, go over some of these things. Did want to mention real quick that every Friday NelsonCorp Wealth Management is wearing jeans for charity. Money raised in the month of May, will be donated to the Genesis Foundation Program. Again, Nate Kreinbrink with NelsonCorp Wealth Management. Andy Ferguson, with Nelsoncorp 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 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, Inc., a broker dealer member of FINRA SIPC. Investment advisor representative Cambridge Investment Research Advisors, Inc., a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information visit our web website at www.nelsoncorp.com.