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 representative securities offered through Cambridge Investment Research Incorporated, a broker dealer, member of 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, got Andy Ferguson with NelsonCorp Tax Solutions. Normally you are … Tax day is the third Wednesday, but you were out of town last week, so you get November 22nd, the day before Thanksgiving.
Andy Fergurson:
Thanksgiving Eve.
Nate Kreinbrink:
Thanksgiving Eve day.
Andy Fergurson:
Thanksgiving Eve day.
Nate Kreinbrink:
Yes. Fun time. Kids are out of school. I know Elijah, our oldest is back for college, back home for a couple of days and …
Andy Fergurson:
Yeah, basketball season’s on. I had a basketball game Monday night and I feel like it’s going to not be less busy. I don’t think it ever gets less … People tell me it gets less busy at some point in your life, and I’m wondering when that happens.
Nate Kreinbrink:
You’ve got some time yet for that. So we did get our tree up last night though.
Andy Fergurson:
Well, it’s not even Thanksgiving yet, Nate.
Nate Kreinbrink:
I know. We just did the tree with lights.
Andy Fergurson:
Wow. Mine’s been up for a week.
Nate Kreinbrink:
I compromised.
Andy Fergurson:
My kids had it up. I think they had the tree up before they had the Halloween decorations down so …
Nate Kreinbrink:
It’s all in good fun. It’s that time of the year, weather’s starting to turn. So it is starting to kind of feel like a holiday season.
Andy Fergurson:
And you know what comes right after holiday season?
Nate Kreinbrink:
Tax season.
Andy Fergurson:
Tax season.
Nate Kreinbrink:
Tax season. I know you have this blue pamphlet that you always bring out and you give me 27 different things that you want to talk about. There’s no way we’re getting through all that. But a couple of things that you did highlight that I kind of thought interesting. I know a month or so ago you had brought up as far as Venmo, PayPal, how that was going to maybe be treated a little bit differently going forward and you weren’t real excited about it.
Andy Fergurson:
Yeah, so honestly it was my biggest fear going into the ’23 filing season was that everybody was going to get these 1099-Ks, which a 1099-K is a reporting document. It’s like a W2 or a 1099-R that you get from your retirement accounts. But that 1099-K reports income that you received from a credit card vendor or a card processing vendor, and the law has actually changed several years ago, and they’ve been threatening to put this 1099-K in motion to where going into this ’23 filing season, we were expecting that everyone who received more than $600 throughout the entire year from some of these card processing apps and vendors was going to get one of these 1099-Ks, which meant that we were going to have to justify all that income. And some of it was income and some of it wasn’t income. So I think we had a whole episode or session on that where we talked about making sure you know the difference of where that money came from.
Well, yesterday I was in a continuing education course and right in the middle of our course, this doesn’t usually happen in IRS …
Nate Kreinbrink:
Breaking news.
Andy Fergurson:
Yeah, they came across, breaking news, and I was like, what is happening? But yeah, they came across breaking news. The IRS announced yesterday they were going to push that law off until 2024. So for our 2023 filing, we don’t have to worry about those 1099-Ks. The other thing that they said as they went through that or what the IRS announced is that that amount, it’s going to change from a $600 threshold to a $5,000 threshold.
Nate Kreinbrink:
It gives it a lot more leeway.
Andy Fergurson:
Yeah. Now it’s not going to be every person in America getting one. Now there’s going to be fewer people. The IRS estimated that there was going to be 44 million of those 1099-Ks issued, and that was 30 million more than they normally get. And so it was going to be a headache. And so luckily for us, they’ve pushed it off and I kind of did a little bit of a happy dance when that announcement was made. They actually had to kind of … That’s why it was breaking news in our IRS training.
Nate Kreinbrink:
Well, that’s a big deal though. Like you said, because I guarantee no one is keeping track of that this year because they weren’t aware of it, that they had to. Now obviously now when you meet with them to do taxes this following year, you can kind of give them a little heads up to say, “Hey, you probably are getting close to that threshold. You need to probably start keeping track of some of that.”
Andy Fergurson:
It should be significantly fewer people impacted. We’ll brief it with the majority of people, but significantly fewer people. Now, even if you are paying your kids’ rent while they’re in college and they’re paying you back, you’re probably not going to cross that $5,000 threshold. And so if you spread that money out enough, and remember that’s $5,000 in the year on one particular app or one particular card processing service. So if you use a specific app just for certain transactions, let’s say you’re giving your kids whatever, 400 bucks a month while they’re at school and they pay you back when they get paid or whatever, if you do that on one specific app, you won’t reach that $5,000 mark. And if you do your Facebook garage sale on a different app, you won’t hit that $5,000 mark. And so if you separate your stuff a little bit, you probably don’t have to worry about it.
And if not, the other advantage to separating onto the different apps would be a knowledge of what that income is and where it came from, and that would help you identify, oh yeah, this is income, or this is profit from the sale of an asset. Or no, this is just reimbursement. This is me buying basketball tickets so that me and my brother and our families could go to the game and then he just paid me back. So those things are all treated differently on the tax form. But the good news is we don’t have to treat them at all in 2023 or for the 2023 season.
Nate Kreinbrink:
Delay it. Delay it. Delay it. So we talked a little bit last week, kind of the 2024 cost of living adjustments for social security came out, Medicare Part B premiums come out, the contribution limits, standard deduction, those totals came out as well. I know for contributions to an IRA or to a Roth account, if you qualify, they went up again. So again, can start putting a little bit more money away if we needed to.
Andy Fergurson:
Yeah. So there’s a couple of things that would caution about that. First of all, we have to remember that these limits that came out last week and the week before are for 2024. When we’re filing taxes in the spring, we’re filing for 2023. So we have to make sure we’re using the right number. As you go into your preparer and say, “Hey, I want to put this much money into a traditional IRA or whatever, I heard that the limit is increased.” Well, you make sure that you’re using the right number and your preparer will be prepared for that.
The other thing that I would add to that is the thresholds for where those things are deductible and non-deductible move also. And so it may be that in 2023 you’re not eligible for a deduction from an IRA contribution because your income is too high or you and your spouse’s income is too high. But in 2024, you may very well be eligible because it moved. Depends on what happens to your income. Or maybe you work half the year instead of the full year or something like that. Remember, you have to have wages to make contributions to IRAs. And so depending on your situation, it may be something that you can take advantage of in ’24 that you couldn’t take advantage of in 2023. So it’s worth asking the questions, making sure that you talk to your preparer and say, “Hey, is this something I can do? Will I get any benefit from this?” And they’ll know right away, “Oh, nope, you’re over the limit. There’s nothing you can do about it.” Or they’ll say, “Oh no, yeah, you’re squeaking in right under it. You can make that contribution.”
Nate Kreinbrink:
And again, just kind of always the friendly reminder as well. There’s some of these things that we want to look at that have a 12/31 deadline, whether it’s conversions, anything like that, contributions to a Roth account or IRA account you have up until the tax deadline. But reminders to do that. And you were joking too as we were walking in that we’re only a couple of weeks away before people are going to start getting those mail documents.
Andy Fergurson:
It’s time to start watching.
Nate Kreinbrink:
Like you always say, if you have any doubt, save it.
Andy Fergurson:
Yeah, that’s right. If it’s as important tax document on it, bring it in. I’ll throw it away for you if it’s not important. And there are some things that aren’t important, but keep all that stuff because it’s much easier to throw it away if you don’t need it than it is to try and go get it again if you do need it. So keep all that stuff. Make yourself a list. Put it somewhere close to where you put your bills or your other incoming mail and check off the things that you’re looking for. It’s probably going to be pretty close to what it was last year, or you’ll know if there’s some extra thing coming this year. If you got 2 W2s last year and 2 1099s and a couple of interest statements and a mortgage statement, you’re probably going to get the same thing this year.
So take a look at your tax return, look at those things and make yourself a little bit of a checklist on what you’re expecting and who it’s coming from and check those things off. And one of the things that is frustrating to preparers and to tax payers is getting that appointment set up to go in and see your tax preparer and getting all the way, you wait a week or whatever to get in or two weeks to get in. You get there and you hand him all your stuff and you go through and he’s like, “All right, now where’s this document?” And you’re like, “Oh.”
Nate Kreinbrink:
I forgot.
Andy Fergurson:
Or, I saw that. I don’t know what I did with it or whatever. Just try and check those things off so that you don’t have to do it twice.
Nate Kreinbrink:
All good stuff. And I just want to mention too, you got any questions on any of this, give him them a call. He’d be happy to sit down with you before they get too busy. Did want to mention before we run out of time that every Friday, NelsonCorp Wealth Management is wearing jeans for charity. Money raised in the month of November will be donated to the Caring Closet, which is located at the First Presbyterian Church in Davenport. Andy, appreciate you joining me today. Andy Ferguson, NelsonCorp Tax Solutions, Nate Kreinbrink, NelsonCorp Wealth Management, bringing you this week’s Financial Focus. Wishing everybody a very happy Thanksgiving.
Andy Fergurson:
Happy Thanksgiving.
Nate Kreinbrink:
Talk to you guys next 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.