Contributing to Your 401k Plan

it's just that Cossfinancial dot com. That's k l Aasfinancial dot com. Telph number six oh eight four four two five six three seven.

twenty five dollars gift card to Texas Roadhouse. Tell you a little bit more later on the program on how you can win that little tip though, listen closer to the program not only get a lot of great information, but oftentimes just about every time both the question and answer come up each week during the program, and before we start talking about midyear taxes and as we kind of work our way down the stretch, let's actually look back at last week's program, get the Closs Quiz question

week question and answer there as well.

significant solutions or i should say adjustments. Therefore, since we're nearing the middle of twenty twenty five, which is kind of crazy to say, we thought we should slow down and dedicate a show to some mid year tax strategies and questions you should be asking yourself. So here are some of those questions and strategies. Starting with questions, are

you withholding appropriately from your income sources? Have you had any significant life changes or do you anticipate any significant life changes before year end that could impact the amount you should be withholding from your working income. Do you owever get a refund from last year from the Feds or the state? Have you made any adjustments this year to your account for the prior years under or over withholding?

So these are just some high level questions for you to be thinking about as it relates to kind of mid year pauses. We often find that individuals or couples are so excited to be done filing their income taxes in March or April that they fail to make any meaningful adjustments the following year to avoid any under or

over withholding. So now is a great time to pause and ask yourself if you made any of these adjustments to your withholdings this year to compensate for last year's problems, and if not, you should even if your taxes were perfect last year. So some people go, yeah, yeah, I was fine. I only owed you five hundred dollars or I got one thousand dollars back, so I'm fine, Okay,

we'll stick with me. Even if your taxes were perfect last year, you should still ask yourself if there's any significant changes or differences about this year compared to last year. Here's some exam simples of significant changes that you might want to consider. Number one, did you receive a significant pay raise or decline? Are you expecting or have you received a large bonus this year? Are you for the first time vesting some non qualified stock options or restricted

stock units? Were there any changes in the ways that you're compensated, like moving from w two to ten ninety nine compensation. Are you starting to generate some income from an online business or like a side hustle. Now, well, this is not certainly not a comprehensive list of these significant changes in income from one year to the next.

Hopefully it gets your mind thinking critically about this. If anything I've mentioned makes you think there could be something you need to review, then we would highly suggest working with a good accountant or CPA who can help you decipher what, if anything, needs to be adjusted to avoid

any major tax filing surprises in the new year. The good news is that by asking these questions now, you have ample time before the end of the year to make adjustments that hopefully will avoid any major swings in your personal cash flow well.

sign up for the weekly Market Pulse newsletter. It's a great weekly email comes in your inbox, got a link to the most recent programs podcast. It also has a little snapshot of what's been going on in the market. So again a great, great service, great thing for you to head on over to Clossfinancial dot com. That's Coss k l aa S Financial dot com And they're teleph number six so eight four four two five six three seven. No charge for that at first get to know you

appointment at cows Financial, it will be complimentary to you. Again, they're number six oh eight four four to two five six three seven. So Eric, you know what about estimated tax pay payments? I hear, you know, people that are you know, own the small businesses are talking about quarterly estimates and things like that. But people other never, you know, other people have never maybe paid a quarterly estimate in their life.

And this is typically on earnings that are not subject to regular tax what's holding, So think of it this way. After the end of the calendar year, in most circumstances, you're going to owe some federal and state income taxes based upon all of the various sources of income that you've received throughout the year. So let's look at some examples of these income sources. You've probably seen these on your tax return, so cash tips, social Security income, pension income, rental,

property lease payments that you receive, gambling winnings. I know everybody's for sure reporting all of that interest income, dividend income, capital gains from selling a stock or other appreciated asset, W two, wages from your employer, and then if you're

a contractor, ten ninety nine payments. Now there are many more to add to the list, but these are some of the more common ones that we see, and pretty much all of these sources of income, they have various required federal and or state income tax consequences that you'll need to be accounting for at the end of the year when you go to file your income taxes for the prior year, And the question becomes, then, do all of these income sources, including all of those that I

mentioned above and many others, do they automatically pay the federal government and the state where I reside before they actually pay me. Simple answer here is no. So if we think about like a W two for example, that's really straightforward. Your employer is withholding federal and usually state income taxes, and are they are sending those into the I R S or the Department of Revenue in advance, right.

But if you have substantial earned income sources or unearned income sources that do not withhold federal and or state income taxes prior to you actually receiving the dollars, you'll probably need to make quarterly estimated tax payments. And you need to do this to avoid any penalties, since it's generally not allowable by states or the federal government to just wait till the end of the year and pay all of your tax that is due. The I R S wants to wants you to pay taxes as you

earn the income. They are they are not very patient when it comes to actually getting the tax payments. So how does this work in practice? What you what you would need to do is the first step is you need to basically estimate what you think your annual income will be for the year, and then based on you know, various deductions and things like that, what your actual tax

liability will be. Now, this is where you very likely would need to pull in an accountant to help you out, which is why we often see small business owners and folks who have more income sources outside of just like a W two or or even in ten ninety nine. This is where we see them working with accountants to make sure that they're they're doing all of this correctly

in advance. But when you after you've done that estimation of income and tax liability, if you estimate that you'll owe more than about one thousand dollars in federal or state taxes, you should generally divide that amount into quarterly payments and make these payment amounts by the quarterly due dates, which are April fifteenth, June fifteenth, September fifteenth, and January fifteenth,

and the irs is quite specific about those dates. So if we are if we are a few days late, there can still be some some interest penalties due on those dollars. And I know, Sean, I know, if we have accountants or our CPA is listening, they are probably saying, wow, that is quite an oversimplification of how all of this works. And we hear you. You are you're not wrong about that. But we are here on the radio speaking to the

general public. So this gives everybody a general sense of why they might need to make quarterly estimated tax payments, along with when those those payments might be due, and then we'll trust our friends in the accounting profession to implement it all correctly.

Financial each and every week. And if you miss part of a program, whether it's today's show or you want to listen back to a previous program, Dorfgey, you can always listen at Costsfinancial dot com. That's coss k l a a s Financial dot com. You can listen and subscribe to the podcast right at the website. Of course, you can always give them a call at cost Financially. They love to talk with you six oh eight four

four two five six three seven. That first call, that first conversation that gets to know your appointment not going to cost you a thing. It'll be complimentary to you. At Coss Financial again, they're telephone number six oh eight four four two five six three seven. We're going to continue our conversation with c Jen Eric next as Money in Motion with Coss Financial continues right here on thirteen ten. Wuibi joined this morning by our retirement planning professionals from

Closs Financial CJ. Closs and Eric Schwartz. You can learn more online thewebsite Closs Financial dot com. That's coss k l as Financial dot com and they're telephone number six so eight four four two five six three seven. Talking this week as we're kind of getting close to midyear, getting you ready for tax season and getting you getting you prepared and things to keep in mind, And had a great rundown in that last segment about estimated tax payments.

the new year for the previous tax year. Some of these income sources will send you a tax document, and some of these income sources will not. Examples of these income sources and tax documents might include a W two ten ninety nine's whether it be ten ninety nine R or div or I, int self employment income, rental income, alimony received, gambling winnings, jury duty pay, etc. Et.

Some of those expenses or contributions you might want to consider documenting and keeping good records of include mileage logs for business miles or charitable travel, donation items or donated item receipts and logs you don't think like goodwill or Saint Vinnie's home office expenses, State and local tax This is like property tax bills, mortgage interest expenses that typically show up on a Form ten ninety eight, charitable contributions,

casualty and theft losses, education expenses, retirement account contributions, childcare expenses. Think of a purchase and sale of like a rental property, and then health savings account contributions. So again, while these are not comprehensive lists of income sources or deductible expenses or contributions, this should at least give get you started on the types of items you may need to record in a file for when you eventually go to file your income taxes in the new year. Now, I don't

know about you. But when I hear lists like this, I start to clearly understand why people often hire accountants to file their income taxes. Again, maybe it's just me, but by the way, I'm actually formally trained in tax not that I am an enrolled agent or CPA. I don't file income taxes for clients. However, we do have somebody on staff who does that, by the way, for our team, for our clients, but even for me. So again, formally trained in tax we have a person on our

team who does this. I mean, I'm reviewing literally hundreds of tax returns a year, so I'm quite competent on how the irs or how the tax code works. And yet do you think I file my own income taxes? Nope, nope. So I'm not saying everyone should have an account and file their taxes, but wow, there is a lot to know and keep track of to make sure you're filing your taxes accurately and with the greatest amount of consideration for possible, you know, reductions and tax liability for deductible

expenses or contributions. And listen, it's not just it's not just that there's a lot to this, because again I generally know the things that I need to keep track of. It's more the Okay, it's enough work for me throughout the year just to gather this information. Right, if I install a new furnace that has certain efficiencies for I'll keep a copy of the receipt so I know these

kind of hacks and things I should do. But then to take it all curated up to a tax return and be aware of any minor changes in both the documentation and the filing, and then the you know, the the actual submission of that return, I just don't want to do it. So I'm not saying you need to be like me, but what I am saying is do develop some good habits around keeping track of these documents, whether you're going to file it on your own or

have somebody do it for you. That the harsh reality is even in the best accountant can't file taxes for somebody who doesn't know what they bought or contributed or sold or what their income was for the year. So make sure you try to keep good records.

four two five six three seven. The website coss Financial dot com. That's coss k l aas financial dot com. More of money in motion with Coss Financial, it comes your way next to here on thirteen ten WIBI.

oh eight four four two five six three seven. Talk in taxes this morning, and a lot of great points about about certain areas that you may not always think about as far as saving and retaining tax documents.

maybe four fifty seven plan. Max out these contributions first, and then consider additional retirement account contributions thereafter once you've

hit that max. But just as a quick reminder, the maximum that you can generally contribute as an individual employee to a four oh one K or a four oh three B or even you know another similar employer sponsored retirement plan for twenty twenty five, that limit is twenty three thousand, five hundred if you are under the age of fifty, or you can contribute thirty one thousand if you are over the age of fifty, or you can contribute thirty four thousand, seven hundred and fifty dollars if

you are specifically age sixty, sixty one, sixty two, or sixty three. So, given that we're talking about twenty twenty five mid year tax hacks and reminders here, we highly suggest that you evaluate the amount you are currently contributing to your retirement accounts where you work, and then also consider increasing these contributions to number one, potentially reduce your tax liability for the year and number two saved more for the future.

whether or not basically the deductible is high enough. Now there's other tests that they do to make sure it qualifies as an HSA plan, but it's basically our higher deductible. So contribution to these plans. Again, just think I've got this medical insurance plan with a high deductible and basically because that deductible is high enough, the IRS says you qualify for this HSA account kind of thing. Often your employer will will say, oh, that's through fidelity or whoever,

and you can just do it through payroll deduction. But other times you have to go set this up at your local bank and contributions again to these plans are tax deductible and they grow tax free and can be used tax free for qualified medical expenses. Furthermore, you aren't typically required to use all of the money within these accounts by the end of the calendar year, so any unused amounts in the account can roll over to future

years and help cover medical related expenses. Now, as a reminder, the maximum you can generally contribute to an HSA again health savings account in twenty twenty five is four three hundred dollars for an individual or eight five hundred and fifty dollars for a family. In addition to this, if you are over age fifty five, you can contribute an extra one thousand dollars as a catchup contribution on top

of the maximums I just mentioned. Therefore, if you have an HSA eligible medical plan, you should consider if you have an HSA account open for contributions, along with considering trying to max out these contributions in order to reduce your taxable income for the year while having a pot of money available to cover current and or future medical related expenses. So listen, everybody, as it relates to these accounts. These are actually one of the most tax preferred account

structures in the entire IRS Code. Let me repeat that HSA accounts are one of the most tax preferred account structures, if not the most, that you can establish fund and use in the entire IRS Code. And here's why. I get a deduction for federal income tax and in many

circumstances state income tax. I get a deduction when the money goes in, I get tax free growth while it stays in there, whether it be you know, just earning a little bit of interest or a lot of interest, and then when I pull the money out, it's tax free. I don't pay tax on that. And now the money has to come out for medical related expenses. I can't just generally use it for anything. There are some rules once you get over sixty five that you can pull

it out like a retirement account. But that's not the point of our show today. But here's the idea that's that's like unbelievable in the IRS Code. And the reason why is typically in it like an IRA, When I put money into an IRA pre tax and then it grows tax deferred. When I get to retirement and pull the money out.

an HSA account. So hopefully everybody gets the idea. HSA's wonderful little you know segment to the of the tax Code highly suggests that you use suggest or that you set up one of those accounts and make sure you're contributing assuming you have an HSA qualifying plan.

You'll then have thirty minutes from the and today's program call the Class Financial office right here in Madison at six oh eight four four two five six three seven. If you are the first call with correct answer, you'll win this week's prize, which is a twenty five dollars gift card to Texas Roadhouse. This week's Class Quiz question the week is this, what is the maximum a forty five year old employee can contribute to their four oh one K plan in twenty twenty five, not including any

employer contributions. Telephone number six oh eight four four two five, six three seven first call with crieckt Answer one the twenty five dollars gift card to Texas Roadhouse and don't forget as well. That's Class Financial's office right here in Madison. Six oh eight four four two five six three seven CJ.

Financial News comes your way next right here. On thirteen ten Wiba