Arista Wealth Podcast
Arista Wealth Podcast
Tax Strategies W/ Stephen Nance
Stephen Nance is a partner and CPA with Drilldown Solutions. Before working at Drilldown Solutions Stephen was an auditor with the Utah State Tax Commission. He helps clients save thousands of dollars in penalties and assessments and he is excited to share some of his knowledge with us.
Stick around to the end to learn how a new president can affect your taxes and some strategies you can use to save money on those taxes.
Stephen Nance
Email: snance@drilldownsolutions.com
Website: https://www.drilldownsolution.com/
Arista Wealth Management
8876 Spanish Ridge Ave.
Suite 202
Las Vegas, NV 89148
Phone: (877) 309-9970
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Website: https://aristawealth.com/
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Hello, and welcome to the Arista wealth podcast, where we focus on your finances, wellness, and lifestyle. So you can focus on living. Your dreams will help you navigate through important topics so that you can elevate your life and financial health. Let's get started with your host. Paul Moffitt,
Speaker 2:Welcome to risk to wealth podcast. We're excited this week to have, as our guest, Steven Nance CPA, extraordinary. Stephen is a partner drill down solutions where they focus on physicians, dentists and other wonderful physicians that are in the medical practice. He has been with drill-down solutions for six years before that, and don't hold this against him, but he was an auditor, an auditor. When they come, they're not your friend folks. When they show up, they're still not your friend. And when they leave, they're not your friend with the state of the Utah tax commission. He helps clients save thousands and thousands of dollars in penalties and assessments. He's the go-to guy. If they're trying to say scary things to you, but Steven and chilies and his wife have three beautiful high-performing high energetic children, and we're excited to have Stephen Nantes on our podcast. Welcome Stephen Nance. Thank you, Paul. Great to have you and Steve, where did you go and get smarter? We like to tell people, ask them that question. Where'd you go to get smarter besides reading the back of the Wheaties box? I did my bachelor's at Utah state university and then did a master of the Weaver state university also in Utah. Wow. So you spent a lot of years in the books. Yep. That's great. Well, Steve, I know that things are really, really hectic for, uh, your industry right now, a bunch of deadlines. Once January starts, you guys get on that timeline treadmill, and the speed just gets amped up every week as we get closer. So I appreciate you taking some time, but a question that we have for our listeners, Steve is now that 2020 is over what can they do to still impact their 2020 taxes? Yeah, that's a good question. And the short answer is yes, there are some things that they can do. You are going to be somewhat limited now that the year is over, but there are a few things you can do. First of all, you can contribute to an IRA. That's one that you have until April 15th, and that can count toward the 20, 20 tax year. You can do 6,000 for yourself, another 6,000. If you have a spouse, the 12,000 total, if you are 50 or older, you can do another thousand each so up to 14,000 that you can contribute to an IRA and have that be deductible. Also there's the Roth option, which you can also do and have that count for 2020. Now with a Roth, you don't get a tax deduction, but you do get the savings of having tax free growth
Speaker 3:On that. It's most people do better overall with the raw, but it can depend on your overall situation. So the IRA is one thing. Another thing you can do is an HSA health savings account. You can do this. If you have a high deductible health insurance plan, meaning for an individual, the annual deductible is 1400 or more, 2,800 or more for a family. You can contribute up to 3005 50 for an individual or 7,100 for a family. You can do this up until April 15th. If you're 55 or older, you also get another thousand on that. So you can do up to 8,100 for an HSA. If you own a business and you have an employer sponsored plan. So a 401k ACEP defined benefit plan, which I know you Excel at, you have until the due date of the business tax return to contribute to that, which is usually March 15th, which can be extended to September 15th, to have some flexibility there. Also with the coronavirus relief, if you have capital gains last year, 2020, then you have until March 31st to contribute to an opportunity fund and defer those capital gains. So those are your options basically for what you can do now that the year is over. Typically, I'd say it's best to meet with your CPA, whoever that is regularly throughout the year, and do some tax money, making these decisions ahead of time. So you know what you're doing, know what you're looking at and look at other options.
Speaker 2:I love it. I love it, Steve. And also let's remind them to fill out that form 86 Oh six so they can track the cost basis on those IRAs. Because I got to tell you, last week we met with some new prospective clients and I asked a few of them, what's your cost basis on the IRA? They said, I didn't know. There was one. And it's like, yeah, who wants to have an IRA that you just continue to pay taxes on until it's exhausted, but you know, getting that cost basis on that and the way you do that is through that 86 Oh six. Yeah. I could call no, that's great. And HSA is absolutely at the deductability of only 1400 bucks. I mean, that's everybody's health savings accounts. Yeah. You know, the cash balance annual retirement plan report just came out for listeners that cash balance plans have increased 15% while 401k's have only increased 1% over the last multiple years. And that 92% of cash balance plans are in place with fewer than a hundred employees. Steve, you, you mentioned a really important topic here. The importance of adding these additional tax savings, you know, companies with cash balance plans increase their contributions to employ a retirement savings 50% or more. Yeah. We're seeing them as sort of a, you know, still very underutilized under accepted vehicle. Are these a cash balance to find benefit plans? You know, they work when the two States that have the highest state income taxes, California and New York have the most cash balance blends, you know, and last I read, there's a lot of California head into Utah. Are they going to ruin your tax system up there? And they're going to ruin your roads and your freeways, are they bringing their politics or just their wallet?
Speaker 3:We hope just as our wallet, but we'll see, we'll see what happens there.
Speaker 2:Yeah. California and New York count for 24% of all cash balance plans. Wow. You know, we also saw January of this year, Arizona just raised their state income tax. You know, listeners need to be on the alert that government is trying to find ways to get more money. So, but no, that's great. Those are some great suggestions, Steve. Thank you. So, so much another question for you is I'm sure some listeners who have some family members or some neighbors or from some friends or associates, but let's talk about this big word, the unemployment. Yeah. And what's happened with, since COVID with those that are on unemployment and stimulus.
Speaker 3:Yeah. So most of you know that for a good chunk of the year, last year, not only were more people on unemployment, but the federal government was kicking in an extra 600 bucks a week for these people on unemployment. What people may or may not know is unemployment benefits are taxable, just like wages, which unemployment benefits are, is just a wage replacement. So it makes sense that they wouldn't be taxable. You typically do have withholdings at a flat 10% or so, just like a W2 we'll have some withholdings on it. But for a lot of these people that were making an additional a hundred bucks from the government, from the federal government on top of their unemployment, some of them were making more than they were with their job before they went. Right. Which is awesome for them. But that could create some surprises for their taxes. They could end up owing more taxes than they've owed before or owing when they're used to getting a refund or less of a refund. So again, it comes back to meet with your CPA regularly and reconcile all this. So you can project and know what to expect ahead of time. And it's going to be different for everyone.
Speaker 2:You're absolutely right. It also means that there's a tax bill coming. So except the cash deposit, the cash and spend wisely because the tax man's now coming. Yep. A lot of people they think, Oh, it's from the government, it's like a refund and there's going to go spend it all when in fact, no. Yeah. With this new administration, the Democrats are happy and the Republicans are sad. Talk to us about this new presidential administration and what potentially is coming down the pike with the Congress and the president,
Speaker 3:As far as taxes go, president Biden has made proposals on several tax increases. First of all, the, the top tier of marginal tax rate currently at 37%, he's proposing increasing that to 39.6, which is what it was before the Trump tax cuts a few years ago, also social security, which is currently capped at one 42,800 is the cap for 2021. So if you have earnings above that, you're not hit with social security, but he is proposing that, that kicks back in. If your earnings are over 400,000 with no limits. So if you have a W2 with a million dollars or you're getting social security taxes on most of that income,
Speaker 2:Stop the madness, Stephen, stop the madness. Yeah.
Speaker 3:Uh, and save taxes.
Speaker 2:Yeah. If you're driving, pull over. So walk us through that one more time, Steven, because I don't think people understand listeners, please pull over getting a safe place before Stephen repeats what he just said. Yeah.
Speaker 3:So the proposal is that your social security earnings, so W2 wages or self-employment income from a partnership or schedule C sole proprietorship, wouldn't be subject to social security taxes for incomes in excess of 400,000. Currently they stop at about one 42. So they would be subject to self-employment taxes for anything above 400,000 with no limit. So that could be fairly significant for those high income, social security or wage earners. Ouch. Yeah. That, that could be a big ouch. Another one for self-employed business owners, the qualified business income deduction, which was also part of the Trump tax. That's a few years ago where you get a 20% of your business income is basically excluded from income from taxable income. That would be phased out if your income is above 400,000. So that could be significant as well. Again, with the example of a million dollars. And you're used to getting$200,000 deduction on that, that's going away and you're subject to income taxes on the full million, plus your tax rates going up to 39.6. So that would be significant as well. Now the other one that a lot of people are concerned about is long-term capital gains. The current top tax rate on long-term capital gains is 20%. Biden's proposing an increase to the full 39.6% marginal income tax rate on long-term capital gains. If your income is above a million, so that may or may not affect everyone. And he is also proposing to set this a lot of tax benefits for the poor expansion of the earned income credit and the child independent care credit. Now, before you panic too much, which would be my main message don't pack too much because anything that he wants to get done has got to go through Congress. And currently Congress, he's more focused on spending money than bringing it in. Currently, I don't know of any significant proposals yet by Congress. And remember also the Republicans still control 50% of the sentence. So there is some balance there and there's going to have to be some compromises. If anyone in Congress wants to keep their jobs, they are going to have to weigh that carefully, especially in these heightened tested States and districts like that, but know that nothing is changing yet. The biggest thing again, is meet with your CPA regularly so that your CPA can update you or any changes do come into play. Currently, nothing is happening yet. And I doubt that Biden's going to get everything he wants out of this. Uh, but I will say that the government is going to have to come up with some money. Somehow they've been trillions of dollars on the Corona virus, pandemics stimulating the economy. And they're talking about trillions more and the debt to GDP ratio is concerning. They are going to have to come up with money. We just don't entirely know what that's going to look like yet. So meet with your CPA regularly. So you can be updated on any changes that do take place.
Speaker 2:Well, Steve, you think it's now safe for our listeners to put their car from park back into drive, you know,
Speaker 3:Um, just some silver lining with what you do with the cash balance plans and things like that. If tax rates are going up and qualified business deduction is phasing out, you're going to see even more of a benefit from investing in things like that. Yeah. So no, there there's hope. And through proper planning, all this can be navigated
Speaker 2:Paul, uh, Steve, I mean, once again, it's just great to have your insight. You know, in regards to IRAs, HSA is putting money aside through five 29 accounts and through these current tax strategies are out there and then with this current administration, so, so important to be proactive. And as you said, three or four times talking regularly is the word that was used with the CPA because it's not what you make anymore. It's what you keep. And then Steve, uh, where can our listeners learn more about you and drill down solutions?
Speaker 3:So the website is drill down solution.com. That's drill down solution. singular.com. Phone number is(801) 225-8474. You're also welcome to email me with any questions you have at S as in Steven S Nancy, N a N C E at drill-down solution.com.
Speaker 2:Outstanding. Outstanding. Thank you for listening listeners. Please remember to go to crystal wealth.com to get tools, tips, and resources to help you with your financial life and to optimize your life. Don't forget to subscribe, rate and review. So you don't miss out on learning from our excellent guests like Stephen today. And we'll see you in our next episode. This episode of the Arista wealth
Speaker 1:Podcast has ended, but be sure to subscribe for more advice on your finances, wellness, and lifestyle. So you can focus on living your dreams. Don't forget to rate and review so we can continue to bring you the best content. See you on the next episode.[inaudible].
