Transcription:

Episode 2 – Conversation with Jeff Rieder of Wauch, Maloney & Co.

00:21:17

The money experience where experts in finance and life experience professionals chat amongst friends, get comfortable and listen in while we uncomplicate all things money, how to save it, how to invest it, and even how to spend it. Here are your hosts.

Kevin McGarry: Welcome to the Money Experience Podcast. This is our second episode. I’m your host, Kevin McGarry. We are really excited today. We have Jeff Rider, certified public and accountant and managing partner at Welch, Maloney and Company. I said that correct, right?

Jeff Rider: You did Kevin. Nice work.

Kevin McGarry: Awesome. Thank you. First of all, you know, just a little introduction to Jeff here. Jeff helps Valley Financial out with our business planning and for some of our clients. The one thing at Valley what we find really important with your company and with you is you exude trust, experience and you work with a lot of multi-generational families. And when we see that and what for some of our listeners, what is that they’re working with their children’s children and sometimes their children’s children, which is really impressive. You’re doing something right when you’re working with families over decades. So, what kudos to you.

Jeff Rider: Appreciate it. 

Kevin McGarry: Today, why do we invite Jeff today? Well, it’s January. We’re in the mud of it, in the heat of tax season and it gets very complicated. But before we jump into that, Jeff, could you tell us a little about your firm?

Jeff Rider: Sure. Like you said, we’re Welch and Maloney. We are based in Horsham, Pennsylvania. We’ve been there for probably close to 35 years. This is my 33rd tax season. I’m a little embarrassed to say, all at the same firm. So, I’ve grown up there. I know our clients. I know what we do and that is we work with both businesses and individuals. Tax preparation, financial planning services, not the same as you, but kind of helping them just set their life plan, if you will as it relates to taxes. We do all the standard accounting things like financial statements. We do some business valuation work, we do some litigation work. So, we touch on a lot of things. We’re a relatively small firm and then we’re about 30 people. We’re not one of these giant firms, but it’s a great size, we think to be able to service our clients and give them the service that a larger firm can. But with a consistency of people. I think that sometimes you don’t see it in bigger firms. It definitely has a lot of turnover.

Kevin McGarry: It definitely has a family feel to it.

Jeff Rider: Yeah, definitely. We try to have that family feel and like you said, we work with a lot of families. And it’s really rewarding to be able to see things move from one generation to the next. I mean, sure it’s fun to work with an individual as well and see them build their business, but to be able to see it go from generation to generation. I mean, we have one client that I think is in their fifth generation now. I can’t say we’ve been through with all of them but it’s still really cool to see.

Kevin McGarry: That’s awesome. So, let’s dive into it right now. It is very stressful for a lot of individuals out there because it’s tax season, with your experience. What have you seen work the best getting ready for tax season?

Jeff Rider: Sure. So, I’ve seen it all over the board and it really has to be what works for the individual. We have people that take every document they have that’s says important tax information. They throw it in an envelope and they send it to us. Never opening it. I wouldn’t suggest that. We also have people that make detailed spreadsheets of everything. I would say somewhere in the middle is where most people fall. And for me, I think the best way to do it is just to use your past as a guide and which is what we do. When we get a new client we ask for the last year’s tax return and we take a look at what’s on there and I would say from an individual’s trying to gather their information, I think that’s the best way to proceed. Get out your return from last year, match it up. Most people’s lives don’t change that dramatically from year to year. Kind of take a look at what you had last year, think about what might have changed this year. And I’d say that’s your starting point, at least for gathering information. As it is right now, all your 1099s and W2s and all those things are going to start rolling in over the next couple of weeks to a month I would assume. The IRS is set for filing next Monday, January 23rd is the day they’re opening up to be able to accept tax returns. So, it’s on us. It’s funny for us it’s still a little quiet right now. Things will start getting crazy soon. But it’s the perfect time to start organizing things.

Kevin McGarry: Awesome, man. When you’re organizing, what’s the checklist? What items? I mean, I know you mentioned 1090s. Anything else? 

Jeff Rider: I grew up it in kind of the way a tax return goes. So, it starts out with income. Think of your income items. You’re going to get a W2 from your job. Did you work somewhere different this year? Should you have two W2s? You’ll get your 1099s for interest and dividends from your broker statements and whatnot. Are you retired? Should you be getting a pension distribution? It’s a 1099R, it’s another form like that. So, all those kind of forms, so security statements you get, and I got to tell you, through the years, we’ve had a lot of people not provide their social security statements for one reason or another. I think because when they come in the mail, I don’t know if they look so important. They’re a little bit different looking form than others. So, a lot of times it seems like we’re missing those and there are things you can get from the Social Security department if you happen to be missing it. I’d say one of the things to focus in on the income side is, if you have some kind of side hustle or somewhere where you’re making a little bit of extra money, you’re driving Uber, you’re doing this or that, keep in mind that there are expenses against that you can deduct. So, you’re going to get information that’s likely going to tell you your income, but you’re the only person that can tell us your expenses. And think of what you spend, I mean, Uber’s pretty easy. You drove your car, you got gas, you got all kinds of things like that. But whatever you’re doing, kind of think about what relates to it. And that is likely a legitimate expense against that income. So, I look at income, I look at expenses. 

Now expenses are something that, it used to be that just about everybody itemized, they’ve been increasing the standard deduction a lot over the last couple of years. And so more and more people are taking the standard deduction. So, maybe it’s not necessary to dig up all that information. But if you do itemize, you’re going to need your real estate taxes, you’re going to need your mortgage interest, you’re going to need charitable contributions. Those are the biggies that you deduct. There’s also medical expenses. Medical expenses are limited based upon your income. So, unless you had something really dramatic happen, you’re not likely to get a medical expense. I mean, maybe, if you’re paying for your own health insurance, you have a significant medical event, it makes sense. If you’re just adding up your prescriptions for the year, more likely than not, it’s not going to matter. A change that did happen this year with charitable contributions, so the last couple of years they allowed this above the line deduction we call it. So, even if you didn’t itemize your deductions, you got a little bit of a deduction for your charitables. They took that away this year. So, your charitables are really only important if you itemize. I think once you get past your deductions, there’s credits. A) you get child tax credits, so obviously you want to make sure you have a lot of the right information about your kids. Child independent care credits. Did you pay for somebody to watch your kids while you worked? There’s credits available for that. So, make sure you have that kind of information together.

I guess lastly most of your payments are probably going to be withholdings on the different forms that we’ve talked about already, but if you did make any estimated tax payments, keep good records of those. They’re always important and they’re always something that we struggle to make sure is right because we don’t really have an avenue to confirm that with the IRS. That it’s the right number. So, we’re really relying on our clients to give us that information. And while I’m thinking about it kind of something in your realm, I guess one of the things we see with information that we’re missing often is when you’re selling, gains on sale of socks or whatnot, the information has to be provided on the 1099 in terms of your basis and whatnot. A lot of times there’s some things that just aren’t on that statement. We always have to go fishing for those. So, kind of take a look at your statement that you get and see if there’s anything in there where some information isn’t there. Sometimes your broker can help you with that. Sometimes you just have to go back because it’s a stock you felt for a hundred years. It’s just one of the things that we see a lot in terms of needing to get information. 

Kevin McGarry: Awesome. Thank you. Yeah, no, I mean the checklist is out there. I mean, I know when we’re planning and we’re doing the planning here, the one thing we want to do is make the plan, the financial plan a better experience for a client. It’s always harder when someone comes in and says, hey listen, I’m retiring next week, can I retire? But when it comes to tax planning and for the listeners out there, what’s the best way to make this a better experience? Is it the process? Is it the planning? Is the communication with the CPA? What is it?

Jeff Rider: Yeah, I think it’s the communication.

Kevin McGarry: How often would you communicate with the CPA?

Jeff Rider: And I guess it all depends upon what you have going on. We talked a little bit about if you have a business on the side or maybe even your primary business. I think in those cases we have a lot more communications with people because there’s more questions that come up. If you’re somebody who your income’s coming in through a W2, a 1099, your social security or pension, whatnot, probably not necessary to have a lot of conversations. But I do think it probably makes sense that sometime of the year, maybe in the fall to reach out. Mostly because, well I don’t think there’s anything we can do to make the experience fun. It is taxes and the only fun thing that happens is when you get an unexpected refund or you’re balance you owe was a lot less than you thought it was going to be. I mean, that’s the only fun.

Kevin McGarry: But if you are over-communicating or you do have a calendar with your CPA, you’re not blindsided.

Jeff Rider: I would agree. 

Kevin McGarry: And that’s more enjoyable I think.

Jeff Rider: No, I would agree. And that’s a little bit about why I was suggesting maybe in the fall to reach out because at that point in time you kind of have a sense of what your year is going to look like. And so what we would do in that case, just do a quick projection, income, withholdings. You’re looking at owning some money in April, you’re not exactly what you said. Nobody likes surprises. And we do a lot to try to make sure people aren’t surprised in April. 

Kevin McGarry: I think the big thing here is, really just trying for the listeners just to partner with somebody like Jeff, professional or a team. Make sure you’re not giving any gifts to the IRS because that’s not fun. Its fun when you keep the money and you get to do things with your money that you would like to do and gain from that. But last thing, Jeff, is there any IRS codes or changes in the tax laws for 2023 that our listeners should be ready for?

Jeff Rider: Well, there are some things that are happening. There’s no major changes anywhere. I guess first I would say that the tax season we’re going to be filing for now 2022. Couple of things that people might not be aware of that probably will have a big impact on them this year. And that’s that some of the things we talked about earlier in terms of child credits and child independent care credits have been significantly reduced. They really bumped up those numbers during the COVID years, if you will. And so the dollar amounts were pretty significant. I mean, your childcare credits used to be able to get $3600 for your younger kids, they’re down to $2000 for your child credit cut. Your dependent care credits in 2021 with two children and spending what everybody spends on childcare, you could get an $8,000 credit in, 2022 depending upon your income limit, the max you can get is $2010, $6000 difference. So, if you have a couple of kids, I mean, just the change in those two numbers, there could be almost $10,000 less in credits than what you had last year previously. And these are credits. They’re not just deduction. So, a deduction reduces your income and then you calculate your tax. A credit reduces your tax dollar from dollar. And so they have a really big impact. And there’s something that I think some people will be surprised with this year. It’s certainly helped a lot of people over the last two years that those numbers were out there in terms of children. 

Otherwise, I don’t think there’s anything real significant. Just like every other year, your standard deductions a little bit higher, your tax brackets have spread a little bit. So, you’re getting a little bit better bang for your buck is, if you will, I mean, they haven’t changed any rates, they haven’t changed capital gain rates, income rates. So, not a big change for 2022. 2023, so there’s a lot of changes that are happening this year. Most of them have to relate to various credits and whatnot. Everybody knows about the electric vehicles, clean vehicle credits. They’ve changed that program a lot. They’re trying to get people to buy electric vehicles. But at the same time they’re also placing some limitations on it. So, if it’s something that you want to do, really look into it. It’s a confusing area. They’ve put some income limitations on it. They’ve put some price limitations on the cars. They put a lot of things on there that while they’re trying to encourage it to some extent, they’re making a little bit more difficult. 

Kevin McGarry: You don’t hear that. 

Jeff rider: You don’t, everybody thinks, okay, everybody want, you’re going to go out and you’re going to get a card and you’re get a $7,500 credit and those credits are still out there and available, but they’ve changed the requirements for it enough that don’t automatically think you’re going to get it just because you bought an electric car. So, something to think about. They’ve also changed some of the credits for improvements to your home. Used to be there was a lifetime limit of $500 in terms of this credit. They’ve changed it for 2023 and I think for like the next five or 10 years towards $1,200 a year for the same kind of repairs, windows, doors. Some really good credits that are available for solar and geothermal. You can get a credit of 30% of what you spend with no limits. And so there’s some really good incentives to do those kind of programs. So, they’re probably the biggest thing on the tax side. Recently at the very end, I guess it was the last minute in 2022, they passed this SECURE act to which you’ve probably seen on the news. And frankly I don’t think I ever paid attention to what SECURE stood for, to tell you the truth. SECURE actually stands for Setting Every Community Up for Retirement, enhancement, believe it or not. 

Kevin McGarry: Right. Thank you for sharing it. 

Jeff rider: It was great that they were able to put all those words together into this. But so that’s out there and it really does do a lot of things for people to be able to save for retirement. Starting in 2023, not necessarily a savings, but they’re increasing the age for require minimum distributions going up to 73. So, if you don’t need to take your distributions, you have one more year to hold off. One more year to let it grow. Certainly a good thing there. They’re reducing some of the penalties if you fail to take your requirement on distributions. I would tell you that if you do fail to take your distributions, there are some ways to be able to work yourself out of those penalties. But if you don’t fall into any of those categories, they have reduced them. This SECURE act has changed so that it’s really adding things every year. 2023 has a couple of things we talked about, 2024, they’re going to give you the ability to take some emergency distributions out of your account. They have a pretty interesting program where they’re going to allow you to allow to use balances in 529 plans and roll them into Roth IRAs. You have to meet the specific qualifications to be able to do it. But you’re allowed to do it up to $35,000. And it’s a great way that if you have a plan for your kids, your grandkids that they didn’t use and the money sitting there, it’s a great way to be able to put it into something that’s going to really benefit them long term. And then I think maybe one of the bigger changes in terms of retirement start in 2025 where they’re doing certain employers, larger employers and larger I think is only 10. I mean, it’s not a ton, it’s not like the a hundred or thousand employers. They need to auto enroll their employees in their 401K plans at a minimum of 3%. Right now, an employee can still opt out, but there’s all kinds of studies that people don’t generally get in and I think that the kind of having that auto enrollment, I think more people will stay in than opt out. 

Kevin McGarry: I mean there’s many things out there that say one third of Americans don’t have a penny safe for retirement.

Jeff Rider: Right, right. Which is really scary. Scary especially with everything we hear about social security every year and what’s going to happen. I tend to think it’s going to be there, but you just never know. You just never know. And they’re giving some ability to do increased catchup amounts. So, like you said, where people don’t have that much safe retirement, for a number of years, there’ve been the ability, if you’re over 50 to put some more money in either your IRA, your 401k. In 2025, they’re having a special catch up, if you will, for if you’re 60 to 63 and an even higher amount. So, as you’re getting closer to retirement, maybe you have more ability to put things away. You’re not raising your kids anymore and you have a little bit more money. So, it gives you the ability to give a little bit more there. So, all of those things, while not necessarily tax things, they really are, I mean, the more money you put into your 401K or IRA or reduces your taxable income, it reduces your taxes. It gives you money for retirement. So, I think that SECURE Act 2.0 does a lot of things good to allow people to get some money set aside for their retirement.

Kevin McGarry: It’s definitely helping create security for retirement. I mean, when we’re doing the financial planning here, cash flow’s king, right? And you can identify where the cash flow’s going and where you can’t invest any extra cash flow and there’s opportunity moving forward with the new changes that people can save more for retirement. So, I mean, just listening to you is how do you make this a better experience tax season? Number one, you communicate early and you plan.

Jeff Rider: I think that says well Kevin, that’s really our mantra through the years, whether it be dealing with businesses or individuals as plan, plan, plan. Know what’s out there, know what’s ahead of you. You just talked about planning in your financial world. You should be planning in your tax world too. It may be sitting here now in January, maybe too late to do some things that had to be done by December 31st. But there’s still a lot of things you can do. I mean, there are retirement plans that you can still fund. You can fund them up until April. I think some of them you can still create now up until April. So, I think there’s still a lot of opportunities and they’re the kind of things where you want to either start working on your taxes soon or dealing with an accountant who you’re working with relatively soon so that you can identify like, hey, you have an opportunity to put some money in a simple plan, something like that. And if you put in 10 grand, you’d save three grand in taxes. It’s a good trade off. You don’t want to get that news on April 14th, it’s not going to do you any good. So, you want to know about it now. This year there is a little bit of added time. The filing date this year is April 18th, just for everybody to know.

Kevin McGarry: Three extra days. 

Jeff rider: The 15th is on a weekend. There’s a holiday called Emancipation Day and Monday the 17th. And so we get till the 18th. It’s probably the worst thing at all for CPAs.

Kevin McGarry: You’re working overtime this year?

Jeff Rider: I am definitely. Usually by the weekend of around the 15th. We’re kind of cutting back a little bit, but we got an extra couple days this year. 

Kevin McGarry: Awesome. Well, I want to thank you for joining us. I also want to thank you for all the help you give to our clientele and to this company. So, thank you for that. For the listeners, Jeff’s information and his company’s information will be on the show notes. I want everyone to be safe and have fun out there and look forward to the next podcast. And everyone have a great day.

Thank you for listening to the Money Experience where we’re helping you create experiences and memories to last a lifetime. To reach out to Kevin or to learn more about how Kevin can help you start saving, please visit valleyfinancial.com. To listen to previous episodes of the Money experience. Go to valley financial.com/podcasts/the money experience.

This material is intended to be educational in nature and not as a recommendation for any particular strategy, approach, product or concept for any particular advisor or client. These materials are not intended for any form of substitute or individualized investment advice. This discussion is general in nature and therefore non intended to recommend or endorse any asset, class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own. Before participating in any investment program or making any investment clients, as well as all other readers are encouraged to consult with their own professional advisors, including investment advisors and tax advisors.