Year-End Tax Tips with Kevin Cross

What's most important to you when it comes to choosing your financial advisor? Someone who's aligned with your biblical values. How about someone who will take the time to explain your options? Certified Kingdom Advisors are professionals who meet high standards in competence and integrity, and have been trained to offer biblical financial advice.

To find a Certified Kingdom Advisor in your area, visit faithfi.com and click Find a CKA. Did you hear about the guy who paid his taxes to the IRS with a smile? It didn't work out, though. It turns out they prefer money. Hi, I'm Rob West.

Well, paying taxes is certainly no laughing matter, and we don't want to miss something that could end up costing us money. Fortunately, Kevin Cross is here today with a list of year-end tax tips you won't want to miss. And then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is Faith in Finance, biblical wisdom for your financial decisions. Well, I can't tell you what a pleasure it is to have my old friend Kevin Cross on the program. Not that you're old, Kevin, but our relationship goes back a ways, doesn't it? A few decades. A few decades. He's a dear brother in Christ.

We've been friends for a long time. He's a certified public accountant and has headed up CPA firms in Florida and now in Georgia. He studied the tax code at length. The rumor is he keeps the tax code on his nightstand.

I'm not sure whether that's true or not. Kevin, great to have you on the program. So good to be here. Kevin, we've got less than 60 days until the end of tax year 2024. So I'd like to try to quickly move through a few tax tips. What do we need to do before time expires? Well, I tell you, I can't believe the year is almost over. Yeah, and we're all looking at things we can do.

First, you want to do the easiest. How much have you withheld? How much have you paid in? Because that's a biggie. Yeah, no question about it. You certainly don't want to give the government a tax-free loan. You also don't want to owe anything. So there's a balancing act there.

Is it too late for that or are we just learning for next year at this point? Well, really what we can do is we can over withhold for the next whatever, six paychecks or two paychecks or the next month. Knowing how much you've paid in is a very good feeling. Because if you're way behind, if you owe 10 grand, 20 grand, all of a sudden you say there's a desperate move I need to make now to not only pay some in, but to see what I can buy or do or donate to kind of lower my tax liability.

Yeah. Well, let's talk about that in terms of lowering that tax liability. Obviously, the first thing that comes to mind is retirement plan contribution.

So in these next 60 days, what should they be thinking about there? This is perfect because say they're behind and they look at their paycheck stub and they haven't contributed to their 401k or they haven't contributed to an IRA. This is a great time to do that and you actually could allocate all of your paycheck. This next month and a half to your 401k, maybe max it out. Now, some have already maxed out.

Some say, oh, look, I already did that. I'm way ahead of you. Well, that's where you could do something maybe creative like a backdoor Roth. That's a kind of a cool thing. All right, let's explain that.

What does that mean? Well, it doesn't exist in the tax code, but it's this cool thing where you put money into an IRA that is not deductible. So you're prohibited from doing it. And so what happens the day after that money gets spit back out as a non-deductible IRA contribution, and it goes right into a Roth IRA. That's a very good, good, good thing for people who are high income.

Okay, excellent. So ask your tax preparer about that a backdoor IRA. Now, speaking of IRAs, if they've maxed out their 401k or 403b, which has to happen by year end because it's salary deferral, that IRA contribution could go all the way up until they file their 2024 return, right? Yeah, traditional IRA can, but the backdoor Roth has to be done this year.

That's the little nuance. Some people go, wait, wait, wait, I thought I had until filing deadline, not for a backdoor Roth. Okay, very good. So backdoor Roth by year end, regular IRA contributions, both traditional and Roth IRA by tax filing day. What about some other deductions that they may not have on their radar?

Okay, so I love this. We always talked about this for the last 40 years. We've been together charitable contributions, even though the standard deduction is higher. And we know with the Tax Cuts and Jobs Act of 2017, which probably will now stay in. Yes, we're going to have a very robust standard deduction, but this might be the year for you to say, hey, I could batch my charitable contributions. I could do two years worth of charitable contributions this year. Lower it next year to take the standard deduction and then do that every two years.

That'd be great. And also non-cash contributions. Non-cash contributions is a hidden gem. I guarantee our listeners probably donate every month to Goodwill Salvation Army. We'll take a picture of it and then we start to document those. It's not as hard as it sounds.

Kevin, you mentioned bunching. Would that best be done through a donor-advised fund or just make those contributions direct? I would love a donor-advised fund because then your charity, your nonprofit is going to get their consistent monthly or weekly gift the following year. So I love donor-advised funds. Excellent. We're talking about tax tips here at Year End. Kevin Cross with me today.

He's the CPA and he's helping us out as you prepare for, not paying any more than you have to, but being ready to file when next April comes or perhaps even before that. More just around the corner. Stay with us.

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With me today, my good friend Kevin Cross. He's a certified public accountant and he's run CPA firms in Florida, now in Georgia, and we're talking about Year End tax tips, the year end coming so quickly and that means another tax year in the books. We want to make sure you're ready as you start preparing for filing for tax year 2024. Kevin, just to summarize, you mentioned in the last segment, make sure you reduce your taxable income. One of the best ways to do that is with retirement plan contributions.

You mentioned two types. You mentioned the 401k. You also mentioned the IRA, traditional and Roth, but also a backdoor IRA. That's for those high income earners who are not eligible for a Roth contribution, but can make a non-deductible contribution to a traditional IRA and then convert it.

Is that something they'll want to talk to their CPA about? Yeah, absolutely. It's a great, great vehicle to kind of get you to a place where, you know, some don't have Roth IRAs because they've always had traditional 401ks and they'd love to because obviously in retirement, we want to be able to take money out of our Roth, not just out of our traditional. Yeah, exactly. You have to do a Roth by year end. Now with those standard Roth and IRA contributions, if you're eligible to do that, you can wait all the way until you file for 2024.

You also hit on the opportunity to be creative in our giving. You said, because is it now 90% of taxpayers take the standard deduction with it being higher? Is that right? It's crazy. Yeah.

Yeah, 90%. So in order to get above that, you may want to think about bunching your charitable contributions if you have the ability to do it. That means putting in maybe two years worth of charitable giving and you mentioned a donor advised fund is a great way to do that. I call it a charitable checking account. Why do you like the donor advised fund? I love it because it's less daunting because most of our listeners say, well, if I give twice as much giving this year, my church or my nonprofits will get nothing next year.

Yeah. Well, no, no, we won't do that. We'll make sure that your giving plan, whatever you predetermined in your heart to do, if it goes into the donor advised fund, that donor checking account, that charitable checking account, the money goes in there and you can divvy it out however you want to. And really, it puts you in a better position. You could be on vacation and you're visiting a new church and you go, wow, I want to, I want to donate here. And you've got this opportunity because you got this donor advised fund. It really makes you a better giver.

I love it. NCF is the place I'd go. There's many, many donor advised fund sponsors out there, but National Christian Foundation is our go-to resource.

Go to ncfgiving.com. You can open a donor advised fund in no time at all. Now, as we talk about charitable giving opportunities, Kevin, here we are with the Dow Jones and the S&P and the NASDAQ sky high, especially on the heels of the election. A lot of people in taxable investment accounts, probably sitting on significant gains that they didn't anticipate when they started the year. How can they be thoughtful about giving that away in a tax-efficient manner? Well, most of us give out of our cash. We get our cash flow. And even though we might have some gains in our stocks or mutual funds, we go, well, I don't know really. Yeah, I think I can give that. This is the perfect time because we probably got a little bump this last month.

We're up for the year. Let's go ahead and give appreciated stock. It's a great idea because say you bought a thousand dollars with the stock. It's worth fifteen hundred. Now you give the fifteen hundred dollars of stock to your donor advised fund. You get a fifteen hundred dollar deduction, not the thousand dollar, which you paid for. So if you compare apples to apples, you only had a thousand dollars in your bank account to give. Now you have fifteen hundred to give and you get the period right off on the fifteen hundred.

Well, it's amazing. Yeah, that's great. What about record keeping on charitable contributions? Well, usually the charitable contributions always go to a place where they're very good about giving you a receipt. Over two hundred fifty dollars. You've got to get a receipt. If you give non cash or you give like stocks or some appreciated stock or even not appreciate, you might say, look, I got the stock.

It's a dog, but I want to get rid of it. You still get that right off on it. And it's wonderful. And the organization will give you a receipt.

I love it. Kevin, we've talked a lot here about qualified charitable distributions for those in a retirement season of life. Am I correct in saying the only way to get money out of an IRA without adding it to your taxable income is through a qualified charitable distribution?

I love them. I wish they would reduce that to our age because we've got money in retirement that we'd love to give. It doesn't end up on your tax return. So you might say, well, what's the difference between me giving through my IRA or my 401k through a qualified, terrible distribution or me just giving it? Well, when that money comes to you, you have to report his income and then you can deduct it on your schedule A.

But if you're not deducting anything on your schedule and you're taking the standard deduction, you've just paid tax on income that you shouldn't have. Yeah. Okay, very good.

All right, Kevin, let's switch gears here. Is there any common missteps people make or anything unique to tax year 2024 credits, opportunities they may not have on their radar that they don't want to miss? Well, I was telling everybody, hey, we don't know how long the capital gains lower capital gains rates are going to be here.

It looks to me I don't have a crystal ball, but it looks to me that's probably going to be preserved into the next few years because they were going to phase out at the end of 2025. So I would say, hey, if you've got some appreciated stuff, get rid of it. You're going to be in a lower tax bracket for capital gains. What I do love also is taking advantage of this code section 121 a that is selling your primary residence and you can forgo $500,000 in profit if you've lived in it two of the last five years. So I love that's the only tax code section you have to memorize 121 a and that every person can take advantage of especially with appreciated market. Well, I mean all of our listeners know code section 121 a so I mean I've educated them appropriately Kevin.

I can't imagine that you would have thought I wouldn't have. All right, let's talk about planning for next year. Kevin, you talk about reviewing your withholding.

Why is that important and what should they be looking for? Okay, so several clients change jobs this year or maybe you have your small business lot of people have small business little consulting, maybe gig workers and maybe there's not enough taxes paid in. And so if you can take a look at what you've paid in you can go. Whoa, I've got only less than two months left. I've only paid this Mount in I think I've made this look at last year's and I paid into the IRS less than I paid last year. I'm going to be in a world of trouble.

Yeah, so that's why we need to look at that. All right, and how important is the quarterly estimated payment? It's like interest you got to do it to avoid the interest and that's what the underpayment penalty is.

It's really just interest on the money that the IRS would have liked to had quarterly. So say you say I'm not giving the IRS money. I'm not going to pay my estimated tax payments. I'm just going to pay on April 15th. Well, that's fine. You can pay the full tax, but they're going to charge you interest so to speak and that's the underpayment penalty. So it's going to cost you more than it would cost you to put it on a credit card. Even yeah, I rest rates are awful.

All right. Well, that's really important to know and that's why we want to make sure we pay in what we need to now. We hear from people all the time that say listen Rob.

I'm not proud of this but I haven't paid in years and I'm scared to even open the letters even think about engaging the IRS with it because I'm not sure what I will find. What would you say to that person who's in that situation? Oh my that's the bulk of my clients over the last four decades and this is what usually happens. They hear a radio program like this.

They feel like the Lord's talking to them. Yeah, and they say look I need to do the right thing. Yeah, but there's this fear that if they do it the IRS is going to throw them in jail or they're going to be broke or you know, they're going to lose their family. It's not true.

It is not true. God can take care of you take the first step contact your local CPA contact. Someone who's got some IRS controversy experience and then let them file a limited power attorney. It's an iris form that allows them to talk on your behalf. Take a look at what needs to be filed and you're going to see that God has a plan and it's a plan that's going to help you get from where you're at.

There's a lot of anxiety. It's on your heart and on your mind so long do this and you're going to be fortunate to see what God does. That's a great place to end today Kevin great to see you. Thanks for stopping by.

Hey, thanks for having me. That's Kevin cross CPA in addition to helping a lot of Believers prepare their tax returns. He specializes in representing taxpayers before the IRS learn more Kevin cross CPA.com.

All right, we're going to take a quick break back with your questions after this 800-525-7000 stick around. What's most important to you when it comes to choosing your financial advisor someone who's aligned with your biblical values. How about someone who will take the time to explain your options certified Kingdom Advisors are professionals who meet high standards and competence and integrity and have been trained to offer biblical financial advice to find a certified Kingdom Advisor in your area visit faithfi.com and click find a CKA. Do you feel like your hands are tied with debt preventing you from serving God if you have credit card debt Christian credit counselors can help through our debt management program. We can get you out of credit card debt about 80% faster while honoring your debt and full for more information on how Christian credit counselors can help visit Christian credit counselors.org.

That's Christian credit counselors.org or call 800-557-1985 800-557-1985 Thanks for joining us on Faith and Finance. I'm Rob West, you know, as I think about a biblical worldview of money management, there's three big ideas that jump out at me when we think about God's economy versus man's economy in God's economy. We start with Lordship and we surrender to the fact that he owns it all Psalm 24 1 the earth is the Lord's and everything in it the world and all who live in it. Then we have to accept our role as stewards. So the next big idea is stewardship or to use God's resources to fulfill his purposes in Genesis 2 15. It says the Lord God took the man and put him in the Garden of Eden to work and to care for it stewardship and then the third big idea generosity you see sharing releases the world's grip on us.

Remember the Macedonians 2 Corinthians 8 2 out of the most severe trials. They're overflowing joy and extreme poverty welled up in rich generosity Lordship stewardship and generosity. All right, let's head to the phones to Arkansas. Hi Raymond.

How can I help you? I'm here in Arkansas and my kids are in California out there in San Diego. And of course, they've told me right out there.

They're not ever coming to Arkansas. I got these houses that I paid for and I've got them fixed up in good shape got them rented out. They give me a good income, but I know I just know what's going to happen. If I if I kill over dead, they're going to auction them houses off and I've been to a lot of house auctions here and they go real cheap. They don't bring near what they're worth because people don't need to come and look at them.

They don't clean them up. It is auction them off and you can pick up a home for anywhere from 30 to $60,000. It's worth a hundred and twenty two hundred thousand dollars. So I don't want that to happen to me.

And I just want to hear advice. Should I sell those houses put that money in a trust for my grandkids to go to school or what should I do with that? Yeah, it's a great question. I mean listen, you know you typically folks will have a will at a very least at the very least and you would name an executor of the estate and the executor named in the will is tasked with managing your estate and their duties include administering the state even selling that home. And so there's no reason that this home would be sold in an auction and kind of a fire sale. I mean if the executor is doing his or her job there, you know properly marketing and selling these properties to get you know, the market proceeds whatever the prevailing selling price is based on the market conditions and then that would be a part of your estate after all debts and obligations are settled then it would be distributed. Now, should you put these into a trust?

What would be the benefit of that? Well, you certainly could the benefits would be number one that it would pass outside of probate you would name similarly to an executor. You'd name a trustee who would be tasked with managing, you know, the the property including the sale of the property and so, you know, I think that would be a nice option for you and the other benefit of it passing outside of probate would be that you know, if you wanted the the proceeds of the house the houses once they're sold to be distributed to your heirs over time.

You didn't want it all to happen at once. Perhaps you wanted to wait and distribute it to the grandkids when they reach a certain age or when they graduate from college. All of that could be done inside a trust a revocable trust. Whereas that would not be able to be done with a will the will get settled immediately. But even with a basic will going back to your original point.

There's no reason these houses should be auctioned off. You know that executor if they're doing their job, they're going to get you know, the the prevailing market value for the property when it's sold. Does that make sense? Yes, sir. Sure does and I do have an executor my younger sister and I'll told her what my wishes are. That's exactly what I want to do is as the kids reach age for college help them with some college money and then when they graduate they can get a lump sum there to to help them get started in my business or buy a home or something.

Okay. So given what you just said there Raymond and I'm not an attorney, but I'll just tell you generally. I think you do want to trust a revocable trust because you see the will has to be settled in its entirety, which means who's ever getting the money is getting it at you know around the time of death. Whereas a trust your sister if she's the trustee could leave the assets or a portion of the assets in the trust and then distribute them over time based on certain triggering events.

So it sounds like given the desires you have in the control you want over the the proceeds you want to trust so I'd encourage you to go find a godly estate attorney and put that in place. You could get a referral from a CKA on our website faithfi.com. Let's go to Tennessee. Hi, Amy. Go ahead. Hi. Thank you for taking my call. I listen to your podcast faithfully. So that's great.

Appreciate you. I just have a quick question. So I'm kind of trying to figure out right now, you know, my budget and I am contributing to a 401k but I was wondering whether I could if I should just stop contributing to a 401k and instead have just six months of emergency savings like saved up first before I do that.

Yeah, it's a great question Amy. So how much do you have in your emergency run right now? How many months not even too much but close to two months right? Okay, good. Yeah. That's great and you're not putting anything in the 401k currently. I am I'm putting 15% right now. Oh, wow.

That's tremendous. And so are you getting any matching? Yeah, I am. Okay, I'm getting like 5% so okay, but what what I'm hearing is though that because you're doing the 15% you're not having anything left over. So you're not able to add to the emergency fund anymore. Is that right?

Yes, and no, it's very tight. Right now, but the good thing is that I am debt-free because I paid off my student loan last year. So hallelujah. Thank the Lord praise the Lord for helping me through that. Well, here's where I would go from here.

I think it's great. I would absolutely take full advantage of the matching but beyond the matching now if you can dial back other spending so that you can contribute a meaningful amount to your savings. So you're continuing to head towards six months expenses.

That would be great. I'd rather you pull it from other places than the 401k if you can find it, you know, maybe I there's a subscription you could cancel or maybe just you don't need out quite as much mean whatever it is, but if truly the the thing that's preventing you from really getting your emergency fund up to six months in a relatively short period of time is the 401k contributions. I would say dial that back so that you're still getting the full match, but you're not quite doing the 15% and then when you get up above three months expenses or perhaps close to six months, then maybe you turn that back on but you know, I'd rather you have a fully funded emergency fund at this point in your life than I would you put in the full 15% in the 401k as long as you're still getting the matching portion. Does that make sense? Yes, it does that actually completely just helps me. Thank you. Okay, you're welcome Amy. Thanks for calling and for being such a faithful listener. We appreciate it big. Thanks to my team today. Certainly couldn't do this without him Sandy Dickinson managing our phones today by producer the amazing Devin Patrick and providing research today. Mr. Taylor Stan rich and everybody here at faith by what an amazing team. We have the opportunity to work with you want to support our work. Just go to faithfi.com and click give and come back and join us tomorrow. We'll see you then. Bye. Bye faith and Finance is provided by faith by and listeners like you.