The Financial Dictionary

Let’s step into the classroom again to cover some financial buzzwords. Are these important to know? What are they? How do they impact you? We’ll answer those questions and more as we always look to educate you a little bit on the show.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

Transcript Of Today's Show:

Speaker 1: Hey, everybody. Welcome into Plan With The Tax Man with Tony Mauro. And welcome to October. This is our October edition of the podcast. We appreciate your time as always, as we talk investing, finance, and retirement with Tony. And this week on the docket, the financial dictionary, and maybe a couple emails if we have time. What is up, my friend? How are you?

 

Tony Mauro: I am good. Thank you. Just got back from a little vacation.

 

Speaker 1: Well, how'd it go with the crazy 2020? Okay?

 

Tony Mauro: Not too bad. Not too bad.

 

Speaker 1: Hey, that's that's pretty good in this year. I'll take not too bad.

 

Tony Mauro: I'll tell you it. It's so weird. And I traveled earlier this year out to Vail to visit my son. And it's weird not to see all the business travelers, and people are just kind of stepping back in, but the travel industry is definitely still hurting, so.

 

Speaker 1: Altered and strange.

 

Tony Mauro: Ooh, yeah.

 

Speaker 1: Yeah, for sure. Well, good. I'm glad you had a good time, a little mini or a little vacation there and enjoyed yourself a little getaway. That's always a good thing. And we are into October. So I don't know a lot of people are definitely fans of the fall, fans of the pumpkin spice and all those things that come in the fall along with Halloween and things of that nature. So if you're a fan of that, enjoy yourself as we get started this month. But for today, let's talk about the financial dictionary. Let's step into the classroom, so to speak and just cover some buzzwords. Are these things important to know? We'll let Tony tell us what are they? How might they impact us? Things like that. So, what is well, an EA, an enrolled agent, which is one of the things you are?

 

Tony Mauro: That is one of the things that I am. Near and dear to my heart and what an enrolled agent is, it kind of sounds weird because... I wish they would have came up with a better name than that sounds like some kind of CIA [crosstalk 00:01:45]

 

Speaker 1: Well, there you go. It's got a cool feel to it.

 

Tony Mauro: Yeah. But an enrolled agent is a tax specialist that is enrolled to practice before the US treasury in all 50 States. So it's a federal licensure and unlike the CPA, which is state driven, most people equate CPAs with accounting. EAs basically, I mean, we do accounting and payroll as well, but the EAs more are equated with tax specialists. That's really what we thrive on and what not in that area. So we not only help people with their tax returns and trying to tax plan and whatnot, but we also, at least with us, help people with IRS tax problems which is, we don't really talk about that too much, but there are a lot of people out there that have gotten for whatever reason, a little sideways with the IRS or their states, and they need help because they're not two of the most helpful agencies to work with.

 

Tony Mauro: And so trying to get them a little bit of peace of mind there and trying to get them back on track is something that a lot of our enrolled agents work in. It's kind of a little specialty niche there, but we want to, if you're looking somebody to help you with your taxes, that you're not doing them yourself or whatnot, you want to look for a CPA or an EA or some somebody like that rather than just Tom Smith is possibly doing them out of his garage, because they're not required to follow any type of rules, they're not held to high ethical standards things like that. And so it's important there, but [crosstalk 00:03:24] that's kind of it in a nutshell.

 

Speaker 1: That's an EA. Okay. And you've been in the industry now for 23 plus years. You're also, and it's not on our list, but we'll just do it real fast. You're also a CFP and a lot of people hear that and most of us might know what that is, but what's a CFP?

 

Tony Mauro: A CFP has done a better job of marketing. The [crosstalk 00:03:43].

 

Speaker 1: That's a good way of putting it. Yeah.

 

Tony Mauro: Yeah. And of course the King is the AICPA with the CPA because you ask anybody, everybody knows what a CPA is. But a CFP is a certified financial planner. So, again, it's a person that has gone through some rigorous, I would say is an understatement training, and of course exam and to earn that designation in the area of the six major points of a person's financial life or financial planning. And so again, someone that's held to a pretty high ethical standard we're supposed to follow the fiduciary rule and always put the client's interests first, a lot of people don't realize that they just think everybody's does that. It's not really the case.

 

Speaker 1: Which is kind of silly, right? It's one of those things where you think, why do we need a law to tell us not to whatever, and it's it's common sense then why do we need something to tell us we should be ethical, but yet we do, so.

 

Tony Mauro: Yeah, we do. And we still have problems. But the certified financial planner, really, most of the people in the profession are planners of some sorts. And are helping people through the various stages of their life and their personal financial plans.

 

Speaker 1: Well, and as you mentioned, it's quite rigorous as well. So typically a lot of folks, if you're working with somebody who is a CFP, they have definitely some might say gone the extra mile to get all those certifications and get all that extra education and training in there. So that's something that certainly, that some people really look for, so.

 

Tony Mauro: They really do. And the last thing on that and they're all great from, but having the designations for so long, I think what a lot of people don't realize is because these different governing bodies, what they impose upon us is the continuing ed requirements. That we're kind of subjected to now, obviously we enjoy what we do, and most of that is pretty good, but they also make you really stay current because stuff's changing so fast in, in both of those areas. If you're not doing that, then really you're giving your clients a disservice.

 

Speaker 1: No, absolutely. That's a great point. And unfortunately it is what it is, but a lot of times it's not like our government sometimes makes rules that make sense, and you've still got to learn them and you still got to work with them right? Within the parameter. So, and of course doing a lot of taxes and things of that nature, you are certainly well versed in some of the things, the goofy things that the government does from a rule standpoint, from time to time. All right. So, that's those two. So let's get into some other things, estate tax. I think most people can kind of figure this out, but they don't often understand what it really is, and how it might affect them.

 

Tony Mauro: They really don't. And we get a lot of tax clients asking well "When I die, I know I'm going to have to pay estate tax." And they're a little confused on it. This is a very technical area, but what it is, is it's a tax really designed for the government to kind of get their hands on the wealth of the truly wealthy these days. The estate tax threshold is very high right now. It's like 11 million and some change per person. So effectively when you're married, you basically have a $22 million exemption, meaning that if you're not worth more than that, you don't pay any estate tax. And you get out [crosstalk 00:07:01]

 

Speaker 1: Well, I'm safe, then.

 

Tony Mauro: It's weird because it used to be, in my lifetime it used to be weighed down around a million then two million, and then 5 million now it has gone up, but you look at some of the very wealthy in this country and you point out some big names and whatnot Warren Buffet, Bill Gates the list goes on and on. Those guys certainly have to plan, but even people, though even on the coasts that are making some money and even here in the Heartland some farmers with the way land has gone up over the years, there could be some big farms that potentially could have some estate tax due when they die, and it's very progressive. It gets up all at the 55% very quickly.

 

Tony Mauro: And so people with potential state tax issues need to definitely plan not only with the accountant, but with the state tax attorneys to make sure that you're not losing half your wealth to estate taxes for your heirs, if you have those kinds of issues. But for most of us, it doesn't really come into play the most average Joe's and even, I mean 22 million net worth is quite large.

 

Speaker 1: Oh yeah. Definitely.

 

Tony Mauro: ...by Midwestern standards. But it's something that it buzzes around and you never know that they could drop these things back down to some other levels to try to capture more.

 

Speaker 1: Yeah. And there's conversation [crosstalk 00:08:25] about that as well.

 

Tony Mauro: Exactly, the government's in trouble. In this virus days, you know that they're spending money. I think I just saw a stat last month. What was it? A national summit about the national debt is bigger than the economy now or something.

 

Speaker 1: Yeah, [crosstalk 00:08:40] it's pretty hefty. So yeah, there's lots of conversation, lots of things out there we see and hear on a regular about different ways they may be coming after different kinds of taxes and things of that nature. Of course, we've got the election coming up and just a couple of days over a month now from the time that we were doing this here. So, there's been conversation there, one side is may raise taxes. The other side may keep it the same. Who knows? Right. So won't know till it happens, but lots of stuff on the horizon. But anyway, for now, let's continue on with our financial dictionary. Support and resistance. This is something it's definitely a buzzword that I think we try to hear in a lot of avenues of customer service, but in this arena, what is support and resistance?

 

Tony Mauro: Well in this arena and people probably see it more today than they used to because there's so much on the news, especially if you turn on MSNBC or CNN, especially when the market is going, you see all these charts flying up in these colors and things like that. But this is a technical term, again, basically in an area of finance called technical analysis, that the technicians always... Their premonition was, that we can predict how the market's going, by the way that things behave. In other words, the way that the market's kind of go up and down and they plot lines and they do all this. So, in their world, the support line is kind of like a bottom line that a stock or bond might be trading that it doesn't break through. It kind of bounces around between its support at the bottom and it's resistance at the top.

 

Tony Mauro: And as they break through one of these, usually when it breaks through on the downside, on the support line, the technical people think, "Well, then that's a sign that this stock is probably going to drop further", and same way on the upside. Once it breaks through it keeps going up and they always point to these historical patterns. I never have been a huge believer in it, but in all my years, I've never spent enough time really trying to understand the way lines going to me that again, is trying to predict things that I have no control over. And I'm more of a planner that I know where we need to be over the longterm, and that's generally inequities.

 

Tony Mauro: And these little micro things I think more are for trying to maybe make money in the short term, which I don't advocate, but there are a lot of people out there trying it and there might be some even doing it, but I'm not a big believer in that, but that's kind of a buzzword. So, if you see it on one of the new shows, you can kind of follow along with the lines and at least have an idea of what it is.

 

Speaker 1: Right. Gotcha. And That's kind of why we're doing this because we do hear a lot of these terms and different words and things. Sometimes we maybe have a grasp on them, sometimes we don't. And then misinformation, obviously, it was rampant also in 2020. So we can certainly easily go down the wrong path if we're not checking it out. So, let's take a look at a couple of things or one more here, at least for sure. Maybe we can squeeze in another one, but JTWROS? What in the world is that?

 

Tony Mauro: So, this is a fancy acronym for joint tenants with rights of survivorship. All right. So generally that's a titling issue in property or in certain cases, investment accounts and whatnot. And what that means is that if you titled something like that, you are a joint tenant. And if you and I have something that we own together with this designation, that means if I die, it automatically comes to you with rights of survivorship. If you survive me and it doesn't have to pass through my will. So it's a good thing to have if you understand what it means. And that's your intention.

 

Tony Mauro: That way I don't have to include that in my will. And I know that the person that I've designated that's on this account with me, it goes right to them. But if you kind of just willy nilly, go into something like that and you get something titled like that, and that wasn't your intent. Then you need, again, talk to your accountant or your attorney and make sure that stuff is titled properly because when you start talking legal stuff, title, and all that, you're usually talking about stuff that matters, which is either larger investment accounts, retirement accounts, property, things like that. You want to make sure that what happens is what you intended to happen.

 

Speaker 1: Yeah, definitely. Yeah, because there's so many things out there that's for sure. And I'd definitely say if you hear a buzzword or if there's something you keep seeing kind of on repeat and you're not sure what it is, or you're being told about it specifically as it relates to your situation and not just maybe seeing it on the telly or something like that? I don't know why I went British all of a sudden and said telly, but either way, if you've seen something like that, always check with a qualified professional, reach out to Tony and his team, call them and say, "Hey, someone's talking to me about this. What is this buzzword, or whatever the case is." And that could be a lot of things. Sometimes people get confused and there's multiple kinds of annuities and they get all those kinds of jumbled together.

Speaker 1:

So there's so many buzzwords in any industry. It's always a good idea to have those conversations with someone who has a lot of experience in the coast, as we said earlier in the show, Tony is an EA, and a CFP with 23 plus years of experience. So just call him at (844) 707-7381. You can also stop by yourplanningpro's.com. There's a lot of good tools, tips, and resources there. You can subscribe and find the podcast as well. You can also just search out Plan With The Tax Man on whatever app you're using. But if you're at yourplanningpro's.com also send us an email. We'll be happy to try that, tackle those on the show from time to time. And we're going to do that right now. I'm going to switch gears, and see what Jake's got for you. He said, Tony, I'm getting a big tax refund this year, obviously with the delayed filings and everything. And actually I have for the last several years. So it is nice to get that refund, but am I better off just to keep more money throughout the year?

 

Tony Mauro: Yes. And from a tax perspective, we get this every year. And it's funny because most of our clients our tax clients that is generally receive refunds and they're happy with that because unfortunately they use it kind of as a forced savings. And that's the only way they can save. Now from the financial planning world, that's probably not the best way to save because the old adage is you're giving the government an interest free loan. And back in the day, when you could put it in a savings account and get five, seven, 8% on it it made a lot of sense not to let them do that, but in today's world with savings interest rates so low it kind of just depends on personal preference. I mean, some people just want that money.

 

Tony Mauro: They use it for vacations and to pay off their Christmas spending and whatnot. And that's okay, it's all your money. It's not magic here, and I think every year we have to remind some clients, this is still your money here. Do you want it a little bit in little chunks throughout the year? And they all say "No, because I can't save it. It just gets eaten up. I don't know where it went, and I'd rather have it now", others are more savvy saying, "No way. I'm not letting the government hold any more than I have to. I want to pay my fair share [crosstalk 00:15:42] I want my money."

 

Speaker 1: That's always how I heard it. I would have people say stuff like, "I'll tell you what, why don't you give me the money? I'll hold it for you, and then I'll give it back to you at the end of the year with no interest", that's what the government's doing, right?

 

Tony Mauro: That's what government's doing. Yeah. And when you put it like that to people if I did that with our many tax clients, well I could have a lot, and that's what they do. I can have a lot of money I could use for you, now with the caveat is I got to give it back. [crosstalk 00:16:10].

 

Speaker 1: ...to give it all back. Right. Yeah, sure.

 

Tony Mauro: If I go spend it. But the government is a unique position, because they go spend it as you know, and they spend more than they take in, but then they have the magic wand where they can of course print money [crosstalk 00:16:22].

 

Speaker 1: ...and send it back [crosstalk 00:16:23]

 

Speaker 1: Well, let me, let me ask you this, Tony. I was kind of always told, as an EA, tell me where you stand on this. I was always told to shoot for zero. Like the idea is you don't want to have to pay too much and you don't want to have to get back too much because if you do that means you're working your tax equation out correctly. And that's kind of like the ultimate goal is to shoot for as close to zero as possible.

 

Tony Mauro: Close to zero as possible. We go one more for the people that really want to do that because we say, look, if we can get you plus, or minus $500 around that zero mark, we have done really well. So, yeah, if you're okay with something happened and okay, I owe $400 here, no big deal, or a, we missed on the other side and you get back 400, you know that you're maximizing the money in your pocket, and making sure that you don't have a huge surprise at the end of the year, because the government wants its share and you got to pay it or you get behind the eight ball there. [crosstalk 00:17:25]

 

Speaker 1: That's how I was always told. So, yeah, same kind of thing. You say zero, but right. It's that like within a 500 bucks or so, because something that won't be too catastrophic either way, right?

 

Tony Mauro: No, exactly. And that's the way I feel. I don't like to let the government, I'll give you an example here, too, of the government, hold, in fact, it's going on right now with my brother, second year in a row. So, in 2018 he did not get his refund, and they owed him about 4,500 bucks. Okay. And they kept telling him that his W2 was wrong. This was the Feds. And we did not get this straightened out until November of 19. So he was supposed to get his refund back in April of 19. Didn't get it until November. Well, luckily he didn't necessarily need that money, but it kind of got to a point where like, "Wait a minute, this is my money. I didn't make a mistake here."

 

Speaker 1: And he didn't get any penalties and interest, had it been the other way.

 

Tony Mauro: Oh yeah. But the other way penalties, interest. So he had to finally get me involved and we had to contact the taxpayer advocate. The advocate agreed, said, "Let this guy have his money. You guys made a mistake", meaning the IRS, and they released his refund. So, if you were depending on that money and then you didn't get it like that, you're at the whim of a huge, huge organization that has a lot of bureaucracy, a lot of inefficiencies, why go through all that? And it happened just here in 19. So he filed this 2019 taxes here in March of 20. Still doesn't have his refund and we're fighting with the IRS again. We're going to have to go to the taxpayer advocate again.

 

Speaker 1: It sounds like he's stuck in sonar or some sort of rabbit hole there.

 

Tony Mauro: [inaudible 00:19:04] ...it's not an audit. It's just that they can't figure out why his withholding doesn't appear correct. And now what he's done though for 2020 is saying, all right, that's it, I'm not letting them hold my money anymore because I'm not going to have to fight with them and go through the aggravation just to get it. And so that's... And then same way with Iowa here, a couple of years ago, Iowa said, "Well, we're a little short, we're not going to issue refunds till April", basically when they had money coming in from estimates, and so I just have something, and I'm not knocking the government, don't get me wrong [crosstalk 00:19:35].

 

Speaker 1: ...it's a huge, huge entity, and there's definitely going to be some just mess in something that large.

 

Tony Mauro: So, I mean, what happens when you're, depending on your two, $3,000 refund to go on spring break vacation, something like what I just said happens. And then you can't go [crosstalk 00:19:51]

 

Speaker 1: ...fix your AC unit or.

 

Tony Mauro: Yeah. That's not good. I mean, you're eventually going to get your money, but then you just really get mad, and it's [crosstalk 00:19:59].

 

Speaker 1: Oh yeah, and again, to the point I had earlier, I think that's where people get really annoyed too. It's the same kind of thing with, and for any doctors out there listening, no offense, but it's the same thing kind of thing when it's like, if you happen to not call and tell them, sometimes you'll get hit with a charge for for missing your appointment. But yet we can go sit there for sometimes an hour or two hours past our appointment time. And yet we don't get any kind of recompense on that same thing with the government. It's frustrating when you're like, "Wait a minute, how can you hold onto my money for five months and not pay me anything extra? But if I owed you some money for five months, man, you'd certainly be after it."

 

Tony Mauro: Oh, they'd be after you. I'd get letters, probably some threatening letters [crosstalk 00:20:38]

 

Speaker 1: ...it's so funny about that. I sent something in one time and we were off like by, I don't know, $4 or something. And so you get the letter for $4. You send them the $4 and by the time they get it, they've already sent you another one saying that the $4 was late, and now you owe like a dollar 75. And so you said the dollar 75 and the same thing by the time you get it, it's down to like 40 cents. I'm like, "Oh, are you kidding me?"

 

Tony Mauro: Yeah, no, it is. And we always recommend getting everything paid. Don't don't send checks anymore. Let's let's pay it EFT. So it's, boom, it's right there [crosstalk 00:21:08] because even in today's world, right now, what's happening with COVID is people's money. Their tax clients call and say, "Well, I sent a check, it's not cashed. Hasn't been for three months." So, they forget that IRS has been [crosstalk 00:21:20]

 

Speaker 1: Now, that has not been the problem for me. So I do my [crosstalk 00:21:23] quarterly estimates, no, they actually were on it. They used to be actually slower. I sent my quarterly estimates in this year, as you mentioned, some of those earlier, and I wrote them on Monday. They were cashed by Thursday. Oh, that's good. I was surprised actually, because within three days, I was like, "Okay, well I guess that's going good." Or they're like, "We need the money to give it here."

 

Tony Mauro: That's right.

 

Speaker 1: All right. Well, there you go, folks. So, that's our financial dictionary conversation this week. You're on the podcast. Thank you so much as always for tuning into the show. We certainly appreciate it. And if you haven't done so yet, please consider giving us a subscribe on whatever platform you choose. Apple, Google, Spotify, maybe this was sent out to you in an email blast or something from Tony or whatever the case might be if you haven't done. So we'd certainly appreciate it. Just type in Plan With The Tax Man in whatever app you like using, or go to yourplanningpros.com. Again, that's yourplanningpros.com. You can find a wealth of information there as well. And of course, if you have any questions, always reach out first (844) 707-7381. And I will talk to you in a couple of weeks or probably just shortly before Halloween. So, you have yourself a good October and I will catch you soon.

 

Tony Mauro: All right. Sounds good. Take care.

 

Speaker 1: We'll see you next time folks right here on Plan With The Tax Man with Tony Mauro.