Welcome to another episode of the Dr. Friday Radio Show! In this episode, Dr. Friday takes on the latest tax updates, answers callers questions, and talks over the following topics:
- Dr. Friday’s Tax Tips For the End of the Year
- What You Should Know About the Build Back Better Act
- How To Be Prepared for the Advanced Child Credit
- Does the IRS Know How Much Money I’ve Gifted Someone?
- Certain Limitations Contributing to A Roth IRA
- Standard Deduction Changes for 2020 Tax
- Am I Being Audited By the IRS?
- The New Charitable Contribution Deduction
- How To Know If You Are Paying Penalties and Interests
- The Capital Gaines Tax Changes
- How to Get In Touch with the IRS
- Dr. Friday Talks About How to Get Back on Track With the IRS
and much more!
Transcript
Caller 0:00
No, no, no, she’s not a medical doctor, but she can share a cure for your tax problems or financial woes. She’s the How-To Girl. It’s the Dr. Friday show. If you have a question for Dr. Friday, call her now. 615-737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
Dr. Friday 0:28
Good day, I’m Dr. Friday and the doctor is in the house. We are all working on our last big weekend for the final numbers for the individual and corporate. If you’re less than 20, your due date is 10/15, which is next Friday. So now’s the time to hopefully sit in front of that computer, when it’s a little bit quiet, I hope, and make those numbers sing for you.
Dr. Friday 0:52
So that way, and I have quite a few people to be quite honest with you, I am in the process of working with many people or you know, my clients at least will email me things that are coming up with things that have changed. And there, you know, we have quite a few people that sold real estate, it’s that simple.
Dr. Friday 1:11
So quite a bit of real estate. And in doing so you may have created some tax situation, especially if it was rental real estate because rental real estate can usually have recapture of capital gains along with recapture of depreciation sorry, which is ordinary income plus the capital gains.
Dr. Friday 1:30
So we might need to make sure that you’re covering both of those so that you are ready when it comes few more months, and we get ready to start looking at doing taxes, that we’re not telling you that you owe another, you know, $50,000 in taxes.
Dr. Friday 1:45
I know in the last just today alone, I’ve had three people I’ve been working with clients that have sold real estate that has been rental real estate, and all of them have had some pretty good tax bills, one of them only paid like 40,000 and sold it for like 410,000. So obviously in those situations, you’re looking at some pretty big capital gains.
Dr. Friday 2:06
So if you’ve got questions because it’s not just straight across the board 15% If you’ve got questions, give me a call, you can do it here in the studio at 615-737-9866. Taking your calls, talking about pretty much all things when it comes to taxes.
Dr. Friday 2:25
So if you’re in the process of finishing your 2020s, or prepping for your 2021, you know that there’s going to be certain things like some changes, the standard deduction in 2021 is going to be 25,100 for married filing jointly 12,550 for single and 18,800. For the head of household. This is including inflation, so every year will go up a little bit, I do want to make sure individuals that are receiving the advanced child tax credit that you have prepared that information.
Dr. Friday 3:01
Especially, it’s just going to be a little confusing in my mind, because maybe I deal with a lot of people that go two different directions. But income has gone up a prime example is if you sell a piece of real estate and you’re getting the advanced child credit, it may come down to a situation where you might need to give this money back.
Dr. Friday 3:24
I mean, it’s possible that you’re getting money right this second, that isn’t going to be money that you’re entitled to. Now the likeliness of that happening is pretty rare. Married filing jointly will basically start cutting out at 400,000 single individuals 200,000. But those individuals that I was talking about, you know, are obviously individuals that their normal, ordinary income will actually go up those same numbers for 2021 adoption credits will start phasing out for single people between 214 fully phased out at 254. And that’s the same for married as well, one of those married penalty ones that you have interest on educational loans.
Dr. Friday 4:06
You know, again, if you have student loans, if you have an income of more than 70 maxes out at 85 for a single individual, you will not be able to claim the interest on your student loan. The same thing for married filing jointly, it’s 140. And it will max out at 170. If you make more than 170, you’re not going to get $1 of your student loan interest. If you have children in college and an American opportunity or lifetime.
Dr. Friday 4:30
For individuals that are single, those individuals will start phasing out at 80,000. For the American Opportunity, credit and 59,000. For the Lifetime Learning credits, that one’s always a problem because let’s be honest, hopefully, if you’ve got a college education, then you might be making more than 59,000.
Dr. Friday 4:51
Those numbers will go up and they’ll start at that number and they can kind of phase-out by about 65 for single people on the lifetime and about 8590 American Opportunity doubles, first joint married filing jointly 160,000, for American opportunity you can make before you start losing that credit, and 118,000, you can make on Lifetime credit.
Dr. Friday 5:12
The same situation on that basic active retirement, if you have the money you put in into an IRA, as long as you make less than $75,000, for active participant plans for nonactive, meaning if you’re in a business and they’re participating in there, you may have some limitations. If you are just an individual putting money into your own IRA, there are very few limitations on how much money you can earn for those situations.
Dr. Friday 5:42
So, again, there are certain limitations contributing to a Roth IRA. And one always tells me oh, I can always contribute to a Roth IRA. That’s not true. If you make more than 139,000 as a single person, or 206,000, as a married couple, Roth IRAs are not on the table.
Dr. Friday 5:58
So there are certain limitations. And if you’re planning and trying to work your way through the best situations, you want to sit down and figure out how that’s going to work both for you. And for those individuals, trying to deal with all kinds of things. I had a person that we talked a little bit about divorce, they’re in the process of getting divorced, and, you know, they were they will be divorced before the 15th of December.
Dr. Friday 6:22
And I’m telling them at that point, “That means you’ve been single for the whole year of 2021.” And the gentleman’s like, “Well, wait, I’ve supported the family, I’ve done this, I’ve done that.” It doesn’t make a difference. If you divorced before, my suggestion was a push it off till the first week of January.
Dr. Friday 6:39
But you know, either way, it’s kind of sometimes difficult because getting a husband and wife, this particular couple is actually on the same page. But very often, they don’t want to file together, they don’t want to claim things together. They don’t want to do anything together. So they don’t want to make that work for him.
Dr. Friday 6:55
But if you are in the midst of doing a divorce, taxes are a big part of that. And you do want to make sure that you’re taking the time, you know, it’s better to give each other the money than to give Uncle Sam the money. And that’s really the option in many cases because sometimes you’re just leaving money on the table that, you know, just because you don’t want to really talk to each other. So not good advice.
Dr. Friday 7:14
All right, let’s hit Jim in Nashville. Appreciate the phone call. Hey, Jim.
Caller 7:20
Yes, Dr. Friday, my question is about the gift tax. And I made a fairly large gift to a grandson this year, in 2021. And, you know, it’s my understanding that you can do the excess amount above what it allows, you can put that against your estate limit. When do you file the tax, when do you file the paperwork for all that?
Dr. Friday 7:51
that would be filed in the year it happens. So in the case that we are talking 2021, you will file a 706 gift tax return for that you’ll list the dollar amount, you’ll back out the 15,000 that you were allowed to give him. So let’s just say it was 50,000, 15 would come out you would report 35 coming from your lifetime. And you have to give them their name, address, and federal or social security number.
Caller 8:19
Okay, so you would do it in the year that you did it.
Dr. Friday 8:21
Okay, exactly, yeah, in the year that you do it, which is not I mean, it’s a really easy form. And it’s basically just, you know, a paper trail really, um, but we do have quite a few of those. But right now, the lifetime limit is 11 million right now, I’m not sure exactly what’s going to happen if they change that which is on the table. But at the moment, you’ll just need to file that form along with it. It’s a separate form, but you know, at when the same time you file your personal tax returns.
Caller 8:50
Okay, thank you very much.
Dr. Friday 8:53
No worries. Thanks, man. Great question.
Dr. Friday 8:55
Because again, seems like we’ve had quite a few people, parents are pretty awesome. You know, I mean, I’m one of those ants, so I don’t get to necessarily claim to be a parent. But I have a lot of great clients and parents seem to be, especially when inheritance comes in, or something large, like they sell a piece of real estate or whatever. So often a parent gives or pays off something or gives kids a gift to be able to buy a house, those kinds of things.
Dr. Friday 9:25
And anytime it’s over the $15,000 and there are certain ways like if the gentleman, his grandson is married, theoretically, he could have given his wife 15 and his grandson 15 If it was only 30,000, but sometimes that also keeps the money coming outside of the family tree or descendants.
Dr. Friday 9:47
So there are certain loopholes you don’t want to possibly do that with but all that being said, it’s one of those things that you do really want to be able to track and make sure you put it down. I know I have people come up to me all the time and say, “Well, how does the IRS know I gave someone so much money?”
Dr. Friday 10:05
Well, like everything in taxes, really, there are certain documents that are filed. If the money is used for a piece of real estate, for example, a gift letter has is attached to that particular purchase. And therefore, there is a paper trail that gifting was involved. If, if you just gave someone $25,000 out of your bank account, there’s probably not an easy way of tracking, if you’re ever audited, it’s right there in their face, and they will find it but you would have to be audited to find that.
Dr. Friday 10:34
So, you know, I guess I like to sleep at night. So I kind of just like to make sure that whatever I do every year, I do to the best of my ability track or whatever, if I’m supposed to 1099 or if I’m supposed to give the gift tax return, or whatever it might be, it doesn’t make a difference, just want to make sure that everything’s done.
Dr. Friday 10:52
So that way I can check off that year and move forward. Because it’s already the complaint complicated enough when we’re actually doing what we can. I know, I had an email today from one of my clients that I’m not too sure about, but somehow their 2019 is showing he filed on our side and obviously not showing filed at all on the IRS website, yet they received the money.
Dr. Friday 11:13
So it’s, it’s one of those wonderful things and you can’t reach anyone at the Internal Revenue Service. If there is anyone that works for the Internal Revenue Service listening, it would be totally awesome. If we were able to actually reach somebody, I have been keeping track of a log and actually sending it to our tax advocate that we representative we talked to.
Dr. Friday 11:36
And to be quite honest, you know, three out of the five phone calls I make are usually hung up on disconnected after waiting 45 minutes, hour and a half. The other day, I actually did it five times. And I did finally the fifth time get somebody. And the fourth time was the hardest because I waited an hour and 40 minutes, and the person who got on the phone said hello, etc, etc. And then we lost the call.
Dr. Friday 12:03
I don’t know if she hung up on me or somehow the phone call got lost. But I had to start over and another time, I was on the phone pretty much eight hours that day waiting for the IRS to get on the phone to help with resolution. The person I actually got was absolutely no help. She was pretty much saying, “Well, if we can’t see it in the computer, even though you’ve got Proof of filing proof of paying,” whatever, they weren’t going to do something. So it wasn’t I wasn’t in the right place.
Dr. Friday 12:33
But that being said, it is very frustrating. So if you if you’re trying to reach someone on the IRS, all I can tell you is patience. And just keep calling it does happen. But plan an entire day now just plan the entire day to basically try to reach somebody and if anyone has a phone number that actually is worthwhile calling, you know someone has found for collections, usually who I’m dealing with, please feel free to share it with everyone else. Or maybe you should because then everyone will call it. Alright.
Dr. Friday 13:01
So if you want to join the show, you can very easily 615-737-9986 If you have a story to share about calling the IRS or just basically giving people inspiration to say hey, I did finally get through and they help resolve something. It’s always nice to hear. Because you know, usually I’m only hearing when there’s a problem.
Dr. Friday 13:18
615-737-9986 is the number here in the studio. We’re gonna take our first break and we come back we’ll get to some more of your emails and phone calls. We’ll be right back with the Dr. Friday show.
Caller 13:38
All right, we are back here live in the studio. Having a lot of fun today with this system. And I have to love Lovectucus for keeping us going here. So we’ve got several people on the line. And it looks like maybe Dana will be our first caller. If we can hit Dana. We’ll go ahead and get her question on. Hey, Dana.
Caller 13:56
Hi, thank you for taking my call. My mother is 86 years old and we’ve had to move her into a nursing home. And she will need the funds that she has in like an IRA annuity. And I’m just wondering if I need to ask for all of it at once. Or if I should just get small increments a month? I didn’t know which way would be better.
Dr. Friday 14:21
Well, you need to at least look at it this way. Since she’s having to move into a nursing home I’m assuming that’s because she is needing more assistance. She can’t dress possibly, can’t feed herself can’t remember to take her prescriptions, we need to have in those areas, then it’s really more of a medical movement.
Dr. Friday 14:40
So what you’re going to want to do is take out enough that’s going to offset her medical expense. Now 100% of the housing won’t be a write-off but a big chunk of it will be. So don’t take it all at one time is what I’m saying take out enough that’s going to cover the next six months whatever. Keep it within the same tax year, if you can.
Dr. Friday 14:59
So then in January, you might have to take it out, you know, late December. But as long as you deposit it in the first week of January, then you’ll have enough for the next year, but try to keep it within the year, because then you’ll write off the medical against the IRA, and we won’t have very much taxes to pay for Mama.
Caller 15:15
Wow, she has not had to file taxes in a long time because she doesn’t have any money or income.
Dr. Friday 15:22
She will if she’s taking out more than 10,000 in theory because if you don’t report the medical to offset the IRA, all the government’s gonna see is that she took out $20,000 from an IRA or whatever, her Social Security will then become possibly taxable. So we have to, you know, we’ll have to make sure that she’s filing taxes just to write off the medicals to offset the deduction that you need to take out the tax, the IRA money.
Caller 15:46
All right, if it’s less than the 20, do I have to worry about doing taxes on that?
Dr. Friday 15:52
Well, theoretically, the provisional tax code is half of her Social Security up to 35,000. So if you take half of your Social Security, subtract it from 35, the difference is what you can take out tax-free. In theory, It won’t make it taxable. Keep in mind her standard deduction is what, 16, 15 16,000? So that would be the most she could take out before any taxes would be due.
Dr. Friday 16:17
Right. Okay.
Dr. Friday 16:17
Whatever the deduction is over that. Does that make sense? Because we only can take up to the standard deduction, and that would keep her Social Security also not most likely not taxable. So maybe she’ll be able to continue not filing taxes, but hopefully, that’d be great. But sometimes you have to take out more depending on.
Caller 16:36
Exactly. Alright. Well, thank you. I really appreciate your help.
Dr. Friday 16:39
No worries, thank you. I appreciate the phone call. Alrighty, and let’s go right to Shane. Shane in Smyrna. Shane, what’s happening?
Caller 16:49
How are you doing? I’m a first-time caller, longtime listener. I definitely enjoy your show. I’ve got a situation where it took me about two years to do my six-month remodel with the current world environment. And I finally got that done. And I’ve been holding off on refining my house until I got that done because it was going to increase the value of it. So I went in and took advantage of the low-interest rates and refined the house. But I did take out $41,000 of cash in order to pay the bills from that remodel. And I didn’t know what the tax implications are going to be for that.
Caller 17:26
I have great news for you, Shane. It will be zero. There are no taxes from a loan that you took out because you’re gonna be paying it back with interest. So it is solely lone.
Caller 17:38
Very good. I just want to make sure that I didn’t have to claim it as some kind of income.
Dr. Friday 17:43
No. You’re in great shape, sir. No worries.
Caller 17:46
Alright, thank you very much.
Dr. Friday 17:48
Thank you. All right, let’s see, David has been very patient. David from Mount Juliet.
Caller 17:54
Hey, thank you for taking my call. About seven years ago, I bought a little cabin over in the mountains, a fixer-upper. I put about 28,000-30,000 into it. So I’ve got about a total of 78,000 in it. And so with the way people are buying, spending their money, and all that I’ve had somebody offered me 175,000 for it. So how bad is that gonna kill me on taxes? Because it’s not a rental property. I’ve never rented it for anything, and it’s just a family retreat. So is that considered a second home? I mean, I’m not sure what I’m gonna have to do with that.
Caller 18:33
It’s still considered an investment. But it’s not a rental investment, meaning there’s no recapture of depreciation or anything on it. It’s just a second home in essence or investment property you won’t get be able to take the exclusion like you can a primary home. But so you’re looking at roughly for ballpark conversation 100 grand capital gains, give or take a little. And can you give me just a rough idea of what your ordinary income is, before that 100,000? Are you married?
Caller 19:02
I am. And our combined household incomes about 170.
Caller 19:06
Okay, so, up to 250 You’ll have a 15% tax bracket, for everything over the 250 you have to add the 3.8. So, you know, theoretically, a little wiggle room base your most of its going to be 15%.
Caller 19:22
Okay. All right. That’s better than I thought. Thank you very much.
Caller 19:28
Hey, thanks for calling. I really appreciate it.
Dr. Friday 19:31
Alright, so if you’ve already joined the show, you can at 615-737-9986. Okay, so what I really want to talk about today, and you guys can join in anytime with any tax questions because that’s what we love to talk about.
Dr. Friday 19:48
But many of you guys have been emailing and we’ve had a lot of conversation about the Build Back Better Act, also the Infrastructure bill. I don’t have a problem with the infrastructure if they want to fix some things. I have no problem.
Dr. Friday 20:00
But the Build Back Better Act, I mean, they tried to make it sumptuous there. Okay, so they’re talking about Roth conversions. People with money in Roth and basically eliminating Roth for people in the higher income by 2032. They’re going to eliminate the backdoor, where a lot of you guys are putting money into your traditional 401k or IRA and then doing a conversion and moving it into the Roth, that’s going to be completely gone. Now, pretty much if they get their way, there’s not going to be any backdoor anymore.
Dr. Friday 20:30
And then it’s going to go to illusion, assuming that you have a million dollars in a traditional IRA, within the state, the million dollars will be subjected to 40% estate tax. Yes, I know some of you guys need to get off the floor and come back to the radio. 40%.
Dr. Friday 20:47
I mean, these people lunatics? So we have that. And keep in mind that before the current tax code, the highest tax bracket would have been at 39.6%. But you don’t normally have to take out remember, they changed the law on the IRAs, where we now only have 10 years when you inherit or have or if it’s your own, to take it out. Right?
Dr. Friday 21:11
So when you pass away, your beneficiaries only have 10 years now to clean out the money. They can’t defer it, they can’t roll it over. And now they’re talking about people in the higher tax brackets anyone with more than a million dollars, the traditional IRA the new estate tax will be 40%.
Dr. Friday 21:28
However, the $1 million destructive industry is a beneficiary be subject to ordinary income tax potentially 39.6. Seriously? 39.6, or 40. Are we going to quibble over 4% or point 4%? No, we’re not going to. So that’s pretty much leaving you with some other traditional. One of the things we used to do a lot of and right now, one of the categories we want to talk about a little bit is also grantor trust, because I am not a financial planner, nor an attorney. So that out there right now, I’m going to give you my opinions, as you guys know, I don’t hold back.
Dr. Friday 22:07
But you want to go talk to your financial planner and or your attorney, because grantor trust, basically the law, they’re basically gonna change it, they’re gonna kick it out, they’re gonna make it where you can’t do some of the things but it’s going to be granted in. So if you do it now, before they pass the law, the new law is only going to be subjected to the new grantor trust moving forward.
Dr. Friday 22:29
So, my attorney, Russ Cook is buried. I’ve been sending people his direction. He’s like, “We can’t do anything because we’re doing so many trusts because people are afraid.” I mean, there’s a big difference because as some of you guys may or may not know, with a grantor trust, the money basically is you and the trust where if you’re paying tax on trust, it starts out pretty much at 24%. And it jumps basically the 35 and then 39. I mean, the trust doesn’t have a progressive tax code.
Dr. Friday 22:59
So with a grantor, the money passes from the trust stays protected, but goes on to the individual or the grantor and then they pay tax at ordinary income rates. This is a big tax saving for everyday individuals.
Dr. Friday 23:11
So if you are a person in the higher income brackets, people that are in you know, or have estates that are in the higher, they’re talking about reducing the estates right now where it was 11. Seven, down to 5 million. Doesn’t sound like a big drop. But, you know, again, inflation is happening, guys, when I was a kid a million dollars was a ton of money nowadays. Well, let’s just put it this way. If you only have a million you’re retiring, you may not make it to the great old age to be able to survive in the same life you’ve been living in before.
Dr. Friday 23:43
So if you’ve got questions on this, I will do my best to help answer some of them. But I will suggest that you guys need to be keeping track of that Build Back Better Act as their gift going out there because it is going to change IRAs, Roth IRAs, and trust which is what most of us use vehicles to actually save money into retirement.
Dr. Friday 24:05
Alright, so we’re going to take a break and when we get back we’ll take more of your phone calls. We’ll be right back with a Dr. Friday show.
Caller 24:20
All right, we are back here live with the Dr. Friday show. You can join us on the show at 615-737-9986. We are taking your calls and we’ve got Thomas. Let’s see what we have from Thomas.
Caller 24:39
Yes, ma’am. I am self-employed and I always found online and I found in February. And usually, it’s processed within you know a week. But yeah, right now. I am it still when I checked the website. It just says still being processed. Is there something to be concerned about?
Caller 25:00
Well, let me ask you, did you have the rebate credit or the stimulus checks? Did you receive those? Did you report those on the return?
Caller 25:07
Yes.
Dr. Friday 25:08
Meaning did you get them in advance? Or were they part of your refund? Or credit?
Caller 25:13
No, I got them in advance.
Dr. Friday 25:15
You got them in advance. Okay. So they were not on the tax return. Okay. I have found that some people that have been delayed because of that, you have confirmation of e-file. When you say you file online, I’m assuming you’re using an online service. Like, they e-filed it for you?
Caller 25:30
Yes, it does. It did say accept it. And if I check the IRS website, and it says, Where’s My Refund, it says, You’re still being processed? Okay.
Caller 25:43
Well, I have several of those, I got people, a couple of people, they’re almost freaking out because they think they’re being audited. That’s not the case. I just think the IRS is so far behind on processing a lot of these and there are things they’re trying to match, like, possibly you have 1099 or W2’s that weren’t in their system that you reported, or I’m just guessing.
Dr. Friday 26:01
But we’ve had a couple of problems where people’s W twos weren’t showing up. And so the people were having to provide proof, you know, that nothing that the person could do if their employer didn’t file something correctly, you know, I’m saying but it held up their taxes for it.
Dr. Friday 26:16
All I can guess is that’s the situation. Since you’re self-employed, the only thing you would normally have is 1099. But you may have someone else on your tax return that has a W2, or maybe you got 299 that weren’t filed with the IRS, even though they gave them to you. And they’re trying to do matches for identity theft purposes. So it may just be holding up for some reason. That’s the only guess I have, you might want to call and find out but that will be painful. Calling the IRS.
Caller 26:44
Right, so I’ve got multiple 1099’s.
Caller 26:48
That’s possible. I mean, that’s the only thing I can think of like I said, I haven’t had a lot with 1099 more with W2’s Because as you know, entrepreneurs, we always usually report more than we receive on 1099. Anyways, but anyway, you look at it, Thomas, I would say as long as it’s showing up in the system. I know it’s taking a long time. Do you have a refund coming back?
Caller 27:11
Yes. I’m not concerned about the refund, I’m concerned about it just not being processed.
Caller 27:18
Right? Yeah, no, I hear you. But if it’s showing that they’ve received it, there’s nothing you can do. And in theory, they’re paying you 8% interest while they’re processing. So it’s better than the bank. But I know that’s not the question. But I’m just saying, at this point, there’s really nothing more you can do until you get a love letter that tells you that they’re either need more additional information because they’re looking at your schedule C and saying, “Hey, we want to know how you came up with your miles number,” you know, a paper audit, or most likely, it’s just going to resolve itself. And you’re going to see the refund at some point here. But that most likely, I mean, the percentage of audits is 3%. So odds are in your favor that you’re not being audited.
Caller 27:57
Right. So if it goes into next year, is there something special I should do?
Caller 28:04
There’s nothing you can do. I mean, you could certainly call and ask them if there was some reason why it’s taking so long because it’s been nearly a year since you filed right? Or whatever the time limit is, that would be something I would probably follow up on. But the fact is, you know they have it.
Dr. Friday 28:19
So there are reasons, either identity theft if we got other returns coming in your name, and they’re trying to do something, you know, there’s, there’s a lot of reasons why they take a longer time. Unfortunately, they haven’t mastered communication very well. So it leaves a lot of my clients worrying and stressing over it. But my answer would be if it goes I mean, there’s nothing more you can do.
Dr. Friday 28:40
As long as you know, they have physically received it. And you can do that by looking and saying that they’re processing itself because otherwise, it would say they don’t find your return. You know, I mean, when you look on it, there’s nothing really Thomas you can do in all honesty.
Caller 28:54
All right. Well, thank you so much. Thank you.
Caller 28:58
Hey, thanks. I appreciate. I wasn’t a whole bunch of help for poor Thomas, you know the answer.
Dr. Friday 29:06
The answer to what he needs to do is, unfortunately, going to just come down to him, either, hopefully getting a love letter from the IRS and coming through. I also want to put a call out to all EAS or tax people. Obviously we’re getting ready to go into the new tax season. Also, if you’re a real estate professional, these courses will also qualify for those.
Dr. Friday 29:28
So at least my courses of these so Tennessee Society of enrolled agents, we are holding a two-day conference through zoom. It’s November 4, and fifth you can get the information by just going right on to the 10 in sba.gov website. Or you can go to my website, I’d be more than glad or email or call me if you’re interested in getting these courses. It is going to be 16 credits, two of them will be ethics. We are going to be able to give these That way you get in at the end of the year when we all have to have our additional credits.
Dr. Friday 30:03
If you haven’t taken all of yours, you need to go ahead and do that. We can do that through our online and this will be live. So what’s cool about this compared to so many of the other ones really comes down to is that we, you know, you’ll be able to ask questions, we’re going to actually have a roundtable on day two, where you can bring you if your tax person, maybe brings some of your questions, or if you’re someone that prepares their own tax return, and you want to join these seminars, you certainly can, but this is really for tax professionals that are looking to get CPE credits, this is fully accredited.
Dr. Friday 30:35
And we’ll be doing that again on November 4, and fifth live so that way you can join in on those. So if you’re interested, you can either go to you can email me Friday at Dr. Friday, comm or go into the National Association of Tennessee association of enrolled agents, and you’ll find it on the website so you can sign up. So it’s a really good experience.
Dr. Friday 30:56
And I’ll be teaching for hours of that and then other EAS in the area will also be teaching some of the courses, so might be fun for everybody to do. Alright, so we’re getting down to the last 15 minutes of the show.
Dr. Friday 31:08
So if you’ve got questions, all you have to do is pick up the phone at 615-737-9986. We finally finished back on October 15, the 2020 tax season. So now we are moving forward into 2021. Now’s the time, especially guys, if you have sold real estate that has been huge in this last year, a lot of people have sold their second homes, they sold their primary homes for more than the exclusion of 250 or $500,000.
Dr. Friday 31:37
So there are going to be some taxes. And keep in mind, if you have sold those properties, you have 90 days to make proper estimated tax payments. So if you haven’t figured it out yet, you’re not too sure. And a lot of people are still working under the old tax code where if you sell your primary home, you could reinvest the money within two years into a new home.
Dr. Friday 31:57
That does not exist, guys, that is fantasy is not on the table. We have 250,000 per single 500,000 for married couples exclusion, and then you add the price of what you paid for the house. And then if you built the house and redid the kitchen or done something that added to the value of the home, that would also be added in.
Dr. Friday 32:17
If you sell rental real estate, remember we have recapture of depreciation which is taxed at ordinary income rates, not capital gain rate. That is very, very important to remember. So that way you have the ability to know what you’re going to do and how you’re going to do it. Right?
Dr. Friday 32:32
Because we’re seeing you want to do is get there. No, I was my clients waiting until the last minute. And then your property, you’re doing your tax returns. And then you’re sitting there going, “Oh my gosh, I owe 20,000. I owe 30,000.” And then you’ve got penalties because you didn’t pay it properly in and then the government comes back and says, “Oh wait, you might owe this penalty or that penalty.”
Dr. Friday 32:52
Now sometimes. It’s the first time you haven’t had any IRS issues in the last three years, you might be able to get some of those penalties waived. But do you really even want to be dealing with the penalties?
Dr. Friday 33:02
I think not. So make sure you do it correctly in the first place, then you can make sure that you can do what you need to do. But make sure that you have the information and that you’ve got the basis of whatever you sold so that you know how much your taxes are and how much money we have there.
Dr. Friday 33:19
Alright, you know what? Let’s hit Alan before we go through the next break. That way we don’t have them pulled through. Hey, Alan.
Caller 33:25
Hey, doctor, how are you today?
Caller 33:27
I am doing awesome, mate. What’s happening?
Caller 33:30
Hey, question, I think I asked you this before. So my grandmother through a will we sold off some property for about $22,000 in Indiana. And of course, I live here in Tennessee, will I be held accountable for capital gains on that money that I’ve collected from the property that was sold up there?
Caller 33:57
So it really depends a little bit if grandma died. You know, within a few months of that when you guys put the property up for sale, the likeliness of the basis is gonna be pretty much what you sold it for. If grandma had to go through probate or grandma’s will went through probate and before you could sell it, so it’s a year old. The fact is the property’s worth more now possibly than it was when grandma passed away.
Dr. Friday 34:17
So the biggest question I would have is, what was the property worth at the time that grandmother passed away? And what did you guys sell it for? And then wherever your percentage was. Most likely will be minimal of anything but right now the way property and things are selling. You know, I’ve got people, they’re selling their homes for you know, 100,000 more than they even asked for the house. Right. I mean, there’s a lot of craziness going out there.
Dr. Friday 34:40
So in Indiana, I’m not too sure. Come on who wants to live in Indiana? I’m just joking. No. I was born in Indiana actually.
Caller 34:52
What part? Where?
Dr. Friday 34:54
I was born up in. It’s near Chicago, a place called Munster Indiana. Munster Island.
Caller 35:01
Yeah, all right. Yeah, my wife, she was born in South Bend, Indiana.
Caller 35:06
Oh, absolutely I know that. My brothers and sisters were all swimmers. South Bend was a good swim team, we always swam against them every year up there.
Caller 35:13
Well, my kids swim. He’s a year-round swimmer. So yeah, he’s up at the NAC. And yeah, anyway. Thank you very much.
Caller 35:23
Hopefully, whoever did you know, I mean, someone else helps with a will or whatever. Just make sure because you have to report the 22. What you also report was the basis. So it might be 22 against 22. But they’re gonna need it because I’m assuming you weren’t the only person selling the land. So there are other people that would be reporting as well. So it’d be great if all of you guys are using the same numbers.
Caller 35:44
That’s correct. Yep. That’s exactly what’s gonna happen. Yep.
Caller 35:48
Make sure they give you some good numbers, and then you can file your taxes real easy. Okay. I don’t think you’re if anything, but that’s my guess.
Caller 35:55
All right, and just if your kids win, I don’t know. Watch out for AJ Fair. So anyway, that’s all I’ve got.
Caller 36:05
You got it. I appreciate it. Yeah. Bye. Bye. All right, we’re gonna take a quick break, we get back, we’ll take a few more your phone calls, talk a little bit about more of the tax changes that we might be expecting in 2021. If you want to join the show, you can 615-737-9986. We’ll be right back with the Dr. Friday show.
Caller 36:33
All righty, we are back here last part of the show. So if you’ve been holding your breath, first, take a breath and then pick up the phone at 615-737-9986. I know you’re so excited to call the show. All right, let’s go ahead and get Al from Nashville so we can see what we can do to help. Hey, Al.
Caller 36:50
Hey, my buddy, he’s had a stroke, he’s in a nursing home. And he’s never made enough over the last six years since his first stroke to have any taxes with the social security that he has, and we sell this house, the papers, healthcare until something happened so, will he have to pay any taxes on this money?
Caller 37:18
He’s most likely not going to have to pay any taxes, but you will need to file taxes so that the IRS knows A, that this was his primary home that was sold. And there is an exclusion that he would claim. So the only way we know is how much did he pay for the house? And how much did he sell for? Do you know?
Caller 37:36
He was given the house for his family. His mother left it to him when she passed.
Caller 37:43
Okay. How long ago was that? Do you know?
Caller 37:49
Approximately about 13 years ago?
Caller 37:53
Okay, so what this gentleman is going to need to do is go back at property taxes if he doesn’t know and look back in the year in which he lost his mom and write down how much the house was worth at that time. And then what do you sell it for? And the difference if it’s less than $250,000, there’ll be no taxes.
Caller 38:16
He sold the house for 223.
Caller 38:22
Okay, so he’s good no matter what. Because he sold it for under 250,000. So there’ll be zero tax.
Caller 38:29
Okay. All right. I appreciate it.
Caller 38:31
No worries. All right, Paul appreciate. Thank you. Alrighty, so we’re gonna keep moving on here. If you want to join the show, there are a couple more minutes left at 615-737-9986. We are taking your calls.
Dr. Friday 38:48
Remember, guys, we only have a few more months left. And guess what? Boom, it’s a new year. And that means taxes, again. So you might want to get organized, you might want to figure out if you do need to contribute money. But be careful. Last year, we had a couple of people that contributed money to IRAs or Roth IRAs where they got penalized because they shouldn’t have contributed money to an IRA or a Roth IRA.
Dr. Friday 39:12
So make sure you’re talking to your financial planners. You know, if you’re a do-it-yourself kind of guy, make sure you’re calculating your income, there are limitations. And if you already have a work IRA or a 401k, you may not be qualified to be able to do the others. You need to make sure you have an expert helping you with that. Also, if you have a family estate, and your estate is worth more than about $5 million, I would definitely say you don’t have much time left.
Dr. Friday 39:35
But you need to talk to an estate attorney, you need to be finding out about grantor trust or other trusts that might be a way for you to preserve or even save you tax dollars, especially with the new tax code coming down. Just I mean, there’s I mean, I know a lot of people are saying well, $5 million is a lot of money.
Dr. Friday 39:54
But you know it. It really isn’t when you start adding people’s homes, their IRAs their inheritance that they may be getting from other people. It doesn’t take long. I mean, let’s be honest, I mean, now homes are worth seven $800,000, where, you know, 2030 years ago, people’s homes were worth, you know, 100 or $200,000. So, property, inflation all that’s going to be coming back in.
Dr. Friday 40:21
And then, of course, they’re also looking back to the pre-tax cuts of the tax cuts that came in with Donald Trump were supposed to expire in 2025, it looks like they’re going to exceed or accelerate that for the estate tax, they’re talking about moving it up very quickly to the 5 million so the 11.7.
Dr. Friday 40:42
So if you have any way of wanting or needing to preserve or do something, I will tell you do not just go and do a quick claim of your home to your kids or to your grandchildren, or anything like that, that isn’t going to save or help that individual because when you do that they’re not going to have any tax savings. I know a lot of times people want to do that for the look back for Medicare, all of that.
Dr. Friday 41:07
But there are ways there are proper ways and ways that you can save taxes and do it right. So don’t really isn’t a do your itself kind of thing. You want to make sure that you have all that information properly handled. Russ Cook is a great guy and Britain was Tennessee, if you’re looking for an attorney, that can help you understand how these things are going to work again, he says he’s so busy, it’s going to may be difficult to get into him. I do want to remind people again that we’re going to be having a live zoom conference and you’re meeting for the TN SCA, the Tennessee Association of enrolled agents, that’s going to be November 4, and fifth.
Dr. Friday 41:43
So if you want to join us, you can just email me at friday@drfriday.com. Or you can just go on to the TNSCA.net website. And right there, you can sign up for it. Gonna have a great time, and you also will get CPE credits for all of you that might be getting ready to start a new tax season, we’ve got a lot of tax things that we’re gonna be doing, we have the Cares Act, we’ll be talking about the American rescue Act, the consolidated Appropriation Act, those are just the last three that’s happened in two years.
Dr. Friday 42:13
And then we have, of course, the build-back better act that they’re coming through. And they’re talking about that passing any day now. So we’ll have some information if it’s available when we have to deal with that that has not passed yet. But there’s a lot of conversation, we may need to have to do that.
Dr. Friday 42:28
So if you haven’t filed taxes in a number of years, maybe you haven’t really dealt with the IRS even though you need to deal with the IRS. I’m an enrolled agent licensed by the Internal Revenue Service to do taxes and representation. It’s all I really do. I talk about taxes I do taxes is what I have a passion for.
Dr. Friday 42:47
If you need someone that’s going to be in your corner as an enrolled agent, I do the representation, which means I’m a little bit of a shield between you and the IRS. And we can help you get back on track, we can help you figure out, you know, what do you owe? How do we do it because a lot of times people are like, I don’t have my 1099 I don’t have my w two, I don’t know where to start?
Dr. Friday 43:04
Well we do, we can help you start and we can help you get straight, all you have to do is make an appointment, initial consultation is always free to make sure that we’re able to help you and that we can get you onto the right track that you need.
Dr. Friday 43:16
So if you need to do that, go to my website. My website is drfriday.com. Again, drfriday.com or you can email friday@drfriday.com. It’s going to be the fastest and the simplest way and I promise I won’t make you cry. Well, I can’t really promise that I do make people cry from time to time. But we’ll try not to. And if this way you can make yourself and your business and your lets be honest, your house could be in jeopardy your businesses are in jeopardy.
Dr. Friday 43:44
And if you do inherit or do anything else, you have to make sure that you are doing the right things at the right time. So we can help you do that and make it as pain-free as possible and get you back on to doing what you want to do maybe want to buy a house or maybe you want to. I mean, I’ve got people that inherit and they’re sitting there going, I can’t really do that.
Dr. Friday 44:03
Because if I inherit my parent’s house, now the IRS is going to take it, you may not want that to happen. So again, if you want help getting your taxes done, or maybe you’re in perfect shape, and just looking for the best tax person in town, that would be me, all you have to do is call 615-367-0819.
Dr. Friday 44:22
That’s a direct line 615-367-0819. You can also email the easiest way probably to get me friday@drfriday.com. And the websites have always been updated. In fact, in the next couple of weeks, we’re gonna be opening up the calendar for tax season again, and if you’re one of our existing clients, you can feel free to already contact us and we’ll be more than glad to get you on the calendar so that we make sure that we have you covered and doing all the things you need to do.
Dr. Friday 44:51
I hope you guys are actually going to have a really great Saturday. This Saturday, oh my gosh, the weather is awesome outside. I’m fortunate enough to have my Nathan Her family come up and visit and we’re going to have our Christmas lights going guys, you know, I love my Christmas time.
Dr. Friday 45:05
So we’re going to get that all setup and then we’re going to enjoy a haunted house tonight. So hopefully you guys will take advantage of doing those same exact things and have a great time doing it, spend it with your family and have fun. All right, one more time. 615-367-0819 that’s direct to me or friday@drfriday.com or the website drfriday.com. Hope you have an awesome Saturday. Call you later