Welcome to another episode of the Dr. Friday Radio Show! In this episode, tax expert Dr. Friday answers callers’ tax questions and covers the following topics:
- Do I Get a Refund If I Overpay Estimated Taxes?
- How Capital Gains Tax on Real Estate Works
- Why Do I Owe Taxes If My Job Takes My Taxes Out?
- Do Single Taxpayers Pay More than Married Filing Jointly?
- What to Do If You’re Behind on Your Taxes
- The Importance of Tax Planning in the Middle of Tax Season
- How to Get Straight With the IRS to Avoid Bankruptcy
- What is The Qualified Charitable Distribution for 2023?
- How To Do Tax Preparation and Financial Planning The Right Way
And much more!
Dr. Friday 0:01
No, no, no, she’s not a medical doctor, but she can sure cure 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 0:30
Yay. I’m Dr. Friday and the doctor is in the house, we have made it through another fabulous tax season. And we’re ready to look at what’s going to be happening you either have filed your taxes already, or you’re still like myself or on the extension, but also working on your 2023 tax situation because we’re already four months getting ready to start our fifth month of 2023.
Dr. Friday 0:55
So if there is any tax planning requirements, any type of situation where you already know you might be going into a tax situation, even if it’s not necessarily that you owe money, but you don’t understand what it is that you’ve got going on, then you want to basically make sure that you don’t have to deal with any of that situation as far as you know how it’s going to work or anything else. So what you want to basically be able to do is take care of yourself, but also preamp what could happen in 2023, that might make it more important or more.
Dr. Friday 1:32
The information that you get can save you tax dollars, or just that big rush of oh my gosh, I owe $25,000. Every year, we ended up with some of that. Sometimes it’s a shocker, right? We don’t know why we owe it, we don’t have any idea what the situation is. But if you do owe it, and you had that same situation, then you might as well stop dealing with that, you know, the problem, you might as well just basically say, You know what, I’m gonna basically go forward, make sure I’ve got everything happening.
Dr. Friday 2:02
And I know if I sell this, I need to set this much money aside for the taxes. If for some reason, we overestimate that, well then guess what, you’ve got the money, no problem, everything’s good. But if you don’t, and then you go ahead and reinvest that money, that’s usually the biggest problem is that if you’ve got a plan, and I still get people that walk into my office, and they have sold their primary home, or they’ve sold another piece of real estate, not so much the primary because we do have the exclusion of 500,000 and a 250.
Dr. Friday 2:32
But I will be honest, in the last year or so we’ve had more than one situation where that 250 or the 500,000 doesn’t cover the profit on a home, but they say, “Oh, I’ve really invested it already into another piece of real estate.” Well, tax law right now, the current tax law has nothing to do with that only if you do this under a 1031 A 1031 cannot be done on your primary home. So it really only applies to business property for business property at 1031. Exchange is a light kind of change.
Dr. Friday 3:03
So if you have a rental property and you want to sell that rental property, and then you turn around and you want to buy another one, you might want to think consider a 1031 because then you don’t even have to pay taxes on the first sale because you’re still investing that money in the IRS is trusting in the big picture, they’re gonna get their tax dollars one way or the other. So it is was one of those situations. So if you want to join the show, you can 615-737-9986. We’re taking your calls, talking about all things important.
Dr. Friday 3:40
And I mean, not always is going to be a tax question you might be in the midst of like I said, maybe you’re settling an estate, maybe you’re thinking about selling some real estate buying some real estate, often people come in, and one of the reasons they come to my office because this is the first year and they purchased the home. And they’re trying to think that maybe they didn’t do something right when they did the taxes for themselves, thinking that they should have gotten this big tax savings because they purchased the home.
Dr. Friday 4:07
Not the case, guys, I mean, especially now under itemizing unless you have a very large mortgage, which creates a large interest in property taxes. And even if property taxes were more than $10,000. You can’t claim anything over 10,000 for sales tax and property tax, then you actually have the situation where you have the salt tax we call it that’s your your state tax your income to your property taxes, etc. That can be 10,000. But if you’re a married couple of you have what 26,000 almost you still have to have $16,000 in charity and in interest to qualify for even $1 of really going forward.
Dr. Friday 4:46
So it’s not that easy to deal with the situation with, you know, itemizing. So if you’re buying a house, it’s really more for the investment purposes as far as I’m concerned. It has nothing to do with the tax advantage. Again, I do know that a number of real estate professionals and individuals, sometimes they’ll get into saying how much money you’re going to say. But it’s really me it’s still an awesome investment. All right, it’s a good thing. You have an investment, and it’s going to grow.
Dr. Friday 5:13
I mean, very few times has anyone usually lose money on a rental are on a piece of real estate. Normally, if it does happen, it’s because they they flip it very quickly, or they purchased it at the height of the market, and then they’re selling it at the low power market. But I mean, I have many clients that will just hold on to the real estate silicones back, it’ll bounce back, it will always bounce back. So why don’t we go ahead and hit the line one. Hey, what can I do for you? This is Dr. Friday.
Yeah, just a quick question about income overseas. But we’ll get paid in dollars. But it’s gonna be made overseas cannot send it back and invest that income into like a Roth account or IRA. Whether it be in the United States, it’s not American.
Dr. Friday 6:05
Are you living overseas as well?
Yeah, for the time being? That’s correct.
Dr. Friday 6:12
Well, if you live overseas for over six months, up to a year, there are certain tax exclusions where you won’t have to pay certain amount of tax for the first 100 grand you make. So the answer is, is it considered earnings? Yes. Can you invest it into a Roth IRA or standard IRA, depending on how much money you make? Absolutely. But you do want to also look into the exclusions. If you are physically living and working overseas, there are certain tax forms we can use to exclude some of that or all of that income, depending on how many months you’re over there. And how long?
Yeah, I’m gonma exclude quite a bit of it. Can I still invest it?
Dr. Friday 6:53
I mean, you could do it, it is considered earning. So in answer your question, yes. Up to 6000 or 6500, if you’re under the age of 50, and seven or 7500, if you’re over the age of 50.
Dr. Friday 7:07
Cool. Thanks, buddy. Appreciate it. Alrighty, so again, if you want to join the show, you can 615-737-9986. We are taking your calls, talking about my favorite subject, but you know what, it can be a lot of other subjects as well, like I said, it could have to do with taxes, it can have to do with planning. You know, a lot of times, things happen in life, and we just don’t have the time to plan. So if you have the ability to really sit down and say, “Okay, this could be what will happen.” I mean, I have more than one client, they will say, “What if I do this? What if I do that? What if I sell a piece of property, but I carried a tilt the mortgage for two years or something? How does that affect what can I do?”
Dr. Friday 7:59
So if you if you actually have someone or you play those games, it’s very important because on the other hand, I have people that walk in and they take money out of retirement accounts to go buy something, or to pay off debt or whatever. And they’re completely shocked that they owe money on that money doesn’t make any difference. If it’s an IRA, Roth or an IRA, traditional, depending on how the money comes out how much of it was growth, and how much of it was actual your investment, taking money out that kind of situation, you don’t have the ability to not pay the tax.
Dr. Friday 8:35
So again, you really do want to consider where you’re getting your money, how you’re getting your money, and what kind of situation you’re going to have if you have that money. Because there’s a penalty if you’re under the age of 59 and a half. Sometimes now you can take money out of an IRA or certain things if first time homebuyer major medical. But that money does have to be taken out properly, and used and paid out directly to certain situations, you can’t just say, Well, I had a ton of medical, so I couldn’t work and I took money out of my retirement.
Dr. Friday 9:09
And in some of those cases, even though you may have had medical and you weren’t able to work, the money didn’t go directly for the medical bills, it was used for your life style, and that does not exclude the situation. But if it’s handled properly, you might have been able to do things a little differently. So you know, or if you’re helping to take care of seniors, I mean, a lot of my clients or many of my clients, they’re, they’re very good to their parents and they try to take care of them or, or those kinds of situations.
Dr. Friday 9:36
Keep in mind that there are certain things that we can do, especially the qualified charitable deduction. Very few. Most seniors give something maybe it’s $500. Maybe it’s $1,000 a year. Some give a lot more, but any of it you give if they have a Roth, I mean, I’m sorry, they have a 401 K or an IRA, they’re taking RMDs required minimum distributions. If you schedule that payment from there. It’s 100% tax write off right now. I doubt they’re getting any tax advantage for those smaller dollar amounts.
Dr. Friday 10:08
I will say I have some people to give 20 and $30,000. But this you know, if you’re if your parents or whatever just gives $50 a week or whatever, work that out with them where they can get 100% tax deduction Plus they’ll give to their favorite charity. All right, let’s see. Here we have it, Katie. Hey, why? This is Dr. Friday, who’s on the hot call for me. Hello, yes, there you go. What’s your first name?
Hi, it’s Joe. How are you?
Dr. Friday 10:43
Hey, Joe. I’m good. I just couldn’t read what my gentleman on the other in the line put out there for me. So how you doing Joe?
Doing well doing? Well. Now listen, I’m getting older, aren’t we all?
Dr. Friday 10:57
Yes, we are all of us.
So, in a few several years, I will get a pension from England. I’ve heard all kinds of chatter on the bricks on USA sites and stuff like that. But I’ve heard that if I bring my British pension over here, like somehow my Social Security is lower, or they they take away what my Brits give to make it like more equal or something?
Dr. Friday 11:29
Well, I’m gonna be honest, I have some people that have Canadian, I don’t have a lot of Brits, but I have several candidates. And that hasn’t changed for them. But I’m not an expert on it. And I would hate to say I mean, it’s obviously taxable. Here, we have to do the conversion and put on the taxes because as a US citizen or as a taxpayer in the United States, it will become taxable income. But other than that, I mean, it doesn’t seem quite fair, that there’s something that you got from over there. But we all know tax law is unfair.
So, is there a possibility I could just leave that money over there just to use when I go visit or something and just not tell anybody about it?
Dr. Friday 12:12
No. I mean, no, there really isn’t because England is very well connected to us. Like yes, communicate well, exactly. It’s not like some countries where there may be very little communication, London or England or whatever. They’re very connected with us. So they’re going to be reporting back and forth. And then you get the foo bar, and then there I’ll text you 100% of whatever you have. And that’s, you know, that is the penalty on that is absolutely completely ridiculous. So yeah, not not a not a pretty sight. But I would definitely say that I mean, no one says you have to actually physically bring it here. But you would have to report it.
Report it. Yeah. All right, then. Well, thanks so much.
Dr. Friday 12:57
No problems. We appreciate you. Take care. All right. We’re gonna take our first break. And we’ll get back we’ll take some more your calls. You can get us here in the studio at 615-737-9986. We’ll be right back. All righty. We are back here live in studio, you can reach us at 615-737-9986. Taking your phone calls. And we have one on the line that looks like it’s Trina. Hey, Trina, what can I do for you on this beautiful Saturday?
Hi, I have a question. I wanted to know, I work at a job and I pay taxes out of my money. But at the end of the year, I don’t understand how you can owe money at the end of the year when you’re already paying. So I don’t understand how to how do you balance that out? Well, you don’t owe at the end of the year?
Dr. Friday 13:58
That is a wonderful question. Seriously, I can’t tell you how many times we have to deal with that. Because in my personal opinion, the current tax law is worse and not say the last one was great. But it seems to be even harder for people to truly get to that just breakeven, they’re not looking to get 1000s of dollars back but they certainly don’t want to write a check at the end of the year. And may I’ll ask and you say yes or no, no, that has to be perfect. But are you married?
Dr. Friday 14:26
No. Okay. Do you do more than one job?
Dr. Friday 14:29
Dr. Friday 14:30
And do you have children?
Dr. Friday 14:34
Okay, so I mean, all I can say is you should be claiming single and zero. And I know nowadays it’s not quite that simple used to be able to actually fiscally check off the box single and put in zero dependents and get that withholding, but you need to make sure that that’s what’s coming out because you have no dependents you have nothing to you know to reduce your income. So you should be taking out the maximum withholding without having to take out Extra, I don’t know without looking at it, but and you can also go to irs.gov, check your withholding I think is what it says on the front page.
Dr. Friday 15:08
And you can take a look and see how much they say that should be coming out. But really, it’s between you and your employer. I’m assuming you’re not self employed. Correct? You have a W two. Okay, no. So, you know, so I think you need to just go back and even tell whoever does payroll at your place, if it’s a big company, it’s obviously HR, they have somebody if it’s smaller company might be able to talk to him. But make sure that they have you at zero withholdings other than just the standard single and zero because you should be one of the easiest ones to actually identify. Normally, it’s someone with multiple incomes has a child, but they’re single, but they’re in the higher tax bracket. But as a single zero, no children, nothing else your should your should come out where you’re breaking even at least. I think you need to talk to the HR and make sure do a do W-4 and just make sure that that is showing single and everything else has zeros on it.
One more question, what’s the benefit? Is there a certain type of laws that tell you how much you can make per state in terms of what you make per year, which will make you broke breakeven? Because if you claim zero, you’re going to actually pay more taxes. So you actually have to pay more taxes on the money that you earn since I don’t have any dependents or anything?
Dr. Friday 16:28
Oh, absolutely. Absolutely. Tax called never looks favor of some on someone like ourselves, single zero, anything like that. We’re always going to pay a lot more than a mom with children or married couple with children. Anyone with children pretty much unless you’re a married couple in the higher income brackets, then they don’t get any of the advantages. But but most of the time, absolutely. I mean, having a dependent is why one of the reasons the IRS is actually has a whole group of people auditing single with children situations because a lot of times, friends claim friends children, “Oh, I live with my boyfriend and he claims my kids.” And by law they can’t. But yeah, your time. Thank you. I appreciate you calling. Seriously. Thanks, Trina. All right, let’s hit Nancy. Nancy in Tennessee girl, how you doing?
Mark question is me and my husband, we found married filing joint. And this is the first year that we’ve had to pay in and next year, I’m afraid that we’re gonna have to pay him more because I’ll be getting a promotion. And we both on our W-4 we both do. Single married take I mean, marry take out at a single rate.
Dr. Friday 17:54
Well, I don’t think at the current. Okay, so if you’re doing that you should not, oh, if you’re both claiming single and zero basically married but claiming at the single rate is basically saying that you’re single and zero. If you’re both doing that, again, just like Trina who called in the tax code should not be a problem. If you’re both W-2’s and there’s no children. If there’s children, you should be in a better situation, I would take a wild guess that somebody’s claiming married and zero and married means that you are supporting another individual. And since both of you work, you should both be claiming single and zero.
Right. And I filled out his W-2 because the last year was the first year in our eight years of marriage that he’s worked all year. So we were in a higher, made a lot more money. But I don’t know what else to do. Because we had to pay like $1,050.
Dr. Friday 18:55
Yeah, which is a lot of money when you don’t have any expectation of having to pay that. So I would actually do one of two things. One, since we don’t have a lot of history, it sounds like you were the one that was mainly working for a lot of these years. So we don’t have the combined income situation in the US. But I would actually be looking, I mean, the minimum tax that should be coming out of any of either your paycheck should be about 15% minimum.
Dr. Friday 19:20
So if you look at your pay and say, you know what I made $100 $15 should be in federal withholding. So do a calculation to see if enough taxes because I know some employers. I mean, at least I’ve been told by other people that have employers that basically say, Well, we’re taking out the maximum unless you want extra maybe maybe in this case, we do need an extra $10 A week or something coming out. So you don’t owe $1,000 At the end of the year.
Okay, and we don’t itemize we just have.
Dr. Friday 19:50
Right, that’s the problem. Nobody I mean, I shouldn’t say that but a large number of people cannot itemize so you have no place to actually have deductions. So truly If you the $26,000 standard deduction, and then whatever taxes are do is do you know, I mean? So I would I mean, in my opinion, if if nothing changed from last year to this year, and if you’re looking at your pay stubs and you don’t think anything’s really changed, I would probably have one of you guys go ahead and start having an extra few dollars, whatever, depending if it’s weekly, bi weekly, semi monthly, how often you’re paid, I would just have that extra money come out of the paycheck, just go and ask them to start taking it because the worst thing in the world is to have to come up with money at tax time.
Yeah, yeah. Because it was a shock to us, because we’ve never had a baby before. And I was like, what is going on?
Dr. Friday 20:40
Yeah, it’s like “We’re finally both working. And now looking at now they want more money.” Yeah. So I don’t again, there isn’t a perfect science to this because some depending on the software some employers use and how much money but it sounds like you’re doing it correctly. Again, Trina, you I mean, it sounds like you both are claiming single and married at the single rate is the same as saying single and zero. And both of you need to be claiming that’s the only thing I can say if it sounds like you are so if that if that didn’t work for you, then Nancy, you need to go ahead and just go to your employer, fill out another W four, make sure it’s a single and zero or married at the higher rate of single and then ask for an additional $20 or whatever it works out to being since we’re almost five months into the year to get that extra $1,000 paid in now. Because we’re scenarios we overcompensate and then you get that $1,000 back. best scenario. I mean, you know, I’m saying that, you know, if we overcompensate but the other side of it is if you do it, and then we don’t owe anything at the end of the year, at least you it’s easier to pay $50 or $20 a week or whatever that it is $1,000 at one time.
Okay. Thank you very much.
Dr. Friday 21:55
No problem. Thank you. All right, let’s, let’s hit Rhonda, Rhonda in Mount Juliet, what can I do for you, sweetie?
Hey, my house. And, of course, I paid off all my debts, like off the top. But I didn’t refinance it for a lot of extra because I didn’t come on and pay my house off. But I put it all under one blanket, but then I got like, 20,000 Extra. And I want to take it and I went out and bought a bunch of materials and everything like that to better the property. How much interest? Were I’d be paying on that extra 20,000? Do you think on my taxes?
Dr. Friday 22:39
Well, I mean, it’s probably I mean, depending on what rate you actually received. I mean, if it’s 6% 7%, you know, I mean, you’re talking maybe $150 a month, a year? or so. I mean, I’m not a not a mortgage expert, far from it. But I don’t think it’s going to be enough to probably, I mean, depending Are you single Rhonda, are you married?
No, I’m talking about because I took out the loan.
Dr. Friday 23:04
Right? But I mean, itemization if you’re single, it’s gonna be like, you have to have more than like, $13,000 of interest. And if you’re married, it’s gonna be like 25 or 26,000. Most people have a very difficult time itemizing. So that’s the reason I was asking that is if I mean, you can’t just I mean, most mortgage interest under the current tax law is having a difficult time doing that, as far as taking out that, that that loan, okay, so it the loan may not be tax deductible.
The extra money that I got out of it?
Dr. Friday 23:42
It may or may not be because it’d be if your interest rate is not high enough on 20,000 It’s, you’d be ridiculous that you’re paying $10,000 a year on that interest. So yeah, I don’t honestly think that you’re probably going to have any tax deduction if if we’re talking 2030 $40,000 Sorry.
Yeah, yeah, cuz my interest rates only 4.150.
Dr. Friday 24:07
So yeah, you’re not gonna see any advantage from your, from your taxes on this.
Okay, I don’t have to claim it, or do I have to.
Dr. Friday 24:17
Nope, it’s not taxable income either.
Wow. Well, you just made my day!
Dr. Friday 24:23
Oh, good. All right, girl. We’re gonna take a quick break here. Yeah, thank you. Appreciate it. We’ll take a quick break and we get back we can get some more of your phone calls at 615-737-9986. We are back here live in studio and if you want to join us, it’s really easy. 615-737-9986. We are taking your phone calls talking about my favorite subject and apparently, we’ve got several people that are dealing with payroll issues, payroll, I guess you would say basically making sure that the withholding and is going well.
Dr. Friday 25:07
And I’ll be honest with you, it’s not a perfect science. I know some people would like to probably think it shouldn’t be. But it’s not because they changed the rules. For one, they tried to make it simpler. So if you have two jobs, if you have this, if you have that, they changed a lot of that stuff. And then you’re sitting there going to really work because now we have more people that are having more time. And I think this year, we had more people that actually had a situation where they ended up owing money this year, because the last couple of years, it was simpler, I think, because we had money coming in 2020 and 2021, we receive stimulus money three different times, they gave some extra money out for charity, there was several different payment plans for PPP, PPP one, PPP two, etc.
Dr. Friday 26:00
All of those things were out there. So we had money coming in all the time, from all kinds of different directions. And now 2023 comes along, and 2022, I should say, and now we’re in 2023. And we haven’t had that kind of thing, we haven’t had the government handing out money, which mean, you guys probably know my opinion on that. Not necessarily the best thing in the world. Anytime the government gives out money, most likely, that means we’re going to have to pay it back. And it’s going to be a lot more paid back than what we actually received.
Dr. Friday 26:32
So probably not going to be the best plan. But I do know a lot of individuals had that extra money. And they were able to do some things that we actually didn’t have to worry about paying tax on now. We’re back to full, both parents working again, everybody doing their things again. And I think people are finding out that it’s been a little different in the tax code. So you do want to definitely take a look, if you haven’t filed your 2020 TOS yet, I think you’re going to find that it could be a little different than the last couple of years, what you had going on. But it is always important to be able to make sure that you understand where your tax dollars are.
Dr. Friday 27:12
Because, again, some people are great savers. So hey, we come back and we say there’s a $5,000 difference. And they’re sitting there going, Okay, I’m not happy about it. But I have the money, no problem. You other people, you can tell them you owe $500. And they’re like I’m living paycheck to paycheck, I don’t have $500 to give to the IRS right now, which if you don’t pay it in the right time, now that 500 becomes 1000 very quickly.
Dr. Friday 27:38
And it can just turn into more and more tax issues. So if you’re having any of those problems, if you’re trying to figure out how to deal with either back IRS issues, I’m an enrolled agent licensed by the Internal Revenue Service to do taxes and representation. That’s really pretty much all we do. My brother handles the bookkeeping side of the firm, I handle the taxes. And so if you are behind on taxes, you’ve had tax issues, you’ve receiving love letters from the IRS, and you’re not too sure exactly how to respond.
Dr. Friday 28:08
Or maybe you haven’t been responding because you’re just like, I don’t know what I’m supposed to do with this information, I can’t answer it, I don’t have any money to pay them, etc, etc, then you need to give our office a call at 615-367-0819. That is my direct number. And you’ll be able to reach me on Monday we can talk and set up a time to go over see if there’s any kind of resolution that we would be able to help you with see if there’s a way of making things a little bit better. It may be that you can be non collectible. Everyone always hears about the Fresh Start Program. Or you can if you listen to the station all the time, you may hear about attorneys that basically talk about how the IRS could put you in jail. I mean, some of the things I’m not saying they’re incorrect, it’s true.
Dr. Friday 28:51
The IRS has their own courts, the IRS can get liens or levies or seizure of warrants easily. They don’t necessarily have to go through a tax court situation, unlike if you, you know, hit somebody with your car, you’re going to end up in court possibly and you both gets to tell your side of the story. IRS is not quite like that. But they’re also not rushing to put people in jail. I think the less than 50 people a year go to jail due to tax evasion. And in most of those cases, it’s true tax evasion or illegally selling something be that drugs or something and they’re brought down Al Capone everyone knows about Wesley Snipes we all know about.
Dr. Friday 29:30
Those are the kinds of situations where you either got really bad tax advice in Wesley Snipes situation, trying to say that taxes was an elective is something that we could voluntarily do. I’m not too sure where he got that advice, but it did end up putting them in jail and millions of dollars later, but taxes just for any of you that are listening. My personal opinion and I’m pretty sure the opinion of anybody that works at the Internal Revenue Service.
Dr. Friday 29:57
Taxes are not elective. It is something that we have to find All we have to pay and we are responsible for being the person that does that the IRS doesn’t just assess and say, here’s how much money it is our job to file taxes. So if you haven’t filed your taxes, if you haven’t dealt with your tax issue, the IRS can handle that for you. And I guarantee you, that is not what you want, you don’t want the IRS to be coming at you, they can take money out of your bank, without any real notice, they usually will send out a letter that says in 30 days, we have the ability to levy your lien your bank, take a levy from your your bank account, and they can take every doll that’s in there up to the amount that they have.
Dr. Friday 30:37
But what you may or may not know is it’s only on the day that the bank receives that letter, it’s not for every day that you you have it. But again, if your rent money’s in there, and they take it, it’s not going to be something you want, and they will not give it back. I mean, again, so often when people come in, and we talk about smart freshstart programs, or the offer and compromise program, and you start talking about how much equity people have in their homes, how much money they have in their 401 Ks. And they’re like, Well, I’ve done, I’ve paid this my whole life.
Dr. Friday 31:07
Or I’ve built this up over the last, you know, 10 years. But that happened to me the same time that you chose not to pay the IRS, they’re going to sit there and say, Wait a second, you made your mortgage payment, you didn’t pay us you put money into a retirement account, you didn’t pay us. So that money is ours. It’s pretty simple. I mean, you you wouldn’t want your friend to go out and go buy a new car if he owed you money. Because then you’re gonna say, Well, hey, that car is mine. Because you went and took my money to go buy that new car? Well, that’s the exact same mentality the IRS has in their tax law. So if you are at all considering one need to actually truly get straight with the IRS, and it’s not just something you say, “Oh, yeah, I gotta I gotta deal with the IRS.” But it’s not just so much if I make a deal, and I say, “Okay, you know what? The IRS is going to take this, we can get you straightened out, and we’re going to do all this, blah, blah, blah.”
Dr. Friday 31:58
And the IRS agreed, you have to stay current for the next five years. And if you don’t, all that hard work, all of that, that we did, can go by the wayside, they can basically disallow all of it, bring back all the tax liability you have. And that’s what you don’t want. So it’s not always just a matter of making a deal with the IRS. Sometimes it’s making a deal with the IRS and making sure that the taxpayer is going to be able to put a system in play, to keep every thing going, it’s so important to be able to keep everything going once we make that correction on your taxes. It’s not like bankruptcy, where every few years, you could physically go bankrupt.
Dr. Friday 32:42
Lisa used to be able to I’m not absolutely positive, you can, but you know, used to be well, every 510 years, I’ll just go bankrupt. And that’s all there is to it. That is not the way it is people, not the way things are gonna go and not the way that you want things to actually happen. So if you are serious about wanting to get your life together and get the IRS off your back and get actually not just that, but move forward with paying taxes and doing things you want to do well, thank you certainly give us a call 615-367-0819. But if you want to join us here in the studio, if you’ve got a question about that, or maybe you just have a question about dealing with, like I say a lot of estate planning, we get into it many times and you have other state issues, or maybe you just want to have a question if you have one of those anything to do with taxes or money.
Dr. Friday 33:30
I’m pretty straightforward on all that and you can reach us here in the studio 615-737-9986 is the number here in the studio. And again, we are talking about taxes, getting your tax life together. It’s kind of like cleaning house, right? When you want to go through all your drawers and start cleaning everything out, make sure you’ve got everything right and perfect. That’s what we want to do when it comes to this kind of situation as well. We want to make sure everything is nice and organized. So if you have a question 615-737-9986. Some of the rules have changed the set in 2025. Keep remember that our tax law will change in 2025. Some of the provisions that came into effect under President Trump the tax cut and Jobs Act expires and starts as of January 1, January 1 of 2026. We will have a new tax law in place it will revert back to what was on the table back in 2017. So that means the biggest thing and a lot of times people are sitting there going well. Well how does that affect us?
Dr. Friday 33:31
The biggest thing is we’re in the lowest taxes that we’ve ever seen pretty much before tax really came in. So the 12% Well now go back up to 15 and then fear so so the first 12 That’s 3% going up and then people that are in the 22 will go up to 25 So that’s a 6% increase, and so on and so on. And it’s going to be moving its way up all the way through the tax code back up to 39 and a half. So it is an important situation where we want to make sure that if you are thinking about selling some real estate, or if you are thinking about doing some tax planning, you need to take into account the tax planning that we have. Why don’t we go ahead and hit Rosie real quick, and then we’ll take the break. Hey, Rosie, that way, not the way to do it. What can I do for you, sweetie?
Hi, Dr. Friday, I was just listening, and what my husband and I do, and I know this is probably the nerdiest thing to do. And we do have fixed income, like we get paid the same every month. But I always in June, I always do an estimated tax return for the year. And then in September, I did the same thing, you know, just quarterly, right, just to make sure we’re on track. And, and so I was just wondering if that would help people.
Dr. Friday 36:07
It would, but you’re expecting me, I hate to say this, but you you sound like you’re a fairly organized individual. A lot of people don’t do their own taxes. So they don’t know, there’s some free software out there people can use to get the basic information. And I do know on irs.gov, if you’re just a W two person you could put in your earnings. And we’ll tell you how much should be coming out. But do you have multiple sources of income?
No, sounds easy for us. Because we’re, you know, one, two incomes, my husband and I, and I know that it’s gonna be because it’s fixed salaries.
Dr. Friday 36:47
Right. And that sounds a lot like Trina and them, were saying that they had a single w two. So in their case, I mean, again, it shouldn’t be that complicated. But I like the theory, that’s a great idea. And that’s what when people come into my office, often what we do is the same thing, we actually put in the information just to see what the tax code would be calculating. You know where you’re at. And then that way, for some reason, if it starts showing that you’re not heavy enough withholding, you still have time to either put some money aside in a savings account, or have your employer start adjusting your withholding, which I like, because that way, you know, you actually aren’t being shocked come March or February or March when you actually file the tax return the next year and says, you know, “Hey, I thought we were calling it close.” So you kind of knew, or I expected to be refund or whatever. But that’s a great idea. And the people listening if you have a advantage to going onto a software or just getting something that will calculate the tax so she with a single income like that, I would think that would be pretty easy to make sure that that was but that’s a wonderful idea, Rosie seriously.
Thank you. Um, I’ve been doing it for like 20 years. And, and, and I just like literally take the old fashioned texturing forms and do a paper return. Just to make sure you know, and, and so yeah, I just wanted to throw that out there as an idea. So hopefully Greg will help some, but hopefully people are listening.
Dr. Friday 38:13
Thank you, Rosie. Appreciate. Thank you. All right. We’re gonna take a quick break. When we get back, we’ll get to the rest of the phone call 615-737-9986. We’ll be right back with the Dr. Friday show. All righty. We are back here live in studio on this beautiful Saturday. And if you’ve got questions, and still a little time on the clock, so you can join us at 615-737-9986. Talking a little bit I got an email a little bit about long term capital gains, everyone does still realize that we do have a 0% capital gains rates for people in the long term capital gains. You do have to be basically in the 15% tax bracket or less including those gains, then you have the 15 and then the 20. And then don’t forget the 3.8 surtax on investment income for single filers. Income is 200,000 for joint 250. There’s that wonderful marriage penalty that you that you get sometimes in the tax code.
Dr. Friday 39:23
That’s why it’s not always fair, but the 0% Right, which I sometimes think people don’t think about when they’re, maybe they’ve got something they want to sell or do and they so worried about not doing it that sometimes they they don’t take into account how they might be able to do it for zero tax. So that would mean that in 2023 the taxable income can be 44,625 for a single return 50,750 for head of household and 89,250 for a joint filer. And then, that way it’s important to have Understand these tax codes, right? So you go zero, let’s just take a single person, you say, “Okay, if you’re making 44,625, and it includes all your income and your capital gains, you’ll pay zero capital gains rates.”
Dr. Friday 40:13
Then on the other end, if you are a single person and all of your capital gains plus your income exceeds 492,301, you’re now in the 20. They always say the 20% tax rate, it is the 20% capital gains, but they’re going to also hit you with that 3.8 surcharge for investment income. So it’s really 23.8 that you’re going to pay on all money above that dollar amount. So the game is how do you try to figure out which way or in the middle of one of those situations because most people think capital gains rates, all they think, is 15%.
Dr. Friday 40:50
Now in the favor of the individual that may have thought they’re gonna pay 15%, and they end up paying zero? Well, they never seem to complain much about that situation. But how about the person that is basically thinking they will pay 15%, but they end up paying 23, or 18.8%, because even though you are at the, you’re still under the 20% tax bracket, remember anybody in the 15% tax bracket and you make more than 200,000, for a single or 250,000, for a married couple, that’s going to kick you into the 18.8% tax bracket, these numbers are so important, it’s so very important to understand where why, what and how you’re supposed to be able to do anything with your taxes, if you don’t plan if you don’t sit down and say, “Hey, you know what? I don’t know for sure how this is gonna work. But here’s my problem.”
Dr. Friday 41:50
And then you have somebody like myself and enrolled agent or your tax person, use them during the offseason, you know, let them because it’s so difficult sometimes to really do sit down and plan for an hour, hour and a half of just really understanding your tax situation in the middle of what we call tax season, what is better is for you to be able to basically go forward and say, “Hey, here’s my scenarios.” Maybe it’s a conversion, maybe you want to do a Roth conversion of some sort. And then again, those kinds of situations, Roth Conversions can be great you but if you don’t have it planned out my friends, a Roth conversion can be a freaking nightmare, because you forgot that you were going to have to pay taxes on the money that you converted, and you didn’t get an assessment on how much that was going to be.
Dr. Friday 42:37
So the next thing you know, you now have to come up with, you know, 2030 40,000, I had a gentleman did a Roth conversion. At the same time, his financial planner, actually had done a balancing a rebalancing of his portfolio, ended up costing him somewhere in the ballpark of of 50, or $60,000. Because because the conversion was not done at the rate that he thought it was going to be. So very important, that everything is moving in the right direction that you’re doing everything you should be doing, and that you have somebody that’s going to hopefully give you that information so that you can actually sit down and figure out what is my next step? How much money is this really going to cost me? How do I make this work for for everybody, you know, especially for my bank account.
Dr. Friday 43:27
So if you don’t know, you know, if you have a decided situations where something’s coming up, and you don’t already have someone that you’re working with, you might want to give our office a call at 615-367-0819 on Monday, and we can get you on the calendar to sit down maybe do some tax planning to if nothing else gets you onto the right page as far as what expectations you might have come in. Because sometimes life can give you some pretty interesting little interesting little shakes, I guess we can call it and if you’re not prepared for those, then sometimes that can get you sometimes it’s a wonderful thing. I had a gentleman last year win the lottery.
Dr. Friday 44:04
I mean, how can that be a bad thing no matter what. But when you have to write a check for $330,000 on an off of the million, and then you know, then you when you’ve already pretty much spent all $1 million, you have to have some evaluation on how that’s really going to work. And if I had if somebody had come to me and they won the lottery before they had already taken the money out, I would have suggested possibly not taking out all of the money. I know some people think that that’s a great idea.
Dr. Friday 44:08
But in some cases, unless you are very good with your money and you have a strong financial team that will work with you on how to make that money grow and what you’re going to do an annuity maybe because some of these annuities actually not only your lifetime, but they’ll go through the lifetime of the next person. It is a smarter situation because you know you win 2.5 million but then if you take the new If you don’t, you get a million dollars. Sounds like a lot of money, guys not so much by the time you get out of doing everything you need to do.
Dr. Friday 45:07
So, again, if you have tax questions, if you’re going to be selling or coming into some income, and you’re trying to figure out what’s the best way to keep the taxes as low as possible, and prepare yourself for whatever tax consequence that’s going to be, or you just have friends or family that maybe haven’t filed taxes for a number of years, sometimes I have two cases right now where the kids Senate kind of got involved with helping mom and dad out and found out mom and dad hadn’t been filing taxes, and they should have been now some seniors should not have to worry about filing taxes.
Dr. Friday 45:40
But there are some that should have been in this case, they should have been filing, they just didn’t. And now the kids are trying to make sure that everything is done correctly, because you know, some point all of us are going to leave this world and you don’t want to leave a mess. So if you’ve got someone you know that needs help, you want to set up a free consult to go over the initial tax situation, the phone number reaches at 615-367-0819, you can check us out on the web at drfriday.com. That’s drfriday.com. Or you can email firstname.lastname@example.org. As an enrolled agent, my job is to help you try to figure out the best ways to get back on track with the IRS to give you representation.
Dr. Friday 46:32
So you don’t feel like you’re kind of walking up to the door without any protection at all. There are rules that the IRS has to follow. There are regulations and I do understand guys, every time you pick up the phone, I’ve got two cases where they have to call the IRS to get their six digit PIN for us to file the tax return again, if you can’t get a hold of somebody, how do you expect me to be able to do something and they’re they’re having they’re getting a bit frustrated. So I know not everyone’s in the mood to get new hires of the IRS.
Dr. Friday 47:03
I’m not one either, if they’re going to put them all in audits, but it would be nice to have a few more people that can answer phones and to deal with resolution. So we don’t have so many people that look like they owe money but they don’t because the IRS isn’t answering the call. So hopefully we’ll get that again if you join us 615-367-0819 The number to my office 615-367-0819 and email email@example.com I hope you guys have an awesome Saturday. Been a good one for me. Thank you for listening copy later.