Welcome to the Dr. Friday Radio Show! In this episode, Dr. Friday takes on the latest tax updates, answers the caller’s questions, and talks over the following topics:
- Dr. Friday’s Tax Tips For the Tax Season
- Did I Receive the Child Tax Credit?
- File Your Tax Extensions Before It’s Too Late
- What If I Sell My primary Property?
- How To Report Your Capital Loss on Taxes
- The Changes in Tax Laws
- How To Get Your Tax Details In Order
- Don’t Leave Tax Money On the Table
- How To Get Back on Track With the IRS
- Taxes For Individuals Are Due April 18
and much more!
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 0:27
All right, the doctor is in the house and we are counting down we are in April. Everyone, Tax Day is April the 18th. That means if you’re a procrastinator and you’re like, “Oh, I’m going to file my taxes on time,” you might want to think about preparing for those tax returns.
Dr. Friday 0:43
There’s a few extra questions, you need to make sure you do have your advanced child tax credit information, you need to make sure that you have you know, your 1400 or your stimulus money that you received it or not. And I’m telling every single person seriously, I’ve had more than one person that has come and said, “No, no, no, I would have known if that $1,400.”
Dr. Friday 1:03
Or it could have been a maybe not exactly 14, depending on your income bracket. That does means test out. So some people had less than 14 when they went looking, but it will say EIP 3 or, you know, basically it’s the third stimulus check. And so it will say that the other ones for the children will say CTC, child tax credits.
Dr. Friday 1:25
And again, a lot of people are saying, “Oh, no, no, I didn’t get it.”And I will say least on the Child Tax Credit, if you didn’t receive it, it’s able to be put in, in you know, theoretically. And if you received it and the child is not your dependent this year, it will become income to you. Now on the stimulus money.
Dr. Friday 1:47
That is not the case, if you received it and you were not entitled or if you did not receive it. It’s not taxable. I am just telling you last year, we held up a lot of tax returns because people kept saying, Oh, I didn’t get especially the $600 even though we were specifically saying it probably hit in January, a lot of people said, “No, no, no, I didn’t get it. Last year, I didn’t get it.”
Dr. Friday 2:09
And then the IRS changed the tax return. We don’t want to do that. In fact, if you’re my client, most of you guys will know that I pacifically tell you, we will claim it because the only way for you to get your stimulus money, if you did not receive it through the mail are in a direct deposit is to file a tax return.
Dr. Friday 2:27
So we will file it and we’ll claim it on the tax return. But I will use the if there’s money do suggest my client pay the money do and then wait for that refund check to come back versus claiming them and it will reduce the amount due and then if they disallow it because they say you did receive it, or your parents received it because you were a dependent last year for them, or the bank account you had was not correct on the tax return they had in 2020.
Dr. Friday 2:57
And the bank still has to reject it. Any of those things could have happened. Then, you know, you’ll have to chase it afterwards. But the first thing you need to do is obviously get your taxes filed and prepare to move that direction and do what you need to do. Make sure you have all of your tax documents. It seems like this year, more people are still providing me documentations later in fact, we’ve had a couple of already that we’ve had to amend because we missed something and didn’t know to expect it.
Dr. Friday 3:26
So again, just double check all of your Coinbase wallets, BlockFi, you know, Robin Hood’s you know, TD Ameritrade all those accounts, if there is any dividends, interest or stock trades, those are going to create a win or lose situation. Also, if you have obviously worked more than one job, you sold some property, you inherited property. There’s a misconception I’ve heard out there on a couple of them where you know, just because it’s inherited property somehow you don’t need to report it on your tax return. That is true in some cases.
Dr. Friday 4:01
But in many cases, it’s basically sold in your name or in many siblings names. And in that case, the IRS is only going to know about the amount you’re paying because it’s on a form 1099 S. So you need to know what was the basis that you were entitled and as fast as real estate is going up, If you had an inherited property in March or April and you didn’t sell it till September or October. In all honesty, you probably have a gain on that property.
Dr. Friday 4:31
Because it was worth in March is is probably less than it was worth when you sold it you may have been in a couple of with the bidding wars, right? They tried to sell it for the price, and then people offered them more money. And no one’s silly enough to say, “I don’t want more money to pay money to the IRS.” At least I hope you’re not because the highest tax bracket for capital gains is a little less than 25%. I would still like to keep that 75%.
Dr. Friday 4:57
I’ve had more than one person saying, “Oh I don’t want to I don’t want to earn any more money, I don’t want to do this because I have to pay the IRS.” None of us like to pay the IRS guys. But to be honest, even if you’re in the absolute highest tax brackets, which is 37%. And if you have a state income tax, it could be as high as 12%. That’s what, 49%?
Dr. Friday 5:20
So maybe you’re still going to keep 50%. And that would be a person that is in the million dollar brat tax bracket, that would have that. So you know, you make a million, you have to give 50% to the IRS and you get 50% to yourself. I’m not saying it’s fair, I totally don’t agree with that. But it is still worth going out and building and making money.
Dr. Friday 5:20
So don’t ever not sell something or do something just because, you know, people say “Well, I don’t want to do that,” because you don’t what to pay the IRS money. Now there are ways sometimes I do find that people kind of make decisions, not knowing what the taxes are. And then of course, they’re, they’re blown away, because in some cases, they went and spent the money, maybe one of the biggest misconceptions that’s been out, and I’ve been doing a couple speaking engagements with real estate.
Dr. Friday 6:06
And I don’t know if it’s the real estate professionals, or if it’s just individuals that hear things. But if you sell your primary property, and you make money on it, and keep in mind, the tax law we have right now in the books is the exclusion of 250,000, up to 500,000. If you’re a married couple, you’ve lived in the home two out of five years, and you have not excluded a 200 if you have not had the exclusion in the last two years. So if you meet those two scenarios, then you sell a house, let’s say you you purchase the house for 200,000.
Dr. Friday 6:40
And you sell it for 400,000, you had a single person would have an exclusion of 250. So they theoretically could have sold it for 450. No tax. But if that same home, sold it purchased it for 200 and sold it for 800, which we’re seeing out there guys. So they the first 450 would be free, but the remaining $350,000 is taxable. It is not that you turn around and reinvested into some other property, that you have an exclusion that tax law disappeared a long time ago, that is not the current tax law that we are functioning under again, we have a 250 or $500 exclusion on primary homes, you must live in them two out of five years, and that have taken the exclusion in the last two years.
Dr. Friday 6:43
That is the exact tax law. So you need to make sure that you are meeting these criterias and doing what you have to do to make sure that you you know you can maximize tax deductions. You know, sometimes people will say, Well, you know, I just had to sell it because it was a great deal. I totally understand that. But don’t be surprised if it’s not the best tax deal, right? Getting the best deal and a home may not always mean it’s the best tax situation.
Dr. Friday 7:54
And there can be some ways that you can nullify a little the taxes if you know what the tax law is, and what you need to do. So alright, so if you want to join the show, you can the phone line here is 615-737-9986. Taking your calls, as many of you guys know, I’m an enrolled agent licensed by the Internal Revenue Service due to taxes and representation.
Dr. Friday 8:21
So I’ve been doing this for almost 25 years. And I’ll tell you, it’s a very busy tax season this year, last year seem to think last year was a little simpler only because they extended it right. So we had more time to finish taxes on time, this year, we’re going to be hitting a few extra days one extra weekend. And at this point anyone, we’re only going to be able to file extensions for anyone new coming through the doors, because we don’t have the ability to see more clients.
Dr. Friday 8:50
But if you’re doing your own taxes, then it you know, you need to go ahead and start preparing them start seeing if anything has been triggered, if you have any kind of unique or different situation, so you have time to actually review them and prepare them because you know, anyone preparing taxes, especially at the tax season time, you need to make sure you’re reviewing that work because a lot of times they don’t see certain documents, they don’t get the paperwork that was turned in.
Dr. Friday 9:18
So make sure that you review that information and then contact them if there’s any changes that need to be done. But again, if you want to join the show, maybe you have a question, you’ve started a new business, maybe it’s time to get back in work, and you’ve started a new business and you’re trying to figure out should I be an LLC? Should I be a corporation? Should I be a Sub S Corporation should be a partnership, so it’d be a sole proprietorship. Really what’s the difference? And how does that affect my taxes because in some cases?
Dr. Friday 9:42
Some of them are really truly more for legal. And that’s not what I advise at all on and some are better for tax situations. And there are certain times you want to go into those tax situations versus other times and you know there is ways of moving from a sole proprietorship to an LLC or sole proprietorship to a Sub S Corporation, and so you want to make sure that you’re doing what’s best for you to save taxes, as well as what’s going to be the best place for you to grow your business.
Dr. Friday 10:11
Because again, sometimes paying your taxes and maximizing them to the ultimate lowest isn’t always what’s gonna be best for you. Because sometimes you do have to be accountable for mortgages or lines of credits. And you know, just because you’re able to write off a million dollars worth of something doesn’t mean that you you know, you need to be smart, maximize your tax deductions that you can legitimize some people I sometimes think push very hard to make sure that they’re able to keep their tax bill low, but then they, you know.
Dr. Friday 10:42
I mean, I was auditing one tax return the other day, and I mean, to be quite honest with you 100% of a person cell phone, if it’s your only phone line, I don’t care if you’re, if you’re doing business every day, all day. The fact is, most of us have personal use, it’s that simple. You talk to your family, you talk to a friend, you know, you talk to your mother, your father, whatever it might be, there is personal use. And then under that situation, you need to claim not 100%.
Dr. Friday 11:09
And in some cases, you are married with multiple children, and the children and everybody have devices and phones. So taking 100% of a phone bill that might have four or five phones on it. And you have the ability I just say use common sense. Same thing with home offices, keep in mind tax law says a home office is room you cannot a use for other things.
Dr. Friday 11:31
So that means your kitchen table that you think is a little desk in the corner of the kitchen. You know, that is not a home office, according to the IRS. Okay? I mean, nowadays, especially with things being so much more mobile, I mean, I have people that run an entire business off a laptop, and they can sit on their so far at the kitchen table and do it, they don’t have an actual workspace where they you know that they need to do things.
Dr. Friday 11:54
So if that is the case, you’re not going to qualify truly for a home office. So again, you know, understanding the tax laws and making them work the maximum for you, but also being able to claim what you should be claiming and be able to sleep at night, right? I mean, do your taxes to the best of the I mean, I don’t think anyone should leave money on the table.
Dr. Friday 12:17
But on the other hand, did you really put 45,000 Miles evenly 45,000 miles on your car last year? You know, these are the kinds of things you need to be able to document mileage logs are huge for the IRS, especially for like real estate professionals, Uber drivers, any of them because I know with Uber and stuff, they’ll give the total miles of what they show they paid you for right. But then you you know a lot of people will come in and they’ll double it.
Dr. Friday 12:48
And I’m not saying that some of that is correct, and some isn’t. But how documented is it? You know, if they’re paying me for that I had to do a round trip every time How can you show that to the IRS that you actually didn’t pick up another driver that every single time you actually made a round trip to the airport to pick somebody else up you didn’t you know, you didn’t go home after it you need to you know, it’s something else that is not countable miles. So being on top of your taxes, so you can actually sleep is a pretty important thing I think I don’t like I like to put my taxes out there. And then I like to be able to put them to bed and hope that I don’t have to but if I have to come back and visit them. I’ve already got the information where it’s at and what I need to do.
Dr. Friday 13:30
So again, if you want to join the show, you can phone number 615-737-9986. We are taking your calls live we’ll take a quick break. We’ll be right back with the doctor Friday show.
Dr. Friday 13:53
This is Dr. Friday we are back here live in studio. This is the doctor Friday show and we talk about taxes which is absolutely my favorite subject anyways, so a better job they can have. Alright, let’s go to the phone lines. We’ve got Terry from Thompson station.
Hi. Good. I’m doing good and helping your team. Yes, sir. No, I have a daughter who’s graduated from she’s she’s actually 19 years old. graduated out of school, but now she’s going to college. And I want to know, I mostly pay for everything except she pays for a few things. And she’s still living with us. So can I claim?
Dr. Friday 14:39
Yeah, we’ll definitely do you know how much your income she’s earned. If she has earned income?
It was 16,000.
Dr. Friday 14:47
Okay, well, in theory that would not make her your dependents. To be quite honest. If she made $16,000. She would probably file on her own unless you can meet the 50% tests which basically means that you provided more than 50% of her care, you may still be able to do that. I mean, that would be room insurance, car insurance, health insurance, you know, I mean, food, what it would cost if she had to rent a facility, you may find that you still meet that that criteria, and that she was still your dependents. But I would actually probably crunched some numbers just to make sure you had the rules on your side. Does that make sense? What I’m saying, sir?
I’ll have to think about it. What is what about the income? Am I able to get that?
Dr. Friday 15:41
Well, there wouldn’t be any child credit or an income if you if your income is low enough, you can still qualify for the earned income, you might also if she’s in college, or get the child and get the college credit, which can be up to $2,500. So there is some advantages if she’s in school and being able to claim her, absolutely.
Thank you, Dr. Friday
Dr. Friday 16:07
Thanks. Bye, bye. All right, that’s a man that’s thinking. Tax law basically says, If a child makes more than the 12,000, you know, the standard deduction, then you’re pretty much going to be needing to at least justify their care. So again, there is a 50% care law, which basically says, If you provide more than 50% of the cost of their care, and a lot of times if you sit down and really figure out what the medical, and the car insurance is, plus the fear of providing them food, you know, all that.
Dr. Friday 16:39
And she may have been saving her money and never know, kids are pretty good about doing that kind of thing. But in theory, they would add it up and say, Well, is he spending more than $32,000 a year on his child? Or at least you know, 50% of what she more than she made? So I don’t know the answer to that one. But I would say I would definitely think about it and see which way is going to work because she would also qualify possibly for the earned income credit of at least the college credit, I don’t know if she would actually get the earned income credit, because she probably makes too much money.
Dr. Friday 17:11
So that would be a question to make sure that you’re following up on. But if you have a question, you can join the show 615-737-9986, taking your calls, talking about my absolute favorite subject. And remember, you know, this is the one time of the year that this show is actually probably in fashion, right? I mean, because we all have to file taxes, or we all need to start thinking about extensions.
Dr. Friday 17:41
I know in our office where I’ve been filing extensions for a while, I am a little bit over cautious about filing extensions, even if you end up filing your taxes on time, I’m a big one for filing an extension, just in case we never know what’s going to come up. And maybe you’re not going to be if especially if you file your own taxes, you don’t know for sure something doesn’t happen. And you have to file in, you know, a day late $1, you know, whatever.
Dr. Friday 18:06
Now, keep in mind, it does not repeat, it does not extend your money. So if you owe money, and the only reason you’re filing the extension is because you think that you have the ability to delay paying the IRS well, you’re going to have penalties and interest failure to file failure to pay penalties. That’s going to happen anyway. So just want to make sure it isn’t extending the money. It is extending the paperwork of what you have on that situation. Oh my goodness, we got a few. Let’s hit Matthew, real quick. Let’s go to Matthew. Hi, bud.
I’m good. We just moved down here to Nashville, back in August, and we had a house in Indiana. We had it built. We only lived in it for probably, I think, a year and a half. I just wanted to know do I have to pay taxes on that profit?
Dr. Friday 19:03
Absolutely. You don’t meet the the home exclusion because you have to be in it over two years or at least two years to the exact day. So is there any hope in the next five years, you know, move back up there and live there for six months? No. Just trying trying to pull that out there. I’m not blaming.
It was the weather in Indiana.
Dr. Friday 19:28
Yeah, well, I was born in Munster, Indiana, up by the Chicago border there. So I do know what Indiana weather is somewhat like. So, but yes, you can put me back in the snow. So the answer to your question, the main question is yes. Because you don’t get the exclusion. You’re going to be dealing with the capital gains.
Capital Gains Tax?
Dr. Friday 19:49
Yes. So you will get long term capital gains. So we’ll start at 15 Go up to 18.8 and then end up at 23.8 Depending on the amount of money and your own overall income.
Okay, yeah, cuz the CPA told me if we didn’t live there for longer than two to five years, I wouldn’t have to pay capital gains.
Dr. Friday 20:12
Well, you didn’t make the two years. I think that’s what he was trying to say you need to be there two out of five years.
Okay, we might have been, I don’t know, we moved. I’ll have to do the dates, I guess to see exactly how long was there.
Dr. Friday 20:25
I mean, it’d be it would be worth it. I mean, seriously, it’d be worth it look, and make sure because if you were there, the two years, then you had the $500,000 exclusion, it sounds like you might be married. Or if you’re single $250,000 exclusion above what you paid for it, which will cover most of the capital gains.
Okay. Okay. Alrighty. I appreciate it.
Dr. Friday 20:45
Thanks, Mike. Appreciate the call. Alright, let’s go to Okay, Kyle. You know, what, I’m good.
Good. Hey, I’m calling about the business mileage I work as an insurance inspector. For a big company out of New York, I travel all through middle Tennessee. And I think give me 40 cents a mile. And I’m kind of confused. I always thought, you know, that’s nice and smile. But can’t you claim the government rate being 56 cents a mile? Or no?
Dr. Friday 21:17
Are you a W two, Kyle? Yes, then you can’t I mean, the under the current law, there is no additional write off, there used to be the 2106 where you could have put in your total miles claim the 40 cents a mile and got the difference, like this year would be 58 cents, or whatever, you know, but you don’t have that ability any longer under the current tax law. So you basically paid 40 cents, you need to talk to them about raising their rates.
Well, that’s not gonna happen. But I appreciate you very much. You’ve been very informative.
Dr. Friday 21:52
Thanks, Kyle. I appreciate it. All right. Let’s see here. Let’s go ahead. Who you what Christina? Christina. Hey, Christina. What’s happening?
Hey, oh, my daughter is 20 years old. She is in college. She is actually commuting. So she’s living at home. And she was working on her FASFA and she needed to file her taxes. And when she started doing her taxes, she was doing a free program. But she received a 1099 for some work that she did at a local camp. So she can no longer use or that not that we could find a free Well, free no 800 to file online.
Dr. Friday 22:34
That is a according I mean, according to most of the free programs. That is for a self employed person which requires a Schedule C, therefore you’re going to be on a different program and it will not be free.
Right. So which should be better off to do it on paper and mail it in?
Dr. Friday 22:54
Oh my gosh, you’re talking to a person that does not do taxes on paper. And two reasons I don’t one is it will take them years and she’s doing FASFA and it’ll take them right now. There’s still millions of tax returns where people do that every year and they’ve got 2020 20 and 2021 taxes that people have mailed in, if she needs to have it posted to be able to pull it and I think they do use the prior year for FASFA. But either way, you know, truly I think she needs to just probably bite the bullet pay for whatever the fee is and get it he file so that she can get into FASFA because they’ll pull it from the IRS transcripts.
Right. You’re right it is from much I guess she was just trying to get it filed for it hers done for this past year. Because she probably only made she did that she did some teaching assistant at the college that she’s attending. So she probably didn’t make more than 3000.
Dr. Friday 23:50
But she said she’s still your independent, correct. Independent at home with making 93,000. Yes, yeah. Okay. Yes. Just make sure when she files that she checks that box that says she’s a dependent of someone else. Okay, because otherwise they’ll mess you up if you haven’t already filed. Yeah, we have. Okay, good. Okay, that’s perfect. You filed and she’ll know she hasn’t gotten it. All right. Do we need to take a quick break here? Nope, we’re gonna hit Manny. Alright, Christina, thank you very much. Let’s go to Manny. Hey, Manny.
Hey, how are you?
Dr. Friday 24:26
I am awesome. How are you?
Just lovely, lovely and awesome. A quick question I have for you is I have an A revocable self settled trust. And I have sub trust in the master trust which some real estate some my cars some precious metals. If any of those, for example, the precious metals and or exotic currency revalues goes up quite a bit in value, for example, a particular currency like a Zimbabwe or a Vietnam, Vietnam Dong, and it’s priced at a certain price and it goes up a lot do I have to pay capital gains tax on what I pull out, or what the total amount that of the revaluation is on that particular currency?
Dr. Friday 25:27
Well, precious metals and currency is not treated as capital gains, they have their own tax code, which is 24% capital, basically capital gains. And it would be when you pulled it out, when you converted it to either another type of currency, and or turn it back into US dollars, whatever you chose to do, Manny. So there would be a gain to report at the time that you actually cash them in.
So if I have, for example, $20,000 in capital gains within the trust, but I only pull out, say, $1,000 of that I pay the capital gains of that 1000 Not on the full 20,000. Is that what you’re saying?
Dr. Friday 26:11
Well, I mean, I guess let me clarify the trust me if you’ve actually converted and made $20,000, which means you have to buy or you have to have sold something to create a $20,000 capital gains, the trust will pay tax on all 20,000. If you did that, if there’s actually a sale that created a $20,000 capital gains, if your account just went up by 20,000, because the dollars worth more or less, or the currency or whatever, then no, but if it’s actually a true sale somewhere in the in the universe that happened, then that sale has to be reported and the gain or loss of it needs to be reported in the trust. And the taxes will pay either through the trust or if you’re the pass through. I don’t know if this grant, you says irrevocable, but I don’t know if it’s a simple trust or grantor trust or, you know, I mean, there’s since you’re still alive, obviously, it’s processing as either a simple trust or grantor trust.
Yeah, it’s a set, self settled trust. So I created it. And I’ve got a trustee taking care of it. But let’s see if I’m clear on this. So if the if the currency happens to revalue at the time it revalued and it’s in a trust, but it was, for example, $1,000 and it went up to $10,000. But I didn’t take out the $10,000 I only took out 1000 of the of the of the revalued version, I only pay taxes as I pull it out, or I pay as you sell.
Dr. Friday 27:42
Yes, as you sell it not I mean, what you take out of the trust is a little different question than what the capital gains would be based on. So again, if you have $1,000 and it revalued to 10,000 at that time you sell it and make the $10,000 within the trust at that time you have capital gains of $9,000 or whatever, and you will pay tax on 9000. If then you distribute from the trust $1,000 to you, then that will not be taxable because the trust is going to pay the tax.
Yes. Okay. So it’s it’s, it’s whatever happens when it happens. And if I only pull up, not the whole amount, just parts of it. The other part stays in the trust, then I pay then that was an occurrence there when the trust paid me. So I only pay taxes on what the amount was that I pulled out of the trust you personally Yes. Yes. Okay. That makes sense. Hey, I appreciate your time. And like to call and talk to you, father at another time. Thank you very much.
Dr. Friday 28:46
Thanks, Manny. All right, let’s take a quick break. And then we’ll hit mark, David and George when we come back. This is the doctor Friday show. We’ll be right back
Dr. Friday 29:04
All righty, we are back live here in studio for the third part of our show. If you want to join us you can at 615-737-9986. Tthe phone lines, we’ve got George in Clarksville. I think it’s George. Am I saying that right? George? Okay. Perfect. I wasn’t sure. Really,
Really common name. My wife passed away in January of 2021. And I would like to know, when I do my taxes, I haven’t done them yet. Can I claim her as a dependent married filing jointly, even though it was only one month of the year that she was actually alive?
Dr. Friday 29:52
Right? And the answer is yes. 100% you’ll you’ll still be married for the year in a year. If they only alive one day. They’re ready. If you’re considered married for the entire year, so you’re going to definitely be able to claim married filing jointly. That will be the last year, unfortunately, from that point, because there’s usually certain things, you know, depending on you know, that may come in her name or inheritance that will come to you. But it’s nice to have the double dependent for that year.
Okay, I always I’ve been doing my taxes myself and file with paper. Two, how do I sign her name? Well, how does that work?
Dr. Friday 30:29
You don’t have to, you’re just going to put deceased on her line, obviously, and then you’re going to sign it. And there’s a spot on, I’m assuming on the paper, if not, at the top of the return, when we do it at the top of the return, it will say, you know, spouse or taxpayer, depending on who it is deceased and the date of passing, that you would put on the tax return.
Okay, I appreciate that very much. Thank you.
Dr. Friday 30:54
No problem, sir. Sorry for your loss. Thanks. All right. Let’s see here. Let’s go to while they’re both been on here for a while. Let’s go to David. Hey, David, what’s happening?
How you doing?
Dr. Friday 31:05
Oh, not too bad. Doing pretty good.
Dr. Friday 31:09
Myself. I’m doing awesome. Thanks for asking. What can I do for you?
My dad passed the other year. And he owned a house down in Florida owed money on it and all that kind of stuff. It was kind of a it was a mess to figure out. But the house ended up going into foreclosure. And then when everything was paid out, and everything was done, the courts notified me that there was money leftover and awarded me what was left? How do I claim that?
Dr. Friday 31:43
On my don’t have to? It was from the sale of his house and his house was taken into foreclosure, which meant most likely they sold it below market value anyways. The the biggest thing is, I mean, you’re gonna basically, it’s, it’s a state money, so most likely there’s going to be zero tax.
Okay. All right. Cool. I have not worried about it. But you know, I just haven’t is always a concern of what do I need to do and how I need to claim that. I always want to pay, pay my fair share, and but I want my fair share back.
Dr. Friday 32:19
Exactly. That’s the attitude. Yeah, we don’t mind paying as long as we can get our share back as well. Yeah, so in answer to your question, you know, my biggest question would be, I guess, would be as if there was any gain. But since since it was a foreclosure nine times out of 10. I’ve never seen a foreclosure sell for more than the market value. Normally, the banks are looking to get rid of it at a cost, but you know, just get their money out is all they’re concerned with. So I would say you’re very safe to assume that that money would be just considered gifting or inheritance after tax dollars.
All right. I appreciate it. Thank you very much.
Dr. Friday 32:57
Thank you. Alright, let’s hit mark and Franklin. Hey, bud, what’s happening?
Hey, Dr. Friday.
Dr. Friday 33:08
I love your show. I appreciate it. My girlfriend and I recently combined households. And we converted her home into a rental property. And this was a last year was the first time we did that. What is the value of the property that we used to establish the depreciation on the property when she first bought it, when she refinanced it, what she bought a couple of years ago, or the current actual value.
Dr. Friday 33:40
The actual price that was paid for originally, so when she first purchased it, and then if there’s been any major improvements, a new roof, a new, you know, whatever those may be added to but other than that, it would be the original value of the home. Okay. Go ahead. No, go ahead. I’m sorry. I was just gonna say you can’t depreciate land. So if this is a house on a piece of land in a subdivision or whatever, you do want to look at the property tax or whatever and take out the land portion. And there’s a place on the depreciation schedule that would show how much was the home and then how much is land land is not depreciable in our rental home, so if I paid 200,050 of it was for land, I would be depreciated 150,000.
Okay, I just said very good. And she had a roof replacement, the insurance paid for that does include the value the appreciation that the new roof would provide or did not get to include that because she didn’t say.
Dr. Friday 34:41
Exactly. She didn’t pay and at the time, the insurance was not a tax deduction in the future. We get to deduct any insurance on the property along with property taxes and everything else. So if there’s other damages in the future, at least the insurance is a tax deduction that we get to claim it’s always better for the insurance company. to pay the new and I anyway.
Yeah, me too. I will see. Okay, well, that’s what I needed. Thank you very much.
Dr. Friday 35:08
Perfect. All right. So again, if you want to join the show, that was awesome, guys, you did keep us very well entertained 615-373-9986. Goodness gracious. 615-737-9986 is a number here in the studio, you can give me a call at, we’re gonna get ready to take our last break. And then we come back, we’ll take a couple more phone calls if you guys want to call in.
Dr. Friday 35:33
I am Dr. Friday, I’m an enrolled agent licensed with the Internal Revenue Service to do taxes and representation, which basically means all I do is taxes and representation. We deal a lot with individuals that need to file back taxes and, and we don’t fill you as soon as you call us and say, oh, let’s pay $3000 or $5,000. And then we’ll see what we can do for you.
Dr. Friday 35:53
We work out how we’re going to help you get either resolution or maybe there won’t be the resolution you think but we’ll be able to help you figure out payment plan offering compromise, partial payment plan non collectible, we have options. So that is what we do. And if you have a question, you can call us at 615-737-9986 here in the studio right now we’re gonna take our fourth break here, third, break, whatever. And we’ll be back with the last part of the show after this.
Dr. Friday 36:26
Alrighty, we are back live here in studio for the last oh seven, eight minutes. So if you want to join the show, you can 615-737-9986 and we are talking about my favorite subject, which is taxes, which is great because we’re in the last couple of weeks of tax season. And again, remember, if you are unable to pay or file your taxes, first thing you want to do is file an extension.
Dr. Friday 36:57
Okay, you can file an extension electronically, I believe you can even go onto the IRS website file an extension, if you have the ability to make a payment with that extension, because you know you’re going to owe money then go ahead and make the payment worst scenario is you get a refund, or you roll it over into the next year. Either way, it’s least money that you you know, you’re not going to pay penalties. Last thing we want to do is ever pay penalties. It is just one of our pet peeves in life, we do not want to pay a penalty.
Dr. Friday 37:26
So if that is a possibility, let’s make that happen for us. So that way, we don’t have to worry about that. And then also remember, if you are an LLC corporation or partnership, and you did not file an extension, you need to do that. Alright, let’s hit Amy and Franklin real quick. Since you’ve got her upload videos. Thank you. Hey, Amy. Hi there. Do for you.
My parents were killed in 2021. On January 5 in a car accident. Am I supposed to be filing taxes for five days that they were living? I haven’t received anything from Social Security.
Dr. Friday 38:14
I don’t think you’re gonna receive if they were only in because I think every so security’s usually put in like the third Wednesday or something of the month, so they wouldn’t have received any social security benefits most likely, in the year of 2021. If they were living solely off Social Security, then my answer would be, you don’t have to now we handle quite a bit of estate work. And we do handle wills and things.
Dr. Friday 38:38
And I will tell you, I do usually always file a final tax return only because I want to make sure that the social security number is closed. And then sometimes we want to get a letter from Medicare to make sure that if they were receiving any kind of additional Medicare or if they were in, you know, again, I don’t know their situation, but you might need to get a waiver to make sure because Did they have a home that they left you or anything?
Dr. Friday 39:04
Okay, so you might want to make sure before you sell anything that they that they didn’t have. I mean kids don’t always know everything. So sometimes it’s good to just make sure you file the final tax return, you get a Medicare waiver, there isn’t a state income to our state estate tax right now unless unless they left you more than they they work with the same over $11 million then you would be dealing with a different situation but you know you do want to make sure all of that is closed so that way if there is any existing medical bills or anything else you might need to discuss that with an attorney some of it is do some of it is not making sure you have that covered.
I’ll do it. Thank you.
Dr. Friday 39:43
Thanks for calling me all right let’s see June Jean. Sorry Jean. Hello is correctly video. It’s my fault. Hey Jean, what’s happening?
I am wondering, can you tell me exactly how the rate on capital gains is Say it and whether in determining your income, capital gains is added in.
Dr. Friday 40:07
So capital gains is added into your income when they’re looking at the rates, they’re going to charge. So let’s say Are you single or married, so I can give you some rough ideas of the different tax brackets married. Okay, so if your capital gains and all of your other income is less than 105,000, sorry, 105,000, then Europe has zero capital gains. If it goes above the 105, if it just goes to 106, you’re now in the 15% tax bracket for any capital gains that might be added into that income that makes it up to 106,000.
Dr. Friday 40:49
That’s going to ride up until $250,000. At that point, you’re going to jump into the 18.8 tax bracket, they add an additional tax called the Medicare tax, or net investment tax, it’s 3.8. So if your total income, including capital gains is over 250,000, you’re going to be at 18.8 for everything above the 250,000. So if it’s 249 still be in the 15%.
Social Security, your percentage that you pay goes into that, too.
Dr. Friday 41:27
Yes. So if you’re up to 100, you’re most likely have an 85% of the Social Security tax. But yes, it would be part of that number.
So generally speaking, 200 up to 250,000. It would be around 18%. You say?
Dr. Friday 41:48
15. It’d be 50%. If it’s 250 or less, oh, total income.
That helps us we have sold a few properties that 10 years or more and, and we’re kind of looking ahead to see what we’re gonna.
Dr. Friday 42:06
Yes, ma’am. Glad I could help. Thank you.
Dr. Friday 42:10
Alright, let’s get Lisa really quick man, we get her on the final part. Hey, Lisa.
Hi, Dr. Friday, I got a quick question. I’ve never dealt with the trade before. But I made a little money last year. And I was living on Social Security. And I made 34,000 on a trade. And I got my taxes done the other day, he said, I owe 3000. And I’m in shock, because I only am living on Social Security. Do you think they made a mistake?
Dr. Friday 42:36
No, ma’am. What happened was when you made that money, not only was the capital gain taxable, but it also made a portion of your Social Security taxable. So you actually end up looking like you made more than 30. Because normally your Social Security is not taxable, because you have no other income. But when you made 30,000, the provisional tax code kicked in. And so you had 50% anyways.
Dr. Friday 42:57
Bottom line is a portion of your Social Security. And if you think about it, you kicked over 50,000 at that point. So, you know, again, I don’t know what how much you make it. So security, but I’m assuming that it was probably around 20 24,080. Okay, so 18 would be nine, and then you have 30. Theoretically, he may be wrong, if that’s the only two things that would make your total income under 50,000. And you should be at the 0% capital gains. Was it short or long term, though?
Wow, I’m even taking it out. I really don’t know what I know.
Dr. Friday 43:31
So that no, so the the only way it would be correct. And I’m guessing, I’m guessing it’s correct, would be as if it was if it was stock that was held less than one year. So if you were purchased, I mean, brought some stock, and then you turn around immediately sold it and you made some money on it.
Dr. Friday 43:47
That’s called short term. And that’s just ordinary income tax. So I would say he’s probably got you correct, because I would, I would guess that this stock that you made, the 30,000 is all short term stock, and therefore, it’s all taxable.
Okay, so can I take some money out of my savings account and put it in my 401 to make make my amount look lower?
Dr. Friday 44:09
Can you do that even though I didn’t work? You didn’t have any earnings? Stock is not considered earnings. So therefore, no, you cannot make an investment into your retirement.
Okay, I love you and I love your accent. Don’t leave it hanging out in Nashville.
Dr. Friday 44:23
I know. Exactly. Exactly. All those southern bills out here. Thanks for listening, Lisa. I appreciate it. Okay, bye. Bye, bye. Okay, guys, that was an awesome show. Seriously, I appreciate all those questions. And hopefully I’m able to lead you guys in the right direction.
Dr. Friday 44:23
I do want to put a little caveat out there that any any advice that we put on the show should be checked directly with your tax situation. I’m doing my best to give you guys the direction you need to head but make sure you double check that information with a tax person, a specialist whoever does your taxes.
Dr. Friday 44:54
If you don’t have anyone, obviously you can contact us but make sure that the information is there. So If you’re needing an estimate on how much to pay in taxes or those kinds of things, you know, just make sure you double check those numbers. I’ll give you the basics. But when no one should come back later and say, Well, Dr. Friday said I should only pay 15. And you’re paying more than 15. Because when I talk capital gains, capital gains is only for things held over one year and a day. So if you have capital gains, that is called short term that’s taxed at ordinary income rates. And we all know that you can pay up to 37% on those kinds of transactions.
Dr. Friday 45:31
Again, just making sure we’re all on the same page. I don’t want anyone to come back and say, Well, Dr. Friday said this, because you know how that is in life, guys. Hopefully, you guys are actually having an awesome Saturday. And if you do want to contact my office, We are open Monday through Friday, and you can call us brighten early Monday morning, the phone number is going to be 615-367-0819.
Dr. Friday 46:00
If you have no idea who I am, and you’re just wanting to get more information about me, all you have to do is go to the web. drfriday.com. Again, drfriday.com And for all of you that maybe I’ve never heard this crazy person before. My first name is actually Friday. So that’s where the doctor Friday PhD in economics, and you can email firstname.lastname@example.org. Again, email@example.com. And I hope you guys are having a wonderful Saturday and you are enjoy yourself.