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In this episode of The Dr. Friday Show, Dr. Friday, discusses various tax-related topics and answers questions from callers. She provides insights on the new Tennessee franchise tax bill, medical deductions, self-employment taxes, and dealing with the IRS.
Topics covered:
- Tennessee Senate Bill 2103 and its impact on franchise excise tax
- Maximizing medical deductions and the 7.5% AGI threshold
- Adjusting W-4 forms to avoid owing taxes
- Quarterly estimated taxes for self-employed individuals
- Amending tax returns to include Social Security income
- Inheriting property and the stepped-up basis
- Filing as head of household with a dependent ex-spouse
- Communicating with the IRS and resolving tax issues
Transcript
No, no, no, she’s not a medical doctor, but she can sure cure your tax
problems or your
problems or your
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, 737-WWTN.
That’s 737-9986.
So here’s your host, financial counselor and tax consultant, Dr. Friday.
All right, I’m Dr. Friday, and I’m here live in studio.
You probably hear my dogs in the background having a little chit-chat of the
neighborhood,
neighborhood,
but we are going to talk a little bit first about the new bill that the
governor has put
governor has put
out there concerning the franchise tax board and the refunds that the business
operating
operating
in Tennessee could be heading towards.
This has not yet been signed.
So this is a bill that he has put.
It’s the Senate Bill 2103, which will change how we complete the franchise
excise tax and
excise tax and
not having the property tax calculation in there, which is pretty big.
I mean, they’re saying that’s going to reduce revenue for the state of over
$400 million
$400 million
beginning the year that this goes into play.
So it will be an interesting — this only applies to businesses that file
franchise
franchise
and excise tax.
So it’ll be interesting to see if this actually passes, and we’ll stay on top
of it to see
of it to see
if there’s any changes.
Nothing I read in here does it say that it’s going to go backwards.
So it looks like to me it’s really going to go into effect for 2024, not in
2023.
2023.
All right, let’s see if we can go to the — oh, the phone lines here in the
studio are 615-737-9988.
studio are 615-737-9988.
And it looks like we’ve already got Jay on the line, which is awesome.
Hey, Jay, what’s happening?
>> Hi, good afternoon.
Thank you so much for taking my call.
My wife had a lot of health issues last year, and so like $217,000 in medical
expenses.
expenses.
And so anyway, we have a high deductible health plan, $10,000, and we’re on
the hook for that.
the hook for that.
Anyway, so obviously we exceeded that, and so we’re having to pay all that.
So one of my questions — I have about three questions.
One of my questions was, can we write off the full $10,000, or we had to work
out payment
out payment
plans with some of the doctors or the hospitals and so forth?
We’re making payments of several hundred dollars a month.
So what can I write off?
>> You will write off — you’ll only write off what you physically have paid.
So it may take you a couple years to pay off the $10,000.
I mean, unfortunately, this, you know, it’s always our worst nightmare, in all
honesty.
honesty.
But hopefully she’s doing well.
But in answer to your question, there’s going to be two sides.
One, you will be able to put that on the Schedule A under medical, whatever
you’ve paid.
you’ve paid.
But also, we lose the first 7.5 of our adjusted gross income.
So you know, depending on how much money you make, and if you have mortgage
interest, property
interest, property
taxes, sales tax, charitable contributions, will you exceed — are you guys
under or over
under or over
the age of 65?
>> I’m 66, and she’s 63.
>> Okay.
So you’re going to have a total of — in the ballpark of like $29,000 is your
standard
standard
deduction.
>> Okay.
And so this — so that’ll be the standard, okay.
All right.
>> Yeah.
>> All right.
So all right.
That answers that question.
Now, I have been — I’ve done ministry work for several years.
I’ve been with other congregations where I was issued a 1099.
I started with a new congregation in February of ’23, where they issued me a
W-2 instead
W-2 instead
of a 1099, but they didn’t withhold anything.
So what — you know, how do I move forward with that?
I don’t — you know, I’ve never — I’ve always had a 1099 so I could write off
office expenses
office expenses
and so forth.
So —
>> Right.
So they gave you a W-2 with just box one completed?
Like a statutory employee?
>> I’d have to look at it.
>> Yeah.
>> They — let me see what boxes.
>> Sure.
>> It’ll take me a second.
I’ve got to lay it out here.
>> That’s all right.
Because I’m assuming that if you have — if it’s just box one, you can
actually choose
actually choose
in your software to roll that to a Schedule C, which will then be — you’ll be
able to
able to
write off your expenses.
Because what they’re basically saying is that you’re a statutory employee,
which means we
which means we
didn’t withhold Social Security.
We didn’t withhold Medicare.
We didn’t do anything besides pay this person theoretically like a
subcontractor.
subcontractor.
>> Okay.
So what I’ve got on box one is 21 — or the dollar amount.
>> Uh-huh.
>> And note box two, zero.
Box three, the Social Security wages and Medicare wages.
>> Oh.
All right.
So did they actually — so box three and five have numbers and so do box two,
one, two,
one, two,
three, four, three, four, five, six, whatever.
All of them have numbers?
>> The only — okay.
Box one —
>> Yes.
>> — has a dollar amount in it.
Box two is zero.
>> Okay.
>> Box three has the same dollar amount in it.
>> Right.
>> And box five has the same, but four and — four — okay.
One — or two is zero.
>> Okay.
>> Four is zero.
Five has six and so forth.
All the rest of them —
>> So they did not withhold any Social Security and they did not pay your
Medicare?
Medicare?
>> They didn’t pay any —
>> They did not — they put zeros on all those.
So then if your tax software — or if you’re doing your own taxes, you should
be able to
be able to
roll that over to a Schedule C and treat it as — I mean, at this point, I’m
not too sure
not too sure
why they didn’t just do it as a 1099, but that’s not us to question.
So you’re going to go ahead and write off the expenses because they truly are
treating
treating
you as a subcontractor.
They did not pay your — pay you like an employee.
>> Okay.
So the —
>> Does that make sense?
>> I’ve got —
>> So you’re just going to roll that over and then it should bounce on.
So it’s not going to show up on line one of your W — of your 1040 or line
seven, wherever
seven, wherever
the W-2, it’s going to show as subcontract or 1099 self-employment.
>> Okay.
And then the third thing is I was 66 and a half in October, so I started
drawing Social
drawing Social
Security.
And so any — anything — any help there or whatever?
>> No.
I mean, as long as you — I mean, as long as you drew it on your full
retirement age,
retirement age,
whatever that might be, then there’s no penalty.
They may tax you, but there’s no penalty for doing it.
If you drew it early, then you have to be careful with how much you’ve earned
or they’ll
or they’ll
make you pay $1 for every $2 over.
>> Okay.
So Social Security is still taxable, but I was —
>> Yes.
>> — 66 and a half in October, so that was my full retirement age.
>> Yeah.
>> So it’s taxable, but they can’t take back any of your other earnings.
>> Okay.
Okay.
>> Okay?
>> Well, I appreciate you.
>> No problem, sir.
>> Thank you for —
>> Hopefully that helps and hope your wife feels better, okay?
>> Oh, she’s doing much better.
Thank you so much.
>> Wonderful.
All right.
Thanks.
All right.
Let’s take Kevin, I guess.
Kevin in Nashville.
Hey, Kev.
>> Hi.
How are you, Freddie?
>> I’m doing well.
How about yourself?
>> Not bad.
Thanks.
>> Okay.
So a question about my 1099.
It looks like the B section.
It says that there are short-term transactions and long-term transactions
which are not reported
which are not reported
to the IRS and those which are.
I’m assuming that even those which are not reported to the IRS, that those
amounts need
amounts need
to be reported on my 1040?
>> Right.
Under Schedule D, you’re going to show them.
If you use the ATT&CK software, it will say reported or not reported, and
you’ll just
you’ll just
check the proper box.
But, yes, they still need to be reported.
The difference is your basis isn’t reported, which is more concerning because
if they received
if they received
how much it was without basis, if you don’t report it, they’re going to make
an assessment
an assessment
that none of it had a basis.
So you want to report it just like your 1099 or the Schedule B has.
>> Okay.
Perfect.
That was all I wanted to know.
Thanks so much for your time.
>> No problem.
Thanks.
All right.
Let’s see DJ in Nashville while we’re on the roll here.
Hey, DJ.
>> Hey there, Dr. Freddie.
Thanks for taking the call, and thanks for the help you give everybody here
every week.
every week.
>> Sure.
>> Great.
Here’s the question.
My brother passed away last year, and I inherited his IRA.
As per instructions, I put those funds into a “inherited IRA” account.
And the instructions also said that RMDs must start by 12/31 of the year after
death.
death.
Like I say, he passed away last year.
However, all well and good, and I understand the 10-year rule and that whole
bit.
bit.
However, I noticed a note that was kind of buried in there, and it says, “If
the original
the original
account holder did not take an RMD in the year of death, an RMD must be taken
from the
from the
account by 12/31 of the year the original account holder died.”
I didn’t do that because I didn’t know about it.
>> You shouldn’t have.
Normally, you would not be the responsible person for that.
Normally, the custodial person, let’s just say it was JP Morgan, whoever, it
doesn’t
doesn’t
make a difference.
Whoever they are, before they distributed the money to you, they should have,
and you
and you
may have to ask, but they should have done that distribution.
That is their job to make sure that the RMD was pulled in the name of the
deceased.
deceased.
So that way, when you filed his final tax returns, or whoever handled it,
would have
would have
filed that as part of his income or to the estate if the money may have been
pulled and
pulled and
put into the estate and theoretically distributed to you, but it would have
been taxed in 2023.
been taxed in 2023.
Instead of 2024 to you.
Either way, you might want to backtrack just to me.
Were you also the executor or were you just the beneficiary of this particular
account?
account?
>> Both.
I am the executor of his will and the beneficiary of that particular account,
among others.
among others.
>> Okay.
So I would probably just for the fiduciary side of things, go back to whoever
had that
had that
money.
Ask them first if there had been a distribution done prior to them
distributing the funds
distributing the funds
to you as POD.
And then I’m assuming it was to you.
And then if there wasn’t, then we need to go back and at least they can’t go
back and
back and
do the distribution, but your estate can go back and make a correction and
pick that money
pick that money
up because theoretically it would have been taxed to the estate, which may
have been a
have been a
roundabout way directly to you, DJ, depending on if there’s a federal ID and a
true estate
true estate
opened or a trust that had been opened or if everything was just POD to you.
So not sure the whole situation, but you might want to review to make sure
because bottom
because bottom
line is someone may not pay tax in 2023, a money that should have been taxed.
>> Well, and that is certainly the case because I could see how much was in
the account prior
the account prior
to its distribution to me and subsequent to its distribution to me, and that
amount didn’t
amount didn’t
change.
They did not do a distribution to my brother prior to or after.
So I’m just wondering what kind of trouble I’m in and how do I get around this
because
because
I wasn’t informed of this particular rule at the time.
>> Right.
Well, I don’t think, I mean, I’ll be honest, the IRS has been pretty good in
my experience
my experience
with these particular situations.
It’s better to be the person to go back and tell them, in my opinion, than it
is for them
is for them
to possibly find out three years from now and then penalties, interest and
everything
everything
else, right?
Here you have honest mistake.
Hey, as soon as I found out, went back, corrected, amended my return, added
the RMD, here it
the RMD, here it
is.
Because in theory, you need to take that distribution as well because it’s
right now growing tax-free
right now growing tax-free
in that account.
And as you know, RMDs had to come out.
So we need to- >> Yeah, understood.
I just thought I didn’t have to do that until 12/31/2024.
>> Nope, you’re gonna do a double dip this year and then file them both into
this year
this year
because you don’t wanna go back and then you’re gonna explain that the first
distribution
distribution
was the error that the, however you wanna put it, my opinion, that the prior
custodial
custodial
did not live up to.
>> Well, the prior custodian was the federal government.
He worked for the Department of the Interior.
>> There you go.
That explains it all to me, DJ.
I mean, it’s really just making it right so that way they can’t say that you
didn’t live
didn’t live
up to what you found out at the time you found it out.
That’s really what it comes down to.
>> Let’s hope the IRS is as honorable as you seem to think they are.
>> Well, 28 years, you get good and bad, but I think under this, we have had,
this happens
this happens
more time than I like to tell you, DJ.
Because just like you said, it is not blatantly out there as everyone knows
now, “Well, I’ve
now, “Well, I’ve
got 10 years to do this,” or “I’ve got these numbers.”
No one pushes that.
And I do blame the custodian, the people that are managing the funds, because
they should
they should
know that before it gets distributed.
>> Right.
Thanks for the help.
>> But, you know, no problem, DJ.
Thanks.
All right, we’re gonna take our first break.
When we get back, we’ll get more of the phone calls, 615-737-9986.
We’ll be right back with The Dr. Friday Show.
[Music]
>> All righty, we are back here live in studio.
And we are here to take your calls if you’ve got questions.
615-737-9986.
615-737-9986.
As we all know, it’s April 6th, so it is time for everyone, if you have not
completed your
completed your
taxes and you’re probably gonna be working the next few, oh, we got almost a
week, almost
week, almost
10 days to get these done.
But if you aren’t sure you’re gonna get there, you’re not too sure if you’ll
be able to get
be able to get
it finished, then my suggestion is definitely file that extension.
It is so important to have an extension filed so that you can then make sure
that if you’re
that if you’re
running late, you’re not hit with failure to file on-time penalties.
So again, if you’re not sure if you’re gonna get them done, then make sure you
file that
file that
extension.
Sometimes life gets in the way and we don’t always know what’s gonna follow
with that.
with that.
So just making sure we have what we need and when we need it.
And so make sure you don’t forget things on your taxes.
Unlike when we were talking to DJ, which was not something that was forgotten,
but many
but many
times I’ll have people that will come in and they’ll say, “Oh, I just got
another schedule
another schedule
B. Is that going to be something I need to deal with?
Or I forgot a W-2.”
Or whatever.
Just go through your information.
Make sure.
I mean, you can always fix if you forgot something, but it’s kind of nice not
to have to worry
to have to worry
about going backwards if you can actually get things fixed the way you need
them to
them to
be fixed.
So again, just making sure you have everything the way you need it.
So that way, when you hit the send button to the best of your ability, you
have managed
have managed
to take care of what you need to take care of.
And if you’ve got questions, you can join the show at 615-737-9986.
I will say that we also have run into many emails this last week about medical
deductions.
deductions.
And again, keep in mind that depending on if you’re single, married, over the
age of
age of
65, under the age of 65, what your standard deduction is.
You have to be able to exceed that.
And plus, whatever that is, you also have to take whatever your taxable income
is and
is and
remove the first 7.5% of it.
So if you have $10,000 of income, you get the first 7.5% of that that you’re
going to
going to
deduct off.
And then everything above that will become part of your itemizing.
They don’t add everything.
So it’s very difficult to maximize medical deductions.
So if you’re working with that concept, you need to make sure, A, that you’re
making sure
making sure
you’re tracking everything, all of your trips back and forth to the pharmacist
or to the
or to the
doctors or to the chiropractor or whatever, because you do get medical miles.
That is not as high as individual working miles, but still you get that along
with obviously
with obviously
all of your out-of-pocket costs to see if you can actually do that, see if you
can actually
can actually
itemize.
And if you can, then you can maximize that deduction.
Other than that, you want to make sure that in that same scenario, there used
to be people
to be people
were tracking all of their sales tax paid, but since the standard deduction
went up,
went up,
I have fewer and fewer people that do that because the SALT tax, no matter
what, I had
what, I had
a gentleman that came in last week and he had more than $40,000 in property
taxes on
taxes on
all these different properties that he owns.
They’re investment properties, but as we all know, we can deduct property tax.
Well, the problem is you can only deduct in property tax, sales tax, $10,000.
That’s the most.
And if it’s married, filing separately, it’s $5,000 each.
But if it’s married or single, it’s $10,000.
So if you have $40,000 in property tax thinking you’re going to be able to
itemize, it’s not
itemize, it’s not
going to happen.
He had no mortgages, so he didn’t have very much in charitable contributions
or medical.
or medical.
So even though he had all of that money that he was paying in property taxes,
that wasn’t
that wasn’t
going to work as far as the concept of itemizing.
So you do want to make sure that if that’s your situation that you’re
following through
following through
with that, because sometimes it sounds like a great idea until somebody has to
tell you
tell you
it didn’t happen.
Also I don’t know about anyone else, but this year seems to be a year where
people are having
people are having
to pay more money.
Many times it’s money that people are not expecting to have to pay.
So if you’ve prepared your tax return and that tax return is, I don’t know,
let’s just
let’s just
say you owe $2,000 and you normally don’t, or maybe something happened.
Because sometimes people change jobs in the middle of the year, sometimes
multiple times,
multiple times,
and that usually does mess it up.
But in some of these cases, just the fact of the new tax code going into
effect, whatever
effect, whatever
it is, it affected the payroll systems.
And so people are getting less coming out of their paychecks and no one looks
at their
at their
pay stubs any longer, it seems like.
So when you’re doing your payroll and you’re not seeing, “Oh, well, I got a
little bit
little bit
more money.
So maybe you thought you got a raise, so you’re going to get more money.”
Anyways, that money is now, you’re short, right?
So you need to think about your W-4 form.
I don’t care if you are truly single with three kids, or if you’re married
with four
with four
kids or one kid, or you don’t have any children.
If you owe money, you need to make an adjustment.
It can be simply leave it at whatever it is, and you know you owe $2,000 and
you’ve got
you’ve got
10 paychecks left.
Take $200 of paycheck, go to line four in the W-4 where it says additional
withholding.
withholding.
Only put a number in there.
Do not put zeros everywhere else.
Do not complete anything other than the top where it says married, single,
head of house
head of house
or whatever.
And then you’ve got the lower part where it says, like I say, line four,
additional withholdings.
additional withholdings.
Sometimes I think by putting zeros on some of the lines in there, it actually
makes you
makes you
exempt and therefore it’s not withholding the normal tax code.
So if you owe money this year, I would definitely say consider looking at your
W-4 form so that
W-4 form so that
you can actually make sure that you had enough money filed to take out.
No one likes to owe taxes, especially if you’re working on a regular paycheck
and you’re like,
and you’re like,
“Okay, this is my usual situation.
Why am I now having to deal with this?”
Don’t really know the answer guys.
All I can tell you how to fix the problem.
And I will say also many people made a lot more money in interest this year.
You put the money in the bank, you made more money and no taxes came out of
that.
that.
So sometimes you owe a little bit more because of the growth of your money.
So again, just making sure that you’re tracking all the right information.
And if you are making extra money outside, be that through social security,
because many
because many
people do not have any withholdings come out of their social security, be it
being from
being from
stocks, dividends, interest, any of those, and taxes are not coming out.
Prepare yourself before you come to the tax person.
And then we have to turn around and say, “Oh, you know what?
You do owe a few dollars.”
And then you’re like, “Why?”
Because this.
So just prepare so you know what you have going and you’re able to make sure
you have
you have
all of the right information that you need to run that the way you need to.
So just making sure that you don’t run into the situation where if you owe
money and you’re
money and you’re
not too sure what you need to do, there is ways of compensating.
So it’s a lot easier to pay it over a number of paychecks than it is at the
end of the
end of the
year.
And there is often penalties that can be a part of that as well.
So you don’t want to get hit with some of those penalties if you can stop that
from
from
happening.
And that leads me to self-employed individuals that decide they do not want to
pay quarterly.
pay quarterly.
Hey, it’s a choice, not really.
The IRS basically says it’s a mandate.
You owe four equal payments based on the prior year.
And if you don’t file that, we are going to have a situation where you’re
going to pay
going to pay
penalties.
Okay.
Now some people will say, I’d rather pay the penalties and pay all my money at
the end
the end
of the year.
That is fine.
That is your prerogative, maybe I should say.
But if you are a self-employed person and every year you’re not able to pay
your taxes,
your taxes,
now you’re getting yourself upside down and creating a whole different
situation and that
situation and that
becomes a problem.
All right.
Let’s really quick.
We’re going to get Lisa and then maybe we can get the other one after the
break.
break.
Hey, Lisa.
Hey, Dr. Friday.
I’ve got a question.
My husband passed away in February of this year.
We always filed married, filing jointly.
And I’m still preparing for the 2023 filing.
I’m hoping to get it done this week.
Do I need to do anything differently because he passed away in February of
this year or
this year or
last year?
Sorry.
Yeah.
Sorry for your loss.
But the answer, the good news is no.
The only thing you might need to fill out is a 1310.
If there’s a refund, there’s going to be an additional form you need to
complete that
complete that
just says as the spouse, I’m collecting all the refunds so that they know
who’s to get
who’s to get
the, if there’s a refund.
If there’s no refund and you’re making a payment, then there’s absolutely
nothing.
nothing.
And in 2024, you’re going to file married as well because you were married in
the year
the year
he passed away.
So the big change won’t be until 2025 for you.
Okay.
Cause I was thinking I’d have to do head of household next year.
Now, do you have a child or someone at home?
Yeah, I have two children at home.
So you will.
I mean, there’s a, there is a, for someone like yourself, there’s also the
widow one,
widow one,
which if there’s children at home, you can claim widow for two years after
it’s pretty
it’s pretty
much the same as head of household.
But two years after the death of the, of the other parents.
So yes, you’ll be good for another few years and then you can go ahead of
household.
household.
That will be determined whichever way, but 2024 will still be married.
Okay.
Good deal.
All right.
Well, thank you so much.
No problem.
Thanks, Lisa.
All right.
We’re going to go ahead and get Angela in Nashville.
This is the Dr. Friday show.
We’ll be right back.
Alrighty.
We are back here live in studio and let’s head right over to Angela in
Nashville so
Nashville so
we can find out if we can help her.
Hey, Angela.
Hi, Dr. Friday.
Thank you for taking my call.
So I already submitted my taxes, but the thought occurred to me that I
actually drew social
actually drew social
security for the first time starting last year.
So I didn’t submit that.
So I imagine I have to make a full out magendum.
Yes.
An amended return.
Actually, it’s a 1040 X.
You’re going to need to potentially, at least you’re going to want to check.
Uncle Sam will be more than enough to theoretically, Uncle Sam will probably
send you back a change
send you back a change
letter saying you had not reported all of your income and they will estimate.
But if you owe money, it’s better to know that in advance.
If they have a refund, they may just change and take part of your refund, not
knowing
knowing
your situation.
But yes, I would say, did you do them yourself, Angela, or did you go to
somebody?
somebody?
I did.
I went to a preparer and I figured I would have to admit it.
I just wanted to submit it.
I didn’t want to wait for the last minute.
I think that’s the smart.
I was going to say, yeah.
Yes, ma’am.
Go ahead.
I just wanted to know.
Do you know I didn’t receive anything from the government with regard to the
Social Security?
Social Security?
That does happen from time to time.
You should have received a tri-fold paper that would have a red center on it.
If you didn’t, you can call them and they will, I think they will mail you.
They will not fax you because I think we’ve tried that a few times or email,
but they
but they
will mail you a duplicate form.
So you might want to call that and get that in hand before you make sure that
whenever
whenever
you started receiving it, that it will have the detail, how much you received
and anything
and anything
else that might be pertinent.
Okay.
Well, already last question.
So like with your company and how you want to tell them what you want to
withhold, for
withhold, for
example, you’re married with children and you want to withhold, you know,
maybe four
maybe four
or five.
How do you do that with the Social Security?
You know what the form that is?
Social Security, you don’t.
The Social Security is a little different.
They’re going to take a percentage.
So you’re going to need to know what tax bracket you’re in.
So when, so whoever you go into just might want to ask them, you know, what’s
my, not
my, not
your actual tax bracket, but ask her or him what your effective tax bracket,
it’s usually
it’s usually
much lower.
You may be in the 22% tax bracket, but maybe only pay 14% average tax.
Ask them what your effective tax rate is.
And that way you can use that when you’re talking to Social Security.
Thank you so much for your help and your answers.
Have a good day.
No problem.
You too.
Thank you, sweetheart.
All right.
So yeah, sounds like Angela, that I can’t tell you how many times we have one
that came
that came
in the other day and we don’t know what we did not report because the
government’s really
government’s really
good about saying, hey, we’ve held back or we’re changing your tax return.
But sometimes some of the letters will say we did it because of this, this or
this reason
this reason
and not knowing which one of those things apply.
I much prefer the letters where the IRS says we’ve changed it.
And here’s the reason that this is what’s not matching up.
And many times it’s really not changed.
It’s going to affect you in some ways, even though the love letter says, oh,
we’re going
we’re going
to charge you $5,000.
It’s because they didn’t have the basis in some cases on the stock sales.
So as once we get that filed and submitted and accepted, then that usually can
take care
take care
of itself.
But you don’t know until you’re dealing with the situation.
And right now it’s still difficult to be dealing with IRS situations.
I will say that the tax advocate office does an excellent job here in
Nashville, Tennessee,
Nashville, Tennessee,
even though some of the revenue officers that you try to deal with here in the
state, it
state, it
can be difficult to get them on the phone and to follow up with situations.
And part of it is obviously middle tax season when we try to do that and
everyone’s really
everyone’s really
busy.
So be patient with that.
But if you do have a major or you have something where you have the intent to
levy letters
levy letters
and they’re coming out and getting much more aggressive, then you definitely
want to go
want to go
in and just either do a 911 to the tax advocate office or make an appointment
to the IRS office
to the IRS office
so they are open again so that you can actually try to get some sort of
resolution or maybe
resolution or maybe
even it’s just getting a payment plan set up, getting something done where you
can make
can make
a monthly payment and that way they’re no longer sending you nasty grams when
it comes
it comes
to that kind of thing.
Because no one likes love letters.
Love letters can just be a bit overwhelming, especially nowadays where they
send one to
send one to
you, one to your spouse, and then one for every year.
And if you’ve got four or five years, you can end up with 10 love letters in
one day.
one day.
And that’s a bit stressful for some of my clients.
So very important to make sure that you’re tracking.
But do not just take all of those love letters and throw them in a drawer
because that is
because that is
going to pretty much eventually lead to the IRS coming and taking action
against your
against your
payroll or going into your bank account.
I had this time of year, of course, I get to fortunate enough to see many,
many of my
many of my
clients and some of them still, “Oh, I don’t want to give the IRS my bank
account.”
account.”
But working with the IRS now for 20 plus years, one thing I will tell you is
if you have your
if you have your
social security number tied to a bank account, the IRS knows about that bank
account.
account.
Doesn’t mean they’re going to do anything.
It doesn’t mean they’re going to take anything.
But if you are in trouble with the IRS, you’re ignoring them or not making
plans or doing
plans or doing
things, they can come right in and do what they need to do.
Sometimes it’s, I swear, it’s just to get your attention so that you’ll start
doing
doing
what needs to be done.
But that being said, there’s nothing worse than thinking that you have rent
money in
money in
the bank and then you find out that that money is gone.
And I will say we’ve had only a handful of cases this has ever happened.
But if your name, if you have the IRS issues and you have bank accounts with
your children,
your children,
because children can’t open up their own bank account without an adult, they
can also take
can also take
that money because the bank account is tied to the adult.
So be very careful if you have IRS issues, you may want to make sure that the
money that
money that
the children have are not in your name, if that’s at all possible.
All right, let’s hit Bill in Nashville real quick.
Hey Bill, what’s happening?
Well, on my wife’s dad last year, was, am I eligible for a step up in basis on
the real
the real
estate?
So was it held jointly, Bill, when you guys purchased it?
No.
Was it in your wife’s name alone?
Yes.
Oh, okay.
So then the answer is if it was in your wife’s name alone, yes.
When you inherited that property, you get a step up in basis.
Now, should I have had an appraisal done right off or can I still have that
done?
done?
Or how does that work?
So my personal opinion is to get an appraisal or to get an appraiser to do a
opinion, I
opinion, I
think is what they call it.
But you need something that somebody can say within 60 days of the passing of
your wife,
your wife,
that this was the value of this property based on said comps.
Just like if you were going to buy real estate anywhere else.
That way, is this a primary home, Bill?
Yes.
Okay.
So then you’re probably going to continue to live in it.
So that may be, you know, yeah.
So a number of years from now, if you decide you want to sell, you’re going to
need to
need to
have that appraisal to be able to use for your justification.
Because obviously the only information we would have prior to that would have
been the
been the
value that she had paid for the house originally.
So you need that appraisal to be put into your documents to create your new
step up
step up
in basis.
Okay.
Well, I didn’t do that.
Is it possible to get someone to look back and do that now?
Absolutely, yes.
You might want to find maybe if you know a real estate person or whatever, you
just need
just need
to find a real estate person that will then give you an appraiser.
They can go back based on comps at the time of her passing.
It’s been done many times.
Okay.
Thank you.
No problem, sir.
Thanks for the phone call.
Sorry for your loss.
Thanks.
Appreciate it.
Yeah.
All right.
So we are getting close to our last break here.
If you want to join the show, you can at 615-737-9986.
615-737-9986 is the number here in the studio.
Taking your call, talking about things that we need to make sure we do so that
we keep
we keep
Uncle Sam off our back.
Right.
Or if Uncle Sam is already on your back and you’re like, okay, I need to get
out from
out from
under this.
Maybe your time has come where you’re just like, I need to make arrangements.
I need to do an offer and compromise.
I need to do a fresh start.
I need a payment plan.
I don’t know because each person is different and we need to figure out what’s
going to
going to
work best for you.
But whatever those things are, you need to make sure that you are not just
ignoring them
ignoring them
because sooner or later when you really want to go either sell your real
estate because
estate because
now they’ve put a lien against it.
So when you sell, guess what?
They’re going to take their share.
They’re going to make it their asset.
And then that way when you sell, they’re going to try to do what they need
done or they’re
done or they’re
going to turn around and they’re going to say, Hey, uh, that piece of real
estate that
estate that
you have over here, it’s not your primary home and you owe us.
So we’re going to force you to sell.
And yes, if it’s not your primary home, the IRS can mandate selling that
property.
property.
If you have not made arrangements to do something else, it’s that simple.
You either, you either make arrangements and in some cases that arrangement
may be that
may be that
you have to sell or take a mortgage against an existing property that you have
to make
to make
it work for you.
Um, all right, let’s hit Ron before the break.
That way it isn’t the way through the break.
Hey Ron.
Hello.
How are you today?
I am good.
Good.
Excellent.
I got a quick question for you about standard deduction.
I’m done.
I’ve done it myself.
A 1040 SR.
And I checked one box in that section and I’ve got to the latter stages of
the, uh,
the, uh,
of the tax return and it asked how many boxes are checked.
Well, I’ve also filed a check the box single in the filing status.
So is that one check box and standard deduction or is that two counting the
filing status?
filing status?
One.
Okay.
Just one.
Okay.
Yeah.
And I got one other question.
Quick question.
I’ve got my ex wife lives in my home with me and she, uh, she makes about
12,000 a year.
12,000 a year.
So you get that.
I guess I’m certainly have to file her taxes at that rate.
Plus, uh, she’s on social security and Medicare.
So last, uh, go ahead.
Go ahead.
So last year what I had done was, um, I filed her under a head of household.
I mean, I filed myself under head of household.
She had filed last year and I did get a letter that somebody else had filed
for her that
for her that
would then herself.
And she realized that she probably didn’t have to do that and didn’t file this
year.
year.
So can I file her as a head of household this year?
Yeah, directly.
You’re legally divorced.
So she is a dependent of yours if she’s making $12,000.
Or is she making 12,000 plus social security and Medicare or the 12,000 is her
social security
social security
and Medicare.
That’s it.
Just, just social security and Medicare.
Nothing else.
Correct.
Okay.
Then yes, she can be a dependent.
They don’t consider that earnings.
So, you know, and you’re probably providing her room board.
I mean, I’m just saying supporting a large part of her lifestyle since there’s
not much
not much
income there.
So you can be head of household.
And if I file head of household on her, would she have a chance of losing her
Medicare or
Medicare or
Medicaid because she’s filing as a dependent under me or I’m filing her as a
dependent
dependent
under me?
Is there a chance that she would lose her Medicaid?
How old is she?
She’s 72.
Oh no, no, that would have no effect.
It was only if she was on disability or something that that would come into
play.
play.
Well that makes quite a difference in my refund.
I would imagine it would, but then again, you have a second individual that
you’re supporting.
you’re supporting.
The biggest thing is you probably just want to do a support test.
I’m pretty sure you, you know, making sure you’re supporting her more than
50%.
50%.
But you know, when you consider all the overhead and what she has, I would say
that that’s
that that’s
probably not hard to do Ron.
Okay.
So what would I do with the letter they sent me about her filing last year?
And then nothing, I mean, I’m assuming when you filed last year, you took her
off and
off and
you filed single this year.
She hasn’t filed.
So you shouldn’t have a problem.
Very good.
Thank you so much for your help today.
I appreciate it.
Thanks Ron.
No problem.
Thanks.
All right.
We’re going to take our last break for the day.
You can reach us here in studio at least for a few more minutes.
615-737-9986.
We’ll be right back with the Dr. Friday show.
All right.
We are back here live in studio for the last part of the show.
You can reach us for a few minutes at 615-737-9986.
615-737-9986.
Taking your calls here in studio.
So if you want to make sure you’ve got everything going the way you need to go
again, just like
again, just like
you hear callers, make sure you’re thinking about what the situation is, what
you have
you have
going on.
And then that way we can make sure that we are spot on when it comes to doing
what we
what we
need to do on our taxes.
Nothing really be afraid of, just making sure that we get them done right so
that we don’t
that we don’t
have to worry about all the other situations that go with it.
Right.
If you do need help, I know our phone lines have went crazy at this time.
We aren’t able to take on any new clients directly, but we can get you
extensions filed
extensions filed
and then we can go ahead and do what we need to do when it comes to getting
you in after
you in after
tax season and getting you squared away and making sure we’ve done everything
we need
we need
to do to get you set up.
If we can help you with any kind of issues you may have with the IRS and you
know, just
know, just
get you back.
So you have what you need done and where you’re going for it.
So again, if you need help with that or if you’ve got a question, you can join
us here.
us here.
We’ve got about, I don’t know, six, seven minutes left.
615-737-9986.
Taking our call, dealing with any kind of issues you might have with taxes and
making
making
sure that at least you’re going the right direction so you can make sure you
have what
have what
you need, when you need it and how you need it.
So we can make sure, you know, I mean, last thing anyone wants is getting a
love letter.
love letter.
It’s that simple.
When you get those letters in the mail, you’re sitting there going, Oh my
gosh, what am I
gosh, what am I
going to do?
How am I going to take care of this?
Are they going to take my house?
Are they going to take something from me?
And you don’t know the answer.
And it’s not, I mean, to think that the IRS cannot take your house or to think
that the
that the
IRS cannot get into your bank account or to take your paycheck is a bit silly
because
because
of course they can’t.
I mean, if you have ignored them, if you have not given them the information,
if they’ve
if they’ve
been trying to track you down and all you’ve done is move and relocate, then
we’re good.
we’re good.
We’re time to go do what we need to do and move forward.
But if you have been communicating, if you have been doing what you can, maybe
you haven’t
you haven’t
been able to keep a good payment plan because maybe you’ve lost the job or
someone in the,
someone in the,
something’s happened within the family and you’re able to do what you need
done, then
done, then
you’re going to have to make do with what you can do.
But communication is the secret to making sure you have what you need.
You need to keep that communication open so that you can make sure that you’re
able to
able to
achieve what you need to achieve and not have the IRS stepping back on you and
saying, oh
saying, oh
my gosh, they’re going to do this.
And there’s nothing worse than your employer finding out that you have IRS
issues by them
issues by them
sending notices to them saying that they want you to levy their checks, right?
They want to take and take your paycheck from you in some fashion.
So if you’re having those kinds of issues, you need to have that
communication.
communication.
And again, I know I’ve people that keep logs that have said, I’ve tried to
call the IRS
call the IRS
at this time.
This is the number I call.
They tried to call here and every time I’ve been on hold for two hours, I was
on the,
on the,
I got, I got someone and then they hung up on me.
So I understand the frustration, but the fact is you still have to make that
resolution.
resolution.
You still have to communicate with them and you still have to get that.
So if you need help with doing that, that’s what we do.
We deal with the IRS all the time.
And I know that not everybody is going to have a perfect situation.
And sometimes people don’t think they can afford to pay the IRS, but the way
the IRS
the IRS
calculates debt, it’s not the same way as you might sit there and say, well, I
don’t
don’t
have any extra money by the end of the month.
But theoretically the IRS is saying, Hey, you know, you have your child in
private school.
private school.
You have three cars and there’s only one of you and you have two car payments.
These are things that they consider excessive and therefore they may give you
time to resolve
time to resolve
it.
But if they can’t, then they’re going to say, you need to sell one of those
cars, right?
cars, right?
That you need to consider taking your kids.
And yes, I was sitting in a meeting about four or five years ago with a
revenue officer
revenue officer
and her resolution was going to submit to her, her employer that they needed
to take
to take
their children out of private school.
The advantage we had was the school was because of the child being on the
spectrum and we
spectrum and we
had to have doctors and all kinds of different things showing that the
schooling was essential.
schooling was essential.
Therefore we got it removed, but you know, not every time is that going to be
the situation.
the situation.
So really understanding how the tax law works, what you can do to protect
yourself and your,
yourself and your,
your assets and what you need to be doing so that the government doesn’t kind
of just
of just
take the bull by the horn and say, here, this is what we’re going to do.
First and foremost is filing your taxes.
And right now we’re in the midst of filing 2023 tax returns.
So either complete your tax return or file an extension.
So that way you’ve got enough time to resolve it within the tax code, which
means until
means until
October, if you have a proper extension done, that does not extend the money
due.
due.
So when you file an extension and you know that you owe 20,000, but you know
what you
what you
filing extension either in hopes that you can raise the 20 or put it off a
little later,
little later,
it’s not extending that money.
So penalties and interest is starting as of the time you owe that money.
It’s not going to extend out to October.
Otherwise all of us would extend our taxes to October because no one wants to
pay their
pay their
taxes any earlier than they have to.
Right?
So make sure that if you know you’ve prepared your taxes, okay, I’ve got a
balance due.
balance due.
If you file the taxes, collections will start and you need to have a way of
what you’re
what you’re
going to do to make those payments.
If by delaying it, you’re delaying that situation, then you just understand
that penalties interest
that penalties interest
is going to increase from the time that you actually had that situation.
So we’re getting to the end of the show.
Here’s what we got to do.
First, if you’re interested in what we’re talking about, you can certainly go
to irs.wwwdrfriday.com.
to irs.wwwdrfriday.com.
Sorry.
DrFriday.com is my website.
You can find out more about who we are and what our firm does.
If you would like to reach someone in the office, you can give us a call on
Monday at
Monday at
615-367-0819.
We can help you file an extension and then we can try to get you scheduled in
next week
next week
or the weeks after the 15th and see if we can help you get some sort of
resolution and
resolution and
resolve your tax issue or just get 2023 filed so that way you’re in compliance
and everything’s
and everything’s
good if you need help with a payment plan or something.
Some of that can be very simply handled.
Or you can email Friday@drfriday.com.
Again Friday@drfriday.com.
That is what we do.
As an enrolled agent, I’m licensed by the Internal Revenue Service.
That’s who I am.
Dr. Friday, enrolled agent.
That sounds like one of those little TV show things.
When I’m an enrolled agent licensed by the Internal Revenue Service with taxes
or you
or you
need representation in front of the Internal Revenue Service, then you need to
call our
call our
firm.
We’re going to be the best that you can have.
And again that number will be 615-367-0819.
If you’ve got questions because you don’t know, should I be going bankrupt?
Should I be dealing with the IRS?
Do I have, how long, I thought the IRS only had 10 years to collect and why
are they still
are they still
collecting on 2011 on me?
There are answers to those questions and if you need answers we can help you
again.
again.
615-367-0819 or email Friday@drfriday.com.
That will be the simplest way for us to try to get time to get you in to
resolve your
resolve your
situation or to help you understand what you need to do and what you don’t
have to do.
have to do.
But most important, don’t ignore the love letters.
As we always say in Australia.