Listen to this week’s episode of the Dr. Friday Show, broadcast live every Saturday at 2:00pm Central on on 99.7 WTN! Radio personality John Haggard takes over the show while Dr. Friday is on the line. In this episode, they cover the following:
- Trump on Lowering Income Taxes
- Tax Changes in the Final Quarter of 2019
- Solar Credits
- Hybrid Car Credits
- How Doctor Friday Helped Someone Who Was Ought to Pay $1,000,000 but IRS settled for $100,000
- On The Affordable Healthcare Act That Required Health Insurance
- IRAs For Stay-at-Home Spouses
- Medical Deductions
- Standard Deductions
- Retirement Contributions for Self-Employed Individuals
- Can You Do SAP if You Have Both ACP and IRA?
- Benefits of Health Savings Account
- Are You Getting More on Federal Tax Brackets in 2019?
Transcript
Announcer: 00:01 No, no, no. She’s not a medical doctor, but she can share cure your tax 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!
John Haggard: 00:30 Live from America’s music city. It may be Saturday where you are, but it’s Friday all day, every day, all the time with the tax doctor, the tax lady, the doctor of accounting. Known in these parts of America as the Dr. Friday. And right here she is live. Hey Dr. Friday.
Dr. Friday: 00:48 Hey John. How’s life?
John Haggard: 00:49 Life is good. But sure is hot here in Nashville. I gotta tell you what. But down about 10 degrees. So I think things are things are going better. How about you?
Dr. Friday: 00:57 Things are looking up. I’m actually in Knoxville and it’s hot here too.
John Haggard: 01:01 Yeah, you’re up there. Of course they get to, they get a lot more snow and sorta ice and cooler weather. Have the tree started turning yet there in Knoxville or is it a little bit early for that?
Dr. Friday: 01:09 Yeah, it’s still a little early for that. It would’ve been nice. I’ve always loved coming up to Dollywood and seeing the changing of the leaves, but nope, it’s pretty much the same. They’re expecting a little rain later but other than that, it’s a bit toasty. It’s about 92 here, so…
John Haggard: 01:26 Alright about 92. Well folks, you’re listening to the Dr Friday show. By the way, if this is the very first time you have tuned in, you just happened to glance in cause that happens every week, what is this show? Well, this is the place where you get all the tax advice that you need. Trying to fill out a tax return or maybe you’ve got some love letters, Dr. Friday calls it from the Internal Revenue Service or it could be any type of a problem. Just a general question. Dr. Friday says, you know, there are no dumb or stupid tax questions. I mean, you know, the answer is to get the answer. Why give the IRS any more money than they are entitled to. And one thing. Just very quickly, I want you to know about Dr. Friday, especially if you’re new and have not heard the show before.
John Haggard: 02:08 She is an enrolled agent with the Internal Revenue Service. No, she doesn’t work for the IRS. It’s kind of confusing when you heard enrolled agent with the IRS. No, she can represent you like an attorney would represent you in a court of law. One of the cool things about being an enrolled agent with the Internal Revenue Service is if you don’t want to talk ever again or do the internal revenue service, you don’t have to cause she can work on your behalf, talk on your behalf, speak on your behalf, do everything on your behalf. That’s Dr Friday. We’re going to tell you some other things about her too, but I’ll tell you what I heard. I think last week, Dr Friday seemed like President Trump was talking about, well I think I might lower the payroll taxes or some of the things [inaudible]. Is that anything in the works that’s going to help for 2019 that might be coming up in terms of a tax revision?
Dr. Friday: 03:04 Well there’s a lot, there is quite a bit of talk. But Donald or President Trump, he was talking a lot about the payroll, which I know many people jumped on board. But it is really at this moment just talk. There has been nothing put through as even a potential bill or anything else. There are still some educational credit and solar credits and even electric your car or hybrid car credits, those are all still there. So everyday ordinary people type credits that are available. There is some talk about possibly bringing back some of the employee reimbursement credits. But like I said earlier, none of those have actually passed into law, any of them.
John Haggard: 03:54 Alright. So in committee, would you say at this point or even not even there yet?
Dr. Friday: 03:58 Not really even there yet, yes. More talk than action.
John Haggard: 04:02 Gotcha. All right. Well, any big surprises that have happened in the last quarter or so or anything that we thought when the new tax code passed that we’re now finding out, “Oops! Gotcha!” Well, anything like that or is it all pretty much okay?
Dr. Friday: 04:20 Well, I mean, I think… Hello? My phone is beeping back to me guys, so hopefully I’m not repeating myself out there.
John Haggard: 04:26 You’re doing well.
Dr. Friday: 04:28 Okay, good. To answer your question. I think the few changes they’re in the middle of auditing some of the tax changes and there is an internal audit the IRS does to find out how these exactly happen. Child credits, one of the big ones that are the new alimony rules went into play. And I, you know, I don’t know if IOC sent this over to you John. I was reading some articles last night and I found it really interesting. They had done an audit back in 2010 and they found out that $93 billion had not been reported in the year of the audit. I should say the audit was done in 14 for the year of 2010 and they said under reported alimony was $93 billion. Now keep in mind up until this current year, alimony was taxable to the person receiving it and it was a tax deduction to the person paying it. So it may lead you to wonder are at least try to explain why the IRS was looking for, or the government was looking for better ways of maybe collecting taxes on that money. So again, not necessarily but a surprise, that’s a lot of money. I did not realize we had so many under-reported alimony payments in the world.
John Haggard: 05:48 That is a phenomenal numbers. Are we saying now under current tax law for 2019 that alimony, both sides of it, it can’t be deducted and is not reported also as income on the other side or what was that again?
Dr. Friday: 06:02 No. Actually what it comes down to, if you have divorced as of December or January of 2018, I think it was, alimony is no longer taxable to the person receiving and it’s no longer a tax deduction to the person paying. If you are divorced prior to that day, you are still legally responsible for paying tax on the alimony and it is still a tax deduction to the person paying it. But I think what their plan is, like anything else over time, less and less people will be receiving alimony that are under the old rule and eventually it will fall off the book so that they won’t have such a large deficit in that situation.
John Haggard: 06:43 Gotcha. All right. So as we talk about, you know, the fun thing to talk about in the tax business is tax credits. Can I get a credit or can I get a deduction here or whatever it is. And one of the things that we hear a lot about, especially from home improvement folks, even from heating, ventilation and air conditioning roofing contractors is the solar credit. And you know, what qualifies and what doesn’t and you know if there’s a limit in terms of the dollars you can spend or if there was a big, you know, sort of push under the Obama Administration Green, green, green and go get you a lot of solar credits. Just kind of wondered, where are we on that now?
Dr. Friday: 07:21 Yes, it did survive. The initial cut it is 30% for 2019, but if you’re pondering solar or not, it is going to drop to 26% in 2020. And this means that for each thousand dollars you qualify for solar credits, you’ll be about $40 less. So if you’re going to do it, if it’s a matter that hey, I really want to go solar, I’ve just been kind of dragging my feet. I went and visited my brother in Laguna, California. He is got a solar, a big solar panels and works off the solar. He loves it. Of course we are seeing California versus Tennessee, maybe more sunshine, but he qualified for the solar credits. So I mean if you’re going to put $30,000 in and you can say 30% which is $9,000 that is a sweet refund against the investment that you want to do anyway.
John Haggard: 08:17 Yeah, that’s huge. Is that dollar for dollar off the top when they say like in that example you’re using the $9,000
Dr. Friday: 08:23 Yeah, this is a credit. So it is not a deduction. It is a credit. A dollar for dollar. Good job, John.
John Haggard: 08:29 Hey, I learn from you, don’t I? Now folks, here’s the phone number. We are live and when we say live on the Dr. Friday show, that means you call now and you get an answer to your question now, number to call (615) 737-WWTN. (615), 737-9986. We say call now because in another about 47 minutes we’re going to be gone and sometimes people, well, I’m going to call here in a few minutes and then you know the hour gets away from you. So any question at all, doesn’t matter what it is, call now. Now, I’m not really sure about electric vehicles. If they’re really going to catch on Dr. Friday until, you know, they get to the point where the batteries could take you maybe like a full tank of gas would. Because I always thought, hey, if I got an electric car and didn’t have it charged up and say I had to go 140 miles, say on some emergency or something like that and only had enough electricity for a hundred I mean, you’re just out of luck.
John Haggard: 09:27 So, you know, I don’t know what’s going to happen. I mean, eventually the batteries, just like they do in cellphones will get better. It might be some time. But what about for those who say, well, you know, I’m never, of course when somebody says never, there’s always, I never say never because you never know. But they, you know, people who drive maybe 50 miles a day or 75 or something like that. What is the plugin electric vehicle credit or is it even around anymore? Has it been phased out or what’s going on there?
Dr. Friday: 09:57 Yes. So I am exactly the same way, John. I am not a person that’s going to ponder, well I be within the miles of my vehicle or not because we’re so used to just, well if I need petrol, I need petrol, right? I mean I can keep going. My sister does drive the fully electric Tesla in Laguna Niguel. And it’s a good car. So if you are interested, cause I know a lot of friends of mine have talked. I’ve even thought about looking at a Tesla but I just can’t see myself plugging in and not having the ability to go anywhere if I have to wait two hours or something for my car to charge. But 2018 was the full credit. That was the last year of it. 2019, we’re in the phase out. So if you buy a Tesla right now, you’re going to end up with about $3,750.
Dr. Friday: 10:43 Perhaps in the first six months of the year, then it will drop to about $1875. It will be gone at the end of this year. And by the end of 2019, the test is if there’s 200,000 vehicles or more on the road, it becomes a non-tax credit. So they have basically hit that number. So if you’re pondering it right now, I would say you’re probably out of luck with getting a tax credit on the Tesla. There are a couple other ones. There is a website and it’s on the IRS website. There are some cars that are still out there that would apply for it. And when you do get the full credit, it is something like $7,500 or something like that. So it is well worth the credit if you really are into electric cars and you’re going to buy it anyways. I always say you have to want to buy it anyways because no one wants a credit. No one wants to spend $60,000 to save seven. That would be silly. So if you want to do it and it’s something you want, then saving seven is just a gift.
John Haggard: 11:47 No, I don’t, I don’t think I know anybody who has a 100% electrical, you know, electric vehicle. You may with all the clients you deal with. Do you have anybody that takes that deduction?
Dr. Friday: 11:57 I did. In fact my brother took it last year and I had about three other clients. They all purchase Teslas in 2018.
John Haggard: 12:04 Wow.
Dr. Friday: 12:05 That’s the full electric one.
John Haggard: 12:05 All right.
Dr. Friday: 12:06 My three clients are in Tennessee and one of I met not too long ago and they’re already ready to kind of sell it. It was their second vehicle. They thought it’d be really fun to have and they just found out that it wasn’t all the bells and whistles. It wasn’t as exciting as they thought it would be. But they said it’s a wonderful car. They said it’s a great car, just not necessarily for them.
John Haggard: 12:27 Gotcha. Folks, you’re listening to the Dr. Friday show, John Haggard here in the studio and we’ve got about 44 minutes to go. Any questions at all that you have about taxes right now? Jump On. 737-WWTN. 737-9986. When we come back, I’m going to tell you how Dr. Friday had a client who owed over $1 million in back taxes. See ,the Internal Revenue Services, she got it settled for less than or right about at $100,000. And there are a number of stories like that. You’ll learn more when we come back on Supertalk 99.7 WTN.
John Haggard: 13:12 And back live, we are! Segment number two. The Dr. Friday Show live from America’s music city. John Haggard in the studio. The Dr. Friday, an enrolled agent with the Internal Revenue Services on the phone with all the advice answering your questions at 737-WWTN, 737-9986. Now is the time to call. Before we went to break, I told you this and we’ll tell you how. As an enrolled agent with the Internal Revenue Service does not work for the IRS, folks. Just understand that because some people like, “I don’t talk to IRS.” Well, that’s why you need an enrolled agent with the IRS. That’s Dr. Friday now. For Dr. Friday to get that certification, she doesn’t just fill out a form and send in a 100 bucks or something. But you gotta do a lot of continuing ed and there are some very strict requirements to get that done.
John Haggard: 14:01 But one of the things that she does do, I was telling you about this person that owed over $1,000,000. Now you may not owe over a million dollars, maybe it’s $100,000 you owe or $800,000 or I don’t know what the number is, but Dr. Friday we hear these offers and they’ll, we’ll really start to hear them coming up here in about another month about these companies that “we always monitor the Internal Revenue Services you call us and we’re going to do all this for you and we’re going to reduce all this money.” And you know, there was a national scam several years back. It was a shutdown by the feds that they were taking money and doing nothing. But in just its simplest shortest form, when somebody says, “You know, they owed over $1,000,000 and you got it settled for about $100,000” It almost sounds like too good to be true and most things that sound too good are. So how did that work? How did you do that?
Dr. Friday: 14:50 Well, in that particular case, and this is the case with many other people that initially come in, the person was not in compliance. Which just basically means the IRS has already assessed based on 1099 and things turned in his taxes with zero deductions. Claiming he’s single, not married, etc. because he never filed. So once we filed the taxes and get the actual true information out there, then it drops his taxes drastically. And then he had some hardships. So we were able to get a few things waived as far as penalties and things. But, it’s not magic to be quite honest. It is really just doing the numbers and making sure that it works. I mean, not everybody, in fact, a very small number of people, when you really think about other body that files and does taxes can really get a true offer in compromise.
Dr. Friday: 15:45 When you hear this 10 cents to the dollar thing. I mean, I do them all the time. But some people they may owe $50,000 and they get get it down to $20,000. That’s still a heck of a savings, but you know, it’s not 10 cents on the dollar. So and then I have people that owed $74,000 and got as low as $25. So it is different for every single situation in most of those situations are, if you’re getting that kind of really good deal, you don’t own real estate, you are working at a minimum paid job or retired, your assets are very, very limited, then there’s nothing for the IRS to really come against and therefore you qualify for what they call an offer in compromise.
John Haggard: 16:28 I think, like you’ve said before, let’s say someone’s got a $840 a payment on a car and living in a rich area of the city and got a little bit of equity in that house, say maybe not very much cause they’re over leveraged, but they got all these, maybe they got two cars and they got this and that. Can the IRS make you say, “Look, you know what, you don’t need an $840 a month car payment. You go get you one for $300 and you sell that thing.”
Dr. Friday: 16:58 Well the IRS basically has a plan for you. And yes. So here’s what it comes down to. They allow a car payment within means. So if you’re driving a Mercedes that’s costing you, like you say, $800 a month, unless you can prove that your job, like maybe a high end real estate agent or something needs to have a particular image, we may be able to argue that. Otherwise, you know, there’s really no need for you to have that. They’re going to suggest that you sell that vehicle or what they’re going to do is an add back. So they’re going to say, we’re going to say that you can have a car for $350 a month with an average car. And the difference that you’re going to have to find a way of paying us because we’re going to say that you need to pay us $1,000 a month at your income bracket.
Dr. Friday: 17:43 You can’t afford it. And I mean, just like private school for your kids, that’s a choice. That’s a luxury. That is not something that the IRS says is is available because you don’t pay the IRS, but yet your child could go to private school. No, it doesn’t work that way. That’s what public schools are for. So there are many things that you may consider a necessity that the IRS will look at you like you’re a bit crazy and saying, no, that’s not gonna fly. We’ll give you 12 months to reevaluate, rechange your life or to get out of the car or whatever it is. And then we’re going to come back, then we’re going to impose this and meanwhile they’re going to impose penalties and interest on that loan.
John Haggard: 18:27 So when you call the IRS you’ve probably got a special, what I would call a back number, I guess, a special number to get in. When they first hear you, do they say, “Oh, it’s you again…”
Dr. Friday: 18:43 We do have, thank God, we have a tax practitioner hotline. So people that do taxes, anyone that has a 2848 or an 8821 – power of attorneys anyways – on somebody’s you can use the tax practitioner hotline as long as the person is not in collections. Unfortunately, 90% of the time someone comes into mind is because they’ve received a love letter saying that they’ve either been to levy, they want to put a lien against the payroll, they’ve levied the bank accounts, you know, so collections is already started and therefore I am on the same exact number that you are or anybody else. They did not given us the ability to have our own operators to help with collections, which would be really sweet cause we can probably resolve a lot things faster than… If we didn’t have to wait quite so long. So yeah, we do pretty much have the same phone numbers as you do unless it’s just ordinary questions. And then we do have a practitioner’s line.
John Haggard: 19:41 Alright. So folks, if you are in trouble with the Internal Revenue Service, maybe you haven’t filed in the last five years, 10 years… What’s the longest case you’ve ever had, Dr. Friday, where someone came in and said, “Well I have not filed in x years.”
Dr. Friday: 19:57 28 years…
John Haggard: 19:58 28 years?!
Dr. Friday: 20:03 That long ago, yup. He has came in. Filed when he was in his early twenties. You can imagine where he’s at now -in his late forties, early fifties almost. And he has not filed a tax return since. And the IRS had filed some. But this gentlemen, most of the time, in all fairness, he was self employed. So you know my self employed individuals pretty much just trying to stay under their radar. So he did have some 1099s but not very many because the type of business he was in was more to residentials. So, bottom line is the government really had no idea. And the only reason I think he came into me was because he was getting married and wanting to buy a house and you need tax returns to do that. And we really only go back 10 years unless there is existing tax issues. So we don’t usually 7 to 10 years, we don’t even, you know, even in his case, I would not have went 20 years unless the IRS had an open case on an earlier tax situation.
John Haggard: 21:03 Gotcha. Great Answers, folks, to questions that you might have just like that. So you know that’s what you want Dr. Friday for. And the number to call, 737-WWTN, 737-9986. Now, just one other question because I think there’s a little bit of confusion on this one, Dr. Friday. And that is, we all do remember the affordable care act requiring individuals to have health insurance. And some people say, “Well you know what, it’s going to cost me more money. If I do that Obamacare, it’s going to cost me 500 bucks a month. So that’s 6,000 a year. I just rather pay the fine!” And I guess some people did. Do you still have to now?
Dr. Friday: 21:42 Okay, so you’re right. There is a little confusion on that because the penalty itself is gone. But many people are still in what we call the marketplace., The Obamacare where you call in and they have provided you health insurance and they pay a portion of your health insurance for you. If you are in the marketplace, that’s penalty or that’s payback situation. So it’s always based on your prior year income. So if you make more money in 2019 than you did in 2018, you could end up still doing a payback to the marketplace or to Obamacare. So if you are still there, you will still have a 1095-A, you will still have to file that form, you will still need to make sure you’re accountable and every year you have to still provide them your tax return to stay within the mandates.
Dr. Friday: 22:36 So even though there isn’t really the penalty, there is no longer the requirement to have to have health insurance for everyday individuals. Now most of the mandates are still in place for employers. If you have 50 or more employees all those kinds of mandates, those all still exist as far as providing health insurance and all that. So really the only thing that was removed from the current law is the penalty for individuals that did not have health insurance. You will not have a penalty this year on your tax return.
John Haggard: 23:12 Okay. So again, just for clarity now, if you were still in the market place and you’re still, you know, under that plan, you gotta file that form and so forth. But is there any penalty possibility whatsoever?
Dr. Friday: 23:26 Well, it’s not really a penalty, but there is a payback. So let’s say you told him you’re going to make $20,000 and you ended up making $30,000, you may owe back. I have people last year, two cases. I know of one had to pay back Obamacare $12,000, one had to pay back $18,000.
John Haggard: 23:42 Oh my God.
Dr. Friday: 23:43 In both of their cases, they actually sold real estate. Not thinking about that being as income, but according to Obamacare or the way they do your thing, it is income. So in both of their cases, they had to actually pay back every dollar that they were given in the Obamacare situation. So again, it’s not so much that you got a new job, but what if you actually decided to sell a piece of real estate or maybe some stocks, something like that, that kicks your income into a different bracket and you don’t think about it cause you’re thinking, I’ll ask, they worry about is income and boom! They end up penalizes. You know what I mean? This was a big chunk of money that nobody knew about really until we prepared the taxes.
John Haggard: 24:28 Another reason folks, why you need Dr Friday for the advice. Because if you’re thinking about doing something, things that you do can affect your taxes. “Yeah. Well I didn’t realize you’re gonna do that. You mean I got to pay that?” Yeah, you do. And one thing about IRS if you will, and that is this. These folks you know, a lot of people will say, “Oh, they work for IRS. I hate those people, Blah Blah Blah.” Do you realize that it’s Congress who passes the laws, the IRS employees, all they do is to enforce the law. Now I know there’s some bad eggs in there like they are everywhere else. We remember Lois Lerner and some folks like that. But you know, generally they’re just enforcing the law that your elected politicians. Oh my goodness.
John Haggard: 25:17 You know, I’ve passed up there. So we do, you know, just in all fairness to the IRS, cause I mean, there are a lot of good people that worked there. So when we come back, we’re going to talk to you Marshall who’s got an IRA question. We’re T-27 minutes to go, that means jump on the phones now to get the answers to your tax questions and maybe some advice on should I do this or not or wait until next year about something you’re trying to do that could impact how much you were going to pay. All right. And phone number 737-WWTN, 737-9986. John Haggard in the studio, Dr. Friday on the telephone with all the answers for you and your phone calls. They’re all next on Supertalk 99.7 WTN.
John Haggard: 26:03 Allman Brothers Band! Feel like I’m on a rock and roll radio station, 2:35 Supertalk 99.7 WTN. Ain’t that a great record, Dr. Friday? I love that record.
Dr. Friday: 26:10 It is awesome. I love that!
John Haggard: 26:13 Man. I’m going to tell you what that was some of the best years of music ever in the history of mankind and womankind. The Allman brothers band. All right, back to the phone calls we go as promised, you’re on the Dr. Friday show live from Nashville. Let me tell you this real quickly before we do go to the the phones and that is if you are ever outside the area of the listening area of this radio station, if you download that iHeart app on your smartphone and just enter WWTN you can listen to the Dr. Friday show anytime on Saturdays from two to three or any program on this radio station. Let’s bring in Marcio on to the Dr Electric Show. Hey Marcio, you’re on the air.
Caller 1: 26:52 Yes. Hello. I have a question. If my wife is not working, she doesn’t have an income. Can she still open an IRA?
Dr. Friday: 27:02 Are you, are you working?
Caller 1: 27:05 Yes.
Dr. Friday: 27:07 Okay. So a husband can contribute to his wife’s IRA. So if you’re making more than $12,000, you can put six in for you and six in for her. So yes, I mean she can still have an IRA, but you would have to contribute the money from your earnings. I mean it doesn’t make a difference, it’s family income. So as long as your earnings reflect higher than what’s being contributed, you’re fine.
Caller 1: 27:34 Okay. Okay. That was my question. Thank you.
John Haggard: 27:37 All right. I appreciate the phone call. You know what’s the most, I think, very difficult, hard to understand when it comes to deductions, in my opinion, and I’m a simple guy I just try to read the black and white on this – medical deductions. Gracious. Has anything changed there? And is there any simple way that you could explain what I get and what I don’t?
Dr. Friday: 28:04 It is more complicated now in some ways. And I think they’re trying to simplify it, in fairness to the new tax law. So as we know, as a single person, I have a standard deduction, a little over $12,000. I have to meet 10% of my adjusted gross income to get a dollar off my medical. So let’s use easy numbers. I make $100,000. So I first have to make, I first have to have more than $10,000 in medical before I’ll even get a dollar. And then assuming that I don’t have a mortgage or anything like that, I’d have to have more than 12,000 to even get a dollar to even into my tax return. So you’re looking at, for a single person that doesn’t own their home, probably somewhere around $22,000 a medical would be needed before, and the scenario that you’re making $100,000 would we be made to even get a dollar.
Dr. Friday: 29:09 The good news is, I mean, what some people forget is, if you are a person that has to take prescriptions for example, and you have to drive to Walgreens or whatever. So miles from medical is a tax deduction. The way of helping you get over that initial tax deduction. So you’ve got your miles to the doctor, miles to the pharmacist, miles to the eye doctor, miles to the dentist, whatever those all may add up to and the many times that you may to do. And don’t forget your eye doctor and don’t forget your dentist as a lot of times people really think about medical as doctors and prescriptions. But most people at least do once a year eye exams and dental exams and some of those kinds of things.
Dr. Friday: 29:57 So you want to have that, it’s a whole package. My suggestion, and I know a lot of people, I like to keep my clients, I hate to say this, but trained because the tax law we have right now, 2025, it will disappear. We could go back to the standard deductions we had before and then more people may be itemizing. So don’t get in the habit of, “Oh, I can’t do it now.” Whatever you do for taxes, my suggestion is a bit of a wisdom share here – always do it every year. Put together a folder or a Manila envelope, put all your receipts in it for the year. Anything to do with medical, anything, I mean some people still count sales tax. Even though you might not use it for the next couple of years, it is always a good habit to have all your tax documents in the same place every year, the same way you’ve always done it. So just don’t get too lazy in the new system that says, “Oh well I can’t do this and I can’t do that.” Because come 2025, your tax person may be asking you for something different and you’re like, “Oh wait, I didn’t know I could do that.” Where every year you may bring it to me. I may say I don’t need it, but it’s still there for us to make sure we have.
John Haggard: 31:08 Good advice on that. T-19 minutes to go, T-19. That means jump on the phones now and get the answers. You know this stuff is complicated folks, and here’s the way I look at it. Why not go ahead and get the advice and the knowledge about it before you do it. In that way, maybe you’ll make a decision that will save you a lot of tax implications in dollars that you will pay that you wouldn’t normally have to pay. So you know, always best to, what they say, foresight is better than hindsight or something like that. All right, 737-WWTN, 737-9986, call now! You hear me? We want you to get all that, all the best advice you can possibly get and it’s free, so why not? Hey, you don’t want another thing that seems to change every year or every third year, second year, first year, I don’t know. Then another one that’s kind of confusing as that thing they call the standard deduction. So could you update us on that Dr Friday?
Dr. Friday: 32:01 Absolutely. Okay. So we did have a big change from 2017 to 2018 we had one of the big tax changes. Went from a standard deduction for an individual grow about $6350 to $12,000. Married couple doubled that. So they were around $12,400 and they’re at $24,300 or $24,200. So that’s the standard deduction. And like we were talking about, to be able to itemize, we still have the sales tax and the property taxes, but they put a maximum on that. So why is that so important? You’re asking me, well, I’m going to tell you. Because I used to play this little game where every other year I itemize. Because my property taxes and sales tax and mortgage interest, I wasn’t always able to do it every year. But what I would do is I pay my property taxes twice, once in January, once in December, every other year I would give all my charity contributions in the same year.
Dr. Friday: 33:01 And then of course pay my standard a mortgage. And so when I did that, I was able to kind of maximize my itemizing against my standard deduction. And when that stopped because they turned around and said, “You know what, we’re going to put a limit on sales tax and property taxes of $10,000.” Well that wasn’t really good for someone like myself because my property taxes doubled up was almost maximizing that number without added back in my allowable sales tax every year. So now I have a limit of $10,000. So I really stopped doing that and I am not really itemizing as much as I was able to unless something big comes up. And so I’m just saying the new law, the itemizing has changed, I think it will work for many people. Just like any other tax law, it doesn’t work for everybody.
Dr. Friday: 33:53 So if you’re from another state, I have a brother that lives, I talked earlier about Steven that lives in California. His wife and him ended up leaving $28,000 on the table or the salt because California taxes are high. And with $10,000 limits for their income tax as well as their property tax, that’s a lot of money they ended up leaving on the table. And again, it’s not going to work for everybody, but I did see a lot of people that actually benefited from the new tax law. So I’m really just learning to work the system the best you can and making sure you not caught having to pay taxes is the important part of that conversation.
John Haggard: 34:31 Right. And that’s why we say folks for Dr. Friday, you just need to get the advice before you make a mistake because why leave money on the table or whatever the situation is. So her number, by the way, (615) 367-0819 (615) 367-0819 if you want to call her during the week or you go on the website, drfriday.com, drfriday.com. Again, foresight better than hindsight. Save yourself some money. honey. Okay, let’s get that done. Now, you’re on a roll. So I’m going to keep asking you these questions because these are the things that people want to know about. Here’s something else we know about – retirement contributions seem to go up a little bit each year and all this kind of stuff. So what’s the current deal on IRAs and for those who are self-employed, they call them the seps, what do we got working for 2019?
Dr. Friday: 35:26 That’s a great question. Let’s see what I can give you for that one. Cause you know, it would be really good to know. So, okay. Here we go. So a married filing, that’s the standard deduction. Well $56,000. It’s up about a thousand dollars in 2018. This is one of those things that kind on depends in what is the subject for individuals that are listening. That’s a self employed employment savings account. So, it’s a little bit better than an IRA. IRAs are, what, $6,000 in 2019. And I think the catch-up makes it seven if you’re over the age of 50. But with the sep, what’s nice is, if you’re self employed and you want to be able to put a little bit more aside than just what you can put in IRA, that is the way to go. It’s kind of the a 401K of the self-employed. Even though we, we can always put a little more in than they can. So that’s always nice too. So you have $56,000 maximum and then you also have $6,000 for the IRA for people under the age of 50 and $7,000 for people over the age of 50.
John Haggard: 36:36 All right, you heard it right there folks. Got about 14 minutes more of advice coming your way. T-14. You got a last minute question right now? Jump on the phone. 737-WWTN, 737-9986. John Haggard in the studio, Dr. Friday an enrolled agent with the Internal Revenue Service and no, she doesn’t work for the IRS. Enrolled agent means that she can represent you in front of, and on your behalf,The IRS. Just like an attorney represents you in a court of law. Phone calls are next here on Supertalk 99.7 WTN.
Commercial 1: 37:13 Duration, bookkeeping or payroll. That’s what Dr. Friday tax and financial firm does. We help small businesses get organized and stay in compliance. Again, call me at (615) 367-0819
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John Haggard: 38:43 Back live. We are at the final 10 minutes of the Dr. Friday Show today on Supertalk 99.7 WTN. Gonna go to the phone lines and bring Ron onto the Dr. Friday Show. Ron, you’re on the air.
Dr. Friday: 38:56 So talking to Byron.
Caller 2: 38:58 Hi. You are talking about the ACP and IRA. Can you do both if you have an SAP? Can you also do an IRA on top of that or are you still limited to the same $56,000 or whatever it was?
Dr. Friday: 39:15 Well, if you’re able to maximize the SEP, that means you’re making over $235,000 which would mean you could not qualify for an IRA as well.
Caller 2: 39:26 Okay. Thank you.
Dr. Friday: 39:28 No problem.
John Haggard: 39:29 All right. Simple, quick answer to that. Absolutely, it was. You know, another thing that we had a lot more of before and maybe it’s as big now and continues to get bigger, I’m not sure. But health savings accounts known as HSAs, are those still in vogue as it were or what’s the deal on them?
Dr. Friday: 39:49 I would say they should be. I have one, I still love them. I love the idea of paying for my medical with pre-taxed dollars and the ability to write off up to, in my case, a little over $3,500 a year of my contributions to my HSA. So I get the tax deduction along with, when I spend the money in my HSA, it is actually tax free dollars. So it’s a win-win situation and my health insurance is much lower than ordinary. So I can control my own spending to a point at least. You don’t always have all the choices, but I pay less than $150 a month for health insurance and then I can maximize my HSA. It is a high deductible health insurance of mine is like $2,500. The first 25 I have to pay, but I have that in the HSA and it’s already tax-free dollars.
Dr. Friday: 40:44 So I don’t know why more people don’t… Most of my or many of my clients that are entrepreneurs, we have kind of moved towards that kind of thing because, well, to be quite honest, entrepreneurs are really bad about going to doctors most of the time because they’re so busy trying to build their businesses. So having a savings account is kind of nicer than having medical insurance that they don’t use as often as they probably should. So you know, I’m sure there’s some people out there that are more of an expert than myself on it, but from the tax standpoint, HSAs are very good investments.
John Haggard: 41:22 All right. And since most good things, sooner or later come to an end, is there an age that you reach where you cannot contribute to an HSA?
Dr. Friday: 41:34 Of course, always a limitation to, like you say, all good things must come to an end. The year in which you take Medicare. So if you wait until you’re, I think, what is it, 65, 66, whatever, a year you start taking your Medicare, you no longer can contribute to an HSA. But the money that you have saved up in your HSA, and I have people that have $30,000 and $40,000 in their HSAs can still be spent on medical procedures. So you don’t lose the money that’s in the HSA. You do get to use it for medical purposes still and have the the tax exclusion like you always did, but you cannot longer contribute to it.
John Haggard: 42:14 All right. Now can you use, if you are in that situation, can you use the HSA money to pay the medicare premium or is it only for procedures?
Dr. Friday: 42:24 No, you can use it for premiums.
John Haggard: 42:27 Good deal!
Dr. Friday: 42:29 I like that!
John Haggard: 42:29 Yeah, that’s pretty good deal. So if you’ve got…
Dr. Friday: 42:32 You cannot do that while you’re contributing to your HSA and paying for your other premiums before retirement. But once you hit retirement and you want to use it for your secondary insurance coverage or something like that, Medicare usually comes out of your social security. You can use your HSA funds to pay for that secondary insurance.
John Haggard: 42:53 All right, folks. There’s some good news there. Back to the phone lines we go and let’s bring Candy onto the Dr. Friday show. Candy, you’re on the air.
Caller 3: 43:02 Good afternoon. I have a [inaudible] missing repayment, a 68 withdrawal [inaudible] to be sure.
John Haggard: 43:16 Hey Candy, you’re, you’re breaking up there a little bit. Are you on a speaker phone, Candy, by chance?
Caller 3: 43:21 I am. Hold on just a minute. I have to move and get off the speaker. I’m in my car.
John Haggard: 43:28 All right. Don’t do anything illegal if you’re in the state of Tennessee cause I don’t think you can have that.
Dr. Friday: 43:33 [inaudible] You forget that we’re on a college. We have people listening to us who are in a car and they cannot use their phones any longer to call us. So it makes it a little harder to get those calls in.
Caller 3: 43:47 But we’ll see…[went off]
John Haggard: 43:51 Let’s see. Did you already pull over their candy? Cause I think we may have lost you. Why don’t you give us a shout back real quickly if you can? And then we’ll see if we can get you on very quickly cause we’re almost out of time and maybe we’ll sometimes we hit another cell tower and something will be good. Hey, how about those federal tax brackets, Dr. Friday? We’re going to get some more money in 2019? We’re going to get some more back or what’s going on there?
Dr. Friday: 44:15 John, I love your, I love your attitude. There’s always hope when I hear you talking. How do I tell you this? Yeah, not going to be a lot of extra situation. I mean, obviously the federal tax bracket, you say about 2% from 2018 going into the 2017 going into 2018. The tax code is the exact same for 2018 to 2019. So there should not be any adjustment to my understanding. There is a… Right now is the time though to consider if you are in a higher tax bracket and you’re wanting to move money or do something specific, you’re going to want to consider doing that possibly now because obviously we are in a lower tax bracket than we will be in five years.
John Haggard: 45:07 All right? Now, do you ever get – because it’s hard to know these days with all the emails out there. If you are in some trouble and have not been contacted by the IRS, would they send you an email saying, “Hey, we’re looking at this tax return and you need to call in here quicker. We going to come get you.”
Dr. Friday: 45:23 Yeah, that’s a great question. I get the phone calls where people say, I received the call or I have an email here from the IRS. But the answer is 90% of the time the IRS won’t even call you unless it’s a local agent. They will never email you ever. It’s outside of their policy. They will mail you. And if a letter looks suspicious, if it doesn’t seem correct, don’t call the phone number on the letter. Call the regular internal revenue service. If you’re not sure, you can always call my office and we’d be more than glad to give you a main number that you can call. But you do want to make sure, I mean there’s nothing wrong, even if you owe the IRS, and this is the ones that get the most worked up over these things because they already know that have a balance due and they’re afraid.
Dr. Friday: 46:11 And these people take big advantage of that situation by telling them that they have minutes or an hour to get the money to them or they’re all come with the police and knock on their door or they’re gonna seize their car, their homes or [inaudible] their paychecks, whatever. And I’m not saying some of these things the IRS cannot do, but I’m going to say that there is a pack in order the IRS uses and they don’t just email you or phone call you and make you do it. It is a number of letters that has to be sent to you. And there are policies in which we can use to stop those as simply as make your payment plan can stop that from happening.
John Haggard: 46:49 All right folks, for a lot of great advice on the Dr. Friday show that you’ve heard today. So if you did not get on the air, let me give you Dr Friday’s phone number. Would you like to add? Here we go. (615) 367-0819. We do a lot of numbers around here so we’ve got so many numbers. And on the website for Dr. Friday, here it is drfriday.com that’s drfriday.com and always email friday@dourfriday.com Did you know that 1000 years from today you will be alive? The question is where. Did you know that many people are just 12 inches away from heaven? That’s the distance from their head to their heart. They believe in Jesus Christ in their mind, but they have never accepted him in their heart. The biggest decision you will ever make in your life is where you are going to spend an eternity and the good news is you get to choose where. If you don’t know, if you’re going to go to heaven, I can help you settle it right now. Just say after me, Jesus, I invite you into my heart. I proclaim you my lord and Savior. Forgive me of my sins. God willing. We’ll see you next week. Everybody. Blessings from the Dr. Friday Show, Supertalk 99.7 WTN.