Listen to this week’s episode of the Dr. Friday Show, broadcast live every Saturday at 2:00pm Central on on 99.7 WTN! For this episode, Dr. Friday hands out advice to callers and discusses topics such as:
- IRS and Cryptocurrency
- How to Determine IRS Scams
- How to Do Tax the Right Way When Starting a New Business
- Why You Must Report Personal Tax Returns
- How to Claim a Loss by Scheduling a D
- Maximum Amount to Contribute to Children and Grandchildren
- California and Tennessee Comparison on Minimum Wage
- What Type of Business License You Should Apply for When You Operate at Your Home
- Why Get an Insurance When Making an Entity
Transcript
Announcer: 00:01 No, no, no. She’s not a medical doctor, but she can sure cure your tax problems or your financial woes. She’s the how to girl. It’s the doctor Friday show. Do you have a question for doctor Friday? Call her now. Seven three seven WWTN that 737-9986. So here’s your host financial counselor and tax consultant Dr Friday.
Dr. Friday: 00:29 Good Day. I am Dr Friday and the doctor is in the house. It’s been nice. I’ve been a kind of remote around the office the last couple of weeks it seems like. So it is great to be back here in the studio. So if you’ve got questions, maybe you’re getting ready to think about preparing your 2018 extensions for businesses will expire on September 15th, individuals by October 15th. So it’s very important to go ahead and start getting them prepared in case you owe money and get prepared to how you’re going to get ready to pay that if it’s an add on to your existing payment plan or setting up a payment plan or just paying them outright. So that’s very important. Over the July 26 that actually came out. So basically it was updated on the 27th, the internal revenue services announced Friday that they are beginning to send out letters to tax payers who own crypto currency, advising them to pay back taxes they may owe, to file amended tax returns regarding their holdings.
Dr. Friday: 01:30 Some information that has been being submitted through bitcoin and some of the other companies. Big, big news for a few, if you’re one of those that follow or invest into that. There’s been quite a bit of conversation about how the IRS will even know who actually has money in this since it’s very difficult. They have more than 10,000 tax payers at this point. By the end of this month, they say they’ll have at least 25,000 letters going out. So, hey, just a heads up. If you’re one that has nephews that have invested, or if you’re an investor into crypto currency and at this point you’ve been in it for a number of years and you haven’t filed anything on your tax returns, just keep in mind that the IRS is getting more and more information from different sources about cryptocurrency. And if you have made money, and that does not mean that you’ve actually converted it back into US dollars.
Dr. Friday: 02:30 But if you have sold bitcoins for other types of currency or if you’re mining and you’ve sold money from one to the other, that’s a step up or a change or a new purchase. So when you sold it from one to the next, theoretically that should have been reported just as if it was buying one stock, selling it to buy another stock. Every time there’s a transaction, unless it’s being held in a tax deferred account like an Ira or something similar where we don’t have to report it. Until we actually take the out, if it’s being invested with after tax dollars, don’t be surprised if you get a love letter from the Internal Revenue Service talking about those kinds of situations.
Dr. Friday: 03:08 We also want to talk a little bit about scams. So if you do want to join the show, if you’ve got questions or maybe you’re in the middle of getting ready to get all your tax information, or you’ve got friends or family that are in the middle of some tax issues, you can ask the questions.
Dr. Friday: 03:24 We don’t record or keep any of the information here. So your name you give us or anything else isn’t important. It’s more about asking a question that may even help yourself or maybe help other listeners that are listening that may be a bit shy to ask the question. 615-737-9986 is the number right here in the studio. Six one five seven three seven, nine, nine, eight, six. IRS has also released some new scams. They’re really not new. Many of them are pretty much the same thing. The IRS doesn’t usually call individuals unless there’s an open case. They’ve already sent you letters, they’ve tried to contact you. They are probably more apt to knock on your door than to call you unless it’s a local revenue officer that you’ve been in contact with in the past.
Dr. Friday: 04:12 I’ve had a case where I had a young lady, really quite upset. Because unfortunately, like I said, the last couple of weeks between a wedding and my brothers (they do this shark swim thing where they swim from Alcatraz into the land… Crazy brothers that I have). Anyways, this person was trying to reach me and she had gotten two phone calls and she had made the mistake of actually trying to have a conversation with these individuals. Long story short, this person does owe money to the internal revenue service along with millions of other individuals. So the phone calls do hit because there’s quite a few people that may have tax issues. So in her case, she was thinking that they were going to come and take her home, come knock on her door. The police were going to arrest her.
Dr. Friday: 04:59 After I got a chance to talk to her, I told her that wasn’t the case. She was totally in a non collectible situation. This person is living paycheck to paycheck and is hardly making it. But meanwhile, for a couple of days before I could get back to her, she was totally freaking out. These calls can be very intimidating. So, if you get a phone call from the IRS, I can’t tell you how important it is. A, don’t answer those questions. If they’re asking you anything personal, this is the internal revenue service. Get a badge number, get a name, hang up the phone, call the local office, call the 1-800-829-1040 number. Ask if this is a true agent. Ask if there’s a situation you know with your case. Don’t just assume that you’re talking to the Internal Revenue Service. And one of the biggest giveaways… just picture the internal revenue service threatening every single American that owes them money, that we’re going to come seize your property, that we’re going to have the police at your door, I mean come on guys. Use a little logic. I realized you’re already stressed because you owe the IRS or you have issues with them.
Dr. Friday: 06:08 But the likeliness of that happening, especially if you haven’t relocated in the last two years or so and you have filed information with the government, there would have been a ton of love letters and they’re more apt to put a lien or levy against your paycheck than they are to come and arrest you. I think it’s like 0.1% of people that actually have ever had, and most of the time, it’s more like fraud or theft that the IRS is more interested in than coming after a person that owes a couple thousand dollars or even tens of thousands of dollars on those issues. So step back from the issue and seriously do not answer those questions and make sure that you are dealing directly with the IRS before anything is coming up. So if you have questions, (615) 737-9986 is the number right here in the studio. (615) 737-9986 taking your calls, talking about all things information, taxes, money.
Dr. Friday: 07:06 All good stuff. Anything that’s going to make it exciting for us. Any questions that you might have about your tax return. Keep in mind that if you’re starting a new business, sometimes a lot of people seem to be contacting my office thinking that they need to start out with a c corporation, that they need to, you know, get into, in my opinion, something that might just be a little too big for a small business because of the current tax laws. But the current tax laws are not permanent. They’re going to disappear in about five years. So, do we really want to start a business that we are kind of stuck into possible tax laws that aren’t as good for us or the fact that, keep in mind if you are a corporation, c Corp, sub s corporation, you must start payroll.
Dr. Friday: 07:54 You must put yourself on payroll. The only person that does not need to be on payroll in an corporation situation is possibly an investor. But if you’re working, if you’re doing the bookkeeping, you’re managing it, you’re doing the work for it. You must be on payroll based on tax law and if you aren’t or you’re not paying yourself what’s called a fair wage, because a lot of people misinterpret the fact that if I have a sub s corporation and that money rolls over to me as dividends, theoretically I don’t have to pay self employment tax. Thinking, oh wow, this is a lot better than a sole proprietorship or a partnership or a single member LLC in some ways because I don’t have to pay self employment tax, which will save me a lot of money. Of course you’re not paying into social security, which means that in the long run you may be kind of cutting your legs off there, but who knows where that will be when we get ready to retire.
Dr. Friday: 08:46 The bottom line to that conversation is that’s not true. Sure, your K1 will come to you without you having to pay social security tax. But if you are ever audited, and I will tell you the IRS is not stupid people, they are looking at sub s corporations. Why? Because a large number of people incorporated that pay themselves as if they’re only investors and they’re working the company and there’s no payroll, no payroll at all in their sub s corporation or c corporations. No payroll. Who is running this company, sooner or later you’re going to get caught is my opinion and I don’t like to live my life with the idea that I’m constantly looking over my shoulder when I’m running my companies. It’s just not something I want to do. I want to be able to, at least with the best of my ability, report what I know.
Dr. Friday: 09:36 So it’s very, very important that you get into doing this the right way. There are lots of changes coming down from the IRS where they’re basically going to be auditing and making sure that more information, and they’re passing that down to us who are doing the bookkeeping and taxes and then being quite honest, they’re wanting us as bookkeeper and tax people, all my fellow partners in this industry, they’re holding us more and more responsible. They want us to be the first line for audits. You know, in all honesty, they want us to be the ones that basically identify people that are possibly not reporting things properly. They want us not to just be throwing numbers onto a tax return. They want us to be a little bit more involved and, and it’s a catch 22 in some ways. I’m going to be quite honest with you because you know, our job is tax.
Dr. Friday: 10:26 They want us to make sure those taxes were prepared properly. But if it’s a matter that we have to know where all those numbers come from, if the IRS is going to start finding us or putting penalties on tax people, we’re going to have to get more and more involved with what’s going on and how it’s going to work for us. So that means more questions, more and more questions and how things are going to be done. Because as a tax person that’s been doing this 20 plus years, we’re going to need to know how that’s going to work for the tax payer. How do we protect our PR, our clients from audits to the best of our ability? Because putting numbers on a tax return is great, but you know, software does some of that. And if you’re just relying on software to do everything, well then you’re going to be in trouble in the long run.
Dr. Friday: 11:10 Cause we all saw this last tax season where the software was wrong. In many cases we had to override or we had to work around because the software wasn’t even doing the taxes in the correct way. So you know, if you’re just relying on software, you’re going to be in trouble in this industry. All right, so if you’ve got questions, it’s really easy. Pick up the phone. 737-9986, seven three seven, nine, nine, eight six. Talking about taxes, talking about new types of business entities, what do we need to know? How’s it going to work for us? Is there going to be a change in earnings as far as, are we going to have to increase our payroll to meet the new mandates that’s going to be coming off of the new tax changes that have happened? There has been a couple of new tax laws that are enforced.
Dr. Friday: 12:01 I was actually in San Francisco this last weekend. And in California of course the minimum wage is already like $15 an hour I think. And then when you pay your bill, you actually have another four or 5% for employer mandated fees. So, whatever starts in one area may end up feeding or trickling down to the rest of us. So be prepared that we’re going to be looking at possibly new federal payroll tax laws. And we’ll talk a little bit about that when we come back. And a couple other things that may have changed in taxes in the last month or so. We’re going to be right back. You can join the show at (615) 737-9986. We’ll be right back with the Doctor Friday show.
Dr. Friday: 12:53 We are back live in studio. If you’d like to join the show, it’s really easy. (615) 737-9986 and we have got Bill on the line. Hey Bill, thanks for calling.
Caller: 13:08 Thank you Dr Friday. I sing at all senior citizen centers and although I file a w9 for each and every one of them, I never earned more than $600 from any of them. And they all tell me, well that’s not taxable. So we don’t send you any tax information at the end of the year to file what say you.
Dr. Friday: 13:29 So they’re correct. They don’t have to report it from their side. But as you probably know, Bill, any money we make, we must report on our personal tax returns. We just wouldn’t have 1099’s to back them up. So you would just do it on a schedule C, you know, filing it as other income on your tax return.
Caller: 13:51 So then just take my word for whatever I say I make, I mean I’m not gonna lie, but in other words, just write down what you did and they take your word on it.
Dr. Friday: 13:59 They would, yes, because, you’re just not making enough per show to justify the 1099 so they’re just gonna take it as cash income basically from the IRS side. But I would just do that and then write off the miles or whatever equipment or whatever else you might have had to be able to perform those shows.
Caller: 14:18 Thank you so much.
Dr. Friday: 14:19 No worries. Thanks. I appreciate the phone call. Bye. All right, let’s go. This is fun.
Dr. Friday: 14:24 Hey Bill in Murfreesboro.
Caller: 14:28 How are you Dr. Friday?
Dr. Friday: 14:29 I am good Buddy. What can I do for ya?
Caller: 14:32 I had some [inaudible] that vested last year, they vested and I was taxed on them last year, and I sold them this year and I probably lost $14,000 when I sold them versus what they were worth. Can I count that off? Does it gotta be counted like stock this year and stock sale. How does that work
Dr. Friday: 14:52 It is, so when you purchased it, it showed up as your ordinary income, you know, when you did on your W2 most likely. So when you sell it, it’s going to be a schedule D and you’re going to be able to take the loss. But unfortunately you’ll only be able to go up to a negative $3000. So if you lost 14, you’re going to be doing it for a number of years to get all of the losses, unless you have a gain of some sort on some other stock.
Caller: 15:15 Alright, so I could dump some cash mutual funds this year to offset the loss.
Dr. Friday: 15:20 You got it. Yep.
Caller: 15:23 And take the whole loss this year.
Dr. Friday: 15:24 Yes, so you’ve got a gain of $14,000 on those and a loss on this one. They’ll wash each other.
Caller: 15:31 Thank you. And how do you claim that? How do you show the loss?
Dr. Friday: 15:34 Schedule d? So you’ll a schedule D which would show the stock, how much you paid for it, which would be what your vested amount was, what you sold it for. And that will automatically calculate the loss and the same thing on the other, what you purchased, what you lost, the capital gains and they’ll just automatically offset each other.
Caller: 15:52 Thank you very much.
Dr. Friday: 15:53 No worries. Thanks. Appreciate it. Yep. But great question. And one of the things that a lot of times people don’t realize, and Bill actually asked a good question. I can’t tell you how many cases we’ve had come in the door where people don’t understand because there’s a two sided entry to when you have a company stock that you’re able to buy. One is you buy it and you purchase it on your W2 and it increases. Sometimes people’s W2 like, oh I made all this money and no you really just purchased stock. And that gives you your basis, whatever that is, times the number of shares. And then when you sell it, there is actually a capital gain situation because sometimes people will buy it at a lower rate. Normally that’s what happens. And then when they sell it, they could actually still have a huge capital gains along with whatever they paid.
Dr. Friday: 16:42 So one year they’ll pay ordinary income tax kicking them often into a higher tax bracket. And then again, when they sell it, they’ll end up paying short term capital gains depending on how long they’ve held the vested stock. So they can end up paying a lot more in taxes. And sometimes people only do half of the transaction where they’ll report it. They don’t have a choice. So they reported on the W2. But when they sell it, they don’t report it because they think, hey, wait a second, I sold it at the same time. I vested it, therefore it was all one big transaction and it wasn’t. So just keep in mind, there’s always two sides to that transaction and you need to make sure you keep track of the vesting side, so when you purchased it, and the date, how much it was, because you may decide not to sell all you may say part, you may hold some, you may want to hold it over a year after investing to keep it in long term capital gains, etcetera, etc.
Dr. Friday: 17:36 Just keep in mind that those basis is very, very important because when you’re purchasing them on your W2, a lot of times people feel like they’ve already paid a ton of taxes, so when they sell it, there’s really no taxes to deal with. But that is not the case. So, just putting that out there, making sure that we’re all on the same page.
Dr. Friday: 17:58 All right. But that was a great question. I really appreciate it. And the first caller that was calling about the W9, both were named Bill. So we’re gonna go with Bill again. For all of you that weren’t sure exactly because I didn’t really explain the W9 is for anyone that is working as a sub contractor. You will complete a W9 form, kind of like a W2 but the W9 would have your name, address and again, I am kind of anal.
Dr. Friday: 18:22 I don’t like my social security number out there any more than possible. So if you are a person that is working as a subcontractor, maybe you have a small cleaning business or construction business and you want to keep it as a small company that not a problem. You can once you can go to the irs.gov type in the word SS4 online, that’s SS4 online. Get yourself a free federal ID number. It will follow you no matter how many self employed businesses you want to do. So if you’re a musician, and a magician and whatever else in doing something on the side and you have two or three little businesses and people ask you to complete your w9, you would always put that federal id number on there. Therefore, Gosh, forbid something happens because a W9 has almost everything someone needs to take your identity.
Dr. Friday: 19:11 They’ve got your legal name, they’ve got your social security number, and they would have your address. I mean, that’s kind of giving someone a lot of information that you really, really do not want to give. So again, go to the irs.gov. Get yourself a sole proprietorship or an individual federal id number. You can use that number. Anytime you would be using your social security number to complete a form like a W9. You would not use it on a W4 form and you would not use it when you’re completing an application for borrowing or something. But this would be, so if somebody 1099’d you, they would 1099 that federal id number, keeping your social security number nice and safe, at least safe as you can. Every time it seems like I opened my mail, somebody’s information, be it target or other organizations have had, even the IRS, your information has potentially been, hacked.
Dr. Friday: 20:08 So here you go. So it would be nice to find a way to protect as much as we can. So again, if you are a sole proprietor, single individual, just doing something on the side, keep in mind if someone has you completing W9 forms, it’s free guys and you never have to get another one. Just keep that number and it’ll follow you no matter what business you’re doing. Just use the federal ID number instead of your social security number. It just going to make your life a lot easier. All right, so if you want to join me, six 737-9986, seven three seven, nine, nine, eight, six. Taking your calls, talking about all things exciting, especially about money or money issues. So if you’ve got questions you want to join us, feel free to do that, so we can hopefully get you in the right direction.
Dr. Friday: 21:01 Starting a new business. Entrepreneurs are my favorite clients. One of the reasons I love entrepreneurs is because, well they often create and do things that are outside of my normal thinking and it’s fun to watch them. But be careful if you’re a small, young business, the last thing you want to get yourself into is IRS issues before you’ve got the business really on its feet. So just making sure that you have certain types of liability protection, making sure you’re building the company the right way so that way you’re protecting yourself, your personal assets, yet you’re not having to file something on a monthly or daily basis. It feels like sometimes at least monthly, before time comes. So, you know, if you have questions starting a new business, not too sure how you want to move forward with that. Or if you haven’t filed taxes in awhile and you’re looking to get yourself caught up and you’re like, I don’t know even where to begin because let’s be honest.
Dr. Friday: 21:56 Sometimes I have clients that I can’t remember what happened a year ago or two years ago. There’s no way I can recreate five, six seven years worth of tax information. And the good news is you don’t have to fully do that because what will happen is if you come to us, we would get power of attorney at that time. We can pull your transcripts and then we can see what the government, it gives us a tool to find out what does the IRS already know. And in some cases we find out the IRS has already filed taxes for you and that’s why you’re getting these love letters because you’re like, I’ve never filed taxes but the government says I own $50,000. Well, if you’re self employed individual and you’ve received a lot of 1099 they have no basis. So bottom line is, unless it was just your personal time and you had no write offs. But most people do have something to write off against their business, but bottom line is they say you owe this and then you get failure to file, failure to pay, failure to do all these different things.
Dr. Friday: 22:54 It’s not as simple as you like to think. I had a person that their mom got diagnosed with Alzheimer’s, they realize that she hadn’t filed taxes and there had been some real estate sales and so they ended up paying almost $200,000 in ordinary taxes. Just got the love letter and they owe $59,000 in failure to pay penalties. So they add up really, really fast guys. So you need to be on top of it. And in this case, even, you know, making sure that other people you love are doing what they need to do to make sure things are passing through the system properly. So if you’ve got questions on how to do this, how to get started or you just want to know what the next step would be. Again, we don’t take your name and number, you can call in under any name you’d like.
Dr. Friday: 23:40 It’s not the important part of the question. Ask your question and again, appreciate the call… it is six one five seven three seven, nine nine, eight six is the number here in the studio. Six one five, seven three seven, nine, nine, eight, six taking your calls. And when we come back, we’re gonna talk about a bill that Donald Trump has signed, and we’ll see how that’s going to affect some of our tax laws and what we might think are important in the current taxes. So we’re going to make sure that we stay on top of it and when, if possible, or is it at all going to change minimum wage as well? Minimum wage, maybe a little different than what you think. So we’re going to take a quick break and we’ll come back for your calls and have a few of these other topics. We’ll be right back with the Dr Friday show.
Dr. Friday: 24:37 Alrighty. We are back live in studio, I love rock music. Got It. All right. If you want to join us. 615-737-9986, 615-737-9986. And we’ve got Georgie on the phone. Hey George, thanks for calling.
Caller: 24:55 Hi Dr Friday. Thanks for taking my call. If I recently came into some extra money and I wanted to contribute to my daughter and my grandchildren, what’s the maximum I can contribute to each before I have to pay a penalty?
Dr. Friday: 25:10 Well, the good news is there’s two sides to that, George, you could give $15,000 to each of them before you have to file a tax form. But for some reason, let’s say you wanted to give more than the 15,000 you would file a tax form, but there would still be no tax unless it’s over 11 million, then we would have to worry about it. George, most of us, that will never be a lifetime issue that we’ll have to worry about. So, yes, there is no tax unless it’s over $11 million. But other than that you have, and that’s over your lifetime. Otherwise $15,000 before you have to file a gift tax return.
Caller: 25:45 So if I give $15,000 to my daughter now that she has to file a tax on that,
Dr. Friday: 25:51 No, George, nope.
Caller: 25:52 Okay. It’s either way, I don’t file a tax nor nor does she.
Dr. Friday: 25:57 Right. The only thing the giver would have to worry about would be as if it’s tax free money. So I mean, if you won the lottery, let’s just say, you would have to pay the taxes on the money from the lottery is not a deduction. But if it’s already been taxed, then you can give it to her without additional tax forms.
Caller: 26:14 Well, like I’m selling my house and I’ve been in it for a while and I’ve got quite a bit of equity in, so I could therefore give who I want to a maximum of $15,000.
Dr. Friday: 26:25 Right. And you can pass it down. That’s cut you off. But like your, you said grandchildren, so you could give if they’re not minors theoretically, because you might want to put it in trust otherwise. But if they’re older, then you could give her 15, her children each 15, her husband 15, whatever the situation was.
Caller: 26:41 Okay. Great. Well thank you so much. You’re always so helpful.
Dr. Friday: 26:45 Thanks George. I appreciate it. Talk to you later. Bye. Bye. All right. And so we are talking and gifting is a great way. I mean, sometimes people think about it as the beautiful thing about gifting is that neither person has to pay additional tax. So the giver would be the person that would have to pay tax if it ever needed taxes. The receiver, the person that’s receiving gifts would never pay the tax because they’re getting it tax free. But the person giving the tax, in George’s case, he would have an exclusion. If he’s single $250,000, if he’s married $500,000 above what he originally paid for the house. So he has tax free money that he then wants to pass on and share with his children or grandchildren. And that is certainly a wonderful, wonderful thing to do. And as passing that is a way to change people’s future or help them pay off additional issues or whatever else.
Dr. Friday: 27:46 So, we’re talking a little bit about minimum wage. I guess that came up a lot when I was traveling to California because of the fact that every year they have a bill that they keep increasing the minimum wage. We had a bill, I think it was back in maybe 2015 or something, about the minimum wage situation. And it was basically trying to get it to $10.10 cents, I believe. But they basically say in Tennessee, minimum wage is $7.25. Less than 8% of people work, 7.5% of people work for $7.25. So they’re saying that it’s a very small crowd, either seniors or teenagers that are actually receiving that wage. So, it would be interesting to see what will be the next step as far as compared to many states. Many of the minimum wages in other states are working their way up to $15, $16 in California, they eliminated what we call the waitress wage or whatever, where a lot of waiters and waitresses work for $3.25 minimum or $4 and then they get tips, which put them over the top of the minimum wage.
Dr. Friday: 29:04 So they actually work at a lower rate. In California, they don’t have that rate. Everybody makes $15 an hour. I will tell you though, personally speaking, I’ll take Tennessee and not so much that, but it just seems like the customer service here is so much better. And, I mean, this is the girl I, I lived in Newport beach for goodness, probably on and off. My parents lived there anyways, so I visited them for 20 years. So, in and out of California a lot. And it just seems like now that, that it’s a little different. Maybe it’s because I’ve become more southern. We’ll find out. But, I do like the customer service or the attitude of Tennessee. And so, if you want to know more about the minimum wage and things, you can always go to the irs.gov, see how it’s going to proceed.
Dr. Friday: 29:51 I don’t think if you change to $10 in the state of Tennessee, that would have a huge effect on most workers. Again, because I mean, we do bookkeeping for a lot of companies and there are very few companies, even in the restaurant industry that are paying less than $10 an hour to their employees. It’s a very competitive market because there’s a limited number of people. So I think you’d find that that bill would probably have a fairly small effect on the employers here in the state. So I’m not too sure. But, once you start messing with it, then you get more regulation and next thing you know, boom, things are getting changed. So if you want to join us, 615-737-9986, seven three seven, nine, nine, eight, six taking your calls, talking about all types of different tax issues or what’s happening with the IRS.
Dr. Friday: 30:48 Just to let you know, Trump is working on signing something to do with minimum wage and also trying to get better free services for, I guess you would say what he considers the middle class. So right now if you are an individual and you make less than I believe $40,000, you can file your taxes for free on some of those sites. If you’re a married couple, I think it’s $65,000 or less. Now that would assume that you don’t have earned income credit, that you don’t have a business. This is solely, people with just aW2 putting in a tax return and getting the, the tax credit. So they’re trying to expand that, bring in a little bit higher limitations to the free tax returns, giving individuals that. I’m all for this to be quite honest with you, if all you have is a W2 you have about the simplest tax return in the world.
Dr. Friday: 31:44 And nowadays with some of these companies, they basically will import it. So you go to places like I guess HR Block, and you sign up for them and they can actually physically import your W2 from your employer. I will tell you, we don’t have that service. I’m not too sure exactly how that works, but that being said, they bring it in so they can do your taxes in moments. Even if you haven’t received your W2, they’re able to access those, and get your taxes done. And with W2’s having to be filed by the last day of January with Social Security Administration that is helping us, the tax people to get that information in a faster system. Because as you know, they’re already slowly pushing out the deadlines for filing taxes, and I will give the IRS Kudos on this.
Dr. Friday: 32:32 They are trying very hard to match information with what’s truly filed and people’s information because the biggest section of the IRS dealing with is fraud. There are a ton of people out there guys. They’ll just take any information, throw it into a tax return, create a refund and try to get it faster than the IRS can approve it. This year we’ve had a lot more delays in people with the number of children. People that did not actually physically have their W2’s in hand or information we were using. Final paycheck stubs, things like that. They delayed those refunds trying to match. Are these really their children, is this really their income before those refunds left the building, which I think is great. I know a lot of families count on the fact of getting these refunds really, really fast.
Dr. Friday: 33:24 I know the used auto market, now are pushing out march, April, being more of a busy time. It used to be late January and February where they would have huge amounts of people taking their refunds and buying a car because they need new cars. The money does go back into the economy. I mean, I’ve got people that try to claim their girlfriend or their neighbor’s kids, and things like this. You can’t claim other people’s children. It isn’t the way the law works and you need to make sure and the government needs to make sure. I’m waiting. One of my biggest things would be address matching. I mean, there’s a lot of people that seem to live in the same household, but they’re not married, but the children are both of theirs.
Dr. Friday: 34:18 And I mean, it’s a little hard to claim head of household if you really are living, cause no one’s claiming rent, but yet you’ve got multiple incomes in the household. So it should be interesting to see that as one of the things they’re trying to work into their system. It’ll be interesting to see if the IRS can pull that off and find ways of also reducing the ability of people trying to claim earned income credit, or child dependents that are maybe not as individual as they like to show. So we’ll see how that works. This new tax laws making it much more difficult for people to itemize. So it changes a little bit on contributions, mortgage interest. If you have to have more than $24,000. If you’re under the age of 65 as a married couple in less than $12 or thereabouts as a single individual.
Dr. Friday: 35:12 And obviously the tax code has and always will give better benefits to people that are in debt. Just keep in mind my basic mathematics comes out with, that is never going to give you more tax savings than if you never paid the money in the first place. So just keep in mind, I had a lot of people come in and say, wait, I’ve got this mortgage. Is it worth it? I’m like, if your mortgage is less than this, you’re to save more money than having to pay $10,000 and save $2000 in taxes. I’d rather not pay the $10,000 at all and just pay the $2000 in taxes because that way I saved eight grand. Massive, to me sounds like a good idea. That’s why a lot of entrepreneurs, small business owners, I see them rushing out taking on debt, or I’m going to go buy myself a big truck, and if you need that piece of equipment, it’s going to turn more income.
Dr. Friday: 36:03 Or maybe the truck you’re driving is breaking down and you’re losing income because you’re having to put it in the shop. Bingo, go do it. Go get one. But if it’s just the matter that you’re looking for a section 1.79 to reduce your taxes, that may not be the smartest move. Taking on $40,000 worth of debt to save $10,000. If you don’t need it, I don’t think you need to. Do better to pay the $10 to the IRS and save the $30 for yourself. Alright. We’re going to take our last break. If you want to join the show. (615) 737-9986 (615) 737-9986. We’re going to be right back with the doctor Friday show.
Dr. Friday: 36:59 We are back. Live In studio (615) 737-9986 (615) 737-9986. You got questions? Hey, give us a call. If you don’t keep listening, we help because we’re hopefully going to keep you in the right track. I know this isn’t the busiest season of the year for taxes. But after nine years, most of you guys have got us down here. So if you’ve got questions again, six one five, seven three seven, nine, nine, eight, six taking your calls. I’m trying to help you guys. Basically just know what choices you have. If you’ve got love letters and you’re not too sure what to do with them, I’m an enrolled agent licensed with the Internal Revenue Service to do taxes and representation, which basically means guys, you have a couple options. Non-collectible making a payment plan, making a partial payment plan and doing an offer and compromise.
Dr. Friday: 37:54 Not One of those are going to fit every single person. Hopefully one of those will fit your situation but not the same for every person. So you want to make sure that you are actually getting what’s best for you. I know there’s a lot of people out there that are companies that will basically say, “oh yeah, we can fix your problem”. “No worries”. I can’t tell you the number of people in the last 10 years that have walked in my door after talking to them and me, having to be the bad guy and say, here, this is what we really can do. Because we have to actually deal with the issue. We can’t just make an offer, we can’t just do something. There are ways and things we have to do. So. All right, we got Travis on the line. Hey Travis, thanks for calling.
Caller: 38:36 Yes. Hi Dr Friday. I’m actually listening to your show a lot. I breed dogs and they sell from anywhere from$ 600 to a thousand depending on markings and whatnot. I’m wondering, I’m looking to get a business license and get it back right off, you know, cause I donate some to the police department and things like that. But what would be the best type of a of business that I should apply for?
Dr. Friday: 39:04 Well, I mean, obviously you’re going to this, is this being run out of your house, Travis?
Caller: 39:09 Yes, it is.
Dr. Friday: 39:09 Okay, so you have two options in my opinion. You have some liability, but in my understanding from attorneys that I hang out with, that an LLC may give you limited protection because most of the time the LLC or the limited liability protection is more for employees than it is for you personally. So my suggestion would be either a single member LLC or just keep it as a sole proprietor and then getting yourself a great umbrella policy and liability because your biggest concern will be potentially the dog doing something right. I mean their puppies. So probably not a whole bunch, but if something happens or someone says that since they’re paying, I know I AKC dogs. I mean mine are Great Danes. What kind of breeds do you deal with?
Caller: 39:55 German Shephards.
Dr. Friday: 39:55 I had a feeling when you said police department, I figured they were shepherds. I mean certain expectations and if they don’t turn out the way people expect, then you’re the bad guy no matter what.
Dr. Friday: 40:07 So, that would be my biggest concern. And also, you’ve probably been doing this for awhile, but I know my breeders always have me sign off on a lot of documents. It’s almost like buying a house nowadays. Making sure that they’re doing the best that they can, but certain things, even from the fact that I can’t sell my dogs or do anything, I have to give them back to them. Which is awesome cause they just don’t want their bloodline to be messed up. Bbut that being said, I would probably just keep it simple. That way you could have a home office or in your case, possibly a Kennel. Square footage wise, but the utilities and the yard maintenance and whatever else it takes, the water bill and all those things that will take to actually take care of the pets. If you have a separate building for them or a part of the house square footage in the house, if you are using the garage or whatever. And then, all the food, the shots and stuff you have to get for them. All that would be something that you could build into the cost of each puppy.
Caller: 41:06 Okay. And then for taxes, how should I?
Dr. Friday: 41:10 Same thing. So, you know, bottom line. Assuming, let’s just say you have a litter of 10 and you have a $6,000 worth of bills and you sell the litter of 10 for $10,000. Just easy math, you’d be able to write the $6,000 off against the 10, making it taxable income of four is my simple math.
Caller: 41:27 Right. Excellent. Thank you doctor.
Dr. Friday: 41:29 No worries. I appreciate it. Good luck. Thanks. I do love my puppies. All right, so we have a few more minutes. It looks like we might have Lamar joining the show. If so, we’ll take his call before the final break here. But, sometimes making an entity, in my opinion, again, I’m not an attorney, but in my opinion, sometimes having really good insurance. Because an insurance company is going to do your representation versus just thinking that you’re insured because of the limited liability that you have with a corporation or an LLC. That usually means that, I operate as a sub s corporation. If I were to get sued, I would have to go hire an attorney, put down a retainer with that attorney for him to represent me. And the cost is all on me.
Dr. Friday: 42:20 There is no additional. So if I have a problem, hopefully it will fall under ENO insurance. And in that case, the attorney under that insurance will represent me and I’ve paid a premium throughout my lifetime (it seems like), to deal with that. So, just making sure that you have both sides covered. I may be a little over covered in some ways, but I personally find there’s no such thing as probably having too much liability or insurance when it comes to a business owner. So just talk to your insurance person and if you’re running a business out of your home, keep in mind that your general homeowners insurance may not cover anything that happens under that business shield. So you’re gonna need to make sure that you actually have an umbrella policy, possibly a business policy to protect you so that if something happens, gosh forbid to anything that happens in that business that you’re covered.
Dr. Friday: 43:15 Because if something happens and you lose it all, you may say, “well, I had homeowners insurance” and they’re all saying, “nope, it doesn’t cover you”. Same thing with vehicles. It’s not going to be covered if you have it under your car or whatever. So just as a point of interest. I’m not an insurance agent guys. So my suggestion is always to call your insurance agent and talk to an attorney. Find out what they would suggest is the best protection for you individually because everyone’s story is a little bit different and you have different assets and different things to protect, but always get the best advice. But from the tax standpoint, sometimes a separate entity isn’t always the best answer. So it’s really good to be able to move forward and get that information from different sources.
Dr. Friday: 43:59 But, what I usually run into when people start a new company is they forget to pay their business license. They don’t realize they have to pay franchise excise, they don’t realize there’s an annual report. And next thing you know, they’ve got five, $600 penalties and interest against all these different things. And Boom, what started out as a fabulous idea now is taking on a lot of debt. And that’s something you don’t want to have to deal with. So if you are thinking about starting up a new business or you’ve got a business and you want to know what’s the best way to get moving, or you need help with your tax preparation. Because if you running a business, most likely you may not want to be doing your own tax returns. Not Everybody. There are a couple of simple cases… You know what, you’re a consultant.
Dr. Friday: 44:39 All you really have is your Home Office. You don’t even travel outside your home. Everything is done online, not a lot of tax deductions. So you may have a home office and some office supplies may be about the simplest schedule C in the world. That being said, you probably could handle your own tax return, but then I have people that basically have no idea what they’re doing. So if you need help, all you have to do is call my office or you can go check out my new website. It is up, going and there’s a great new look on it. So, you know, give me some heads up. Tell me what you guys think of it. The website is Drfriday.com. That is Drfriday.com and so you can go out there or you can always contact me via the telephone.
Dr. Friday: 45:22 (615) 367-0819 that is my direct line. Remember I’m an enrolled agent, licensed with the Internal Revenue Service to do taxes and representation. Which means if you have not filed taxes, if you are in the middle of an audit or you’re trying to figure out how to get started on doing whatever your tax situation, maybe you’ve always filed but you just have a big debt or maybe you haven’t filed at all and you have no idea what your debt is. I just prepared somebody’s taxes that went back to 2009 and the first nine through 15. Had huge refunds, refunds, and we’ve lost them all because the time limit, you can only go back three years. So unfortunately 16, 17 and 18 it looks like he’s probably going to owe money, which could have helped us if we had done them all on time. So leaving money on the table, not the smartest idea, guys. So if you have questions, you need help or you’re just not too sure where to start, all you have to do is pick up the phone. (615) 367-0819 is my direct number. (615) 367-0819 you can also go to the website. You can send me emails or just check it out. See what I do. You never know what kind of information you’re looking for. Drfriday.com or email me friday@drfriday.com hope you guys have a wonderful weekend. Call you later.