Welcome to the Dr. Friday Show! In this episode, Dr. Friday talks all about tax filing, tax updates, and the following topics:
- PPP Money: Forgiveness Or Pay Loan Back?
- How Who You Elect As President Will Affect Your Taxes
- Why You Need Help With Tax Representation
- When Do Business Tax Returns Have To Be Filed?
- The Extention For Unemployment
- Should I Pay The IRS Electronically Or Through Mail?
- Can I Take Money Out Of My 401K?
- Will There Be A Second Stimulus Check Coming?
and so much more!
Transcript
Announcer 0:01
No, no, no, she’s not a medical doctor, but she can share cure 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 at 615-737-9986. So here’s your host financial counselor and tax consultant, Dr. Friday.
Dr. Friday 0:30
Hey, this is Dr. Friday and I’m living here in the studio and we’ve got quite a show to do. And if you’ve got questions, I would say now’s the time to pick up the phone. It’s gonna be a great show. Call the number 615-737-9986. We’re going to talk about several emails that came in this week. We want to start the show out strong because many companies small business owners received PPP money. That was the payroll protection money. In some cases, it was needed you were going to keep your doors closed. But in other cases, it was helpful. It was a way of keeping because many companies were not sure exactly if their businesses were going to get closed, what was going to happen, especially restaurant owners. But with lots of my clients, I will have to say we’ve been blessed to the extent that they were able to make up or to move forward with money that came from the PPP, but they can drive through and pick up and delivery. A lot of local people were great as far as using the local services. And so they really did not have any layoffs. And they didn’t have as much loss of income as they were expecting.
Dr. Friday 1:45
So one of the big questions comes is by using the money and getting it forgiven. That means that in the case of let’s just say a small restaurant that maybe received $30,000 in PPP money, but they didn’t really have any major loss because they were able to tighten down they were able to continue to pay their rent and everything with the profits. So the PPP was really used to pay the payroll. So now they paid payroll, they can get it forgiven because they met the criteria, but now they have $30,000 more income in 2020 than what they would have normally had because they’re going to lose that $30,000 deduction. PPP paid for it, they didn’t, they now have a larger profit. So the question comes is this, if you don’t go for forgiveness, you have a 1% loan for five years. And the question comes in, it’s gonna be different for everyone but something you might want to talk to your tax person or do some number crunching depending on how much money you made, and how much profit you are showing for 2020. We pay tax and most of my clients are many of them in the 22% to 25% tax bracket in some cases, would it be better not to ask for forgiveness and to pay that money back over a period of time, or to claim the profits and have to pay 22% tax and in some cases self-employment tax, which adds that another 7.65%. So that could be almost a 30% tax, in some cases or anywhere somewhere there. So that’s the question you need to really think about in some of my business cases, we have come to the conclusion that it may be smarter not to ask for forgiveness, but to actually pay the loan back at 1% interest. Better to have control and do what you need to with it than to even though they would legitimately qualify for forgiveness, the prophets are getting into a tax bracket that they may not want to have to pay tax on. So you really need to consider that.
Dr. Friday 3:56
If you’ve got questions, you can reach us to live here in studio 615-737-9986. We’re also want to talk about some of the things that are happening as far as Donald Trump signing in or President Trump signing in the situation with Social Security for employees not having to pay it. Is this a good idea? Right now, I will tell you, we haven’t heard from the IRS exactly what the law is going to be as far as from us as business owners. I will tell you if there’s a way of opting out of it, my employees have already asked to be able to opt-out. They want to go ahead and pay their taxes. At some point, we all know that They stopped taking the Social Security out now that it’s already been said that’s going to have to be paid back. I don’t think the IRS is a good loan officer. So I get it if you’re in a very, very difficult situation, those few dollars, but it’s 6.2% of your paycheck up to like $137,000. They’re only doing it for people that I think make less than 100,000. So, over the time period, you know, a couple of months, it’s a 90-day window, I think, right this second. Again, we don’t have all the criteria, but President Trump signed in a bill that basically said that he was going to allow employers not to withhold Social Security tax on their employees and give them forgiveness but is no forgiveness in the sense that they won’t ever have to pay it back. It is supposed to be being paid back. It’s going to open up a can of worms. What if you’re no longer working for that employer, are they gonna come back on you and then you’re going to end up with IRS debt if you don’t pay it in the criteria time that they have it? And if you’re already hurting now, who says it’s going to change? I just think that that may be opening up a can of worms that we don’t have enough information on.
Dr. Friday 5:33
I make a living out of helping people out of IRS debt, I can’t see offering this to employees and having to create something at least with an employer and having forgiveness for Social Security. They know us, we have assets, it’s secured, and there’s a huge fine if you don’t follow through with the rules were with an employee with individuals, it’s going to be a lot harder on the IRS, I think to have to make certain collections so I am going to say that that’s not a good plan, but we have not heard but there is something along that line. They’re also talking about reopening PPP for individuals that may be already got it, but also mainly, I know personally, we have about three or four people that got into it too late. They were not able to get the PPP money there are still the SBA EIDL loans, those are actual loans, no forgiveness in that situation. So we have to find out if that’s something you want to get into. It is low interest and for some, but there are criteria for what you can do. You can’t just go out and use that money to buy a new piece of equipment or it’s disaster funds. So it’s the ideal situation is to help keep your business running its current situation not to help grow the business create jobs. So there are some loops on that one that you may or may not choose the one to have to deal with as well.
Dr. Friday 3:59
Understanding where this money is coming from is going to be the best way for you to understand how or what we’re going to do as far as making the money work, right? I mean, if just because it’s forgivable, does it mean you should get it forgivable just because it is. It’s a two loan at low low-interest rates, does it mean that you need that loan? I think there’s a lot of misconceptions out there. And the first thing I mean, I get a ton of applications and information on that. I’m with SunTrust, which is now truest. And I will tell you they’ve been really good about sending out some interesting notices for the forgiveness because I’m getting relatively close with a lot of my clients of the 24 weeks situation. They’re basically saying Congress is currently considering changes to the payroll Protection Program. Loan Forgiveness applications process as part of the proposed health economic assistant Act, or also known as heels act could change what we’re filing today. So right now they’re saying there’s still enough time for us to wait to see if anything happens and to be able to move forward and see what we can do on that. So we’re going to be able to find out more and more about that. So if you have a PPP loan, you might want to consider holding off waiting a little bit. I know rushing to the finish line, don’t be late, don’t get me wrong, but also talk to your tax person. As an enrolled agent licensed with the Internal Revenue Service do the taxes and representation, that’s what we do a lot of is looking at the whole picture. Not just because something is forgivable doesn’t mean it’s going to be the best tax situation for you. It may be, I wasn’t sure you know, how it was or whatever. But whatever works best for you or for the business that you’re running, that is what’s best for all of us to deal with. So, just want to make sure you know, we have that we’re moving forward and that we’re able to understand the situation or what we’re going to do so we have PPP.
Dr. Friday 9:44
Of course tax preparation guys. We’re on August 15, actually, so we have 30 days before business tax returns have to be filed. So it’s really important. In some cases, we’re getting some notices where extensions have been filed because they’re first-year businesses or whatever. Many people thought because of COVID. And they heard about the extension that their business was going to be extended. But businesses were due March 15. COVID and all that activity did not happen until after the 20th of March. Therefore, the IRS is saying no, no, no, you should have filed your extension and or your taxes on time. So businesses only if you file a regular extension, did you actually have anything that you’re going to go with or move forward with on that situation? So we’ll be able to make sure that that is moving there.
Dr. Friday 10:37
If you want to join the show, you can call 615-737-9986. We’re taking your calls, talking about all things taxes, and then of course individual tax returns are due on October 15. Can you believe it? We’re getting that close to the end of the year, then it’s gonna be Thanksgiving and Christmas. Oh, let’s not forget Halloween. Time is flying by, and we want to make sure that we’ve got everything covered and make sure that we’ve done the best we can. I realized a lot of people, you also President Trump did sign in the extension for unemployment, he did send it to for $400, not $600. Then I believe it drops down to $200. For all of you that are on unemployment, there is some relief. I think, sell coming in that direction. But, again, you’re going to want to make sure you know you stay on top of it. I believe every week you have to send in information. I will say getting to work is going to be the best thing. I know that many people listening right now are saying they want to work but their job isn’t to open yet. If that’s you know, the case, well, then you can’t really do anything. But if it isn’t the case, then you need to maybe consider going out seeing what other options are available to you because at some point the government will not be able to support all these people. I’m not sure about anyone else. But when you see the word trillions when they’re putting money out to help and to move forward and to do things, at least, the businesses, with the exception of forgiveness on some side, most of them are going to turn into some sort of loan. With individuals, unemployment, all those kinds of benefits, that money was not something we had set aside. So I mean, as far as I know, federal unemployment compensates to the States. It’s not something we usually get to pay back through the due unemployment benefits. So it’s going to be interesting to see what we have. All right, why don’t we go ahead and take our first break? If you want to join the show, you can 615-737-9986 and we’ll be right back.
Dr. Friday 13:12
I am Dr. Friday an enrolled agent licensed with the Internal Revenue Service to do taxes and representation, and we do a lot of that. I mean, if you haven’t filed taxes in a number of years if you’ve had some tax issues that you’ve been dealing with, but you’re not too sure you’re getting the love letters, and you’re like, Oh my gosh, what do they want now? Right now, let’s be honest, now’s a harder time than most, because in most cases, we don’t actually have to worry too much. But right now we’re I mean, especially after July 15, I believe installment plans all kick back in. So you’re sitting there going, “Oh my gosh, I don’t have the money right now. What am I going to do and how am I going to do it because I haven’t got my job or I’m just getting back to work or I’m on a 50% work schedule.” It’s so hard to call the IRS. I get it to trust me, every day I get all that information and I’m hearing, “Oh, I can’t reach how much is to call them and tell them I can’t make the payments or something else.” I will tell you this. I think the easiest thing is to certify of letter to the IRS and make sure you have documentation that shows that you are actually going to you know that you that you’ve sent it there. It’s not just something that you’re sitting there going, “Oh, I’ve got it. I don’t have a problem with that.” No, I want you to make sure that you’ve got proof because I can’t tell you I’ve had two phone calls this week alone with them basically saying, “You know what happened? I sent my check and the IRS hasn’t cashed it yet. What am I supposed to do?”
Dr. Friday 14:49
Well, I hate to tell you this, but if you sent the check and they didn’t cash it and you didn’t send it certified mail, I don’t know the IRS even received it. I mean, there’s no reason to assume that went up, but in all honesty, they may not have. And if they haven’t received it, then how can they cash it? So the answer to that is to go on to the IRS website pretty much immediately and see if you can pay electronically. I am a full person to pay the IRS electronically through the IRS website, it works. To my knowledge, there have never been any major issues. We have instant documentation saying that the money was paid. Now, the downside to this is in many cases, is that if you sent the check on July 15, it hasn’t cleared the bank yet. And now the government is saying or you know they haven’t cashed your check, now we’re going to have to deal with some possibility of penalties because the government is saying, “I don’t have your check. You never got it to me, you failed. And so now what we’re going to do is we’re going to turn around and say, Oh, so here’s your penalty for failure to file that on time.” Now I would suggest actually having a bit of a conversation with them, again through the internet or through the mail, because that’s the easiest way to do it. But send them a letter explaining that you mailed the check that you have a check number.
Dr. Friday 16:12
Now I would say if, in many cases, people sometimes get the check back, because, at some point, it went to the wrong place, or it was dead lettered or whatever, and eventually comes back to them. That’s nice because you have the envelope proving it was stamped on time. It was a typo and error, whatever. But you want to make sure that you have some sort, even if you don’t have any documentation, it doesn’t hurt to ask the IRS for forgiveness. What’s the worst they can do, say no? I mean, you already have a penalty situation. So at this point, them telling you that you have a penalty and you can’t do anything about it is really not a whole bunch that we can do is what you’re basically saying, which is fine. All we want to do is try to ask them, and sometimes they’ll send back and say, “Based on your history, we’ve agreed or we don’t agree because we don’t think that you have a good Have history and you still think that you have a leg to stand on, you can continue to abate, at least up until the point of a second because then the letter will say, Well, do you have any additional information that you think we need to consider if you do send it? Even if it’s just, Hey, you know, this is what happened. I thought I explained it, and maybe I didn’t, here’s the situation. And sometimes you’ll get it anyways. Because the second time I think often goes more to a human being the first time always feels like it’s like a computer. That’s just basically saying, No, or Yes, based on your history, no matter what you say in the letter. That’s my opinion, after 20 plus years, the IRS will waive penalties after you have paid them. I have a lot of people that turn around and think if they pay it, they won’t get the money back. That is not true. The IRS if they feel there’s an abatement requirement, or something’s going to happen that way, then it will work that direction. I would suggest if you have a penalty message Is to pay it and then ask for abatement. If you don’t have the money to pay it with, it doesn’t change anything anyway. The reason I like to pay it is that they can charge you more penalties and interest on a penalty. So you don’t want to have the money to keep growing. When when you don’t have that situation, so if you had the ability to pay, pay first and then ask for the information afterward if that’s at all possible. So if you’ve got phone calls, maybe you’re getting ready to do your taxes, or maybe you’re thinking about something this year because this year is crazy. I have had several people that have called because they are taking money out of their retirement so that they can survive and there are some advantages to doing that this year and may or may not be for you and you may or may not qualify for it. I am not your financial planner, but if you have a hardship situation and COVID has affected your lifestyle. You are able to make some money out of your 401k. I Had a gentleman call up and saying, “Everybody’s taking money out of their 401k because they don’t have to pay the penalty this year.” But keep in mind, you do have to have been affected by COVID to qualify for, you know, 401k withdrawal.
Dr. Friday 19:19
Right now under the cares act that they did allow penalties, and then you could pay the taxes over three years, but you have to been affected by COVID. So if you’re still working full time doing everything else, you may want to make sure that you’re considering the fact that if you were not affected then the hundred thousand dollars that you can take out of your 401k or IRA, you may get hit with a penalty. If you were affected at all and you want to take $100,000 out, you can 59 or half or not, the penalty would be waived, but you will pay the taxes and it can be split over three years. I believe that has to be documented at the time of the withdrawal. So that you can make sure that you have the waiver on that distribution can be taxed as income spread over 2021 and 22. However, if you can’t pay it back the amount you took out within three years, you can claim a refund on those taxes. So the bottom line is the distribution can be taxed as income and spread over those years. But if you can’t pay it, then you can have a penalty on it. Or if you do put the money back in, then you can get a refund on the taxes that you paid out. So there is some really cool, I would talk to your financial planner and see if there are any advantages for you to do anything, especially if you were affected by COVID. Because, I mean, you know, you’ve got to first think about survival. Then you got to think about what’s next and what’s the best way to do it without putting yourself in debt because credit cards you can get yourself in some serious debt with credit cards, trying to survive and keep everything going. But now may be the time to consider you know reevaluating certain things in life.
Dr. Friday 21:07
If again, you are down as far as finances and income, you might want to consider what other options do you have refinancing a home that a lot of people have taken advantage of. Personally, I think that’s the best thing to do in life. If you’re paying four and a half, and right now they’re down to three and a half 1% over a lifetime of a mortgage is a lot of money even on small mortgages, God forbid if it’s on a larger mortgage. So I would definitely suggest looking into refinancing your home, consider consolidating. Now, if you have credit card debt, and right now you are not making payments and you’re thinking you can probably make a deal with the IRS, with the credit card company. Be warned, I guess is the easiest way because if you make a deal, let’s say you owe American Express $25,000 and you settle for 10. And they say, oh, we’ll write off the 15. Guess what becomes taxable income to you? The 15th. So they will then send us 1099 out showing that you had credit card debt that they have allowed and how much interest that they wrote off, and then that becomes income to you because they’re not going to take a loss on the taxes, right? They gave you that money, they’re going to make it so this becomes taxable income to you. I have seen or talked to several people about that these last couple of months, because if you’re not working right now might be a great time to consider it. Again, be smart. Don’t just go and negotiate with a credit card company. Or even student loan, I had a gentleman he saved $72,000 in student loans, so don’t get me wrong. He negotiated got a great deal from the stand to that but then his income went up by $72,000. All in all, he didn’t save $72,000 let’s just put it that way. He did save more by just paying tax on that money than what he would have had to pay it back to the loan company. You’ve got to put some thought behind all of that before you just go and do something. There are usually tax consequences when it comes to that so I just wanted to make sure that you know, you have what you need and where you’re going with. So that way we’re at a good point.
Dr. Friday 23:34
If you have questions, you want to join the show, you want to be a part of the show or you’ve got questions and you’re like don’t know how to do this. Call 615-737-9986, we’re taking your calls, talking about all things taxes. As an enrolled agent, this is the time. Love letters are coming out the IRS is back in business as far as collections. We’ve had Some pretty straightforward aggressive collections to be quite honest, considering the tempo of the economy. If you’ve got liens, levies, getting the love letters and you haven’t filed taxes for them remember we have to get in compliance before we can do anything else. So even though right now may not be the best time, you might want to consider it’s a great time for you to start thinking about getting your life into compliance with the IRS because at least if we can get compliance going, we then have the ability to possibly take care of all the other things we need to do. If we don’t have ourselves in compliance, then we can’t make a deal with the IRS. We can’t make a payment plan with the IRS. We cannot do anything to make it simple. All right, we’re gonna take a quick break. If you want to join the show you can call 615-737-9986 and we’re gonna be right back with the Dr. Friday show.
Dr. Friday 25:06
All righty, we are back live here in the studio. I’m Dr. Friday an enrolled agent licensed with the Internal Revenue Service to talk about taxes and representation and make sure we keep you guys all out. I got an email here during the break and it says, “My mother in law is in the hospice and she wasn’t. She wanted to know how much she can give her son before she dies, that won’t be taxable. I proceed to look it up and found $15,000 when my father gave me $100,000.” So here’s the deal. It’s actually like $11 million, that can be given to your child over your lifetime credit. But it’s $15,000 per year and otherwise, you have to file a gift tax return nothing wrong with a gift tax return. The father who gave her $100,000 would not pay tax unless you took it out of retirement or something. Anyone receiving the money, so if I received money from a family member or whatever, it would never be taxable to me. So the parent giving the money would pay the tax if there was any taxable amount, but otherwise, the person receiving it would never pay tax. So the money would always be tax-free to the child, but not necessarily to the other situation when it came down to the money coming into that. We have a call so why don’t we go ahead and take that call? This is Dr. Friday.
Caller 26:37
Yes. Hi, Dr. Friday, my wife worked a job in a different state as an independent contractor, and they didn’t take out any taxes whatsoever. Now we live in Tennessee. So I’m kind of wondering how that will work when tax time comes for this year, 2020.
Dr. Friday 27:00
It’s gonna hurt a little bit. So what you have basically and I think your name’s Kelly, right?
Caller 27:05
Correct.
Dr. Friday 27:05
Okay, Kelly, what’s going to happen is first your wife being a subcontractor means that she’s responsible for all of her own income taxes. So she needs to be setting, in my opinion, depending on your gross income anywhere between 20 and 25%, of whatever it was, is going to go to Uncle Sam. Now she may have some legitimate tax deductions to write off and she would be entitled to write off her expenses on like employees. So if she had a home office, I don’t know what she did if she had to use her car and drive places to earn the money, whatever it might have been. She might have some legitimate tax deduction, she can write off against 1099. Now, did she work actually in the other state?
Caller 27:49
She did.
Dr. Friday 27:50
Okay, did this other state have a state income tax?
Caller 27:55
I don’t know, It’s the state of Florida.
Dr. Friday 27:57
Okay. No, it does not. So The good news is we don’t have to worry about the state of Florida then. So again, my biggest thing is if she made $10,000, she needs to, if possible, try to set $2,500 of that, or at least $2,000 of that in a tax account or savings account. So when the time comes, she has the money to pay. If she’s still working as a contractor,
Caller 28:20
No, she did it for about a month and I think her take-home was about, I don’t know about $7,000 or so.
Dr. Friday 28:26
Okay, so again, just do some simple math. So at least $1,400 dollars of that would go to Uncle Sam.
Caller 28:33
Okay. And that company should be able to send us like a 1099 or something. Right?
Dr. Friday 28:37
They will definitely yes, at the end of the year, you’ll get a 1099 and that’s what you will use to prepare your taxes or her taxes.
Caller 28:44
Okay, thank you so much.
Dr. Friday 28:46
I appreciate the call. Thanks, Kelly. Great question because being a subcontractor, sometimes you don’t really know where you have or what you’re going to have to go on. So we just want to make sure we have things going. Alright, let’s continue My phones are finally lined up. It looks like it’s Diane.
Caller 29:05
Diane.
Dr. Friday 29:06
Diane is so close yet so far away. Hello, sweetheart. What can I do for you today?
Caller 29:14
Okay, my mom just passed away. She left me a little bit of money. I’ve got a slight $30,000, and I’m on Social Security strictly so I make about 18 a month on Social Security. I need to keep part of this out of an IRA. But I don’t want to go up into the next tax brackets.
Dr. Friday 29:41
Are you solely on Social Security or do you have other pensions or something else?
Caller 29:45
I’m only on Social Security. The way I figured it would be I could take out like $17,000 and stay in the 12% tax bracket.
Dr. Friday 30:00
Right, you said you’re taking $1,800 Is that what you’re getting on your social security right now?
Caller 30:07
Right.
Dr. Friday 30:15
Right. So it’s about $10,000. So yeah, I would say easily $17-18,000 actually would keep you in if you probably if you took like 15,000 you could pay zero tax. If you want to go 17 or 18, you probably pay 12% a small portion of it. Not all of it because you have the $12,000 is forgivable, and they only tax up to 85%. And your Social Security would not be taxed, right. So we take 17 minus 12. You didn’t have like $5,000 having a small amount of tax on it. If that makes sense. So that’s a great plan.
Caller 30:54
Okay, thank you very much.
Dr. Friday 30:55
Thanks for calling. Bye-bye. Finally, My phone lines, goodness gracious people, you know, I love it when you guys call me It’s so great. Let’s go to Keith gates what you got happening?
Caller 31:07
Hello there. So I’ve got a question. I’m self-employed and I’ve gotten health insurance through the government Health Insurance Marketplace since it began and I always make my best guess at my income. And then I reconcile at the end of the year when I do my taxes. It’s always worked out just fine one way or the other. This year, I am on the way to making way more than I thought, and I think I remember something about a limit like 40 some thousand dollars, and then you’re not even eligible for the health anymore, and I’m afraid I’m getting in a bind. I’m wondering if I’m gonna have to pay like all of this, like the full cost of the health insurance back.
Dr. Friday 31:54
I would say that could happen easily. I can’t tell you at least every year, we end up with two or three people that that had, I mean, I had one person, it was like $28,000, they had to pay back. I mean, it was a married couple, but I’m just saying there are limits, and then the cutoff cost that at some point, you’re going to get to a point where it’s basically maximized the amount of money that they’re willing to cover, and then you can keep it but you’re gonna pay 100% of your health insurance at that point. So yeah, I don’t know if there’s, are you self employed or?
Caller 32:30
I’m self-employed.
Dr. Friday 32:32
Okay. Are you married?
Caller 32:37
No.
Dr. Friday 32:38
Okay. Well, as I say, if they were able to spend the money in essence pay and sometimes it’s the husband has the insurance and the wife doesn’t so you know, the wife is working for the company anyway, so we just put her on a bigger paycheck. That doesn’t help in your case, I’m not helping at all. Yes, you’re gonna need to revisit the concept and just see what they have. Is this like just something special this year that’s kind of happened? Or do you see your future kind of going that way because you might want to go and change? You may have pre-existing I don’t know you, but like a health savings account for us self employed people is a great way for us to set money aside and have high deductibles so that way we don’t end up with a high premium.
Caller 33:23
I actually haven’t even used my health insurance. I just healthy and I don’t even usually use it except for a checkup. Or for the rare case I have some issue.
Dr. Friday 33:34
Then I would suggest the Farm Credit is mine. I’m not saying it’s the place but you can google HSA or health savings account and you can get there’s Health Savings app and you can get an account there and just get a high deductible. I mean, I think like 139 I’m in my 50s so and I have dental and health I mean I’m just saying it’s a good policy for people that are healthy, okay. I mean, if people have pre-existing and different things like that it may not be as good but for us that are lucky enough to be healthy, then it may be something to look into. That would keep your insurance premiums low. And at the same time, give you another place where you might be able to put some money aside for later for savings.
Caller 34:12
Okay, and since I still have time before my taxes, you’ve mentioned talking to a financial planner, and I’ve never had anybody like that. I was wondering about somebody that can kind of help with strategy and such. How do I find somebody like that?
Dr. Friday 34:33
You’re gonna want to go to a financial planner. I use a couple of different people but Hank Parrots is one that handles all my estate stuff and in that element, and you can either give my office a call or I mean, I can give you a cell phone number. I don’t know if I have his work number. I was looking it up as we spoke, just to put it out there because, I mean, he’s on the show a lot. He’s a great guy, and It’s always free to do initial consultation. Here it is. If you have a pen, let me give you his number you can call Monday 615-376-5325, Hank Parrot. He’s been there forever and he’s a great guy and he can, the first meeting is always free. So that way you can find out for you even at the point where you want to get it, do it, whatever.
Caller 35:25
Perfect.
Dr. Friday 35:26
Okay, thank you so much for calling.
Caller 35:28
You’re the best. Thank you. Good day.
Dr. Friday 35:29
Appreciate you. Bye-bye. All right. Maybe we should hit Jim real quick, and then we’ll take a break. Was that?
Caller 35:39
Yes, Dr. Friday? Yes, I had a question. I’ve got a daughter in law whose mother died earlier this year. And she had a couple of annuities and the annuity companies are now going to she was the beneficiary of my daughter in law and they’re sending her a check. It sounds like for the death benefit cashing it out. Is there any taxes involved in that?
Dr. Friday 36:05
There can be, it does depend on how much was paid in usually they can tell you the annuities because if it’s just death benefits, in most cases, I would jump to say 99% of the time death benefits in themselves are not taxable. But sometimes the way annuities put money through and they have some that are like 50-50, that part of that money that was it was growth, and they require them to pay tax out of it, because the way they handled the annuity.
Caller 36:37
Would the company then have to send her a statement at the end of the year?
Dr. Friday 36:41
1099-R should be sent to her. Yes, but you might want to preempt it because if you know, she’s thinking it’s tax-free, and she pays off her house, and then she turns around and gets a bill for $6,000. I’m just saying, it’d be nice to be able to have the extra thing they should be able to tell her if any of its going to come to her on a 1099-R are usually they’re good about that.
Caller 37:03
Okay, well, thanks.
Dr. Friday 37:04
Okay. I appreciate you, sir. All righty. That was awesome guys. I totally love it when you guys join the show because there’s only so much interesting things I can share. Then I get to share with you all right, we’re gonna take our last break here if you want to join the show you can at 615-737-9986 and we’re going to be right back with the Dr. Friday show.
Dr. Friday 37:41
All righty. We are back live here in studio for the last part of the show. It’s a fabulous Saturday outside I hope everyone is taking some time just enjoy the weather and hopefully family and friends. I was lucky enough to have some family coming to town this weekend. So we’re having a great time. Hopefully they’re having a good time to help me build something. So who knows? If you’ve got questions, now is the time to go ahead and get a head start on your 2020 taxes. Remember, we’re already in August, and if you have changes in situation, just like the gentleman that called earlier, and he was saying, you know, it looks like this is gonna be a better year for me than maybe I had the year before, then we need to look and see if there’s something else tax-wise, maybe this would be the year to buy a piece of equipment. I don’t know what he did for a living, and maybe all consulting and equipment went make a big change. But is there a way that he could have report lower income or look at a different health insurance situation but, we have to continuously keep our eyes and ears open, especially for entrepreneurs. Like I said, when I started the show, we’ve got a lot of things changing even with the PPP money, should it stay as forgiven, or should we actually take it as alone. There are options and decisions that have to be made before on a one on one basis of each business and each individual situation, but you need to look at it and see what’s going on.
Dr. Friday 39:07
I talked about the last week I think it was when I was talking a little bit about independent contractors, some people that are subcontractors that actually got PPP money as well as unemployment funds. You can’t have both. So you know, how are what did you know what happened with that? And what do you need to do if you did take unemployment and get PPP money? If it was for your own wages in both situations, because you’ve been paid twice for your time, even if it wasn’t enough to cover unemployment was the maximum that you could have that was supposed to cover you and therefore PPP doesn’t kick in, under those situations. If you haven’t gotten any of these funds, you might want to consider unemployment at this point, I believe you can still apply for unemployment. If you’re at a point now maybe some people were able to hold on some of their jobs I had. Again, we we have A bookkeeping firm here in our office, and we’ve been extremely blessed. But we have had about three companies since March. And normally To be honest, we, we have good retention here. And some of them were ones that were barely holding on one at least. And two are actually businesses that are in malls and the malls are just not open up and really having the activity that they had prior to COVID. So it’s becoming harder and harder.
Dr. Friday 40:27
It’s an election year. So we got things that we’re going to have to consider and talk about on that as well. Because when it comes to our finances and taxes, you know, what’s gonna happen come November, as they’re going to change. If you listen to the democratic side, they’re going to change the taxes, they’re going to change the tax rates, they’re going to get rid of some of the benefits that are in the tax code for many of us, and then they’re going to apparently give other tax breaks that we don’t have on the books. I don’t know how they’re going to do this. The biggest thing is we have to always consider what is best for us and how are what we’re going to do with it. It’s really important to absolutely understand our finances because when it comes to taxes, it all comes down to how much money did I earn. But there are different ways of earning it. Was it self employed? Was it through retirement? Was it interest? Was its dividends? In Tennessee, we still have one more year of the hall tax, right? So we have a 1% unless they don’t vote to have that happen, to my knowledge, it is going to happen. But we’ll find out but if we have one more year and then earning money, from the interest in dividends, or even carrying personal mortgages in the state of Tennessee, it could be a very good thing to do. Right now. 1% still not perfect, nice to be able to move on and do what we have. But if it is going to change then we’ll have to see what we have and when we’re going with that. So it says here 2% for the year of 2018, 1% for the year 2019, and 1% for 2020, there it is. Then is going to be 0% in 2021. So we have one more year. Now again, my understanding, and I’m not sure if that actually has been voted on every year they have to vote to reduce it by that 1%. So I’m not sure if it actually has, according to the internet, there’s no detail here saying that they have or have not done that. I haven’t looked into it yet. There are ways for us to earn taxable income and non-taxable income or lower tax at a higher tax self-employed versus capital gains, long term capital gains can be really sweet. We have a zero percent capital gains rate.
Dr. Friday 42:46
Just like the one woman that called earlier in the show, she was asking or saying that she had only lived off Social Security inherited some money. I think it was Diane. In her case, her social security could be zero, she could take out $12,000 a year, and she’ll pay zero tax on the $12,000. Social Security would not be taxed and she could actually stretch that 35,000 or that about she received from inheritance and pay zero tax on it. So it really depends on how much money is needed, how she’s going to need to do it, and what her growth and expectation are on the account because some people are like, “Yeah, but right now, the stock market’s really good.” And come November 2, we may have a crash in the market. There is a lot of games that are out there. I like to believe we’ve survived more than one election during our lifetimes. The stock market has survived as well. And I’m likely that we’re going to continue to survive that no matter how or what we’re going to do.
Dr. Friday 43:51
Alright, so let’s talk about what we can do. We can help you do your taxes. We are licensed to do taxes for businesses, as well as individuals. So if you have estates or your 1120 s corporate returns, 1065 partnership returns, or limited liability returns, or sole proprietorships we can do all of your tax help. If you haven’t filed taxes and number year, we can help you get the information together to be able to file the taxes, as well as help keep you in compliance, we can help you with offering compromises or payment plans. All of those are out there for us as well. We have the ability to negotiate with the IRS to hopefully keep more money in your pocket, less money in the pocket of other individuals, like the IRS. Then you know if right now you’re having this the worst time because COVID and you are a cook and they get the restaurant closed and you’re not able to work or make money, then I am there to help you try to maybe get non-collectible.
Dr. Friday 44:53
If you need help give us a call. Let us help you try to figure out if we can’t help you then we can send you to the right organization. For individuals that will be able to help you do whatever it is that you’re doing, that you need assistance with when it comes to your finances and taxes. Again, as an enrolled agent working for the Internal Revenue Service, or licensed by the Internal Revenue Service, I am able to represent you. I’m kind of like a shield between you and the IRS. I’ve never worked for the IRS, but I am licensed by them. The nice thing about that is sometimes you need that shield. Sometimes you just need someone that can stand between or stand next to you and help you make sure that you are getting the representation as well as understanding the love letters as they come in and how they’re going to help you or what they’re going to do. I mean when you get a levy letter and they say that they can seize your properties or clean out your bank accounts or take your paychecks. That is scary and frustrating.
Dr. Friday 45:52
So if you need help with any of that, all you need to do is pick up the phone 615-367-0819 Is my direct line. You can also check us out on the web, we’ve got a really cool web page. You can also book your appointments on the web. But you can also just find out who I am, what we do how we do it. If you need more information about how to get started, if you feel like you’re stumped, you’re not able to really move forward or backward because you just kind of confused give us a call again. Call or text 615-367-0819. Check us out on the web at drfriday.com, or you can also email friday@drfriday.com.