Welcome to another episode of the Dr. Friday Radio Show! In this episode, tax expert Dr. Friday answers callers’ tax questions and covers the following topics:
- The Importance of Filing Your Taxes on Time
- All Business Tax Returns Due on September 15, 2023
- All Personal Tax Returns Due on October 15, 2023
- Self-Employment Tax Should Always Be Between 10% and 30%
- How To Manage Quarterly Tax Payments as Self-Employed
- Best Way To Claim on W4 When Married
- How To Take Advantage of Qualified Charitable Deduction
- The Importance of Setting Money Aside for Retirement and Taxes
- How to Get in Touch With Dr. Friday
- How To Make Sure You Have Enough Money for Taxes
- How To Do Tax Preparation and Financial Planning The Right Way
And much more!
Transcript
Announcer 0:01
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 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.
Dr. Friday 0:30
G’day, I’m Dr. Friday, and I’m here live in studio. So if you want to join, the show you can at 615-737-9986, we’re gonna be talking a lot about some of the things that’s kind of coming up here.
Dr. Friday 0:51
We have, obviously, September 15th, which will be here before you know it, that’s when all of our business tax returns are going to be due. And then October 15, for all those that have waited to that last minute to file the paperwork. Keep in mind that does not extend the money you owe. But if you’ve paid all your taxes, and you’re just waiting, I know if we don’t finish the business tax returns, those individuals cannot file their personal tax returns.
Dr. Friday 1:19
So many of you had to wait for K-1’s or other documents. Once you get those then we have until October 15 to file those taxes. So very important to make sure you make those deadlines because otherwise, you’re going to get hit with failure to file on time penalties, which add up a lot faster than and failure to pay. So you know, if you’ve got questions, you need to figure out what we need to do, how you’re going to move forward.
Dr. Friday 1:46
And of course, we’re going to talk a little bit about people that have had some back issues. I mean, if you haven’t filed taxes, especially in the last couple of years, because in 20 and 21, we had quite a bit of free money, that may either be able to go back and pay for some of your tax issues or help you pay the tax years that you may have may not have a keep in mind, 2021 and 22 are the three years we’re able to get to get actual refunds from the IRS.
Dr. Friday 2:15
So if you don’t have, if you haven’t filed, it’s going to fall off. And before you know it when when 2023 comes on 2020 is going to drop off. And that was one of the stimulus checks they had to that year, adding up to somewhere between I think it was 600 and 1200 may have been $1,800, that you would have been able to get for free that year. And then 2021, I believe was 1400. But either way, you don’t want to leave that money on the table.
Dr. Friday 2:46
And so you might want to think about making sure that you’re filing all of your taxes. And there are some situations where maybe you haven’t filed taxes in 1015 20 years, and I have that happen more times than a lot of people think doesn’t mean we have to file all those years in some cases, we may not have to file more than six years to get you into compliance.
Dr. Friday 3:08
So it may be an important now doesn’t mean if the IRS has already assessed you, well, then there’s not much we can do about that besides file a tax return and then deal with the tax issue that might arise from it. But if the IRS has not contacted you, and you’re like wow, I you know, I’m I’m just gonna keep my head down and my mouth closed. And maybe the IRS will never know if I’ve ever actually done anything and therefore I can just go without having to file it pay taxes.
Dr. Friday 3:35
And I’m not going to say I will say I have never been that lucky in life to be able to just ignore and not do but there are people that I know that have haven’t filed taxes because of either being self employed, or because they move around a lot. You know, the IRS hasn’t been able to catch them. And so at that point, you know that either not enough income has been triggered in to them so they don’t have any idea how much money is being made.
Dr. Friday 4:02
But if you want to buy a house you want to buy or a car if you want to get credit if your kids want to go to college and have to do the FAFSA, you are required to file taxes. So it is important to make sure that you have those in place if it is something that you’re going to need to be dealing with at some point. So if you want to join the show, maybe you’ve got all your tax papers or you’ve gotten some love letters. Some of them are pretty interesting one of them of course one of the big ones that’s coming in as people having to prove their identity.
Dr. Friday 4:34
So if that is the case, then you might want to you can join the show 615-737-9986 are are all there for us. So again, if you want to join the show you can 615-737-9986 Are the phone numbers that we have on file, and we will be able to help you hopefully answer those questions. Do you need to do anything with them? Do you want to, you know, make it happen or whatever, it’s really up to you on? Do you want to deal with the IRS? Or do you want to wait to the IRS is going to give you little to no option, and then you know, then you will have to deal with them. I mean, sooner or later, you’re not going to get away with not filing taxes. Even if it comes down to wanting to collect social security, I have people that haven’t filed taxes, therefore, especially for the self employed, they don’t have enough of the information to be able to get their 40 quarters or their 40. Yeah, 40 quarters, 10 years of taxes are not showing up.
Dr. Friday 5:44
Because as a self employed person, we have to report most of that. So they’re not going to qualify for what they think they should be qualifying. So again, one of those situations where you want to make sure that you have you know your papers in order. And that way, if Gosh, you need to collect social security or you have a Medicare, you know, you do are not required to file 40 quarters, or 10 years worth of taxes. And in some cases, some people have not done that. So, again, just making sure.
Dr. Friday 6:16
So if you want to join the show, call 615-737-9986. So a couple interesting things. I know, this is a live show, some of you have questions, you will be on the radio, just to let you know, someone just texted and said is it live? I know last couple of weeks, I’ve been out of town. So we’re getting back into the office here. But this is a live so if you call it is 615-737-9986 is the phone number here in studio. So that means that if you want to figure out what’s next that we need to be dealing with, of course, we also are getting what almost the 15th of September is also when we pay our third quarter estimate.
Dr. Friday 7:02
So if you haven’t an estimated payments are required for people that owe money, it doesn’t mean you have to be self employed. If you are an individual that have money coming in from multiple sources, and you owe more than $500 the next year, theoretically, you should be making a quarterly estimate to compensate so that you’re not short on your taxes. So if you are an individual that maybe have rental properties, or you have investments, stocks, portfolios, or you have k ones and you don’t always have control over are we going to make money, are we going to lose money, we don’t always know the answer to that.
Dr. Friday 7:39
But you do need to do to the best of your ability estimate, which is always whatever happened the year before. That’s how we do that. So if in 2021, you owed 600, or 1000, or $2,000, they’re radically, you should be making four equal payments of that balance, do up to 110% of that year, for the next year. So that way, you at least don’t have it. So I have some people, maybe they sold a large investment in the year of 2022. And they’re saying well do I need to pay in this money to the IRS. So what we have to pay into the IRS is 110% of what she owed or in 2020. So in theory, you might owe $40,000, for the year of 2022, you may not have to send all of that in to keep the penalty from happening.
Dr. Friday 8:29
Now, I usually suggest especially if you’re not great with money, some people are really good, they’ll put it in a savings account, make a few dollars on that. And that’s perfect. But sometimes people if they have access to the money, it will get spent. So if that’s the case, what you really do want to do as you do want to take that money, put it on a 1040 es or go to irs.gov make an estimated payment, because you rather have that money out of the bank in the hands of the IRS, versus if someone’s gonna prepare their taxes come March or April of the year and say, “Hey, you owe 40,000,” and you no longer have it.
Dr. Friday 9:04
Now the interest in penalties will be much higher than what you probably would have earned if the money was just sitting in the bank earning interest. You know, I mean, so again, one of those situations where you really, really do want to make sure that if you owe the IRS, you’re not going to earn more money in the bank. Now maybe if you’re a great investor and you know how to do something, but there’s a risk to that and who wants the IRS as a loan officer personally, not me.
Dr. Friday 9:32
So if that’s the case, put that money aside as any self employed individual should always have a bank account should always have a separate bank, one for business one for taxes. Every dollar you make, depending on your income bracket should be as little as 10% as much as 30 or 40%. Depending on how much earned income you have. We always have self employment tax. So that’s always going to be a minimum of the 10%. And then you know, obviously ordinary income Tax starts at zero to 12, and then up from there. So you should always have that aside. And I will be honest, I often tell my clients to take it from the gross learn to live off 80%.
Dr. Friday 10:11
Now, that may not work for everybody, because if your profit is only 15%, on what you’re selling, then you can’t take 20% from gross, but that conversation needs to be had with your tax person, because you don’t want to live off of the IRS. They’re not good loan officers, guys, they’re not a good credit card. So if you are self employed, if nothing else, the net effect, whatever you’re bringing home, whatever you’re taking out to live on, you should be taking 20% or 25 I don’t know what you know, based on your income, but a percentage should be going in just like you work for somebody else, you get a paycheck, you never get 100% of that, that money you earn, you make $2,000 you bring home 1500.
Dr. Friday 10:52
The same thing needs to be done for the self employed, because I will tell you, in my world, a lot of the issues is often the self employed or someone that sells or takes money out of a retirement account. Those are usually the larger issues, if you’re taking money out of an IRA. You know, a lot of times people are like, well, I’ll pay the tax later, you need to pay the tax when you take it out. And there’s always unless you’re over 59 and a half, or or there is a few exclusions $10,000.
Dr. Friday 11:20
For the first time homebuyer things like that, you need to take out the penalty of 10% plus whatever the tax bracket is. So you know, if you’re in the 50%, and if you take it out and you have a 15% tax or 12%, you need to take out that plus 10. If you’re under the age of 59 and a half at the time you take it very important because with the exception of what we had in 2020, when we were able to split it over three years, and that’s happened a couple different times, you usually get hit in the penalties and the the payment plan that you have on that is never going to be as good. So sometimes we have to take the money out, I get that life happens.
Dr. Friday 12:01
But make sure you take enough out to cover the taxes because most people that’s one of the reasons they end up in trouble. And then they end up with liens against their houses and everything else. Because it didn’t go as well as you thought. All right, we’re gonna go ahead and get for our first break. If you have a question or you want an email, you can call me call the studio at 615-737-9986. The right number is 615-737-9986. Or you can email friday@drfriday.com. friday@drfriday.com. We can take your emails or your phone calls, we’re gonna take a quick break and we’ll be right back with the Dr. Friday show.
Dr. Friday 12:46
Righty we are back here live in studio. I’m Dr. Friday an enrolled agent licensed by the Internal Revenue Service, they do taxes and representation. And that’s what we’ve been doing for 25 years, and probably on the last 15 1015 years here on the radio. So if you have questions, maybe you’ve got love letters, maybe you’re getting some changes on what’s going to be coming down the line keep in mind, they are going to be doing that 1099k At least that is now scheduled for the year of 2023. For anything that exceeds $600, it may change again. So let’s hope it does.
Dr. Friday 13:24
And then we’re going to be making some in basically in 2022, we had this where the Earned Income Credit and the Child dependent credit dropped back down to the 2019 levels. So things are often changing from year to year, even from sometimes they’ll change it what we think and then they’ll backdate it into another situation. So we need to make sure we stay on top of filing. But we do need to file a taxes. As an enrolled agent we do represent which means if you’ve getting love letters, if you haven’t filed taxes, you’re not even sure where to start, you know you’ve been avoiding or you’ve been moving, just trying to keep your head above the water and you know, you just don’t want to drowned.
Dr. Friday 14:06
And there are ways of getting you in to a program either in with the IRS the smart. You can you know Fresh Start program as well as if you want to just file and find out amazed how many people leave money on the table. A lot of times, it’s just I want to leave, I don’t want to deal with it. I just want to not file taxes. And you know, in probably 50% of the cases I have they’ve left money on the table in a year or two of what’s happened so and then we’re also dealing with unemployment audits, not so much that we’re directly employed but we have a lot of employers and they’re now going back and requesting information on employees that claimed unemployment to see if they worked how much money they earn.
Dr. Friday 14:58
Several people that were in the restaurant business they said they, you know, they were on and off, and they were. So you know, so just be prepared. If you have received, you might be getting some more information on that. Coming down the line, that I know the state is working very hard in trying to get all of those audits done. I would also suggest, at some people, at least this last year, we seem to have quite a few people that owed money that didn’t the year before part of it was because of child credit, they reduced it back down to what it was in the year of 2019, which offset some of the people that may or may not have been able to adjust their W2’s.
Dr. Friday 15:38
Other parts of it was where people just change jobs, and they put in there, I don’t know, married and zero, you know, whatever it might be. And of course, nowadays, it’s really am I married and then put the number of children $2,000. For every child you have, if this is a second job, let us know how much the first job, there’s a lot more to a W 4. I’m not too sure if it’s actually been a good thing that they changed the W 4’s. I’m sure there’s other people listening, maybe some of you have had positives, I have found it to be more frustrating for my my people, because I think most people were used to married I have two children, I put two in that box and it automatically goes now we have to be, are they over under a certain age? Is this one way or the other?
Dr. Friday 16:25
So whatever it might be, it’s just a matter of making sure that you are having enough money to come out. Because there’s nothing worse than filing your taxes, you think you have everything in line, and boom, now you owe money from doing something else. And you know, what’s you know, what’s look good is that so if you’ve got questions on that, and you want to know how to help, we can help you at least try to get the adjustments made based on the fact and so often married couples, both people claim married. And so often they’ll both claim the same child. So we’re married and one but you both can’t be married. And one there’s only one child. And keep in mind married means two.
Dr. Friday 17:07
So you’re already claiming your spouse, both of you are claiming, if you have the higher income bracket, then you know, I’ll be quite honest with you that sometimes that doesn’t work in our favor, it’s sometimes better for one person to claim single, and I’ve had, I can’t tell you how many people have walked in my office and said, “Oh, I’m married, I can’t claim single on my W 4.” There’s nothing in the W 4 that says you can’t claim single you can play married at the higher rate, you can collect the box single, it’s only withholding for taxes. It’s not saying that you are legally married or you’re not legally married, it’s making sure enough money is coming out. That is the most important part of that conversation.
Dr. Friday 17:49
We don’t want to have you doing something you shouldn’t what we do want is for you to have enough money coming out of your taxes. The second thing, the IRS has warned that there is obviously always scams, right, there’s a ton of different places that have especially people saying that they are the IRS that you owe money because of them. And that you know that’s coming in two different formats. Apparently, they are making phone calls saying that they are the IRS. And again, because of the fact that you can’t say the IRS won’t call you because there are circumstances in which the IRS can call.
Dr. Friday 18:26
But most of the time, if you’re in my opinion, your intelligent person, you will get the name, you’ll get their badge number and you will get the phone number. You’ll also say who is your supervisor, and what is their number. And then you can either look up those numbers to see if they’re legitimate numbers. And if they’re in Tennessee, and you’re talking to someone local, it will be 615-250. Normally, I’m sure there’s some expansion on that, but most of them are started out at 615-250. If it’s from another state, then I’d be a little bit more curious why someone calling me from a different state unless you just relocated from that state. And it’s a state representative, not a federal.
Dr. Friday 19:08
But that would be something you need to be very, very careful, do not even under those circumstances, don’t give your social security number or your date of birth. Unless you have verified that that person is verifying that information. I will tell you as an enrolled agent and I’m on the phone with the IRS, I do have to give them my social security number as proof of who I am every time I talk to a representative.
Dr. Friday 19:37
But but you want to make sure you’re on the phone with a true IRS agent not just somebody that you got a letter and you call the number on that letter. Just be careful. Same thing with your your older parents. They seem to be the ones that are often targeted for whatever reason. So we just want to make sure that those individuals are safe. So again, and same thing with filing taxes. I mean, most people, one of the things I have to say is if you have a, an older parent, and you are living and they’re living in your home, and the only they have, they are a dependent of yours.
Dr. Friday 20:17
If you’re paying the rent, and you’re providing the electricity and everything else, theoretically, you’re providing more than 50%. And, and Social Security is not considered earnings. So it’s really not a situation. But if they’re living on their own, and you’re helping them with their taxes, and one of the Cubii is one of the biggest are qualified charitable deduction. QCD, to be quite honest, QCD is something I still find a lot of people that are over the age of 65 that have that they give money to charity. And we all know it’s hard to itemize right now under the current tax law, especially people that don’t have large mortgages or large property taxes, or state income tax, whatever.
Dr. Friday 21:00
So most people in Tennessee, especially seniors don’t have those kinds of debts. But they can do a qualified charitable deduction if they have 401, K’s or IRAs. And these are standard, right, because if it’s a Roth, they’re not having to pay the tax anyways. But if it’s on a standard 401 K or IRA was most of converted to IRAs, if they’re over the age of 65. They and then even at 65, you can take charitable, qualified charitable deductions, even though RMDs required minimum distributions don’t start for most until they’re 67, they did not change the law for qualified charitable deduction.
Dr. Friday 21:38
So you can take a draw at 65 from your IRA, as an RMD. And then take that and immediately have the custodian of that account, make the check out to whoever you want as a charitable deduction, I mean, a legitimate charitable deduction. And instead of you paying any tax, it’s completely tax free. So if you want to find a way of giving money to charity, or you’re already giving money out of your pocket, to these charities, especially tithing to your church, people, six $7,000 a year, and they take it and every week, they write their check or put cash in the tithing, they’re not going to deduct it from their taxes, because it’s not enough to itemize.
Dr. Friday 21:38
But if they took that from their QCD, and maybe they’ll take one or two checks a year, instead of doing it every single week, that now becomes their $6,000, fully tax deductible, it does not have to be itemized it is a complete tax deduction. So have this conversation. Many of you are helping your parents with their finances, or talk to their CPA or their EAS or their tax people and find out if they already take advantage of this. Even if they don’t need to take that money out. And maybe in their wishes, they want to give money to charity anyways, why not take it out, they can take up to $100,000 a year, do it while they’re alive, reduce and give it to the charities while they want.
Dr. Friday 22:16
It is a tax planning as well as an estate planning tool. So again, just make sure that if you’re a custodial, or if you’re just have an older parents then and you know that they give so much money every year to these different organizations. And no one says it has to be 1000s of dollars, it can be hundreds, but why not get it tax free. And that would actually may encourage them to give more it’s possible. But even if it’s just whatever they usually give either way, it is a perfect plan. It is tax free money, how often do we get tax free, especially out of a fund that is growing with tax dollars.
Dr. Friday 23:39
So it’s something to consider if there’s something in the state plan and as well as just, you know, they’re doing it anyways, why take it out of their pocket when they could actually take it out tax free? It’s not tax free out of their pocket normally. So that is two things to think about. Sometimes you don’t have that.
Dr. Friday 23:56
But if you have a question, sorry, cou can reach the show at 615-737-9986 is the number here in the studio if you’ve got a question, or you’re working on 2022 and or 2023. Again, we’re working on the last few months here we go about four or five months left to make sure we plan for this. So have you maximized your set because if you haven’t filed your 2022, you have until your extension date to maximize your SEP IRAs. If you cannot do a standard Ira it’s already expired. But you know if you’re going to put money in an IRA, maybe you should put it in now versus later. Let it grow a little faster. Talk to your financial advisor. All right, we’re gonna take our second break if you want to join the show you can at 615-737-9986 We’ll be right back with the Dr. Friday show.
Dr. Friday 24:48
All righty. We are back here live in studio. And if you have a phone or question and you want to join us on the phone lines, you can let 615-737-9986 taking your calls talking about my absolute favorite subject, which is taxes.
Dr. Friday 25:16
And we are in the midst of finishing up the 2022. And we are talking about things that will be happening in 2023. So if you have a question, you want to know what we need to do remember, the highest tax bracket is going to be 37% at this point, greatest income anything over 693,000 for married couple 578 for single person. So that changed. And that’s pretty much the exact same, I mean, all in all the the the rate of how much, but 10 to 37 is what we’ve been dealing with, for the last couple years, obviously, just keep changing the dollar amounts on it.
Dr. Friday 25:57
We also have capital gains rates, remember, we do have a 0% capital gains rate. So talking about another way where you might be able to help the parents, sometimes it’s a matter of how can we get the money out because two things if it’s in an IRA, and they’re at a very low tax bracket, and they could convert for zero tax, because of all they have a social security and money in an IRA, it may be smart to take out bigger chunks, put that money into an after tax account.
Dr. Friday 26:27
So that way it will grow theoretically tax free the tax or even file especially if your income is at a higher bracket than your parents. And then when they pass, it will come to you in a simple because if it’s in an IRA, and they pass away, we have, what 10 years from the date of their passing pretty much or the the first of the following year to take out all of those funds. So if there’s a way of converting, I know I have some that have pretty healthy IRAs, and they’re doing bigger conversions than what we would have normally done in the past because they’re trying to make the money tax free to their children.
Dr. Friday 26:59
So they’re eating the taxes and then letting it regrow tax free. On the other side, this is something you should definitely talk to a financial planner, as well as a tax person to figure out what’s the right numbers, what’s the right percentages to do these conversions. And then where’s the right places to put them because, again, we don’t want to be just, you know, this is a suggestion through the radio, it’s not something that I’m telling any one person to do. So, but these are things that you might be able to do, where sometimes tax rates are lower today.
Dr. Friday 27:30
So what can we do to maximize the lower tax brackets, we know, in 2025, we’re going to start seeing a higher potentially a higher tax bracket again, we don’t know what’s going to come in and how it’s going to offset the Tax Act and jobs, the tax cut and job act that came in 2017. But we do know inflation has come up huge, right? We all know inflation is crazy out there. I mean price of petrol price of food.
Dr. Friday 28:00
So doing those conversions at some point, obviously, you’re making more money, but you’re not actually seeing more money. So again, very important to sit down, especially with either your person that knows your numbers, I don’t care about age in this particular situation. If you are a person that has been paying taxes, are you maximizing what you can to do, but if you’re over 59 and a half, then we have some advantages to making sure that you have a few extra things you could do where normally, we don’t have any extras that you can deal with.
Dr. Friday 28:36
So just making sure that we have exactly what you need to get you to where you want to do. The biggest thing about this show is really just a place where people can ask questions, I will get you the answer. I don’t know I will get you the answer. And then we can actually move forward and try to save tax dollars. No one likes paying taxes, but most of us have to so how much can we pay? And how little can it be paid? If we’re dealing with higher inflation, and all those things that are coming along with the typical tax situation, right, because right now, we’re all needing more money to actually maintain the exact same lifestyle that we might have had, you know, a year ago.
Dr. Friday 29:17
So are we they say people’s credit card debt. I mean, truly, in 2020 people almost had a zero credit card debt. They’re paying it off monthly now and 2023. We’re back to what we were back in 2016 and 17, where people every household has a minimum of $5,000 in credit card debt. And it’s going up part of the reason they’re saying is because of inflation, people are still living the exact same way, but their dollar isn’t going as far as it used to. So that’s an interesting concept to actually address. Because how long can you last under that pretense how much you know how, how long can you keep increasing your taxes until it gets to a point where he can’t do that any longer.
Dr. Friday 30:01
So the second part of that is, is you want to make sure that you’re maximizing for retirement. So that’s why I so often telling you guys heard me talk earlier in the show, but I tell most of my people take in for every dollar you make, put 20% over in your tax account and leave the other 80 to live off of the reason for that is also normally that 20%, especially for people that are making less than 100,000 for an individual and 150 for a married couple, those individuals will have extra money. And then that money can then be invested into a sup into an IRA into some form of retirement that they then can use for that purpose. So not only are we setting money aside for taxes, but now we’re preparing for money to go back into our personal tax situation, right, we’re growing it for retirement, those are the kinds of things that we really want to make sure we’re getting the most from so, you know, if we can learn to live off, it’s harder, I just said inflation’s went up, right.
Dr. Friday 30:59
So even though you were making $1,000 a week, and now that $1,000 Feels like $800. So now you make it up on credit cards, and you’re still having to set that money aside for Uncle Sam, because taxes aren’t going down. Very important to make sure you’re mapping all that now’s the time to really start revisiting, you know, our lifestyles, because let’s, let’s really be honest, if taxes are going up, inflation is going up. And yet, they’ve just said that most jobs were going up by 10%. This year, they’re going to be seeing a 10 person decrease because people are reducing jobs. For me, the roller coaster has started right for a year for months, we kept hearing nobody has enough, you know, no one can get enough employees.
Dr. Friday 31:42
There’s not enough people working, then you hear, you know, on the news that they are going to be reducing salaries, and they want people back in the workplace. And it’s going to be interesting to see how that works. I have particularly certain tax clients that have moved out, they’ve brought property they’ve moved out because their jobs allowed them to work remote. Now we have several of the big Amazon and several of the other larger employers that say, “Okay, yeah, we had that. But now we’re ready for people to show up back in our offices, we need to have people back in the office.” And now that you’ve brought a house out in the country, and you thought, “Well, this is going to basically be where we’re going to be able to do.”
Dr. Friday 32:23
It’s going to be interesting to see how is that going to work against our taxes? Are they going to have to take a pay cut so that they can actually still live out and enjoy the farm and all the things that they have going? Or are they going to have to sell those properties and move back into town where they can actually drive and commute to to the office? Again, it’s not something I know the answer to but I’m sure many of you are facing that. And many of that comes again, with tax savings. I had several that the they moved out the husband was working remote they had the kids, they were homeschooling, there’s a lot of different things.
Dr. Friday 32:59
But if you’re mandated to return to work, how are you going to make that work for you in the big picture. And that’s going to affect your earnings, which affect your taxes. All right, so we’re going to be taking a break here. Keep in mind, if you have tax issues, I’m an enrolled agent licensed by the Internal Revenue Service to do taxes and representation. That’s all I’ve been doing for the last, I don’t know 25 years or so. So that means that if you haven’t filed taxes, you’re getting love letters in in the mail from our friends at the IRS, you’ve been communing, communicating with them for years or over issues, and you’re not getting any kind of resolution.
Dr. Friday 33:37
This is the person I’m the person you want to contact and see if I can’t help you, our initial meetings are always free. Because if I can’t help you, I don’t want to be taking your money. I want to be paid for what I can actually do. And so I want to make sure that you’re going to be able to get a source of revenue of resolution. And we’ll be able to help you do that. If we can’t, then we want to make sure that we can either head you in the right direction. This week alone, I sent some to an attorney, I let one who had been doing all their own representing just to finish it up. We’ll be interesting to see how that works out for them.
Dr. Friday 34:11
But sometimes it’s not a tax issue. Sometimes it becomes a bankruptcy issue, because it’s smarter to go bankrupt than it is to deal with the IRS depending on how old your debt is. And sometimes it’s an offer and compromise. Remember, you have the Fresh Start Program, which means just as it sounds, the IRS has a program that says hey, you know what, we know that you had some issues we know life hasn’t been perfect for you. But if you are really at a point where you’re just starting over again and you don’t own a house with a ton of equity and you don’t have a large 401k and you have basically lost most of everything and you just want to get the IRS off your back then a fresh start program is a possibility.
Dr. Friday 34:54
It doesn’t mean that if you have equity in your home you can’t do a fresh start doesn’t mean if you have an IRA or a 401 K that you can’t do the fresh start, but it is taken into consideration. So if you owe them $20,000, and you have equity of 85 in your house, why in the world would you think that they’re going to make a deal with you? I’m just saying they’re, I mean, they’re, they’re in the business of paying taxes, they’re not in the business of walking away from him. So you know, I will shoot it straight. So you’ll know what your options are and what you need to do and how it’s going to work. All right, we’re gonna go into our last break here.
Dr. Friday 35:28
If you do have a question, if you have something you need to share with us, 615-737-9986, that’s 615-737-9986. This is the Dr. Friday show. And we’re talking about my favorite subject, at least I know in this big, hot, sunny Saturday, many of you are like, I don’t want to be dealing with taxes. It’s not that time of the year yet, because you’ve already filed. But I’m talking to all of those that haven’t filed or are ready to start planning for their next year. That’s what this show today is about. So you can join the 615-737-9986. We’ll be right back.
Dr. Friday 36:12
All righty, we are back live on the radio. So if you want to join the show 615-737-9986 talking about my favorite subject, and hopefully some of yours taxes, leases the subject we all have to live with no matter if you like it or not. So we’re looking at how and what we’re going to do with with our taxes and how we’re going to move forward. Again, we have some corporate taxes, normally 1065, 1120’s or do come 9/15/2023. And then we have personal tax returns do 1015. And obviously, you have to wait so many of them have the K 1s to finish your taxes when you’re dealing with that issue.
Dr. Friday 37:04
Once you’ve got that, then you got to pay your taxes. So we’ll take a look and see how that’s gonna work for everybody. But if you haven’t filed 2022, but again, we’re in 2023. And we’re already making our third court estimate on September 15. So you need to be adjusting your your taxes also for the year of 2023. Even if you file extensions, you still have to make all your payments and your estimates on time, and you need to make sure you’re paying in enough money to make that happen.
Dr. Friday 37:31
So if you have the ability to do that, definitely do because otherwise, you’re looking at the ability to pay 10 penalties and taxes on all of those situations. So it will be something that we will be dealing with and how we’re going to make that happen. I did have someone send me in and ask if capital gains rates have changed? And the answer is no, we still have the zero 15. And as far as I’m concerned, this should be an 18.8. And then a 23.8. actual physical capital gains is zero, 15 and 20.
Dr. Friday 38:04
But we have the 3.8 that kicks in on individuals that make more than 200. And married couples that make more than 250. So if you have, and that’s including all of your income, so you have that, that you have to also look at. Keep in mind also in 2023, another email 17,000 is the gift that you can have, which was up from 16. So again, 17,000 is up from 2022 is $16,000 to 2023 is $17,000. So you have the ability to take that and gift it over and and I tried to explain to individuals, there are a limit to how much you can unlock people are like, “Well, how do they know if I think it might hit $100,000?”
Dr. Friday 38:54
Well, I’m not saying they know, but do we really want to live the idea that if they catch us, then we end up with a tax issue? I don’t think so. So what we really want to know is you need to file a gift tax return, if you give your child over 17,000 You have an exclusion of $11 million dollars, many of us will never hit that exclusion, or even have to worry about it but why not follow the rules it’s it’s basically tax free as long as the money and keep in mind the money that is from the person that’s giving so if I’m giving somebody $17,000 I am the person responsible for the taxes not the person that is receiving the money the person that receives the money doesn’t have to do anything besides possibly document that they received the gift.
Dr. Friday 39:38
And the same thing for any any of those situations. So I have some people that will give their children down payments for homes. And you know, they write a gifting letter and that’s fine you give them but if you give them your son 40,000 for a down payment with exceeding the 17,000. So the remaining dollar amount will have to show up on a gift tax return. So that shows that If that’s coming out of your lifetime, that’s all it comes down to. It’s not that complicated. It’s not something you have to sit around and really worry.
Dr. Friday 40:06
It’s just making sure you’re tracking that information. So that way later in life, if money comes back, or somehow you end up in an audit, or your child ends up in an audit, and that income shows up in the tax return, so they don’t have to worry about paying tax on it, because there’s already a paper trail, it shows that was a gift from your parents, and that you paid that money out the way it needs to be paid. So you just need to be able to go forward and make sure that that’s working the way you need to. So if you have questions, you want to join us on the radio right now we have few more minutes 615-737-9986, you can also set up an appointment, we are, obviously to see us if you want to go over your tax situation.
Dr. Friday 40:53
Easiest way to do that is just pick up the phone and call me at the office on Monday morning. 615-737-9986 is the number to our office. So you can give us a phone call. And we can set up a time where if you’ve got a question like the ones I’ve just read off, you can always email friday@drfriday.com. friday@drfriday.com. That is an important way of for you be able to email us and see what we have and see if we’d be able to answer those questions or at least get you into the right place or to the right place.
Dr. Friday 41:32
Because sometimes I know a lot of people don’t like to hear the word, you know, bankruptcy or anything like that. But you know, I don’t know if people maximize the uses of bankruptcy along with offering compromises. If there are limitations, there are rules you have to follow like anything else in life, but if it applies, and you’re able to do it, you don’t want to leave it off the table just because you need it. And sometimes you want to go ahead and deal with that. All right, let’s hit Jean really quick in Manchester. Hey, Jean.
Caller 42:02
Hey, yes, I have a life insurance policy that I have been leaving interest and dividends in with the policy. And wondering about the tax implication of the dividends?
Dr. Friday 42:35
Are you thinking about taking the money out yourself?
Caller 42:39
No. At my death.
Dr. Friday 42:41
Okay. So as long as you don’t take it out, when the person inherits that life insurance, it’s tax free. So it’s one of those little catch 21. So sometimes people will cash out their own life insurance, maybe things change, and they don’t need to have the life insurance any longer. That can become taxable income. But in your case, if you’re just going to let someone inherit, it’ll be tax free to them.
Caller 43:06
Even the dividend interest income?
Dr. Friday 43:09
Yes, ma’am. Yep.
Caller 43:11
Okay. Thank you so much.
Dr. Friday 43:13
No problem. Thanks, Jean. Appreciate it. So okay, so we have a few more minutes. So again, if you’ve got questions, and you’re not sure of which way to go, or you know, you’ve heard this or you’ve heard that easiest way to reach me 615-367-0819. You can also email Friday, just like the day the week, friday@drfriday.com, friday@drfriday.com. And if you have no idea who I am, and you’re like, “Oh my gosh, I just turned on the radio, this person is talking. I don’t know who she is, what I need to be doing,” you can just check us out on the web at drfriday.com. drfriday.com is the website.
Dr. Friday 43:58
So again, as an enrolled agent, I am licensed by the Internal Revenue Service to do taxes and representation. So that means if you have IRS issues, you’ve got love letters, maybe you know somebody that hasn’t had resolution with their taxes, they you know, they they just been avoiding or maybe they’ve been making payments forever, and they don’t know exactly how to make it work.
Dr. Friday 44:21
How can I get myself out of this? How can I make this work? So I’m not always paying the government maybe it’s a matter because a lot of times people are always paying the past but then they’re not paying enough in the future because they’ve got to keep enough money coming in to make the payments and that’s not the best system you want to have.
Dr. Friday 44:38
First thing you always want to do is get current with the IRS and you want to pay your most current. Right now, I’d be concentrating on 2023 2024 I don’t care how much money you owe from the past that’s going to either take care of itself one way or the other. What you don’t want is to keep adding to that clock because of the situation you’re in. So first thing you know you want to get that resolved and then you want to turn around and go ahead and get the, you know, concentrate on what happened in the past.
Dr. Friday 45:09
Because if you’re working out your budget for the IRS, they will take into account your current numbers going in. So again, we have systems that will help you get organized, help you get caught up, if you haven’t got your tax documents, we can help you, you know, get those documents we have the IRS transcripts that will tell us how much the IRS shows for all your W 2 is mortgage interest, student loan interest, all those kinds of things will show your stock portfolios. So we can help you obtain that information as well. If you want, you can set up a free console at first easiest way call 615-367-0819.
Dr. Friday 45:50
And again, you can always email me your question or just email and see if you need to set up a time. You know, again, that’s friday@drfriday.com. This is a every every Saturday we’re on from 2-3. And we’re talking about taxes, financials, dealing with self-employed individuals, trying to figure out what’s the best way that we can set up our entities, do we need to be an LLC, do we need to be a corporation? That’s the kind of things we cover here. And you can join us every Saturday and take on your calls. Or again, sometimes people don’t like that and they’d rather email or call us. So the phone number one more time is 615-367-0819.