Welcome to the Dr. Friday Radio Show! In this episode, we have tax expert Dr. Friday take on the latest tax updates, answer the caller’s questions, and talk over the following topics:
- You Can Still Get Your Stimulus Check
- Do I Have To Take an RMD from My Roth 401k?
- Sub S Corporation Tax Deadline September 15, 2022
- Individuals That Filed Extensions Deadline October 15, 2022
- How To Pay Down A Line of Credit
- Dr. Friday Can Help You Get a Tax Resolution
- Can I Do A 1031 Exchange?
- Is It Better To E-File or Paper File?
- What If I Haven’t Filed My Taxes In a Number of Years?
- How To Find Legitimate and Honest Tax Resolution Companies
- Dr. Friday’s Tips on Getting In Contact With the IRS
- Tennessee’s General Assembly Approved Sales Tax Holiday on Food & Food Ingredients August 1-August 31
and much more!
No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or 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. 615-737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
Dr. Friday 0:30
All right, I’m Dr. Friday, and we’re here live this wonderful Saturday; I don’t know what part of town you’re in. But if you’re in Spring Hill, we just had some nice little rain showers. I think every day we’re getting a bit of rain, it always makes it a bit exciting for all of us. But hopefully, you are staying dry. I know my nephew is here in town, and he is playing in the baseball tournament up in by the Vanderbilt and all that area.
Dr. Friday 0:53
And so obviously, hopefully, the rain will stay away from those tournaments. So if you want to join the show, you can look at 615-737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday. So I am an enrolled agent licensed with the Internal Revenue Service to do taxes and representation. That’s all I’m really good at. And so if you haven’t filed your taxes in a number of years, maybe you’re getting some of the love letters from the internal revenue or from the state of Tennessee or other states.
Dr. Friday 1:26
Or you’re just you know, wanting to get straight with the IRS, maybe we’ve not really done anything. I mean, the sad thing is, I have many cases that come in where someone just hasn’t filed taxes for a number of years, many reasons why simply is just never happened. And so they want to get caught up, and they want to be able to maybe go buy a house, or their kids are getting ready to go to college. And they need to do Pfeiffer and those kinds of things.
Dr. Friday 1:51
So you know, whatever it might come up to being, but whenever you don’t file taxes, sometimes there are a couple of things. One, you have the limitation where you can only go back three years to get your refunds right. So, 19, 20, and 21 pretty much is what you have as far as getting refunds. So anything prior to 18, you may you will not get your refund. Now, if there’s already an IRS assessment, and they’re taking money out and paying earlier years, and it’s been done in the last few years, then you may be able to collect some of those monies even though they’re for older years.
Dr. Friday 2:24
That being said, you also have the situation where you’re dealing with stimulus money, right? I mean, there’s still a large number of individuals that did not get stimulus money because they did not file 19, 20, and 21 taxes. And those are still available. So if you did not receive the $1,400, or you did not receive the $2,800 if you’re married, or you know the advanced child credits and all this, those will come to you if and when you file your 20 and 21 taxes.
Dr. Friday 2:55
But again, the IRS isn’t just going to send it right out to you assuming something if you don’t make the attempt to get straight with them, then they’re not going to do, and so that’s the kind of thing you really need to do is be able to just get straight with the IRS. And the easiest thing to do when you do that is to be able to first get your taxes in order because we can’t make an offer and compromise. We can’t do anything until you’re in compliance. And then once you’re in compliance, then we can talk about payment plans, offering compromises partial payment plans, noncollectible, these are all options that are out there.
Dr. Friday 3:28
But until those options are actually there and available, then you don’t have any option at all. So the IRS will give you an option that, in many cases, they will file tax returns sent claiming you as single and zero and no deductions. Because that’s, that’s the highest. And that’s what they’re going to assume since you didn’t file that you have that. And there are several situations where the IRS may disallow other credits and deductions because you did not file the proper taxes in a timely manner.
Dr. Friday 4:00
And we’ve all seen the last couple of years where different situations have happened. And they’ve come through the door, making it happen in that direction. So if you have questions, or you’ve got someone that, you know, my Lovedious will be back with us in just a second, he’ll answer the phone lines. But if you want, you can take care of getting a hold of me, and we can figure out what’s going to be the best plan for you. Because that’s really what it comes down to. We need you to be in a situation where you can negotiate with the IRS where you can go in your head and qualify for loans or home mortgages or whatever.
Dr. Friday 4:38
Because without tax returns without being in compliance with the IRS, then you’re not going to have a situation where you can stay in compliance with the IRS. Just give us a few more minutes, and then we’ll be able to answer your phone calls. So if you want to, you can just stay, you know, stay with what you know if you haven’t filed and you have no idea what kind of W twos what kind of turned on.
Dr. Friday 5:00
And if we can help you with that, we can help you come up with those tax documents, we can help you do our best to recreate the tax years that you may not have filed. And in some cases, you may only need to go back 567 years, depending on the situation, even if you haven’t filed taxes for 20 years. So there are certain rules and stipulations that we have. And then that way you can make sure you have what you need. And you’re only going to have to deal with what you have to deal with.
Dr. Friday 5:29
But waiting and just letting it slide by is never the right answer; you definitely want to make sure that you are in the right place and that you’re doing what you need to do. Because once you’ve done that, you get back on track and there are systems and directions you want to go meaning that a lot of times people get so focused on the past that as a self-employed individual, we have two sides, right? I mean, we have to take care of our taxes from last year, but we should be paying taxes now for this year.
Dr. Friday 5:59
And if you file an extension, you know, some people could have a protects bill that they’re still waiting to pay all the way up until October, and then they have, you know, then you almost have a whole year that you haven’t paid anything for this year. So it’s really important to get into again, compliance, right? So you start, and you’re looking at 2022. At this point, if you are a self-employed person that it has tax issues, the first thing we want to do is get you out of going forward and dealing with tax issues, meaning you’re in compliance, then we can go backward and deal with whatever needs to be dealt with continuously trying to pay off the past, you’re never going to get caught up with the future most likely.
Dr. Friday 6:38
So unless you’ve got a fairly nice-sized bankroll, you’re going to need to be able to figure out and prioritize which direction you’re going to go, right? I mean, which one is going to be the best for you? And everybody is a bit different. So I never expect you guys to sit there and go. This is the format for every single individual because it’s not different people but different things.
Dr. Friday 6:59
So I want you to make sure you understand what you have and what you need to do. But that’s the way it needs to go forward. So again, if you want to join the show, you can 615-737-9986. Pretty sure Lavinia is back in the studio for me, so he’ll be able to answer your calls now. And we can take your calls talking about, you know, taxes, or if you’ve already filed taxes, and you’re still trying to figure out where your refund is, I will be honest, straight out, guys, we’re still working on some of those, the phone numbers are still not really working very well. We are working with certified letters.
Dr. Friday 7:43
But we all know that the IRS was behind; they say they’re pretty much caught up with the mail. But I just had a client email me this morning, I saw my email where he was looking for a cheque that he had mailed almost six weeks ago that has not cleared the bank. So in his case, it wasn’t tracked. So I’m gonna suggest obviously stop that check, make a stop payment on it, and then re-issue now; if the IRS does have that check, they will, they may turn around and say, Hey, you stop payments, you know, there’s a fee for stopping the payment, whatever.
Dr. Friday 8:17
But, you know, it isn’t one of those situations where I mean, if they’ve had it for six weeks, there’s no reason they wouldn’t have cashed it. So I’m assuming it’s been lost in the mail. And since we can’t track it, we’re going to have to go ahead and just re-issue another check. But if you have a question on that, or if you’ve got a friend or someone that you think, you know, maybe need some way to start because I know what happens is people get extremely overwhelmed, when it comes to the IRS.
Dr. Friday 8:42
They’re afraid of the IRS, or they basically have been under the table so long or off the radar, whatever the proper term is that they basically turn around and they’re like, “Wait, I don’t know what to do about it.” But you know, when it comes about it, it’s going to basically come in, and you’re you know, there are processes, there are ways that we can help get this going. All right, well, let’s talk to Rosie Rosie in Nashville. Hey, Rosie.
Hey, Dr. Friday, thanks for taking my call. I got the second half of your show your parents on paying parent, which I’m gonna get a repeat to get the whole show. But at the very end, you talked, and I didn’t realize this. For some reason, this totally skipped me. Passed me by that the Roth 401 K through our work is subjected to RMD?
Dr. Friday 9:33
Yes, and to be quite honest with you. I didn’t know that Rosie; he pulled that out the other day. You didn’t glad you watched the show. But he pulled it because I was always under the understanding that anything was a Roth 401 K 403 B standard Roth all of them were not subjected to RMDs.
Dr. Friday 9:51
Now, again, they’re not taxable, but RMDs required minimum distributions for all those that are not sure what Rosie and I are talking about; those are when you hit the age of 72. Now that you have to start taking money, but only usually out of traditional IRAs, but in this case, if it’s still in the 401 K at work, and you’re no longer working for that company, and that’s for either side, and you never transition it into a Roth, just a standard Roth IRA, you are supposed to start taking RMDs. And I didn’t know that Rosie.
Well, oh, well, now I don’t feel as bad because you have your doctorate in taxation.
Dr. Friday 10:32
Well, the laws are always changing. But that’s weird. What’s the point?
What is the point of a Roth IRA? I mean, what’s the point of a 401 K?
Dr. Friday 10:42
Well, so the point would be that even though they’re mandating you to start taking the money out, it’s still not taxable. Right? So you’re gonna get 1099 R, and you’re still not going to have to take it out. But there is a penalty for anyone that doesn’t take what’s called the requirement on distribution; that would be my concern. And after 25 years of doing it, I’ve never yet received a love letter from any of my clients that did not comply with this. Right? So this is, this may be something that’s new that’s come out. But in answer to your question, there are no taxes due. But it would be the requirement that they could hit them with a penalty if they didn’t do it. So that’d be my biggest concern would be that.
Yeah, I guess I should have asked why I do that now. But why should an employer/employee open a Roth IRA? I’m sorry, a Roth 401 K at work?
Dr. Friday 11:40
Well, the reason they do that is usually, I mean, I think the reason most people do it is that that’s growing tax-free, right? So they’re not getting the tax advantage right now. But when they hit retirement, there are no taxes to a Roth. So if you’re in the lower income brackets, personally, if married couples combined income is less than 150. And a single person less than 60, or 70.
Dr. Friday 12:02
A Roth is probably in the current tax code and would probably be a smart thing to do because you’re already in roughly the 12% tax bracket. So you know, you put it in now and pay the lower bracket and then let it grow for the rest of your work history would be my quick answer to that. But I do know, that some employers do not match Roth’s contributions. So you have to be very careful and understand anyone that’s listening because I mean, I wouldn’t want to put money into a Roth if an employer’s contributing money to something, you know, I’m saying, I want to get that free money and then do a conversion or something every year if I if it was a benefit, again, but that would be my answer.
Dr. Friday 12:43
But I was more surprised, like you Rosy that was one of the things I can say I walked away with from understanding that is you know that if you have anyone that’s listening that has a 401 K and is over the age of 72. Under the current tax law, you need to make sure that RMDs are happening if it’s still in a 401 K. I think most people, when they hit retirement, actually move most of their 401 Ks into IRAs. And those individuals do not have to do it. But somehow, you’ve left your Roth 401 K at work, even if you’ve retired, you might want to talk to your financial planner about that.
Yeah, we’re just waiting until my husband retires to switch everything over. But I guess that’s another reason. Another advantage of the Roth 401 K through work is that it’s not subjected to the $6,000 maximum.
Dr. Friday 13:36
Correct. Yes. The minimum deposit is if you’re under the age of 55. And if you’re over, I think it’s 7000. But either way, yes, you’re right, the limits, it has the 401k limitations, which I think is like 20, some $1,000, you can put into a 401k.
My mind was in a cycle. Why did I do that then? But then it’s like, now I know.
Dr. Friday 14:01
Yeah, it’s good, but I would definitely say anyone listening, and Rosie brought up a really good point if you’re at the age of retirement, and you still have something in a 401 K, you need to talk to your again, this is more probably of a financial planner on the one hand, but if you do your own taxes, make sure that RMDs are coming out again, we’re only talking for people that still have it in 401 K’s or 403, B’s or 457. All those business retirement accounts. If your Roth is in a standard IRA, this is not for you.
Well, I learned something new today.
Dr. Friday 14:35
Thank you, Rosie. I appreciate you bringing that up very much. Thanks. All right, why don’t we go ahead and take a quick break? And when we’re done, we’ll come back to the next caller. This is the Dr. Friday show and we’ll be right back.
Dr. Friday 14:58
All righty, we are back here live in concert. It sounds like. No, back in the studio. We’ve had Don that has waded through the break. So let’s get Don on the phone and see if I can help with that. Hey, Don.
Hey, thank you for taking my call about having a train go by; I hope it’s not too loud. My question is I’ve got a pension plan that the company is no longer going to handle. And we neither take a lump sum, roll it over into something nor they will put it into annuities. Do none of the above, which I don’t want to do. I looked at a variable.
Dr. Friday 15:41
Did you look at a variable?
Yes, variable annuities have beneficiary benefits. I’m looking for other options. And like your last caller, I’m approaching that magic number 72. But I’m still working. So I’m gonna have to start taking some, so I thought about maybe part of it in a variable annuity and maybe a part in a self-administered IRA that I started making that withdrawal. What are your thoughts? Is there anything else out there I’m missing?
Dr. Friday 16:19
Well, I’ll be honest; first, let me put a little caveat, I’m not a financial planner; I’m a tax person. So I’m going to basically go with the idea that the first thing you need to do is make sure you have somebody the show she was talking about the retirement report that I was on last week is a gentleman named Hank, parrot, he’s in the Brentwood area, or I’m sure you may even have a financial planner, but I would actually probably try to get a second opinion.
Dr. Friday 16:44
Because since you’re still working, you’re a little different. I mean, you’re in your 70s instead of working, which means you’ve got actual paychecks coming in. Which means that, I mean, we can’t stop RMDs. But if you do charity, you could qualify for the qualified charitable deduction, and you can put your annual charity coming through your RMDs could be donated to a church or something.
Dr. Friday 17:07
So you don’t actually have to pay tax. But on the conversion of the pension, I’m going to make the assumption that some pensions are one way or the other. But if this is all taxable money, like a regular 401k, so when you draw from that pension, it becomes 100% ordinary income, is that what it is?
Dr. Friday 17:07
Okay, then, then you’re really, I mean, you have only a couple, I mean, you have a couple of options. Obviously, you can do the annuity, you can do the conversion, you can even look at Roth conversions, possibly, but again, with you working, that’s probably not going to be on the table, unless you’re not making, you know, unless you’ve cut down a lot, so you’re not making a lot of money.
Dr. Friday 17:46
But you’re also at the point where you’re probably getting social security. So anything you do creates up to 85% of that Social Security becoming taxable. So, you know, I would definitely suggest contacting Hank, parrot, or if you’ve got a financial guy, I would have them run up a couple of scenarios to find out what you know, like you said, most likely, it’s going to be diversified meaning so much that maybe going into a managed fund so much into an annuity, so much, potentially into a self-directed IRA, where you can actually invest it somewhere.
Dr. Friday 18:17
But we don’t want to tie it up in the real estate, or at least not all of it, because you have to take that RMD out every year. And I know, a number of my clients, like the self-directed because they can buy and do things, but you know, does limits when you get closer to the RMD years, we have to make sure there’s cash flow. So, um, but you know, not helping a whole bunch. The one thing I will tell you is your tax person, even if I’m not your tax person, does not cash the whole thing out.
Dr. Friday 18:42
That’s gonna hurt you no matter what. So exactly. It’ll kill me just thinking about it. I’m thinking that we, you know if you need any of it as your rainy day fund, there are always ways of doing some of that, but definitely rolling it into, and I would hate the whole thing to be an annuity. I’m not a huge annuity person. I’m not, again, I’m not financial, it’s more my personal opinion, that anything in small doses is doable, but to take a large chunk of one’s retirement and put it all into an annuity doesn’t, in my personal opinion, sounds like a great plan, but you probably get professional to tell you whatever you should be doing versus taking my personal on some of that time. Probably not the best plan.
Now, and you know, one of my issues with the annuity is that my age is not going to gain much interest. By the time I do have to start drawing it and I quit work and so I’m looking at as maybe part of it for that because the plan does allow for beneficiaries for my wife or kids.
Dr. Friday 19:45
Right. And that’s always not I mean, again, it probably depends to a point, and again, we’re really just talking in theory but in point A, how much of this is your income, right? I mean, how much of this is tied up to your lifestyle While or is this something that is going to be possibly really pulled when God forbid something happens to you? It’s like a security blanket for your wife to have a little extra money or, you know, I only need to take the RMD portion every year, because, in some annuities, I know for a fact that they do pay people to join them, you know, like, if you put 50,000, they’ll give it an extra ten or something like that.
Dr. Friday 20:22
But you have to leave them in there for five or 10 years as well. And, again, you’re hitting your 70. So if you know, and I do know every year, they do usually cash out the percentage of RMD on some of those, all that kind of stuff I see from my side, but I’m big on diversification, nothing should all be in one little basket as far as I’m concerned. But thank you so much for calling.
I appreciate it.
Dr. Friday 20:48
Thanks, buddy. Bye. All right. Again, you are listening to the Dr. Friday show. I am Dr. Friday, a surprise instance as Marsha. And if you have any questions, you can join us at 615-737-9986 to take your calls and talk about taxes.
Dr. Friday 21:11
Or if you’ve got questions like again, a lot of times we will get into helping people calculate taxes on conversions, or selling pieces of real estate, or if you inherited property dealing with bases. These are the kinds of things we can help and teach you or at least help you get the right information. So when you get ready to file your taxes, a lot of times people don’t think that inherited property is taxable. And in many cases, it’s not I don’t want to freak anyone out. But lately, because of the way that the property has been inherited, in some cases, we’ve had a couple of cases where parents have quick claim the homes or the property to their children.
Dr. Friday 21:52
And unless the paperwork is correct, guys, I mean, I understand as a parent, you’re a lot of people are looking at that five-year look back for Medicare, they want to get all the property out of their name. So that way, the property stays with their children, and it doesn’t get eaten up by the government or whatever, that totally relates to what you’re saying. The problem with that is when you quickly claim that property to your children, that eliminates the step up in basis. So that means they’re preserving your basis.
Dr. Friday 22:20
So if you paid $20,000 for that home 30 years ago, that’s the basis that your quit claiming to your children; you’re not quit claiming it where if you had passed away, and now that the house is worth 300,000, they’re not getting that 300,000. So you have to make sure and again, I’m, I’m not an attorney, I’m not a financial planner, I’m talking taxes here. And I understand why people do it. But on the other hand, you’ve got to be very, very careful about just quitting claiming something over to someone because you’re afraid of leaving it in your name.
Dr. Friday 22:54
There are trusts, there are estates, there are wills, and there are all kinds of legal documents out there that can help you preserve it without leaving it on the table, making your children have to pay quite a bit in taxes because of it. So, you know, just need to make sure that we’re dealing with that right issue. All right, let’s go ahead before the break; why don’t we go ahead and get Penny in that way we can do that. Hey, Penny.
Dr. Friday 23:22
Quick question. A friend of mine filed her mother’s tax return early this year. But they sent it by mail. So she passed away, and they closed her checking account. How hard does the IRS try to send the refund to the family?
Dr. Friday 23:49
Well, what’s going to have to happen is if they get the refund check in the name of the mother, they’re going to have to send it back with 1310. And they’re going to have to get it put into her estate. Unless for some lucky reason, the bank will cache it even if it’s in the mother’s name. But if they’ve closed the estate or bank accounts and nothing’s in the mother’s name, then there’s a problem because the IRS is going to send it either to the estate or to the deceased individual or, in some cases, to the husband but not at times they’ll still file a joint.
Dr. Friday 24:22
So they’re going to either have to open up another bank account if they get a refund check. I mean, if it was direct deposited and depending on the mom passed away while they’re waiting for the refund, or was this her final okay? So depending on you know, again, since they did it by mail, you know, we all know that can take an extra I mean, theoretically a year sometimes to get that money, so I would I wouldn’t even possibly go ahead and proceed. If they haven’t heard anything, I would probably send a second copy with a 1310 and a copy of the death certificate and certify that to the IRS showing, you know, in a sense, mom’s passed away, here’s her deceased.
Dr. Friday 25:04
Here’s 1310, which basically all that says is, this is who you need to make the checkout to. And I’m going to be responsible for distributing these funds to all the beneficiaries or the court has appointed or whatever the situation might be. But they might as well supersede what’s going to happen. Because nine times out of 10, they’re either going to get a check, or the IRS is going to hold it up because they know that she’s now deceased, and they haven’t received 1310. So, okay, it’s kind of essential for them to get that over there. And since they’re dealing with the mail, I mean, I know myself, I’ve got a few clients that choose the mail, you know, mail them in every year and it just it, it is a slow process, but I would definitely suggest that to your friends. Okay.
Okay, thank you, Dr. Friday; I appreciate it.
Dr. Friday 25:50
Thanks for calling. Bye, bye. All right, we’re gonna take our second break here. And you can certainly join my show at 615-737-9986. And we’ll be right back with the doctor Friday show.
Dr. Friday 26:07
All right, we are back here live in the studio; you can join us if you want at 615-737-9986, taking your calls took you about my absolute favorite subject, taxes, how can you not love the subject? And we’re talking about some of the things that you may or may not. And it’s always helpful when you guys call because sometimes, I’m not sure what people are thinking about right now.
Dr. Friday 26:44
You know, I mean, obviously, in my world, we’re thinking about tax completion; we’ve got individuals due on October 15, we have businesses due on September 15. So if you have an LLC partnership, or you have a Sub-S Corporation, you may have a deadline there that you have sneaking up before, you know, it could be less than 30 days before we have to have them filed. And that’s assuming, again, that an extension was already filed if you haven’t filed an extension where you’re late already anyways, so that way, we can just manage to move forward and do what we need to do.
Dr. Friday 27:16
So if you have questions, though, or you need to know something that I might be able to help you with, please let us know. And you can join the show at 615-737-9986. It’s six again, taking your phone calls and talking about my favorite subject.
Dr. Friday 27:35
Alright, so while we’re working our way through that favorite subject, if you happen to have something that you need to do, again, 615-737-9986. So we haven’t really seen a lot of moves in tax law. So in case, anyone wanting to know the most up-to-date news, because we really haven’t seen a whole bunch that’s been happening, a lot of talks a lot of fear things, sometimes I love to watch some of the conversations on the internet about all the different things.
Dr. Friday 28:03
But to be quite honest, at this moment, we haven’t seen anything really change every once in a while; whenever there’s a new bill that they’re putting out there, a lot of times, we’ll all jump in because we don’t know if they’re going to add something in there, that’s going to change tax law because they have done it more than once. And we just want to make sure that whatever we’re doing, we need to make sure we understand how it’s going to affect you and me because that’s kind of the most important thing since we’re the taxpayers.
Dr. Friday 28:29
But you know, again, as an enrolled agent, really what we do is we make sure people are filing, and they’re in compliance, we make sure if you haven’t filed that we have a way of getting you into compliance, we deal with the IRS. So when we’re dealing with an IRS issue, we’re you know, we can represent you and help you resolve it. And the revenue officer will be calling us and talking to us first. And then, if necessary, all three of us can talk, or in some cases, depending on communication, the revenue officer can go directly to the client, but only if the client is not usually negotiating very well through us, the representative.
Dr. Friday 29:05
So it’s really important that you don’t procrastinate when you’re dealing with the IRS. I know everyone dislikes the people that work or I guess you would say work with the IRS. But in all honesty, keep in mind that the IRS or the people that work for the IRS are really just then a very successful collection agency. They don’t write laws, they don’t deal with that. All they are is the implication. And then they’re the ones that come out and make sure everybody is doing things correctly. I did think it was interesting.
Dr. Friday 29:35
The other day, I saw a letter come in from one of my clients, and they were one of those that had applied for some of the state funds that were available. And what I found interesting was they were auditing the state funds now. So I thought that was interesting because there’s a lot of people and again when you’re looking on the internet, and you’re talking about all these subjects, you’re like, “Oh, I wonder how that person gets so much money. I wonder why this person got that” or whatever.
Dr. Friday 30:01
And now they are. Now they’re auditing people who got unemployment, in this case, was an individual that had claimed and collected unemployment. And then, apparently, something was turned in, and the IRS audited, or the state audited. And, now they owe about $15,000 because they collected unemployment benefits they were not entitled to. So, you know, it looks like now and I was I’m not surprised. It looks like now, in my opinion, you know, for a while there in 2020. And 2021, a lot of money was being thrown to a lot of individuals, that you’re sitting there going, how are they getting money and other people aren’t, you know, they make as much as this, and you know, this, but yet they were getting the services?
Dr. Friday 30:42
Well, now, I think you might don’t be surprised if you start getting if one of you that may be collected something, you’re like, “Well, they gave it to me,” well, the state unemployment and some of the grants and different things, they can come back after audit and request you to pay those funds. So it’s very important that you follow up and make sure that you know if there’s especially communication, don’t let just the communication go, make sure you respond to anything that comes in through that.
Dr. Friday 31:10
Because, you know, if you received money from the grants, or from even the PPP, I still have clients that have not filed anything for the PPP; they haven’t requested any kind of waivers. Now yet, if you don’t request a waiver, then you are actually just saying it’s a loan. And as far as I know, I don’t believe there’s anything they have a payment plan schedule, and you can pay it off. But I wouldn’t be surprised if they don’t do some audits on some of the PPP money coming through. Because again, there were individuals that seem to have gotten quite a bit of money through PPP, that you’re sitting there scratching your head saying, how did they get it and you know, is supposed to be based on this, this and this, and it didn’t seem like it was?
Dr. Friday 31:52
So if you have questions on some of those, or if you’re getting some of those questions yourself, just make sure to communicate. Again, I’m licensed by the IRS to do representation. So if you need somebody to stand up and help you with an audit, or help you with dealing with back IRS issues, that’s usually the case, or payroll issues, small business owners, you guys often have a problem with 940 ones 940s. And again, and just failed to file W twos. And I’m going to tell you if you get one of those love letters, the IRS has already come down hard, and they said, Hey if you’re not filing your W2s, we’re just going to penalize you.
Dr. Friday 32:29
And that penalty can be up to 50% of what your W2s were. So if you pay $200,000 out, they can charge you $100,000 With the penalties. That’s a lot of money, people. So making sure W TOS or making sure payroll reports are filed on time is going to be a huge benefit to you. It a huge because the last thing you want to do is have Uncle Sam turn around and say, oh, yeah, now you owe me that money. So, you know, I always think it’s funny because a lot of times people are like, like, I didn’t have to do this, or I got away with this. But how much did you get away with people if you don’t actually pay it, and now they’ve come back with penalties and interest, the IRS minimum penalty in most cases is, you know, 5% per month?
Dr. Friday 33:14
And most of the time, by the time they hit you with failure to file or failure to pay. Sometimes, depending on if it was an audit or not, you know, failure to report and you think about the 555 days 15% penalty, basically per month, most of them maximize up at 25%. Not all of them. So you have that situation where they’re maximizing and coming out for you. So it is very important to make sure that if you’re doing things, and you want to make sure your IRS isn’t one of those people that are in your business, I mean, you know if you do things, you track your information, you do everything you need to do, then you will be able to make sure that you can actually, you know, do what you have made what you have, you know, keep what you have, I guess it’s the easiest answer.
Dr. Friday 34:02
Because the IRS, again, they have come down and they basically say hey, I know a lot of times again, as an Enrolled Agent, we deal with a ton of offering compromises. It’s what we do a lot of, obviously, and in doing those, we have to get all the information do you have equity in your home? Do you have money in your 401 K’s have you invested in the stock market, etc. etc. And in those questions, the IRS basically has us confirm, hey, if you have no home you don’t own home, then there’s no equity less likely to be able to collect money from you because you don’t have a house.
Dr. Friday 34:36
But if you’ve got a bunch of money in a 401 K, the IRS, even though they can’t force you to take the money out of the 401k, in most cases, it’s shielded and protected. They can deny an offering compromise because the money you put into a retirement account and not paid the IRS if you owe the IRS $5,000, But you put three into a 401k that year. The IRS is saying, “Wait for a second, that’s our $3,000 plus any growth or anything else that’s happening on it because you didn’t pay us in the first place. So you’re investing our money. And now we want it back.”
Dr. Friday 35:07
So again, these are the kinds of things you need to understand if you understand how the IRS is thinking, then you can make sure that instead of if you’re calling it close, and you don’t have the money, then make sure that you don’t have money going into a 401k. Make sure even though you’re paying your house, you know, if you have enough equity, in many cases, these people do a thought might go ahead and get a line of credit pay off the IRS, and then you can pay off your line of credit as fast as you want.
Dr. Friday 35:37
And most likely, at a much lower interest rate and then eight and a half almost that the IRS is. So you know, it’s important to understand that that is the way they look at your assets and your money because it’s not yours, according to them, because you owed them in the first place. So make sure you understand that, and then you’ll have no problem dealing with them. All right, we’re gonna take our third break when we get back, you guys can join the show at 615-737-9986. We’ll be right back.
Dr. Friday 36:18
Alrighty, we are back here live in the studio. So if you’ve got a question, this is it, guys. For this Saturday, we’re getting down to the nitty gritty stuff, you’ve been holding your breath, you’re like, Oh, I really wish I could call her and say this thing. Call me at 615-737-9986 is a number here in the studio. So if you have a question, now would be the time to ask it. Alright, so dealing with the IRS. We’ve already touched a lot on that. And then, obviously, just getting your tax documents in order. I know you’re thinking, My goodness, it’s only August.
Dr. Friday 36:53
Why would I need to be doing that? Well, because I’m a firm believer that you kind of need to do it throughout the whole year, you then need to have a manila envelope, a basket of all kinds people do different things doesn’t make a difference a drawer in the house, someplace where you start getting because I know myself, I sold a piece of real estate, which is a little different. So that way I need to have that document which is already been received. And I have it, you know, set aside because if you sell real estate, if you have something else that’s going on, and you need to be able to deal with it, you need to have those papers where you can get them so that way you can move forward and take it on.
Dr. Friday 37:29
All right, Lovedious. We went for a few minutes. Let’s hit Dave, real quick way to get the next caller. Thank you. Hey, Dave. Hey, Dave, I am good. What can I do for you?
I got a couple of $100,000 equity in my house. And what I had to refinance to get into equity.
Dr. Friday 37:49
Dave? Can you turn the radio off? Because we’re working on the delay a little bit? Turn it down. I don’t want to hear my voice twice. I have enough. I was listening to myself the first time. All right, so you’ve got a couple of 100 equity in your house? Do you don’t have any IRS debt or anything, though, right, Dave?
No, no, no.
Dr. Friday 38:09
Okay, good. So I mean, obviously, again, probably put this little caveat out there. I’m not a financial planner. But when it comes to taxes, obviously, any money you pull out of your house is not taxable. It’s a loan.
Dr. Friday 38:22
Therefore, you can take that money out and buy either another piece of real estate to make improvements on your house or invest it somewhere else. And it might be at a lower amount than if you haven’t, but as your house pretty much paid off then, or is it still have a decent-sized mortgage? Dave? I don’t know. 60,000 Oh, okay. So you must have that bad boy paid off. Compared to me, at least. So it at that rate, I mean, obviously, if you don’t need the money, I’m sure a lot of people would say don’t do anything with it. But I will tell you that if you have equity in your house, as a person that likes to dabble in real estate, it’s a pretty safe investment, assuming that you don’t put yourself upside down, meaning you can’t make your own mortgage payment because you borrowed the money.
I was just gonna borrow, like, I’d like to get like because we want to remodel some rooms and get back in the house.
Dr. Friday 39:17
That’s wonderful because now you’re improving your own property. Right? So that means when you sell that property, you’re gonna get more money from it. And it also adds to what we refer to as the basis of your original home purchase. So, personally speaking, that’s probably the best thing to do. Because right now, buying real estate is kind of wonky out here.
We’re never gonna move, we’re just going to leave the house to the kids, probably. So we should refinance, and get the money out?
Dr. Friday 39:48
Yes, you’d want to either get a line of credit or refinance, but at some point, you’re going to refinance because you don’t want it in a line of credit unless you plan to pay it off in the next few years because that usually has a flexible interest rate.
It was a possibility depending all the next few years?
Dr. Friday 40:05
Yeah, that’s awesome. If that’s your thought, then you could probably just go in and get a home equity line. And then, and since you’re putting it back in the house, that interest theoretically would be tax deductible. I don’t know if it’s enough under the current tax laws. But that would be the fastest and easiest way for you to get the money out, put it back in the house, and get done what you want to get done.
What kind of interest do I have in equities right now?
Dr. Friday 40:27
You know, I’m not absolutely positive. But I did have a client come in the other day that said he had gotten a loan for like four and a half, which was higher than what we’ve we’ve had a long time.
I had one years ago that was, like, 14%, because I needed the money.
Dr. Friday 40:46
Yeah, yeah, they were not at 14 Yet, you know, we have had inflation, but we’re not at 14 yet.
I appreciate it.
Dr. Friday 40:54
Hey, thanks for listening. I appreciate you. Alright, let’s see Joe in Nashville. Hey, Joe.
This is his wife, I’m gonna ask a question for him. If you have, if you’ve sold a piece of real estate that was part of a living trust? What kind of taxes do you have to pay on that money?
Dr. Friday 41:18
So for people listening, what she’s asking about is a living trust, which usually means people have a lifetime. So as someone living on that property, and they’ve just recently passed away, are they still alive? That passed away? Okay. So, in that they had the ability, when did they move off that property?
Oh, years and years ago.
Dr. Friday 41:40
So normally, in the case of a living trust, and again, you know, I’m not looking at the trust paperwork, guys. But normally, in those cases, the date that the person is no longer living on the property is where you’re going to get your basis. So if this was years ago, whatever that property was worth, then and then what have you sold it for? Now, the difference is where you’re going to get your capital gains.
Dr. Friday 42:03
Does that make sense? Yeah, so you’re gonna have to go back and whoever, if you get a real estate person or something, you’re going to need someone to be able to look at the living trust, see if you had the ability to sell or if you had to wait for them to die. And you know, unfortunately, there are some parts in there, we don’t know under this quick phone call.
Dr. Friday 42:21
But if you had the ability to sell, and it was in the living trust that persons moved out whatever date that happened, that would be when you would have the basis. And then, when you sell it, the difference would become capital gains. Of the property. So let’s just say the person moved out ten years ago, the property was worth 100,000, he now had the in he now wants to sell it, it’s worth 200,000. So his basis would be 100. He sells it for 200. So you’d have $100,000 capital gains in that scenario.
Let me ask you another. Would it go by the date that they’ve moved off the property, or go by the date that they passed away?
Dr. Friday 43:06
Well, that would depend on the trust. So in the living trust, if he if the person, let’s just if it’s your husband, whatever had the right to sell it, once the person moved off the property, then that would be the date, the date of moving, but if the living trust said that he could not sell it until that person passed away because we never know if he was going to move back on or whatever, then it would be the date of death, but it would be in those documents to know which is the way he had it not until you’re not until I’m assuming your husband went not until that person that inherited had the ability to sell.
Okay. But you do have to pay capital gains?
Dr. Friday 43:44
In the difference. Yes.
Okay. So thank you very much.
Dr. Friday 43:49
I appreciate the phone call. All right, guys, we are winding down here with a few more minutes. So let’s go through the basic information that we need to go through. So if you haven’t filed taxes, if you need help getting your back tax issue, or even in the scenario where something like this one and you need help calculating the tax on an inheritance or a piece of property that you’re thinking about selling and you don’t have a tax expert that can help you obviously, you can give our office a call 615-367-0819, and we can set up an appointment, and we can help you with those that information. We do offer if we’re going to be doing offering compromises or back work.
Dr. Friday 44:36
In those cases, we usually offer a free consultation. If you need an estimate done then obviously there’ll be a fee for coming in. But it’s better than estimating taxes that you have no idea what you’re going to pay in Texas. So make sure before you sell something. Ideally, you understand what tax implications that can be. So that way, you can make good judgments on when and where, and how much, and you know, there are options. But once you sell something, there’s no option for money in the bank. You know, at that point, there’s nothing for 1031 There’s nothing for a partial payment plan, there’s nothing for gifting a portion of it to a charity, none of that existence of or any habits.
Dr. Friday 45:15
So we need to make sure whoever you’re dealing with talks; if you’ve got a tax person, that person may say they have a handle on already your current tax situation, they may be the person you need to call, but if you do not have one, I’ll be more than glad to help you. Again, you want to call the office on Monday at 615-367-0819. If there’s a question and you’re just not a person that wants to call a radio station, totally can relate to that man, I tell you, and you have a question.
Dr. Friday 45:47
You can certainly email me, and it’s Friday, just like the day of the week. That is my first name firstname.lastname@example.org. Friday@drfriday.com is my email, and if you have absolutely no idea who you’re listening to, or who Dr. Friday is, get a little bit more information by going to the web drfriday.com. Again, drfriday.com. I hope you guys have had a wonderful Saturday and hopefully the Sunday and all the days that come to follow I hope that you guys take a little time for yourself and enjoy yourselves, and don’t forget taxes if you have if you haven’t filed 2021 The deadline is around the corner you need to give us a call 615-367-0819. Call you later.