Another episode of the Dr. Friday Radio Show is here! In this episode, Dr. Friday talks about all things taxes, and also the following topics:
- Tax Advantages Because of Covid-19
- What Happens If I Didn’t Get My 2020 Stimulus Check?
- You Can Now Deduct Up To 7.5% of Your Adjusted Gross Income
- Who Will Recieve PPP Forgiveness?
- Unemployment Is A Taxable Income
- 1099 and W2’s need to be mailed by The End of 2020
- Do You Need Help Preparing Your 2020 Taxes?
- Why You Need Help With Tax Representation
- Tax Deductions Will Expire By The End of 2020
- IRA Conversion Deadline Before The End of 2020
and other caller’s questions!
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 at 615-737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
Dr. Friday 0:32
We are live here. So if you want to join the show, you can at 615-737-9986. We are taking your calls talking about all things taxes. We had a big tax, Christmas giveaway. If Jimmy King Woodberry is listening or someone that knows him, please have him call the show the information we received did not go through or you can call me direct on Monday morning at my direct number, but we need to get your gift card to you. We didn’t quite get a good phone number apparently. So I’ll repeat that a couple of times. But as we’re going, let’s talk about a few things. We’re winding down guys, there’s only like a week left or so. And many of those days, people are not going to be around doing a lot of things when it comes to preparing or moving forward on tax planning. So you do want to go ahead and start looking at your options, what’s going to change. What decisions you might make today might change for next year, etc, etc. We all know that the standard deduction did go up. When we filed taxes last year single person was 12,200. When you file them this year for 2020, there’ll be 12,400. Head of household 18,350 up to 18,650. So those are important numbers. Because if you don’t have expenses to exceed those numbers as a single person, if you can’t itemize past $12,400 you’re not itemizing.
Dr. Friday 2:16
The same thing for basic married couple 24,800, you will not be itemizing there is a little bit of a change. In fact, this year is going to have a couple of different changes. So one of the changes is $300, up to $300 charity deduction will be on your 2020 tax return. So normally, that falls on the schedule a were files on to itemizing they added it as an extra deduction. So up to $300 above your standard deduction, you will be able to deduct the second part is the stimulus checks, which were actually advanced payments on a special 2020 tax credit, known as the recovery rebate credits, you will be filling that out as well. So, individuals that didn’t get their stimulus money, you will be getting it on your 2020 tax return. If you did get your stimulus money which would have been $2,100 or $2,400, for a married couple $500 for each child that was under the age of 17. So that means they were 16 or less, then you would have you’ll put that in there and it will count for that information. So it’s going to be a little tricky because of children and ages. If the children are over that age now how’s the system going to count for it? I don’t really know all the answers yet because it hasn’t come down from the IRS how they’re going to treat you if you were overpaid.
Dr. Friday 3:45
What’s going to happen if you were underpaid? What’s going to happen? We do not know for sure. Another thing that has changed a little bit or maybe not. You can now deduct up to 7.5% of your adjusted gross income. For chair for medical, it was 10%. It’s now 7.5. Again, that then kicks into the standard deduction, beating it. So when you’re itemizing the first let’s say you make $100,000, the first 70 $500 in medical expense, you would get zero. Everything above that would start going to your itemizing. Very important. I also had a couple of cases come in the last couple of weeks and we had a situation where individuals that were used to taking expenses, remembered 17 you guys had a 2106 form. I’ve seen schedule C’s that people have put in with no income but writing off what they thought to be their expense for doing their business in some cases they had used of their cars. Keep in mind if you are a W2 individual you cannot under the current tax law, write off your expenses on a Schedule C and there is no 2106. So there is no place for you to write those expenses off kind of important because if you get audited, it’s gonna reduce and give you credit for things that you shouldn’t. And that’s not going to work well in our situation. Then also, we’re going to be looking at the PPP forgiveness, lots of conversation going on how that’s going to happen, considering very few people are going to actually receive their full forgiveness.
Dr. Friday 5:27
In the year 2020, I’m not going to say you’re not going to get it. But if you’re a business owner or a self-employed individual, and you have applied but haven’t received it, theoretically, you’re not going to report it this year as income. But guess what, you’ll probably going to write off those expenses. So next year, it is going to become income. So just you need to talk to your financial planner, or your tax person, and make sure you are on track when it comes to that situation. Unemployment, we had huge unemployment numbers this year. Keep that in mind. And if you collected unemployment, make sure you do not forget that on your tax return it is taxable income. So you need to make sure that you had that information as well. So again, we have stimulus money, if you received it, you’re going to make sure you have that information. So that credit is on there. If you have extra, if you had $300 or so, or more, I guess you would say $300 of charitable contribution as well as unemployment benefits, very important. All right. Looks like we’ve got our first caller. And thank you, Gary, for calling.
Yes, thank you for taking the call. I want to know, can you do a personal self-employed EIN account?
Dr. Friday 6:48
Oh, absolutely. I’m a big advocate of that, in fact, because that way, then you’re not putting your social security number out for the world to have. So absolutely, you can do. You just go to irs.gov. And then the little search put SS4 online and you can get it pretty much immediately during the weekdays.
Okay, If I’m the only individual and I don’t have any employees, I can do that?
Dr. Friday 7:14
Yes. That number would stay with you no matter what business you’re doing as a self-employed individual.
Will it affect my taxes or anything?
Dr. Friday 7:26
Nope, you would put it on your schedule C so it’s tracking through showing that you filed your taxes, but it would have no other effect on you at all.
Okay, all right. And if I didn’t use it at all, then it’s not gonna matter.
Dr. Friday 7:40
Exactly. Doesn’t make any difference at all. It’s just tied to you as an individual. But as a business owner, preferably, I like to 99 that have EIN numbers, because otherwise, I’ve got your legal name, your business and your address, and your social security number on a 1099 form for small business. Don’t really like that if I can help it.
Okay, so what web address do I go to then?
Dr. Friday 8:03
Go to IRS.gov and in the right-hand corner, you’re going to see a little search, just type in SS2 and then type in the word online. And you can do them right there off that website.
And why would my accountant not want me to do this?
Dr. Friday 8:22
I have no idea. I have absolutely nothing because there is absolutely no disadvantage. As far as I’m concerned. There’s no renewal. There’s no fee, there’s no requirements for filing. The only requirement is when there are actual employees, but that’s always required for anybody who has employees. But as an individual, it’s just the protection mode as far as I’m concerned.
Okay, and then I could also when I file my taxes, if I’m working as a self-employed versus working as an employer, it’s not gonna matter.
Dr. Friday 8:53
No, if you’re working self-employed as I said, there is a place on a schedule C that says are you working under an EIN number? Personally, I put that number under there. It’s not really required because most the 1099 but if you give someone a W nine or their 1099 you and vice versa. I rather see that EIN number than your social security number.
Okay. Alrighty. Well, thank you very much. I appreciate it.
Dr. Friday 9:17
No worries. Thanks, Gary. Appreciate it. All right, thank you very much. And so we’re moving on. And we’re gonna and I will say, there we go. Gary is a spot onto something I know people have been listening to me for over 10 years and it is one of my favorite things to bring up is that we always worry every day about identity theft. Most people do you hear about people getting their identity stolen and their bank accounts taken or people buying cars and other people’s names etc. As a self-employed individual, we basically fill out forms all the time. If you’re working doing a job, you might have the name of a business but as a self-employed person doesn’t make a difference if you were working under a handyman plus. But if you have to actually put your physical name as a sole proprietor, we have to have your legal name, your address, and the name of your business, and your social security number to 1099 you. If you have subcontractors, you’re going to put that same information on those forms. Again, you know, that’s a lot of information on a piece of paper that can be passed around a lot of different locations. So my opinion is to get an EIN number, it doesn’t cost you $1. It’s not going to require any additional paperwork in your world. And it’s just going to make his anybody that’s self-employed my opinion, a safer situation. So that being said, that’s my two cents on that conversation. But I would go for it, it’s a very simple thing to do.
Dr. Friday 10:41
Okay, so we were talking about some of the changes that we’ll be looking for when getting ready to file our 2020 taxes or our 2021 tax season. And this year, we’re going to fall on Thursday, April the 15th. So there’s not going to be any extension date I’ve had a lot of people send in saying “Do you think they’re going to extend tax day again?” I do not think so. I think there’s no major reason if anyone was listening to me before my show, I was listening to the news or whatever. And obviously Great Britain is now shutting down even back to what they had prior only one person can meet another person in public outside, apparently, there are additional COVID different versions of it. So that being said, we could be looking at a more very difficult year still coming up. So people working from home kids not being able to go to school, those kinds of things. So you might want to look. I know with us, we’re doing zoom meetings, and where we’re taking taxes electronically, as well as through the mail and everything, it may not be as simple as it was prior to COVID. But you need to file your taxes on time, many people still did not get their stimulus. So you need to make sure you’re going to get that additional money.
Dr. Friday 12:06
There are a lot of talks at least don’t know what it’s going to be exactly. But probably a second stimulus is going to be coming out. So you want to make sure if you haven’t filed your taxes in the last couple of years, or you’re not current on your taxes, this is a good time to get current remember the last $1200 they could not keep applying to your tax bill, even if you owed money. So you know, you don’t want to miss out on these opportunities so that you can keep your doors open, roof over your head, and all those good things. All right, we’re gonna take a quick break. When we come back, we’ll take some more your calls at 615-737-9986. We’ll be right back with the Dr. Friday show.
Dr. Friday 12:54
We are back here live in-studio on this wonderful Saturday. If you want to join the show, it doesn’t take much just pick up the phone at 615-737-9986. If you’ve got questions about filing taxes, or maybe you’ve gotten some love letters, and you’re not too sure which way to go, this is the show to at least get the conversation started. Alright, looks like we’ve got Larry on the line. Hey, Larry, you want to join the show?
Dr. Friday 13:26
Hi, sweetheart. What can I do for you?
My question is, I live in Tennessee, but my typical place of employment has been in Alabama. So I have Alabama State withholding on my paycheck. But since the middle of March, I’ve been working full time from home because of the lockdown situation. So I wonder what the effect that may have on my liability for Alabama state income taxes.
Dr. Friday 13:52
So I’m assuming if you’ve done this in the past, you’ve always had to file a nonresident tax return for the state of Alabama. And so you’re it even though you’re homebound and not even using their roads, or any of the other things they like to tell us is the reason they charged us for these taxes. You are still going to be filing the exact same thing because the employer has paid in and you have paid him from your paycheck the state income tax situation. So not going to probably change anything if you’ve done it in the past. If it’s the first year, then you run to file a nonresident like I said, but it sounds like this is something you’ve been doing for a number of years, or at least for a while.
Well, yes, but before March, I was going into Alabama work but since March I have not been but I think I think you did catch that.
Dr. Friday 14:41
Yeah, I did. And unfortunately, that’s the problem. I have a lot of people that email me every single week asking, “Well, since I’m homebound and I’m not using anything, am I going to be able to write off my home office? Am I going to be able to do something else?” And the answer is there’s been no change in the standard law. So even though you’re not physically driving to Alabama, they’re gonna still consider you an employee theoretically, and to charge you or file the exact same way you’ve always had to. It’s not going to change. Sorry. Well, thanks for listening. I appreciate it.
All right. Thanks.
Dr. Friday 15:16
Alright, looks like we’ve got someone from Nashville. Hello there.
Dr. Friday 15:30
Hello Lavonne. Sounds like you’ve got PPP on your mind.
When is there a deadline to get the forgiveness? My bank keeps telling me to hold on. And they’ll email me a form but I’m getting anxious to be forgiven.
Dr. Friday 15:48
Yes, well, I was the same way, and I am still the same way. My understanding is based on the papers I sign in unless someone knows something different. We were supposed to have at least submitted by December 31. So, you know, then it’s in the bank’s hands. That’s their problem, as far as I’m concerned. Now I’m with a, I’m with trust or SunTrust, I’ll be honest, and I had to go and finally found someone that sent me the link, they kept telling me they were gonna send me an email with the link and I’m like, “Wait for a second, you know, we’re less than a couple of weeks out.” They do have it and there is a contact number, and if you want to, if you’re with that particular bank, you can certainly call and call me or whatever, I’ll be more than glad to share that link with you. If you’re not with that bank then or a phone number.
I’m with Horizon. I’ve already turned in a different form and gotten forgiven, like two or three people that I know. But, thank you so much.
Dr. Friday 16:52
No problem. Thanks for bringing it up. Because it’s something we’re all concerned with. Yes, ma’am.
All right, bye. Bye.
Dr. Friday 17:02
Okay, and in the end, to be quite honest with you, it is something I have? Well, we did probably about 85 PPP loans for our clients. I don’t think one of them, maybe one or two have actually gotten actual forgiveness, every one of the rest are either in or still waiting to put the forgiveness in. I wish if anyone’s working on the banking side or know something that we don’t because my understanding was we had to have it submitted by December 31. Otherwise, it was going to convert into an alone. And you know, most of us do not want that to happen. So hopefully, we can get better expertise on here. But my understanding is there is several banks that have been great. And then there are other ones that I mean, that’s what my bank kept saying is we’re going to get back to you, you know, just hang in there, everything’s good. But on the other hand, you know, I don’t want it to turn into a loan, and I don’t want them to turn back and say, Oh, no problem, we’re just gonna do this, and then that becomes a problem as well. So if you have questions or, or need something, my suggestion is you can go to the SBA, they do have the 3506, or whatever it is short-form and long-form. But again, the SBA pacifically says on their website, you have to go back to the people that gave you the loan to get the forgiveness. So it has to go through them, you cannot go directly to the SBA and ask for forgiveness. So that part, we have gotten perfect clarification too.
Dr. Friday 18:41
So if you have questions, or you need more information, again, I would, I would try to find someone. Again, at my bank, they have a whole division for it, they did a great job once I started making the phone calls. But if you’re waiting for your bank, I’m a little concerned that it’s going to be something that you’re waiting too long for. So we’ll have to wait and see what it comes up with or how it comes in what’s going to happen with the flexibility of that. And there may be more flexible than what I know. But I think more people need to know more about what’s going to happen. I know many of them were waiting for some information because there were going to be some people under 150,000 who got automatic forgiveness or something like that. But as far as I know, that never happened. So it’s something that we’re all working for and hopefully we’ll get some more information.
Dr. Friday 19:37
So if you want to join the show, you can 615-737-9986. We are taking your calls, talking about all things taxes, and you know, right now’s a good time to think about if you haven’t filed taxes, it’s time. The IRS is working on so many different things. It’s time to make a deal. If you’re not at the best in your situation in life, that’s also a good thing. Because the IRS looks at where you are today, they don’t look at what you are, where you’ve been. They look at what you have and what you have, as of today, not something. So if you’re underemployed or your house is not worth as much as it used to be, or whatever the situation might be, this is a time to have an expert. I’m an enrolled agent licensed with the Internal Revenue Service to do taxes and representation. So that’s pretty much what we do all the time. We work with taxes, we do small business, we do individuals, we do corporations, trust, LLCs, partnerships, etc. Pretty much all the tax forms. We do all 50 states, along with that we also do representation. So if you’re receiving love letters from the Internal Revenue Service, and you’re not too sure what to do how to handle it, right now you can’t afford them or your situation is changing a lot. This is the time to resolve some of those issues, or at least notify the IRS so they know so they can put a two-year hold, make you non-collectible if that’s what needs to be done something along those lines to help make it work out. Whichever way is going to be best for you? Whatever is going to happen, you know, to make everything that you need to do and take the situation. Alright, looks like my buddy in the studio is just typing away. Let’s go to number three there. Hey, Dan, what’s happening?
I usually hire a CPA to send out the W9 or 1099?
Dr. Friday 21:40
Okay, can I just do that myself on an online forum or something?
Dr. Friday 21:47
Absolutely, we use a service called e-file4biz. They are awesome. I mean, we do it for all of our clients basically. Because that way they send it out, everything’s put in, and you don’t have to worry about being the one that will send it to your contractors, as well as they’ll send it to the IRS. If you have to make a correction, you can do it on there as well. So I’m not getting paid to endorse them. but I will say we’ve used them for a number of years, I’ve never yet had an issue with them. So I think using a service is probably easier on you than having to find a CPA, that’s gonna do it for you.
Well, I have to compile all the information anyway. So efile4biz?
Dr. Friday 22:34
Yes. Then you’ll put in obviously, your information, then you’ll also put in the person that your 1099 the dollar amount and pay and let it go. It’s really quite simple.
Well, thank you. No problem.
Dr. Friday 22:53
Thanks. Bye, bye. All right, let’s hit Ashley real quick before the break. Hi, Ashley.
Dr. Friday 23:04
What can I do for you, sweetie?
Well, I am an adult, but I have a lot of medical problems. My mom who has always worked is no longer able to work because she’s having to help me and take care of me and be here for me with what I’ve got coming towards me. So in the last year-
Dr. Friday 23:31
Ashley, did I lose you? Okie Dokie. Well, why don’t we put her on hold or close it out, then we’ll see if she can we’ll take a break here in just a second? If she calls back. Hopefully, we can deal with that. Ashley, if you’re listening to the radio, we’re going to hang up, but I’ll ask you to call me back. We’re going to take a quick break. And when we come back, we can take your call and answer any questions we might have. We’d love to have you call back. But you may have hit a dead zone. Meanwhile, while we take a quick break, and then it looks like she may even be calling back right now. This is the Dr. Friday show. We’ll be right back.
Dr. Friday 24:21
We have Ashley on the phone and willing to wait and we appreciate it now we’ll have plenty of time to do her question this. Ashley, you still there?
Dr. Friday 24:32
Okay. So you were saying that your mom is having to take care of you. So she’s unable to work right now.
Right and she’s got Social Security because of her age, but it’s, you know, not a lot. It’s not a lot of money. But with what she gets and when I get we just you know with her sense of security and mine being a social security disability. We didn’t know if we have to follow taxes? And if so, how do we follow it? Is there something different we have to do?
Dr. Friday 25:06
No, both of you would be basically, as long as neither of you has any other major earnings. It doesn’t sound like sounds like you’re both receiving a version of Social Security. Neither of you, it’s not taxable unless there are other earnings. So the only thing I would say is, keep an eye on it, you’d be one of those situations where you’d be a nonfiler. And like last time with the stimulus checks, a lot of individuals like yourself, who didn’t file a return, some of them got it through Social Security, some did not use my one, you know, if they have another release, you may have to be a non-filer again, but you do not and are not required to file taxes or your mother.
Yeah, because we both did get the Stimulus.
Dr. Friday 25:49
That’s great. I mean, you should have been glad to hear at least work the system worked in that situation. But again, there’s no reason for you to file taxes out there. At this point, there’s no additional credit, so there’s no reason for you to do it.
Okay. All right. Thank you.
Dr. Friday 26:05
Thank you. Good luck. Okay, we are still here. And if you want to join the show, you can at 615-737-9986. We are taking your calls, talking about all things, even something as simple as you know, maybe you have children in the house, they’re not yours, but maybe you’re wondering who can claim them. Sometimes I find that a lot of times different people seem to claim different children, just because you have a girlfriend in the house or boyfriend and that person may have children, those children are not necessarily qualified for earned income credit. They may or may not be qualified for you to actually do anything as far as taking them on your tax return depending on how much support they have. If they’ve been in the house for more than six months, and different things like that, and what address is listed at their school and medical records, there will be a need to make sure. Then I have a lot. I shouldn’t say a lot, but a number of individuals that are grandparents that have taken in the children, we have two cases open right now in my office, I assume, if we have two then just think about other accounting firms that also have them where the individuals parents are that either their own child or the other person is claiming the child even though you don’t have them living in your house, you’re not taking care of them, they’re not spending more than six months in one day with you.
Dr. Friday 27:38
If somebody else is taking care of your children, that is the caregiver. Just because you can put them on a tax return and think that they’re yours, doesn’t mean it’s the right thing to do. So the IRS is getting better and better at it, I will say we had quite a few cases where they came back and rejected. Well, of course, once we file the tax return with the documentation, showing that the children should have been claimed by the grandparents. That usually creates quite a bit of havoc for the individual that claimed it because now you’ve got fraud, you won’t be able to claim earned income credit again, and you won’t be able to claim those children. So you kind of mess yourself up by not doing the taxes in the first place the correct way. So make sure you know when you’re filling out the tax returns either yourself or having someone else file it, make sure that you are looking at the right information and that that information is correct, not just something that makes it looks like. I can’t tell you how many times someone walks in my office, and they specifically tell me “Well, when I checked this box, I got more money than checking this box. So went ahead and checked this box.” It may have been that you are legally married, and you click Head of Household because you’re claiming the children instead of filing married filing separately, you claimed head of household and yes, because that makes it sound like there is not another individual in the house taking care of those children.
Dr. Friday 28:57
So we had a case where a gentleman hadn’t filed taxes for a year and apparently his wife has been filing Head of Household for a year. So that obviously created a bit of a problem because at that point, when we filed our tax returns, we had to show that he was married filing separately. I’m pretty sure that that’s going to cause some opportunity for the spouse to get into some tax issues. But you’ve got to do it, right people, you don’t want to be sleeping at night wondering if you’re doing something wrong. In my personal opinion, you want to be able to do everything you can in the correct direction. So if you need help with doing that, or maybe you’ve been doing something a little bit, there’s nothing stopping you from going backward and correcting it. I know you might owe a few dollars to Uncle Sam but it’s still the right thing to do and making sure that you’re doing the right thing so that you can move forward and take advantage of the things you need to do.
Dr. Friday 29:51
I’ve had several cases where we’ve amended tax returns and keep in mind those tax returns have to be paper-filed right now as of the middle of December, I believe they close down e-file’s. So there will doubt there’s no electronic filing, they are now going to start accepting electronic filing of 1040 x’s, though. So that’s fabulous news. So amended tax returns may start to be able to be amended, electronically, which will speed up the process. But that’s still something that at this moment will not happen. But if you’ve got questions about filing taxes, or maybe just dealing with what you have at this moment. One of the big questions that have come in on an email here just now was, “Should I be claiming my 17-year-old son, or my 19-year-old daughter that’s in college this year?” because last year, the stimulus money was given to each individual that filed and if you were not claimed as a dependent, it became a question of which one do you file if the individual file their own, they got $1200. If you’ve claimed them, it was worth $500. So it was a question of who’s really truly supporting and what the situation might have been. These are the kind of questions each person needs to evaluate, based on their income bracket, the age of the child, how much money the children have made, if there are college credits involved, these are the kinds of things we need to make sure before you just go in immediately say, “Well, I’m going to let them clean themselves so they can get this.” For one, we don’t have any idea what the next stimulus package is going to be like. So it’s a little harder to just make that evaluation.
Dr. Friday 31:32
But if you need help with that, you can certainly call my office. We’d be more than glad and our calendar is open, I will tell you, it’s getting very, very full. So if you don’t see a time or a date available, you can call our office during the week. And we’ll take a look and see if we can’t find a time for you. But at this point, I think most of the calendar is getting to the point where we’re not going to if returning clients will always have a spot but for new clients, it’s going to get almost impossible to get in. So the sooner you can make that appointment the better. We have obviously 1099. Don’t forget those do need to be filed and in the mail by January 31. Same thing with w twos. So for all of you guys that maybe do your own accounting, not necessarily electronically, but you know paper kind of guys, you might want to go ahead and take this weekend or the next and go ahead and add up all of your vendors. Remember this is for anyone that has done work for you. So any consultant, any subcontractor that’s made more than $600, if you are manhandling rental properties, any work done on your rental properties for more than $600. We are supposed to 1099 those individuals to take them on our tax returns as expenses. Because those are businesses, right? So again, any individual that works for your business, or works for your rental, and it’s over $600, you need to send them 1099 the information you need is their legal name. So security or EIN in number and address, then you take the dollar amount together and put it in there and that way, then you will know which way that goes. But anybody $600 or more per year, not per check, per a year, you are supposed to be 1099. And that’s kind of really, really important to see what we have on that one and what they have. That’s an interesting question. Okay. Let’s see if we can get Eddie in before the break.
Dr. Friday 33:39
I have a question. It’s a social security question. In 2018, I had some lottery winnings that pushed me over the threshold of 175 and like going up on my social security. But of course, that’s a one time deal. You know, that pushed me over the threshold. And is there away? I filed an appeal online.
Dr. Friday 34:11
Yes, so there is the appeal that you can file Eddie, as well as it’s not actually your social security but your Medicare, right?
Dr. Friday 34:21
Medicare is means I caught means-tested basically means if you make a little bit more money somehow you’re using more benefits than other people. So, therefore, you have to pay more money. I will tell you you have maybe a 50/50 chance of that waiver working. I have not in 20 years had a successful waiver but I’m always open I have had people say they have gotten it waived. But I have not successfully done it for my clients in their situations and most of the time it’s where they had one rental or something sold at once otherwise live basically off Social Security you know kind of thing which makes sense to me and I like your situation. I mean, obviously Having a couple of lottery tickets that went well, how often is that going to really happen in life? So you wouldn’t think that’s going to be consistent. I’ll be honest, the only thing you can do is put that waiver in and then hope that they take it and set it back. So, but it happened in 18 when you filed your taxes, did it not? Because they only do it for one year? Did it not go back down?
Well, it’s gonna happen next year, starting in 2021. I guess it was 2019.
Dr. Friday 35:33
Okay, so must be 19. Because we filed them in 20. So in 2021, it will go back down.
Yes. Okay. So, yes. So it’s gonna be that way for a year regardless.
Dr. Friday 35:45
Yeah, it’s 12 months from when they got it? Because if you filed in April of 2020, it pretty much goes down in April of 2021.
Okay, so just wait to hear from them? If they approve it, then that’s good. If they don’t, well.
Dr. Friday 36:00
At that point, you probably made it through the worst of it. And you’re able to go backward. But yes, sir. That’s pretty much the answer. Sorry.
Okay, I appreciate your time.
Dr. Friday 36:10
No problem. Eddie, thank you very much for the call. I really appreciate it. Okay, well, we go ahead and take our last break. If you want to join the show, if you’ve been holding your breath, or you’ve got something interesting, call me. That was a good one I hadn’t heard of, I mean, I’ve got several cases where like Edie where people have certain situations, but they always say follow those appeals never had that happen yet. So 615-737-9986 is the number here in the studio 615-737-9986. And we’ll be right back.
Dr. Friday 36:46
All righty. We are back here live in the studio. Almost at the end of the year. Time is flying, and we are having fun around here. But let’s go ahead and hit Sandra on the line. And then we’ll see if we can help her out. Hello, Miss Sandra.
Yes, I’m here.
Dr. Friday 37:05
Okay, I’m 77. I’m on Social Security. I received the stimulus package. And I was working part-time. I was laid off because of the COVID, and they allowed me to receive unemployment. Yeah, do I have to pay taxes on that?
Dr. Friday 37:31
So Unemployment, depending on how much you made in earnings prior to and after if you’ve been able to go back to work, don’t know your situation.
I can’t go back to work now until after because I worked as an event worker and they not having any events at all until after the spring.
Dr. Friday 37:51
So January, February, maybe part of March. You were working Still though, correct?
Yeah, towards the end of March.
Dr. Friday 37:59
So you’d have a W2for the first quarter or first two months, two or three months, then Unemployment, both of those would be taxable. possibly making your Social Security, the stimulus is definitely not taxable. That will not only thing, you’re going to have the stimulus, it’s just going to report as part of should have you received more or less, but they’re not making payback one way or the other. So at this point, my understanding is more of a tracking. Did you get it? Or did you not? So that will just be going on the return, but unemployment in itself is taxable, and W2. And if those combined, if you’re on Social Security, a portion of your Social Security up to 85% can become taxable. And you’ve been working so you’ve probably had that happen in the past.
Right, right. Well, then, am I gonna have to pay? I don’t make a whole lot of money. Do I have to pay?
Dr. Friday 38:59
Did you make more than like 10 or 15,000? With the unemployment and the so sick and the W2?
Dr. Friday 39:08
Did you make more than about 10 to $15,000? with just the W2 and Unemployment?
I didn’t make any money. Right. Only I was $108 a week since March.
Dr. Friday 39:29
yeah, so the 100 did you get the 600 or no? Yeah, on the unemployment. Did you get those $600?
Dr. Friday 39:38
Okay, so obviously, the biggest thing is the first 12,000 that you earned would have been zero. So if you made less than $12,000, over the whole time period, including all of your unemployment and all of your W2, then you won’t have to worry since you’re 77, it’s actually going to be another 13 above that or so. So you’re looking at almost 14,000 would be free money. Then after that, they’re going to be, if you make another four or 5000, then Social Security could kick in as taxable.
Then they’ll take away my Social Security,
Dr. Friday 40:15
They won’t take it, there’s gonna charge you tax on it, they won’t take it away. In essence, you’re gonna pay some tax on it that they don’t your to keep you from earning all the money you want, they can’t take it back. It’s just a matter of if it’s going to be taxable or not.
Dr. Friday 40:32
Does that make sense? So that sounds like you’re gonna have to file taxes this year, maybe you have or haven’t had to in the past. I would add up my w two and unemployment, just see how close to 14,000 that comes to. That will give you an idea if you’re really going to have to worry about any taxes or not.
Okay. All right. Okay, good. Thank you.
Dr. Friday 40:52
No problem, sweetheart. Thank you are ready. Let’s go ahead and hit David. Hello, David.
Good afternoon, Dr. Friday,
Dr. Friday 41:03
Hey, what can I do for you?
If you got into family partnerships or LLCs? What determines whether or not you have to pay self-employment tax on those things?
Dr. Friday 41:16
basically, it depends on if you’re you’re an investor, if this is just an investment, LLC, like family, limited partnerships, a lot of times those are family farms. Not always, but I’m just saying or land or management situations. So if the partnership creates earnings, meaning it is a business selling a product or service, then income coming from that if you are actually working that LLC is going to be self-employed, or self-employment tax would be on your share of the profits.
Okay, so if a group of people gets together, they have a partnership owns some property and gonna sell off a lot for that, or whatever does all the investment, that’s
Dr. Friday 41:58
none of that’s gonna be self-employed. That’s all gonna be capital gains, theoretically.
Right? Even though all of the members are self-managed people, whatever. So it shouldn’t be self-employment.
Dr. Friday 42:13
It should not be its investment, they’re all investing in that land to turn around and turn it into another investment. The question will be, is it short term or long term? I mean, depending on how long they’ve held the partnership or LLC, it will just be determining if it’s short or long term, but it would be a capital gains for those individuals, not earnings.
Okay, so when I get my K 1 from that what signals tax advisor whether or not.
Dr. Friday 42:39
Self-employment would be normally in box 14. But you’re going to actually have it under most likely the capital gains is going to be showing up in like six or seven, depending on if it’s a partnership, LLC, whatever. But it’s going to show as a capital gain. So your tax person is going to know it because it’s going to show them exactly if it was long or short. If there’s dividends, interest, whatever, it’s going to be on the proper line of the K 1 to show that.
Okay, if somebody paid like $10,000 for an easement to go across that property or something. That’s still the same kind of thing, right?
Dr. Friday 43:17
Yeah, I mean, the question, Well, is there any basis or is it would be 100% profit to the partnership. Because they give you a part of the land away, so there would be some basis, whoever’s handling the tax return for the partnership, or LLC would put that in there, and then your percentage of that 10,000 would be taxed after basis.
Gotcha. Sounds great. Thank you so much. Okay.
Dr. Friday 43:41
Thank you. Appreciate it. Great questions, guys. Love it. All right. Well, it’s been another wonderful Saturday and we are having a wonderful time here. If you want to join us, you can call my office at 615-367-0819 Monday morning, I will tell you we’re basically working on a very small staff next week is Christmas. The big Christmas is happening. Hopefully, all of you guys are going to spend a little time enjoying family friends, even if it’s through zoom or Skype, or just go out and look at the Christmas lights. I know I’ve gone a little crazy this year with Christmas lights. But whatever is going to work best for you guys to enjoy a little time and if you have questions, tax seasons coming obviously so if you want to set up a tax appointment, you can do that a couple of different ways. One, go to drfriday.com, click on the calendar, and schedule an appointment that fits your schedule. Again, if you don’t see a time or date that works in the time, give our office a call at 615-367-0819, and that way we can help you. You are going to want to make sure if you’re self-employed, don’t Forget January 15, is going to be here before you know it. That is our final estimated payment. Everyone, if you’ve sold some sort of real estate, if you’ve had a big stock year, everyone should be trying to make that January 15 deadline, because, by law, we’re all supposed to be paid within 90 days of the big event, an estimated payment. Sometimes that does or doesn’t happen. But at that point, we’re finishing up the year. So you need to have a good estimate, at least send in something because there are penalties for failure to file estimates or quarterly, as well as failure to file on time failure to pay all kinds of little failures to do in life. So we don’t want to do that.
Dr. Friday 45:42
So again, if you’re not too sure what that number should be, or there’s nothing else you need to pay in 100% of the year before if it’s a better year for you, you know that at least 100% of the year before would be what you owe. Trying to get that money out in that way, you’re not having to run around and try to pay it in some other direction. You can pay that directly on irs.gov, either with a credit card or with ACH or banking account information. Again, just quick deadlines, because they’re going to happen here real soon, you’re going to need to issue your W2 and 1099 by January 31. In then obviously, if you’re going to be contributing to an IRA, you need to do that before April the 15th. Those dates swing by so fast and it’s hard to get in with your tax person when the tax season kind of starts. So trying to get those answers why you can and when you can, is the best thing you can do. So if you need help with trying to figure out your tax situation, give us a call at 615-367-0819 or you can email firstname.lastname@example.org. And again, drfriday.com is the website. Call me later.