Did you have a great Valentine’s Day? Love was in the air, indeed, but there’s one “love” you don’t want to get – a love letter from the IRS. Luckily, Dr. Friday and host John Haggard are here to talk about tax issues and answer queries from callers. In this episode of the Dr. Friday Show, John and Dr. Friday talk about the following topics:
- Tax Changes for This Year
- What an Enrolled Agent Does
- Will Closing out Your CD Affect Your Social Security?
- When Does One Not File a Tax Return
- Higher Medical Deductions for 2019
- Affordable Care Act
- Filing a Tax Return for a Deceased Loved One
- Is Life Insurance Taxable Income
- Does Electronic Accounting Software Commit Mistakes?
- Can You Pay Estimated Tax in Advance?
- How Out-Of-State Occupations Are Taxed
- Why Opening up an Audit Is Important to Business
- Having a Grandson as a Dependent
- Is Alimony Considered Income
- The Difference Between an Audit, a Review, and a Compilation
- How to Avoid Tax Scams Over the Phone
- How to Fix Errors When You Do Tax Using Accounting Software
- Taxing People With Permanent Disability
- Itemizing deductions with your medical expenses more than your taxable income
- Limited Partnerships Inside IRAs
- QuickBooks Online
- Taxes on Electric Vehicles
- Provisional Tax Code
No, no, no! She’s not a medical doctor, but she can 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 737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
John Haggard 0:26
Live from America’s Music City, ladies, and gentlemen! It may be Saturday where you are, but it’s Friday, all day every day all the time with the tax doctor, the tax lady, the doctor becoming known in these parts of America as the Dr. Friday. And right here, she is. Hello Dr. Friday!
Dr. Friday 0:44
Hello, John, and thank you for sitting in on this, which makes my life a little bit more convenient. So I appreciate you very much.
John Haggard 0:51
Glad to be here and you haven’t any sleep in the last four weeks…
Dr. Friday 0:56
It has been a bit challenging, let me tell you. And for our office, it truly has just started. So for about the next eight weeks is the busy season for us. So it’s going to be, people have finally received W-2s and 1099s. So there, you know, I think my complete month of February is already fully booked and there are limited openings in March at this point. So we’re doing great in our office, no complaints.
John Haggard 1:23
Gotcha. Any breaking news in the tax front in this past week or two? Anything that’s going on or about to go on or anything folks should know about? Maybe a radical departure or somewhat different than last year?
Dr. Friday 1:37
Well, probably not a ton. I think really what more people need to be paying attention to and I’m driving as we talked but, in my opinion, will be is this is an election year. So people need to be listening to the people that we might be voting into office and making the decisions do we really want, you know, a different tax code. Are we looking, you know what changes, what are the big changes that some of them are bringing to the table? Are taxing things like Roth IRAs, bringing back the excise tax. You know, taxing certain elements of Social Security instead of having a cut off of where it is now, taxing 100%. These are major tax issues that I think people really need to pay attention to and just see, you know, how are they are who is saying what is, you know, making those decisions based on what’s really going to affect everyday people. It always sounds great to have universal medical, even though I was raised in Australia and universal medical was there and it really doesn’t work as far as most people would tell you if they’ve ever lived in those countries. But that’s what you know. I mean, everyone has usually a special interest when it comes to whatever it is, and minus taxes. And so just telling all my listeners to really listen to all the different people and see what party is best for what you want. what’s going to work best for your family.
John Haggard 3:01
Alright folks, you’re listening to a live program. Dr. Friday the tax lady, she’s an enrolled agent with the Internal Revenue Service and we always say this – that word “with” can be very misleading. She does not work for the Internal Revenue Service. An enrolled agent is a person who works for you. Now, how does that work? Well, much like an attorney would represent you in a court of law. Dr. Friday can represent you before the IRS. If you are tired of those love letters that Dr. Friday talks about, and you don’t want to talk to those folks anymore and you just plain don’t, Dr. Friday can do all the negotiation and all the talking for you, when you authorize her. That’s what an enrolled agent is, isn’t it?
Dr. Friday 3:45
We are having some really good success right now, John, to let you know. I mean, we were fortunate enough, have a great listening audience. So I always have a nice stream of individuals wanting to get straight with the IRS. And right now, we have I’ve had some really good success with getting people back on track with the IRS being able to make livable either payment plans, some really great offering compromises, which, you know, everyone always loves to hear that 10 cents on the dollar payoff. But it’s not always 10 cents on the dollar. But when you owe $50,000, and you’re paying $15,000, you’re usually pretty happy. So we’ve had some very successful transitions in this last couple months where the IRS has closed some cases and people are able to go back, you know, get married, buy houses, move forward from things that have been, you know, really pretty much holding them down with the IRS as your revenue officer or your collection agency. It can be hard to move forward.
John Haggard 4:45
And the phone number to get answers to questions like that, that you might have in your own situation. If you’ve been running for the last 20 years haven’t filed maybe 10 years, five years, whatever it is. Here’s the number to call right now. Live means get the answer now. 615-737-WWTN, 615-737-9986. To Columbia we go. And Roger, you are on the Dr. Friday Show. Go ahead.
Hey, Dr. Friday, thanks for taking my call.
Dr. Friday 5:12
Thanks for calling.
I have a question about mine and my wife’s Social Security. We’re both retired. She’s a year older than me. And she wanted to close out one of her $25,000 CD. So I told her, you know, they asked if we wanted to save any money for taxes, I said, we’ll cover that at the end of the year. But I didn’t realize is that going to affect her Social Security? Are they going to come back later on and determine that she’s got to pay half of her Social Security back or, you know?
Dr. Friday 5:45
So when you say you’re on Social Security, can I ask your wife’s age?
Dr. Friday 5:53
Okay. So, an answer to your question, it is not earning. So no, there isn’t any payback. Two to one. It’s only based on earnings. So it will not be a payback situation, but it will make possible the Social Security taxable.
Dr. Friday 6:11
Possibly, I don’t think it actually is. If that’s all you had an income with social security and that $25,000 even under the provision of tax code, I don’t think it’s going to tax you. But I’m just saying be prepared, you might owe a couple of dollars.
When I told her when she took it out that you’re going to be responsible for this towards the end of the year, but I’m retired from what the auto company. So that’s not our only income, it’s Social Security, but and
Dr. Friday 6:38
Do you have a pension or some sort of?
Yeah, I’ve got a pension. Should we file separately this year?
Dr. Friday 6:46
You’ll probably find that that would not be a benefit. But what you might do is if you do your own tax returns, do it both ways. And then what you how much taxes were actually due on that $25,000. And see if, you know, so that way she knows Okay, we owe taxes with or without. This is my portion based on the additional income not you know an easier conversation that keeps usually married couples a little happier knowing you know, she’s expecting possibly to pay some taxes but you know sometimes they think well that’s more than I thought or whatever so you can actually show her if you do your own taxes. Or if you use a professional just ask him to give it to you with or without so that way he understands that was the additional tax due to that withdraw.
Okay. Where are you located? Are you in Nashville? Brentwood?
Dr. Friday 7:38
I’m in Brentwood sir. I’m in Brentwood.
I might call you, have you do it. Thank you. Thanks for your time.
Dr. Friday 7:48
Thank you, sir. Appreciate the call
John Haggard 7:50
Number to call folks on the Dr. Friday show live from Nashville 615-737-WWTN, 615-737-9986. Call now, because what happens people say, “Well, I’m going to call it a few minutes.” And the few minutes are gone. And there are a lot of people holding at the end of the show. So whatever your question is, if you are kind of like, you know, I don’t know if I should ask that question because someone would recognize my voice my best advice to you – put a sock over that phone. Do whatever you got to do. But get the free advice right here. Dr. Friday is live. So now is the time to call. Dr. Friday, some folks ask is there any circumstance where someone is not required to file a tax return?
Dr. Friday 8:34
Absolutely. And that would be individuals that live off solely Social Security. Possibly a small pension, if they’re single, and they only earn you know, maybe $500 or $600 a month. So maybe, you know, seven or $8,000 a year. Actually, they can earn up to about $12,000. Those individuals without be required. Now the trick to that would be as if you have as a gentleman was saying Before they ask, did you want to hold out any withholding. Sometimes people will have withholdings on their retirement withheld. And if you do, you still have to file to get your refund. But other than that, you know, basically just making sure. I have clients that come in every year, one of my regulars that I’ve been doing this 20 plus years, but some of them are getting to a point where they don’t have to pay taxes or file taxes. And I’m the first to say we don’t need to file these, you know, you don’t have to, but just call and make sure. So just double check with somebody to make sure there are like AARP and a couple of them will do free tax returns for people that are usually seniors or people in certain areas. But they’ll also let you know that you don’t need to be filing a tax but you know, you might check every year. Something’s changed. Sometimes you get an inheritance or you take a little extra money out of retirement and you’re thinking “Oh, I should still be fine.” Just make sure. Because the last thing you want to do is not file a return and then find out that Uncle Sam says you should have and then there are penalties on top of it.
John Haggard 9:57
Right now we do understand that Congress is allowing higher medical deductions for 2019 and 2020. Can you give us sort of the executive summary on that?
Dr. Friday 10:09
Actually, yes, so the Security Act passed. And so one of the things, back in 2018, they basically passed the part of the law of change was that we were going to go up to a 10% medical. That basically, so when we itemize, part of our itemization is our medical and to get any kind of medical expenses as a double whammy, first you have to meet the itemization. And then you get a portion and then you have to meet the criteria. So first is you have to 10% or in this case, 7.5% of your adjusted gross income before you get $1 of medical. And then once you get to pass the $7.5 you have to have more than either $12,200 or $24,400 along with mortgage interest and property tax. You have to be able to itemize is what I’m saying. But they have lowered it. It’s a lot harder to meet 10%. That is 7.5. So 7.5 is a new number that will be able to go forward with and hopefully that will help a few people. I’m going, to be honest with you, John, it’s very difficult under the current tax tables to itemize unless you have a large charitable contribution, or, in my opinion, a large mortgage or mortgage that’s for that, you know, $20,000 in interest or whatever, for Medical.
John Haggard 11:25
All right. You know, there are a lot of changes every year in people’s lives, and they sometimes don’t understand what those tax implications are. You’ve heard Dr. Friday talk about this before, but you probably know somebody and you may be in this situation divorced, separated, married, widowed. And so any advice on separated taxpayers, divorced taxpayers, maybe a recently married taxpayer, or a widowed taxpayer. All that you know, who claims the children? What about the alimony? What about the community properties about the Affordable Care Act?
Dr. Friday 12:02
I think we all have a little of it. And that’s a great question, actually. Because under the current tax law, obviously, just like the gentleman that just called and he would say, well, should we file married filing separately? Or should we file married jointly? And that is an option for you. And the answer isn’t always black and white, because sometimes you need to do it both ways to find out which one’s going to put the least amount of tax liability to Uncle Sam, right? We’re always looking to save tax dollars. Sometimes you just want to say, Well, I want to be responsible. I will tell you many times we have an entrepreneur as a spouse, it’s sometimes we’ll just file them married filing separately, just for the shield, that the other spouse isn’t responsible for that person’s tax. So you say I’m going to pay up a little bit more The other one is kind of protected from, now there’s also injured spouse and innocent spouse, but especially in the years that you get married or divorced. I have a gentleman that got divorced on December 23rd. What a bit Christmas that person must have had. But he’s like, “Well we’re married, you know, almost the entire year. Do we still file married?”
Dr. Friday 13:03
No, if you divorce on December 31st, you would have been considered divorced that entire year. The problem with that is sometimes people don’t go in and change their W-4 information. So they’ve claimed married and zero or married and one for an entire year that they’re going to be switched to single and zero or, you know, if there’s no children. So again, you really need to put a little foresight. If you file for divorce, go ahead and change your W-4. Even if it takes a year for it to happen, I know more money’s coming out, but you don’t want to be that guy that owes Uncle Sam. Head of household could be claimed, to be quite honest, Head of Household can be claimed on married person if you have been living completely separately in separate households for more than six months. You could instead of being married, married filing jointly, there is an exclusion for Head of Household at that time. So again, if you know my opinion, get some second advice on what is best for you. Because if you’re married and you’re claiming head of household, that is completely wrong unless you have two households and you’re basically living completely separate. And I can’t tell you how many people I’ve seen tax returns because they get a better return if I claim head of household than married filing separately and, you know, better doesn’t mean, right.
John Haggard 14:18
You’re getting the tax advice right here. So here’s my advice to you. T-43 minutes to go. That means jump on the phones if you have a similar situation like that. And you know, some people say, Well, I was married half the year, so that means 50% off. Listen to Dr. Friday. She’s got the answers for you. But here’s what you need to do now because we’re only here 43 more minutes. Jump on the phones and get the answer 615-737-WWTN, 615-737-9986 Call. Now Dr. Friday, an enrolled agent with the Internal Revenue Service who can represent you before the IRS you never have to speak to them again, if you don’t want to. Just like an attorney would represent you in a court of law. We’ll take your phone calls next time. John Haggard in Nashville, the Dr. Friday – the tax lady on the phone – with all the answers. You’re on Supertalk 99.7 WTN.
John Haggard 15:15
Coming to Nashville, I think it’s in June thereabouts. The Rolling Stones. Well, that would be a big show. And Mick Jagger has stopped smoking, I understand. Did I get it right? I think I did. Okay, Keith Richards. All right. All right. And we get that right. Dr. Friday is an enrolled agent with the Internal Revenue Service. What does that mean? Folks, I want to really drive this point home for those of you who just joined us and we see who you are. That means that Dr. Friday can represent you before the Internal Revenue Service, just like an attorney would in a court of law. So if you’re, you know, in trouble, think you’re in trouble been running whatever the situation is, there is a way out and Dr. Friday can help you do that. She’ll also warn you of these companies would say, you know, give us $4,000 or $5,000 deposit, and we’ll get everything fixed for you because a lot of that oftentimes turns out not to be true because it sounds like it’s too good to be true. Back to the phone lines. We go. Let’s pick up line four and let’s see, we have, I believe, Cathy on the phone. Hi, Cathy.
Hi. I have a question about an estate and filing taxes. My father in law passed away last year. And he was receiving core Social Security, a military pension, another pension and he died July the 15th. We sell the house and all the money is in an escrow account waiting for probate court. But we’ve heard from a couple of people that we need to file a tax return on the money that he received up until the time he passed away. Is that right?
Dr. Friday 17:05
You’ll have two returns. You’re going to need his regular 1040, his individual tax return from January to the date of his passing. And then there’ll be an estate tax return that you’ll need to file possibly for well, I’m assuming you had to open up an estate that’s under a federal ID number for the money is sitting in. So you’ll need to close that estate. Either possibly within 12 months, so you may actually close that with the probate or whatever. But so yes, he definitely still needs to file and on that return, you’ll put his date of passing. So that also closes his social security number, so that somebody can’t later, you know, use it for some reason. So yeah, you will definitely want to file a final return. It may be that he doesn’t owe any money and maybe I normally doesn’t have to file but always in the year of our passing, you want to file a final tax return.
Okay, so we’ll be filing on his income, but not falling on the amount of money out of the sale of the house, we won’t be filing on that yet?
Dr. Friday 18:11
No, and that most likely that’s going to be a paper trail but not a taxable situation unless it was something unique. Normally, let’s say his house was worth $200,000, just as a number, nothing to bear. And then and then you sold it for $200,000. So there are no capital gains, there’s nothing there that you have to worry about reporting. So it really is just going to be going through probate getting the clearance making sure there was no liability or Medicare issues, and then you’ll be able to distribute those funds to the beneficiary.
Okay, okay. So we do need to file taxes, then on all of his income for last year?
Dr. Friday 18:48
Okay. Can I ask another question he left my husband as a beneficiary on a life insurance policy. Which the money came to my husband because I believe he was named on the policy. Do we have to file taxes on that amount on our taxes?
Dr. Friday 19:09
99% of the time life insurance in itself is not taxable income. There are certain situations where it’s an annuity, life annuity, and then there are sometimes taxable dollars built into those. But the normal standard, life insurance policy was paid on death benefits went to the beneficiary, you’ll find that you’ll receive no documentation and it’s not a taxable situation.
Oh, okay. Very good, then. Well, thank you so much for your help.
Dr. Friday 19:36
No problem. Thank you.
John Haggard 19:37
All right. Back to Nashville on the Dr. Friday show T-34 minutes, jump on the phones get the answers to the complicated questions that have everything to do with tax right now. 615-737-WTN, 615-737-9986. David, welcome to the Dr. Friday show, you are on the air.
Dr. Friday 19:56
Hello. I filed my taxes for 2019. I was using an electronic freebie service. And I got a little confused by because there was a form I’m supposed to file, I think it’s an 8269 I’m not sure, for reporting the medical loss rebate medical, medical loss ratio rebate. And here I thought that that would be picked up in the form because it asked me what kind of income it was and it didn’t pick it up and I didn’t think of that when I paid the tax. So I overpaid. It’s only $100 but it’s a lot to be, because I’m a cancer survivor and disabled. So is there a way I can get that back or fix that?
Dr. Friday 20:58
Absolutely. I like to tell you everyone’s perfect and we don’t make mistakes. But you know what? That’s not about life. So what you need to do sweetheart is – are you expecting a refund on this original return? Did you owe money?
No. No, I don’t make enough to, well, I would have had a $49 refund, but.
Dr. Friday 21:21
Okay, all I’m saying is once you know that the original return has been accepted in process, all you’re going to want to do is file a form called a 1040-X, attach the 8962 and then you’ll be able to get the rebate.
Okay. All right. Now, can I do that electronically?
Dr. Friday 21:40
No, unfortunately, that my friend is snail mail.
Okay, well, it’s better than, you know.
Dr. Friday 21:47
No, no, it will come back to you. You won’t lose it, but it will take them probably prepare for it to take about 60 days. I mean, 60 to 90 days. Okay?
Yeah, that’s fine. Okay, great. Thank you so much.
Dr. Friday 21:58
No problem. Thanks for calling.
John Haggard 21:59
2:27pm Dr. Friday all the time Supertalk 99.7 WTN. T-32 minutes. We keep saying that on the countdown, folks because a lot of you wait until about the last four minutes or six minutes of the show and there’s no way to get the advice on the air. So now is the time to jump on the phones get the answers, no matter what the question is. Dr. Friday will tell you there are no dumb questions none. When it comes to figuring your taxes with the IRS, why give away money? You don’t need to give away. Number to call 737-WWTN, 737-9986. Call now. To Franklin, we go. Here’s Linda on the Dr. Friday Show. Hi, Linda.
Hello. My question is this. I’m ready to file federal income tax and I had some carryover credit from last year which applied and then I had some withholding. But the note on it shows that the amount For 2021 is $500 that I should consider that I’ll have to pay next year. My question is, do I need to pay estimated tax?
Dr. Friday 23:18
If it’s $500 or less, estimates are not required without penalty. You’ve got that little bit so you are probably not being required to file as-is. But you know, obviously being prepared to pay that much money. You know you don’t put yourself in hardship if it’s easier to send them $125 a quarter. So if you haven’t paid in, you can still do that, but it wouldn’t be a requirement.
Thank you so much.
Dr. Friday 23:43
Thank you, sweetheart.
John Haggard 23:44
All right, folks, you’re listening to the Dr. Friday Show. When we come back, we will be talking to Johnny and also to john in Lebanon. And you that phone number again. 737-WWTN, 737-9986. You’re listening to the Dr. Friday Show, the tax lady with all of the tax answers to your questions. John Haggard in the studio and your calls are all next right here on Supertalk 99.7 WTN.
John Haggard 24:15
Welcome back, everybody. Segment number three, the Dr. Friday Show Supertalk 99.7 WTN, where you can call in right now get all the free tax advice you could possibly want. But now is the time to call because it’s only T-25 minutes to go and we are live. That means pick up the phone 737-WWTN, 737-9986. To Lebanon, we go. Let’s bring John on to the Dr. Friday Show. John, you’re on the air.
Dr. Friday 24:43
Hey, I was wondering, my wife just started working for an out of state school. She’s working from home for a school in Massachusetts starting in April this year. And they haven’t been holding out Massachusetts income tax. Well, we still have to follow and owe, possibly owe out of state text for her?
Dr. Friday 25:06
I will tell you. I do two teachers that live in Tennessee but work in California. I don’t know Massachusetts law that well. But I will say California still considers them employees and we have to file their income as if they’re earning it in the state. So you do in part, you know, you’ll do an out of state return but that will be yes, it will be taxed as if they’re in the state for that now your income would not be so you’ll want to do a partial return so that anyone’s income from Tennessee or whatever. Anyway, you know, any income outside of the state won’t be taxed, but whatever was earned on that will be.
Right. We can still file jointly, just file that income. Just file her income in Massachusetts.
Dr. Friday 25:48
Absolutely. You got it. Yes, sir.
Okay. Okay. Thank you very much.
Dr. Friday 25:53
John Haggard 25:54
To Nashville, we go. Johnny, you are on the Dr. Friday Show right now.
Hello, good day how are you?
Dr. Friday 26:02
I am fabulous.
Yeah! I have a question. Well, we closed on a house about five months ago. Of course, I had a lot of jones with the IRS and, you know, when getting their transcripts. So somebody sent me an opportunity where I’m an independent contractor, somebody sent me a 1099 for $4000 that we filed. And they pay me they didn’t sell it. So it put up a red flag for there it’s like they’re trying to stay up charging, trying to make like I’m making more money than I did. And also I’m trying to I’m raising my grandson for four years. I’m trying to get him on taxes. I think maybe you talked about this once before, but I was trying to wonder how to handle it.
Dr. Friday 26:05
Well, if your grandson lives with you, and it’s, you know, and he’s your dependent, then that shouldn’t be a problem. You can only go back three years to get an actual refund that you could go back four years, theoretically, if he’s been with you all for years and get credit and you probably owed money on the years.
Dr. Friday 27:01
And as far as the 1099 that one is tough because you would actually have to physically open up an audit and have them audit and prove that the money wasn’t paid to you. And sometimes that’s not worth the headache. You said $4,000 or $40,000. Yeah.
Yeah, about $4,000.
Dr. Friday 27:19
Okay. Probably not worth the aggravation of having them audit your record. If it’s $40,000 I would have a different conversation.
Yeah, right. I got you. Okay, that’s good enough. Thank you so much.
Dr. Friday 27:34
John Haggard 27:35
2:36 pm. Dr. Friday all the time. Supertalk 99.7 WTN. To Dixon, we go. And you are on the air, Lisa.
Hi, Dr. Friday, my son who was 16 last year, received a W-2 for working. And he made close to $1,700 dollars but the employer didn’t take any taxes out at all. So I’m wondering, do we file or does he have to file his own return and possibly pay taxes? And do we still, are we still able to claim him as a dependent and because it’s such a small amount though, right?
Dr. Friday 28:12
Correct, and I think you’re on the correct set you’re all the way down. So no if he has nothing in box 2 or no federal withholdings on the W-2, there’s no reason for him to file it’s not high enough for him to file. And yes, he is still your dependent and you would claim it as you always have filed your taxes as you normally have.
Okay, and my other son receives disability income. Of course, he’s not able to work or anything but that is not taxable? He shouldn’t have to pay taxes on disability income, right? SSI?
Dr. Friday 28:45
No. And does he live with you?
Yes. We have to take care of him.
Dr. Friday 28:53
Okay, he would still qualify as your full dependent. And no, you would have no place to report that. It’s not taxable income or earned come. Great.
Okay. Thank you so much.
Dr. Friday 29:05
John Haggard 29:05
On the Dr. Friday Show, now to Hendersonville. Susan, you are on the air.
Thank you. I have a question. Is alimony considered income?
Dr. Friday 29:17
It will depend on when you divorced. Did you divorce last year or did you divorce many years ago?
No, this is a divorce that’s coming up. Actually it’s not going through the courts. Exactly. This is what he’s agreed to pay they signed an agreement. It will be filed, you know, naturally with the courts, but I would get gifts that we considered alimony?
Dr. Friday 29:41
Right. So Child Support is obviously Child Support. Alimony or spousal support is usually referred to as, unless they’re fully divorced, in this alimony. Anyways, in the current tax code, no, it is not taxable income. The person paying it has to pay the taxes and the person receiving does not.
Okay, thank you so much appreciate your help.
Dr. Friday 30:02
John Haggard 30:04
You know, Dr. Friday, some of the questions that come in, that people want to know an answer to is if you’ve gotten one of those, as you call them to love letters in the mail. What’s the difference between an audit, a review, and a compilation?
Dr. Friday 30:20
Yeah, that’s, that’s great. Because most of the time, a love letter is going to be a paper audit from the IRS. Nowadays, they do very few face to face in comparison to the number of paper audits we get. And normally those are we have changed your tax return. And here is what we’ve done. When most of us are self-employed, or people with stock sales or something, where they just disallowed all of your expenses, picked up 100% of your income and said, “Well, if you agree to this, sign this document, if not provide us with additional documentation.” So normally, that’s all you’re going to get. Compilation and audited financials are obviously what we use many times when we’re preparing documentation for banks or for lending companies on businesses. And normally the only people that can actually prepare those forms are CPAs. As a EA, I deal with IRS audits or state audit, or tax preparation, everything and anything to do with taxes is my expertise.
John Haggard 31:20
All right. And you know, you have talked about this many times before, but I don’t think you could ever say it enough. And that is you. We know about phone spoofing these days. So you can see that and says, looks like IRS 800, and all this kind of jazz. And so you pick up the phone and they say, we’re calling you in reference to. What advice would you have about taking phone calls from what it purports to be the IRS?
Dr. Friday 31:45
That’s a great question, John. Because I will tell you, there’s always, especially at this time of the year, it seems like there’s always cases out there with you know, people trying to take from other people. So what my suggestion is if any revenue officer calls you unless you already have an open case and you know this revenue officer, my suggestion is plain and simple hang up the phone, call the local or 1800. Usually 615-250-something or contact the IRS at the regular 8100-1040, 829-1040. And then find out there is an open case on you. Get the name of the officer. Anyone you talk to be able to see it in the computer and then you can call that person back. And I’m 99% sure there’s a revenue officer may not like it, but they’re not going to hold that against you because there’s just too many scams. Normally revenue officers will not call you not have some that will come knocking on your door and they’ll leave their business card because they’re not getting any kind of response from the letters that they’ve been mailed out. But again, that the business card at least gives you something and you can research to make sure it’s legitimate person. Never, ever pay the IRS over the phone, real IRS does not take payments over the phone. You have to either do it on the website or you have to make arrangements to get the money through certified mail or whatever. No credit cards, no running down to some sort of cash checking place and sending them money. IRS does not allow any of those sorts of payments,
John Haggard 33:21
You know, and something else that we talked about, and you do as well. And that is there are a lot of tax preparation software companies out there and people say why you know, for 4995 or whatever, you know, I’m just filling my stuff out. And off I go and I think the question, one of them is this. What is the accuracy and of course every programs different but are there some out there that disfigure? I mean, assuming let’s say somebody actually puts the information in there properly but would disfigure the tax. And if so, you know, what’s your recourse?
Dr. Friday 33:58
And that’s, you know, my answer to that is go with a company that you’re going to have the ability to have a record. The gentleman that called earlier and said, you use the free software. And so now he probably can’t easily go back and do an amended return. But many of them into it, I’m sure, Jackson Hewitt, some of the ones I’ve been around a long time you can do an amended return on there you know, their site. But yes, you paid money don’t give nothing free in life. But and they also in some cases now, I will tell you, I am not a huge fan of H&R block’s, and I’m not saying this about them, per se, I’m saying they have this thing called Audit Proof or they’ll pay so much of the audit if something is done wrong. But when you read the fine print, the person putting in the information has to have done it wrong. And normally when there’s a mistake on a tax return, it’s because the documentation was not received on time, or the information wasn’t provided in the format that you needed to get the deduction or the credit. So it’s not human error. Normally it’s more just not the right information at that time. So they’re not going to cover it. So you paid this extra money for the ideas the IRS is going to, you know, they’re going to represent you. And my understanding is and if you work for h&r block, and I’m saying this wrong, but my understanding is they don’t actually send a representative with you to the IRS, they give you the information on how to approach an audit. I’m not sure that’s really good for a lot of people. I’m just being honest. I don’t think I would want to fix my own car, and many people should not handle their own audits.
John Haggard 35:32
There you go, folks. And this is where all the advice is. And so we have about 14 minutes to go. And that’s your warning. Hey, if you need some free advice, right, now’s the time to call because we’re going to be gone in about 14 minutes. So if you’ve been hanging around saying oh my gosh, I didn’t realize the time was, yeah, well the time is here. So, 737-WWTN. That is 737-9986. The advice is free. So pick up the phone and why pay more when you can pay less? I mean that’s the idea here. And some of these you know tax stuff is is money-money complicated and you just you know you need to get the right answers. So now is the time to call. John Haggard is in the studio along with Dr. Friday on the telephone with all the answers. We’ll take your phone calls next right here on Supertalk 99.7 WTN.
John Haggard 36:30
And now the final nine minutes, live from Nashville. For this particular Saturday, now’s the time to get on the phone get a last minute answer to that question you’ve been bugging by. You know and whenever it has to do with taxes, 737-WWTN. 737-9986. Call now. To Nashville we go, Doug, you are on the Dr. Friday Show.
Hello, how are you?
Dr. Friday 36:57
Fabulous. How are you?
I’m great. Two questions for you. If you have qualified for permanent disability license plate doesn’t do you any good on your tax form when you file, as far as an additional advantage?
Dr. Friday 37:13
No, only over the age of 65 or legally blind as a two that qualify.
Okay. The other question is, if you had a lot of medical expenses last year, but without even going into the itemized deduction on Schedule B form. If your standard deduction is more than what your taxable income is, is it even worth trying to do the itemized deduction for Schedule B?
Dr. Friday 37:40
I mean, it’s not going to give you any rewards like give you a refund, then there’s no purpose in cutting down expenses that’s not going to qualify. Does that make sense?
Right. Also, if married falling jointly and your standard deduction is $24,400 or whatever. And your taxable income on the lines of $19,000, it’s a waste of time to try to do the itemize form, correct?
Dr. Friday 38:04
Absolutely. Because you’re going to get 100% of whatever you may have paid in already. Okay, there’s no credit. There’s no debt, no credit.
Last thing if you had a miscellaneous income, and you owe taxes on that, that that would still you’d still have to pay that up for you miscellaneous 1099, right?
Dr. Friday 38:24
Correct. You’ll have the self-employment tax, it won’t be reduced by the ordinary income taxes. Yes, you will pay the self employment even if you’re in the negative income.
Thank you so much. you’ve answered that question.
Dr. Friday 38:36
John Haggard 38:37
Let’s go to Tullahoma. And Joe, you are on the air with Dr. Friday. Go ahead with your question.
Dr. Friday. I have a question about Limited Partnerships inside IRAs. I understand sometimes even though they’re in an IRA, they’re still taxable. They’re above a certain amount is you can’t talk about that when that’s true.
Dr. Friday 38:59
I would love to talk about that, but I don’t have any situation where I can give you actual knowledge of that. We do have a couple of people that run a limited self-directed IRAs and what’s the investment goes to the limited liability in it. If they’re just the investor into the LLC, then I will tell you then that money, any earnings or profits made is protected outside, then it’s an actual business. And that’s the way many of mine are, I’ll be honest when we have self-directed IRAs, and then they actually have corporations and then the IRA brought the stock. I’ve never had an IRA with the LLC held inside of the IRA. So I would have to look that up. And if you need more information, it’s a great question. And I got my curiosity up, but I would have to go to the tax law and pull it up to find out if there are circumstances in which that money has now become taxable because somehow it’s been earned outside the IRA shield, but I don’t know the answer to that sorry.
Okay. Well, thank you.
Dr. Friday 40:04
John Haggard 40:04
Folks. You’re on the Dr. Friday Show. A couple of moments to go here. So if you got any last-minute question, you know what the number is. 737-WWTN, 737-9986. And you know, Dr. Friday, some folks do use QuickBooks Online. And there are some things you need to know about sales taxes in QuickBooks Online. I’ve got a quick tutorial there if you can.
Dr. Friday 40:28
Well, I think there are a few questions that we need to answer on that one. Yes, sales tax on QuickBooks Online. So you need to, I mean, we are certified QuickBooks advisor in our office we’ve been using sales tax and are using QuickBooks since the beginning of my firm back 20 plus years ago, we started with the software. had a lot of changes. And now with the online, you have to be careful. But this, this will actually go with both sides of the issue I’m thinking of at least. And that is going to be that if you have an online business and you are processing your invoices to QuickBooks, you know, we have the exclusion of things are sold out of states, you have to make sure those other states, California is one of them, that no matter how small if you’re collecting or sending should say, if you’re selling something to the state of California, from out of state, you need to collect California sales tax according to California law. So you need to make sure you have set up the sales tax correctly. If you have a lot of exempt sales, you need to make sure those are processing as well correctly in your system to make sure that you’re not paying too much sales tax or not enough sales tax. And also the Use Tax guys! For all business owners, keep in mind. You go out, you buy a truck in another state, and you don’t pay sales tax. And then possibly when you come back here, you register it but maybe it’s not something that has to be registered, maybe it’s a trailer or a piece of equipment. The sales tax is due in the state of Tennessee. Even though you didn’t pay from the vendor, we have a Use Tax here. And you’re supposed to pay the tax at the time that you bring it into this state. So I just want to bring that together because I see a lot of businesses that buy their equipment and things out of state. And then they come back here and there. We’re getting audited for personal property taxes and things and finding out that there wasn’t sales tax ever paid. So just because you’re getting a good deal doesn’t mean that there isn’t a law that keeps you from making sure you pay that sales tax here.
John Haggard 42:28
You see, you need to get that expert advice, folks. Don’t try to guess you might get one of those love letters. Hey, Dr. Friday for somebody who bought an electric vehicle this year, let’s say in 2019, any tax credits on that or is that all over now?
Dr. Friday 42:43
There’s still some out there and you need to go the irs.gov. They have a list of the cars that are still out there. Remember, if there’s over 100,000 cars sold in any of those makes that they eventually will no longer get the credit. So you do have hybrid and electric cars that there are still some tax credits, but it’s harder and harder to get one because they’re so popular at least in some parts of the country like California, then they have a lot of them.
John Haggard 43:10
All right. And for folks who are still a little bit confused about the old Obamacare days, if someone does not have insurance at the moment health insurance, is there a penalty for 2019 taxes?
Dr. Friday 43:25
There is no penalty for not having health insurance. But just as the gentleman that called earlier, if you’re in the marketplace, and the Obamacare or the marketplace is giving you credit for your health insurance. Keep in mind you still have to file the 8962 and find out if you owe money or if you get a credit back. So even though there is no penalty for all of us that may have had private insurance companies. If you’re still in the marketplace, you still need to comply with reporting it to 1095 A, creating the 8968, either paying or getting credit or breaking even.
John Haggard 44:03
Alright, and then there’s a question that someone asked me this week. So Dr. Friday this question, would you, this is a person who is taking Social Security over the age of 66, but still working and understands because I think the person is going to make $60,000 to $70,000 something like that for the year. That said, am I gonna have to give him I’m not gonna have to pay tax on the Social Security that I contributed to, because I’ll make it over some minimum or what’s the rule on that?
Dr. Friday 44:31
Right, there’s a provisional tax code. And, I’ll be honest, this is probably my biggest pet peeve, because in many cases, at least we don’t pay tax once, but we all pay tax on our social security and medicare when we contribute to it, it’s not a tax deduction. So you would think at least when you take it out, you should have no taxes. Well, that’s not the case. So the provisional tax does says we’re going to take half of the Social Security, add it too if you’re married or single. And if it comes up over $32,000, or $42,000, I believe, if it’s married, we’re going to start taxing 50% up to 85% of your Social Security tax, or Social Security benefits. So, in this gentleman’s case, he’s going to be taxed at 85% of whatever his Social Security was, along with his regular income. And that often leads to people owing money because they pay enough for the wages, but they forget that you know, if you get $30,000 in Social Security, you could be adding another $26,000 or so to your income. And that could add a second tax bracket in that case, he be taxed at 22% on that. So it hurts.
John Haggard 45:42
Sounds like a joke to me, you know?
Dr. Friday 45:44
I agree. I agree. You know, the alternative is you say, “Well, let them wait till they’re 70.” And then they can take it out and it’s growing at 8%. But most people say but I don’t know if I listen to that age and I want to get it sooner itself. It’s a tough choice, sometimes.
John Haggard 46:00
Folks, another great hour the Dr. Friday Show. Did you know you get to choose where you’re going to spend eternity in? There only one of two places, folks, it’s heaven or hell. But remember that belief in Jesus Christ is not enough to get to heaven. This is something I didn’t understand for 48 years of my life. And so I thought if you believe you’re good to go, Well, no. We must accept Christ in our hearts to be good to go and not just know about him because even the devil also agrees that Jesus Christ is Lord. If you want to choose Heaven, just say after me, Jesus, I invite you into my heart. I proclaim you my Lord and Savior. Forgive me of my sins. That’s it, God willing. Dr. Friday, we’ll see you next week right here on Supertalk. 99.7 WTN.