Taxation is never an easy subject. But, Tennessee is lucky that we have Dr. Friday to show her listeners the way! In this episode, John Haggard takes over the studio while Dr. Friday is on the line taking phone calls from listeners who have various tax questions. For this week, the topics include:
- Taking Distributions to Two Life Policies
- What to Do Tax-Wise Before Remarrying?
- Where to Listen to the Dr. Friday Show?
- California’s Landmark Labor Registration – What Is It?
- Higher Medical Deductions for 2019 and 2020
- Are Home Health Care Providers Taxable?
- Other Tax Filing Surprises That Might Trip You Up?
- Taxes for Recently Divorced, Separated, Married and Widowed
- How to Tax Lottery Winnings?
- Helpful Tips to Avoid Tax Scams
- Limitations on Expense Report
- Tax Credits Post Retirement
- Income Limits for Social Security Withholding?
- Taxing Clients From out of State
- Taxing Miscellaneous Income
Transcript
Announcer 0:01
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 0:29
And now 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 of accounting known in these parts of America as the doctor Friday. And right here she has everybody, Dr. Friday. Hello, Dr. Friday.!
Dr. Friday 0:49
Good afternoon, John. How is life for you?
John Haggard 0:52
Well, life is pretty good considering my age, income, and attitude. But I do know this; I do know this, this is a trying part of the year for anybody that has anything to do with the tax business. And you must be knee-deep in it probably got papers all over the place and computers that are busting at the seams on their hard drives with information. Would that’d be kind of accurate?
Dr. Friday 1:15
That is totally accurate. If you saw me right now, your picture would be awesome because, yes, I am buried in papers. Everyone’s wanting to get something done so they can find out how much they owe good old Uncle Sam or if they’ve estimated or some of the new tax changes has any of this affected some of them even though 2018 we did have the new tax law with the exception of possible divorce that people get divorced in 2019. They may have had different effects, but, all in all, I think a lot of people are now feeling some of the changes if that makes sense. Like in 2018 they’re like okay, I didn’t get the refund I expected or I did, now when they’re looking at 2019 is it going to be the same refund, did I make an adjustment that was too much? Some people don’t like a large refund, so they try to adjust their W-4s, their offset of what they were getting. So yeah, it’s, it’s been a good year, so far. No complaints on my side. I have wonderful clients that like to return. So I am very blessed on that side. But I will tell you; they keep me busy.
John Haggard 2:13
And before we go to the phone lines, folks here’s something very important you should know about Dr. Friday because you might be one of those who has not filed a return in three years, five years, ten years, maybe 15 or 20 years. And now you’re saying, man, it’s time to come clean. Dr. Friday, especially for those of you who do not know her, you need to know this. She’s an enrolled agent with the Internal Revenue Service. And when we say with no, she does not work for the Internal Revenue Service. She’s an enrolled agent; in other words, she has to be certified. And she can represent you like an attorney would in court, where you would never have to speak to the IRS again. She can handle all of the negotiations, figure out if you have not filed for years, what it is that you owe, and based on your circumstance, what it is you can pay, and then she can say, look, here’s the situation, IRS. Let’s try to make a deal here because this person can or cannot do this. So if you have been running or haven’t done it or have been found out, even and IRS finally caught up with you say we will put you in a bulky or something, you need to call Dr. Friday.
John Haggard 3:33
Because we’re only going to talk about just one particular case here, no names, but did you know that Dr. Friday had a client who owed over $1 million? And you say, Well, I don’t know that much. Okay, well, she’s had some who owe over $500,000 over $100,000 over $50,000 whatever the number is, she’s had a lot of numbers. And in the case of the over $1 million, that was settled for a little around $100,000 And some that were like $10,000 settled for like $1,800 whatever. And sometimes you say, you know what, if it sounds too good to be true it is. And you’ll hear these advertisements especially now on the radio, on TV on cable on Google on YouTube everywhere, we’re gonna sell you and this and that. And the one thing Dr. Friday is always said, you better be careful about some of those things because a lot of them are, we’ll just take your money say, Well, let me get a big deposit on this will go to work for you, and nothing ever happens. So set a straight on that. Dr. Friday.
Dr. Friday 4:31
Yes, in fact, I had a client that just walked in this week, and they’ve been dealing with about eight years of back work. And they hired a company from the same radio station I’m on, and they called him up, and they said, Okay, yes, we can help you the long story short, about nine months into this so far. They’ve paid over $4,500, and they haven’t seen a completed tax return. They’re now getting letters from the government. They keep getting told, oh, we’ve got this handled. And that’s where I always have a problem. In any kind of situation when somebody says, oh, I’ll take your money now and then I’ll tell you what we can do later. It doesn’t really work for me. If anyone comes into my office and, somebody listening, I’ve dealt with some of your cases. And it’s basically first. Can I help you before we talk about what kind of money are we looking at? Because I can’t help everybody. There are a lot of cases out there where the people really need to file and pay their taxes. They have it and means they may not want to. Nobody wants to hand over their hard-earned money to the government, but the government basically says, you have the way to pay us, you need to pay us. But there are other cases where they don’t work in those kinds of cases, yes, we can make a great settlement. We have one that’s closing. They’re working for a year and a half. And finally, finally, from originally we offered $82, it’s not going to be $5,467. Still a big jump, but they owed $58,000, so they’re still really happy with the deal, even though it wasn’t the original deal. But there are ways of making these deals, but you have to make sure that the person working for you is working for you.
John Haggard 6:07
Absolutely. And to get that analysis first don’t just give your money to somebody like Dr. Friday said, there are a lot of these people doing this, folks. And there’s no need to do that. So we’ll be learning more about that this hour, the telephone number to call here. If you have a tax situation a tax question, maybe it’s a question you want answered for someone else, whatever it is, the numbers to call, we’re only here until three so you got 51 minutes. That means you better get on the phones now because they light up at this time of the year. Here’s the number to call 615-737-WWTN, 615-737-99866. Do me this favor folks, if you would, part of our computer system is down so I can’t see your name. So I’m going to put you on the air like this caller right here. Just state your first name and where you’re calling from and Dr. Fridays on the year for you. Go ahead.
Caller 6:57
Hey, good afternoon, Dr. Friday. This is Phil from Nashville. I have a question. So this year, I took distributions from two whole life policies, whole life insurance policies. And I roll them over into a new policy a hybrid life insurance Long Term Care Policy. So I got these 1099-R forms, box four Federal Income Tax Withheld is empty on all the forms. Do I somehow need to account for these forms on my 2019 return?
Dr. Friday 7:30
You do? Can you tell me what’s in box seven?
Caller 7:33
Yeah, box seven. I’ve got them right here. So box seven… Bear with me one second here. Box seven distribution code is six on one of them. And W on the other one. And so that’s yeah, that’s pretty much it.
Dr. Friday 7:53
All right. So a 6 on a 1099-R usually means special distribution. So you need to put them in. They probably are not going to have actual direct tax implications, but you definitely need to put them into your tax returns so that way the IRS knows that you’ve accounted for them because they’re going to see that come up on their records. So we just need to make sure because I believe that’s just going to show, it gets a distribution from a Roth is a box six, so that’s a six which means it’s not taxable most likely, and don’t get too… I know what a W is right off the top it on the back of the format will tell you but I don’t think either those are going to have a direct tax as far as making it taxable to you, but I…
Caller 8:37
W, changes or payments for purchasing qualified long term care insurance. That’s code W, contracts under combines arrangements.
Dr. Friday 8:56
So that was just a transfer from one type of life insurance to another account, it sounds like.
Caller 9:00
Right. All right. And one of the forums as well that I got that up from the new company where I moved everything over to box eight other, there’s a $1,300 dollar charge in there. I think that’s the charge to establish the policy. But that’s just in the other box. And it’s a very vague description on the back of the form. So does that count as an income or is that…
Dr. Friday 9:25
Is there anything in boxes 1 and 2?
Caller 9:28
Yeah, well, I have a gross distribution and one of $2,900 and gross distribution and the other one this is the one where I have something in box 8 is a gross distribution of $1,300 dollars
Dr. Friday 9:42
Right. So when you put that one in, obviously, the difference is going to be box eight from box two usually. So, those two would add up to box one, if that makes sense.
Caller 9:53
Okay, so Yeah, all right. I gotcha. Okay, good. Another question quickly, this year and 2019, I also established a health spending account to lower my taxes, which works by the way. So I put $400 pre-tax money, and they put it on a debit card, which I use when I go to the doctor. Do I need to account for that somehow on my 2019 return?
Dr. Friday 10:15
You do. They’re going to be sending – well, the contribution obviously should be coming on like a 5490, something that shows how much money you paid in unless it was on a W-2, and then you’d have a Code Won your W-2, showing that contribution. And then if you spent any of that money, you should have I think it’s a 1099-SA that would show that you actually spent this much and you have to tell the IRS that it was for medical use versus obviously taking it out for any other personal use, which to be quite honest, I’ve never seen anyone be able to accept a card only for medical but that being said, that’s the way the law works.
Caller 10:54
Okay, all right. I appreciate your time. Thank you.
Dr. Friday 10:57
No worries. Thank you!
John Haggard 10:57
Appreciate the phone call and, if you will, just state your first name. You’re on the air with Dr. Friday.
Caller 11:04
Hey. Hello, Dr. Friday, this is Alan. And my question is, my ex-wife and I are considering getting remarried. But when we were married the first time we owed taxes, it was about ten years ago, and right now, we’re in non-collectible status. If we were to remarry, will that be a red flag to the IRS? And will they come after everything at that point?
Dr. Friday 11:31
Well, what they would probably do and in anyone, that’s a non-collectible. Once a year, they do reevaluate once people have filed their taxes to see if they will be coming out. So if you remarry in the year of 2020 when you file those taxes, you will file as married or married filing separately, but either way, it could trigger them to reevaluate because now there are two incomes into the household versus the single that you’ve each had up until now. So it could, depending on how long ago this was, remember the IRS as long as everything was filed on time, theoretically, the IRS only had that 10 years to really do something unless the clock stopped for some period of like if you made an offer and compromise or something.
Caller 12:15
It was 2010. So and we filed in 2011. So would that be 2020 or 2021?
Dr. Friday 12:23
Well, in 2021, if there was no stopping of the clock, it would be the ten years. So if you filed in 2011, adding ten is 2021. But they may have extended the clock just in time.
Caller 12:36
How will I know if they stopped the clock?
Dr. Friday 12:37
The easiest way to do that is – sorry, I keep talking over you, Alan, and it’s hard on my phone. The way you would know is to pull your transcripts, you can either go to irs.gov. You can call the one 1800-829-1040 and request transcripts from the years in which you’re looking and on that, you may ask them if they could give you your CSED date, that’s the collection dates we work with to find out what that date is, is really all comes down to.
Caller 13:09
Great, but at ten years, then they can’t collect. Right?
Dr. Friday 13:13
Right. But again, there are times where they’re allowed to stop that clock while you’re either being judged to be non-collectible while you may have been in a payment plan for, they were setting up that payment plan if you ever did an offer and compromise, so there are windows. So, in theory, it could be a little bit longer than that. So I don’t want you to lock in on that and say, hey, Dr. Friday said ten years. But it is a full ten years so you might want to call or have somebody if you know of your tax person, you can give them power of attorney and they can do it possibly if they’re EA, but just see if they can get you that CSED date if you want to do it. If you want to wait till after whatever, it’s just you’re very close, I think, to the date that you probably need.
Caller 13:55
Great. Thank you very much.
Dr. Friday 13:57
No worries. Thanks, Alan.
John Haggard 13:58
Folks, you’re listening to the Dr. Friday Shoe live from Nashville. By the way, if you’re ever outside the listening area of this radio station, if you have the iHeart app on your smartphone, just search WWTN every Saturday at two o’clock or for any program at any time on this station, and you can hear it live now you’re hearing some really, really good advice from Dr. Friday about technicalities and things that could go against you and this and that need to really pay attention to this program. And most of all, if you have not filed it, and you know you’re supposed to, and it’s been 2 to 10 or more years call Dr. Friday first before you hand over money to some group that says as she said earlier will give us your $4,500 or $5,000 or three or whatever they can get out of you frankly. And will you know then we’ll go to work for you? She’s going to tell you I can help you or I can’t. Nobody can help everybody 100% of the time. Am I right about that, Dr. Friday?
Dr. Friday 14:58
100% correct. Yes, sir.
John Haggard 15:00
Alright, so if it sounds too good to be true, oftentimes it is. Usually, it is. When we come back, we’ll be taking your phone calls to realize we’re only here till 2 pm. T-42 minutes to go. Now is the time to jump on the phones get the answers all the free tax advice it’s right here but only if you call 615-737-WWTN, 615-737-9986 right now. John Haggard, in the studio, Dr. Friday, an enrolled agent with the Internal Revenue Service. Once again she does not work for the IRS she works on your behalf just like an attorney would in a court of law you don’t even have to talk to the IRS again if you don’t want to if you use Dr. Friday, an enrolled agent with the Internal Revenue Service your phone calls are next all here on Supertalk 99.7 WTN.
John Haggard 15:56
And we play those drums ladies and gentlemen. You’re about due; the IRS will beat you up with a drum if you don’t know what you’re doing. Actually, let me say this about the Internal Revenue Service folks. And that is, sometimes it gets very, very personal with them. Do you understand – and I hope you do, okay – a lot of people who work for the IRS that are great people. Sure there are some roads in there, we’ve heard about some of like Lois Lerner and folks like that over the years, but all they do is to enforce the law that the people you elect and put into Congress pass, okay? So I know it seems like it’s personal sometimes, but just to say, I mean, because there are a lot of great people there. And that’s something very scary to talk about here. This is very, very scary. I am very concerned to learn that potentially, potentially, independent contractors becoming extinct because what happened in California – always starts out there and it can move east just like fascists.? The California Legislature recently passed landmark labor legislation that essentially makes it almost impossible for a worker to be classified as an independent contractor, that Governor Newsom did out there, he was quick to sign it. Here’s my question. Effective January 1st, if I understand it, of this year, I thought Dr. Friday, I mean, independent contractor and classifications of people and tax and all that stuff is federal but can a state government override like this?
Dr. Friday 17:36
Well, they can to the extent that each state has its own regulations when it comes to the labor laws. We have the Tennessee Department of Labor here, and they are working and I’ve been talking about this on my show for the last number of years, misclassification of independent contractors. This all stemmed off of a case that they had with Dianetics Operation West, it’s a big trucking company. And the mistake that kind of happened was they had all their drivers on as employees. Then some bean counter said, “Hey, what if we make them all independent contractors, we can save money.” So they did that. And then the Labor Department said, Wait for a second, what do you mean you don’t have employees anymore? They audit, then they end up going to Supreme Court, the court rules that they should have been employees. And that’s where the independent contractors, so then they’ve refined the ABC test, which all of us have. Every state has one in the federal government, which is basically a test it says, do you provide them with any types of tools? Do you tell them when where and how to do a job? Do you define the ability that they are unable to work if you’re working more than 20 plus hours for one company, and etc, to define that independent contractor.
Dr. Friday 18:52
And so, in all honesty, I know that Uber and Lyft have been going through California they had a big case with them. And again, it came back as they could leave them as, funny things is that you can leave them as independent contracts, but you’re paying Tennessee, you’re going to pay the California Department of Labor for their service. So let’s face collecting, but the Fed. And an answer to your question, it does have some unique side effects when states decide to supersede. But this could be a landmark case that the Fed will use to try to push more and more people into employment.
John Haggard 19:28
Yeah, I mean, it’s really something, it always happens with abuse, like you were talking about, because there are companies out there that don’t want to pay the taxes that they legally owe. So they call some of these people. Gotcha, gotcha now, higher medical deductions for 2019 and 2020. Congress allowing. Tell us about that.
Dr. Friday 19:49
Well, yeah, so they went back to 7.5%. And this, this came across, basically the same time that some of the other logs They’ve changed it. So if you are, if you’re 65 and older, you had to go to 7.5%. And then 2003 through 2006, they lowered it to 7.5%. up to the end of 2018. It was supposed to go back up to 10%. Well, guess what, it’s back down to 7.5% for the next two years. So if you can follow that line of thought, it comes down to simplifying everything. If you’re under the age of 65, it is still 7.5% if you’re over the age of 65, it is 7.5%. So, at least through the tax year of 2020, we are on the same page.
John Haggard 20:39
Alright, so now that we have that, folks, T-33 minutes, if you have a question about taxes, something that just really confuses you, or maybe you’ve gotten conflicting opinions, sometimes you can get a conflicting opinion from a medical doctor, and if you’re kind of concerned if is it or isn’t it? Now’s the time to call and get that free advice, 615-737-WWTN, 615-737-9986. You’re listening to the Dr. Friday Show. Yes, she is an enrolled agent with the Internal Revenue Service but “with” means representing you not employed by the IRS. Very important to know because if you just sort of feel like as Dr. Friday says, I’m tired of these love letters had come about every two weeks and I just don’t know what to do. I don’t have the money. I can’t pay for it. I just… there’s no sense in me even responding. You better get some help to seek advice, get it done. Now, Dr. Friday can tell you, hey, here’s what we can do. Or here’s what we can’t do remember this as an enrolled agent. She’s represented people who’ve owed over a million dollars end up paying $100,000 people who own, $20,000 end up paying $2,700. By the way, Dr. Friday, how does that actually happen if you take the case of the person who owed over $1 million and you get the settlement down to about $100,000 that almost sounds too good to be true.
Dr. Friday 22:02
Right. And in that case, in my situation in that particular case, that was because he did not have, he had not filed taxes and the IRS had filed it on his behalf. So he was a self-employed 1099, no expenses on the returns, the IRS filed, obviously, he had expenses. So once we filed the returns, getting them closer to what he truly had earned in those years, it was more of just getting them on the right page. The IRS says, Well, if you’re not going to file taxes, guess what, we have a plan for you. We’ll file them on your behalf. And for entrepreneurs that receive 1099, that is never going to be a friendly tax return because they’re not going to know about your rent or your mileage or your office supplies. They’re going to take 100% tax against what they know of his income.
John Haggard 22:50
Simple enough. Let’s go to Murfreesboro and bring Bobby on to the Dr. Friday Show. Bobby you’re on the air.
Caller 22:57
How are you guys doing today?
Dr. Friday 22:59
We are awesome.
Caller 23:01
Hey, the reason I’m calling is my mom, the last few years has actually had a home health care provider to come into our home. We’ve been actually playing the home health care provider every week. And is it just something that we can do as far as doing 1099 with this home health care provider? I mean, that when it could help my mom on their taxes, she’s actually paid quite a bit in 2019 toward home health care costs.
Dr. Friday 23:36
Correct. I mean, there is we were talking about earlier about being an employee versus being a subcontractor. If this is an individual off the street that only comes into your mom’s house and work, then theoretically, that’s a household employee and there’s a Schedule H that would need to be filed on that, not a W-2 issue, to that person. If this is someone that is doing home health care as you know, like four or five different homes and she does your mom every Monday, someone else Tuesday. So, whatever, or it’s a business that you hired and they are bringing or sending people to you, then yes, a 1099 issue to them would be what you want to use. Does she have long term care insurance?
Caller 24:19
No.
Dr. Friday 24:20
Okay. So, the answer to that question is, and at the time, it just depends. If it is a person that is working in her home and often and that’s it basically, that’s her job is to come and work with your mom then as a Schedule H and a W-2. If she is doing this for multiple homes, and she’s got a small business and a 1099 would be appropriate.
Caller 24:42
Okay, well I appreciate your time. Thank you.
Dr. Friday 24:45
No problem. Thanks,
John Haggard 24:46
Folks, you’re listening to the Dr. Friday show. We are live from Nashville, live means you can call now, get all the tax advice you want. It’s right here. It’s free. It’s on the air. 615-737-WWTN, 615-737-9986. Don’t put off the call why would you want to give more to the IRS? Then you should make a mistake on your tax return. You could be overpaying. Make a mistake on your tax return you could be underpaying and get one of those love letters that nobody wants to get. So now is the time to get on the phone. T-27 minutes to go 615-737-9986, 615-737-9986 Call now on the Dr. Friday Show. John Haggard in the studio and we will be taking your phone calls next right here on Supertalk 99.7 WTN.
John Haggard 25:44
It’s part three of the Dr. Friday Show from America’s Music City Supertalk 99.7 WTN, with the phone lines open for you 615-737-WWTN, 615-737-9986. Call in now and get all the advice you want Dr. Friday on the telephone here with the answers. Now is the time to call. A lot going on in the tax world. Is there any big surprise Dr. Friday this year if people go to file their taxes that’s different from last year that could trip them up in any way?
Dr. Friday 26:18
Well, there’s always something that could trip you up. But there are basically a couple of things you want to make sure of. And, one is that when we prepare our tax returns, I think one of the things people need to make sure is the documentation. Don’t be making educated guesses. Don’t guess at what it is that you think it is. The IRS has copies of your W-2, they get your 1099-K from your merchant statements, they get your 1099-Rs and your 1099, miscellaneous, etc, etc. They have a lot of forms they know when you buy and sell real estate. So the important question is making sure that you don’t rush. I had two cases already this year where people have filed their taxes already and then something else comes in in the mail. So make sure that you have some additional information, make sure you kind of match it up or take and think about, hey, did I sell anything? Did I gamble? Did I win anything, whatever, because people don’t necessarily have to have your brokerage accounts to you until the 15th of February? So just because you haven’t received it doesn’t mean you aren’t so like, I guess one of the biggest things is making sure you check the numbers that you input. If the refund on the bottom line seems larger than it was last year, and nothing really changed. Double-check. Make sure you’re doing everything correctly because it’s easier for you to fix anything now. Then once you send that return, then the love letter will come and say oh, we changed your return because no one likes that letter. Trust me.
John Haggard 27:45
All right now folks in 2019 were you divorced? Were you separated? Were you married? Or, unfortunately, were you widowed in 2019? Because we do understand that there are some unpleasant surprises that may await you at tax time? Dr. Friday, what do we got there?
Dr. Friday 28:03
That’s a big one. So under the new tax law as of January 1st of 2019, if you were divorced, there was a big change of who’s paying tax on alimony. So up until then, my entire time was doing taxes if you receive alimony, you pay taxes if you paid alimony, it was a deduction. That is not the case. If you get divorced in 2019, and you receive alimony, it is now going to be if you receive alimony, it’s more like Child Support is what I look at it, it is not taxable. If you’re paying alimony, it is not a tax deduction. Well, the new questions on the tax return does ask what was the date of your divorce. If you’re married and you’re maybe going to get divorced, and you’re living in two separate homes, if you’ve lived separately for more than six months and you are supporting the children in that household, you may be able to claim Head of Household. Just making sure that you file the right status for the right person. If you are widowed in the year in which that happens, you are still married, you still be able to claim the person that passed away. So same thing married separately or married and was it widowed? Whatever. And if there’s children and you are widowed, you will be able to claim widow for up to two years. So couple changes in there, so just making sure that again, you double-check the new tax law and don’t just assume you know the answer.
John Haggard 29:25
All right, T-18 minutes. Jump on the phone lines, get the answers. 615-737-WWTN, 615-737-9986. If you are a small business establishing a qualified pension plan, of course, you got to define what that is for your business. You may be entitled to the credit for small employer pension startup costs. Can you walk us through that Dr. Friday,
Dr. Friday 29:49
I can. There is a qualification the businesses did not employ by preceding years more than 100 employees. So this is obviously when they say small businesses, they mean people that basically have less than 100 employees. If you have four years considered a large business. But the bottom line is you can get an initial credit of the lesser of $500 or 50% of the administration fee. So if you pay $1,000, you’d pay basically $500. If you pay $2000, it will still be $500. And then you are also eligible for a participation plan that can go all the way up to $5,000 credit. So you might want to talk to if you’re thinking about establishing, Paul Winkler, I know he gets into that, had a couple of his clients come in and say they’re doing a 401k for their office or whatever. You might want to make sure that you tell your tax person because there are some hidden credits in there that could put a few more dollars in your pocket besides just setting aside money for retirement.
John Haggard 30:49
All right, let’s go to Smyrna and bring Irma onto the Dr. Friday Show. Irma, you’re on the air.
Dr. Friday 30:55
Hey Irma.
Caller 30:56
Hi. I’m a little confused. I’m 82 years old, and I haven’t filed taxes at all for quite a few years. I’m a widow, my husband died two years ago. And I have, the only income I have is my Social Security. However, I won a few dollars with the lottery. And they don’t take the taxes out. How do I pay that tax? Or do I or don’t I?
Dr. Friday 31:32
Can you tell me how much you won? Can you give me a ballpark? Don’t say exactly, but give me a ballpark.
Caller 31:38
It was $4000.
Dr. Friday 31:40
Okay. Well, I can tell you good news. You don’t need to do anything, sweetheart. That is your money. No taxes do because your income is at a point where there isn’t a requirement for that. If it’s been $40,000, we would have had a different conversation, but you are perfectly fine at $4000.
Caller 31:56
Oh great! Thank you very much, I appreciate it!
Dr. Friday 31:58
No problem. Congratulations on your win!
Caller 32:01
Thank you!
John Haggard 32:02
Wow, Dr. Friday, it’s always heartwarming to at least get one call.
Dr. Friday 32:08
That you can say something good about?
John Haggard 32:10
Yeah, where you can say “Wow! Congratulations! No worries, no liabilities!” It’s just great rather than, like you said “If it had been $40,000, it would have been a different conversation.”
John Haggard 32:23
Exactly.
John Haggard 32:24
So folks at this time of the year, the scammers are out there including this. If it’s never happened to you, did you know that a scammer can spoof a phone number? So you say, Well, I got caller ID I ain’t answer nothing I don’t know.” They can actually put in a number that looks like it’s coming from the Internal Revenue Service and there are all types of scams out there. What about some general advice on how not to become scammed, Dr. Friday?
Dr. Friday 32:50
Okay, so there’s a couple of things but what I will tell you I know there’s many we can read off but one that I find I tell all my clients is A: if the IRS is calling you, hang up, period. I know you may eventually or a number of people may possibly hang up on a local revenue officer. But in my opinion, hang up, call the 1800 number or if you’re dealing with an agent you know them because they’ve dropped their business card at your house or business, call them direct. Don’t give any information if you are having a conversation with someone from the IRS, and this goes with any kind of collection in my mind, and I tell everybody, the same thing. Don’t give any information if this person doesn’t really know everything, hang up, get the name of the company, they’re calling from whatever and if you do have an issue with them, you be the person that makes the call back to them because giving bank account information, giving credit card information, giving your social security number, date of birth, anything like that. It could be even something as simple as Oh, you know what, I’ll just Checking Can you tell me who your first mate was at your wedding or, whatever your Bachelorette or whatever because those the kind of security questions you’ve answered and all you are doing is giving those people the answer so then they can go on and get into your bank because that’s the kind of question that’s asked and they’re giving them the answer to the question as if their security checking you. So don’t do it, don’t answer any of those. If for any reason you feel uncomfortable or any of you feel really comfortable with this person. Those people should not be asking you those questions.
John Haggard 34:32
There you go, folks. Let’s go to Lawrenceburg. Bring Bobby on to the Dr. Friday show. Bobby, you’re on the air.
Caller 34:39
Hey, Dr. Friday.
Dr. Friday 34:40
Hey Bob.
Caller 34:44
If an employee got a business and they have an expenses account for that business, which is this written on a vendor check, or a not necessarily a payroll check, what are the limitations on the items that you can list on an expense report?
Dr. Friday 35:07
I’m not too sure if I’m falling so you have an expense account with a company or not you per se but an individual has an account where they have an expense account and they’re looking to itemize that is that what you’re asking me?
Caller 35:19
Yes, yes, ma’am. Yes, ma’am. Is it just anything like Coke circuits laundry, gym memberships, or is it gotta be?
Dr. Friday 35:27
Well. Yeah, it would. I mean, for it to be a legitimate reimbursement it has to apply to the job they’re doing. So if you’re a truck driver, my favorite kind of guys. A truck driver basically has to take a shower, if he’s on the road, it could be as simple as his meals, it could be lodging it could be grooming like buying toothbrush, toothpaste, those kind of things. Clothing would not be allowed because he has to buy clothing no matter where he lives. Getting his hair cut I would say is not allowed. He has to do that if he’s an individual working at home or on the road, these are supposed to be things that kind of keep him on the road, the reason he’s staying out there for that example. So go ahead.
Caller 36:15
What if you’re not on the road? What if you work at an address and drive to work every day and drive home?
Dr. Friday 36:24
Well, then the expense report would only be legitimate if there’s something in your job that requires you to do something like take clients to dinner. Thinking outside the box, I have no idea. It will really depend. If you’re not traveling, normally expense reports are tied to people that are required to be traveling. If you’re a local person, the only thing I can think of is the meals and entertainment and you have to be kind of careful with that. But all in all, that’s the only kind of expense I can think of because there’s no dry cleaning. If you’re living at home, you can do your own dry cleaning, there’s no haircut, there’s no toothpaste, because you’re going home every night. So there’s no reason for them to provide you those services.
Caller 37:02
No. Okay. And then one other quick question if I can get one in. If a business has some employees that they provide health insurance to the company buys, and then they have other employees that buy their own insurance, and that employees is written a check than an employee that’s buying their own insurance to check they receive would have to have federal tax social security medicare taken out of it, I guess.
Dr. Friday 37:39
It would in some cases. Now, it really depends on the insurance policy because if you’ve got a Section 125 like AFLAC, or some sort of insurance that is pre-tax an HSA health savings account, and you’re saying those would not. But on the other case, most other insurances Blue Cross Blue Shield and ordinary health insurance for rent is paid with after-tax dollars if they’re having to pay you on a check. Yeah.
Caller 38:05
Okay. Okay. So since that since our bond money, individually, whatever they give me with a federal Social Security, Medicare…
Dr. Friday 38:14
After-tax, you got it.
Caller 38:17
And then if the company buys it for them, it’s not tax, I don’t think?
Dr. Friday 38:22
It isn’t because the fact is it’s a deduction to the business. Otherwise, it’s really just a reimbursement to the employee. So the tax comes in two different ways.
Caller 38:31
I see I see and then the individual might be wrong here, but the individual can deduct the cost of their health insurance? Am I correct here or wrong?
Dr. Friday 38:39
Not on an employee program. Now the person that’s paying their own they can if they qualify for itemizing, which can be just as hard for an everyday individual that doesn’t have a huge mortgage or lots of charitable contributions. But it is able to be put on a Schedule A the person that’s getting it through an employee program cannot.
Caller 39:00
Okay. So somebody that’s just on their own and they can…
Dr. Friday 39:09
Essentially, it can go on to their own. But, again, it’s you have to have more than $12,400 to itemize, $12,200 this year. So, it’s hard to itemize.
Caller 39:20
Yeah, yeah, that’s a hard target to hit, you’re exactly right. Okay, thank you.
Dr. Friday 39:22
Thank you.
John Haggard 39:27
I appreciate the phone call folks. We’re fast running out of time. If you’ve got a question right now you better call because just got a few more minutes to go 615-737-WTN, 615-737-9986. John Haggard in the studio, the Dr. Friday on the telephone with all the tax answers. Your calls are next here on Supertalk 99.7 WTN.
John Haggard 39:55
Alright, the final few moments here at the Dr. Friday Show. Let’s go to the phone lines and talk to Tony. Tony, you’re on the air with Dr. Friday.
Dr. Friday 40:04
Hi, Tony.
Caller 40:05
Yes, thank you for taking my call. I have a quick question. I just recently retired back in 2019. And of course, I had to get some insurance towards the end of the year. And I was going through my insurance forms and papers and stuff, and I saw that at the bottom of the page on one of them there, that I have like a little over $1,000 tax credit or tax break or something like that. Now that goes on 2020 taxes, okay, am I correct or is that wrong?
Dr. Friday 40:38
Anything we pay for or do we do our taxes on a cash basis. So it should have gone on to the 2019 return if it was in 2019.
Caller 40:48
Even though I got it in December?
Dr. Friday 40:51
That ain’t a difference. All are there in January.
Caller 40:56
Okay. So that should belong to my 2019 taxes.
Dr. Friday 41:02
Correct.
Caller 41:03
Okay. All right. Thank you.
Dr. Friday 41:06
No worries, thanks.
John Haggard 41:07
Alright, next let’s bring Jim. Jim, you’re talking to Dr. Friday on the air. Go ahead.
Caller 41:13
My question is about Social Security withholding. I entered my single W-2 into TurboTax and it was fine. Then, and I know that I maxed out my withholding, the $8,200 or whatever it was. When I entered my wife’s W-2 on top of mine, there was a message that popped up that said, I should be getting some back, I thought, because she, of course, had withheld for Social Security, too. I guess my question is, are the income limits for withholding slide per individual or per family, or how does that work?
Dr. Friday 42:02
Right, it is per an individual. So I’m going to make an assumption when you saw those messages before you click that it was your spouse’s W-2. Or if it still has a credit under there, you might want to make sure that W-2 is marked as your spouse’s, because it’s looking at it as if it’s another one for you.
Caller 42:20
Okay, so the cap is like 135, whatever it is per…
Dr. Friday 42:25
For you. And then the same thing for her. Correct. Yeah.
Caller 42:29
All right. Thank you.
Dr. Friday 42:31
No worries.
John Haggard 42:32
Alright, folks, let’s bring Joe on to the Dr. Friday show. Just about out of time to but go ahead quickly, if you will.
Caller 42:38
Yes, question on the, I work with investors buying properties and they’re from out of state. If you take them out to eat, before they come and stay at your place, are the meals deductible, and can your own spouse be written off too if ever she goes.
Dr. Friday 42:57
So, the Tax Law says if you’re the one in business and you invite a husband and wife to dinner, and then you bring your wife that’s acceptable. But so you would be able to take 50% of that meal off if you discuss business. Having them stay in your house though would not generate any tax deduction unless you’re using that as a percentage square footage for one day would probably be minimal, or two days or whatever. I don’t mean unless you’ve got a separate home that you have people constantly staying in as a source of purpose for out of state people to come. I don’t know you personally so I’m just saying. But basically, if someone comes and stays in my house, even if they’re one of my business clients, I won’t be able to deduct much of that as a business deduction. But the meal is deductible,
Caller 43:46
So on eating out then, if you go out to eat and just there’s is deductible, not my own or my wife?
Dr. Friday 43:56
Correct, because you’d have to go out to eat anyways. I mean, that’s the tax law. You’re not really making money by feeding yourself. You’re making money by feeding someone else hopefully.
Caller 44:05
Okay, right. All right. Thanks a lot.
John Haggard 44:10
All right, we’ve got about 15 seconds. Sherry, what’s your question?
Caller 44:15
Okay, I get 1099, I’m retired and my wife has a small job. She makes about $2,000. And there’s never a 1099. It’s a family friend. So she’s never given her anything for that. So where do I put it to equivalent miscellaneous income?
Dr. Friday 44:36
It would have to fall, if it’s earning, they’d have to go on to a Schedule C as a small business because self-employed, it has to be calculated.
Caller 44:47
Oh, I see. Okay. Well, can I add it to the other 1099 that’s on there?
Dr. Friday 44:53
You can. I mean, both of them to go to the same Schedule C. Yes.
Caller 44:55
Excellent. Thank you.
Dr. Friday 44:59
No problem. Alright.
John Haggard 45:01
I appreciate the phone call. Another great hour on the Dr. Friday Show. If you did not get on the air, here’s the number where you can give Dr. Friday a call 615-367-0819. Here’s the website drfriday.com. And if you would like to email Dr. Friday the place to do it right here the address friday@friday.com. Any last-minute quick advice for people who are getting ready to file 2019 taxes, Dr. Friday?
Dr. Friday 45:36
Now, just make sure you have all your documents before you hit that send button.
John Haggard 45:40
All your documents before you hit that send button. And one of the quick things when I asked you to. Could you just tell us very quickly, Turbo Taxes, QuickBooks taxes, all these software programs, are they safe in terms of accuracy?
Dr. Friday 45:54
I think they are safe. I think you just need to make sure that again, make sure when you sign up You’re using your own software that someone else can’t see your information. Don’t do it at Starbucks for example.
John Haggard 46:06
Great advice from Dr. Friday. Ladies and gentlemen, the phone number one more time to get her if you did not get on the show today, 615-367-0819. I pray that God will bless you and your extended family make Jesus Christ number one in your life, and you will have eternal life in heaven. Dr. Friday will be here next week, at two o’clock. Right here on Supertalk. 99.7 WTN.