Listen to this week’s episode of the Dr. Friday Show, broadcast live every Saturday at 2:00pm Central on on 99.7 WTN!
Announcer: 00:01 No, no, no. She’s not a medical doctor, but she can sure cure your tax problems or your financial woes. She’s the how to girl. It’s the doctor Friday show. If you have a question for Doctor Friday? Call her now. Seven three seven WWTN. That’s 737-9986. So here’s your host financial counselor and tax consultant Doctor Friday
Dr. Friday: 00:30 Good day, I’m Doctor Friday and the doctor is in the house. It is that season. You know, I get excited anytime I’m on the radio, but let’s be honest, it’s Tax season. It is so great. I know many of you are probably sitting there going, okay, this girl’s a crazy b… Let’s be honest, I have absolutely no idea where I’m finding some of the forms that you might be looking for. Why is it when I look at my 1040 I don’t see my E, my schedule E entry and why don’t I see my loss on my profit and loss and for my schedule C. And why are these things all lumped into somewhere on a schedule one? What in the heck is a schedule one. If you’re looking at your tax returns or you’re preparing your tax returns and you’ve got questions or maybe you’re just preparing for your 2019 because let’s be honest, some people have already done their taxes and we are actually planning for 19 I brought one of my best friends in the office here, Hank Parrot, Estate Financial Strategies.
Dr. Friday: 01:21 Many of you guys have heard him in the number of years we’ve been working together on here and he always brings some pretty good offers. So if you’ve got questions, not only about taxes but maybe about a state planning or should you be doing an IRA or a Roth IRA or should I contribute to my 401k? When should I take my social security? All those kinds of things that you guys are throwing at me sometimes and I don’t always have the answer. In fact, I don’t normally have any of those answers. Um, this is the day, you know, (615) 737-9986. So if you’ve got tax questions or financial questions today, we got them both right here in the house. All right, so we’re gonna hit Howard. Hey Hank. I didn’t even say hi. Hi. Hey. . Exactly. A little too much coffee going on here. It’s my second cup or third. Who knows? Um, this a multiple numbers. All right, let’s go to Howard now. Hey Howard.
Caller: 02:13 Yes. My son has a daughter that turned 19 and she’s in college and he couldn’t [uninteligible]. Can he still count her as a dependent?
Dr. Friday: 02:24 Absolutely. Um, unless that daughter is earning more than $12,000.
Caller: 02:30 No. No. Okay. She’s not working at all. Okay. I appreciate that. I enjoy your show. Thanks Howard. Bye. Bye.
Dr. Friday: 02:36 Too Bad we can’t have a whole list of those easy ones, Huh? Sometimes. All right, let’s see what Phillip has. Hey Philip.
Caller: 02:42 Hey, how are you doing doctor Friday?
Dr. Friday: 02:44 I am doing awesome. What do you got going?
Caller: 02:47 Hey, so all right, so I’m a single guy. I have a job, I own my own home. I have a mortgage payment and all that. I make a fair amount of charitable deductions every year. So I just do my taxes. I have a very simple return, no dependents do my taxes on one of the popular tax software programs. So I have everything lined up in there. This year, and my God I’m having to pay $610 which is more than I’ve ever had to pay before. It doesn’t appear like my mortgage interest is, is making a dent, nor are my charitable deductions. Is that correct? Under the new tax law?
Dr. Friday: 03:19 Yeah. Welcome to my world. Phillip. The problem with this whole thing comes down to is really this, you may be getting an, I don’t know if you have in front of you, but you probably aren’t itemizing cause you have to have more than $12,000 so before you had 6,350 or something like that. So you might have been taken seven or 8,000 easily, maybe even nine or 10. Um, but then you also had the personal exemption of $4,050 but under the current one. So if you are taking 10,000 on itemizing plus the four you are at 14,000 combined, now you’re only at 12 you’re not going to be able to increase that because we don’t have enough to offset the personal. So you’ve lost 4,000 at a 22% tax bracket or higher, you could easily be owing $600
Caller: 04:05 Okay. All right. Yeah, so, uh, so, so uh, that 12,000 personal exemption, that’s actually less than maybe I had in previus year
Dr. Friday: 04:12 Yes. If you looked at your 17, it took your standard deduction plus the personal exemption, you may find that those two numbers add up to closer to 15 or 16,000.
Caller: 04:23 Gotcha. Okay. All right. So, so much for the tax reform.
Dr. Friday: 04:27 Well, it does help some, it just not you and me. Okay. All right. All right.
Caller: 04:31 Well I appreciate it. Thank you.
Dr. Friday: 04:33 No problem, sweet heart thanks. Thank you. All right, bye. All right. So if you want to join the show, you can, it’s live here in studio. So you know what, if we don’t take your phone numbers and you can make up any name you want, as long as I can pronounce it. (615) 737-9986 (615) 737-9986. If you’ve got questions about taxes or like I said at Hank here and you know what, normally he’s not as cheap as he is today. I mean, I’m not calling him cheap exactly. But you know what I’m saying. It’s free advice, right? A good value. A very good value, He’s wallet friendly. That’s what Joe Macro. He always says he’s wallet friendly. So, uh, anything that people should be thinking about right now in your world as far as dealing with, you know, financial things. I mean, one of the things
Hank: 05:16 Yeah, this is a great time of year when you’re thinking of taxes any way and you’re getting ready to file your taxes, a great time to do some tax planning for 2019 for this year. And one of those in particular, comes into play with a tax efficient income, especially in retirement. So if you’re getting social security now or if you’re thinking of, you know. When do I take social security? How, What’s the best way to do that? Other income streams I’m going to have in retirement required minimum distributions. If you’re 70 and a half, if you’re going to, or if you’re just taking distributions because you’re retired and now you need that money that you’ve been saving all these years and these retirement accounts and you needed to supplement your income to be able to maintain your standard of living quality of life, great time. When is the best way to take this money? You know, are there some ways that you can take income and retirement that meets the goal of maintaining your standard living quality of life, but at the same time can still result in a lower taxable income.
Dr. Friday: 06:09 Yeah. And We’ve done that for a lot of people and many cases, you know, even just starting to take a, I send someone last week to you as I was saying. Here is one of the conversations I always go with. They were under the income so they didn’t really have to file a tax return, but they were sitting on a fairly healthy IRA. Right. And they weren’t at 70 and a half yet. Right. So I’m, and they’re like, well, we don’t need it. And I’m like, that’s not really the conversation you need to go get a second opinion because in their case they were going to end up having to pay taxes once they started their RMDs. Why not take these few years and either pay very little or zero tax and take some of that and put it into cds or whatever, you know, just an after tax account possibly or something.
Hank: 06:50 Yeah. The analysis when it comes to tax, patient and income and it goes to the point of whether a Roth IRA makes or converting some of traditional IRA money or company money into a Roth. One of the things you look at is, well, what is your tax bracket today? What tax bracket are you were in? What you’re doing effective tax rate, and then what’s it going to be when you retire? Right? You know, or in the future. And if you’re already retired, there’s also some potential opportunity. If you’re looking at looking forward and you’re in a, let’s say on a 12% bracket right now, and maybe you got some room even right at 12% bracket before you cap it out, but you start taking required minimum distributions at 70 and a half. And we can look forward 10, 15 years and see what those RMDs are going to be.
Hank: 07:31 In other words, I can factor in what you’re doing now. If you’re adding any money to those accounts or if you’re just saving it or invested, in what kind of rate of return we can expect to make over that time. We can then do the projections and see how much the accounts will grow to, and project for that calculate to RMD the tax on the RMD. What’s it gonna do to you? Is it going to put you in a 22, 24 and 30% bracket? Maybe now’s the time to do something about that, let’s say.
Dr. Friday: 07:56 Exactly. So if you’re able to now and the lower part that takes phone, everyone, don’t worry about it. That’s live radio, what can we say? Um, anyway, so you have that as a situation. I agree with you and there’s also, and this why I love the fact that Hank always offers a package on my show and it’s basically the first 10 callers that are listening to the show. You can call his office at (615) 376-5325. It’s a free full evaluation. And it answers a lot of these questions. When should I take social security? Should I be doing a Roth instead of his standard IRA? When should I take the money from them? And all the different tax consequences. If you’ve got a lot of money into real estate or anything, you know, some people invest from their IRA into real estate, but they’re getting close to their RMD requirements. What kind of problem could that be causing or whatever. He takes all of that into account and says, okay, these are your options. And without options we don’t know what they’ll do.
Hank: 08:51 Mean it’s a comprehensive plan. So what we do for the first 10 callers to my office, (615)-376-5325. that is the same by, She’ll get you information, she’ll send out a checklist of things for you, to bring to your appointment with me. And one of the things with that, it’s an investment analysis. We look at the risk in your current portfolio, the volatility, there’s a measure for that. So we can basically, it’s like stress testing your portfolio, if you will. So you know, on the next bear market hits, right. When the next bear market its, not if. When that happens, what you can expect from your portfolio, how much might you lose and how can you know, are there some strategies that can help you minimize that risk? And the answer of course is yes. We have 60 years of Nobel prize winning academic research showing us how to construct a portfolio to minimize that volatility while while getting the desired rate of return.
Hank: 09:37 And this is the other piece of it is we’ll look at what your financial future, I can show your financial future. We’re going to look at your income, your expenses, how much it costs to maintain your current standard of living, assets, liabilities will factor in. Inflation will factor in taxes, all of that at no charge to you. Yes, this is an opportunity for me to meet you, for you to meet me and let’s see if we like each other enough to want to do business down the road. That’s always important. I’m happy to show you the value of what we do as a way to gain that business.
Dr. Friday: 10:04 Exactly. I mean that’s, that’s really the point for all of us. That’s why I offer free consultation for my initial consultation because it really is, Are we on the same page? Do you know? Is the type of taxes in the what I require from my people on the same page of what these people are using. Paint does the exact same thing. And that’s, that’s really what you’re looking for. If you are not on the same page with the person that you’re working for, you feel like sometimes they’re talking over you or you feel like they’re kind of just doing it and not really having that conversation. You need a second opinion. And even if you’ve got the world’s greatest financial person or tax person, as far as I’m concerned, always, it can never hurt to get a second opinion. Make sure that, I mean, I can’t tell you, I mean Hank may or may not, but in my case, many cases I’ve told people the taxes are done right.
Dr. Friday: 10:46 I couldn’t have done anything different. Right. You know, it’s just maybe sometimes that assurance, but sometimes I’ve also said, Did you know you missed your sales tax or did you know you missed this? And that way you know, you left money on the table and that’s, you know, that’s what you don’t want to do. So that’s what’s really cool about this kind of partnership in and we were able to work together and do what we need to do. So again, if you want to reach the show, you’ve got questions, maybe you’ve got some financial or it’s tax time guys. And there are some changing that’s been happening on the taxes. And yes, I did fail English. Now that’s not true. May I have learned the queen’s English before I learned the American English, but anyways, (615) 737-9986 (615)737-9986
Dr. Friday: 11:31 And there’s some change when it comes to partnership returns that everyone, anyone that has a limited liability company that has multiple members that elected to be a partnership or if you’re just working with a partnership in 2018. You now have to decide which partner is going to handle the audit. And now when the audits are done, we have the ability to pass income. Let’s say that they did something wrong. We passed that now onto all the partners so that way the partners are not audited, which is what we used to have to deal with. So, so when he had a partnership with the IRS would audit the partnership and then proceed to go audit all the partners. They’ve got a new rule where they’re basically going to be auditing the partnership and then passing that straight on down. You can opt out of that. Um, and according to the IRS you might want to expect that a lot more partnership exams will be getting audited. So, you know, that’s nice. Maybe we’ll give some of those sole proprietors of break cause that was the number one up until recently what we had. All right, we’re gonna take our first break. If you want to join the show, (615) 737-9986 (615) 737-9986 Hank and I’ll be right back with the Doctor Friday show
Dr. Friday: 12:38 [inaudible] Live in studio, I’m doctor Friday an enrolled agent licensed by the Internal Revenue Service to do really one thing really well. Taxes and representation. So if you want to have or You’ve got IRS issues, you have
Dr. Friday: 12:58 File taxes for a number of years. You’re looking at your taxes this year and going, oh my gosh, I didn’t think I had owed money. Everyone’s supposed to be getting money back. Well not everyone can, I’m contest to the fact that not everyone’s going to get money back. Um, so you know, it really is just going to be a matter of what your tax situation is and keep in mind, many of you actually got more on your paycheck than what you at the year before. So that also means that you’ve gotten some of your refund earlier. So you might’ve gotten 5 ,10 or 20 I’ve had people say up to $40 more on their paychecks. And so depending on, I suppose on how often you’re paid, but that would have been additional refunds that you would have normally gotten at the end of the year. So we’re going to hit the phones real quick. We’ve got Tiffany on the line. Hey Tiff.
Caller: 13:45 Hi. My question is about the child tax credit. Can my fiance claim one of my three children as a dependent on his return? No. Okay.
Dr. Friday: 13:58 The IRS is really trying to break down on some of that. It has to be a direct dependent and adopted child. Now when you’re married, you know. That will be a different situation even though he’s not their biological, he’s married to you. Therefore, you know. He’s their dependence in the home. But, because the problem is he would then try to claim head of household possibly and get earned income. And you’re claiming it on to, you know, I’m just saying it’s, the law doesn’t really allow for that.
Caller: 14:27 Okay, thank you.
Dr. Friday: 14:28 Thanks Tiff, bye. And that’s a huge area in the tax law. I will tell you they are delaying refunds. They’re really trying to match up children that belonged to children. Well cause I nowadays, I mean even in my family, the children’s names are different than the parent’s name. So you can’t really just go by last names any longer because wives or women that may have married, took their maiden names back. But the kids still have their fathers names or they’ve remarried and you know, you give two or three names happened around. It’s really crazy. There you go. All right. So, Hey, let’s talk a little bit more, because I think a lot of times on my show, many times people want to talk a little bit about when to take social security because a lot of people think of that is kind of like some money sitting there and I could get it now and maybe pay off something. And I’m assuming you take into account debt when you make these decisions, but also taxes, right? Because if you’re still working, and now 85% of that social security is taxable, right? You know, you’ve just lost a big chunk of money.
Hank: 15:25 Exactly. So understanding the social security rules as well. So the earliest you can take as age 62 but if you’re taking big bud here, main caveat, and that is if you’re taking an age 62 and you’re still working your makeover, approximately $16,000 17 too or something, that’s 17 too, so 17,000, uh, $200 per year than every $2 over that you have to give back a dollar of those social security benefits. So that’s one downside. Now, here’s another, if you’re looking at, if you’re making as a provisional income formula that’s used to determine how much of your social security benefits would be taxed. So initially if you make little, or that’s all you have is social security, then you’re not going to pay any tax on it. However, if you take half and for single, that’s half of what you make for a couple of half of what you both make and you take that and add in if you have wages, we just talked about if you have a even municipal bond interest, which is normally tax free, well it counts towards the provisional income for me.
Hank: 16:24 You have to add in for that. If you’re taking money out of an IRA or for 401K traditional money there, you’re going to have to count that. Exactly. Capital gains. So you had all of that together. And if it exceeds, again, for a single person, if it exceeds $25,000 and up to 50% of those benefits can be taxed. If you’re married filing jointly, that would be up to 32,000. Now imagine that I’ve got people getting social security who exceed that just on half of their social security. All right, so one of the things to look at, you’re probably going to be banned some tax on social security benefits. And here’s the other part in this, by the way, has been around. They haven’t changed these numbers in decades, right? So the income is bring in more and more people in. If you’re making more than 34,000 on his provisional income formula, again, counting half a social security benefits than up to 85% of your benefits can be taxed.
Hank: 17:17 And for married filing jointly, it’s 44,000. When we’re looking at when the best time to take is one of the consideration of course is, are my benefits going to be taxable? Another, If you’re still working, am I going to lose benefits? What’s the point? Right? If I’m going to lose benefits and they’re going to be taxable, it’s better just to wait. And your course, your benefits, your, the amount you’re going to receive is going to go up every year, right? Substantially, by the way. So it’s what you know, may well be worth it. When I do a comprehensive planning and and I, you know, we offered up earlier, for those of, you know. If you’re one of the first 10 to call in and you’ll benefit from this and that, we look at what is the break even point for you as social security. We’ll run it both ways and we do that through all your financial decisions.
Hank: 17:53 Imagine as, well I’m can’t decide whether I want to, you know, take a lump sum pension or should I take the pension amount? Should I take social security at 62 or wait until my full retirement age at 66 what’s the best or even 70. Okay, All right, well we’ll run it for you both ways. We’ll run for you always and we’ll say, okay, well let’s see what that does. And we can tell you, for instance, on the lump sum we can say, well, you’ll have more money if you take the lump sum versus the payout or vice versa, whichever it is.
Dr. Friday: 18:18 And even taken the RMDs when to take the requirement of the distributions. We all know that you have to take it at 70 a half, but you also know that you can delay that to the first of the next years. And we’ve done that several times where you’ve advised people to get this part organized, then do a double take in the next year and that it has saved them tax dollars.
Hank: 18:36 Exactly. For some, if it’s the same amount of tax paid, either way, if I take it in one year or I take it in two years and I’m paying a 12% tax either way. Right. Okay. Is there an advantage and then the advantage, maybe we might get an extra year that we can do a Roth conversion or something and we’ve done to have that extra income. So there’s, there’s a lot of strategies that come into play. This is called tax efficient income, but it’s also a tax efficient investing.
Dr. Friday: 18:58 There you go. All right, we’ve got John on the line. Hey John, thanks for holding.
Caller: 19:01 Hey, Thank you. I’m doing my taxes with turbo tax as we speak. Okay. And we refinanced in June and then, that company only then they will get right over to another one. Okay, so the 1098 I got from this first mortgage, copy* that we started at with doesn’t have all the information like mortgage insurance, the beginning loan amount and the ending balances because that’s on the the one that enrolled* too, right? So all it shows on this 1098 is mortgages interest received from parallel line one a in a 1098 it’s 553.86 So when I’m filling my blanks, which 1098 he wants me to fill in, beginning the wrong amount and the ending loan amount image doesn’t show it on here. I’m wondering if I shouldn’t even put that 1098 in.
Dr. Friday: 20:05 Well I’m going to ask you really quickly, cause it sound like you’re married. Is that correct, John? Yeah. Okay. So if you add that in your other mortgage, your property taxes, your state tax or sales tax and charitable contributions. Do a quick tape on that or calculate that and just see if you’re exceeding 24,000 before you even bother putting it all in.
Caller: 20:25 [inaudible] Towards an interest in or I mean
Dr. Friday: 20:28 So that’d be charitable contributions, interest paid, property tax and sales tax. Yeah,
Caller: 20:34 it’s not over 24,000.
Dr. Friday: 20:35 Okay. And medical, but most people have a very difficult time do anything with medical. So if it’s not, then you’re gonna get the standard deduction anyways.
Caller: 20:44 Right. I’m already getting that. so just I just forget about this 1098 then?
Dr. Friday: 20:45 Exactly. You don’t need to put any of those in. I mean your choice, but it won’t be, it’s not gonna go onto the tax return anyways.
Caller: 20:54 Okay. Well yeah, I’ll just skip this one, all the other ones are done. Yeah, I just feel good.
Dr. Friday: 20:59 Well, the information is what we’ve always had to put in, don’t get me wrong John, but now supposedly there is simplifying it. So, Well. There you go. Thank you very much. Thanks, John. Bye.
Caller: 21:11 Right. Okay.
Dr. Friday: 21:12 All right, we are live in studio and we’ve got the Hank man in here that does everything that you can think of when it comes to financial play. He does all mine. We’ve done the work together for 20 plus years and he’s helped a lot of my clients in saving tax dollars by investing smart. So again, I want to offer up cause it’s free and I like free. Hank. Why don’t you tell them a little bit about what they can get if they were to pick up the phone right now,
Hank: 21:38 Have you call my office first 10 callers, first 10 callers to my office. (615) 376-5325. This is to get a comprehensive financial plan. It’s not just a singular, you know, consultation where, you know, I answer a few questions and it’s an hour and we’re done. No, I’m going to actually do up a comprehensive plan for you. You’ll have something really valuable to you. In fact, I’ve charged anywhere from 500 to $5,000 for these types of plans, over the years. What we’re going to do is show you, your financial future based on the things you’re doing today and show you strategies that you, how you can improve that, where you can able to, again, a then maintain your stand, living quality of life, no matter how long you live. So we get into social security, we talk about Medicare, what’s the best time, you know, how the Medicare rules work and how that with those healthcare costs are going to look like in retirement.
Hank: 22:25 We factor that into the planning. As I mentioned, income, expenses, assets, liabilities. We look at all of it. We do up a comprehensive plan. You’ll be able to see. Are you going to be able to retire when you want? These are some of the common questions that we get all the time. And am I going to have to worry about running out of money and can I in fact, you know, have extra money. I maybe I’m spending 50,000 a year. Could I spend 60 70,000 or I’m spending 120, could I do 150, whatever it might be for you. We can show you based on the things you’re doing. What the answer to that is, we add in for fun money. Sometimes we get the basics down. Say, okay, you can easily mantain you know, maintain your current standard living. Now we can add in some extra money so you can, Oh right.
New Speaker: 23:06 When you retire. Everyday, Saturday you get to do all these fun things, whether it’s travel or play. You know, maybe you’re going to spend all your time on a golf course. I don’t know where you’re going to go. Do a lot of fun things with your grandkids, whatever it might be. We can show you how to in fact accomplish these goals or at least show you what you’re doing. Are you going to be able to do that or how do we make sure that you can, what kind of adjustments do we need to make to allow for that? So again, first 10 callers, (615) 376-5325 * by. She’ll get your information. She’ll send you out a little checklist of things to bring to your appointment with me. Again, if it takes one visit, two, three, whatever it takes to get you this planning done, I promise to do that in a second piece. When you come to see me, I’ll give you a free copy of my book, seven steps to financial freedom in retirement.
Dr. Friday: 23:51 Thank you. That’s very nice of you. All right. So as an enrolled agent, what I need or what I like to do is help people try to get straight with the IRS. So if you’ve been avoiding the IRS, maybe you’ve gotten some of the love letters and you’re sitting there going, wait a second, maybe I’ll just throw this in the drawer. Or, I’m relocating again. They’re never going to find me. You know, it doesn’t really help because in some point you’re going to want to settle down, maybe get married, maybe have a house, maybe even just, you know, taking and putting your kid in college. Those things can trigger the internal revenue service. And so in doing that, you need to get your act together and we can help you do that. And you’re like, well, I don’t have any of the documents.
Dr. Friday: 24:28 I don’t know where I’m supposed to start. that is all right. We can help with all of that. And as an enrolled agent, all I need is a little power of attorney and I can help you start going the right direction. So if you want to join the show, maybe you’ve got a friend that has IRS issues or maybe you do and you have some questions or you’re working on your taxes or your planning for 2019 and you’ve got some questions about the way something’s going to work. Maybe you’ve got inherited some properties. Is that going to be taxable? Well, you better call and find out. (615) 737-9986 (615) 737-9986 the number here in the studio and we’ll be right back.
Dr. Friday: 25:04 [inaudible] where’s the rock and roll?
Dr. Friday: 25:19 All right. This is the doctor Friday show. I’m an enrolled agent license with the Internal Revenue Service, the new taxes and representation. So if you have questions or you had family or friends that maybe just hasn’t really kept up for, dealt with the IRS lately in there at that point where they’re ready to do that, then give them my number. Otherwise let them keep thinking. Hello.
Dr. Friday: 25:40 All right, so, Hank we’re in the time where people are really, they should be thinking about 19 as far as I’m concerned when it comes to financial. But I wanted to ask you a couple of really quick, a lot of times people will come in and say, what can I still do to reduce my 18 taxes? Can they contribute to anything in the year of 18?
Hank: 25:59 Just the standard stuff. You can get you know. You can do your traditional IRA of course money into a Roth Ira that’s not going to reduce taxes this year, but still can be done up until, um, April 15th, I guess this year. And then you’ve got for those that are self employed or that have, you know, income that qualifies they could set up a set by rain*, then they have longer. And of course you can put a lot more on its app, then you can into a higher range.
Dr. Friday: 26:23 No. Can you contribute for an spouse? It’s not working or doesn’t have a retirement account.
Hank: 26:28 Yeah, that’s right. This was another part. If you’re, when comes to your tax stuff, these are some easy ones to do is look at, and here’s the thing, you know, when you’re looking at reducing taxes this year, you’re also thinking of, you know, are there any, is there anything different I can do in 2019 you know, that I missed maybe missed out on, I had a client in here just a couple of weeks ago and walked into my office and one things they were talking about today were contributing into a 401k in a Roth 4 one k and they had both had to, for one kit traditional 401k in a Roth one k this is one of those, we can’t just last minute throw this in by April 15th right. Unfortunately it’s gotta be done by the end of the year. Right. Or you might want. So okay, we can’t do anything about that one for 18 but this is the time of year to definitely increase maybe contributions or look at those contributions.
Hank: 27:13 They were in a 24% bracket, their income as such, that would, if we cut back and what I said, don’t. Why are you putting into the Roth? And he says, well, I didn’t want to pay. And , we did the we ran the comprehensive planning form, we determined he’s going to be in a 12% bracket when he retires. I’m like, where are you going to only be paying 12% tax when you say double that now? And I said, so why don’t we just, you know, let’s cut back on how much is going into the Roth, get you back down into the 12% bracket, then any excess can go into the Roth. So you have that, that bit and now we save 24% that would have been paid in taxes on that amount of money. And guess what? Not only is he going to be paying 12% later, and even if it’s sunset, it’s still 15, it’s still way lower.
Hank: 27:54 Right? But then not only that, but it’s cheaper dollars. Remember inflation. So yes, I’m going to postpone and put in pay with cheaper dollars and especially at a lower rate. Now here’s another consideration. If you’re gonna, you know, try to figure out what do I do Roth or that, that’s one. But another piece would be a lot of people maybe are putting into the traditional, and we’re only paying 12% and you’re saying, wait a minute, you’re only band 12% tax and when you retire, you know, we calculate the large retirement accounts that could have some really big RMDS, right. That are going to push him into a distribution where now there are 24 or 20, you know,
Dr. Friday: 28:29 and that’s, and that’s the problem I have as a tax person. When people come in, I’m going to convince them in most cases that you need to do a standard IRA. Because my job is to save them tax dollars today. Instant gratification. That’s what I’m about. Um, and so, you know, I’m going to tell people now, a lot of times I may suggest that, you know, I always suggest I’m not a financial planner. My thing is what’s in front of me today? What can we do to reduce taxes? And then we look at possibly what the next year or whatever, but I mean, I may tell. Hey, you’re in the 12% tax bracket. So obviously if you put $5,000 in, you may only Save, you know, 12% of $600 where maybe better not to do that. Or it may not be enough to save where the guy in the 24% tax bracket now just, you know, $1,200 instant growth, perfect deal as far as I’m concerned. Um, but it’s your tax person isn’t the person to ask that in my opinion. You know what I mean? Some of them even sell those projects.
Hank: 29:27 You don’t necessarily have enough information. Yeah, right. This was one of the things with comprehensive planning. When we get into doing the numbers for you and we’re looking at what your income is and your expenses, these are things your tax person doesn’t do, right? We’re looking at one year you know.
Hank: 29:42 We’re doing the projections. What are you going to have for a pension when you retire, if you’re going to have one, what are you going to have her social security, right? Do you have rental income? Are you going to have any other sources of income in retirement in addition to social security? And then how big are your retirement accounts? And how big are they going to be five years, 10 years, 20 years down the road. And what are the tax implications of that? So that’s where copy that we look at all of that so we can look at that financial future and that then helps us and helps you make those decisions.
Dr. Friday: 30:08 Well, that’s it. And I, I just, you know, I think a lot of times people just think of, you know, I mean, again. I’m a good taxes. I’ll make sure to best of my ability, everything is put in the right places that we can consult and say, hey, you know what, you need to adjust your W2, your W4 so that your W2 has more withholding or less withholding. kids going to college next year, you know, taking into an exception of what’s happening in the current year and the next year so that we can make sure that they don’t get huge refunds. Cause I don’t like huge refunds to be quite honest with you. Um, but on the other hand, I don’t want someone to owe $5,000 or $10,000 Because that’s not something a lot of times people have it ready cash necessarily just to go through until the IRS.
Hank: 30:47 When we work with a client together and I’m able to show you that financial future, show you how their accounts are. It’s a lot easier to then advise someone about these tax decisions. And it’s a lot in, if you think about it, this was where from my clients, it’s such a benefit as well is because they see that financial things. I see, while if I do this way, you know, good this path that I’m going to have this resolved, I go this way, I have this resolved. If you know what the end result of our decisions would be. Right. I wish I had that in high school. If I knew that then. Right. WhatI know. Exactly, How much better , how much easier it would it been. Well, this is one of the benefits of the kind of planning that we do. Again, you know, this is also a part where it comes to estate planning. Same thing when it comes to figure, what do I need a trust? Do I need a will? What? You know. [inaudible],
Dr. Friday: 31:32 And that’s the thing. I mean, we have a Russ and he’s going to be coming on in the next couple of weeks. And you and I have both worked with Russ and John McCain. You know, both are great attorneys. That’s one of the things, I think a lot of times people don’t think about. And I know you introduce it and I often bring it up because of just knowing these guys and they always talked, talk about it, you know, and just saw him for my own State because you know, things change. You don’t think about it. How often things change. So with taxes, we see it every year, right? I mean we get to have a yearly reevaluation no matter what. But when you’re talking to your financial planner, how often should somebody be touching base with you? Right. I know the attorneys is every few years at least or something,
Hank: 32:16 But about every five years he sends out a letter when we’re doing our planning. And this was one of the other things like with the estate planning, when we did get into a state playing Russ does the documents and everything, I’m showing that same financial future. So , you know, if you’re looking at today and you’re saying, well, I’ve got, you know, whatever amount of money I’ve got in real estate or whatever it might be, and we say, well, here’s what that’s going to be worth 20 years from now. At that might be a little different view of what I’m gonna do with this stuff, you know, or how I’m going to handle it with my kids and what kind of estate planning I might want to do and whether trust are important. That so that helps a lot with Russ and I when we where working together with clients as well.
Dr. Friday: 32:49 That’s what I figured. All right, let’s see if we can get Joe on the line. Hey Joe.
Caller: 32:53 Hey, good afternoon to you. Thank you. What can I do for you? I was doing some checking for my mother in law. She is getting alimony from her ex husband and she’s getting the social security. Are they taxable?
Dr. Friday: 33:11 So alimony, I mean, assuming that she didn’t just get divorced, by December of this last year. The answer is alimony is taxable, and depending on how much money she’s getting in alimony, it could make her social security taxable.
Caller: 33:27 Okay. It’s about, I guess $12,000,
Dr. Friday: 33:31 $12,000 a year in alimony? Then Mike, depending on how much. Do you have any idea what she’s getting in social security benefits?
Caller: 33:39 Maybe around a $1,000. Okay. So a thousand a month.
Dr. Friday: 33:45 So another 12,000. So the answer would be no. She would not have to pay taxes on her alimony or social security under those numbers.
Caller: 33:53 All right. Well,
Dr. Friday: 33:54 you know, she’s got some other income or she’s got retirement or something like that, but that’s it. Yeah, She should be good. She won’t even be required to file taxes.
Caller: 34:03 okay. All right. Thank you so much. Thanks. Appreciate it. Bye.
Dr. Friday: 34:09 All right, this is the doctor Friday show. You can reach us live here in studio for the next 10 minutes or so. (615) 737-9986 (615)737-9986 Many of you guys are probably listening to show and finding out that mortgage interest, property taxes, sales tax and in charitable contributions may not be turning out to be exactly what you were used to in the past. Now many people, I will say, I know that, you know, Howard or Phil it was Phil that actually ended up with that. and maybe even John have found out that they’re not going to be itemizing and by not automizing you might actually end up owing a few dollars. So my suggestion is getting to your tax person earlier than later this year because as Hank was talking about earlier, when you make adjustments in any tax year, you know, we’re already through February almost, I mean through January and partway through February. So any adjustment you make to your payroll is not going to be two months already basically into it by the time it takes effect. So you need to figure out if you’re not paying enough, you might have to just. You’re married to zero versus married one single two zero plus something. So that you at the end of the year you’re breaking even. No one wants to have to pay taxes to do that. All right Hank, one more time. Let’s offer the ten first 10 color before you have to take off.
Hank: 35:26 So the first 10 callers to my office, if you would like a free comprehensive financial plan where we gonna to go over all these different things we’ve been talking about and more, then just call the number (615)376-5325 test standing* by. She’ll get your information, she’ll send you out a little packet, a checklist of things to bring to your appointment with me. When you come in to see me, I’ll give you a free copy of my book, seven steps to financial freedom and retirement. And I cover, I’ve been doing this for almost 30 years. I cover a lot of the things in the book, from the planning piece to IRA mastery. When you’re taking money out of those retirement accounts, how to minimize taxation on those. For instance, how the smart money invest, safe money strategies, longterm care. And of course the estate planning. It’s all that.
Dr. Friday: 36:12 All right. So give him a call. We’re going to be right back with the doctor Friday show.
Dr. Friday: 36:17 [inaudible]
Dr. Friday: 36:23 We are live here in studio. We’ve got about six or seven minutes if you still want to join the show. (615)737-9986 (615)737-9986 Taking new calls in the studio. Otherwise call me Monday morning. All right, so I do want to give you guys a little heads up on the IRS is giving some welcome relief, an underpayment a penalty. So there realizing
Dr. Friday: 36:53 with all this tax changing going on, some people may find out as we heard on the radio today. Where they might owe money that they normally didn’t owe. So they’re tracking the usual packs penalty of a 90% if you didn’t pay it in 90% of your tax penalty. Then you would actually end up with an underpayment penalty. They are going to change that down to 85%. So when it comes down, the threshold is going to be about 5% less in penalty. Wavier you do have to request it on the 20 to 10 though. That’s the important part of this conversation. So if you owe taxes and you maybe normally don’t owe or you pay a lot less normally, I would definitely suggest on anyone that owes money to the IRS to, I’ll go ahead and request the waiver to see if they’ll reduce the penalty on you.
Dr. Friday: 37:43 Do you want to say the deadline is April 15th. Do not forget though that we have LLCs which are on 10 65 normally at some could be on 1120 as is or 1120s all of those are due on March the 15th. So you know, even though you have your personals due April 15th, the rest of them are due on March the 15th. And if you are listening to me on Iheartradio and maybe you’re listening in Maine or Massachusetts or Washington DC, all of you guys are good until April the 17th, because of different holidays. This is the first time where we didn’t just extend for emancipation day for everybody. I’m not too sure why that changed. So they’ve got most of the United States going on the 15th of April and then in Maine and Massachusetts there until the 17th, because of Patrick’s Day. Saint Patrick’s Day I guess, or Patriots Days. I’m sorry.
Dr. Friday: 38:36 I Guess we don’t celebrate that one. Then emancipation day in Washington DC. So, that’s interesting. I thought that was a little trivia for you. So a few of you guys will not have that whole situation going for you but then there is some free filing for some of you that are listening and you do have a gross of $66,000 or less, a 1W2. You can go to irs.com/free filing and apparently you can file for free. Now I am finding out from other individuals that you might be able to file, but the e file costs you some extra money so I’m not too sure exactly on all of that how that works. I would, you know, make sure that you have that information and make sure that you’re doing it. Also really quick.
Dr. Friday: 39:22 If somebody is doing your tax return and you’re paying them to do your tax return and their information is not under the prepare on the first page, now that falls on your front page of your 10 40. Then you need to make sure that there’s some reason because if you’re paying a prepared their information. Their p 10, all of that should be on the tax return. They have a responsibility to making sure that information is there. I have reviewed about three tax returns in the last couple of weeks, where the preparer did have their information and these are different prepares, but they do not have their information on the returns. And as an enrolled agent, you know. We take responsibility, we work with our clients. We, you know, you’re paying us for service and that person needs to know who’s being paid for that.
Dr. Friday: 40:07 So it’s the IRS also needs to know that information so that they know that I have a P10 that I am operating as a legal office. So you don’t want to be paying somebody that is not doing that. Again, 10 65. You’ve to decide that. What partner is going to be the audit partner so that they can handle the audits. The IRS is no longer going to deal that. And last but not least, qualified business income. I don’t talk a ton about it cause it’s not something you can do easily. It is in the new tax law. We had it before, but this has to do with businesses. Um, and if you’re operating an LLC and you take partner guaranteed wage at this time, that is not coming back in as payroll. So you are most likely not getting your QBI if you’re doing a partner, a tax return with a partner, guaranteed wage versus doing payroll, which we can’t do through an LLC.
Dr. Friday: 41:05 So, You might want to evaluate with your tax person. Is it time to consider a corporation in which you can take payroll? Is it time to basically make a change in your entity, to find out if that is going to be something that is maybe very important to look at because you may be leaving money on the table, but I hate to make decisions on a code that’s actually only for five years, four years left. * is making this for, I mean we stay in our businesses for a lot longer but it is important that, when you’re doing your taxes. Have that conversation with your tax person. Evaluate what your best entity is. Talk to your attorneys, find out what their input is on that. Because as a tax person, I don’t do the legal side but, I’m gonna tell you how it affects you on your taxes.
Dr. Friday: 41:48 And sometimes one side doesn’t always work with the other. So it’s very important that you actually have both sides of that. Don’t just change because your tax person says you need to change. Talk to an attorney. Find out if that’s a really good decision because there could be legal reasons you don’t want to change that entity even if you’re maybe not maximizing every single tax dollar. You’ve got to have both sides of that. All right. If you are wanting to set up a tax appointment with me, it is so simple. Go to my doctor friday.com website. That is Dr friday.com and click on appointments and see if there’s any left. I think last I heard the first openings was March 10th or something like that. If you are my client are returning tax client, you don’t see a date in there that you’re able to work with.
Dr. Friday: 42:34 Please call my office directly. We do hold back clients appointments for our clients because some of you guys wait until the last minute and I know this. I love you guys so I take care of you. So if you are that kind of individual and you are a returning tax client to me, you can call my office at (615) 367-0819 again (615) 367-0819 in preparing your own taxes. There is absolutely nothing wrong with doing that. The problem that most people do is you just miss or sometimes leave money on the table, especially if you are self employed or you are a person with a lot of rentals or are you are a person that invest in other properties. So you have k1 or things like that that you have from other entities. These are the types you need to consider. Also, if you’ve inherited property, you know, often you’ll hear where we often talk about wealth is inherited.
Dr. Friday: 43:25 You probably don’t know taxes. It’s not always the case. Sometimes people hold onto rental properties, sometimes properties appreciate get turned into… I had one recently where when the parent died six months earlier. They, you know, normally would be, they got step up in basis. They sold it, but it turned commercial between point A and point B. So it was worth at the time of the passing a couple of hundred thousand. When they sold it was worth a couple million. So it was a huge change in the taxes*. So you really need to make sure that you understand what you’re inheriting or what the situation is for you. Because if you don’t understand the tax law, then you need to get someone that’s going to represent or help you understand it, before you make decisions. Had a great couple that came in the other day and drove quite a bit, came all the way from the Knoxville area and those were* referral from a client of mine.
Dr. Friday: 44:15 They basically want to sit down and solely* just go over their tax picture because again, it’s tax time. So a lot of times people are just throwing those numbers in and we’re just trying to get it. But if you’re trying to plan for the future, one of the things you really, really need to do is understand how the decision you make today are going to get taxed. For example, we decided they need to look into something called a 10 31 exchange because in their case they were going to be selling into multiple properties in a period of time and they wanted to reinvest into other real estate. So again, it’s not for everybody. So you know, sent them to an attorney that actually handles that, but it will save them thousands if not tens of thousands of dollars in taxes today, impossibly over the long hauls. So that makes it really, really important to make sure they have.
Dr. Friday: 45:01 So, and in many of you guys, if you listen to the retirement report* on news channel five plus, I did that Friday, but it plays again after this show, you will actually see news channel five go again, I think on my station,.I’m with xfinity or whatever. I think that’s like channel 250, something like that. It will be playing I think today. And then again on Sunday. And then if you’re actually listening to the radio, I don’t want you change the dials too often, but the retirement report. We’ll also be doing a live radio on 98.3 wich also plays, I think on 1510. Which is where I actually started my original radio shows back in the day, Gosh. That makes me sound old back in the day. Anyways, it’s an AM station and that’s at two o’clock tomorrow.
Dr. Friday: 45:43 So if you didn’t get a chance to listen or get your phone call in, you can call that show and I will take your calls at that time. This is the doctor Friday show. If you want to set up an appointment, Drfriday.com is where you want to go. Click on that. You can also download a tax organizer for free. Sign up for our newsletter or call the office on Monday morning, (615) 367-0819 again, (615) 367-0819. If you didn’t get your question and you’re not big on phone calls, call ahead and email me Friday at drfriday.com again, my first name Friday, just like the day of the week at drfriday.com is the number you want to call. It’s been an awesome Saturday. Hopefully you guys are enjoying yourselves and I will catch you again next Saturday. Call you later.
Dr. Friday: 46:34 [inaudible].