The Dr. Friday Radio Show is here, and you won’t want to miss it! In this show, Dr. Friday explains all the latest tax updates, including the following topics:
- Partnership Form 1065 S and Corporation Form 1120S Due March 15, 2021
- Available Forgiveness Without Documentation for PPP Loans Under $150,000
- Need Help Preparing Your 2020 Taxes?
- Can My Child Get a Stimulus Check If They’re My Dependant?
- A 1099 Payment Is Taxable Income
- Unemployment Is A Taxable Income
- IRS Says It Will Take 21 Days To Get Tax Refunds
- The Third Stimulus Coming March 15- April 15
- Why You Should Get Help With Tax Representation
and answers other caller’s questions!
Transcript
Announcer 0:01
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 Dr. Friday show. If you have a question for Dr. Friday, call her now at 615-737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
Dr. Friday 0:30
Good day, I’m Dr. Friday and the doctor is in the house. Yes, we are live today. You can reach us at 615-737-9986, is the phone number here. In case you want to reach us we have some great news from the SBA and Treasury. They have simplified anyone that received PPP loans for less than $150,000, they are going to be offering forgiveness without supporting documentation. So you can’t ask for anything easier than that, can you? So that will be something that’s going to be for the this is right now for first PPP. Forgiveness hasn’t been offered on number two, I don’t know very many people who have received PPP number two yet.
Dr. Friday 1:17
So that is the first thing and then they say portals remain open for PPP two, you can still register. So here’s the deal, guys. A lot of people I meet with quite often just see people that are self-employed individuals, they did not know how or what they should have been filing to get a PPP loan. Remember, if you’re a Schedule C individual, and you paid self-employment tax on the money, you can get your PPP and you can get around one, round two. Round two is open people. So if you missed the first window, it may be something that you need to do when it comes to getting ready to do that. So just a heads up, if you are having a hard time and you did not get the first PPP, you may be looking to be able to get the second. All right, mate, let’s go ahead and go to line five. Hello, Mitch.
Caller 2:10
Hi, I have a question about those stimulus payments. My wife and I received both of them, we received the first and the second. And we have two dependent children. We didn’t receive the payments for my two dependent children. I’m wondering if my Social Security has something to do with it?
Dr. Friday 2:28
Well, I have to ask, are your dependent children 16 and older or 16 and younger?
Caller 2:33
16 and younger.
Dr. Friday 2:35
Okay, well, that’s good news. It would have nothing to do with your ID being in all honesty, your Social Security because anyone on Social Security can receive stimulus as well. So it would be that, were they listed on your 2018 and or 19?
Caller 2:52
Both of them were and we received the earned income credit from my wife.
Dr. Friday 2:58
You would have gotten yours under Social Security sounds like you, you. I’m assuming you know, you weren’t working, you’re disabled, or whatever you might have in your situation. But it doesn’t make a difference. You should have received the extra, I think it was 500 for the first one for each child and 600 for the second one. The good news is when you file your 2020 because let’s be honest, the IRS was never set up to really be doing stimulus checks. I mean, they’re there for collecting, not necessarily forgiving money back.
Caller 3:30
There was a portion on the filing on Tax Act where you click if you were missing it. I did. And I put in how much my wife and I both received, we received $1,200 apiece on the first round. Then we receive the same on the second.
Dr. Friday 3:47
You should have only received $600 for each on the second.
Caller 3:51
So it should have been 600 for each child?
Dr. Friday 3:55
No, each person. Everybody just received 600 on the second one.
Caller 3:59
Then we missed 1200 from our first one on the first, right?
Dr. Friday 4:04
Yeah, I think is 1000. It was $500 for each child and the first one, $1200 for individuals. And then the second one, it was 600 for each person. So it sounds like you got all of the second ones. But you’re still missing the two children on the first one. So when you went and clicked that button and you put in 24 it should have been showing 34 was available and you got 24. So when you went and calculated your taxes. Did you owe money?
Caller 4:36
No, I didn’t. I was still getting a refund. But that was based on the income from my wife from last year. The income stayed the same. When I clicked on it. I did it both ways. So I did it with adding that and without it and it stayed the same. It’s exactly the same.
Dr. Friday 4:54
So you’re saying when you go on to the line 30 on your tax return, there’s no number in there?
Caller 4:59
That’s correct.
Dr. Friday 5:01
Okay, so something’s not calculating correctly, I don’t do the Tax Act. But I’ve done enough of these returns where people are getting them. And the one I just finished now they’re getting $1100, because they also didn’t get the one for one of their children, for either of them. So they got $1100, $600 for the second one and $500, from the first one, and it’s showing up right there online 30. So you should, Mitch, I don’t know. You might need to contact them and ask why it’s not calculating, but it should be showing up on line 30 as an additional number above your earned income or any other rebates or credits you’re getting. Okay?
Caller 5:36
Okay. Thank you very much I appreciate you.
Dr. Friday 5:38
Thank you, bye. Alrighty, again, if you’re having questions, or you need to have help, I will do my best. I am more of an Intuit person. But even that question, if he was working into it, all I could tell him is he is correct, it’s going to be it’s called the recovery rebate credit. For anyone that’s looking at it, and then you usually have to put in my tax software, there’s two-line 16 and 19. On that form, I have to put in how much the clients received. Then the system’s already telling me how much they were supposed to get. Keep in mind, guys, they are basing this on the year 2020. So if your children were 16, in 2019, they’re not going to qualify for credit in 2020, because they’re 17 years old. So even though you may or may not have gotten it. Some people did get money for children that were actually 17 already in the new year. But all I’m saying is, in Rich’s situation, his children were both under the age of 16. So you have to be 16 or under to get credit for them. Otherwise, it’s going to go the other direction. All right, let’s see if we can hit Terry in Nashville. Hey, Terry.
Caller 6:46
Hi, there. Thank you for taking my call. My question was about the $600 stimulus, I did not receive it. I understand there’s a line on the 1040 form where you can write that down.
Dr. Friday 7:01
Right. Well, if you’re doing it manually, it would be on line 30, you should if you’re doing it through a computer, there should be a form called the “recovery rebate credit” worksheet. On that form, you would fill in both of them, one of them you may have already received, and then you didn’t get the second one that seems to be more typical in my world, where people got the one last year, but they didn’t get the one from this year. Or they had children in 2020. Of course, the government didn’t even know about that. Anyways, yes. Then that will roll over to line 30 in you know, on the tax return, and it specifically says rebate credits, recovery rebate credit and it should be filled in there, and then that would be added to your refund or and or your taxes due.
Caller 7:44
Alrighty, so you can do a manual 1040 return it doesn’t have to be online to do to get that 600 credit?
Dr. Friday 7:52
That is correct. If you’re I have a handful of people that every year still like to use paper forms and I give you guys more power than it’s ever you know, that is more work than wanting to do. Yes, Terry, you can still do it manually line 30 is still going to be on your 1040. I would see if you can download the rebate credit worksheet just so you can put that behind just like anything else. But yes, it’s going to go right there on line 30 of 1040.
Caller 8:20
Okay, do I have to prove that I never got to $600?
Dr. Friday 8:27
That’s a great question. That was one of the things I want to put out there. The IRS hasn’t really said yet. I have some people that say they haven’t received it. And then we filed the taxes, and then they came back and said, “Oh, wait, we found out we did get this money.” I mean, just accidents happen. I’m going to work with the idea that the IRS is going to match it. So if for some reason you didn’t get it, but let’s say you were divorced in 2020. And they based it on 2019, and your ex received it there. They might not give it to my client because it was $1200 or $600, whatever to the bank account that was on file. So that may come where you’re like, “I didn’t get it, but maybe my ex got it” or whatever. That’s all very possible. And I think we’re going to have some really interesting love letters coming in another few months.
Caller 9:19
Oh my. Okay. All right. Thank you so much for your help.
Dr. Friday 9:24
That was a great question, Terry. Thanks for calling. Thank you. Again, the IRS is gonna basically be matching this information up. I am sure like everything else in the world, they have probably are going to probably have a situation where some people are going to have it. I have a couple of situations where the individual I’m doing the taxes for is no longer with the person they were filing taxes for. They divorced or they’re separated and the money may have come to a bank account. That they no longer have access to and that person may not have given the money to that person. I don’t know. I don’t know how the IRS is going to respond to this.
Dr. Friday 10:11
I will tell you this, just like any other divorce or situation like that, they are not going to get between you and anything else, they will say you go to court get the money from them. They’re going to basically just deny us that money, I’m assuming we’re going to get a love letter saying, “We’ve changed your tax return, because…” and then they’re going to basically send back less money because of that situation. So you know, and this one is going to be interesting, guys, because prior when you got the stimulus money, if it comes through the normal tracks, it cannot be used to pay back IRS debt, but they are using that recovery credit to pay this current year. They’re applying it to the people’s debt or taxes that they owe for 2020. So it’s got a little different situation going on. So if you are a self-employed individual, you might want to file only to get that money to apply to any back taxes you have, but you’re most likely probably not going to get the refund of that money directly into your bank account.
Dr. Friday 11:13
So just want to make sure that everyone understands that that money is going to be used as part of any other tax deposits that you have. And then it’s going to roll through directly onto your tax return. So again, you know, you can put the information in there. But if you think you did get it or if it went to someone you know, then you might find out the IRS is going to turn around and say, “Yes, we show you received it at the bank account we have on file” or something like that. And then we’re going to have some fun trying to figure out how to get all that put back into place in the right way.
Dr. Friday 11:48
So if you’ve got questions, this is the show, you might want to call it if at least Tax Questions. I’m an enrolled agent licensed with the Internal Revenue Service to do taxes and representation, which basically means all I do is taxes. That’s what I’m good at. And that’s what I have done for 20 plus years. So if you have a question or you’re working on your own tax return, you can call the show at 615-737-9986. We’ll take a quick break and then we’ll come back and get some more of your calls. We’ll talk a little bit about a few things that we know that are different this year than we had in the past. So we’ll take your calls in just a minute. We’ll be right back with the Dr. Friday show.
Dr. Friday 12:36
Alrighty, we are back here live in the studio if you want to join us, call 615-737-9986 taking your calls. Straightforward, and we are talking taxes. Alright, looks like the first one we’re gonna go to is Robert. Let’s hit Robert number five. Hey, Robert.
Caller 12:53
Hey, how are you? I appreciate you taking my call. Basically, long story short, last two years not counting this year. I’m self-employed. Usually, I have somebody else do my taxes like H&R block, or etc. But I did not do my taxes. I barely made enough money to you know, I made enough money. Long story short, I haven’t done it. But I’m gonna try and do them all three, this year. Two of them, I’m assuming I have to go without having somebody else do them, I’m gonna go print off the forms I need and do them manually. Then this year is what I’m going to do it electronically. I didn’t know if there’s anything, guidance might give me towards that. Or?
Dr. Friday 13:36
Well, I would be careful doing a manual only because mathematics is still the number one mistake people have when they do a mathematically they put things in the wrong way and we have to fix the situation. For example, a situation where the gentleman took an expense that he wasn’t entitled to cuz he had it on the wrong line. It was just a simple mistake. But it cost him a couple of $1,000 because his math was off when he put it on the wrong line. So using any service, I would say any accountant would be able to go back to three, I mean, we can go back 15 years on tax software. So we don’t need to in most cases, you only have to go six to eight years. But I’m just saying if you go in and get taxes prepared this year, if you want to download the forms and have them all, basically, you know all the information on the schedule C which is your big information, have it all worked out. So you know the numbers and you know, your finances are in order that may make it easier, maybe even less expensive at some places, but I would probably have someone file them because we can e-file 18, 19, and 20 right now while the E file is open.
Caller 14:41
I didn’t realize that. I didn’t I thought once the electronic version of the file, once that year passes, it’s done.
Dr. Friday 14:49
Yeah, a lot of people think that, Robert, that’s a great question because yes, we can do that. And you might just want to get him e-filed one you’ve missed out on any of the stimulus, money, and 2020 you can get that put in. Even if they roll it back to help cover some of your taxes, I don’t know if you’re in a hardship situation, but at least that’s $1800 that you can kind of get for free to pay your taxes. Or if you don’t owe that much, you’ll put it in your pocket. Either way, it will help you, you know, move forward, at least, IRS is bad loan officers.
Caller 15:20
Well, that pretty much answered that. I appreciate it.
Dr. Friday 15:22
No problem. Thanks. Appreciate the call, Robert. Let’s see if we can get Kathy number one. Hi, Kathy.
Caller 15:31
Hi, I’m good. Thank you so much. I’m enjoying your show. I wanted to know, is it okay to use a deduction of, we have like, $15,000 of interest that we’ve paid on loans that we took out to renovate a home. But the home was purchased without my husband’s retirement account. The home, we finally have it under contract to sell it. But for two years, we had so many issues, it was built in 1903, that we took out all these loans, and we’ve had to had extensions upon extension. And so we had all these fees and interest and all this. So I want to know if it’s possible for us to deduct any of that in our 2020 taxes?
Dr. Friday 16:19
Well, it would all be tied to the sale of the home most likely because doesn’t sound like these are actually mortgages. They sound like more lines of credit. And I’m just guessing between the lines, Kathy of what you’re saying, if it was a mortgage against the house, then it’s pretty straightforward. It was used for that residence, you can deduct the mortgage interest. Or if it was a second on that house, then you can up to $100,000. If these were credit cards and things like that, that you were just making do to survive until you could get it, all that money would be added up to the cost of the home. But it wouldn’t be a mortgage interest, it would be part of your actual investment in the home as part of your deduction. So whatever you have into the house, obviously as your basis.
Caller 17:01
They were five mortgages against five of our properties.
Dr. Friday 17:06
Okay, so the mortgages were not against the house that you put the money in.
Caller 17:10
Yes one of them was for $247,000. Then another one was against our own residential home for $202,000. And then the other three are on three rental properties that we own.
Dr. Friday 17:24
Well, if the money was spent against the home that the mortgage was on, that’s a straight answer, you know the answer to that. It’s obvious that interest is deductible. Otherwise, its investment in the interest is going to have to go against basis. Against your investment into that home. So when you sell it, you would be able to deduct it against the sale price. Was it a rental? Or was it just a piece of property that you guys were improving to sell?
Dr. Friday 18:01
Oops, I lost Kathy. I think I overdid that. Sorry, Kathy, if you need to do one on one, you can certainly call my office on Monday. Might be easier on that one. You can reach us here at 615-737-9986. We are taking your call. And if you have questions, you can call us. If it’s a complicated question, and not that Kathy wasn’t following, but the fact is, sometimes, I probably get too in-depth on the conversation on the thing. So you can always email or call our office directly. I usually try my very best to help walk people through what they need to do when it comes to their taxes. But whatever is going to work out best for you guys. Okay, so let’s talk about something that a couple of people aren’t really sure about.
Dr. Friday 18:52
On the current tax law, we normally have a standard deduction, right? Everyone knows that. That changed in 2018 when Trump came in, and that gave us the 12,000 or 24,800 or 12,400, this year’s standard deduction. But on the part, line 10 of a regular 1040, 10 B to be precise. That is where you’re going to get something called a charitable contribution. Now, you cannot take all of your charitable contributions, okay? You can take up to $300 per tax return, nothing more. So if you’re taking the standard deduction, and if you have had, and this has to be cash contributions, but if you’ve done cash contributions of $300 or more, you will get an additional $300 on that line. So if you’re doing your own taxes, make sure because the thing is guys, the last year or two we really haven’t put a lot on a Schedule A because let’s be honest, we haven’t needed it because we knew you didn’t have enough to itemize, but this year, you’re going to want to fill in the charitable contributions to see if it will trigger up to $300 per a tax return. It is very important because that’s another $300. I know it’s not a ton people, but we will take every dollar we can get to save taxes. Alright, let’s get Pat on the line. Hey, Pat.
Caller 20:24
Hey, thank you for taking my call. My mother in law, assets are about $250,000. It mainly consists of a home, she really doesn’t have anything other than she gets a pension. But if she goes into a nursing home, which he may very well need to in the next year or two, will they take her assets, the government?
Dr. Friday 20:53
Well, they have a five-year look back. So in theory, the home is protected if she has a spouse, but once the second person has moved out or whatever she’s the last person standing, then, yes. Her home is going to be part of what the government will consider as far as I know, for Medicare, to help pay for her care.
Caller 21:16
Okay.
Dr. Friday 21:18
She could probably sell it prior to doing that and then put the money in the bank, if it’s a family home, I know that she can theoretically song she sells it at fair market value, she can sell it to the family and then put that money in a Medicare trust fund that would actually be used to give her things a little bit better than maybe what Medicare would provide her. Then when she passed away the money would go to Medicare if there’s anything left, but I kind of like the idea that there’s a little extra money that would be used to provide a nicer wheelchair better beds, whatever that might be needed.
Caller 21:53
I understand. Thank you so much.
Dr. Friday 21:55
Thank you, Pat. Appreciate the phone call. Okay, let’s keep going here. Oh, okay. Yeah, let’s keep going here. Yes, number six. Let’s do it. Robin.
Caller 22:03
Hi. I’ve lost my job last February, and then COVID here. After I was laid off, and they wouldn’t have let me borrow to COVID to the unemployment. And I know I have to claim everything. But is there anything I can do as far as reducing that? Like job search and stuff like that?
Dr. Friday 22:28
No, none of that’s available any longer. The form 2106 is gone. So there are no job searches, no expense for trying to find employment any longer. It’s gonna be straight-out income expense, I mean, standard deduction, basically. So now there isn’t a good question. And Robin, we used to have that I forgot. It’s been a couple of years since I’ve had to use that. But no, there is nothing on the books allowing you to do a job search. And if you did, a single person would have to still itemize with it, which was $12,400 would be really hard to meet that unless you have a decent mortgage.
Caller 23:01
Well, I’ve been doing it all year. So it’s kind of like oh, no. They also made us remove our 401k from the 401K plan that we had. And now we’re gonna have to claim that as well. If I did that, according to the COVID, Is that going to count against me as well?
Dr. Friday 23:22
Well, do you plan to replace it in the next two years?
Caller 23:30
Yeah, I can’t do it to the same company. I plan on taking it to Edward Jones. In fact, we already have.
Dr. Friday 23:37
Okay, so if you rolled it over, you didn’t cash it, but you rolled it over into another retirement account within a period of time.
Caller 23:45
I moved it over to our savings.
Dr. Friday 23:47
Okay, theoretically, you’re going to pay tax on it, you can spread the tax over three years, or you can put it back into a retirement account that could be an IRA, a SEP don’t know what you have another 401k somewhere, I don’t think usually contribute back into a 401k. Usually, it goes into an IRA. But Robin, you can put that money into an IRA, and then it’s not taxable. But if you’re going to keep it up because right now you’re not sure what’s going to happen with jobs and everything else, then you’re gonna need to do an 8606 with your tax return, and probably spread that tax over the next couple of years. They’re allowing us to do.
Caller 24:29
Okay, thank you!
Dr. Friday 24:32
Thanks, Robin. Great question. All right. Let’s do it real quick. Let’s do Robert. Number five.
Caller 24:40
Thanks for taking my call again. I actually had a question I forgot to ask you. In 2018 I never received a W2 from an employer even though I tried and tried and tried to get one never could get one. What actions can I take or so I can actually get one. I mean, I have roughly my last pay stub. I think with this employer I probably made about, we’ll just say $12,000 untaxed tax dollars. It was actually a W2, they just never took out, they took out Social Security and Medicare, but any federal taxes. I just, you know, as I said, haven’t done them in the process. And I’ve noticed, “Hey, you never sent me this.”
Dr. Friday 25:22
So the easiest thing to do to go to irs.gov, click on “my transcripts,” and see if you can get online right through there. You can pull up, it will have all of your W2’s, anything that was submitted by those years, 20 1819, or whatever, you can go back six, seven years on there, and it will give you the name of the employer and how much they took out and will have their federal ID number, which is what you really need to be able to do electronically, you can’t file a W2, without that you can do a miscellaneous but it’s a lot more work. So if you’ve got your final pay stub, you can use it based on that. But it’d be nicer to have the exact dollar amount. Sometimes W2’s and pay stubs don’t always match dollar to dollar for whatever reason. Just pull your transcripts, it’s pretty easy. Most people can do it. It usually requires you to have a credit card and can’t be a debit card, and they don’t charge you anything. It’s just that they’re using that to prove it’s really Robert on a thing, not somebody else. They’re using your credit. But other than that, it’s pretty straightforward.
Caller 26:24
Okay, I appreciate it. Have a great day.
Dr. Friday 26:27
Thanks, buddy. All right, let’s hit Ron real quick, then we’ll take our break. Hey, Ron. What can I do for you boss?
Caller 26:40
We’re talking about basis in an S corp, or a partnership, or a particular company basis for the owner. It’s my understanding that the basis has to be reduced for nondeductible expenses, but also increased for nontaxable income. So if we have PPP loans or EIDL that are not taxable, they increase the basis is that correct?
Dr. Friday 27:19
Well, it would increase the profit because the PPP was used. That’s a good question. Actually. I like that question because it’s making me really think. Almost all my companies have PPP, and it’s increasing the liability right now because most of the miners haven’t been forgiven. So as of right now, it’s showing as a liability. But if the liability didn’t exist, then it would actually show as if that was money put in by somebody, therefore, yes, your basis would have to be increased. There’s no choice, I mean, there’s no other place for us to put gifts, which is really what it was, you know, I mean, in the world of accounting. I was really shocked when they actually made it complete, we expected it to offset the payroll that we paid, so that was going to be an offset against the income that we made, and then they paid the payroll, but when they made it, that we could deduct all the expenses and be forgiven on the PPP, it’s going to actually increase, which is then, therefore, going to make you have to show it as an increase. Just doesn’t seem right. Because your basis is only you know, that just doesn’t seem right. Because how can we justify that basis?
Caller 28:43
It’s a triple benefit. Number one, you don’t have to count the income. Number two, you get to deduct that were paid out of it. Number three, your basis gets increased. That’s incredible. That was all my comment. I just wanted to hear your comment on that.
Dr. Friday 29:00
It’s a great one, I’m thinking that we’re gonna probably do something on the K1’s that show like a credit form PPP per person. So that shows that it was actually PPP and you know, under the memos, but you’re right, it’s still going to be an increase of basis in your Yeah, it’s crazy. But great call, Ron. Thank you very much.
Dr. Friday 29:20
All right, we’re gonna take a quick break here. When we get back if anyone else wants to try to stump me, that was a good one, because I haven’t really had a lot of loans forgiven yet. But now that I’m looking at a return that I pulled up when Ron was here, and it’s like, I’m going to need to make some sort of documentation because, for all of you that are listening, that’s a little confused about what we’re talking about. We’re talking about money that normally a shareholder or partner would have deposited into the bank or profits that were not distributed, normally makes up our basis when we increase this is going to be where the PPP money has been given to the business and therefore it’s going to actually look like additional basis was put in by the shareholders or partners or members instead of the government. So I’m sure there’s gonna be something more that we’re going to have to track on that. But if you’ve got questions, call the show at 615-737-9986. We’ll be right back.
Dr. Friday 30:30
All right, we are back here live in the studio. Ron, you have got me thinking and thinking because, for all of you that are doing taxes right now, many of us are working on corporations because they are due just for a reminder for anyone that has an S corp 1120, a regular calendar year 1120, or 1065. Those are due March 15, they have not done any extensions, a lot of people keep calling saying that they’ve extended, they have not extended we still are back on the good old March 15 for businesses pretty much and April 15 for all the others. So keep in mind, there’s no extension this year for your taxes. I was looking at the CPA Association and looking at some of them to follow through on how they’re going to be documenting this PPP forgiveness on to the basics because it just seems like it’s not going to be proper to be putting it on as if somebody has contributed the money. But right now, that’s pretty much what everyone’s saying. So we’re gonna have to get a little bit more detail into that before we finish off some tax returns that actually have had loan forgiveness on them. But we’ll work forward on that.
Dr. Friday 31:46
If you have a question on your taxes, maybe you’re working on doing your personal tax returns, or you’ve got some questions about how to do this, we’ve had quite a few emails and questions this week about children that are 18, 19, or 20 that maybe would be considered a dependent in many of the other situations. But in all honesty, maybe they have worked and earned enough money to be independent, even though we all know that you are probably supporting them. But with the stimulus money. It may be smarter, we’ve done a lot of tax returns, or we’re working quite a few. In many cases, we have children that may qualify to be dependent. In some cases, it’s better for them not to be dependent. And there is a fine line. I mean, if they’re not making enough money to support themselves, they’re not really going to be independent. But some children do make $6-7,000 $8,000 a year which the government would consider independent children. And they could then claim the stimulus money. But if they’re in college and the parents make less than $165,000, it may be better to have the college credit because, you know, you figure if you if they can get 1800 in stimulus, we get 2500 in educational credits, in many cases, it is a better deal to still claim them as dependents. So it really depends on the fine line of who’s truly a dependent the 50% care, and if they’re in college or not, because in many cases, that makes a huge difference. So you need to really review your taxes this year to make sure that you’re claiming. A lot of parents may say their children may make $10,000, but they live in the house and I pay for everything and I have to take care of. But you know, in all honesty, are they really? I mean, theoretically, they’re living there, but are they dependents according to the IRS? They’re not, they’re not qualified as dependents theoretically.
Dr. Friday 33:40
And then they could actually qualify for the stimulus. So it’s something you need to consider and work your way through. If you’ve got questions about that or any of the other tax changes we’re dealing with this year, call 615-737-9986. I want to remind everybody I know a young lady called earlier, but make sure that you’re getting your 1099 G that is your unemployment statements. Unemployment is taxable income. And for business owners that if you got credit from the state of Tennessee, they were giving out 5, 10, 15, and up to $20,000.
Dr. Friday 34:20
I thought they were grants but they are actually taxable, they have actually sent out 1099. So make sure if you’re filing your tax returns that you are picking up that income. So that is something that you need to make sure you’re filing and paying on. And so you’re moving forward and making sure that you have all of the information you need to get your taxes done. Again, don’t rush to get them done. I know it’s always nice, but remember, we just opened up last Friday for the IRS to start filing taxes. So it’s only really been about a week. I know I’ve had somebody say well, when do you think we’ll get our refunds? It’s only been a week people. The IRS says it takes 21 days. And if you claimed on that tax return two things, if you’re claiming earned income credit, there could be a delay, they do have a new matching system, they’ve been using the last couple of years to make sure multiple parents aren’t claiming the same children, and that the earned income credit is legitimate. And then I would say we may be slower guys if you’re actually claiming the rebates because of the stimulus rebate because they’re going to have to match their records up to what you’re saying. And they may be changing tax returns, which anytime that happens, you end up with a delay in your tax refund. So just making sure that you have that information available to you so that you’re not expecting that money necessarily to come as fast as possible.
Dr. Friday 35:48
I do know a lot of people are trying to get taxes filed and also making sure that they’re putting in banking information, updated banking information, updated address information, because I’m sure everyone else is listening to the news as well as I am, we are expecting a third stimulus to come out sometime relatively soon on March 15, to July-April 15, according to what I last heard, and that’s the $1400. At least that’s what they’re at right now. So getting everything filed and up to date is an important thing. So that way, you know that you’re going to get the money directly. Alright, so we are going to actually get back on the clock. We’ll take one more quick break and we come back that will be it guys. We’ll only have about 8-9 minutes. When we get back from this break. I am an enrolled agent licensed with the Internal Revenue Service to do taxes and representation. So if you have tax issues, if you need help with taxes, we can help you. I know that right now during tax season, I will be honest, we’re getting pretty booked. But you know what, if you have any tax issues, and you need help, that’s what we try our best to make time to help people do those things. You can reach us at our office on Monday. But right now if you’ve got questions about back taxes, or who you should be claiming who or what your situation is called the phone at 615-737-9986 we’re gonna be right back with the Dr. Friday show.
Dr. Friday 37:21
We are back. This is the end of the show, guys. So if you’ve got any questions you’ve been questioning or wondering or waiting up, and you’re like, “I really want to ask the question.” Let me clarify, there are no bad questions. If you don’t ask a question, you’re never going to get the answer that I can guarantee. So I would say if you’ve got a question, now’s the time 615-737-9986. All right. Looks like we’ve got a so let’s hit and first on the line.
Caller 37:49
Hey, Dr. Friday question, I thought it was going to be able to get a tax deduction for contributing to an individual or an IRA standard IRA. I’ve got a tax software here that’s telling me I make too much to do that. So I’ve got my gross pay at 123 for 2020, W2 adjusted income of 118. I’m 55. Am I able to take $7,000 and put it into an IRA and get a tax deduction?
Dr. Friday 38:17
Nope, you make too much money. Now, what you’re gonna need to do and though is you’re either going to need to move that into a ROTH, you can still I believe contribute to a ROTH, it won’t be a tax advantage. When did you deposit that money?
Caller 38:36
I haven’t done it yet. I was gonna do it with the check that I get this month.
Dr. Friday 38:42
You can still do a Roth. I mean, it’s not going to help you today. But in the long run with the way tax laws are changing, it may not hurt you and it will still be tax-free. It’s a thought.
Caller 38:52
Okay, because I contribute to my employer 401k already.
Dr. Friday 38:55
Oh, that’s why that’s one you won’t be able to do either of them. Okay, got a 401k you can’t actually contribute to the others to get a tax deduction. Sorry.
Caller 39:06
Thank you so much.
Dr. Friday 39:07
Thanks, again. Great question. All right, let’s hit amber embers on the line. Like that name. What can I do for you?
Caller 39:18
I have 50/50 custody with my ex. Last year, he gave the kids back early several times. He doesn’t pay daycare. He doesn’t do any of the medical bills. He doesn’t take them to the doctor. I’m just wondering, he’s saying he’s going to take me to court for claiming our little boys. We have twin boys. They’re four years old next month. He’s going to take me to court for me claiming them on our taxes. I just want to verify. I had a lawyer tell me that. If I had them more than half the year then I was in my right to claim them. Is that right?
Dr. Friday 40:00
So the IRS doesn’t necessarily care about a divorce decree. They have perfect rules. So even though lawyers sit around and say, “Oh, you can do this and all he’ll pay off the taxes, blah, blah, blah.” I have people walk in my door every day because the other person did not pay off the taxes, and now they have liens against their payroll. So they’re going to basically say, the lawyer was correct. If you have the children six months and one day, you’re the primary care meaning that their medical records, their school records are basically listed under your address, because you’re the one that’s primary, then you are according to the IRS, the person that should be claiming them every year unless you sign that form. And I don’t know the number off the top of my head like an 8800 or whatever, where you can release them to your spouse on the other side. Now, they can take you back to court. I don’t know what a court I mean, I’m not a lawyer. So I don’t know what a court would say. Since I’m assuming also in those court documents, it says he’s supposed to share and other costs, like costs of medical and all these things, and he’s not living up to those expectations. I’m assuming you’d be able to justify it. But then again, how much do you want to put up with and how much you know, and does he have the money to even go to court? I understand it takes like eight months to get a court date right now because everything’s on COVID. And nothing’s open. So, but you are in the right, as far as the IRS is concerned, if you are the primary caregiver, and the children stay with you more than six months in one day.
Caller 41:27
Okay. All right. Awesome. Thank you for your advice.
Dr. Friday 41:31
Thanks. Good luck. All right. No problem. All right. So if you’ve got questions, and you’re not too sure which way to go, there is some great information on the irs.gov website. friday@frtriday.com. Remember, if you’re an individual that’s sitting here, going, “Last year was just one of the absolute worst years of my life. I just don’t want to think about taxes right now.” You think you’re going to owe money. And that’s usually when people don’t want to think about taxes, let’s be honest if you think you’re going to get a refund, you’re the first person at the door, usually trying because you’ve had such a bad year, and you really need the money. So I would suggest at least file the extension, get an extension filed. So that way you can, at least hopefully, by October 15, maybe you’ll be in a little different position. You can get everything filed and worked out because failure to file a tax return is higher than actually failure to pay when it comes to penalties. No one likes to pay penalties. But you know, they happen sometimes. And if you haven’t filed for a couple of years, and maybe you only have a few dollars, a couple $1,000 do or whatever. Again, keep in mind that most individuals that make less than 75,000 and married couples that make less than 150 would have received each individual $1800 so far with the additional possible $1400 to follow. So that’s left money on the table that might actually help pay for some free either back child support the first one only when the second one did not apply to back child support or tax debt. So these are, you know, considerations that you might want to consider. I know that sometimes it’s easier just to avoid, but my suggestion is avoiding is never a good idea, especially with Uncle Sam, let’s be honest, the IRS is a collection company. That’s all they really are.
Dr. Friday 43:41
I had a client that called me the other day and she said that she was speaking with a person that says they were a tax advocate. And she goes, “They weren’t advocating for me they were advocating for the IRS because I was trying to tell her I couldn’t afford to pay.” I’m sitting there thinking well, of course, they’re advocating for the IRS, their job is to still make sure that the tax situation is fair. But in her case, it wasn’t what she wanted to hear. So keep in mind the IRS is a business that may not be the same as yours and mine If you’re self-employed, but their job is to make the collection. So if you owe IRS debt, the last thing you really want is the IRS on your back. If you have the ability to make payments, no matter what those ads say, “We can negotiate 10 cents on the dollar. We do a lot of offering compromises.” But I will be honest with you, not all of them are going to turn out as good as you like to think. If you’ve got 401 K’s you have equity in a home, you have the ability to make a payment but it’s just that you know what I spend too much money the IRS is not going to take that as the ability not to pay so you have to be willing to at least meet halfway and try to figure out what the situation is. But if you want an honest opinion, you can always get my opposite call. Because that’s the one thing I don’t usually start the conversation out with.
Dr. Friday 45:00
We will give you the answer that may not be the one you want. But we will give you an answer of how you can deal with the IRS and get your situation taken care of. If you want to do that. Again, you can call my office at 615-367-0819. You can also email that’s probably at this time of the year emailing and texting will be the fastest the phone number I gave you is 615-367-0819 you can also text to or you can email friday@drfriday.com. If you’ve never heard this show before, and you’re wondering who an enrolled agent is or who Dr. Friday is, you can check out the web because that’s probably the best way and you can also send emails or letters through there if you have a request, and it’s drfriday.com.
Dr. Friday 45:57
I’m here every Saturday at 2 pm. I’m licensed by the Internal Revenue Service to do taxes and representation. So I help people try to get their taxes straightened out, make sure we do them. So you’re not having to lose sleep over them. And also make deals or deal with the situations that you need to have dealt with. When it comes to the IRS or the states that you’re dealing with. We do file taxes in all 50 states have there are a few states that don’t require it. But if you need help, we are here to help you do any of those situations. So again, you can call me at 615-367-0819. I hope you guys have a wonderful Saturday. Call me later.