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Tax season is in full swing, and this episode centers on making smart filing decisions before deadlines hit. Dr. Friday opens with reminders for entity returns due March 15, then walks through live caller questions on deductions, IRA strategy, home-sale basis, and grant-funded wages. She also covers reporting side income correctly and planning ahead so tax results are less of a surprise.
Summary Points
- Reminder that S corporations and many LLC/entity returns are due by March 15, and extensions should be filed if records are incomplete.
- Discussion of overtime reporting issues on tax documents and why taxpayers should use accurate employer-provided figures whenever possible.
- Caller conversation on the additional age-based standard deduction and using IRA withdrawals or conversions strategically within tax brackets.
- Breakdown of home-sale basis and capital gains factors, including inherited/spousal history, added land costs, and documentation needs.
- Clarification that employees paid through block-grant-funded organizations are still generally subject to normal income tax rules.
- Guidance on self-employment side work reporting on Schedule C, including tracking income and legitimate business expenses.
Episode FAQ
Q: Should I wait to file if I am missing key business tax documents?
A: File an extension before the due date to avoid unnecessary penalties while you gather complete records.
Q: If my job is funded by a block grant, are my wages tax-free?
A: The episode explains that employee wages are generally still taxable even when an organization receives grant funding.
Q: How should I report money from side jobs?
A: Side income is typically reported on Schedule C, with income and eligible expenses documented carefully.
Transcript
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 Dr. Friday, call her now. 737-WWTN. That’s 737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
G’day, I’m Dr. Friday, and the doctor is in the house. We are talking today about my favorite subject, which of course is taxes, and it is tax season. It is the time that we’re all looking at our tax forms I know many of you are still waiting for your 1099 consolidated from places like Schwab or Edward Jones. We have many clients that are also on that same page, don’t sweat it, they will come out, all will be good.
Um but if you are a corporation or an LLC, a sub-s corporation I should say, or an LLC, remember your due date is around the corner, March 15th. And so we just want to make sure that you are not um, you know, waiting too long or if you if you’re waiting for something else to come in and you’re at the mercy of either another company that may be owned and you have to wait wait for their K1 to come into yours. Don’t forget to file your extension.
Better be safe than sorry. So if you’ve got questions though, you can join the show. 615-737-9986-615-737-9986. Taking your calls, talking about life. favorite subject and then we need to talk a little bit about a couple of the things I see happening in my firm and then if there’s other people that are uh tax experts that are listening, feel free to chime in.
But I’m seeing a large number of people that don’t have all of their overtime information. Many of them are requiring to have to go back and look at pay stubs. It’s kind of an interesting challenge for tax people like myself because I have found out at least if people work for like GM in some of them They don’t follow the federal overtime standards.
For example, if you work more than 30 hours in some cases, they get overtime. If they work more than 10 hours It’s overtime. They have the union that has negotiated their overtime schedule. And it isn’t exactly what the Fed. So therefore, it could look like they have more overtime hours than what we have um or what we’re actually allowed to show.
And then sometimes they have double time and and weekend times. So um you know, as a tax person, we have to go with what we can to the best of our ability uh understand. But it would be very helpful If the companies, now some like Kroger’s and them, even though the WTs don’t have on, they have sent separate letters with the amount for each each employee.
So that makes it so much easier, right? So again, if you’re just taking a number and you cannot take the total number off of a pay stub because again, that’s your overtime, including your prime rate So it would only be like a third of that or time and a half of uh of the number that you need to use. The IRS is going to get this information from the employer It’s going to happen. It may not be as fast as we’re providing taxes, but it is something that we’re being asked to provide.
And so the IRS is going to end up coming back and correcting your information if If you put it in incorrectly is my understanding. So make sure you understand exactly how that’s going to work. All right, let’s see if we got Val in Spring Hill, my town. Not the warmest Saturday in the world, but hey Val, what can I do for you? Hey Dr. Friday, I have a question.
I did my taxes recently and saw that twelve thousand dollar additional uh d standard deduction uh added to the standard deduction for those of us over sixty five. Yes. Is that just like a regular added to that? I mean is that worth Regardless of where the income comes from?
It is. It’s all based on um AGI. So if you had all 12,000, then I’m assuming your AGI was less than 150,000. for a married couple um or right around that number. And then if you make more than that, let’s say you make 200, then you would have seen possibly nine 9,500.
Well, they would have means tested, right? I call means tested. They would have adjusted it based on income. But everybody or anybody that’s 65 and older that meets the criteria will get that sweet little uh um a senior benefit, I guess you would call it. I think there’s a proper term senior something like that that they’re putting on my tax returns.
But yes, it it is an automatic And so so the reason I’m asking is because I’m trying to calculate how much to take from my wife’s IRA without us having to pay taxes on it Um we don’t make a lot of extra income, but we don’t need it. Our social security is good for us. Um so I How I did it was I took the table where you figure out your taxable social security based on you know there’s a number you plop in and it tells you how much is going to be taxed.
Right I mean I found the chart online which which gave me the number. So I took that and I took the amount I want to take out. And then what I think my income is going to be, and it comes out to less than the forty six seven, which was this the deduction that I you know, the whole twelve thousand plus thirty-four seven If I do that, I shouldn’t owe any taxes next year if I do that, right? 100%. That is the game we love playing, especially when people have retired.
They’ve they’ve Limit like yourself, you’ve limited all your debts so you can live off your social security. Theoretically you can have a decent, you know, but you have money let’s say in an IR uh a traditional IRA or four And theoretically, could you be converting money every year for nothing or pennies on the dollar? Um, and then that way, you know, when your family inherits or whoever inherits So why not money from the government for free?
That’s what I want to do because I don’t have to do it from my social security. I’m not required for another two years to take money out. first year that she’s required to so I want to take out as much as I can so that when the time comes, you know her R and D is going to be less. So no that’s that’s a smart idea. Seriously. Very smart Martin I I I I’m glad you brought that up to be honest, Val, because I think so often people just look at the idea I don’t have to pay taxes or or I’m paying the minimum or I don’t even need to file, right?
But then you you’re leaving money on the table if you don’t need to file it and you do have an IRA or a 401k, maybe you should file just to make that tax-free conversion. It’s just saying you know it’s it’s free money so good idea great planning very good thank you bye bye thank you appreciate it all right that was actually really good um what val was saying so if you are someone one and it doesn’t have to be anyone that’s 65 and older. I’ve got people that retire at at 58 and 60 um and they don’t need to take any money out but maybe they have um small pension or something they’re getting or maybe maybe they’re just living off of savings.
So the idea would be is to take that free money that the IRS is giving you And if you’re 65 and older, like he said, it’s basically forty-six thousand dollars. Now, again, you have to take into account your provisional income or your social security portion that will be taxed because for some of you you have a zero tax on your social security.
If you do a conversion, it could be a dollar for dollar. So if you convert 20,000, 20,000 of your social security could be taxed so there’s your 40 but that’s twenty thousand dollars that was converted for zero dollars i mean it’s kind of a no-brainer but you do need to just play the game hopefully you’ve got a good tax person or or if you do it yourself just as Val may be doing figuring it out now’s the time to kind of put it into the this year’s tax program and say hey if I do this and I calculate this and it it comes out with zero because sometimes you have interest and dividends and capital gains, a few moving parts that you don’t have absolute, but the tax code’s not planning to change a lot from 2025 to 2026.
So it’s time for you to play the game and see how much money you can do without paying. Or maybe you’re only paying six or seven percent And you know, if your children, and I know it’s kind of morbid, but all of us are gonna pass away at some point, and the game is to let your children have it for a lot less than what they would have to pay if you pass away. And if you have a healthy IRA, I mean I’ve got people that have several million, but let’s just say you have 500,000 or a million, you know, and you’ve got one or two children, they have to take all that money out in 10 years.
That’s the new law, right? So you right now have your entire lifetime to do conversions or do whatever, but when they inherit what’s left, and it’s a traditional IRA and or 401k, they now have a 10-year clock to take whatever you have in there. So if they’re at a decent income bracket, you know, they’re going to have to pay 24 Or some 32% tax on their inheritance. And you could have maybe paid 12 or less on some of it.
Maybe you’ll never get it all converted, but what you can convert will grow tax-free. So therefore they will have some money that is fully tax-free, if nothing else, to help pay for the taxes on the IRA that isn’t. So it’s just a gift that keeps on giving. So keep looking that direction. Again, I’m not a financial.
So I’m not saying this uh this approach is for everyone. It’s not. I’m sure there are people out there that if you’re gonna be living off of what you have in an IRA or in your retirement that’s in a tax account a taxable account, you know, maybe it’s it just let it ride and you use it every year during your lifetime and it’s not.
Another game to play and I haven’t I was talking to someone I guess they had heard the radio show or whatever and I gave them this idea and I I’m glad I said it, but I want to repeat myself because it saved them tens of thousands of dollars because the mother um who was very much a person to squirrel a lot of money aside, right? So she had a very healthy bank account. She ended up in a nursing home. Um it’s costing eleven thousand dollars a month and she also had several hundred thousand dollars in a IRA they were um going to take a lot of they were just going to spin down her cash and then go And start taking the money from the IRA.
And then they heard what I said, and then they checked with their financial planner to make sure this was a good plan for mom. Because again, we don’t want to, I’m I’m giving you good time tax advice. I’m not your financial planner. Sometimes we don’t work hand in hand. But if if it does work, it’s beautiful.
So anyways, in this case they were going to take a portion of her IRA, which could apply against, because again She had dementia. She was not going to be ever to live on her own again. It was in a um assisted living, full, full living facility. And so they were able to take part of that because that’s medical cost. And then that way they were taking tax dollars and being able to write it off against medical cost, and it was helping to reduce the cost and therefore she really wasn’t paying tax on it either.
It was going to put more money in everyone’s pockets. Cash is cash and we want to keep as much as we can. um and pay as little amount of taxes as possible, especially when you’ve worked out your whole life to accumulate this and you don’t want to just be giving it away. All right. So if you want to join the show you can 615 737 9986 615 737 9986 is the phone number here i’m an enrolled agent licensed with the internal revenue service to do taxes and revenue I do not work for the IRS.
I work for you, the people, and helpfully give you the guidance you need to represent You in front of the IRS. We’re gonna take our first break. We’ll be right back with the Dr. Friday show. Alrighty, we are back here live in studio working on on our taxes, trying to figure out what the best way to do things is going to be for all of us.
And remember some things that are best for one thing might not be very good for another person. And so make sure that you’re getting some good solid tax advice on your particular situation because penalties and interest can be a bit expensive and you don’t want to be paying them If you don’t have to. Let’s talk a little bit about the Trump uh bank accounts.
Because I can’t say uh yesterday was probably the first day where I had a number of people that were starting to um oh an I shouldn’t say bank account investment for the kids account um I think they’re just calling them the Trump investment account for kids is what I think they’re referring to about. But um it’s basically just the jump start for that generation. It’s really important. I think anyone that has, and keep in mind, you as a grandparent may want to consider um having the form filled out, you can also go right to the IRS.
I think it’s called Trump account and you can file the 4547. So again, the 4547 is gonna basically want the custodial parent or grandparent to complete this so you can set up an account where you can actually put and if the child was born in the year of 2025 There is some additional benefits for those children. You get up to another $1,000 in summer, if it depending, I know.
uh Microsoft and and a couple are actually adding to these funds. But if the child was born in 2025 or any child born from 25 to 28 will get an additional thousand. But after that you have um a $5,000 per year contribution. And so a lot of times, I’ll be honest, as an aunt to what, 18 or 16 um nieces and nephews and probably another six or seven great nieces and nephew.
We, you know, a lot of times we’ll either buy savings bonds, we’ll we’ll spoil them rotten. Maybe one of the better things because this whole pop idea is to give them this investment. Um, and there was usually nothing there. You had a 529 was the probably the closest to something like this, but um it’s an investment account for a child that’s not working, right?
So once you start working, you can do IRAs. Which is sort of like what this is. But the nice thing about this is, at least in the example I’m going to give you, is I know someone that’s divorced It’s been pretty bad the whole time. And so there’s no communication. And last thing they want from each other is for them to have any benefit from each other.
But The child is what we’re talking about. So this account is set up. You file a 4547, you put them in there, and then grandma or grandpa or aunts and uncles Um, or the children themselves, if they get money from other ways, can contribute up to $5,000 into this account and it will grow until the age of 18. At that time, this account goes into that child’s name.
They could use it for education, they can use it to buy their first home, they can buy it for trade, so they can use it for trade school because not everybody is designed to go to college. Um, you know, it’s just really easy. Qualified name, US citizen, social security number. That’s it. And you can set it up.
Um we were, I was talking to someone yesterday and they have six grandchildren, two in which they are raising. because unfortunately um one of their child children passed away so they’re raising the grandchildren and then they have four others and so they wanted to make sure these were established so grandma and grandpa can contribute money to these accounts And then that way when these kids get older, and maybe grandma and grandpa may not be here, some of them were two and three years old, who knows?
Then they have these accounts and they can Use them for their education, for their um for their first-time home buyers. You know, this is a way of giving that generation some amazing step-ups that some of us may not have been fortunate enough to have. That’s the purpose in it, right? Is to be able to give this next generation $5,000.
And if it’s got 10 years, this child will have $50,000 plus the growth in this account. Um and maybe more if they’re if it starts when they’re just born, right? Because you have 18 years and you, you know, and it doesn’t always have to be the same person, right? It can be I put in a thousand My brother puts in a thousand.
The grandparents from the other side put in a thousand. It’s not like everyone has to, but if you could do that, just a maze imagine what those children could do with that money. All right, we got Jeff from Manchester and see if I can help him. Hey, Jeff. Hey, how are you? I am awesome.
How about yourself? I’m doing all right today. Um, I have a question. Uh my father is ninety-two years old and just sold his house to move into an assisted living. And the sales price was approximately a million dollars. Okay. And we’re curious as to what we need to do to navigate capital gains taxes.
Great question. So what you and hopefully dad is still able to help a little bit, but we need to know how much did they buy that property for and then if they’ve owned it for the last forty years, let’s say, because that’s what I had one recently. They had basically built it and lived in there. But they had re they they had done some improvement. Improvements on it over the years, major improvements, adding things, things like that.
I don’t, I mean, again, at 92, I’m not too sure if Dad has all of that documentation, but to the best of our ability, we’ll need to know when he purchased it. We can use if we have to probably um tax assessments, but ideally if you could find the original form, did he build it or did he buy it? Do you know? Um he bought the piece of property and then he built a house on it in the fifties and then I believe he built an addition on to it in the seventies.
Okay. So and was he married or is he married? Uh he was married uh but she’s since passed away. Well, was she on the title at the time that they built? Was this his spouse and I mean his spouse he said he was married, but were they both in this house as joint tenants? Do you know?
‘Cause back in the fifties and forties things were a little wonky for what you know, I mean just how things were put in names. And they divorced and she’s passed away. Uh, he remarried and she is uh passed away. So he’s outlived them both, but Poor guy. Um so the reason I’m asking this is because if they were if they were I mean, unfortunately with divorce, there wouldn’t have been a step up in basis.
He basically either brought her out of the house or they she agreed uh they made their own arrangements, right? Whatever it didn’t affect the basis of the house If the second wife moved in and she lived there until sh and she became um and they and they jointly held the property and this is where it gets a little, I don’t know, and we may have to get a little deeper in than we can on the radio But um if she became part of the home as far as you know she was on the um title um and then she passed away, there would have been a step up in basis at the time of her passing, and that’s what I’m looking for.
because obviously if she passed away in the 80s versus the house in the 50s, we might have had a better basis for pat half of the home. But I don’t know if that’s gonna apply or not. I uh a question about that. Uh the house was on approximately an acre and sometime in the nineties, I believe. He bought an adjacent acre and a half or two acres to increase the size of the property.
Would purchasing and joining the two pieces of land would that cons would that make the step up in basis? Because it’s less than five eight well it won’t get a step up in basis, but it would add to his base Because he went and spent another twenty-five thousand, fifty thousand. I don’t know what whatever it costs for that acre and a half, two acres. Now that would be added to his homestead or his home property.
So it it it would increase the basis because when you when he sold them assuming it included all let’s just say three acres at the time of the sale Okay. So we need, you know, you’ve got a couple different moving parts. Because basically what you’re gonna have in it you know is whatever we can justify he put into the house plus at this moment $250,000 that he gets as an exclusion.
The rest of it, whatever that number plus 250,000, anything above that number is going to be capital gains. So it’s important to try to do our best to come up with all the legitimate basis we can. Or step up in basis if the wife passed away and you know she was part of the home. Okay. So my next question uh to that is Uh he lives in South Carolina, so I assume I need to find a CPA located in South Carolina.
Is the what is the I mean we yeah, I mean we can do we do all states, but I would say it may be beneficial. Um they may know Um as we know here in Tennessee, obviously living here thirty years, if you can find someone, they may know because there’s a state tax in South Carolina as well. So not only capital gains to the Fed, but also capital gains to the state.
So yes, we need to, we you probably need to have someone that has some um experience in dealing with real estate, if you can. Okay. Uh any suggestions on how to go about finding that person? Do you guys have an estate uh does di since he lives there, does he have any kind of attorney that he’s been dealing with for his trust or will Uh I don’t believe so. Which it’s probably something else that needs to be good put in place, huh?
Yeah. I’m thinking it a lot of times we work hand in hand Like here I often work with attorneys. So as I say, if you can find an attorney, often they’ll work in hand in hand because he’s gonna need um like well he should have a goodwill, obviously, if nothing else, or a trust, um, but something and And then he needs the power of attorneys for, you know, medical. He may have all those, but it might not hurt to have um an update done at this point since he’s changing ownership of the home, moving into a facility.
Um might not hurt to just get all of that, you know, make sure. And then, you know, at 92, you know, we hope and pray he has a nice long life, but the fact is he’s towards the end of it at this point.
everything is nice and organized because I’m sure he would like that. Um and then having that attorney in state because you’re talking to me here, so I’m assuming you’re a Tennessean And not that it’s a far drive, but we do have a state and uh federal situation there that we don’t have to deal with here. I understand. Yes, and I am a Tennessee resident, so Okay But yeah, so if you if you need help, you can always um text my office or call my office and I will give you if nothing else I can give you a few places to start and then they might be able to lead you to someone you feel comfortable with.
All right. Well thank you so much for your help. Yeah. Thank you. All right, guys, we’re going to take another break here. When we get back, you can join us 615-737-998. We’ll be right back with the Dr. Friday show. Alrighty, we are back here live in studio. And you can join us online or Live here in studio at 615-737-9986.
We’re gonna hit Nelson in Nashville. Hey Nelson, what can I do for you, sweetheart? Hey Dr. Friday, how you doing? I am doing good. Hopefully you are also. I wanted to know some standard deductions amounts. I just want to know, you know, h what the final status is.
How much is, you know, for each of each uh threshold uh for uh uh this is for people over sixty five years old. Uh what is the standard industry for a filing marriage So if you’re finally married, um you basically have the standard deduction is 31. 5 and then you get an additional um 1600.
I’m looking it up really quick. I’m cheating because I don’t have that memorized myself. And then on top of that, um you’re gonna get another 12 because I know it’s 43. 5 So it’s yeah, so it’s 435 is what you get if you’re over the age of 65, I believe. leave that’s what it comes out to here we go married 435 would be the total for both spouses basis 31 plus you get thirty two hundred dollars extra Um, so that makes it 34-7 plus the twelfth.
So your standard deduction is thirty-four-seven. What about filing single I mean separate in your married? Married filing separately, it uh it’s basically just taking that number in half. They give you sixteen hundred plus your standard deduction of what fifteen So it’s just basically taking that 34-7 and dividing in half. They don’t give you any additional benefit from married filing separately.
I think it’s about 17350. would be the standard plus if you’re over 65 you’ll get that additional 6,000 if the income now marry finally separately you cannot get the 6000 So that new one that came in, it only allows for married filing jointly, single or head of household. Married filing separately, it’s disallowed. So that’d be something like 19 something or what? Uh 17,350 is what you would get married filing separately.
Okay, and the last one is a single flower. If you’re just single and you’re filing separately, I mean just single without the other is um twenty-one seven fifty. It’s 21. Okay. Uh did they ever do they still do that uh deduction extra deduction if you’re legally blind? Um if you’re over 65, you don’t get the extra deduction for being legally blind.
I don’t believe leave but let me just double check that i don’t do a lot of um yeah i wanted it used to be a fifteen hundred dollar used to be um like an extra fifteen hundred dollars um in 2025 legally vacuum total standard okay so a single person over the age of 65 that is legally blind would get an additional two thousand dollars so that would be 19750 This is what happens when you keep your computers. So they do give me another two thousand dollars.
Yes, sir. You good question. Well, I really appreciate it. And I’ll and all you have to do is add the uh six thousand to that nineteen, right Right, if you’re single, legally single, yes, sir. Oh, okay. All right. Well I appreciate it. No problem. Thank you for asking Appreciate that.
Okay. All right, thanks. Bye-bye. All right, let’s hit Rebecca in Cottontown. Hey Rebecca. Hello. Thank you for taking my call. Mm-hmm. I have a job that’s funded by block grant funding. And the people that write the check said don’t claim it on my income tax ’cause it’s not taxable Well, I claimed it one year.
I don’t have to pay federal taxes on it, but I had to pay social security taxes on it Okay, that’s an unusual. So a block grant is basically a federally grant awarded to state or federal government broadly defined as functions, health care, so social services are Community, highly flexible, lacking of automatic funding. I can’t say I’ve ever really heard of a block grant, but what you’re saying is it’s not earned income, therefore they’re not taxing you as far as the ordinary income tax, but it still qualifies as earnings because Social Security and Medicare has to be paid.
Right. Huh. Reciprocant can tailor the program to look around the And you just work for them though. You’re an employee of this company that has the grant. Well, actually they write the checks, but it’s like I’m an individual and they fund the people that I work for. better light and but again you’re you’re actually work I mean I I’m a little just making sure I don’t want to lead you in the wrong but you’re actually working for a company that has received this grant Um, but you’re you’re not an owner of that company.
You are actually an employee or are they just giving you money every month? I mean are they 1099 in you? Is there any paper? 1099 at all. Nothing You don’t hit nothing except you check with a stub that says which client you work for. Okay. Well, I’m gonna be quite honest.
I have never heard and I’m gonna be researching that Because to me, even if um my company receives the grant, and from what I’m reading here, it’s basically designed for love uh smaller regional government bodies to help aid in social services of different types, right? It’s supposed to help with care, social health care, children care, et cetera. But if you’re the employee, so let’s say I have a daycare and I get the grant, my employees are still going to be required to have all the regular Because what if they fire you?
You should be qualified for unemployment. You know, I mean, I’m assuming this is a ordinary job. So I think they’re I think they’re misleading you. I will be honest with you. Now if somebody’s listening to this and is totally hooked into this, I don’t want to mislead this lady, but I’m I mean I can understand if a grant comes into my companies, I have people that have gotten grants to buy or to recycle something and that is not taxable because the money is used for for a specific purpose, but I’ve never heard of an employee that works for a company that receives a grant not to be treated just as any other employee.
I know if it’s a nonprofit, if they have less than five employees, they don’t have have to pay unemployments. There’s certain things that work for nonprofit. Are you working for a nonprofit? Yes, ma’am. Okay. It is a it is a legitimate 501c or version of a 501c? Yes, ma’am.
Okay. I still, I mean, we do a lot of nonprofits and I still think that you are not a uh officer of this nonprofit, you are an employee. I think they’re leading you down the wrong path. But you need to keep if you don’t mind, Rebecca, keep listening. I’m gonna put my number out in just a second, my regular number Um, and we can follow up on that and I can get a little bit more.
I don’t want to put any more on you because this is just the basic call-in show, but um If if you have to pay Social Security and Medicare, you have to pay ordinary income. That I know. But let me um let me see if I can jump to Pam that’s on the line and and I’m gonna get my phone number out and we can talk more off the air, okay?
Okay, thank you. Okay, thanks. Let’s hit Pam from Manchester real quick. Hi, Pam. Do you have any I have I have a really s maybe strange question. Uh in 2014 I got a reverse mortgage on my house. Uh I moved in uh 2011 and I just sold it in 2025.
And I have uh let’s see, mortgage insurance well anyway, I I paid off the the the uh reverse mortgage And I uh I I’m on Social Security, I’m seventy-three years old and I don’t know uh what are my options as far as filing income tax And um I know I I don’t have enough to do the uh capital gains because it’s under two fifty.
But uh uh I bought the house for seventy three thousand and I sold it for two ten. Okay, yeah. So even if I I mean so yeah, your your your math is correct, Pam. So obviously you sold it for less, but you do need to report that as a f they don’t always know it’s your home that you sold. They may get a ten ninety-nine S and they may not the government should get representation that the home was sold.
So there is a primary home form that you need to put on your tax return it will not be it’s all gonna be zeros I suggest you doing it you probably don’t have to um no capital gains and you’re living off social security no required filing uh for Social Security if that’s all you have. And you could you could probably wait and see if the government comes back and asks you or they send you one of those love letters says now we’re charging you capital gains because you didn’t report it.
But I don’t want to put that pressure. It may never happen, to be honest with you. But you’re under the requirements as far as you’ll pay zero capital gains on the house as well as you know, obviously with zero capital gains nothing else is going to be made taxable like your social security or anything. Right. But is any of the interest that I paid on the reverse mortgage uh recoupable?
Well since you don’t really have any income There’s no reason to worry about itemizing. I mean all you could do is itemize to reduce taxes due. You don’t have any taxes due, therefore the itemizing would be of no use. use. Okay, so just uh just do the standard uh ten forty or whatever and uh make sure that I fill out the sales sale of a house form.
else it’s going to be all zeros there’s no advantage to having an additional loss because there’s no there’s nothing taxable Right, because my re my retirement unfortunately was from uh Kmart and it’s less than two hundred dollars a year. Oh wow. Okay. Yeah, so again that keeps you and then after this you won’t be filing, at least for a very long time Well, you know, I I do that just to to because uh because we’ve brainwashed you for the last sixty years.
I’m sorry, what? I said it’s because we’ve taught you for the last fifty years of your life, when you were working and everything, you’ve always filed taxes. Oh yeah. Yeah. But we don’t have to be a little bit more than that. Yeah. It’s up to you. It’s always something you can fill out.
It’s not a problem with you doing. I’m just saying the the mandate is there that you are not required if you have less than 15,000 as a single person and you’re on Social Security, you’re not going to be filing a tax return. You certainly can. No one stops you, but I’m just saying that the pressure is off. You don’t have to Well uh with the social security I brought in like forty thousand, but I know I only have to pay taxes on half of that.
And then that makes sense. Right. Uh Social Security is is full tax free unless you earn another fifteen thousand above the social security. But what you’re telling me is you’re pretty much living off your social security with the little retirement you’re getting from when you worked, but it was only like two or three hundred dollars a year.
Right. Oh, it’s not even that much. Okay, so you are not required because the Social Security only becomes taxable when you You have other earnings of like fifteen thousand. Okay. So then no file no filing unless I really want to and to go ahead and and file the paperwork for that I sold the house.
You got it. Perfect. Perfect. Well, all right. Thank you so very much. I relinked my mind. Thanks. All right, we’re going to take our last break. We’ll be right back with the Dr. Friday show. Alrighty, we are back here live in studio. Again, you can join the show.
We got a few more minutes. 615-737 9986-615-737-9986, taking your calls, talking about my favorite subject at least, taxes. Um, I did want to bring back up on the block grant. I was texting with someone because again, I’m not gonna say I’m always an expert on certain nonprofits. I don’t get as much into nonprofits as businesses for profits.
But it was specifically told to me that if you must pay income tax on any wages you receive from any nonprofit, even if that nonprofit is funded by a block. grant while the nonprofit itself is tax-free, he says, but the employees are still subjected. And that employer that you’re working for, that is the nonprofit, should be providing you a usual form called a W-2.
Nonprofits are required to file them just as any other organization. The source of the funding does not exempt employees. from paying any kind of personal tax. So not only should you be paying Social Security and Medicare, you should also be paying ordinary income tax on that. But if you are listening, uh, I think it’s Rebecca, you can also call me at 615-367-0819.
For anyone listening, that’s my direct line, 615-08 367-0819. Um, and you can give me a call on Monday and if you need more information on what you should be doing, but they should be giving you a W-2 and or a 1099, not knowing your connection exactly, but either way, your income should not change from uh for-profit or not for profit. The block grant has no bearing on you as the employee or subcontractor.
All right, so that all being said, it’s getting down to the final part. So we just want to make sure that it is tax season. It’s time for you to think about preparing your taxes. But not only preparing this year, thinking about next year. This is the time. I mean, I know we often have a large number of people that are um, you know making changes in life, right?
We have things that we we want to do. Conversions one thing, but maybe you’re thinking about retiring. Maybe you’re thinking about selling your house and downsizing or moving to another state All these decisions are pretty big, and most of them, I hate to tell you, have a tax impact. And so making that impact is important to being able to understand how to um follow through with that to know am I gonna owe money?
Is it a good idea to owe money? Is it a good idea to do something with it? Or, you know Just so you’re prepared. No one likes to file their taxes and know they owe $83,000 like someone I just finished. All right, so let’s hit the phone line real quick.
Moose in uh Greensbrier Briar. Excuse me, Greensbrier. Hey Moose Yes ma’am, how do you file like if you’re doing side work, how do you uh how do you file that in other words if I wrote down five thousand dollars in income, am I am I gonna have to provide You know, or is that just gonna red flag a audit? Well no, it won’t I mean a lot of people do side work.
You’re gonna file that on a schedule C like cat Um, and it’s basically designed for self-employment. You’re gonna tell them, hey, I was doing landscape, I did handyman work, I whatever, I don’t know what you do. Um, and then you’re gonna fill in your income and or expenses um that you might have had to do whatever you’re doing for the side work and then pay taxes on it as you have.
Um whatever you know, whatever the profit is after your ex legitimate expenses you might have for that five thousand. But no, I mean We do a ton of Schedule C’s for people that do what I might say side work where they work a regular W-2 job, but yet on the weekends or things, they do a side electrical, they do a side, you know, handyman work, whatever.
Okay, schedule C is in CAT. Yep, you got it, sir. Thank you. Okay, thank you. All right, so again, that’s a great question. Because if you’re filing your taxes, you kind of want to make sure you are reporting all of your income. And I want to clarify one thing because a lot of times people will come in and they give you all their 1099s and they say, here’s all my income.
And I’m always asking them because the likeliness is that you don’t get all of your income on 1099. Some people are just not going to 1099. You maybe made less than $79 $600. Yes, you are required as the person receiving the money to report that’s uh $500 or $400. They may not be required to 1099 you because anything under $600, we don’t have to Same thing when I’ve had someone just recently, we did all their taxes, and then she came back and said, oh wait, I’ve got another 1099.
Well, you’re supposed to be giving your tax person every dollar you’ve earned If you get a 1099 or not. And it’s pretty easy because it’s every dollar that either went into your bank or all the cash that you have used throughout the year. You as a business owner, that is your responsibility to track all the income you are making and on the other side track the expenses that go into those just because someone gave you cash doesn’t mean that you’re entitled to not report it Um the IRS is kind of funny that way.
They, you know, and keep in mind, the IRS is an enforcement agency. They don’t write tax law. They are not The bad guys, in essence, no one likes enforcement, but the fact is their job is to collect so that we can have all the benefits we have here in the United States. You may not like the way they spend the money in Congress and the Senate, but the IRS is not spending the money.
They’re collecting it, putting it into the general fund. General fund is then spent however they spend it. And yes, I’m with you. It’s not spent very well Um, but I had a a gentleman come in my office and he’s like, I don’t want to pay any taxes. I don’t want to have to do this.
This taxes are unfair. We shouldn’t Well, I think probably every single person listening would say taxes are always high, taxes are not always fair, it’s not a good thing to always have to pay taxes. Some of us Um, you know, some people I I have as clients pay more in taxes than people make in a year. It’s not something that you have a choice, though.
You’re a U. S. citizen. Our obligation is to pay our taxes Also, our obligation is to take every legitimate tax deduction we’re entitled to. But you can’t take that if you’re not tracking it So again, you know, if you ever get audited, they’re going to do a means test, meaning your lifestyle, if it’s more than what you’re showing on your tax return.
In some cases, I see people come in and they say they’ve only made $10 or $12,000. They’re raising a child, but yet they’ve got a car payment that’s $600 a month and a rental, they pay rent of $14 or $15. There’s no way you can be living off that if you don’t have both. Just saying, not possible. All right, we’re gonna hit Alley really quick in Manchester because we only have about three minutes left.
Yes I sold a place in in McGallan, Texas, and uh I took a cash offer And I only received around one hundred sixty five thousand for that, but it was appraised for way over two hundred plus thousand. But I took it because it was a cash offer and to avoid expenses like property taxes and so on. And now with the IRS they say I’m to pay a capital gains tax.
And I wanted to ask you, uh I’m age seventy seven. Uh do you think I should pay the capital gains tax? Yeah, well you would it just depends. How much did you buy this property for? Uh I bought it for 130,000 in 2021. Uh-huh. It was at a rental.
other people that could just rent it to all ages. Okay. But w while you owned it, was it a rental for you? Did you have it on your tax return as a rental Well, yeah, I did rent it out two different times and but but not for long because well, one guy moved out early and the second lady moved out because she didn’t want to pay an increase in rent when all the costs went up.
Yeah. Well, right now just based on what you said, you paid 130, you sold it for 165. If there was closing cost fees, you can back that out. But you do have about thirty thousand plus recapture of depreciation. So yes, ma’am, age has no bearing on it. You do have, based on what you’ve given me, some capital gains issues.
Now if you don’t have have very much income and um you know this is all you have theoretically there is a zero percent capital gains rate but I don’t do your taxes so you might want to just but yes ma’am I’m gonna have to take a quick break here because the show’s gonna end. But um But yes, you will need to to talk to someone, but you may have taxes due.
Sorry. Yeah, I’m gonna get back in touch with you. Thank you. Thank you so much. Good night. Thank you. All right. We’re gonna take uh this the end of the show so I need to make sure you guys have my contact information 615-3670819 that you can call on Monday 6153 367-0819.
You can also email Friday at drfriday. com, Friday at drfriday. com, or just check us out on the web. You can also send questions through the website drfriday. com again drfriday. com again it’s tax season I know there’s a lot of crazy things going around do not fall for some of the phone calls there is I meant to hit on some of the scams the IRS says is happening.
If you’re getting rejections on your uh tax returns and things, you may have to call the IRS. But keep in mind that we’re here. So hope you copy later, as we always say and also Joy.