Another incredible episode of the Dr. Friday Radio Show is here! In this episode, Dr. Friday takes on the latest tax updates, answers callers questions, and talks over the following topics:
- Dr. Friday’s Tax Tips For the Tax Season
- Can I Take My IRA Out Without Penalty?
- Taxes For Individuals Are Due April 18
- How To Start Filing Quarterly
- What If I Received Two Stimulus Checks In 2021?
- The Difference Between Sole Proprietorship and LLC
- Why You Need to Start Preparing for Tax Season
- Do I Need to Get an EIN for My Sales?
- Don’t Leave Tax Money On the Table
- How To Get Back on Track With the IRS
and much more!
Announcer 0:01 No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or 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. 615-737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
Dr. Friday 0:30 All right, the doctor is in the house and oh, man, are we in a full blown tax season? That’s right, it is tax time. And if you haven’t already set up an appointment, unless you are pre-existing clients, then our office I know is already full. I’m sure a lot of other CPA or accounting full firms are also you can’t wait to that last minute to decide who you’re going to have do your taxes, or you may end up doing them yourself.
Dr. Friday 0:55 You can join the show we are live 615-737-9986 is the number here in the studio 615-737-9986. While we’re waiting for some of those calls to get answered here. I did want to start the show up with an email I had gotten this morning from one of my clients that have been with me for a number of years.
Dr. Friday 1:17 And apparently he was getting some emails saying that there was going to be another stimulus out there. And he was smart enough to say hey, Fridays, this actually true coming for home $3,708 home stimulus. Guys, I need you to make sure you understand if anyone has actually received that and thinking that there’s another stimulus check coming in the mail. It’s not going to be that kind of stimulus. Okay, guys?
Dr. Friday 1:43 This is actually been out there since the middle of last year. But it is something that had to do with homeowners and renters and it was during the COVID. And what they were trying to help people be able to extend their mortgages, try to get you out of not losing your home just because you had a lower income. So that’s where that is. It’s not a stimulus check. Just wanted to get that out there because I know I’ll start getting quite a few phone calls on that situation. Once it starts coming out, especially if a lot of people are getting these robo emails or whatever they’re called.
Dr. Friday 2:15 Alright, sweetheart, why don’t we start with the first one Lisa in Nashville. Hello, Lisa.
2:22 Hello, I’ve got a question we received from my son’s college, two 1099 Q’s one made out to him. And one made out to me because I made a draw against his 529 for reimbursement of things that I had to pay out of pocket before we got financial aid setup and all that. And he also received a 1098 T from the college. And we received a it was a $2,000 refund as part of the America Rescue Plan. How does that affect?
Dr. Friday 3:08 So claiming the child is the child on your tax return? Or is he old enough where he’s filing his own taxes?
Caller 3:14 No, he’s a dependent.
Dr. Friday 3:17 Makes it easier as far as I’m concerned. So what you’re going to basically have is you’re going to be filing the two 1099 Q’s on the 529 plan or state plan, whatever it might have been, that’s going to help offset the cost, right? So you’re going to do an educational form. Along with that you’re going to report the 1098 T, because there still could have been additional college credits that you could qualify up to $2,500 of college credits.
Dr. Friday 3:46 So when you put all that in, you should be able to, you know, take care of the the cost, right? It probably washes but the money you put in the 529 doesn’t disclude you from getting educational credit.
Dr. Friday 4:02 So really, what you want to do is make sure you’ve got the two 1099 Q’s, either to you or to him, they both are going to report on your tax returns and sees your dependents. And then it’s all going to roll over to the educational forum and it’s going to show room board, tuition, you know all the different things that you are paying for to zero out the cost of the 1099 Q plus any additional funds that you may have had to pay.
Caller 4:29 Even if he has to file his own small return for like maybe $1500 or $2,000 that he worked for?
Dr. Friday 4:38 He’s filed a tax return but there’s a box on that return that will say Can someone else claim you as a dependent he wants to definitely say yes, because he’s truly your dependent. He’ll get his refund that’s inbox two of his W2’s. If there’s any if there’s nothing inbox to the W2, there’s no sense in filing there’s no refund to have.
Caller 4:59 Okay, and then that $2,000 refund that they sent us?
Dr. Friday 5:04 That’s not going to come into play. Unless it’s coming on the 1099 Q it’s already been reported under the 1098. T.
Caller 5:14 Okay, good deal. Sounds good. Thank you.
Dr. Friday 5:18 No problem, sweetheart. Thank you. Okay, David in Bentwood.
Caller 5:26 Hello.
Dr. Friday 5:26 Hey, sweetheart.
Caller 5:28 How are you doing today?
Dr. Friday 5:29 I’m doing pretty good. How about you?
Caller 5:32 Excellent. I’ve got a kind of an unfortunate question here. My wife, if I don’t use the right terminology, I’ll try my best here. But my wife is the beneficiary of I believe it’s an annuity that her aunt passed away. And let’s just use the number, for easy math $100,000. But it is to be split with her sister 50/50. That was her wishes on it. What is how should this be done? As far as tax implications, so we don’t get taxed the full amounts on that since half of it is going to go to our sisters a way to do this?
Dr. Friday 6:09 Well, the first question I would have is, was the POD paid on death only to your wife? Or was it gone through a trust or an estate? Or how would that how was it?
Caller 6:21 I believe solely my wife’s name on it.
Dr. Friday 6:25 Okay. Then there’s not going to be any direct easy way of avoiding the tax what your sister what your daughter’s how, oh, my goodness, your wife, sorry, I was putting every family member, like your wife’s gonna have to do. And this will be a determination of how she wants to handle it.
Dr. Friday 6:41 Because sometimes taking it all out at one time may not be the best tax advantage, but she’s going to have to hold back the taxes and then split the net effect with the sister not the gross effect. So after you and your wife pay the taxes, then you can split the money.
Caller 6:59 Okay, so will her sister then have another tax because she’s receiving income?
Dr. Friday 7:05 No, it’s really what you’re doing is gifting the remaining to her.
Caller 7:10 Okay, so let’s say that the tax on it is 30,000. So just take 70 and split it she gets 35 we get 35 each?
Dr. Friday 7:18 Yes. Correct. And the sister will have no tax situation.
Caller 7:22 Gotcha. Okay, that is very helpful. Thanks for help.
Dr. Friday 7:25 No problem. Thanks. All right, we have Dan. Dan in Mount Juliet. Hello, Dan.
Caller 7:32 Hi, Dr. Friday, thank you for taking my call. My son passed away last year at age 39. Without a will, he lived with us he was single, no dependents. He used to do the short form. For his part time work. Last year, he happen to have two part time jobs. I know it went to probate and all that was less than 50,000 or whatever, approximately 30,000 cash in holdings, property, car, etc.
Caller 8:05 No actual property that he owned, he lived with us. So what do I do to get his taxes done? I’ve got the forms from the Wilson County saying that, you know, I am the what they call the affiant. And my wife was the beneficiary, she’s here, how do I file my
Dr. Friday 8:24 You’re gonna file a regular tax return just like you were filling it out for yourself. But at the end of it, you’re going to be signing it as the executor, x or beneficiary, and there’s gonna be a form, I believe it’s a 1310 that has to be filed. And it’s going to basically say, who should we be making the RE if there’s a refund, there’s a refund, who should be making the refund check out to and then you’re going to attach a copy of, I would at least attach a copy of the death certificate along with the trust, I’m sorry, the court papers that you have. Just a photocopy.
Dr. Friday 9:04 And I would probably just mail the return in you won’t be able to E file it anyways. But take the 1310 along with the 1040 and a copy of the documents. And then make sure you do it by trackable mail certified to the IRS, it will take a bit of time because they’re already kind of backed up. But that’s the only way you’re gonna successfully get that return file.
Caller 9:25 Okay, I’ve never done a short from before and everything he did was on the computer. So I don’t have any access to that. That information is gone. But I can work my way through it on a short form. Is that okay?
Dr. Friday 9:37 Yeah, that’s perfect. And if you’re going to do it on on paper or download instance, you don’t tell your computer savvy paper is fine. It’s got to be pretty straightforward. You’ll also attach copies of his W twos, kind of like the old days when you may have done taxes. We just have to attach them to the front of the return. You’ll do the same thing and in this particular case.
Caller 9:58 Okay, thank you very much. I appreciate your help.
Dr. Friday 10:00 No problem. Sorry for your loss. All right, I’m gonna try this name. Rolleta? That’s a pretty name. I’m so sorry. What do I have the pleasure to help you with today?
Caller 10:14 Okay, I did email you this question last week, but I don’t think I made myself clear. I was at my job for nine and a half years. And when I started the job, I did open up a Roth IRA. I just resigned from the job. And I’m 62 years old. Can I take that Roth IRA with me without penalty?
Dr. Friday 10:34 Well, I think I do remember your email. And the answer to that is you can take as far as you can leave that you can move it to another Roth IRA, that’s not a question. But if you want to take the money out, you cannot take it out. If you can trim it, the tax law is five year window. So, 59 or 59, and a half or five years, whichever is later. And in your case, since you were still working up until last month, and putting money into the the Roth, I’m assuming or whatever, that you could take the principal out anytime you want.
Dr. Friday 11:07 So whatever you originally contributed, you can take that out without taxes or penalty. But the money that has grown in there has to be in there for five years from the last from the date that it started. So some of your growth is already hit the five years I’m not an expert, you’d have to talk to whoever’s managing it to get the exact true window because there would be a portion of it. If you took it all out today, a portion of it would be taxable, not penalty, but taxable.
Caller 11:35 Okay. But I can get around taking some of it out without it being taxable.
Dr. Friday 11:40 Absolutely any your original contribution. Let’s say there’s 10,000, I don’t know, you said, but let’s say there’s 10,000 in there. And you know, at least half of it would have been most likely your contribution. And you can find that out again, whoever is managing the account will be able to tell you what your original contribution is, and that could come out tax free.
Caller 11:58 Got it. Thank you so much.
Dr. Friday 12:00 No problem. Great question. All right. And again, if you want to join the show, you can it is 615-737-9986. I’m Dr. Friday, I’m an enrolled agent licensed by the Internal Revenue Service did you taxes and representation so that’s pretty much what this show covers guys taxes, or if you haven’t filed taxes for a number of years, but you have a friend that’s getting all kinds of love letters from the IRS.
Dr. Friday 12:29 And you’re trying to figure out what can we do to help? This is the show to listen to. I’m the person you want to call. So if you want to call us one more time 615-737-9986 We’re gonna take our first break and we’ll get back we’ll take two more of your phone calls after this break.
Dr. Friday 12:54 Alrighty, we are back here live in studio. And if you want to join the show, you can barely see the 615-737-9986. All right, let’s hit James in White House. Hey, James.
Caller 13:15 Hey, how are you? Can you hear me okay?
Dr. Friday 13:17 Yes sir.
Caller 13:18 Okay, my wife and I we live in Tennessee. My wife’s mom passed away last year in December, but she lived in Indiana. And my wife is the executor of her estate. about taxes for her mom. I’m guessing my wife is going to have to do that?
Dr. Friday 13:43 Right. Well, I mean in the year you pass away no matter if she normally or doesn’t, but there would be I mean, she was well no matter what in the year you pass away, but she’s gonna need to file even if she normally doesn’t file I would definitely suggest the year. This particular year she would file a 21 marking her as deceased obviously and file the both the state and the federal since Indiana has a state income tax.
Caller 14:07 Okay, I guess we could do that. I guess online or you go someplace and have it that it’s just no different than us getting our taxes?
Dr. Friday 14:18 No, just mainly making sure ideally in the perfect world would be great if she had a copy of her mother’s last year’s tax return she could find something that would just give the prepare or yourself something to work with so you know, what they what the normal, you know, this shift so security, does she have a pension, you know, what form should she be looking for to make sure that she is reporting all the final incomes.
Caller 14:45 Okay. All right. I guess. I guess it could just be that simple.
Dr. Friday 14:52 I guess that it is. I mean, obviously you’re settling an estate in the state of Indiana, which means there’s going to be a home sale most likely. There is a step up in basis. And in the end is pretty fair as far as their state income tax some of the income your mom, her mom may have had may not even be considered taxable income if it comes from a pension or an annuities or things like that.
Dr. Friday 15:15 So my suggestion would be, especially if you’re from Tennessee, and you don’t, and you haven’t filed Indiana tax would be to go to someone that maybe in most of the most iais are licensed in all states, or, or even maybe mom had an accountant that always did it. You know, I mean, a lot of my clients, I mean, obviously, I’ve been doing for almost 20 years, so she may have had someone she went to, and that would be the easiest way is to go back to the person that’s always prepared, because she would know or he would know what might be missing and make it a lot easier on your wife. If you had to do it virtually through zoom or a conversation over the phone, it may be simpler for your my wife to be able to have that kind of assistance in that situation.
Caller 15:59 Okay, and if there was a return or a refund, I guess would that go to my wife see, she’s the executor?
Dr. Friday 16:06 It would go to the estate. Theoretically, I don’t know if she’s had to open up a bank account in the name of the estates. If there’s more than one beneficiary many times there is an estate bank account. And that’s where the 1310 would come in, like I spoke to a gentleman earlier, there’s a form that would be attached, and then they would make the checkout to the name of the estate, then your wife would deposit it and track it and split it or use it for fees or whatever. But yes, it would go into the estate bank account.
Caller 16:36 Okay, all right. Well, thank you.
Dr. Friday 16:39 No problem. Thank you. All righty. Let’s see what Al in Nashville has to add. Hey, Al.
Caller 16:47 I just sitting at home, I don’t have the paperwork with me. But I got this thing from our early days telling us that they sent me $1,400 back when they stimulate the economy of something. And I never say $1,400. I didn’t know if you had seen any of this or heard about any other. What’s the deal?
Dr. Friday 17:10 No, no, that’s a great question. And that was what we refer to as the third stimulus. So in essence, you would have received three different payments starting back in 2020, when they first came up with the pandemic of whatever COVID. And they gave out $1,200. Now, are you on social security by chance?
Caller 17:32 Yep.
Dr. Friday 17:33 It probably went right into your bank or your card that you use for Social Security. Most most of those cases, they just put it right in the bank, you didn’t receive it in any special format, it would have just went in the bank. And the 1400 would have went in your bank sometime around March or April of 2021, almost a year ago. And you might be a look back in your bank, wherever your Social Security is deposit. I bet you’ll find it in there.
Caller 18:00 No, it ain’t in there.
Dr. Friday 18:06 You didn’t see any money going in 2021?
Caller 18:09 I don’t have I don’t have the patient straightened with me right now.
Dr. Friday 18:14 No, you’re right. It says $1,400 you you’ve received 1400. Because if you file tax returns, we’re using that as the recovery rebate information. And we have to have those forms. So that’s what it is saying. And that’s what you should have received. If you did not receive it, then you need to file a return to recoup that. $1,400. But I will tell you, if you’ve received that letter, the IRS is saying they did give it to you. So you’ll have to try to prove otherwise. And so far, we’re not having a lot of success on that as of right now.
Caller 18:48 Okay, I’m not fooling with them.
Dr. Friday 18:51 Yeah, no worries. But it is a legitimate letter. So I would say if you find some time, you might want to also look back in 2020. And just make sure that you received 1200. And in January of 2021, you probably received 600. Those should have all went into your bank.
Caller 19:09 I didn’t go back into 2021. Okay, thank you. I appreciate it
Dr. Friday 19:14 I appreciate your phone call. Thanks. Alrighty. And again, if you’ve got questions, or you’re not too sure, I will tell you I’m hoping in the next year, we are getting closer and closer to the IRS being caught up so that we then can start really addressing the fact that there are people out there just like owl that called that never did receive the stimulus money but yet they were entitled to receive it, I guess is the best word.
Dr. Friday 19:41 And the government is saying I think in some cases what I have spoke to a couple people at the IRS and part of the problem is if they sent it to you, and for any reason it was returned back to the IRS in check form, or dead letter or your bank account changed, and they weren’t able to get it in the bank. A lot of that information has not yet been corrected in the IRS system. So they show they sent it out, they have not shown receiving it back in. And that also is very time consuming for them to backtrack and get it.
Dr. Friday 20:19 So hopefully once that actually does happen, when they’re able to physically reconcile some of these keep in mind, we can go back three years to collect that money. So in essence, it may be 2022 2023, before we actually start seeing the actual resolution to a couple of these, but we’re, we’re not going to let them go. It’s just that it may take a little while for the IRS to get on the same page as we are when it comes to. I mean, just like Al who called he’s got access directly to the bank, he knows what went in his bank, what how much money he has in everything.
Dr. Friday 20:56 The IRS doesn’t have that nerdy saying, “Hey, we sent it to you.” And that’s where we’re at at the moment. So we’re gonna just keep that going. And as soon as I get better information, I will be more than glad to send that information directly out to all of you guys. But hopefully you guys are working on taxes.
Dr. Friday 21:14 Do not forget, if you have sold your primary home, and 2021 That is something that has to go on the tax return most likely 1099 essays worth our 1099 SS were filed. But and I know I don’t think I actually got the format I got talking about that the other day. It’s an 8949 is the form and it’s a home sale worksheet that’s going to be attached to it. But those are the forms you’re going to want to get into. And then of course, in some cases, these homes may be in installments transfer from first time homebuyer credits, those still existed out there, guys, or you may have been doing depreciation and there’s recaptured depreciation needed on some of these a few are using a home office and you may have used depreciation, I will tell you, I’m not a fan of depreciating homes.
Dr. Friday 22:07 Because of that, I mean, it’s not worth the few dollars you save on your tax return, then you have to turn around and recapture it. But there are some different forms that may feed on or feed off of the sale of your home. So just make sure you are reporting that information. And we still have the 1095 A, which is the the marketplace for health insurance. And again, I want to make sure that the individuals that you know that has them or you are getting insurance through the government that you are actually getting that information, and you’re putting it through your system so that way, you know because otherwise, I’ve had some case situations, people sell homes, and in some cases, they sell them for more than the exclusion they end up with a capital gains. And then that actually turns into having to pay back some of the insurance money that you might have in dealing with your your situation.
Dr. Friday 23:05 So again, just trying to make sure don’t rush through completing your taxes, make sure that you’ve got all of those in order so that way you don’t have to go back and correct or amend or worse, the IRS turning around and amending or correcting our taxes. Because to be quite honest, that is never a win win for you, me or anyone else in the world when the IRS has to come back and say oh, did you do this? Oh, you forgot this or Here’s a helpful hint. We’re gonna change your return. And now here you would do you owe us $20,000 or something. Dr. Friday 23:38 All right before the break, let’s hit Steven in Dixon. That way we can get through it. Hey, Steve.
Caller 23:43 Hey, how you doing?
Dr. Friday 23:45 I’m awesome. Thanks for calling.
Caller 23:47 I was calling about, I’m selling our primary home. We’ve been in for 13 years, this year and building another one and I’ve had an offer on it. And we actually found a home that’s already been built it we really love the purchase. And I was just wondering the tax implications on that, as far as selling it, or income limited. And what we do Mike is non taxable. So I was just curious to what would happen there as far as taxes.
Dr. Friday 24:23 Sure. So, first question. Sounds like you might be married.
Caller 24:28 Yes.
Dr. Friday 24:29 So here’s the way capital gains this is going to be since you haven’t lived in the house that you’re building. But yet you’re going to turn around and sell that house. It sounds like it’s going to be what we refer to as short term capital gains, meaning it’s less than a year from the moment you could move into that home to when you are selling it. Because since it’s being built you have to wait to get the actual moving date not the date you started to build the date that the home was truly able to be lived in would be the first day And then you have to have owned it for over 12 months to be long term. So this would be short term. Am I understanding that correctly, Steve?
Dr. Friday 25:06 Yes ma’am.
Dr. Friday 25:08 Okay. So we turn around and what do you think your gains on that’s going to be as an estimate? I’m not holding anything.
Caller 25:15 Gains on the house are building probably about 80,000.
Dr. Friday 25:19 Okay. So if we’ve got so the home that you live in for 13 years, are you selling that for more than 500? Plus, you paid for it? 500,000 plus what you paid for or is it less than that?
Caller 25:32 It’s less than that.
Dr. Friday 25:34 Okay, great. So your primary home, there’ll be no tax, that’s an easy one, the one that you’re selling, that you haven’t really moved into, and you’re building that 80k is going to fall into short term capital gains, or which is ordinary income. So you’re looking at roughly $12,000 or 12%, excuse me, 12% on that. And then you did say, are you when you say none of your income is taxable, but are you on social security or anything?
Caller 26:00 No.
Dr. Friday 26:02 So depending on if you have any other income, but basically up until 105,000, your income tax would be 12%. So that’s not too bad for an investment.
Caller 26:15 That’s not bad. Thank you very much.
Dr. Friday 26:17 No problem. Thanks, Steve. All right, we’re gonna take a quick break, we come back, we can get some more of your phone call 615-737-9986. We’ll be right back with the Dr. Friday show.
Dr. Friday 26:40 All right, we are back here live in studio. If you want to join the show, you can 615-737-9986. And we’re gonna go right back to the phone. A girl in my side of the neighborhood, Melissa in Columbia.
Caller 27:00 Hello, Dr. Friday. Thank you for taking my call. Well, my question today is starting or wanting to start a new business for doing virtual services online. And so my question is, is do I need to get an EIN for my sales when working with customers? Or should it be for my business? And should I do a sole proprietorship or an LLC?
Dr. Friday 27:28 So right now, it’s just you doing the work? Is that what I’m understanding?
Caller 27:32 Correct.
Dr. Friday 27:33 Okay, so I would keep it simple, which means do it as a sole proprietorship at this point. Now, I’m not a lawyer. So there could be some legal reasons why, as we get larger, I know there’s reasons we want to become LLC, or if you’re going to get subcontractors that might start working with you, then you may want to go into an LLC for the protection side of things.
Dr. Friday 27:54 But for the basic startup, make sure it’s going to work before you open up so many things that it takes a lot to get closed, start out with the basics. So you know, get yourself an EIN number, just under your name, basically, it’s considered a sole proprietor that will stay with you the rest of your life, no matter what types of businesses you have as a sole proprietor.
Dr. Friday 28:14 That way when at the end of the year, if you need to give somebody a W9 to be 1099, your social security numbers not out there, it’s just that EIN number, and then you can be doing business as or it could be your name, whatever, you know, whatever you however, you’re going to market the business to do what you want to do. But my personal opinion is started out simple business license, EIN number, and basically, you know, telephone with your name and business card on it, keep it there.
Dr. Friday 28:41 And then once you get going, or in your case, possibly a good web, since its online services, but you know, whatever that might be that comes from there. And then as the business starts to grow, I’m sure you’re going to head towards either a sub s or an LLC, depending on, you know, the next step.
Caller 28:58 Awesome. Okay. Well, that’s kind of what I think and I just want to get your thoughts. Thank you.
Dr. Friday 29:04 All right. Thank you for listening. I appreciate it. Alright, let’s get John in Hendersonville.
Caller 29:13 Well, I got a letter recently that said from the IRS, it said I received the $1,400 and my wife did not get one. We file jointly and back in 2020 She got the same stimulus payments that I did. And we’re what we’re wondering that sounds a little funky.
Dr. Friday 29:39 Well, I will say that most likely her her letter has not either either either arrived or it’s lost completely. If you know obviously if you know you’ve received it, then just go ahead and put in there that she did. So that way you don’t hold up any other refunds or think that you have 1400 coming back to you and you know you’ve received it But the the letter seem to be better this time than so far, I will say, you know, the first first two, we barely got any notification if someone received it or not.
Dr. Friday 30:10 And this time a couple people are getting in the last week or so. And we’ve already filed taxes, but they are getting the letters. And you know, that’s that’s a sign in the right direction. But, again, if I think you do you know, she received it, because it sounds like you both received them at the same time as far as the amount of money.
Caller 30:30 In 2020. Yes, we checked with our bank, and we did receive them. I haven’t checked on this last letter that I got.
Dr. Friday 30:41 I might’ve been around March of last year, March, April, right.
Caller 30:44 I heard I heard you tell him that, that I’m going to go back into the online account and look at that. And at that time, I’ll find out if we got what we should have gotten two payments, right?
Dr. Friday 30:55 You should have gotten two payments, each of you should have received 14.
Caller 30:59 Exactly, exactly. Okay. I appreciate you for clarifying that.
Dr. Friday 31:04 No problem. Thank you for calling to appreciate it.
Caller 31:07 Oh, you’re welcome. And you know what everyone should tell you this. We’re glad you’re here for us. We really are. We thank you. We know it’s not easy. And I’m always telling people I run into that are serving us that we’re all glad that you’re there.
Dr. Friday 31:23 Well, thank you very much. I enjoy it. And I really enjoy it when you guys all participate. So thank you for listening as well.
Caller 31:30 You’re welcome.
Dr. Friday 31:33 Okay. So if you want to join the show, you can 615-737-9986. And, you know, I know the last couple years, I mean, I’ve been doing this for 20 plus years, but just the changes of where money’s come from who’s been giving us money, if it’s been taxable, or non taxable? You know, we have had between business owners and individuals, a lot of changes when it comes to these things.
Dr. Friday 32:04 And that’s another reason just like, appreciate when John or Al you guys call, because part of the reason is, you’re you know, you’re not alone in asking these questions, you can see that on my smile on my station, we’re getting people calling in, that means there’s probably 10s, if not hundreds of 1000s 1000s of you guys that are sitting there with the same questions. wondering, you know, “If I didn’t get the letter does that mean I didn’t have it, or I did get it.”
Dr. Friday 32:28 Sometimes some people will know exactly when they’ve received it or not. Many other times, the IRS is showing it going into a bank account that is almost dormant like a savings account that you’ve never used, but somehow they had it in their system. So I am going to suggest to any of you that if you don’t know for sure you’ve received it.
Dr. Friday 32:47 Or if you just want to be like John and confirm make sure you did receive each individual in your household should have received the 1400 go back and look from March in go go all the way to the in the year just to confirm you know, so march through December and make sure you do not see a tax payment, it should say EIP three, I believe on on the direct deposit going in. And that’s also confusing because for many people, they don’t really receive many direct deposits.
Dr. Friday 33:16 So they were expecting to see a check. And they know they never received the check. And of course, there’s also that concern that if there was a check to get taken out of a mailbox, all these things we have to deal with. So just double check and see what you have. We have Amy in Smyrna. Let’s hit her next. Hey, Amy.
Caller 33:34 Hi, Dr. Friday.
Dr. Friday 33:37 Hello, sweetheart, what can I do for you?
Caller 33:40 So my husband will soon be starting as an independent contractor. And I’m just curious, how do we start filing quarterly? And how much do I need to hold back for taxes?
Dr. Friday 33:54 So I’m not knowing how much money he’s making, I’m going to give you a basic rule of thumb. And then I’m going to suggest if you don’t have a tax person, or if you need help further one on one, we may have to do a little bit more crunching. But the basic rule of thumb is this, if he is making bring home.
Dr. Friday 34:13 And I again, I’m assuming that he’s when I say what he’s making, I mean after out of pocket expenses. So if he’s got fuel cost, or Petro or miles, whatever he’s taking, if he has cost of goods, whatever is going to be coming in, I want you to be setting a minimum of 20% up to $50,000. And then if he’s making more than $50,000, I want you to jump up to 25% and I want that to go in a separate bank account.
Dr. Friday 34:40 Kind of just like his paychecks, you know, I mean, when he was on a paycheck, you never got 100% They always took out Medicare, Social Security, federal withholdings, etc. So I would set up an account for taxes and then the first year you’re not really going to make a lot of estimated payments.
Dr. Friday 34:57 I would say you can get some and you can go to irs.gov, click on Pay, and you can make estimates right online and print out that page for your tax person or whatever. And then the next year, though, then you’re going to know based on the prior year, you’re going to have to make at least 100% of what was owed from the prior year. So we kind of use 2020 are estimating for 2021, for example, and so on. So um, that’s the way it’s going to kind of work but he’ll have money in his savings account. So when it comes time to pay the taxes, it should be, he should have more than enough in there.
Caller 35:32 Okay. All right. So really, we wouldn’t need to do anything for the first year, it would just be the second year.
Dr. Friday 35:40 Correct. The first year, theoretically, the only reason I would, I mean, just basically having the money, there isn’t much of a requirement. I mean, obviously, if you, if you start looking and you’re like, “Okay, it looks like you know, we’ve made $50,000, let’s go ahead and send them five,” or let’s send them you know, a portion of it. I would never overpay because well, I don’t want the government to have my money before they have to. But as long as you’re not living off it that way, when it comes time to do the taxes, you’re not having a heart attack, if you have to write a check for 25,000 Then we’re good.
Caller 36:17 Okay, thank you.
Dr. Friday 36:17 Oh I gave poor Amy a heart-attack there, but I don’t know what her husband could be making. And of course, you know, if you’re starting to make couple $100,000, maybe at 30 or 35, or even 40%. But then we’ll talk about health savings accounts and, you know, SCPs, and IRAs and those things to help defer to reduce possible income. But that’s the fun part about being self employed, we have a little bit more control.
Dr. Friday 36:43 Alright, we’re going to take our last break here. And if you want to join the show, you can at 615-737-9986 and we’re gonna be right back with the Dr. Friday show.
Dr. Friday 37:02 We are here back live in studio for the last bit of our show. And if you want to join us you can at 615-737-9986 is the number here in the studio in case you’ve got questions, it is the time guys to start thinking about preparing your 2021 tax returns. Remember all your W2’s and 1099 Rs do not forget your cryptocurrency, which you may have easily done through hopefully something like Coinbase or, or Robin Hood, or any of those different services you might have used. You know, a lot of people are like, w”Well, who’s gonna know?”
Dr. Friday 37:42 It doesn’t make a difference, you’re going to know you want to file your taxes, so you can put them to bed and then never have to think about them again. That is the perfect way to do taxes. You don’t want to have to worry and hope that someone’s gonna catch your or find some of you guys have and I know myself, it’s never fun to get a letter A year later saying that the IRS has corrected or amended or done something to your tax return. That is not a fun experience.
Dr. Friday 38:07 So let’s hopefully that won’t happen. So if you do have questions, or you need help with that, you can certainly give us a call. Now I will tell you our calendar right now I hate to say it is full for anyone that is not a returning client. We are fortunate enough to pretty much get all of our clients back every single year, which is a blessing, but also limits the anon new student clients that we get every year.
Dr. Friday 38:31 So our calendar has completely filled up unless again, if you are a returning client, we always have an open space. We will we will not leave you hanging out there. So if you have a question, though, and you’re working on your own taxes, or maybe you’ve got a friend or family member that is trying to figure out or do something that’s a bit different. I mean, let’s be honest.
Dr. Friday 38:50 Again, we talked about some of these different situations. But there are ties when things are just different than what you had the year before. And hopefully I can at least lead you in the right direction. Many times I’m going to suggest though, even with the advice I give on the radio, make sure you check this with your your own personal tax person. If you don’t have one, get one just make sure that some of the changes that I’m talking like anything, you know, we’re doing estimating or assumptions on some of it. I mean, obviously, you know, if your income changes based on the numbers I’ve provided, it’s going to change the taxes that you owe. So just keep that in mind.
Dr. Friday 39:26 All right, let’s hit Wayne in Nashville. Hey, Wayne, what’s happening?
Caller 39:32 Hello. You’ve been a lot of help in the past with stimulus checks. And I just want to ask you this. I’ve seen on my phone where if you’re over the age of 50 and on Medicare that goes send you a $900 grocery check. Is that a scam?
Dr. Friday 39:49 Okay, so I had a question on that myself. And so I went to someone that’s supposedly a lot more of a Medicare expert than myself. And what I’m being told is, I guess you would say it’s not a scam, it’s more like a stretch of reality, in my opinion.
Dr. Friday 40:04 So what it is, is they’re trying to sell you a part B, or C or whatever. And within that, depending on your zip code or certain types of things, you would then have the ability to be able to qualify for some of this. But now this would only normally be if you’re actually already on or going on to Medicare. So in your case, you said you’re like in your 50s, you’re way too young. Unless you’re on Medicaid, you’re way too young, for Medicare at least.
Dr. Friday 40:33 But I think it’s I think it’s a personally I call it more of a scam just between you and me, Wayne, because it’s not like there’s actually a $900 check just waiting for you to make the call and say, Hey, I’m have this situation and I qualify, you have to go through and then it’s like, you know, $75 more a month, that it comes out to working out to like, $900 a year or something like that, that the UPS you can use, but it depends on the package that you get. So it’s it’s not Yeah, it’s not like the stimulus checks where they came out, and they just gave you guys or you know, some people qualified for 14 or 12, or $600. This is a little different than that.
Caller 41:19 In the past, when you said the stimulus check is coming, I told people, you can’t lose hope. And sure enough, you’re right on the money. So you’re the best lady I’ve ever met because you know exactly what you’re doing.
Dr. Friday 41:31 Well, thank you for listening. I appreciate that very much. Thanks, Wayne.
Caller 41:35 Thank you.
Dr. Friday 41:36 No problem. All righty. And then looks like we’re going to have maybe one more phone caller here that will be able to get in. All right. He’s saying go for a live video. All right, go Lynn in Tennessee. Capital Gains question.
Caller 41:49 Yes. If you sold some property, and it brought around $358,900, and you had a basis of around 89,000, what kind of tax would you be looking at?
Dr. Friday 42:04 So for simple math, 360 and 90 is roughly what I’m going to use since it’s a little simpler. That’s given me about 250k in capital gains. Are you single or married?
Caller 42:16 Single.
Dr. Friday 42:17 Okay. And do you have other income other than this?
Caller 42:21 Roughly, it’ll be 20,000 or less.
Dr. Friday 42:25 Okay. So we’ll be at 270. So the first 200,000 on the 250 would be at 15%. The other 50,000 would be at 18.8.
Caller 42:38 Okay, all right. Well, that’s better than I had hoped for.
Dr. Friday 42:41 Well, good. I’m glad it’s always nice to give you some better news than worse news.
Caller 42:46 Yeah, so those two percentages were what now?
Dr. Friday 42:49 It was 15% the first 200. And then everything above the 200 will be at 18.8%.
Caller 42:57 Okay, all right. Okay. Yes, thank you.
Dr. Friday 43:00 No worries, man. Thanks. That’s the fun, I think I think all of us get to have with capital gains. I mean, sometimes ordinary income can be lower than capital gains with the earlier caller with the young, the gentleman that had something where they sold like 80,000, and they were married, they’re going to be closer to 12%. But in most cases, capital gains tax will always be lower than it would be for ordinary income tax.
Dr. Friday 43:26 So that’s always a win win situation. So if you’re going to be doing anything like that, I always suggest making sure like, just like the gentleman that called in, you know, Lynn makes sure that you know, you do have a rough idea, because last thing you want to do is sell a piece of real estate, and then go and reinvest the money. And then Uncle Sam comes around says, “Hey, we want our 30 or 40, or whatever $1,000 that you might have owed on it.”
Dr. Friday 43:52 And you’re you know, you’ve already reinvested in, it’s in something you can’t get your money out of quickly. Now you’ve got a loan with Uncle Sam, which is never, ever a win win situation. They are not renowned for their, their friendship in loans. So I always suggest making sure that if you’re going to buy or sell something, make sure you’ve taken the IRS money out when you’re doing that. So that way, then you can make sure that you you know, you don’t have that loan officer because their interest rates and their penalties, and their assessments are definitely not on the friendly side. So I just want to make sure that, you know, if you’re going to do something like that, take that extra step and just make sure you know, you know how much you’re gonna owe. And then you don’t have to worry about it.
Dr. Friday 44:34 It really is that simple, then you can actually just go invest the money, live life, enjoy and make things work for you. So great questions, guys, because it really does help if you can have the ability to estimate the taxes. And with most of my clients, a lot of times will go back in and the only thing I would suggest, and I don’t know in any of these situations, but if these properties are rental properties, remember there is one more Step you have the ordinary capital gains, yes.
Dr. Friday 45:03 But then you would also have recapture of depreciation. And that’s taxed at ordinary income rates. And if you are at the $250,000, the capital gains your income right now just went up to 22 or 24%. On any recapture, so make sure that you have someone crunched those numbers. That’s the secret crunching the right numbers.
Dr. Friday 45:24 Okay. Pretty much have made it through an awesome show truly appreciate all of you guys calling, asking awesome questions, makes this show always seem so much more entertaining. And also, I think a little bit more helpful than sometimes when I just start reading off tax law. So thank you very much. All right.
Dr. Friday 45:41 So if you want to find out more about who I am, or if you’ve got someone that needs help with the IRS, you can go to the website drfriday.com. Again, drfriday.com. You can also reach our office on Monday at 615-367-0819. And you can also email firstname.lastname@example.org.
Dr. Friday 46:03 I will ask for your patience. I am probably running a good two three days behind on responding to some of the emails. I will try to be fully caught up before the end of the weekend but just give us a little extra time on that.
Dr. Friday 46:15 So again, if you want to reach us in the office 615-367-0819 I hope you guys are having such a wonderful Saturday. Almost March guys we’re getting into the last month almost your comms March. So as we love to say in Australia, call you later.