Welcome to the Dr. Friday Radio Show! In this show, Dr. Friday explains all the latest tax updates, including the following topics:
- Haven’t Gotten Your Stimulus Check? Here’s How To Get It
- IRS E-File Starts February 12, 2021
- Why Some People Have Received Their Second Stimulus Check
- Have The Right Documents For Your 2020 Tax Returns
- Can My Child Get a Stimulus Check If They’re My Dependant?
- IRS Is Not Processing Tax Returns Until February 12th
- Don’t Forget Your Unemployment
- Unemployment Is A Taxable Income
- Do You Need Help Preparing Your 2020 Taxes?
- Why You Should Get Help With Tax Representation
and other caller’s questions!
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 0:31
Good day. I’m Dr. Friday and the doctor is in the house. We have some fun topics to talk about. Sounds like they’re gonna definitely be giving out some more free money, which is just absolutely terrifying for some of us because we’re not too sure where that free money is coming from. That being said, let’s figure out how we can make sure everybody that is entitled to actually truly I guess I don’t afford entitled but hasn’t received their stimulus money, we can talk a little bit about that. We’ll talk a little bit about some of the forms and things coming out on the new one. And we’re gonna go ahead and get to some of the calls that are coming in if you want to join the show you can call 615-737-9866, which is the phone number for the studio. So if you want to join the show, remember, there are no stupid questions. I mean, if you don’t know the answer, I bet a lot of other people don’t either. I might not even know the answer, but we will get the answer. So why don’t we hit Andrew first and see if we can help him out with a question on Social Security? Hey, Andrew.
Dr. Friday, I heard a spot on the radio and it was about social security. And it was actually one of my questions I asked you last week. I’m on Social Security, I’m over 70 total income of $25,900 of that 238 is Social Security. Do I file taxes?
Dr. Friday 1:59
No. You wouldn’t need to because the difference is only a couple of $1,000 that you’re making above Social Security. The provisional tax code takes half of your Social Security, adds your other income. And if it comes up to about 30,000, then you would need to file. So you are way below what you can earn. So you are a zero file. Now, the only time I’m telling individuals in your situation to file taxes in the year 2020 is if they haven’t received both of the stimulus checks because you could get that as a refund on the 2020 tax return. But in normal situations, Andrew, you should not be filing and don’t have to do anything.
Excellent call. Thank you very much.
Dr. Friday 2:42
Thank you and I appreciate you listening. Okay. Alrighty. My guy in the office. Yes. Go ahead and hit Calvin.
Yes, yes. Dr. Friday, I got a few questions. I’ll make them quick. Will the COVID change the filing date like it did last year and give us more time?
Dr. Friday 3:01
No, they basically came out and said as of right now there is no intention of moving the date. The date is going to be April the 15th.
Okay, and you said that 1099 is going to change this year. I’m a sole proprietor. And I’ve just worked myself, but I’ve had to change the way I do business because of COVID. I’m doing all 1099 instead of working for individuals, what’s that going to do to affect a one-man show like me this year?
Dr. Friday 3:36
Well, if you’re self-employed, probably not going to change. But you may notice instead of receiving in the past, you would have received a form called 1099 miscellaneous. This year, you’re going to receive a form called the 1099 NEC. It’s been around forever, but they’re now putting self-employed income on that form, it’s not going to change anything else for you, you’re still going to file your Schedule C, you’ll still write off all of your usual charges or expenses that you had to do those jobs, including if you have a home office or miles and then you’ll pay your regular tax. I will tell you for individuals that are having a very hard time and that are self-employed, you can defer half of your self-employment tax to the next two years in which would be due on December the 31st, 2021, and December 31, 2022. I am certainly not suggesting that for any individual that is already having a hard time. It is on the books and that’s something Calvin that may give you a little bit more breathing room if it’s something that you need to do.
Okay. Also, the stimulus is based on your last year’s taxes. What if I make more money this year, is that gonna come back and bite me?
Dr. Friday 4:54
Well, they’re actually saying that both stimulus the one we received in 20 early or mid-2020, and the one we received in early 21, are both going to be based on the year 2020, which is last year’s taxes that you’re filing right now. Of course, I don’t know what they’re going to do with the new 1400, because listening to the debates, they’re trying to bring it down to 50,000 for an individual and 100,000 for a married couple, I don’t know if that’s going to pass or not. So it is still going to be tied to income. So depending on how much different your incomes going to be, hopefully, Calvin, in many ways your income goes up because I’m pretty sure you’d rather make more money than worrying about making $600 from the government. But that being said, you know, it is going to be, it’s still going to be tied to income. So hopefully 2021 will be a lot better for my clients. That’s all I can say.
Okay, in the Obama mandate, where they find you for not having it, is coming back?
Dr. Friday 5:57
So far, that is not. I mean, who knows what they’re going to sneak into this new bill that’s coming out the $1.9 trillion bill. But that is not something I have heard. So far for 19 and 20, It is not on the taxes we’ve done the last two years. So at the moment, it’s not there. Anything could happen though Calvin, great question.
I don’t know. Okay. Just one last, I could not take mine. I’m a painter, painting contractor. So can I take my uniforms and boots off?
Dr. Friday 6:29
If they’re street clothes, meaning if it’s a set of overalls that are actually used only for painting, and I’m thinking you could probably prove that if the government wanted to see a pair of them. It’s not something you could walk around the street, and then the answer is yes. But if it’s regular blue jeans and a T-shirt, then the answer is going to be no, the standard answer is if you can wear it on the streets, it is not considered a uniform.
Okay, because of bad feet, my foot doctors put me a $350 pair of boots.
Dr. Friday 6:58
Are they steel-toed?
He said, “You wonder what’s wrong with your feet?” He took the toe and bent it to the Hill. He said, “I’m gonna put you in a pair of boots that don’t bend.”
Dr. Friday 7:11
So that they can be considered work boots, because most individuals again, do not wear steel-toed shoes on the street.
Okay, I appreciate your time on that.
Dr. Friday 7:22
Thank you. No problem, sir. I appreciate you listening. All right, and the phone lines are lighting up and just keep listening and calling in if you like. Looks like I just lost Dallas, but we’re gonna go right down to Shawn. Yeah, I think it’s Shawn. Hey, Shawn.
Dr. Friday 7:39
What can I do for you, bud?
Got a question. We just recently, I say recently, within the last year, we moved from Hermitage to Donelson and finally got the Hermitage house fixed up. So we’re going to sell it now. I’ve got about a $90,000 mortgage left on that. We didn’t ask him a price for so you know, with all luck, we’ll get 300,000 for the house. So I’m wondering what my tax implication is going to be after paying off the mortgage.
Dr. Friday 8:17
I have two questions for you, Shawn. The first question is, how long did you live in the house in Hermitage?
About 24 years.
Dr. Friday 8:26
Okay. And how long have you just moved out of it? Correct.
Within the last year.
Dr. Friday 8:32
Okay. So as long as you sell it within the next year or two, you have to have lived in it for the last five years. So as long as you sell it, you’re going to have zero because you are married, correct?
Dr. Friday 8:45
Okay, so you guys can sell the house that you lived in for more than two years, in your case, 24 years, for $500,000 above your original purchase price. I mean, this case, you’re selling it for 300. So if you got it free, you would still have an exclusion. So you would have the homeowners exclusion, there’d be zero tax on that house at this point, as long as you sell it in the next year.
That’s good news.
Dr. Friday 9:10
I thought you’d like that. Yeah, that’s a good one.
Excellent. All right.
Dr. Friday 9:15
All right. Good job, buddy.
Dr. Friday 9:18
No problem. All righty. We are live here. So if you want to join us in the studio, you can call 615-737-9986. You can call us here live in the studio if you’ve got questions concerning taxes, filing your taxes. If you haven’t received your stimulus check now is the time guys we finally have an answer and a way to get that money for you. And last but not least keep in mind. I received an email this morning from someone that was a listener and this is something I’ve been telling people all along. First, the IRS is not starting to do e-file until February 12, which is almost around the corner here about six more days or so they will start processing e-file. So at that time, that’s good news. The second part of that is, don’t forget your Unemployment. Many of you for some period of time was on Unemployment for a month for 12 months. I mean, some people apparently could stay on a lot longer than I thought, doesn’t make a difference. But 1099 G’s only went out at the end of last month. I have three clients right now waiting for those. So I just want to make sure that when you’re doing it that you remember that you have to file taxes on unemployment benefits. Also, obviously, if you worked more than one job, some people were furloughed, so other people went and went to work at other places. And we’re going to talk a little bit about and if you’ve got a question, some people took advantage of the furloughs or the pandemic and took out the $100,000 or up to 100,000 from their 401 K’s. There are some ways that we can use that. But if you took out more than $100,000, you could be in trouble because it was only a maximum of that 100,000. And if you went over there excluding the entire thing, so we’re gonna talk a little bit about that. Okay, really quick. I think we’ve got enough time. Let’s hit John. Hey, John, what’s happening?
I’m doing fine. Thank you. My son got married on December 28, three days before the end of the year. He’s kind of tied into our business also. So just need to know if he is obligated to file or are they obligated to file as married when they file their taxes? They haven’t filed as of yet? Or can they still file separately since they were only married for three days?
Dr. Friday 11:53
Yeah, that’s a great question. And the answer is, yes, they have to either file married together or married filing separately. They cannot choose to be single or head of household. So they are legally married, no matter what the same thing happens. I’ve had people that have gotten divorced in the last couple of days of a year. And I’m always like, put it off till January because it changes things so much. In this case, it’s usually a better thing. But yes, so tell him that he will file married, it’ll just be behind if they want to marry to file married jointly, or if they want to file married filing separately.
Thank you very much. I appreciate it.
Dr. Friday 12:25
No worries. Great question. Thank you very much. All right. Let’s get Mike in the Boro real quick.
Yes, Dr. Friday. We recently just sold our parent’s estate who passed away several years ago. And the property sold for $550,000.
Dr. Friday 13:01
We are live in-studio and Shannon has been great enough to hold through the entire thing. So let’s go right to Shannon. Hey, Shannon. What can I do for you?
I’ve got three questions. Actually. I’m a dental hygienist, but I don’t work for any particular dentist. I work more PRN. So I work in several different areas throughout the year. And with that, should I be getting a 1099? Or what?
Dr. Friday 13:37
Well, if you’re working for different ones, either a W2 or 1099. It sounds like I mean, if you’re asking me how they should actually have you on the books, do you decide who you’re going to see and when or are they dictating you need to show up at this office at this time?
Yeah, the latter of that.
Dr. Friday 13:55
Okay. Well, then, in theory, according to the Federal Department of Labor, you are an employee. So in all honesty, they should be treating you as an employee taking out taxes.
Okay. But what do I do If they don’t?
Dr. Friday 14:11
Well, if they don’t, then you need to make sure you’re filing your taxes and doing what you need to do. Then you can either turn them into, and again, this is a choice, not something I would definitely suggest if it’s a good job, but you turn them into Tennessee Department of Labor or the Federal Department of Labor saying misclassification of the employee.
Dr. Friday 14:32
But, you know, I mean, I’m not saying. They may have enough documentation, I mean, again, I and this is a quick call, so I don’t know what they may show that you know, you might want to have the conversation with them. And maybe ask if there’s any way of going on payroll, I need to have this or if they don’t want to put you on payroll, is there a possibility of doing something like getting a higher amount because you’re covering part of your Social Security tax. Really the only difference? I mean, you’re you know, otherwise, whatever else you’re doing is just you would be responsible for withholding or they would be, the only difference is a 7.65% difference. You know, I’m just saying in the long run, it’s not 100%, or that there’s any difference, you need to be paying quarterly and treating yourself as an employee, in essence, Shannon. Again, it sounds like it could be a misclassification. If there is a process you can go through to make sure that that is corrected. But you might lose your job. I mean, time and day and age where most people are looking, I’m not certainly suggesting rock the boat, but you might have the conversation saying, “Hey, here’s the difference of what it costs me.” And maybe they would give you a potential raise because they are getting an advantage for having not to do payroll. Right. So that would be you know, but on the other hand, you have the ability, because you’re going to different offices to write off miles and things that you can’t do if you were an employee. It’s there’s no deduction for employees, so you would have better deductions than an employee would.
Okay, and that was one of my questions if I could do miles. What about my scrubs?
Dr. Friday 16:12
What’s that mean?
No, ma’am. My uniform scrubs.
Dr. Friday 16:22
Oh, your scrubs? I’m so sorry. I did not translate in my headset there. Yes, that’s definitely a uniform. I don’t think anyone could argue that. Sometimes, so my nurses will have special shoes that they use, you know, that are more appropriate or whatever. So your scrubs that and you could, again, as an employee, you can’t write those things off, because there’s no place but as a self-employed individual, your scrubs, any kind of insurance or licensing or continued education, any of those things that might apply in your situation would be a direct deduction for your business.
Okay, that’s good. I may work for several months on a, like maternity leave, filling in for someone. Is it any different with my tax? Then it would be if I just worked one day for someone?
Dr. Friday 17:14
Well, I mean, we’re only working as a day. I mean, I don’t think that would be enough time for them to even get on the books. So I’m not too sure if you’re asking, but I mean, are you working the same three offices all the time? Or do you go different offices? Like I have some nurses that fill in or whatever? I don’t know exactly, but they fill in, like doctors that fill in and stuff.
Yes, that’s what I do. I’m just basically fill in.
Dr. Friday 17:37
Okay, so in those cases, you are normally actually a subcontractor because they only have you for a very small period of time. And so a lot of times they will treat you as an outsource versus a regular employee.
Dr. Friday 17:54
Again, you do have some advantages to being able, especially if you’re going from office to office. Now, theoretically, from home to work is not a deduction, but if you’re going from one office to the next office to the next office in the same day, you might have some additional miles. I don’t know your situation. Okay?
Okay, I appreciate it. Thank you.
Dr. Friday 18:18
Thank you. Bye. All right, guys. So that was a great question. And I think, you know, again, sometimes on the radio, it’s a little hard to get, I don’t wanna get too personal, get too many questions because I don’t think the world needs to know. But there are situations where sometimes being a subcontractor can be a better thing than being an employee under the current tax laws. But you want to make sure as an employer, that you are doing everything correct, because the last thing you want to do is have to pay all the penalties and things that can apply if we’re not treating our employees correctly.
Dr. Friday 18:51
Alright, so I had someone email me this weekend, and we were talking about, they took an early withdrawal on their 401k. And they did it with the idea that they can take it because of the COVID, or the Cares Act, and that part was 100%. Correct. They took $157,000 though, and the law says you have to do 100,000 or less. So there are many people if you’re not 59 and a half, and you had to take money out of an IRA or a 401k or a 403 B and you took it out because you had to survive. You may or may not have had enough taxes come out. One, you won’t pay the distribution penalty, right, that’s great. Two, you can actually spread that over a three-year period, and or you can re-contribute it back and even though you may pay taxes, you can remit those and get that tax dollar back. So you have some options on that one to make sure but there are some qualifications. And the biggest thing is, you know, if you got furloughed or if you were affected by COVID. Now they say you don’t have to been financially affected by They want to know how that’s going to work for everybody. So we’ll have to take a look and see how that feeds out. But just again, if you did, make sure if you’re doing your own taxes, that there are some advantages don’t pay that 10% penalty if you were affected. Alright, let’s go to Alan. He’s in Mount Juliet’s. Hey, Alan, what’s happening?
Hi, was on furlough for 16 weeks this past year. And I’m just wondering what the unemployment is going to do? Are they going to send me 1099?
Dr. Friday 20:29
A 1099 G, and they did not get them in the mail until the last day of the month is lost what I was told because a lot of my people have not received them yet. So but they are going out. So yes, you will be receiving a 1099 G, which will show how much you had in benefits along with any federal withholdings that you may or may not elect to have had.
Okay, thank you very much.
Dr. Friday 20:52
Thank you appreciate it. Actually, that was an awesome question. Because I mean, again, I have a lot of people. We had a lot of people that basically came through and as I said, I’ve got three people that when we had the conversation, they like, “Oh, yeah, I was on unemployment for a month or I was furloughed.” All these different things. So don’t forget that information. kind of important when it comes to doing what you need to do in that situation. So if you want to join the show, you can call 615-737-9986. We are taking your calls. Maybe you’re filing your own taxes, maybe we’re thinking about filing your kid’s taxes, which kids should file their own, and or should I be claiming my college student even though they are not getting the stimulus money? That may be a great question. I’ll get it when we come back after this break. Again, if you want to join the show. 615-737-9986. We’ll be right back.
Dr. Friday 22:03
All right, we are back live here in the studio. And if you have a question, now is the time to get on the phone. Because I will tell you, these are great questions coming through 615-737-9986. And it looks like Judy was first. So let’s hit Judy. Hey, Judy.
Hi, Friday, I have a question about a home office. My husband and I both have shared an office. He does the work daily as I do. write and read and I meet with our publisher and other writers every Wednesday on zoom. Can we claim that office?
Dr. Friday 22:52
Well, it would depend if you actually have an actual activity or income to offset the home office. So if you and if you know, one or the other. I mean, theoretically, you could split the cost and do 50% under him and 50% under you but we’d have to make sure that there was actually income. Again, you doing meetings and those things may be generating income or not. I’m not sure yet. Haven’t seen your taxes this year yet, Judy. But if you are making income on that, then yes, we would split some of that. And then, of course, your husband would be able to use some against his self-employment as well.
Okay, so I can bring that information to you when I come to file?
Dr. Friday 23:34
Yes, ma’am. Thanks for listening.
Thank you, Dr. Friday.
Dr. Friday 23:39
All right, no problem. All right, let’s go back. And let’s hit Robert on in Tennessee, about his mother’s estate house. Hey, Robert.
Hey, thanks for taking my call. My mother passed away in October of last year. Should we have gotten an appraisal over the home with time?
Dr. Friday 24:02
The answer is yes. Anytime we have real estate that we’re going to be selling or even in some cases, children or other people of the state like to buy it, then we need to have a value on it. So if you haven’t, it’s not too late. We’ve been able to go backward before and the IRS has been pretty lenient about as long as we have something that shows other homes in the area that sold for around this, you know this size is done. A written appraisal is always nice, but not necessarily. You might be able to go to a real estate person and they could pull comps, which is just as good in many ways. Yes.
All right. Well, thank you. Appreciate you.
Dr. Friday 24:40
No problem. Thanks, Robert, for listening, I appreciate it. Alright, so again, if you’re in the midst of doing an estate or anything like that, if you know it’s always nice because just as a couple of other callers have called at some point, you may turn that house into an investment meaning the state may rent it out. You may sell it. Right now, on the table right now with Biden and his crew, I will be honest, they want to eliminate the step-up in basis, which will be very bad as far as I’m concerned because most people have paid taxes on that money over and over. But one of the biggest things people inherit is usually their parent’s home. If we have no step-up in basis, which they consider a rich person’s tax evasion, it’s not I mean, everyday people inherit your parent’s house, it’s sometimes the largest part of an individual’s estate. And since they’ve lived it for 20, plus years, maybe mom and dad only paid $30,000, which 20-30 years ago was quite a bit of money. Then they turn around, and now we can sell for $300,000. Now for over 20 years, they have maintained this property put money into this property. But sometimes it truly is the neighborhood has increased in the value of land, where if you inherit that property, you will not pay any tax on that under the current tax law, because you’d have a step-up in basis. For example, if this gentleman’s mom passed away in October of 2020, she has a home that’s worth $100,000. Then they turn around and they sell it for $100,000 doesn’t make a difference how much mom and dad pay for that house, whenever they purchased it or whatever, it is valued at the current value at the time of their passing. And then if they sell it, no matter how long they hold on to it, that would be what we refer to as the basis for that house.
Dr. Friday 26:29
So if you’re handling an estate, if you have other things like that, it’s very important to get that information because I’ve had many times where sometimes there’s even a lifetime estate now that changes things a little bit. Because if you don’t have the ability to sell the house, because one of the individuals is still living in it, that’s a little different. And it’s a different tax situation. But normally what happens mom passes away or dad passed away, find the last one, and then you have to go back and deal with what you have going on. So if you need help with that, you can certainly give us a call. But I would actually say call a real estate person, they have been extremely helpful in having to help me and my clients. Many times we usually have a couple of different real estate people and they are awesome.
Dr. Friday 27:10
Alright, so we covered a little bit about what was going on with the distributions. If you got a 1099 are deciding, I do want to point out that anybody that is buying virtual currency, remember there is a question on the tax return that pacifically says, “Do you have a virtual currency?” And it’s funny because a year ago, I probably would have told you a handful of my clients said yes to that question that they had. Some people now I’ve had a couple of people say, “Oh, I’ve got a little I don’t really buy it, I don’t really sell.” But if you have it, if you’re sitting on it, then you need to say yes to that question. If you purchase it, and you sold it throughout the year, then you need to say yes to that question. I know a lot of people are like what the whole purpose of virtual currency, I’m not having to tell people, it’s not really out there. Well, coin base and Bitcoin, and several of them are actually giving information to the Internal Revenue Service. I know this because we have dealt with a couple of audits in which those answers have come back at us. So again, you’re not hiding, it’s not something that we really want to hide. If you’re buying and selling or mining or doing anything else with it, you need to be keeping track of it. And there are some really good software’s out there. I’m not advocating any particular software.
Dr. Friday 28:28
The important part is downloading and making sure you’re buying and selling that you’re tracking it through the proper software just like you do. When you use TD Ameritrade or any of the other services. It tells you how much you bought it for how much you sold it for, it is legitimately a stock trade. And therefore basis and sale price need to be tracked at any time. And I realized when people say, “Well, I didn’t really do anything, I just left it in there. But I brought coin base and then I sold that and I did a little mining over here. And then I sold that.” Every time you do that. It is actually a legitimate trade when you move money from Coinbase to another type of virtual currency or some other virtual mining, that is a trade, and then when you sell that, or it does a split or anything else you need to track all of that. In some cases, I have people that you know, because they purchased into this mining they actually got some extra free coins and all that it’s it’s all trackable, and you need to track it because the IRS is getting more and more involved in that and you want to make sure you’re not caught. We all see where Coinbase in different things are going up and down just like any other stock and where they are trading and making sure that there’s information.
Dr. Friday 29:39
So if you want to join the show you can we’re going to have another about eight-nine minutes of the show. You can join us here live 615-737-9986. We taking your calls. We’re talking about taxes. I’m an enrolled agent licensed with the Internal Revenue Service Did you taxes and representation. I am not working for the IRS. But I am trained to represent the taxpayer in front of the IRS, which means that I’m kind of like, superwoman standing in front of you to help you deal with IRS issues and also to get a resolution. Dealing with the IRS is not something you want to be doing your whole life. It’s tiresome. Right now I know how frustrating it is. You can’t get through the phone lines, very hard to get any kind of answers or resolution, or even set up a payment plan when you have extenuating circumstances. It’s frustrating. I know it’s frustrating but doesn’t change that you need to do it and how you’re going to do it when it comes to those kinds of situations. So you need to be able to move forward and make sure that you have that information. All right, let’s hit Dan before the next break if we can. Hey, Dan.
Hey, Dr. Friday, how are you?
Dr. Friday 30:54
I am awesome. What can I do for you?
Good to hear. Here’s the deal, I got a will. Some of the assets that will be passed through the will are pre-tax and some are post-tax. The pre-tax or the SEP and a 401k. The question is some of the requests are going to individuals, some are going to charities does it make more sense to bequeath the stuff in the pre-tax accounts like the 401 K and the SEP to the charities who may not have to pay tax? Or may pay a much lower tax?
Dr. Friday 31:25
You’re 100% spot on Dan. Yes, if you have the ability to to make the choice to be able to sign that SEP or 401k to cover all or part of the charitable contributions, definitely do that. Because then you don’t have to worry too much about, you know, the taxes. And then my next suggestion would be as if some of the inheritors want to roll them into inherited IRAs instead of cashing them all out at one time, something to consider, right? Because then they still have that, what 10 years that they have to cash it out or something like that under the new laws, but it gives them a little bit more control over that versus all at one time, depending on the amount and how much if you can actually split it. You know, it’s a little bit more work, but it’s doable. It’s possible.
Quick follow up questions. Number one, if I do bequeath the pre-tax monies in the SEP in the 401k, to charities will might state benefit from the deductions?
Dr. Friday 32:27
Well, absolutely, if the state has to file in a state tax return, but most people aren’t having to file those right now. Because I don’t know. Unless there’s $11 million, you’re probably not going to have to worry too much unless there’s a state one. But yes, theoretically, if it’s under that, then you’re really just going to be filing and transferring. And, you know, giving the court if it’s going into court, if it’s a regular Will have to probate it, then then they would get that information, but there’s really no state tax anyways.
Okay, and then one final question, Does it make sense then to list those charities as the beneficiaries of the 401 K and the SEP with my brokerage?
Dr. Friday 33:05
Absolutely. Again, if you have that ability, that is the perfect way I am actually handling a state that went into a trust. And unfortunately, the trust was listed as the beneficiary. And I don’t have as the executor of this estate, I don’t have the control to change that. So we’re having to cash it out before we can give it to them, which is just tax dollars, theoretically going down the drain. So if you can change or if you have the ability to make them direct beneficiaries, that would be the perfect way to do it.
As long as I’m breathing, I still have the ability to do that.
Dr. Friday 33:36
Yeah, that’s the 100%. Correct. And I wish this particular case, we looked a little closer to it. So that’s actually something that is extremely intelligent, made them these direct beneficiaries. And that way you leave the after-tax, the ROTH or the cash in the bank, or the houses to the children or the people that are going to inherit, and that way, you’ve eliminated a lot of taxes.
Great. Thanks for your help on that.
Dr. Friday 34:00
No, thank you. Appreciate it. All right, let’s hit Bobby real quick. Hey, Bobby.
Hello. Thank you for taking my call. I love your show. Thanks. I have a third year in college, and she turned 25 in April of last year. Can I still claim her on my taxes?
Dr. Friday 34:23
So age really doesn’t change it. And when a child turns from 16 to 17, they go off the child’s schedule, and they go on to being more of a dependent and that makes a difference. So depends on how much money she is earning, that’s going to make the difference. So theoretically, if they make less than $6-7,000 a year because she’s in college and she’s actually going to school, she may not be making that kind of money. But if she’s making you know, $6-7,000 then theoretically you’d have to look and see if you’re taking more than 50% of her care. Going to college doesn’t mean she has to live in your house, she can be living on campus, and all that they don’t require the child to be living in your home to work those numbers up. But if she’s on a full ride, maybe she isn’t actually truly your dependent. I’ve got a lot of parents that are paying for the car insurance, they’re paying for the health insurance, they’re paying for some of the care at the college, they truly are paying 50% of the care.
Dr. Friday 35:30
All right, we are back here live in-studio for the last seven minutes we have left in the clock. So let’s head right up to Jay and see if I can help Jay out. Hey, Jay.
Hey, Dr. Friday. How are you doing?
Dr. Friday 35:57
I am doing awesome.
Doing well. And thank you for your show and your information that you provide for us in a weekly basis.
Dr. Friday 36:06
No problem, thanks for listening, what can I do for you?
Just want to try to follow my taxes today. And I kind of got a shocking alarm. And this might be something that is pretty normal from what you say on your end. But I live in La Vergne, Tennessee, and my company where I’m an IT field tech is in Georgia. So was not ready to see a state sales tax being taken out of my taxes for Georgia.
Dr. Friday 36:35
Do you actually ever go to Georgia? Do you actually work remotely from Tennessee?
Well, as I said, I reside here. I just didn’t know the legalities of that, as far as do. Can I try to get a refund by calling my company because I don’t live in Georgia? And we don’t have a state sales tax here. I don’t go to Georgia for anything. I mean, I pretty much as I said, I’m a field tech. So I’m going through Tennessee, maybe some in Kentucky, but I’m don’t I don’t reside there. I just go and do service calls.
Dr. Friday 37:08
Right? Well, here’s the deal. The bottom line is all state employees in Georgia will be paying that the question will be is if they can actually get you out of that which should show nothing for Georgia, if you don’t actually work in Georgia. The question kind of heard you say that sometimes you go in and out of Georgia for some of your work. So that would be a fine line if they would actually be able to have you not as a Georgia employee. Georgia is kind of funny. They’re becoming like, California is what always like if you basically do anything, even if you never stepped foot in California, you’re paying California Tax if you work with any business in the state of California. I haven’t been on top of Georgia that close lately. I mean, maybe running into that this may be something but on your pay stubs, do you actually see it coming out every payroll?
It’s kind of convoluted on my checks. I mean, I don’t have a really good breakdown, unfortunately. I guess that’s why it kind of got shocked me there. Because it doesn’t have a really good breakdown. As far as to state tax. I mean, just the total amount of tax coming out.
Dr. Friday 38:16
And that’s pretty when you fall. Yeah. So when you depending on your income, obviously, when you file the Schedule A you can put that dollar amount in there, it can only go up to $10,000 for the salt tax, and that would also include your property taxes, you can put it in there and see if you can itemize, Jay. But that’s the only place on a tax return where you would get credit for it. I would try to talk to my employer and see if it’s really correct would be my first question. I mean, I have people that never go into Georgia, but still, work for Georgia. We’ve not been paying unless something changes this year. So far, we have not had to file a Georgia and you would file a nonresident Georgia and tax return to try to get some of that back as well. But I’m just saying it’s a lot easier if you can get it straight from the employer correctly.
Yes, ma’am. Thank you for thanks. I really appreciate it.
Dr. Friday 39:03
Thanks, Jay. Appreciate you. Alright, let’s go to Ron. Hey, Ron.
Hey Dr.Friday. I wanted to ask you, I haven’t received my second stimulus check. And I just got my tax information from my employers. How can people already have their second stimulus check if it’s based on their 2020 income and they haven’t received it?
Dr. Friday 39:31
You know, that’s a great question, Ron, because the government is messed up. I don’t have a good answer. Okay. So basically, everybody was supposed to get the second stimulus by January 15. That was the goal of the earlier administration. If they didn’t get it would have been because the 2019 tax return wasn’t filed, or their income was too high in 2019, but they are supposed to be basing it on 2012 both of them. So both demos. So even if in some cases you might, some people did not because based on their 19, get this first stimulus, you can get your first and or second stimulus. It’s all going to be based on the 2020 tax return. Again, you’re getting in 2021. What is 2020 have to do with it? Don’t ask Ron because this is the government, but you can get yours as part of your refund when you get ready to file your 2020 tax return is the best news I have for you.
All right, thank you very much.
Dr. Friday 40:31
Great question. Thank you. All right. Let’s see if we can hit Tori. Real quick. Tori. Yes, ma’am. What can I do for you?
I have a 19-year-old who has not received any stimulus money. My younger two children ages 16 and 14 both received theirs. But my 19-year-old didn’t get anything.
Dr. Friday 40:52
And he won’t as long as he’s your dependent. Because any child over the age of 17 did not get stimulus money.
Okay. This next round do you think you’ll get it then?
Dr. Friday 41:05
I’m not unless he’s the file if he files his own tax return, and he’s no longer your dependent, then he will. But if he is your dependent, you’re getting the $500 credit on your tax return for that child. They’re washing those two against each other. As a mother, you’re claiming him so, therefore, but if he’s 19, filing his own tax return, he will get his own stimulus money.
When will he get that?
Dr. Friday 41:30
When he files his 2020. He can get the one that was in January, he could physically get that one as a refund on his 2020 if you don’t claim as a dependent in 2020.
Okay, awesome. Okay, thank you so much.
Dr. Friday 41:45
No problem. All right, boss. We have the other one for the long term. Okay, let’s try we only have like a minute. I don’t have a first name. There you go, Steve, what can I do for you?
We took $115,000 out of our IRA to buy two long term care policies that are within a life insurance policy, they’re riders, and I got a 1099 r for that amount of money. That’s all taxable. I guess.
Dr. Friday 42:18
It’s all taxable. Yep, you’ve invested into the future, but that is all taxable money. And there’s no difference because you took out more than 100,000 otherwise you couldn’t maybe move some of that along. Sorry. All right, buddy. Sorry, he’s gonna cut me off. All right, so this is the Dr. Friday show. And we only have a few more seconds left. If you want to reach me you can at 615-367-0819 on Monday morning again. 615-367-0819. You can also email me so if you weren’t able to get through the phone lines, email me at firstname.lastname@example.org. Hope you guys have a wonderful Saturday. Stay warm, I’ll call you later.