Dr. Friday Radio Show – January 13, 2024

The Dr. Friday Radio Show
The Dr. Friday Radio Show
Dr. Friday Radio Show - January 13, 2024
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Welcome to the Dr. Friday Radio Show! In this episode, Dr. Friday provides valuable insights into the intricacies of tax preparation and compliance. Key topics include the delay in IRS e-file opening, the crucial Small Entity Compliance Guide, and the urgent need for business owners to understand the Beneficial Ownership Information requirements. Dr. Friday emphasizes the importance of accurate tax documentation and the potential implications on Medicare and Social Security. The episode also covers payroll tax issues, child support considerations in relation to Social Security, and questions about capital gains on real estate sales. Insightful call-ins add to the dynamic discussion, making this a must-listen for anyone seeking practical tax advice.

Key Highlights:

  1. IRS E-file Delay: The opening of IRS e-file is postponed to January 29th, impacting the filing process for basic tax returns.
  2. Beneficial Ownership Information Compliance: A critical alert for business owners about the substantial penalties for non-compliance by January 1, 2025.
  3. Medicare and Social Security Impacts: Discussions on how income changes, including Social Security benefits, can affect Medicare costs and child support calculations.
  4. Real Estate Sales and Taxes: Guidance on the tax implications and exclusions related to selling property, particularly for seniors in different living situations.
  5. Interactive Listener Queries: Dr. Friday addresses a variety of caller questions, from payroll tax concerns to retirement account rollovers.

Whether you’re a business owner, retiree, or individual taxpayer, this episode is packed with essential information to help you navigate the complexities of tax season.

Transcript

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No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or your
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financial woes.
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She’s the how-to girl.
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It’s the Dr. Friday Show.
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If you have a question for Dr. Friday, call her now.
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737-WWTN.
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That’s 737-9986.
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So here’s your host, financial counselor and tax consultant, Dr. Friday.
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Hey, this is Dr. Friday and the doctor is in the house.
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We are here live in studio on this very cold Saturday, getting ready to start our tax season.
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Well, actually, it’s already started, already completing returns.
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I will let you know that the IRS is now saying January 29th for many of my very basic W-2
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only tax returns, that e-file will not open until January 29th.
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So in some cases, if you were thinking to rush to that line and get your money back
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from the IRS, you may have to wait a little longer than you expected.
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But if you’re working on your taxes this weekend or you’ve got some questions, a little call
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out to all my prior or existing clients that we, you know, every year obviously handle
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your taxes.
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If you don’t see a time, our calendar, the calendar is open at drfriday.com.
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If you don’t see an available time, just call the office.
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We do have available time, so we just can’t open up on the calendar because, well, if
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we do, then we’ll have no more time because it goes as quickly as we have.
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So that being said, just keep us in the loop.
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And then if you want to join the show, 615-737-9986, 615-737-9986.
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I’m always in your calls talking about my favorite subjects.
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Anytime you have something, you can just let me know.
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Again, 615-737-9986 is what we’re talking about here in the studio.
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So we’ll take it from there.
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I’m trying to get my mic still to work through the system, but this is working fine.
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All right.
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And then we also today, we’re going to talk a couple different times just depending on
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how fast the phone goes in and everything else.
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We’re going to have the small entity compliance guide.
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There is a situation that’s coming around where a lot of people are getting emails,
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phone calls from either other business owners or individuals.
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And part of that is going to be basically where they’re talking about the beneficial
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ownership information.
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And there is a serious penalty.
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We have until January 1st of 2025.
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Put that out there.
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The deadline for filing this is January 1st, 2025.
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If you do not file in this compliance, the penalty is $500 a day.
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So this is something we do want to keep talking about.
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If you’re not too sure, you can always just Google beneficial ownership information.
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There’s a website set up by the Financial Crime Enforcement Network.
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This is coming out through the U.S. Department of Treasury.
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It’s basically asking for the names of the owners, the address of the owners, the dates
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of birth for the owners, the Social Security numbers for the owners of all businesses.
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There are a few that can get waivers or have something that is — something out there where
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basically there are certain businesses, certain things that don’t have to comply, like if
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you sell insurance, I guess because you already have certain amounts of compliance that’s
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required, you’re not required to have to do anything on that.
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It’s just a matter of figuring out which way you want to go and how you want to make it
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work, et cetera, et cetera.
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So if you have a question on taxes, you can reach us at 615-737-9986, 615-737-9986, taking
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your calls live here in studio.
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Really not a whole bunch as far as taxes getting started.
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There has been a lot of love letters, it seems like, coming out in this last week or two,
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but having to do with prior years, ’18, ’19, ’20, ’21, ’22, and a lot of it has to do with
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payroll taxes, like they’re just realizing now that some of these things were done and
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they’re coming back and having us do things.
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So it is one of those situations where you’re like, okay, do I actually really owe this
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money?
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Do I need to do something?
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How can I make sure I’m not just paying a penalty because it’s showing up on here?
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So we want to make sure all of that is in compliance.
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So if you get one of those love letters and you’re not too sure what to do, first thing
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I would do is go back and look at your own records.
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Did you make all your payroll taxes on time?
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Was there a problem?
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Was there a delay?
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And then that way you can double check to see if, you know, the situation is.
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I mean, just like we all know payroll taxes were due on the 15th, the 15th falls on a
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holiday.
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Theoretically, they wanted all the payroll taxes done on the 12th.
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You know, that’s what their prefer was.
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So they would want to be on that and make sure that that was the situation.
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So if that’s their case, then we have to make sure that that is filed on the right situation.
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Otherwise, not going to be really a good situation.
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All right.
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Oh, sorry.
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We have a question from Brentwood is on the line.
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Let’s get Joe.
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Hey, Joe, what can I do for you?
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>> Joe Connor Hey, Friday, former client.
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Question for you.
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I am now eligible for Social Security benefits, but I have younger children under 16 on which
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I’m paying child support.
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So if I start drawing on Social Security, does my child support have to be recalculated
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because that’s now counted as income?
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>> Dr. Mary Jo Cagle That’s a great question.
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That seems like probably more of a legal question.
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And if you have children, if you’re on Social Security, and I don’t know all the rules,
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but theoretically, your children under minor children can actually qualify for Social Security
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benefits.
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Again, not a total expert.
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I have clients with young children that are on Social Security and their children qualify
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as well.
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But that may only qualify for certain types or income brackets, et cetera.
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But that is a good question on how and since it’s not earnings, is it actually even a part
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of the calculation for the child support since child support is not a tax deduction for you?
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I’m not sure if they would actually consider it.
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>> Joe Connor Yeah, it’s been sort of a murky thing that
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I’ve not gotten a great answer on.
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So I thought I would ask somebody that I trusted.
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>> Dr. Mary Jo Cagle Well, I appreciate the question, Joe.
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I just don’t feel like I’m going to be able – I mean, it really comes down to – because
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child support, the way they calculate it, it doesn’t make sense for most of us to be
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quite honest because many times they’re calculating things either prior to taxes being paid in
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the right way and different things.
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So I don’t find that there’s the same mathematics used when they calculate that than they do
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with like us for taxes, right?
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And since it’s not a tax deduction, it becomes even worse.
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So in answer to that basic question, I guess I’m going to have to say I don’t know the
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exact answer.
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And I don’t even know how your Social Security would have even come into play as far as would
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they care if you’re having to pay tax on it or not.
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You know what I mean?
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Would it make any difference that 85% of it could be taxed potentially?
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>> Joe Connor Yeah, and my question is really because Social
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Security is taking out pre-tax and child support payments are made based on gross earnings,
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am I not already paying maximum child support because it’s based on my gross earnings?
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>> Dr. Debra Hixxon Exactly.
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Like I just said, that doesn’t make any sense to most of us.
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If you’re sitting down and doing the math, why would you have to pay child support based
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on gross earnings?
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You don’t put gross earnings in your pocket.
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And then when you take out Social Security, in many cases, even though you already pay
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tax, you’re very likely going to have to pay tax again on up to 85% of what you get in
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Social Security unless you can live off Social Security by itself, which most of us can’t.
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So it just honestly doesn’t make sense to me the way they calculate.
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So I’m going to say that they probably aren’t going to recalculate it.
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They’re probably going to make you pay more because it just seems like they never see
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unless something changes and you’ve reduced your income.
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That’s about the only thing that would change.
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That’s my guess.
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>> Joe Connor Well, I appreciate your time.
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>> Dr. Debra Hixson No problem, Joe.
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Thanks.
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>> Joe Connor I’m going to go to Joyce real quick before the break.
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Hey Joyce, what can I do for you, sweetie?
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>> Joyce Rose We are thinking about rolling over a 401(k)
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to a Roth.
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But now my question is, a couple or three weeks ago, you were talking about somebody
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having income and it would affect their Social Security and Medicare.
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We’re 73 years old and we’re on both.
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So if we roll that over, I know we have to pay taxes on it, but does it count as income
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and does it affect our Social Security and Medicare?
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>> Joyce Rose My understanding is, and what I have seen
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actually, it will affect if you guys go over, I think it’s like 92, don’t have the exact
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dollar, 92 for single, so it’s like 180 for a married couple.
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If you exceed that 180 for all of your income, including the conversion, you could end up
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increasing, your Medicare could go up for another year because they base it on the year
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that, you know, whenever that happens.
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So you could end up paying higher in Medicare fees or the regular withdrawal than you do
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now.
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So I don’t know your income and I don’t know if you’re usually over or under that dollar
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amount, but it is a key number to keep in mind when we’re doing things because we always
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think about the taxes, but we don’t think about how Medicare does mean testing based
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on our tax returns.
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And the next thing you know, I’ve got people that were having a 160 or $130 normally coming
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out and now they’re having a 180 or $200 a month.
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And that, you know, fixed income, just because you have the money in your case, you didn’t
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touch any of that money, you’re just paying the taxes.
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So your fixed income is still the same and now you’ve lost money for your lifestyle.
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Not to say it’s going to make it hardship, but who wants to pay more money to Medicare?
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So 180, now that’s, is that net after you take off all your expenses?
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Yeah, that would be your adjusted gross income.
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Okay.
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That’s 180,000.
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Okay.
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Thank you very much.
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No problem.
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Thanks, Joy.
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Appreciate you.
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All righty.
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So that was a great question.
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And a lot of times, I mean, I’ll be honest, doing this for 25, 28 years now, and one of
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the things that we figured out probably five or six years ago, which makes us a little
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slow, is that we’re always concentrating on the IRS or the state if they’re state income
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and some of my clients, that’s what I’ve always looked at.
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And then we started getting people, you know, coming in and afterwards saying, hey, wait
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a sec, you know, now my Medicare changed because I sold a piece of real estate and my capital
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gains went up, you know, whatever, and now we have this.
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And then, you know, there is some sort of waiver that you can get once or something,
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but I’ll be honest, guys, I’ve never successfully done it.
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I’ve had clients successfully contact Medicare and get it done, but I’ve not yet had any
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real success in filing that document.
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So it’s really important if you can control it, like in Joyce’s situation, maybe they
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do a little bit in 24 and a little bit in 25 and keep them under that number if that’s
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a possibility, that would be something.
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Because a lot of times your financial planner will be sitting there saying, wait, as long
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as it’s under 250, you’re maximizing the 22 percent, let’s maximize as much as we can,
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but when you go from that 180 to 250, you’ve just affected your Medicare rates.
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So again, talk to your financial people, make sure you got it covered.
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All right, we’re going to take a quick break.
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When we get back, we’ll take more of your phone calls.
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615-737-9986.
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We’ll be right back with the Dr. Friday Show.
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All right, we are back live here in studio.
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And if you have anything you want to join the show, 615-737-9986, 615-737-9986, taking
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your calls.
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We’ll go right to Robert from Nashville and see what he has.
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Hello, Dr. Friday.
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My mother-in-law, I’m 90 years old now.
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She has been in a nursing home the last couple of years.
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We sold her home.
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She lost her husband about 40 years ago.
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She never remarried.
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What is the exclusion on the capital gains?
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Does she get 250 or does she get 500?
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She only gets 250.
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You only have a window of two years after the passing of a spouse.
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But she did get a — well, 40 years ago.
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I have no idea.
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Theoretically, if they owned the home jointly that they had owned — I don’t know if she’d
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sell the same house or not that you sold — but at the time of his passing, there would have
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been a 50% step-up in basis.
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But 40 years ago, I can’t imagine what the property would have had today, you know?
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Oh, yeah.
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It would be locked into most of the growth she’s probably seen.
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I mean, I don’t know where it’s at or anything, but I’m going to guess in the last 10 years,
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the house would probably increase quite a bit more than it had in the 30 years.
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Oh, yeah.
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Absolutely.
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With all the growth we’ve had here.
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So, yeah.
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So she’s looking at a $250,000 exclusion.
00:14:23.740 –> 00:14:28.740
But keep in mind, if she’s living in a nursing home, unless it’s a Medicare situation, any
00:14:28.740 –> 00:14:34.740
money that she’s paying out is medical, and therefore can’t be used for itemizing.
00:14:34.740 –> 00:14:35.740
Okay.
00:14:35.740 –> 00:14:36.740
Very good.
00:14:36.740 –> 00:14:37.740
Thank you.
00:14:37.740 –> 00:14:38.740
All right.
00:14:38.740 –> 00:14:39.740
I appreciate the phone call.
00:14:39.740 –> 00:14:40.740
Thanks, Robert.
00:14:40.740 –> 00:14:41.740
All righty.
00:14:41.740 –> 00:14:51.500
So, again, if you have questions, you can join us here, 615-737-9986, 615-737-9986,
00:14:51.500 –> 00:14:52.500
taking your calls.
00:14:52.500 –> 00:14:56.700
If you’ve got questions, again, I do want to keep — Daryl will probably get tired of
00:14:56.700 –> 00:15:00.260
it, but this is a huge penalty to all small business owners.
00:15:00.260 –> 00:15:07.020
That means if you are a partnership, a corporation, it doesn’t apply to single member.
00:15:07.020 –> 00:15:12.860
It does only, in most cases, if you’re a single member corporation, it would, or single sole
00:15:12.860 –> 00:15:13.860
holder.
00:15:13.860 –> 00:15:15.420
But you need to look.
00:15:15.420 –> 00:15:16.420
You need to go online.
00:15:16.420 –> 00:15:20.740
You may have already gotten something from compliance, but you need to be looking at
00:15:20.740 –> 00:15:26.340
the beneficial ownership informational from the Financial Crime Enforcement Network.
00:15:26.340 –> 00:15:28.740
This is a legitimate situation.
00:15:28.740 –> 00:15:29.740
You have time.
00:15:29.740 –> 00:15:33.700
It’s not something you have to draw up the phone and get done today, but it is something
00:15:33.700 –> 00:15:38.060
that you need to make sure that yourself or your accountant or whoever is handling these
00:15:38.060 –> 00:15:39.060
kind of situations.
00:15:39.060 –> 00:15:40.780
It’s not part of a tax situation.
00:15:40.780 –> 00:15:45.260
It’s not something that we normally would do, but it is something that you do need to
00:15:45.260 –> 00:15:51.300
have someone help you do or get done yourself, so that way you’re able to not have this penalty,
00:15:51.300 –> 00:15:58.780
because this penalty is, as far as I’m concerned, massive when it’s $500 a day when you’re late.
00:15:58.780 –> 00:16:01.020
And that could add up really, really quickly.
00:16:01.020 –> 00:16:05.380
So these questions, and keep in mind, right now, one of the best things you need to be
00:16:05.380 –> 00:16:11.180
doing, you can start working on your taxes, but like I said, IRS has already sent notifications
00:16:11.180 –> 00:16:14.140
out to us that they will not be opening e-file.
00:16:14.140 –> 00:16:16.000
It was going to be the 22nd.
00:16:16.000 –> 00:16:19.540
We got notification today that it was going to be the 29th.
00:16:19.540 –> 00:16:23.300
It may not be for every single type of tax return, just some of the returns we’re working
00:16:23.300 –> 00:16:24.300
on.
00:16:24.300 –> 00:16:29.820
And then also you have the situation where you need to make sure you have all your documentation.
00:16:29.820 –> 00:16:32.140
Make sure you have your portfolio.
00:16:32.140 –> 00:16:37.780
So if you have stock, dividends, interest, a lot of that’s not coming out.
00:16:37.780 –> 00:16:42.020
Mortgage statements, I know a lot of times nowadays we don’t use those as often, but
00:16:42.020 –> 00:16:44.100
getting that information together.
00:16:44.100 –> 00:16:49.460
If you have any kind of distribution, 1099s, none of that has to be out to the last day
00:16:49.460 –> 00:16:50.460
of January.
00:16:50.460 –> 00:16:55.780
And in some cases, again, my mortgage company said they weren’t going to have them out until
00:16:55.780 –> 00:16:56.780
February 15th.
00:16:56.780 –> 00:17:00.740
So again, one of those situations where you just want to make sure you have all the information
00:17:00.740 –> 00:17:02.340
so you’re not amending things later.
00:17:02.340 –> 00:17:03.340
All right, let’s take Gary.
00:17:03.340 –> 00:17:04.340
I think it’s in Dixon.
00:17:04.340 –> 00:17:05.340
Let’s see what he has a question on.
00:17:05.340 –> 00:17:06.340
Hey, Gar.
00:17:06.340 –> 00:17:07.340
Hey.
00:17:07.340 –> 00:17:08.340
Yeah, we’re just on straight Social Security.
00:17:08.340 –> 00:17:09.340
We don’t have any other income.
00:17:09.340 –> 00:17:19.180
I think H&R Block told us last year we wouldn’t have to file no more.
00:17:19.180 –> 00:17:20.900
Is that correct?
00:17:20.900 –> 00:17:21.900
Correct.
00:17:21.900 –> 00:17:26.340
If you only have Social Security and you don’t have any other source of income, Social Security
00:17:26.340 –> 00:17:29.300
in itself is a zero tax.
00:17:29.300 –> 00:17:32.420
It’s only when you make money that Social Security can become taxable.
00:17:32.420 –> 00:17:37.340
So yeah, you have one of the few times, few advantages, Gary, at this point in life to
00:17:37.340 –> 00:17:43.100
just be able to ignore all the hoopla when it comes to taxes.
00:17:43.100 –> 00:17:48.500
Well, I think, yeah, I was sort of leery of that.
00:17:48.500 –> 00:17:52.100
So I wanted to ask somebody, you know, about it.
00:17:52.100 –> 00:17:59.060
And they said, no, if you don’t work any more or have any income coming in, up to a certain
00:17:59.060 –> 00:18:01.900
amount, I think is what they told me, but I can’t remember.
00:18:01.900 –> 00:18:06.140
Yeah, it’s up to the standard deduction, but half of that would be possibly, it’s called
00:18:06.140 –> 00:18:10.700
the provisional tax code, so you take half of your Social Security plus whatever you
00:18:10.700 –> 00:18:11.700
might have earned.
00:18:11.700 –> 00:18:16.620
And if it does exceed your, pretty much your standard deduction, which as a married couple
00:18:16.620 –> 00:18:21.740
is almost $30,000 if you’re over the age of 65, you would have some wiggle room.
00:18:21.740 –> 00:18:27.420
So if you made a W-2 for $10,000, you’d still not, as long as there was no withholding,
00:18:27.420 –> 00:18:29.460
you know, you’d still not have to file taxes.
00:18:29.460 –> 00:18:30.460
Right.
00:18:30.460 –> 00:18:34.860
Well, I’m 74, so we’re sort of home.
00:18:34.860 –> 00:18:37.220
You know, we’ll just stay at home and stay out of trouble.
00:18:37.220 –> 00:18:38.220
There you go.
00:18:38.220 –> 00:18:39.220
It’s about time.
00:18:39.220 –> 00:18:40.220
You get to enjoy a little bit.
00:18:40.220 –> 00:18:41.220
Well, enjoy it.
00:18:41.220 –> 00:18:42.220
Hey, man.
00:18:42.220 –> 00:18:43.220
Stay inside, though.
00:18:43.220 –> 00:18:44.220
It’s too cold.
00:18:44.220 –> 00:18:45.220
All right.
00:18:45.220 –> 00:18:46.220
You have a good day.
00:18:46.220 –> 00:18:47.220
Thank you, sir.
00:18:47.220 –> 00:18:48.220
All right.
00:18:48.220 –> 00:18:51.740
And that was a good question, because I have a number of people every year, and I think
00:18:51.740 –> 00:18:55.180
it’s good to check, because sometimes things change.
00:18:55.180 –> 00:19:00.780
Maybe you sell some stocks or even selling your home, even if it’s a zero tax situation,
00:19:00.780 –> 00:19:06.380
a lot of times we like to report it so that the IRS knows it was your primary home.
00:19:06.380 –> 00:19:10.860
But most of the time, it’s just a matter of, you know, just making sure everything is reported
00:19:10.860 –> 00:19:16.140
so you don’t have to look over your shoulder later and you say, “Oh, man, one of my clients,
00:19:16.140 –> 00:19:23.500
he’s an older gentleman, and he just got a love letter from 2022, and we found that maybe
00:19:23.500 –> 00:19:27.740
it looks like it may have been one of his portfolios, information did not come through
00:19:27.740 –> 00:19:28.740
to him.”
00:19:28.740 –> 00:19:33.020
So that’s why I’m using that example, and if you’re not the first, you certainly won’t
00:19:33.020 –> 00:19:34.020
be the last.
00:19:34.020 –> 00:19:40.580
But make sure, do your best to make sure that you have all of your information, because
00:19:40.580 –> 00:19:44.220
the IRS is going to come back, and there is nothing worse than getting a letter from the
00:19:44.220 –> 00:19:48.500
Internal Revenue Service saying you forgot or they’ve changed your tax return, because
00:19:48.500 –> 00:19:49.700
it’s never for the good.
00:19:49.700 –> 00:19:54.060
They never usually send those letters out that I can find that usually says, “Oh, we’ve
00:19:54.060 –> 00:19:56.380
changed your tax return, and you now have a refund.”
00:19:56.380 –> 00:20:02.900
Not really something that’s happening too often, you know, but what we do want to make
00:20:02.900 –> 00:20:09.620
sure is that you are able to get your information and then be able to look.
00:20:09.620 –> 00:20:16.020
And when you do get those letters, this gentleman, he was smart enough to review his taxes and
00:20:16.020 –> 00:20:20.980
see that the way I labeled something and the way the IRS labeled it, it was the same thing.
00:20:20.980 –> 00:20:26.340
So they were saying that one of the things was not on the tax return, but it was.
00:20:26.340 –> 00:20:29.660
And it was on the same section, it’s just different labeling.
00:20:29.660 –> 00:20:35.940
So just because the IRS says they’ve changed your tax return, don’t take that as that you
00:20:35.940 –> 00:20:37.900
have to pay that money, okay?
00:20:37.900 –> 00:20:39.100
That’s not always the case.
00:20:39.100 –> 00:20:42.740
And there, in the letter, it basically says, “If you have any information to help us change
00:20:42.740 –> 00:20:46.420
this, blah, blah, blah, if you ignore us, we’re going to change it anyway.”
00:20:46.420 –> 00:20:50.980
And then you’d have to go back and try to amend, and just so you know, amended tax returns
00:20:50.980 –> 00:20:54.780
are not necessarily having to be accepted.
00:20:54.780 –> 00:20:58.060
So it’s one of those deals where you need to make sure you have everything.
00:20:58.060 –> 00:21:03.300
Also, I wanted to put a reminder out that anyone that may not have applied yet for the
00:21:03.300 –> 00:21:08.020
employee retention tax credit, that will expire come April.
00:21:08.020 –> 00:21:12.780
So if you haven’t applied for it, and not everybody gets it, I can tell you every day,
00:21:12.780 –> 00:21:17.380
during the week especially, I at least get one phone call a day telling me how I can
00:21:17.380 –> 00:21:21.980
qualify for $26,000 per an employee.
00:21:21.980 –> 00:21:28.060
I personally think they should be put under arrest or something, because it’s a fraud.
00:21:28.060 –> 00:21:32.780
I mean, very few people actually truly qualify for $26,000 per an employee, because they
00:21:32.780 –> 00:21:39.540
actually back out PPPs and different things, if you were truly affected.
00:21:39.540 –> 00:21:45.980
Many of us stayed open, so my people were working, therefore they didn’t apply to them.
00:21:45.980 –> 00:21:50.540
It only applies to people that maybe had, I don’t know, I’m thinking like a bar or something
00:21:50.540 –> 00:21:54.220
that was totally shut down in Nashville for periods of time, and then they’d open and
00:21:54.220 –> 00:21:56.020
then they re-shut them down.
00:21:56.020 –> 00:22:00.220
Those companies were totally affected, and maybe in those situations, some of them would
00:22:00.220 –> 00:22:04.780
have qualified, but if they got the PPP, which most of them would have gotten first, they
00:22:04.780 –> 00:22:06.220
still won’t qualify for all of it.
00:22:06.220 –> 00:22:07.220
So it’s very misleading.
00:22:07.220 –> 00:22:11.900
So just be very careful when you get those calls, because I have several clients that
00:22:11.900 –> 00:22:16.060
call me once they get those phone calls, and like I said, I’m getting those phone calls,
00:22:16.060 –> 00:22:17.060
and they’re very misleading.
00:22:17.060 –> 00:22:20.700
A lot of times they’re recordings, and they’re just someone saying something, so it’s not
00:22:20.700 –> 00:22:27.020
like you can say, “Hey, you really can’t — I don’t qualify, so stop calling me.”
00:22:27.020 –> 00:22:29.500
They’re phishing, and they’re trying to get this information.
00:22:29.500 –> 00:22:32.940
So it’s really important that you know and understand how that works.
00:22:32.940 –> 00:22:39.700
But if you have a business that was in business in ’21 and ’22, and you were affected by COVID,
00:22:39.700 –> 00:22:46.260
and you didn’t maybe get all the PPP, or especially the second PPP, because many of them didn’t
00:22:46.260 –> 00:22:51.060
qualify because they didn’t have the hardship, then you might want to make sure that you’re
00:22:51.060 –> 00:22:52.060
not leaving.
00:22:52.060 –> 00:22:59.340
But also I want to say ERTC, Employee Retention Tax Credit, is taxable income.
00:22:59.340 –> 00:23:04.180
That is not like PPP that was free money or turned out to be free money.
00:23:04.180 –> 00:23:06.180
This is a taxable situation.
00:23:06.180 –> 00:23:12.660
So if you get $20,000 back, that’s $20,000 of income that in theory, if it was for ’21,
00:23:12.660 –> 00:23:16.340
you need to go back, amend ’21, and then pay the taxes.
00:23:16.340 –> 00:23:19.460
And the IRS is reviewing and auditing those.
00:23:19.460 –> 00:23:25.900
I have already seen several cases and conversations that I’ve heard on some of these phone calls.
00:23:25.900 –> 00:23:27.900
So just, you know, be prepared.
00:23:27.900 –> 00:23:29.460
Make sure you have your documentation.
00:23:29.460 –> 00:23:33.820
Just because you got the money from the IRS does not mean that they can’t come back and
00:23:33.820 –> 00:23:38.100
audit that and reconfirm that you did or did not qualify for it.
00:23:38.100 –> 00:23:42.140
So again, making sure that all that information was correct and you’re doing it.
00:23:42.140 –> 00:23:45.300
All right, we’re going to get ready here to take our second break.
00:23:45.300 –> 00:23:49.460
If you want, you’ve got a question concerning your 2024s, or maybe something has happened
00:23:49.460 –> 00:23:55.420
in 2023 filings, or I should say 2022, or preparing your 2023, then you can give us
00:23:55.420 –> 00:23:58.420
a call here at 615-737-9986.
00:23:58.420 –> 00:23:59.420
615-737-9986.
00:23:59.420 –> 00:24:02.420
We’ll be right back with the Dr. Friday Show.
00:24:02.420 –> 00:24:06.420
All righty, we are back here live in studio.
00:24:06.420 –> 00:24:12.420
You can join the show if you want at 615-737-9986.
00:24:12.420 –> 00:24:13.420
615-737-9986.
00:24:13.420 –> 00:24:19.420
And we’re going to hit Joe in Manchester.
00:24:19.420 –> 00:24:26.420
Hey Joe, what’s happening?
00:24:26.420 –> 00:24:30.100
Hey, Dr. Friday.
00:24:30.100 –> 00:24:38.180
The house beside me recently sold during the summer, and the guy that bought it is a home
00:24:38.180 –> 00:24:39.180
remodeler.
00:24:39.180 –> 00:24:46.660
And he asked if I would keep his grass mowed for him, which I did, and he paid me $500.
00:24:46.660 –> 00:24:51.100
And I’m not self-employed or a business owner, I’m just a neighbor.
00:24:51.100 –> 00:24:53.100
So how do I need to claim that on my taxes?
00:24:53.100 –> 00:24:58.860
Well, it would either be considered other income, because it wasn’t an attempt to make
00:24:58.860 –> 00:25:00.100
earnings.
00:25:00.100 –> 00:25:04.420
You could put it on your Schedule 1 under other income if you want to be.
00:25:04.420 –> 00:25:10.380
I doubt he’s going to 1099 you, and in theory it was more like a gift that he paid you for
00:25:10.380 –> 00:25:11.940
doing a nice thing.
00:25:11.940 –> 00:25:17.620
But to be legitimate, you file it on your Schedule 1 under other income.
00:25:17.620 –> 00:25:18.620
Okay.
00:25:18.620 –> 00:25:21.900
All right, that sounds good.
00:25:21.900 –> 00:25:23.580
Okay, good question.
00:25:23.580 –> 00:25:25.140
Okay, thank you, Dr. Friday.
00:25:25.140 –> 00:25:28.140
Most people would probably just ignore it, Joe.
00:25:28.140 –> 00:25:29.700
Say what now?
00:25:29.700 –> 00:25:30.700
Okay.
00:25:30.700 –> 00:25:34.220
I said most people probably would not be reporting it, to be quite honest.
00:25:34.220 –> 00:25:36.620
Well, he wrote me a check and everything.
00:25:36.620 –> 00:25:39.140
He’s a home developer, so I didn’t know.
00:25:39.140 –> 00:25:40.140
No.
00:25:40.140 –> 00:25:45.900
I mean, what you’re doing is correct, but theoretically, as long as it’s $500 or more,
00:25:45.900 –> 00:25:48.620
in theory, we’re supposed to report it on our tax return.
00:25:48.620 –> 00:25:52.580
If he had paid you $450, you wouldn’t have had to report it.
00:25:52.580 –> 00:25:55.900
So that might be something if he does for this year, you might just want to cut it off.
00:25:55.900 –> 00:25:59.060
Say, “I’m going to do it for $450, so I don’t have to worry about taxes.”
00:25:59.060 –> 00:26:01.520
Okay, sounds good.
00:26:01.520 –> 00:26:02.520
Thank you.
00:26:02.520 –> 00:26:03.520
Thanks, buddy.
00:26:03.520 –> 00:26:04.520
Bye-bye.
00:26:04.520 –> 00:26:05.520
All right.
00:26:05.520 –> 00:26:09.460
But yes, he probably won’t, because it’s under $600.
00:26:09.460 –> 00:26:11.420
He doesn’t have to legally 1099 you.
00:26:11.420 –> 00:26:16.820
But what Joe brought up is actually a great point, which means that even though somebody
00:26:16.820 –> 00:26:24.820
doesn’t 1099 you, in theory, the IRS says any income earned should be reported on your
00:26:24.820 –> 00:26:27.020
tax return.
00:26:27.020 –> 00:26:31.140
And if you have a, you know, I mean, Joe then, I would have said he could have wrote it off
00:26:31.140 –> 00:26:35.500
as a small business, but the IRS would have classified it as a hobby.
00:26:35.500 –> 00:26:37.140
He wasn’t out to make a lawn service.
00:26:37.140 –> 00:26:38.620
He was doing it as a favor.
00:26:38.620 –> 00:26:41.300
It was someplace that he would just come over and do.
00:26:41.300 –> 00:26:45.180
So he wasn’t really in the lawn business.
00:26:45.180 –> 00:26:50.580
So in his case, he doesn’t, he cannot write off his expenses against that money because
00:26:50.580 –> 00:26:54.420
he wasn’t in business and he wasn’t trying to be in business.
00:26:54.420 –> 00:26:58.980
Now, if you are in the lawn service business, then obviously you could have wrote off your
00:26:58.980 –> 00:27:02.900
petrol and different things, your miles and the gas and things it takes to go into your
00:27:02.900 –> 00:27:06.460
lawnmower, but that’s not one of those situations.
00:27:06.460 –> 00:27:10.860
But anytime, and this is going to be coming back in 20, I know we keep saying this every
00:27:10.860 –> 00:27:19.700
year guys, but in 2023, theoretically, some companies like Square and PayPal and Venmo
00:27:19.700 –> 00:27:27.180
were getting geared up to start issuing anyone that made more than $600 on in using their
00:27:27.180 –> 00:27:28.180
sites, right?
00:27:28.180 –> 00:27:31.980
I mean, that was, and then it got extended and then it’s now $5,000.
00:27:31.980 –> 00:27:39.180
So right now the law is $5,000 or more than 20 transactions.
00:27:39.180 –> 00:27:40.620
And that’s what you’re going to be dealing with.
00:27:40.620 –> 00:27:47.880
So if you’re doing a, I don’t know, like a garage sale kind of thing on, people are coming
00:27:47.880 –> 00:27:53.740
in and paying you through one of them, PayPal or Venmo or any of those, or you’re using
00:27:53.740 –> 00:27:59.700
those apps thinking that that isn’t going to really show up as income because it’s a
00:27:59.700 –> 00:28:05.180
cash app and so far there hadn’t been a lot unless you were using merchant statements.
00:28:05.180 –> 00:28:07.660
So I’m preparing you guys.
00:28:07.660 –> 00:28:13.220
If you decide that you’re going to continue doing your webpage where you’re selling different
00:28:13.220 –> 00:28:17.900
things and you’re maybe even taking furniture and fixing it up and then resubmitting or
00:28:17.900 –> 00:28:23.260
reselling that or going around to garage sales and putting stuff out there and selling it,
00:28:23.260 –> 00:28:25.120
that is a legitimate business.
00:28:25.120 –> 00:28:29.580
Even though you might think it’s just a little side thing that you’re doing, the IRS is going
00:28:29.580 –> 00:28:31.540
to say that is a business.
00:28:31.540 –> 00:28:37.140
You are taking one thing and you’re creating it or you’re even just shopping around and
00:28:37.140 –> 00:28:40.960
then you’re putting that same thing out for the market to buy.
00:28:40.960 –> 00:28:44.000
You are now creating a product and a sale.
00:28:44.000 –> 00:28:49.140
So you need to start thinking about, because most of the time what we ran into in a couple
00:28:49.140 –> 00:28:52.300
cases, no one tracked their little garage sale pickup.
00:28:52.300 –> 00:28:56.460
So people drive around and they find these really cool things that are at garage sales
00:28:56.460 –> 00:29:01.340
and they negotiate prices and then they turn around and put them back out in the marketplace.
00:29:01.340 –> 00:29:03.180
But they’re not carrying a receipt book.
00:29:03.180 –> 00:29:04.260
They paid cash for it.
00:29:04.260 –> 00:29:06.060
They don’t even know where they purchased it.
00:29:06.060 –> 00:29:07.380
So there is no basis.
00:29:07.380 –> 00:29:13.900
So when they sell it, since they did not track where, how, when, how much money that was
00:29:13.900 –> 00:29:18.780
spent on it, then when they sell it and if the IRS audits those individuals, we have
00:29:18.780 –> 00:29:19.780
no trail.
00:29:19.780 –> 00:29:21.900
There’s nothing come back at us and says, “Oh, wait.
00:29:21.900 –> 00:29:26.900
We can actually deduct this because this is who we paid $45 for this item that we sold
00:29:26.900 –> 00:29:27.900
for 80.
00:29:27.900 –> 00:29:31.340
So we have a basis and then we can only have to pay tax on the difference.”
00:29:31.340 –> 00:29:32.340
No.
00:29:32.340 –> 00:29:36.980
So if you’re one of those individuals that has just accumulated that you have a lot of
00:29:36.980 –> 00:29:42.620
stuff and you’re selling it, theoretically if it’s your own personal thing and you put
00:29:42.620 –> 00:29:48.500
them out there, but now if you sell more than $5,000 a year, the IRS is saying that’s a
00:29:48.500 –> 00:29:49.860
lot of money in one year.
00:29:49.860 –> 00:29:52.420
That’s a lot to be generating.
00:29:52.420 –> 00:29:57.580
Therefore you’re going to have to question is it truly a business that you’re in or not.
00:29:57.580 –> 00:30:03.340
You know, maybe you sold one thing for $5,000 because you had a piano or something, but
00:30:03.340 –> 00:30:07.700
if you’re using any kind of cash app, it’s going to start coming.
00:30:07.700 –> 00:30:13.780
So you need to start really thinking about where, how you’re doing things because if
00:30:13.780 –> 00:30:16.420
you’re doing some of this on the side thinking, “Hey, you know what?
00:30:16.420 –> 00:30:17.420
It’s been a great way.
00:30:17.420 –> 00:30:18.420
I find these things.
00:30:18.420 –> 00:30:25.780
I have a sister-in-law that used to go and go to some of the outlets, buy clothes,” and
00:30:25.780 –> 00:30:30.860
then she would list them on the internet and she had a little store there and then she
00:30:30.860 –> 00:30:36.060
would sell the stuff and make it, which was great.
00:30:36.060 –> 00:30:39.900
But obviously if you’re not reporting at all, that becomes a problem.
00:30:39.900 –> 00:30:45.340
So you need to make sure that if you’re doing something like that, you are now really tracking
00:30:45.340 –> 00:30:50.540
your expenses because if you’re not, it could come back at you later where you don’t have
00:30:50.540 –> 00:30:55.980
any expenses because you can’t justify any of them because you didn’t have a paper trail
00:30:55.980 –> 00:30:56.980
to use.
00:30:56.980 –> 00:31:02.100
And the IRS has the right to completely write off all of your expenses because you can’t
00:31:02.100 –> 00:31:03.540
justify those expenses.
00:31:03.540 –> 00:31:04.740
So, all right.
00:31:04.740 –> 00:31:06.100
So we’ve got that.
00:31:06.100 –> 00:31:08.700
Don’t forget we are in the middle of, well, we aren’t in the middle.
00:31:08.700 –> 00:31:13.940
We just started I should say since e-file hasn’t even opened up until January 29th.
00:31:13.940 –> 00:31:16.740
Does it mean you cannot complete your taxes?
00:31:16.740 –> 00:31:19.620
Does it mean they can’t be ready and ready to go out?
00:31:19.620 –> 00:31:24.140
We’ve already completed probably 20, 30 returns and we’re working this weekend.
00:31:24.140 –> 00:31:28.140
Tax returns are going out and getting everything at least as far as we can go.
00:31:28.140 –> 00:31:33.300
There’s going to be a couple that we may start and we’re waiting for a few documents, K-1s,
00:31:33.300 –> 00:31:37.460
different things that’s going to come from other sources that we’re not able.
00:31:37.460 –> 00:31:39.020
Don’t forget to track your stuff.
00:31:39.020 –> 00:31:40.020
That’s all I’m going to say.
00:31:40.020 –> 00:31:44.660
I know I say that a lot, but I can’t tell you how many times someone comes in because
00:31:44.660 –> 00:31:49.180
they get a letter that the IRS has changed their returns because of something they didn’t
00:31:49.180 –> 00:31:50.180
think about.
00:31:50.180 –> 00:31:56.100
In some cases, it’s as simple as they had a 1099-R, which is a distribution.
00:31:56.100 –> 00:32:00.940
And since the federal taxes came out of that distribution, some people think, “Oh, I don’t
00:32:00.940 –> 00:32:01.940
have to put on my tax returns.
00:32:01.940 –> 00:32:02.940
They already took the money out.
00:32:02.940 –> 00:32:03.940
They already took the taxes out.”
00:32:03.940 –> 00:32:07.100
That doesn’t quite work that way.
00:32:07.100 –> 00:32:08.740
All they did was take an estimate.
00:32:08.740 –> 00:32:13.180
They took a dollar amount that you told them, 10, 20, 30 percent, whatever it might have
00:32:13.180 –> 00:32:14.180
been.
00:32:14.180 –> 00:32:17.780
But based on your income, total overall is how that is taxed.
00:32:17.780 –> 00:32:22.620
So in many cases, not enough money came out, and therefore, they end up having to pay more
00:32:22.620 –> 00:32:27.940
money now with penalties because they didn’t report it, and then they get underreporting
00:32:27.940 –> 00:32:30.020
of income and everything else.
00:32:30.020 –> 00:32:33.340
Very important to track your information and make sure you know where it’s coming from.
00:32:33.340 –> 00:32:34.340
That’s all I’m going to say.
00:32:34.340 –> 00:32:35.340
Documentation.
00:32:35.340 –> 00:32:38.700
Right now is the time to just go through, “Steve, did you work more than you said you
00:32:38.700 –> 00:32:39.700
would?
00:32:39.700 –> 00:32:40.700
Did you have more than one job?
00:32:40.700 –> 00:32:44.580
Did you have any major medical situations that may or may not trigger anything?
00:32:44.580 –> 00:32:47.660
Did you have a large charitable contribution?”
00:32:47.660 –> 00:32:50.140
And that doesn’t always have to be cash.
00:32:50.140 –> 00:32:53.260
But what we have also learned over all these years is what, guys?
00:32:53.260 –> 00:32:59.460
If you have something over $250 or $500, depending if it’s cash or product, you need to have
00:32:59.460 –> 00:33:00.460
documentation.
00:33:00.460 –> 00:33:02.740
It’s always about the documentation.
00:33:02.740 –> 00:33:07.740
And in most cases, if you have a family member that’s passed away and then you’ve donated
00:33:07.740 –> 00:33:12.380
all of their things, and theoretically that could be a tax deduction to you, you better
00:33:12.380 –> 00:33:13.380
have an appraisal.
00:33:13.380 –> 00:33:17.700
We have a situation where we’ve been working with someone for a long time trying to get
00:33:17.700 –> 00:33:23.700
them to come back and reopen and audit because they basically disallowed all of it because
00:33:23.700 –> 00:33:29.300
he did not have, but he was under the understanding at the time that one item didn’t require it
00:33:29.300 –> 00:33:34.700
unless one item was over the $500 or $5,000, depending on what you’re looking at.
00:33:34.700 –> 00:33:39.780
Mark, and in his case, no, the IRS came back and they have ruled on this in court cases
00:33:39.780 –> 00:33:44.740
that says if you have an estate, and let’s say the combination of everything in that
00:33:44.740 –> 00:33:50.020
house is $5,000 or $6,000 and you’re going to give it all to a charity and you want to
00:33:50.020 –> 00:33:55.780
deduct that from your taxes as a charitable deduction, you better have an appraisal that
00:33:55.780 –> 00:33:58.020
shows that all of that was worth that.
00:33:58.020 –> 00:34:00.860
And that’s the way it’s going to come down.
00:34:00.860 –> 00:34:05.700
Otherwise, you’re not going to qualify for anything more than the $250 cash and $500
00:34:05.700 –> 00:34:06.700
non-cash contributions.
00:34:06.700 –> 00:34:09.140
That’s pretty much out there.
00:34:09.140 –> 00:34:13.340
So just putting that on the table, you want to make sure that you’re documenting these
00:34:13.340 –> 00:34:14.340
things.
00:34:14.340 –> 00:34:21.100
Don’t forget, if you have some stock that is valued at a certain dollar amount and you
00:34:21.100 –> 00:34:25.060
don’t want to have to pay capital gains, you can gift that to them at the value and you
00:34:25.060 –> 00:34:26.060
get to take the value.
00:34:26.060 –> 00:34:30.940
Let’s just say you have some IBM stock and it’s worth 50 grand, but your basis is only
00:34:30.940 –> 00:34:31.940
10.
00:34:31.940 –> 00:34:39.500
You can donate that to a charity for $50,000, deduct the $50,000 and never pay tax on that
00:34:39.500 –> 00:34:40.500
capital gain.
00:34:40.500 –> 00:34:42.580
That’s the way these kind of things work.
00:34:42.580 –> 00:34:46.700
And if you have a situation where you want to do something like that, I’ve had people
00:34:46.700 –> 00:34:53.540
in the past donate art or donate stocks or homes, then it’s something you want to really
00:34:53.540 –> 00:34:55.180
consider or look into, right?
00:34:55.180 –> 00:34:58.740
You don’t want to just — sometimes it always sounds good on paper.
00:34:58.740 –> 00:34:59.980
Oh, I don’t want to lose that.
00:34:59.980 –> 00:35:02.740
I’ll go ahead and do this and then I’ll give my 30%.
00:35:02.740 –> 00:35:04.580
Well, maybe there’s another way of doing it.
00:35:04.580 –> 00:35:08.660
Maybe there’s a way of giving something that you can then write off and do more with.
00:35:08.660 –> 00:35:11.340
Well, that’s the kind of situation you can work with.
00:35:11.340 –> 00:35:15.100
All right, we’re going to get ready to take our last break for the day.
00:35:15.100 –> 00:35:18.180
That means if you are waiting and you’re sitting there going, oh, my gosh, I have something
00:35:18.180 –> 00:35:21.420
I want to say and I don’t know, there’s really no silly questions.
00:35:21.420 –> 00:35:23.300
There’s no dumb questions, really.
00:35:23.300 –> 00:35:27.620
I mean, if you’re working on it, a lot of times it’s just what you’re asking.
00:35:27.620 –> 00:35:31.140
A lot of other people sometimes are always curious about the same answer and it just
00:35:31.140 –> 00:35:33.140
takes one person to call in.
00:35:33.140 –> 00:35:37.140
So you can call the show at 615-737-9986.
00:35:37.140 –> 00:35:44.500
615-737-9986 is the number here in the studio.
00:35:44.500 –> 00:35:46.740
And we’re going to come back and take some of your calls.
00:35:46.740 –> 00:35:50.660
You’re listening to the Dr. Friday Show and we’ll be right back.
00:35:50.660 –> 00:35:53.940
(Music)
00:35:53.940 –> 00:35:58.180
All righty, we are back here live in studio.
00:35:58.180 –> 00:36:00.180
And it looks like we have a couple people on the line.
00:36:00.180 –> 00:36:05.780
Let’s hit Bobby from Tennessee here and we’ll start there and see if we can get Bobby an answer.
00:36:05.780 –> 00:36:07.380
Hey, Bobby.
00:36:07.380 –> 00:36:13.700
Hey, I just recently got disability and I’ve got a little part-time job on the side and
00:36:13.700 –> 00:36:15.380
they said I could work like part-time.
00:36:15.380 –> 00:36:20.660
But the guy’s going to put that directly in the mutual fund, but it’s not much.
00:36:20.660 –> 00:36:22.660
It’s like after taxes.
00:36:22.660 –> 00:36:26.420
It’s $500 a month, but after taxes it’s only like $462.
00:36:26.420 –> 00:36:30.740
Do I have to still file taxes for that part, that little bit?
00:36:30.740 –> 00:36:33.860
Is this a W-2 or a 1099?
00:36:33.860 –> 00:36:34.900
You said after taxes.
00:36:34.900 –> 00:36:35.540
No.
00:36:35.540 –> 00:36:37.460
I’m assuming it’s a W-2.
00:36:37.460 –> 00:36:43.300
Yeah, he’s just going to put that little check in once a month straight into a mutual fund.
00:36:43.300 –> 00:36:48.500
But I didn’t know if I still had to file taxes on that amount for $24.
00:36:48.500 –> 00:36:50.100
Right.
00:36:50.100 –> 00:36:54.900
Well, the answer would be, Bobby, if it comes on a W-2, then the answer would be no, you’re
00:36:54.900 –> 00:36:57.540
under the minimum and nothing would be taxable.
00:36:57.540 –> 00:37:03.780
If it comes on another form like a 1099, then the answer would be yes, because it’s basically
00:37:03.780 –> 00:37:08.020
considered self-employment and you’ll still have to pay the taxes on it, even if he’s
00:37:08.020 –> 00:37:09.060
withheld the taxes.
00:37:09.060 –> 00:37:10.020
I’m not sure.
00:37:10.020 –> 00:37:14.260
But it sounds like it’s a W-2, and if it is, then you should not have to pay any, I mean,
00:37:14.260 –> 00:37:15.220
you wouldn’t need to file.
00:37:15.220 –> 00:37:18.100
Well, he subtracted Medicare and-
00:37:18.100 –> 00:37:19.860
Social Security.
00:37:19.860 –> 00:37:24.500
All that out of it, yeah, and then he’s going to put the rest on in my mutual thing.
00:37:24.500 –> 00:37:26.180
But I was just wondering.
00:37:26.180 –> 00:37:27.940
Yeah, yeah.
00:37:27.940 –> 00:37:34.020
So just, you’ll know in another few weeks, but my answer would be, if you see a W-2 from
00:37:34.020 –> 00:37:37.380
this gentleman, then you know you don’t have to do anything, because he’s not withholding
00:37:37.380 –> 00:37:39.460
any federal withholding, so there’d be no need to.
00:37:39.460 –> 00:37:45.700
But if he gives you a form called a 1099, then you do need to still do it.
00:37:45.700 –> 00:37:48.820
It doesn’t sound like he’s going to, but I’m just preparing you just in case, okay?
00:37:48.820 –> 00:37:51.060
Well, all righty.
00:37:51.060 –> 00:37:52.500
I appreciate it.
00:37:52.500 –> 00:37:53.940
Thanks, Bobby.
00:37:53.940 –> 00:37:54.900
I appreciate it.
00:37:54.900 –> 00:37:57.540
All right, let’s head over to Darrell in Hendersonville.
00:37:57.540 –> 00:37:58.420
Let’s see if I can help him.
00:37:58.420 –> 00:37:58.980
Hey, Darrell.
00:37:58.980 –> 00:38:00.900
Good afternoon, Dr. Friday.
00:38:02.100 –> 00:38:09.780
I’ve got about $5,000 that I’m going to take as a long-term capital loss on a crypto coin
00:38:09.780 –> 00:38:17.380
that tanked on me, and I wanted to find out what type of documentation would I need to
00:38:17.380 –> 00:38:19.460
substantiate that capital loss?
00:38:19.460 –> 00:38:24.100
Basically, you need the same as you would in any other stock.
00:38:24.100 –> 00:38:29.780
So you needed to have the date that you purchased the stock and then the date that you sold
00:38:29.780 –> 00:38:35.300
it and the type, the dollar, the cryptocurrency that it was.
00:38:35.300 –> 00:38:40.500
You need to make sure that it is documented because that’s one of those areas that the
00:38:40.500 –> 00:38:42.340
IRS is definitely coming back to.
00:38:42.340 –> 00:38:48.100
A lot of people are claiming large losses, but unfortunately, in many cases, they purchased
00:38:48.100 –> 00:38:52.020
one type of currency and then they sold that for another, and then they sold that, and
00:38:52.020 –> 00:38:56.020
then now they finally converted or lost it all, and then they’re trying to claim it.
00:38:56.020 –> 00:39:02.180
But each time you switch currency, it should have been a sale on the Schedule D for me.
00:39:02.180 –> 00:39:07.940
So just tracking that information, no different than if you had brought normal stock, but
00:39:07.940 –> 00:39:10.180
you do want to make sure it’s totally documented.
00:39:10.180 –> 00:39:12.580
Otherwise, they may turn around and disallow your loss.
00:39:12.580 –> 00:39:18.340
So just a regular statement from the wallet company?
00:39:18.340 –> 00:39:20.740
So if you use one of the wallets, that’s the best way.
00:39:20.740 –> 00:39:23.860
Different wallets.
00:39:23.860 –> 00:39:24.740
I use a wallet.
00:39:24.740 –> 00:39:29.060
And as long as you’ve used the wallet to put the money in to buy the crypto and then either
00:39:29.060 –> 00:39:34.020
convert it back or if you lost it because it became zero worthless, then that would
00:39:34.020 –> 00:39:34.820
be when it is.
00:39:34.820 –> 00:39:39.380
As long as it’s been qualified as worthless or you sold it at a very big loss.
00:39:39.380 –> 00:39:42.180
Yeah, I haven’t sold it yet, but I’m going to.
00:39:42.180 –> 00:39:42.980
Okay.
00:39:42.980 –> 00:39:43.380
Yeah.
00:39:43.380 –> 00:39:43.940
All right.
00:39:43.940 –> 00:39:45.300
The best bet is to sell it.
00:39:45.300 –> 00:39:48.660
That way, at least you can prove your loss because otherwise, even though some of these
00:39:49.540 –> 00:39:54.580
currencies are no longer really available, the IRS will say that they haven’t actually
00:39:54.580 –> 00:39:55.300
closed out.
00:39:55.300 –> 00:39:56.580
Yeah, I can.
00:39:56.580 –> 00:39:57.700
In my opinion, it’s worthless.
00:39:57.700 –> 00:39:58.100
But yeah.
00:39:58.100 –> 00:39:59.940
The transaction has to occur first.
00:39:59.940 –> 00:40:01.380
Exactly.
00:40:01.380 –> 00:40:01.940
Exactly.
00:40:01.940 –> 00:40:02.340
100%.
00:40:02.340 –> 00:40:03.540
Good job, Joe.
00:40:03.540 –> 00:40:04.040
Okay.
00:40:04.040 –> 00:40:04.900
Thank you.
00:40:04.900 –> 00:40:05.620
All right.
00:40:05.620 –> 00:40:06.500
Appreciate it.
00:40:06.500 –> 00:40:06.740
All right.
00:40:06.740 –> 00:40:08.100
Really quick, let’s hit John.
00:40:08.100 –> 00:40:09.060
John in Tullahoma.
00:40:09.060 –> 00:40:09.560
Hey, John.
00:40:09.560 –> 00:40:12.260
Hey, Dr. Roddy.
00:40:12.260 –> 00:40:15.220
I’ve got a question regarding gift tax.
00:40:15.780 –> 00:40:23.380
So if I wanted to gift some real estate property to my children, so son and daughter,
00:40:23.380 –> 00:40:30.500
and would there be a gift tax required on that from either my side or their side?
00:40:30.500 –> 00:40:34.500
So you want to gift them some real estate?
00:40:34.500 –> 00:40:35.140
Is that what you said?
00:40:35.140 –> 00:40:36.760
Yes.
00:40:36.760 –> 00:40:38.100
Okay.
00:40:38.100 –> 00:40:44.180
So the way it would work is whatever your basis is in that, let’s just say you pay $200,000
00:40:44.180 –> 00:40:45.700
for this piece of real estate.
00:40:45.700 –> 00:40:50.900
You could theoretically gift them that $200,000 on a gift tax return.
00:40:50.900 –> 00:40:55.540
You would owe nothing because you didn’t have any gains.
00:40:55.540 –> 00:40:58.420
And they would pay nothing because you’ve already paid tax on it when you purchased
00:40:58.420 –> 00:40:59.700
that originally, right?
00:40:59.700 –> 00:41:01.460
I mean, the money was tax-free.
00:41:01.460 –> 00:41:03.540
So there would be nothing on those.
00:41:03.540 –> 00:41:08.740
And then if they sell it, they then would have to pay the capital gains tax on that.
00:41:08.740 –> 00:41:13.460
Now, just as a point of interest, I would probably not do that.
00:41:13.460 –> 00:41:17.860
I would probably let them, you know, theoretically, if you die, they get a step-up in basis and
00:41:17.860 –> 00:41:19.540
nobody pays the capital gains tax.
00:41:19.540 –> 00:41:22.740
But if it’s a home that they’re living in or something like that, and you just want
00:41:22.740 –> 00:41:27.540
to put in their name, then you need to give it to them at the cost basis, not at the current
00:41:27.540 –> 00:41:28.260
market price.
00:41:28.260 –> 00:41:30.660
Gotcha.
00:41:30.660 –> 00:41:31.460
Okay.
00:41:31.460 –> 00:41:37.620
So how would that apply for money if you were to gift them money?
00:41:37.620 –> 00:41:39.140
Is there any–
00:41:39.140 –> 00:41:39.700
Same thing.
00:41:39.700 –> 00:41:40.660
I mean, exactly the same thing.
00:41:40.660 –> 00:41:45.940
If you gift them money, the biggest thing is anything over the $17,000 that you and
00:41:45.940 –> 00:41:50.020
then the theoretic if you’re married, your spouse can give to them, anything above that
00:41:50.020 –> 00:41:51.700
needs to be on the gift tax return.
00:41:51.700 –> 00:41:56.660
It doesn’t mean there’s any taxes, but we have a lifetime of $11 million that we can
00:41:56.660 –> 00:41:57.060
gift.
00:41:57.060 –> 00:41:59.140
And so they’re taking the difference.
00:41:59.140 –> 00:42:03.380
So if you give someone $100,000, the difference between the $17,000 and the $100,000 is going
00:42:03.380 –> 00:42:05.140
to come out of your lifetime gifting.
00:42:05.140 –> 00:42:07.380
Okay.
00:42:07.380 –> 00:42:08.020
Gotcha.
00:42:08.020 –> 00:42:09.540
So you do have to file those?
00:42:10.420 –> 00:42:13.380
Yes, you need to file that so that way they can track it.
00:42:13.380 –> 00:42:14.100
Yep.
00:42:14.100 –> 00:42:14.980
Gotcha.
00:42:14.980 –> 00:42:15.460
Okay.
00:42:15.460 –> 00:42:15.940
Good deal.
00:42:15.940 –> 00:42:16.260
Thank you.
00:42:16.260 –> 00:42:17.860
No problem.
00:42:17.860 –> 00:42:18.820
Great call.
00:42:18.820 –> 00:42:19.460
All righty.
00:42:19.460 –> 00:42:21.220
So that was a good call.
00:42:21.220 –> 00:42:25.060
And there’s many– and a lot of times people are like, well, how does anyone know?
00:42:25.060 –> 00:42:26.900
But it does come down to sometimes.
00:42:26.900 –> 00:42:30.980
I had one where they sold the house to their son and they did an actual closing, which
00:42:30.980 –> 00:42:35.220
was proper, but then they gifted like $40,000 to their son.
00:42:35.220 –> 00:42:41.220
But that became $40,000 in their pocket because they only paid– they sold it for like $200,000
00:42:41.220 –> 00:42:43.540
and they only paid like $160,000.
00:42:43.540 –> 00:42:48.900
So the difference or the gain, they gifted on the paperwork, but the paperwork was trackable.
00:42:48.900 –> 00:42:52.340
So therefore, that $40,000 now became taxable income to them.
00:42:52.340 –> 00:42:56.260
The person giving the gift always pays the tax.
00:42:56.260 –> 00:42:58.740
The person receiving the gift does not.
00:42:58.740 –> 00:43:03.780
So you just have to make sure however you want to give it to them, it’s going to work
00:43:03.780 –> 00:43:07.060
one way or the other, and it could be that their tax bracket’s lower than yours.
00:43:07.060 –> 00:43:11.140
So it’s better to gift the real estate and let them sell the real estate at a lower tax
00:43:11.140 –> 00:43:13.860
bracket than if you were the higher tax bracket.
00:43:13.860 –> 00:43:17.940
There are many things you can do that way, but there are paper trails and there’s a lot
00:43:17.940 –> 00:43:19.140
of things that are turned in.
00:43:19.140 –> 00:43:23.060
So you’re not really hiding anything, in my personal opinion.
00:43:23.060 –> 00:43:24.900
So it’s better to have a paper trail.
00:43:24.900 –> 00:43:26.340
And I mean, let’s be honest.
00:43:26.340 –> 00:43:33.700
The gift limits have changed over my lifetime from as little as $500,000 over our lifetime
00:43:33.700 –> 00:43:37.940
to now $11 million, and it could very likely reduce down again.
00:43:37.940 –> 00:43:42.020
So the question would always be is what happens if you’ve already given several million dollars
00:43:42.020 –> 00:43:43.700
and it goes down to a million?
00:43:43.700 –> 00:43:45.300
I don’t know if I know the exact answer.
00:43:45.300 –> 00:43:47.300
I’m assuming it gets grandfathered in.
00:43:47.300 –> 00:43:48.260
But you know what?
00:43:48.260 –> 00:43:49.460
IRS is always funny.
00:43:49.460 –> 00:43:51.220
They may find a way to tax you again.
00:43:51.220 –> 00:43:56.020
So we’ll have to figure that out when and if that ever happens in the rest of our lifetime.
00:43:56.020 –> 00:44:01.300
But right now, we have a big window for gifting, and at least doing the things that you want
00:44:01.300 –> 00:44:03.140
to do would be one way of doing it.
00:44:03.140 –> 00:44:07.780
And not doing it without a paper trail, in my opinion, is not worth it.
00:44:07.780 –> 00:44:13.140
It’s much better to have the tax returns filed for gifting, and then that way if the children
00:44:13.140 –> 00:44:17.060
actually inherit or something changes, that was filed on the year it happened.
00:44:17.060 –> 00:44:20.740
If you don’t file it, then that’s bound to cause some problems later in life.
00:44:20.740 –> 00:44:21.940
All right.
00:44:21.940 –> 00:44:26.660
So if you’re working on your taxes, again, people that are already my clients and you
00:44:26.660 –> 00:44:32.100
get on my website, drfriday.com, and you click on calendar and you do not see a date open,
00:44:32.100 –> 00:44:33.620
call me.
00:44:33.620 –> 00:44:37.780
You know the number, 615-367-0819.
00:44:37.780 –> 00:44:41.860
Again, 615-367-0819.
00:44:41.860 –> 00:44:43.940
Call me Monday morning, and we will get you.
00:44:43.940 –> 00:44:49.060
We have dating times open for our clients that are not on that calendar, and so there
00:44:49.060 –> 00:44:50.740
is some opening for you.
00:44:50.740 –> 00:44:57.220
If you want to send me or email me, you can always email Friday at drfriday.com.
00:44:57.220 –> 00:45:01.220
Again, Friday, F-R-I-D-A-Y at drfriday.com.
00:45:01.220 –> 00:45:05.860
And again, the website is drfriday.com.
00:45:05.860 –> 00:45:11.060
If you’re looking to make an appointment, there’s also the tax organizers out there,
00:45:11.060 –> 00:45:11.940
many different things.
00:45:11.940 –> 00:45:15.220
Tell us a little bit about me if you don’t know who I am.
00:45:15.220 –> 00:45:16.980
Then go on out there.
00:45:17.700 –> 00:45:22.420
And then you could also send a message through that website directly to us if you’re still
00:45:22.420 –> 00:45:25.620
looking for a date for existing clients.
00:45:25.620 –> 00:45:28.740
So that way we make sure all of you are taken care of.
00:45:28.740 –> 00:45:30.900
We get your tax appointment in.
00:45:30.900 –> 00:45:34.740
Make sure you’re tracking all of your information so that you don’t have to worry about that
00:45:34.740 –> 00:45:35.240
either.
00:45:35.240 –> 00:45:40.340
And then that way you’re in good shape and you don’t have to worry about missing or having
00:45:40.340 –> 00:45:43.540
a problem with your tax situation.
00:45:43.540 –> 00:45:50.980
So if you have big changes, guys, this is the time to also look at your W-4s.
00:45:50.980 –> 00:45:58.180
If you were married, divorced, had a child, you know, child turned over the age of 17,
00:45:58.180 –> 00:46:03.700
you might want to revisit your withholdings on your paycheck because it’s January.
00:46:03.700 –> 00:46:04.820
Now we have a whole year.
00:46:04.820 –> 00:46:08.260
A lot of times people wait until they get their taxes done, which can be April all the
00:46:08.260 –> 00:46:09.380
way down to October.
00:46:09.380 –> 00:46:12.180
And then we’re making changes and that makes a big difference.
00:46:12.180 –> 00:46:15.240
Alright, it’s Saturday, hope you guys had a great time.