Welcome to another episode of the Dr. Friday Radio Show! In this episode, tax expert Dr. Friday answers callers’ tax questions and covers various topics, including:
and much more!
Transcript
Announcer 0:00
No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or financial woes. She’s the how-to girl. It’s the Dr. Friday show. If you have a question for Dr. Friday, call her now. 615-737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
Dr. Friday 0:29
Good day. I’m Dr. Friday and the doctor is in the house. So I’m hoping you guys are all ready for an awesome tax season, we are going strong IRS will actually open E file officially when I know a lot of companies are preparing including ourselves. But we actually end up putting in my queue. But bottom line is January 24 is when you will be able to actually e file your tax returns. So if you are working on your own online or anything like that, you will be able to get an official acceptance from the IRS on January 24.
Dr. Friday 1:07
Do again expect if you are filing early, there’s a couple of things they’re warning people one, make sure you don’t miss any information this year is going to be a little simpler, and a couple of different reasons. One, we don’t have all the stimulus and the advanced child credits, that’s gonna get back to a bit of normal, but the child credit of course, is back down as well to the 2000 instead of the 35 or $3,000, depending on the age of your children.
Dr. Friday 1:33
So some of you that may had a large refund in the last year or two due to the stimulus and or child, additional credits may find your refund to be less than what you had in the past couple of years. You may also find that the 1099k, they extended that to 2023. So many of you that were worried about eBay and having those shops and different things like that, you may find that you’re not going to receive that 1099k That was part of one of the adjustments they made under the secure act. And they extended that out to to the next year. So that will be something we will be still having to face in 2023.
Dr. Friday 2:18
But they did extend it out to us. So it might be a benefit as well, for many people that just weren’t sure exactly how that was going to work. We are going to make sure that if you have any stock sales, if you sold any real estate, if you started a business, if you’ve changed the business, you close the business, just make sure you put a little thought because a lot of times people think, Okay, I’ve only got my W 2, but sometimes other things happen throughout the year.
Dr. Friday 2:47
And if you don’t actually have that information or you know, don’t file your taxes, I know it always looks like you’re gonna get a great refund, therefore, you know, I’m going to file it so I can get my money fast. But you know, there is penalties assessed when you don’t file the taxes correctly. Most of the time, simple things like stock sales forgot to put in my portfolio. And keep in mind if you are a cryptocurrency individual that is dealing with selling cryptocurrency, and that is not just selling it back to US dollars. But maybe you went from Bitcoin to lithium to something else. Anytime you’ve changed the type of coin that you owned, then that is considered a sale. So again, people have a tendency to jump within different crypto currencies within their wallets.
Dr. Friday 3:40
Make sure you have a paper trail that is a legitimate sale, that’s no different than if I went and sold Tesla and brought IBM it’s the same thing. It’s buying and selling something to exchange for something else. Same thing goes with gold. And in precious metals. I’ve got quite a few people now that are kind of dabbling in precious metals or foreign currencies. Again, you know, and sometimes people are like, well, no one really knows, especially in the world of crypto, everything is supposedly high tech and super under the table kind of stuff. And I will be honest, I like to sleep at night guys.
Dr. Friday 4:15
I like to make sure when I file my taxes to the best of my ability, I have done what I can do. I really don’t want to wait for the IRS to come back five years later and then audit because that’s considered fraud if you don’t put information on your tax return, especially if it’s more than 25% of your taxable income. And so if they come back, they can go back 10 years. I don’t want that kind of headache. I’ll be honest with you, I really really do not want that kind of headache. So if you have that kind of situation.
Dr. Friday 4:45
Let’s make sure we’re filing what we need to file when we file it so that way we can sleep well at night. If you want to join the show you can 615-737-9986 is the number live here in the studio. So if you’ve got questions, maybe you’re thinking about doing something with your own personal taxes, getting things done, this is the time to ask the questions, because I’ll be quite honest, we’re getting full, we’re, you know, it’s only January and I’m blessed. I have a lot of people that like me to do their taxes. And so getting into my office, and actually getting tax preparation is going to be harder and harder every year. Because, you know, I like to do my own clients taxes. I’m not a big one on sharing it with other individuals. So if you have a question on that, here’s the show, you want to ask the question. If nothing else, we can send you in the right direction, and we can do what we need to do. All right, lovelies, let’s see if we can get Lynn on the line. Hey, Lynn, what can I do for you?
Caller 5:50
Yeah. Yeah, can you hear me?
Dr. Friday 5:54
I can hear you now. Yes.
Caller 5:57
Okay, I got a quick question. What I’m doing my mother she lives with me and on a power of attorney and I’m want to purchase her home. It hasn’t been lived in for a while, it’s been a little disarray and needs to repair. I’m purchasing a home and going to fix it back up, and most likely rent it out to family members, whoever wants to rent it. But my deal is, how do I do that for taxes? Do I need to how do I find the cost basis?
Dr. Friday 6:28
A couple of different things you might want to consider Lynn one could be that you do the fix up and mom keeps it in her. And then when when she passes away, you would inherit it at the current value. And you know, and you just turn it into rental income in which you could use either for her or you could be the renter and you know, maintain all the income coming and going but you know not to buy the house. Otherwise, you’d have to buy it at fair market value, or mom keep gift it to you at the value she paid for the house.
Dr. Friday 7:00
These are options, you might want to talk to an attorney to make sure that the mom is in even though you’ve got power of attorney, you might want to make sure their other family member or other family children that could be affected by you buying this house of the estate. Okay, so then I would probably I would probably get a couple extra documents handled to make sure because what you don’t want is, gosh, forbid something happens to mom, then the other siblings come back and say, “Hey, you, you took this from mom, when you were you know, power of attorney, you took advantage of the power of attorney,” that kind of thing. you can
Caller 7:38
The agreement, they all will tell you about doing this, but you don’t want to fix it up or they want to keep it a family but they don’t want the financial deal with fixing it up. It needs a lot of work.
Dr. Friday 7:49
Well then what you need to probably have them do is what I would do is I would get a fair market value of the house that right now, what it’s worth, if it was gonna be sold fast sale, you know, I mean, not not so and put money into both, if it was just sold on the street, without any of the repairs and have them all sign off and agreement that that’s the amount you’re going to pay mom, and then Mom can use that money or whatever. But at this point, then you would have the value of that you pay for it at a fair market value. Because theoretically, if they sold it on the street tomorrow, you know, on the marketplace, and right now things aren’t selling as much as they would have two or three months ago, you know, I’m saying market values are coming down.
Caller 8:30
I have a couple estimates how much we’re not actually close to people, they’ll pay this much for as if you just take that amount or…
Dr. Friday 8:40
That’s what I would take, I would take that amount and I would put together a contract and I would have the siblings agree to that dollar amount so it doesn’t come and bite you. Because once you start putting money in that house, and you fix it up, and then they come back and say, “Well, you know you did that for mom” and whatever, you know, God forbid, you don’t want that to come back after you’ve made all that extra investment into it. You need it understood before that happens to protect yourself.
Caller 9:06
Okay, so I guess talk to a lawyer.
Dr. Friday 9:09
I would just have something very simply and then notarized by the siblings so that way you don’t have to, you don’t want to my concern is in my office, sometimes we will see where everyone says, “Oh, yeah, they agree.” But then something happens to the parent, and then it becomes part of the estate. And then the people are like, “Oh, wait, you took advantage.” Even though, you know, that wasn’t the conversation, but there was nothing in writing. So I’m gonna suggest having it all in writing so that way they know what it’s going to be and you you then have that property in your name titled in your name, and it’s out of the estate. They can’t do anything after that.
Caller 9:48
Okay, that’s that’s what I need to know. All right, thank you.
Dr. Friday 9:51
Appreciate the phone call. Thanks. Bye, bye. All right, let’s hit Kim real quick. Kim, what can I do for you, sweetie?
Caller 10:00
Yes, thank you for taking my call. I was wondering, do you know anything about, you know, Congress had set that limit of $600 for income earned from like eBay or Macari or, you know, Facebook marketplace? Are they still going to do that?
Dr. Friday 10:18
They are. But they did push it. They were mandated to happen for the year of 2022. They changed the mandate giving us another year. So now it’s mandated for 2023.
Caller 10:28
Do you think it will actually happen now that publicans have?
Dr. Friday 10:33
I hope that I’m hoping that that was enough to extend it out. And now if we can get enough common minds thinking about real business, and what’s truly a business, and what’s truly just people selling household things and stuff like that, at least before it was, like 200 transactions or $20,000, then this is a huge change. Now, it’s 600 can be one transaction, you know, exactly someplace in the middle, you know, maybe it’s going to be, you know, five or $10,000 600 is just too low for that kind of hobby situation, as far as I’m concerned. But, you know, we need to prepare for just in case. So I have a lot of my clients that, you know, are thinking twice about how they’re receiving the money if they’re doing.
Caller 11:19
I had it going into somebody else’s account. My partner.
Dr. Friday 11:25
Yeah. You need to switch it a little bit.
Caller 11:30
I had one other thing I wanted to go for. Yes. Camera. Okay. So now that they’re not going to have the was 87,000. People, they won’t have the manpower to go after people who make $600. You know, so that’s ridiculous. She thinks they’re gonna everybody wants to, everybody wants to know, what are they gonna do with all that ammo they bought?
Dr. Friday 11:57
Yeah, well, yeah. All those armed IRS revenue people. I mean, most of the people and I have to, I have to put a small shout out today, I was working in my office before the show. And I had a tax advocate, call me on a Saturday, which I will tell you in 20, some years, I’ve never had a Revenue Officer call me on a Saturday to resolve an issue because she was running behind. And actually, she called for another agent that had had been sick.
Dr. Friday 12:20
So not all revenue people. But this is the Advocates Office, which I do love and adore versus regular collections. That being said, I think the question is going to be this, I think they’re going to have in the last five or six years, we have a ton of what we refer to as paper audits, which is basically a computer going in wiping out all the expenses, and then we have to come back and justify the tax return. So I think that may have more of that, then we’re going to have face to face like we used to have issues because and I mean, I’ll be honest, that’s why I go the tax advocate office all the time, because they actually open up a case where I have a human to talk to and I can resolve an issue and they go to the because a computer I can’t talk to I can’t get anything resolved.
Dr. Friday 13:10
So I think they’re going to I mean, I’m hoping they do honestly hire some I don’t think guns are required. I just think the main reason to answer a phone is totally all that’s required and a little trainings, they understand tax law, but I’m with you, I think they’re going to have to reevaluate what they’re considering important because collections is collections, and they’re going to need to do collections. You know, because that’s where the government gets their money. But right after somebody that makes, even makes 20 or 30.
Dr. Friday 13:43
I mean, if you owe less less than 25,000, they consider that basically a wash. I mean, they basically can collect that in 10 years, there’s really no negotiating, it’s straightforward. So those kinds of cases are pretty, I mean, they’re not good, what’s the purpose and chasing that person? I mean, I’m just being honest, they’re gonna put the money into people that owe 50, 70, 100, 200, a million. That’s where they’re going to need to be concentrating on for collections so they can.
Caller 14:09
Well here in Tennessee, you show up with a gun and you’re the government, I think that might not go over to good so.
Dr. Friday 14:18
Well, I’m totally, I’m totally but they have to be careful in Tennessee because a lot of us are proud carrying gun holders also come in my door with a gun. He might be met with a gun and that’s adequate, ever be a good thing? Just saying, you know, I’m not inviting trouble that we don’t need to do. But Kimberly, thank you for calling. And we will talk later. All right. All right. Take our first break. And you can reach us here on the show. 615-737-9986. We’ll be right back.
Dr. Friday 14:59
All righty, we are back here live in studio. And you can reach us if you want 615-737-9986. And let’s hear Rob in Nashville. Hey, Rob, what can I do for you, sweetie?
Caller 15:19
Hey, dark Friday, I’m overwhelmed with tax questions. I started doing it myself or TurboTax, I realized that I know just enough to be dangerous. Real quick, I mailed in my taxes last April. And then I got a refund for like $200 who said, Oh, that’s great. I said, I overpaid. Then I was redoing my taxes for the coming up here. And I realized I left a Roth conversion out. I owed him money. I sent in an amendment and paid him more money. And Turbo Tax said the first time I had to pay quarterly statements of 6000. Now it says 7000. And I just don’t know how much to send in because it’s due on the 17th of January. And I recently retired. So that kind of messes up.
Dr. Friday 16:07
I guess one quick question, Rob, is did you do the Roth conversion in 2022? Was that 2021 situation?
Caller 16:17
It was 2021. I had a Schwab account, I forgot to do it last year. And I realized that so I
Dr. Friday 16:23
was amended 2021. And then you paid. So in 2022, did you have like a real job and then retire partway through the year where you retired in 2022 2022.
Caller 16:33
I retired especially in March, and then I converted the rest of my wife’s IRA. Okay, and owe a ton of money on that.
Dr. Friday 16:45
Alright, so at this point, your best bet. I mean, you have two options, you either pay in 110%, or you make your estimates based on what you owed in 2021. With the conversion, is the conversion that you’re going to do in 2022 on your wife pretty much the same as what you did in 2021.
Caller 17:05
No, it’s different to 21 was only it was like 25,021 22. It’s like 300,000.
Dr. Friday 17:13
Oh, and you converted the whole thing? Yep. Oh, my goodness, you’re crazy. All right. Um, so
Caller 17:21
Well, that’s what income was. That’s what my income was before I retired. So I figured,
Dr. Friday 17:27
yeah, I see what your thought was. But we probably could have done that over a period of time. So you didn’t need 100% of your income. I’m assuming one of the reasons you retired was because you have ability to retire, I could be totally off bench there. So who knows. But at this point, your best bet is whatever your total amount due in 2021. And then you need to add 10%. And you need to send that all in by January 17. So let’s just say in 2021, with the smaller Roth conversion, you needed to pay in $10,000, for the whole year, I’m just throwing a number. So I would pay 10% More, which would then be $11,000, you need to have sent in by January 17. Because as long as you pay in 110% of the year before the penalty doesn’t exist, what they’re looking for is to make sure you’re making the same amount from the year before sometimes, in your case, this will work out great, because you actually did a larger conversion in which you probably owe three, four times this amount, but you don’t know how much exactly you owe because you haven’t finished your taxes yet. So yeah, if you know, you could do a rough estimate and send him more. I mean, you know, if you know that’s going to be a minimum, I mean, minimum of 10% on a $300,000 conversion, you’re going to owe minimum of 30. I mean, most likely, you’re going to OMA 60 I mean, just throwing the number out there, but in that ballpark, you’re going to owe in taxes on a Roth conversion at 300,250 of it’s going to be well 12% And then another 22% for the next and then you’re gonna have so yeah, you know, probably 20% easy just on that besides what other income you had. So you can easily run
Caller 19:07
It’s nerve racking. That’s why I want to come in and see it.
Dr. Friday 19:13
Okay, well, after the show, or just whatever you can text, my main number that we put out on the thing, or you can give me a email at Friday at Dr. Friday, and we’ll get you in here and then we’ll figure out what we need to do before. Don’t know if we can do it before the 17th but we’ll get you in to give you a rough estimate very quickly. Okay.
Caller 19:31
Well, I was gonna overpay like you said, get it in the end.
Dr. Friday 19:36
Worry about Yeah, to get us something thrown in there. And then we can figure out the exact amount. What I don’t want to happen is you to overpay and then have to wait for a refund. You know, I mean, I want to get close, but I don’t want to ever overpay the IRS if I can help it.
Caller 19:50
I always wind up owing him money every year and I haven’t figured it out. Like I said I know enough to be dangerous. That’s why I want to come in and see you.
Dr. Friday 19:58
We’ll get together and get to the right numbers, but right now, please pay in 110% of 2021. Minimum. Okay. Thanks, man. All righty. So again, if you want to join the show, sorry, that one probably got a little too in depth. But that’s the kind of stuff I enjoy doing is crunching the numbers and figuring out how to do it, I probably would have maybe tried to stretch the 300 over a two year conversion, but you know what, sometimes with the market going down, and I’m not a financial planner, so sometimes it may have been smarter for him to do it while the market was low. So it would recap under the Roth, which means it’s growing tax free, so we convert it when it was less than then it will grow at a higher rate. Law, people are firm believers of that.
Dr. Friday 20:40
So if you want to join the show, you can at 615-737-9986, We’ll take your call here in the studios. So another thing that happened under the secured act 2.0, which, you know, they always love to throw all this stuff, most of the stuff in the secured act 2.0, to be quite honest, really wasn’t affecting the day to day tax situation that we deal with more financial planning or estate planning. But one of the things was for all of my people that are that were 72 by the end, anyone that turns 72, after 2022, you now have, you don’t have to take your RMDs or your requirement on distributions until 75. So it says here, if you are the owner of an account, who turns 72, after the F 22. If you turn 72 in 22, you must start taking your RMDs by April 1, the RMDs are triggered then to raise the 75 and 2033 50%.
Dr. Friday 21:49
Oh, here’s another great thing, another member they put out, which I think is great. If you don’t take your RMD, and a lot of times they people rely on their financial planners to help them or the organizations that handle their, their 401, k’s and their IRAs, but we all know it used to be 70 and a half, it went to 72. Now it’s 73. And it’s gonna go up to 75. Anyways, if you don’t take it because a mistake is made, there’s a 50% penalty. Now again, I will give some caveats to the fact that we have had several cases where we have been able to get that way. But there’s no guarantee that will ever happened. They changed the 50% penalty now down to 10%. For not taking it, which is I don’t know a more appropriate situation. So that is something you really want to be able to do. And once to make sure that we are dealing with the situation on that and moving forward. So well. Let’s see live videos. Let’s see if we can take care of this call before. So Mike from the borough, your fast typer limit is Mike from the borough. Let’s see if I can get you in. Hey, Mike.
Caller 23:04
How you doing?
Dr. Friday 23:05
Hi, I’m doing awesome. What can I do for you, sweetie?
Caller 23:09
Well, I was wanting to check out a electrical and plumbing business to last someone, someone else I have to do it now. But I wanted to find someone that would take over you know, like all the aspects with film with running the business and was trying to find out your main number or the way I can get in touch with you during the week.
Dr. Friday 23:35
Correct. And hopefully, if you’ve emailed or text me in the past, hopefully we’ve got all those corrected. I played hooky for a while to the fifth of January. And I’ll tell you some of the things got messed up. But Mike, that being said, Yes, you can the number that I give out 615-367-0819 That’s my main office. It’s also a cell phone so you can text or email to the Friday at Dr. Friday. But any of those numbers you can contact and we can get together and tell you about what are bookkeeping service. My brother runs that division, but I can tell you about what he does, what he can help you with and if it’s going to fit what you’re looking for to fit your business.
Caller 24:14
Perfect. All right. I see I got the numbers 615-367-0819.
Dr. Friday 24:20
That is perfect. Yes. Just give me a holler after the show or first of the week and we’ll get together. Okay, thank you. Thanks, Mike. All righty. Well, we take our second break and if you want to join the show you can at 615-737-9986 We’ll be right back with the Dr. Friday show.
Dr. Friday 24:50
All righty. We are back here live in studio and it is tax season people it is time to start thinking or maybe even doing your Are 2022 tax returns, many of us may not have all the forms available yet they still haven’t approved all of the forms. But you can certainly get in there and start preparing and doing tax worksheets making sure on our website, drfriday.com, there is a free tax organizer, if you want to download one, even if you don’t use our service, it gives you something to start with making sure you’re not forgetting tax documents, or asking yourself questions about rentals or Airbnb or any of that kind of situation to make sure you’re maximizing tax deductions against what you’re doing.
Dr. Friday 25:38
And again, I know I talk a lot about it. But there have been in the last couple of years, there’s been a lot of exchange of pent up properties, people buying selling some people getting into flips, doing partnerships with friends and family. How does that affect your taxes? And what do you do with it? When it’s on your tax return? Should you be paying its capital gains? Or is it actually ordinary income? Are you making estimated payments, the government does charge a penalty for all of you that are self employed and choose not to make quarterly payments. There are some ways around some of that’s right, you can do some of that through like ourselves.
Dr. Friday 26:16
I’m a corporation, so I have extra come out of my paycheck to compensate for quarterly. So as long as I pay in enough with my payroll, I don’t have to worry about making quarterly is not everyone has that. And if you’re a single member LLC or a sole proprietorship, you can’t put yourself on payroll, and you don’t want to put yourself on payroll. So many people come in and they’re like, Oh, I was told to make myself a sub s because I can do this or I was told I should become a partnership. And I can do this different things. Well, a single member or even a partnership, tax return if your partner in an LLC, unless that LLC is a corporation, you should not be paying yourself or treating yourself on a W 2.
Dr. Friday 27:00
Now I will say there are situations where sometimes people just are horrible at dealing with taxes. But the problem is you’re paying extra Social Security and Medicare if you’re doing payroll, now, every business is should be doing I mean, you can’t make a business without making some money. Otherwise, you’re not really in business, right? You’re kind of just surviving. But if you’re in a business that you’re actually trying to make a profit and making money at, then you’re going to have a profit at the end of the year. Now if you’re a profit on a sole proprietorship, you’re going to get credit for 50% of Social Security and Medicare and then you’re going to pay your share. So theoretically, you’re only paying half Social Security, Medicare to a person that owns their own corporation and is on payroll because a company pays offshore and the employee pays a share. So you’re paying more in taxes.
Dr. Friday 27:00
When you do payroll, it’s about 10% more, because you have Social Security, Medicare, and you also have the unemployment so state and federal. So it doesn’t mean that you shouldn’t because again, I treat myself as a W two we work as a corporation. And I find that to be beneficial for my situation. Not for everyone you need to sit down, but don’t want to also get into the game of misclassifying an employee II, that is huge. If you want to talk about where the IRS has found a way of getting money. They have done a ton of audits on misclassification, especially the Federal Department of Labor, they have gotten into doing quite a bit of this.
Dr. Friday 28:28
And basically all they’re saying is hey, I run a construction business and I pick up a crew and they get in my truck or they drive their own truck but they do what I tell them all day. They go in there they put up drywall they framing doesn’t make a difference your refer whatever that those people are doing. You’re telling them you’re supplying them with the supplies, they’re then going to they don’t have a business license, they don’t have work comp, they don’t have anything saying that they’re in business or do they work for someone else showing that they’re doing the same job for multiple companies? Guess what? That’s misclassification, if you don’t have them on a W 2 if your 1099 mean these individuals, you are misclassifying those individuals. I know it’s a lot of people think it’s cheaper, it’s easier.
Dr. Friday 29:16
But the fines and penalties if you are caught, you may think twice about that because they are quite hefty. If you misclassify an employee by doing something like that. And then I will say in the world of construction, I think the IRS has found the most but I have restaurants that will 1099 individuals, I have come across quite a few different things, even gyms or yoga studios, things like that they have come down and unless a yoga teacher is teaching at multiple studios on different days and they can do private lessons and things where they can show that they are truly and one of the biggest things on that one we got went to a big audit on that one about five years ago or so. But one of the biggest things That saved us in most cases is that the, the instructors carried their own insurance.
Dr. Friday 30:05
And we’re working at multiple studios. Now if you don’t have that, because a lot of times it’s really just the person that’s just doing a couple classes a week so that they can do classes and a lot of times they kind of teach on the side. That is a person that is truly your employee, you’re providing them the studio, you’re telling them that they have to teach a class at this time. You may be telling them what type of class they have to teach.
Dr. Friday 30:30
So again, if you are a self employed individual and you have people that you pick up or do things are have worked for you, you can’t say you haven’t been notified at least by Dr. Friday, I am telling you that there is misclassification if you are not treating those people as employees, unless they are truly subcontractor, subcontractor means they do it for multiple businesses. a subcontractor means they provide all of their own tools and equipment. A subcontract means they carry their own work comp, business license, have business cards, and actually promote the service that they’re doing.
Dr. Friday 31:05
This is the kind of thing you need to have, if you’ve just picked up someone and you’re putting them in there. And you’re saying, hey, let’s come out. And let’s do this all week or the month or whatever you choose them, they’ve been working for you for a period of time, they are truly an employee, and therefore, the state or the federal Department of Labor could come back and say more to you. So again, just want to make sure because there has been quite a few deductions or audits that have come up on them. All right, back to the 2023. Some good news, the standard deduction coming now we’re in 2023. So we’re gonna jump up for married couples to 27,700 plus another 1500, for anyone over the age of 65, single people are going to be 13,850.
Dr. Friday 31:53
And if you’re, again, if you’re single, claiming 15,700, if you’re age 65, and up, so that’s another 1500 or so head of house is going to be 20,800. And if anyone’s over the age of 65, there’s going to be another 1850 that will be added. If you’re legally blind, you get another $1,500. So that is important. If you’re going to do any kind of tax planning, you need to know because most people are not itemizing. It is more very difficult unless you have a decent mortgage. And and remember, mortgage interest can only be for a home of 750 $750,000 or less a line of credit for $100,000 or less, both of the line of credit has to have been used on the home cannot be used for paying off debts or anything else buying a car or paying a college for your kids.
Dr. Friday 32:44
That is not going to be a line of credit that is a tax deduction. I will say another thing that came out of the secured act 2.0, maybe something that will help some of you guys is the credit for energy efficiency homeowners up to 30% credit for cost of certain insulation boilers, air conditioning systems, windows, doors, etc. Many of you guys have always asked every year. So this is something that will come back. And it’s going to be a maximum of $1,200. This is for primary. But this again starts in 2023. It will not help you in the tax year we’re doing now, but it will help you in 2023.
Dr. Friday 33:22
So if you’re thinking that maybe you have an AC unit, or maybe you’re wanting to insulate an attic, or do some of this kind of stuff, the actual credit limit is $1,200. It the limit is lowered to 500 for aggregation of exterior and 600 for interior skylights and Windows. So some of the things you might have been holding off on, you might want to consider looking at it with this is going to be over 2023 to 2032 We’ll see if it stays in there. But there is some efficiency, but again, it only goes into effect starting now it was not in effect in 2022, which is the tax year we are working on. But you know what you gotta plan it if you’re gonna use it.
Dr. Friday 34:06
So make sure that you have that kind of situation where you have health savings accounts, you guys all know I am an advocate, they have now increased the Health Savings Account to 338 50 for a single person 7754 family individuals that were born before 1969 can add another $1,000. And so that was $2,000 If you’re married, so that would be a great way keep in mind health savings accounts a great way to reduce your taxes and it’s also a way of paying for your medical bills with pre tax dollars instead of after tax dollars. And that can add up especially right now we’re itemizing is almost impossible, right?
Dr. Friday 34:47
I mean, it’s hard to itemize your medical when you have to meet 10% of your adjusted gross plus you have to itemize which means over $13,000 And it’s not something that’s going to kick in for a lot of people so If you can actually pay with pre tax dollars, something you might want to consider in doing with that kind of situation. Another way of making sure that you have Social Security wages for any of you guys that are on W twos will start maximizing out at $160,200. This was a huge hike. $13,200. So, before, you may have only had like, it was like 148. Now it’s 160. Before you stop paying into the Social Security, you’ll notice that on your paycheck.
Dr. Friday 35:30
So again, one of those deals where you have this extra situation of making sure the Medicare surcharge, which is point nine for individuals and self employed for single state at 200,000. And for married couples, 250. You know, I love those marriage penalties. Not too sure why a married couple of 250. But being single, the $200,000, then we kick into the point nine for the additional Medicare tax. So we have all of those situations, and there’s going to be more so if you want to join the show, maybe you’ve got a question you’re thinking about your taxes, or you’re not sure about certain tax forms that might be required. All you have to do is pick up the phone, we got about six, seven minutes when we get back from this next break 615-737-9986. We’ll be right back.
Dr. Friday 36:30
All righty, we are back here law of N studio. And if you want to have a question or you want to call us here in studio, you can 615-737-9986 We are running through some of the changes that have happened either in 2022 or coming into effect into 2023. From the secured act 2.0. There isn’t a whole lot of things that are directly going to have an effect on everyday normal call, you know situations. One of the things we did talk about one of the callers Kimberly had called in about was the revenue service delay for lower dollar threshold of the 1099k reporting, the new rules will kick back into 2023. Formally, forms sent out basically in 2024.
Dr. Friday 37:16
But for next year, the law that went into place third party reporting such as PayPal square sending out 1099 case, the payers who are paid more than 600 a year for goods and services reporting under this was prior was 20,000 and or 200 or more transactions, the charges which a statutory originally went into 2022 10 99k form first sent out now, I did get a text during the break or whatever and one person said they did receive a 10 99k Even though I’m telling you that they don’t have to do it, this does not mean that they are not going to do it.
Dr. Friday 37:58
And if you get a 10 99k from Pay Pal or any of those organizations, I need to tell you right now that you do need to file or respond to it because it is not going to it’s not going to go away and the government could audit you and they could come back and say well they got this paperwork because it was turned in so if you do get a 10 99k you cannot just ignore it because I’m telling you it did not go in effect. They’ve already submitted it, it’s gone to the government, you’re going to need to reply however that’s going to happen in your situation. Standard miles rates, it is now up to 65.5 mileage is 65.5 and 20 cents for the medical 22 cents for medical 14 for charity. That is for 2023.
Dr. Friday 38:53
So it’s very important that we keep track of those miles because let’s be honest miles and this year we do have a situation again many of you may or may not know this but in the beginning of the year January through June, it was like 58.9 and then as of July 1 through December it jumped up to 62.5 So again, we have a split year which means you can’t just go into your tax person and say you know what? I’m I’m gonna just say I don’t like 30,000 Miles well was the 30,000 from January through December how much of it was January through June and then how much was July through December because that is very important. When you’re preparing a you should not be estimating your taxes that way or your or your information going through that way but it was 58.5 for business January through June 62.5.
Dr. Friday 39:53
July through December. Again, very important to know these are huge taxes. I have people that put 30 and 40,000 miles a year on a vehicle. And if you don’t have that information in the right place, you’re not going to get it. And if you’re just making educated guesses, I will tell you one of the number one things that we see in our office people getting audited is usually people putting in a lump sum like that without documentation of knowing how they came to that number.
Dr. Friday 40:21
And it’s one of the big reasons why they got rid of the 2106, which was a lot of people was taking off personal miles, for going back and forth to work, which is never a tax deduction from those people that were actually using their private vehicles to go from, maybe they drove from home to work, but then they went from this shop, to this shop to this shop to this shop. And that would have been a legitimate tax deduction. But the IRS did a ton of audits on that. And they found out more people were writing off the incorrect miles that they could claim versus others.
Dr. Friday 40:53
So it didn’t make it kind of bad for other people. We’ll see what happens in 2025, when the expiration of the current tax law and they may bring back I’m not hearing that, but theoretically, it could come back into the tax law. So again, making sure you’re tracking your miles, not only by totals for the year, but by month, very important in this year, because in 2022, you’re going to have a split form when you’re filing your taxes, if you’re doing it yourself.
Dr. Friday 41:22
It’s going to ask how many January through June, how many July through December, and you’re going to have a big bump 58.5 And then up to 62.5. We are now at 65.5 in the current year. So it’s a pretty good situation. And miles are always a win. But keep in mind that is also a large audit area. So if you’re tracking your miles, please make sure that you’re doing it I’m suggesting miles IQ. I don’t I don’t get any referral from that. I just want you to have something that’s going to show something that shows every start every stop, the IRS does have the ability to mandate a true mileage log, which is basically starting miles.
Dr. Friday 41:22
How many miles did you put in for what, who? And why did you meet that person? What was the purpose of that meeting, that’s the information you need for all of those different situations. So again, just putting that out there that you need to make sure that you are tracking your miles and doing what you want and how it’s going to be done. Personally, it’s very, very important. So we have that and we want to make sure we were tracking that information. Again, if you’ve got a question you can join us we’ve only got a couple minutes less than about three. And if if for some reason I know asking questions on the radio, to be quite honest with you is never easy.
Dr. Friday 42:46
And sometimes you don’t get the black and white answer, I do my best to try to at least lead you in the right direction. But you can always email Friday at Dr. friday.com, we will do our best to respond to your questions or send you to someone. Because sometimes the questions aren’t really tax maybe sometimes their financial planning or their legal questions. And we’ll try to send you to someone that can answer those questions properly for you. But if you have a tax question and you want to, you know, do it, then you can also text it to 615-367-0819.
Dr. Friday 43:21
That is my direct phone number 615-367-0819. That does take texts, and we’ll do our best to again, respond to those text messages to get get your answers my whole thing of doing this for last, what 1314 years is really just to get people to think about what they can and can’t do for taxes and a way to make sure that you’re not doing things that you shouldn’t, but also that you’re not missing out on things that you should know about taxes. So you know, just having somewhere to ask the questions and to move forward.
Dr. Friday 43:53
I would always suggest anyone that is doing their own tax return, nothing wrong with that. But if you’re doing your own tax return, and you’ve got something like Airbnb, or rentals or small businesses, and you’re not sure, you know, anytime under those circumstances, it can’t hurt to have somebody maybe review your taxes. You may have done an excellent job. I’ve had, you know, again, normally when I’m getting people coming in that have done their own tax returns, I’ll be quite honest. Usually it’s because they’ve received a love letter from the IRS. The IRS is changing the tax return.
Dr. Friday 44:25
We go in and we try to amend it this kind of thing. I mean, I’ve got two cases that came in this last week. And both of them were interestingly pretty much the same for different tax years to different taxpayers. But we are dealing with those and it can take six to 12 months to deal with an amended tax return especially if the IRS has already received an amended correction and they are and we’re not on the same page. So it just remember when you deal with the IRS, it is not going to be a fast process.
Dr. Friday 44:56
One of the reasons I am an advocate for the tax advocates there you Go, because I find that they do their job very well. And they’ve helped out. I mean, last two years without having revenue representation on the phone where we can actually reach people, they have done a great job of stepping up and helping many of us with with resolutions, which is what we’re usually paid to do. So if you have a case where you’re dealing with the IRS, you haven’t reached a real human and you’re wanting to do something you can call our office at 615-367-0819. Again, 615-367-0819.
Dr. Friday 45:35
You can also email Friday, just like the day of the week, friday@drfriday.com, Friday at Dr. friday.com. And we’ll do our best to respond to those emails. And then if you have absolutely no idea who I am, you’ve just turned in or someone’s referred you to us. Thank goodness, I have great listeners and they’re always referring us to somebody, you can check this out on the web drfriday.com. Drfriday.com is a way and you can also send emails through there. Like I said, there’s a free tax planner on there. So you can go ahead and start outlining your 2022 taxes as well as you can book an appointment. If there’s more than a available we’re getting pretty full for appointment. So if you need help again 615-367-0819 I hope you guys have a wonderful Saturday. Don’t let the weather scare you. It’s nice out so I get out there and enjoy it. And I’ll talk to you guys next Saturday. Call you later.