Welcome to another episode of the Dr. Friday Radio Show! In this episode, Dr. Friday takes on the latest tax updates, answers callers questions, and talks over the following topics:
- Dr. Friday’s Tax Tips For the New Year
- Taxes For Individuals Are Due April 18
- The Advanced Tax Child Credit
- Facial Recognition to Prevent Tax Fraud
- W2 Are Due January 31
- IRS Letters on Child Tax Credit and Stimulus Check
- When Can Is Someone Considered My Dependent?
- The Difference Between E-File and Paper File
- Filing Married Jointly or Separately
- Why You Need to Start Preparing for Tax Season
- Cryptocurrency and Taxes
- Getting Back on Track With the IRS
and much more!
Transcript
Announcer 0:01
No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or financial woes. She’s the How-To Girl. It’s the Dr. Friday show. If you have a question for Dr. Friday, call her now. 615-737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
Dr. Friday 0:29
Good day, I’m Dr. Friday and the doctor is in the house. And is it busy around here for all of those that are entrepreneurs are in charge of payroll department, obviously, you know that W2’s are due on Monday, the 31st, then so are 1099, miscellaneous 1099, NEC’s, so we need to make sure all that information is out there.
Dr. Friday 0:50
And if you’re doing your own payroll, obviously, a lot of times you want to make sure you’ve reconciled their state with your 941, your 940 and your W3’s to make everything balances out because the last thing you want to get is a love letter halfway through the year that says, “Oh yeah, it looks like you reported this here. And we’ve got W2 for this. And please explain the difference.” Never a good day when that happens.
Dr. Friday 1:13
And normally I find that happens is sometimes in payroll systems, some will make an adjustment after a 941 from one quarter has been filed, then another adjustment will be made and just makes it a bit more challenging when it comes down to it. So just make sure that your information is correct. And make sure your employees have the ability to receive them by Monday, at least in the mail by Monday. So that way you’re in compliance and you don’t have to worry about it.
Dr. Friday 1:39
That makes life a little bit more exciting then, you know, just winging it and saying, “Oh yeah, we’re going to get those out,” because employees can be a bit testy when they don’t get what they want, especially when it’s time for them to file the tax returns. So making sure that information now we’ll say to employees, it is not your employer’s responsibility to make sure that your social security number if it’s been provided properly, that that is still the right number, especially the name, address change. That is your responsibility.
Dr. Friday 2:10
And according to the IRS and employer can charge somebody for making those changes after this, you know, after a W2 has been filed, because well, then you usually have to file an amended or corrected one, which can cost additional funds. So just making sure that you’ve updated your employer, even if you’ve left them, you know, send them something before the end of the year, so their records can be up to date. So when they kick out those W2 you’re getting it or making sure nowadays, a lot of us are sending our W2’s by email.
Dr. Friday 2:40
So again, making sure you have a current email or if you’ve changed something, notifying the employer prior to the first January is usually the best bet because many employers some some employers have their W2’s out within the first week of January, some not as not as fast as others.
Dr. Friday 2:57
But all in all, you want to make sure that you’ve done your best to comply with what the IRS or Social Security Administration has required. And it’s always a great idea to go on to SSA that Social Security administration.gov, ssa.gov. Sign up and that way you can see your Social Security, I’ve had more than one situation where somebody has come back.
Dr. Friday 3:19
And because something has went wrong or something hasn’t posted properly, years are missing and people so security, they work they know they file taxes. But when they go to the Social Security Administration, those years aren’t showing up. Now sometimes, with entrepreneurs or business owners, sometimes you’ve had a bad year, sometimes you’ve had a year where you may not have paid so security or you paid a lot less in social security than you thought you did.
Dr. Friday 3:46
So just keeping an eye on that knowing because when it comes time to being able to go on to Social Security, the IRS is going to look at the last 30 years. And they’re going to take the highest 10 years or 40 quarters, depending on most entrepreneurs. Again, we don’t do things as much by quarters because we’re not on W2 in some cases. So they’re going to have 10 years. They may equally divide those into quarters for you. But it’s really important to keep all that information straight. Letting you know that you have that.
Dr. Friday 4:18
This year, we want to make sure again, there are many tax changes that we’re dealing with. You want to make sure that you have brought in the Child Tax Credits letter I think it’s a 6419 I don’t have the numbers in front of me guys. But there’s a letter that you’re going to receive from the Internal Revenue Service. And apparently it’s in English and Spanish for all of those that may have chose either way. But it’s going to say CTC on it no matter what, Child Tax Credit and it’s going to be his and hers husband and wife. So you know it’s going to be half on each of you. That’s going to show up in there and then the same thing for the recovery tax credit or the way covery rebate credit.
Dr. Friday 5:01
And that was the stimulus, right? We still had one in 2021. That was up in March, and it would have been $1,400 for each person now did reduce down if you were hitting the higher tax bracket. So, again, those are very, very important letters, I will say that you will want to have, let’s see, he said, he sent it out to me have that information available, so that you can make sure that you, you know, know what you have going. And especially if you’re doing your taxes, or if I’m doing your taxes or somebody else’s doing your taxes, we are not going to know how much credit you received, we’re not going to know the rest of that information.
Dr. Friday 5:40
So you need to definitely have those forms, or have a screenshot if you don’t have the actual paper, but we need to make sure all of that is showing up and it’s properly in there the right way and how it’s going to go through. So we’re just getting going here. So if you do, you can also join us here live in the studio, it’s a little nippy outside. So some of you guys might be sitting at home working on your taxes.
Dr. Friday 6:05
And if you’ve got a question you can join us 615-737-9986. We take your calls, and that way we can hopefully help you, you know, make sure everything is coming out, make sure everything is good. If you if you’re in the process of maybe you’ve sold real estate, or if you’re sold your primary home or you sold the business. Last year was a big year for selling things I’m gonna be honest with you. I mean, I have probably more people that either so primary homes, or a combination of primary and rental investment properties, 1030 ones, and you know, of course exclusions on homes, all of those are going to come into play, making sure you have all the right tax documents very, very important, because it’s very hard to do a tax return properly if you don’t know or have the proper information.
Dr. Friday 6:59
So again, really good for you to make sure that you have all the right information, making sure everything is going in the right direction. If you’re not sure what that information is, you know, you can either call the show 615-737-9986 or you can email me friday@drfriday.com. We are taking our questions through there as well. Because I know you know sometimes your question can either be a little too complicated for a radio show, or are you just a little nervous? And you’re not too sure what you want to do with it.
Dr. Friday 7:32
So Alright, looks like we have Charlie on the line, Charlie, and he’s gotten a love letter. Hey, Charlie, what’s happening?
Caller 7:40
Hi, Dr. Friday. This weel I got a love letter from the IRS. And it’s kind of strange. I haven’t had any problems. I filed my taxes last year on time. And I got a letter they said, “We haven’t received your tax return.” In large letters it says “credit on account.” And they show the amount it is the same amount I sent them in that old last year.
Dr. Friday 8:12
Yeah, Charlie, I’ma tell you, that’s a great call. And thank you for calling because I got or I should say, my clients, three people got the same letter, and I have e-file verification on all three, the credit exactly matches what either, you know, that they should have in there as far as the money in there, which in one case, the person, you know, mailed the voucher and everything the other two were electronically paid, which means the government had to take the money out of the bank yet they sent and said, we have not received your 2020 return.
Dr. Friday 8:42
But you know, this is the credit, please file the return. Obviously, my answer to you is and the same answer I wrote I did for all my clients, we just, you know, put it in a priority envelope with tracking. And we we labeled on the top, you know, here’s the E file confirmation. In my case, I put that in there showing this was received, obviously, payment was correct, please process the return, you know, and I would suggest resigning the return. You can either date it now or put, you know, say second copy on the top of the letter, you know, just so they know that you filed it on time, but definitely resubmit a return.
Dr. Friday 9:20
What happened, I think Charlie is that they’ve got over 6 million returns still not processed from 2020. So I think in cleaning up some of this possibly, and this is a guess I’m not an expert on this thing. But I think somehow some of those returns just kind of got voided or removed or like someone’s cleaning up and they’re just, I don’t know, they disappeared. So they’re just asking us to resubmit them, which is delay refunds on a couple of people. But that being said, great question. And yeah, my suggestion is Charlie just resubmit a copy, but I would send it by priority or something you could track just so you can prove you responded.
Caller 9:59
Okay, If you sent a voucher in descending a copy of your 2020 returns, and it’s kind of a cover letter explaining what what happened?
Dr. Friday 10:11
Exactly, I would just say, a cover letter saying, like I said, we sent in the E file confirmation, but in yours if you didn’t eat file, if you mailed it, but the money’s there, obviously, you mailed it with the check, saying, “Hey, I’m mailed original return with the check, obviously, you’ve received the check, here’s a second copy,” because what we don’t want to get hit with for any reason is failure to file penalties. Right?
Dr. Friday 10:36
I mean, they’ve got the money. But if they say, “Well, you gave us some money,” but you know, try to hit you with a penalty of some sort. We want to kind of zoom that off at the beginning of my opinion, it may not apply in every case, but you never know what the government’s thinking. So I usually try to reiterate the fact that we were in the right, you blew it, you know, just make it right. So you don’t charge me more money.
Caller 10:57
Okay, and send it to this address at the top here. Kansas City Department.
Dr. Friday 11:02
Yes. All right.
Caller 11:04
Thank you, ma’am.
Dr. Friday 11:05
Thanks, buddy. I appreciate you. Alright, let’s go to Rosie. Rosie in Nashville.
Caller 11:10
Hi, Dr. Friday. How are you?
Dr. Friday 11:13
I am good.
Caller 11:15
Quick question about the facial recognition. I’ve read multiple articles, conflicting articles saying that is starting in Summer 2022. And that we will need to do it to file our taxes and another article that says we won’t do need to file our taxes just for estimated payments. And then another article yesterday I read said IRS is not doing it because of the privacy advocates pushing back. So what’s the latest? And what are your thoughts on that?
Dr. Friday 11:48
And Rosie, I think I may have been talking over you what was the original question?
Caller 11:53
Oh, sorry, the facial recognition.
Dr. Friday 11:58
Okay. That’s what I thought you were going with, but I didn’t want to just jump in and then answer your question. Like, it wasn’t the right question. Okay. Um, I’m gonna say that right now, according to what we receive from the IRS, they are not going to be able to, I mean, in the hands of the IRS, they’re really truly trying to stop fraud, right?
Dr. Friday 12:17
There’s so many people that are claiming people that aren’t them, you know, fake tax returns are going out there trying to find a way to do that. And the facial recognition way was one way that they’ve tried it. It’s not as easy as people like to think trying to set that up. I wasn’t very successful. And I finally got it. But seriously, it was and it should be pretty easy. But anyways, they said that you right? The initially they were trying to have everybody that wanted to have at least online access, you were going to have to go through the facial recognition. They have put a hold on that because there is a some some cases out there that are basically saying privacy issues that they shouldn’t have to.
Dr. Friday 12:57
I’m hoping I’m gonna be honest with you, I’m kind of in I’m not going to say I know people are gonna say well, “Big Brother’s watching” but come on people. We already have so many cameras and everything out there anyways, if it’s a way of making things move faster without having to hold up on my refunds or my my clients tax returns, let’s try to find a way that we can do it. But right now, Rosie is not going to happen. I don’t think it’s going to happen. I think it’s gonna stay up in courts right now.
Caller 13:21
Okay, thank you. So, I just went online like irs.gov and, and filed my tax taxes online.
Dr. Friday 13:34
You can use one of the online links that they have.
Caller 13:38
Correct. It goes to a different website. But yeah, but I can still continue to do that. Okay.
Dr. Friday 13:44
You’re gonna be able to do that. I mean, I think most of those are subcontractors to the, you know, like, I don’t know, h&r block. You know, I mean, I think some of them all have some things, but there’s no yes, you can continue to do that. And I don’t believe you’ll have to have it at least. Now, some of them may try to push back, but I think they’re gonna end up having to hold off, I think.
Caller 14:03
Okay. Thank you. And also, if there are any Tom Brady fans out there, just I’ve just got a breaking news notification that he’s retiring.
Dr. Friday 14:12
Oh, man. All right. Thanks, Rosie.
Caller 14:17
Well, thank you so much Dr. Friday. I appreciate you too. Great show. I love your show.
Dr. Friday 14:23
Thanks, Rosie. All right, Randy. Randy, my boy. Recovery Tax Credit what we have?
Caller 14:29
Yeah, I’m just wondering, what is that? Is that something you for 2021? I mean, my situation is I have a grandson that I have a daughter that lives at home with me and has a son. And he was added to our home about me a year and I’m just curious heard about that. Might have been one of your minute updates that you do occasionally. And wondering about that.
Dr. Friday 14:56
Sure. Um, so you have two. The child there was The the advanced child tax credit that was coming out, your daughter probably received it the whole well started in July, it would have come out from July through December. And then there was the $1,400 stimulus is what everyone referred to it, but as tax people think of as the recovery credit, but you would have received 1400 for everybody in your household.
Dr. Friday 15:20
But that would have been around March, she may not have been in the house at that time, but she should have either wish she was at should have received it for the child as well. If she didn’t receive it, there is a letter that’s being sent out for anyone that has received and tells you how much you have received for both of those. But if they haven’t received it, you can take that credit on this current tax year 2021. And you’ll be able to get the 1400 and any missing plus the other half of the Child Tax Credit.
Caller 15:51
And that would be for the grandson. Right?
Dr. Friday 15:53
That would be for the grandson, correct. Well, I know you put a little caveat in there, Randy, your income needs to be low enough to qualify for the 1400. Child Tax Credit is is a little bit bigger. But if if you’re married and you make more than 150, or if you’re single and you make more than 75, you probably aren’t going to get much of that 1400, if any.
Caller 16:18
Okay, well, I just heard about it and was just curious about it.
Dr. Friday 16:24
It’s a great question. I think there’s still quite a few people out there, especially if situations where things have changed, it’s certainly worth looking in. But it would probably be listed the 1400 would be under your daughter, most likely cuz she’s the custodian, I’m assuming.
Caller 16:41
Okay. I appreciate that. Thank you.
Dr. Friday 16:44
Thanks, Randy. Appreciate you. Alright, we’re gonna take a quick break, we come back, we’ll hit some more of your phone calls, you can reach us live here in the studio at 615-737-9986. We’ll be right back.
Dr. Friday 17:06
All righty, we are back here live in studio. This is the Dr. Friday show. I’m an enrolled agent licensed by the Internal Revenue Service to do taxes and representation, which basically means guys, all I do is taxes.
Dr. Friday 17:20
So if you haven’t filed taxes for a number of years, maybe you’re thinking, “This is the time. You know what? I am going to make 2021, the year that I’m going to get straight with the IRS.” And that’s not as impossible as you might want to think first thing you got to do though, is well, there’s really two first in my mind, one, you’ve got to get in compliance, which means you’ve got to file all your back taxes that are required, you might be surprised even though you haven’t filed for 20 years, you may not have to file 20 years of back taxes.
Dr. Friday 17:50
I mean, there’s certain rules and regulations. And we can show you how that would work. The second part of that is you need to start paying now. So 2021, start making your quarterly or estimator or increase your W2 withholding, so that at the end of 2021, you’re not going to be upside down. So that way the bleeding has stopped, you’re learning to live off of what you can live off of, not what you think you want to and then every year you do your taxes. And darn you know, “I owe another 2, 3, 4 or 30, or $40,000, whatever it might be in your world doesn’t change the fact that you need to fix that first.
Dr. Friday 18:27
You’ve got to learn to live what we can live off of. So that way, we can then start thinking about once we get that, what will you be able to pay backwards? And you want to pay forward first, because if the IRS is going to start taking a look and say hey, you’re not paying your quarterly now, but we want you to start paying them back, Well, they can’t do that if you’re paying up front, so they have to back that out. So if you owe $25,000 a year in taxes and you make $100,000, they’re only going to base it on that 75. If you’ve paid the 25,000 It’s that simple.
Dr. Friday 19:00
And then they’ll use that. They have to take all of your lifestyle out and all the other things, and you’ll find that paying backwards may be a lot less, it may be a partial payment plan and maybe an offer and compromise. You may be in a non collectible situation. All of those situations are there but I do want to tell you don’t just go to someone if once you get one of those letters. And the first thing a lot of people think I mean, I know there’s a lot of big companies out there that push and say, “Hey, give us a call. We’ll help you 10 cents on the dollar all of this.”
Dr. Friday 19:29
Now a lot of you guys are many of you guys may have already called me on this and you’ll find out I’m pretty straightforward. A, I don’t first thing I don’t come out of my mouth, you won’t hear me say, “Give me $4,500 Or give me $10,000 Right now give me $1,000 and start making a $500 a month payment and we’re going to help you.”
Dr. Friday 19:45
Why and how could I know how much it’s going to cost unless I really know what your issue is? If that person doesn’t actually give you an evaluation first saying, “Hey, here’s what we’re going to do. Here’s your option. You’re going to do a payment plan because you’ve got equity in your home. You’ve got to 401k. You own other properties, you have the ability to pay, even though you may be cash poor, your property rich,” or whatever the situation might be, it hurts, you might not want to hear it.
Dr. Friday 20:11
But having someone else just take money and say, “Hey, we can do this for you,” before they fold your transcript and set up a plan that is freaking crazy. So think twice before anyone says that to you, at least get the second opinion come to our firm, let us tell you what we can do. And see if we can’t help you at least give you an alternative to just doing something like that.
Dr. Friday 20:33
Because I can’t tell you how many people in the last 20 years have done that first. And then they’ve had to come to my firm to actually get resolution. Not every time I’m not saying every you know, everything that they do is wrong. I’m saying that sometimes they basically say they can do something, and then they find out that things don’t move or get done. And I mean, the reason when people finally set their, their path to saying, “Hey, I want to get resolution, I want to get the liens were lifted, I want to start moving and buying and doing something ” and you can’t because they have you locked in.
Dr. Friday 21:03
You need to have somebody that you can talk to someone that’s getting copies of the love letters, and someone that’s going to be able to help you make it through that path. Because it’s not as simple and it’s a time consuming path, it’s not something that’s going to happen, right now it’s gonna be something that’s going to take a bit of time. So don’t think that if anyone comes in, they’re gonna say, “Hey, that, you know, this is going to happen, we’re gonna do this.”
Dr. Friday 21:26
Nothing moves quickly with the IRS. I mean, you guys should know that by listening to me. All these years, many of you guys, you know, how many times have we talked about, I mean, look at you filed your 2020 taxes, you actually filed them on time you paid them. And now there’s letters coming out. And what’s amazing, because again, you know, we’re one firm, and we’re getting letters, and then some of you guys are getting them as well.
Dr. Friday 21:46
And then they’re saying, “Wait, but make sure if 2020.” And I want to put this out there because I got two phone calls last week when I said this. And it’s really important for all of you that follow your own tax return. And or maybe you go into places to get them done, but they require you normally to know what your AGI, your adjusted gross income is. And if you don’t know what it is because 2020 isn’t posted. If they tried to eat file, they’re going to get a rejection.
Dr. Friday 22:15
Because 2020 the IRS pacifically sent out a notice to all of us that prepare taxes and said, “Hey, if the case is 2020, hasn’t posted yet, in the AGI department put a zero,” that’s right, zero, don’t put anything just fill it in as zero. And then e-file it will be accepted. Very important. Because I know a lot of times when people are trying to get their taxes done associate, you know, when you think you have a refund and you really, but something happened to 2020, you still got to get 2020 resolved, but it doesn’t stop you from doing 2021.
Dr. Friday 22:53
And again, if your AGI is zero now. They also did say not to confuse individuals. But if you are one of those that went in in 2020, and you did one of those free returns because you were looking to get the stimulus money. And you did that they said put $1 in on those individuals. But just keep it simple. Right now, most of you guys filed taxes every year. And for those that filed just like the gentleman that called Charlie, I mean, since he is 2020 aren’t in the system yet, when he e-files his 2021. If he uses one of those software’s that require AGI he would be putting zero in for his 2021. Because 2020 hadn’t posted yet. So that’s really important to know and just want to make sure because a lot of people get frustrated because they’re like, “Well, I can’t file 2020 or any the prior the next year because the prior year hasn’t posted the IRS understands this and they have tried or they are working on trying to make this a little better situation.
Dr. Friday 23:51
Alright, so we’re going to take your phone calls when we get back 615-737-9986. We’ll take your calls, we’re going to talk about some of the tax changes, maybe a couple of tax things that people might overlook. Sometimes the simple things are what you might overlook when we get back from this break. We’ll be right back.
Dr. Friday 24:22
All righty, we are back here live in studio. You can certainly join us if you want 615-737-9986. So I do want to bring up a couple things. We’ve talked about the the child tax credit that’s going to be required on the tax return as well as your rebate credit, as well as charitable contributions.
Dr. Friday 24:48
Remember, we talked about this in the past but in 2020 they had a straight across the board if you pay cash to a charity that you could write up to $300 for everyone, single or married. They changed it In 2021, so it’s $300 for single and $600 for married, so that you would have your standard deduction plus this above. And now if you itemize, you would, you would already have your basically you’ll get 100% of this. But this is basically, for individuals that basically have the standard deduction.
Dr. Friday 25:18
So this will give you an additional $600, for married $300, for individuals that are single. So that would be one situation. We are still trying to figure out on some situations where the government is showing just as a point of interest, we keep talking about the child tax credit, on the child tax credit, you may get a letter saying that you’ve received the money and you did receive the money, but the child is not yours this year on the tax return. So you will end up having to report that and it will become income to you.
Dr. Friday 25:56
So just as a point of interest, it’s not one of those things like the stimulus, where if you receive it, it’s not going to be taxable. This is taxable income. That means you basically, and the problem is going to be in some cases, I had a case where the wife was receiving it, the husband was going to get it. So she was giving him the money. So in those kinds of situations, it’s going to be interesting, because the IRS isn’t going to know she gave him the money.
Dr. Friday 26:23
And we’re going to have to figure out what that’s going to do in the situation of a person that did actually give them money to the person that was supposed to get it. So they claim that they’ve received it, but the IRS is still going to show my client right now she has a letter saying that she received, you know, $500, or whatever. And so it’s in zero children. So it’s going to be a challenge to explain this to the IRS. They were under I think, some impression, not too sure exactly how the IRS thought about this, or if they thought about it, but they were under some impression that it was going to basically be pretty straightforward. It wasn’t going to be a big deal. We’re just going to give all these people advanced credits, and then boom, everything should be perfect.
Dr. Friday 27:07
Ah, yeah, well, we all know how perfect that kind of thing is. And it doesn’t always work out perfect. So just saying if you have one of those unique situations, you’re going to want to make sure that you use maybe a tax person that knows how to put memos and documents into a tax return where it’s being he filed to justify some of the adjustments that might be being made when you’re doing taxes under these situations.
Dr. Friday 27:35
Alright, let’s talk to Chris in Hermitage. Hey, Chris, what’s happening in life, bud?
Caller 27:41
Hi, Dr. Friday, thanks for taking my call. We had a unique situation this year. My husband went to school in Wisconsin for three weeks for his employer, and his employer took taxes out for the state of Wisconsin.
Dr. Friday 28:00
Okay, well, the bottom line is he’s going to be a non resident. If it’s enough to go chasing, and I don’t know how much but you know, I mean, because you’re going to end up paying $50-$60 to probably get it prepared. You could maybe do it yourself, but you’re gonna want make sure you file a non resident and then claim that money back. Because he was never actually a residence. He didn’t live there long enough. And I’m assuming he didn’t actually work there since he was in school. Right. I dont know if his job required to work at night or something.
Caller 28:35
It was strictly schooling.
Dr. Friday 28:37
Yeah. So that, you know, I mean, I would probably go back to the employer and say, you know, but that, yeah, that might be more challenging than it’s worth. You know, because most employers are going to say, well, “Just file it then.” But your you may not get 100% of it back. Because a lot of times some states have minimums that they basically don’t give back, you know, they have a, like a set fee, because, you know, they love to hold on to our money.
Dr. Friday 29:00
So I’m just going to say, but definitely file a non resident, and it should be able to come mostly back to you. But it’s just bizarre that they would have done that for an educational. If he had went there and work three weeks for an employer in that area. I would say, yeah, he would have had to because he was using the roads. You know, I mean, he was an employee, right? In this scenario, definitely an error on the employer side, but probably not going to get fixed unless you just file a nonresonant.
Caller 29:26
Okay, and then if I could just one quick question. We also took a distribution from one of his pension plans from a previous employer. And that’s triggering a basis and an IRA basis info. How do I need to fill that?
Dr. Friday 29:43
So was this a Roth or was this a traditional?
Caller 29:48
It was a traditional.
Dr. Friday 29:51
Yeah, and you know, so the basis would be as of 1231, the year before, just to let you know what number you’re gonna put in there. So as of 2020, you know, to just put the basis in, it’s not going to change anything on the taxes. And it’s possible that it will be a 10% penalty because you sound pretty young.
Caller 30:10
No.
Dr. Friday 30:11
Okay, well, you’re over 55. So you’re like, no. So if you’re over Yeah, then you won’t have the early withdrawal penalty.
Dr. Friday 30:18
It was a direct rollover.
Dr. Friday 30:22
Oh it was a rollover, it was not so you didn’t take the money and put it in your pocket?
Caller 30:26
No, no it went directly to an IRA.
Dr. Friday 30:29
Okay, so you went from one IRA to another or 401k to an IRA. Any of those kinds of. On the 1099 are what’s in box? I used to have it memorized 4 or whatever, where it’s like a code seven a code four, you know what I’m talking about?
Caller 30:45
It had a G.
Dr. Friday 30:46
Okay. G, which is, that’s what means rollover. So G is perfect. So that shouldn’t trigger anything. I’m kind of surprised it’s triggering the basis, but maybe they’re just trying to make sure that you have it on there again. So just put the total of all of his Ira 401 K’s on that total. But you won’t have a tax in that case. Good job.
Caller 31:08
Yeah. All right. Thank you.
Dr. Friday 31:10
No problem, Chris. Thanks. Bye.
Caller 31:12
Thanks. Bye, bye.
Dr. Friday 31:14
All right. Let’s get Lisa in Ashland city. Hey, Lisa.
Caller 31:19
Hi there. How are you?
Dr. Friday 31:20
I am good. What are you up to?
Caller 31:23
Oh, running errands. But here’s a quick question for you. I have a 15 year old son who. And when he was 14, he got a 1099 by his employer. 15, they said they were taken out taxes, we get his W2, his W2 he made $3,300 and they only took out $12.43. During that time, most of his checks were $300-$400 there was a couple that were only 50 or $60. But most of them were several $100. And there was no income tax withheld. Now they did take out $200 in Social Security. Is there anything that should be the reported as far as to the IRS as far as an employer goes?
Dr. Friday 32:08
No, I mean, you could file it for free if you wanted to, and get the $12 back, if you want to go to the irs.gov. There’s some free ones for those kinds of, you know, for kids, or young people or whatever, that have simple, simple tax returns. But otherwise, you know, he doesn’t have to file anything, the $12 I mean, personally, I thought it’d be great if they could take out zero tax.
Dr. Friday 32:28
Because there’s no reason for him to have any taxes come out unless he’s gonna make more than 12 grand and at 15. That’s a little hard to do and work and go I mean, go to school and do. So I mean, I would almost claim him exempt. So that way, at least you didn’t have to worry about his W2. You know what I mean? Especially with the W two the 299. Now, that’s a pain because obviously you had to file and pay some taxes because they didn’t withhold. But with the W two, we want nothing in box two in the perfect world for a minor child, because then nothing’s required for us to file.
Caller 32:59
Okay, so as far as that goes, then he just mark him as exempt and he’s done?
Dr. Friday 33:03
Exactly. Exactly. I mean, I mean, since all the with I mean, the biggest taxes that you have to deal with normally are Social Security and Medicare because the 1099 now it’s all come out. So he doesn’t need to do anything, but you kind of lost 12 bucks, unless you want to chase it. I mean, I’m just saying it’s too small. But all in all, it’d be better if you can just tell his employer just make him exempt because he’s not gonna make $12,000 at 15 and 16. Likely, I mean, he could I mean, some kids probably do. But all in all, until he makes over 12,000 He’ll have zero tax.
Caller 33:37
Excellent. Thank you so much.
Dr. Friday 33:39
I appreciate you. All right, I really appreciate the phone calls guys always make my show so much more entertaining than you guys just hearing me chitchat about different things.
Dr. Friday 33:49
We’re gonna basically be able to get another few minutes in here. So if you want to join the show, 615-737-9986 we’re gonna be going into our third break here. We come back, we’ll be able to take your calls. But we have some situations.
Dr. Friday 34:08
I do want to remind people because a couple people have come on my emails and just asked a couple questions. But one question is when are taxes due? April 18 for individuals. But remember, if you are a partnership or Sub S Corporation, or limited liability, filing as either of those, then that is March 15, which is coming before you know it, so make sure and then also annual renewals I mean most people are getting emails but if you do have a separate entity, like LLC or corporation, remember you can go to the secretary of state right now and file your Annual Reports.
Dr. Friday 34:47
Very important to do because if you don’t file it on time, guess what happens? Then they basically make it nickel they basically you have to pay 70 get to reinstate it righ? And then they have to get tax clearance from Tennessee Department of Revenue, it just takes a bit more work. If you just go in now and get it done properly, you’ll find out that it’s not a big idea.
Dr. Friday 35:09
I mean it’s really quite simple and you do it now same thing with your business license, you want to do that as well. You want to get those renewed that’s through TNTAP and of course your franchise excise all of those are due before the pretty much around April 1 April 15. But we have the ability to make that go through their video. So I’m gonna go ahead and take a quick break. Looks like the phone lines are going crazy or you want to hit Steve.
Dr. Friday 35:36
Okay, we’re gonna go ahead and take a quick break. When we get back. We’ll hit Steve from Hendersonville and a few of the other individuals that are on hold. We’re going to be right back with the Dr. Friday show.
Dr. Friday 35:54
Alrighty, we are ready to go. We’ve got the live here in studio. Sorry. Let’s hit Steve in Hendersonville, we got lots of callers. Hey, Steve.
Caller 36:05
Hey there.
Dr. Friday 36:06
What can I do for you, sweetie?
Caller 36:08
I had a son turn 18. In June last year, I’m a single father and he worked a job for two weeks and then upgraded and then worked another two weeks. So he had about four weeks worth of work to W2. And I took care of him for the whole year. I can claim him on my taxes. And or should I?
Dr. Friday 36:32
Yeah, absolutely. You’re gonna claim him on your taxes, because you gave him more than 50% of his care if he was working less than a few months or even weeks. So, I mean, he’s 18. He’s probably trying to figure it all out still. But anyways, yes, you he would still be a dependent.
Dr. Friday 36:46
He could file as a dependent on his own personal tax return if there’s enough money in box to have both of those who choose to go chasing. You know, I don’t want to leave any money on the table. But all he has to do is do a tax return claiming he will be your dependent. Just click the boxes. I’m a dependent of someone else, he’ll still get a full refund unless he made more than $12,000.
Caller 37:07
No, he didn’t. Yeah, of course. Yeah.
Dr. Friday 37:09
Yeah. So then you’ll claim him and do your normal just like it always was.
Caller 37:13
One more question. I’m sorry to keep you. So my mortgage, I had a forbearance and then I didn’t pay anything last year, but I’m starting to pay this year. Anyways. I usually do what itemize and try to see if I use the interest, which usually doesn’t affect my taxes. I probably wouldn’t even need to worry about any of that at all. And just do this as a standard.
Dr. Friday 37:34
Yeah, I’m assuming you probably I mean, I’m just saying unless the interest is really high. Nowadays, the standard because your head of household still. So what like 18,000 or more, you’d have to have to itemize. So personal opinion, probably good. I mean, it’s possible if your numbers are that high or your charity or property taxes. But if not, I would just do standard deduction. And if you have any cash contributions, take that.
Caller 37:55
Okay, that’s it. Thank you.
Dr. Friday 37:58
Thanks for calling. I appreciate it. All right. Next we got Bruce in Whitehouse. Hey, Bruce.
Caller 38:05
Hey, how are you?
Dr. Friday 38:07
I’m good. What can I do for you?
Caller 38:09
Ah, last year, I didn’t get any of my COVID-19 release check the $1,200. That came out I think in December. And I had to look at it below me already and send you the forms. But I’m just wanting to get ready to file again, he said that they still got me on hold. Is there anything I could do when I filed this year to alert them or get them? Let them know that? I still haven’t got that?
Dr. Friday 38:41
No, because they haven’t resolved the 2020 year part of those 6 million people that are still unresolved. Now you’ll want to Bruce, if you did not receive the one this year, the 1400 you’ll want to make sure you claim it on the 2021 tax return.
Dr. Friday 38:54
But last year, the first one was 12. The second one was 600. But if those if you’ve already sent in, they’re just waiting for resolution. So there’s nothing you can do on your 2021 to let them know that you still have a 2020 issue.
Caller 39:08
Well, are we supposed to get the 1400?
Dr. Friday 39:11
In March or April.
Caller 39:14
So we’re still waiting on that.
Dr. Friday 39:16
No, March or April. Yeah, I mean, you have received it last March or April, a year ago. Okay, March of 2021. You would have received it in around that time. And you should get a letter telling you if you received it or not.
Caller 39:31
I didn’t get anything.
Dr. Friday 39:33
Those letters did come out and I have seen several of them. So keep your eyes open for that. But just let you know Bruce, if you haven’t received it, then you can claim that 1400 on the 2021 the ones we’re filing right now, okay?
Caller 39:49
Where does it go the 1400?
Dr. Friday 39:55
It goes on line 31 of the 1040.
Caller 39:59
Okay 31, thanks.
Dr. Friday 40:00
All right, perfect. Thanks. All right, we got Brandon in Cookeville. Hey, Brandon.
Caller 40:05
How are you?
Dr. Friday 40:06
Hi, I’m good.
Caller 40:08
Thank you for having me on the show. Appreciate it.
Dr. Friday 40:10
Thanks for calling.
Caller 40:14
Just quick question, can you hear me I’m on Bluetooth?
Dr. Friday 40:17
We’re good. Go for it.
Caller 40:17
I started a new job in May of last year, and my W4, I’m married filing jointly. And I’ve got two small children. So that’s that’s in the correct boxes 4000 that it takes out for the deduction, you know, the credit, whatever.
Caller 40:37
But when I usually can enter in one or two, it didn’t allow me to do and use that and always take out extra, all my extra tax withholding, just so I don’t have to pay at the end of the year. And so that’s the only taxes that they took out of my check.
Dr. Friday 40:55
You’re married, does your wife work? Yes, she does. Okay, so you might want to adjust in my personal opinion, I don’t like the new W four form. I’m just going to put that out there. I like the old. But on that one, you might want to go ahead and reduce because you both can’t claim two children. I mean, theoretically, you can. But I mean, there’s not going to be enough money that’s gonna come out.
Caller 41:19
She calims zero. And I claim the children. She claims zero.
Dr. Friday 41:23
you. Okay, so you had done that? I’m gonna assume because it was a new job. Maybe you didn’t work the full year and you didn’t hit high enough? Because if they took out zero, I’m assuming you made 50,000 or less, Brandon, I mean, just in the ballpark. So, you know, because for a married guy with two kids, you’d basically be breaking even at that dollar amount.
Dr. Friday 41:43
So you wouldn’t know withholding. I’m not sure we’re helping. But you might just if you want to leave it that way. Once you do your taxes this year, you might want to just have a little bit more if you if you’re under just instead of you know, having the 20 extra go for 30 and just leave it at the other so that way you control how much federal is coming out.
Caller 42:02
Okay. All right. Awesome. Thanks.
Dr. Friday 42:04
Thanks. Let’s hit Gina in Nashville really quick before the end. Hey, Gene.
Caller 42:09
Hi, Dr. Friday, thank you for taking my call. I have a 23 year old son that lives with me full time. He is unable to hold down a job because of some medical issues. Okay, I’m wanting to know if I can claim him as a dependent.
Dr. Friday 42:26
Absolutely, as long as you’re providing 50% of his care, which means a roof over his head, food in his stomach, you know, whatever, insurance.
Caller 42:36
Yes, insurance, too. I pay for all that.
Dr. Friday 42:39
Right. So most likely at this point because of his health issues, you will claim him as your dependent.
Caller 42:46
Perfect. Thank you so much.
Dr. Friday 42:48
Thank you appreciate it, guys. Thank you so much for all of you guys calling I really appreciate it makes the show again, go so much faster. And so we’re getting to the end of the show.
Dr. Friday 42:58
So let’s go ahead and talk a little bit about first, don’t rush to get your taxes done. In my opinion. Make sure that you have all of your W2’s make sure you have received the 1099’s that may be distribution of some sort. If you did a you know IRA or anything, if you had unemployment.
Dr. Friday 43:18
Make sure you receive and have all of those forms. There’s nothing worse than filing getting a refund, then getting a love letter saying, “We’ve changed your tax return because you forgot this” and don’t forget Bitcoin guys, you know, cryptocurrency the IRS is now tracking. So don’t think you’re my opinion is not worth trying to outsmart. Let’s just make sure we’re reporting what is truly happening.
Dr. Friday 43:43
Same thing with, you know, stocks, anything that you’re buying and selling. Let’s make sure we’re tracking those so that you have it on your tax return and then you don’t have to really worry so much about what it is. So again, if you’ve got cryptocurrency, I definitely suggest trying to do more of that through like coin base or something that’s tracking it.
Dr. Friday 44:03
I know there’s gonna be so many guys listening saying, “Well, what they don’t know.” But I don’t know what they don’t know. Come on. We are all getting I mean, more and more people are receiving 1099K’s from things like Amazon, and eBay and things because they’re selling products. And it used to be at $1 amount, right? If you sold less than, I don’t know, $10,000 they didn’t give it.
Dr. Friday 44:23
Now it’s like if you have a number of transactions, they’re going to start sending out 1099K’s. We all know in the infrastructure bill, the build back better bill, they were trying to do something where every $600 that was received, you are going to have to do some sort of tracking. So just saying make sure you’re reporting what you have. So you can actually put that tax return to bed and start living the next year and not have to look over your shoulder and try to figure out, “Oh, no, what next do I need to do?” And you know, he said it’s always worse because once they given you the refund then there’s penalties and interest because you got money that wasn’t yours because you didn’t report.
Dr. Friday 45:01
So and the one thing everyone’s always always asking, Can I get a waiver on penalty and interest and it mean to do is there a way of getting around it? And the answer is sometimes yes. I mean, I can’t tell you we haven’t gotten waivers on penalties. Interest very, very rarely. In fact, the only time you really get a waiver on interest is if you change and reduce the entire bill.
Dr. Friday 45:21
Therefore, interest in penalties would be reduced in the same situation. But just make sure you’ve tracked all your documents, make sure the information is complete, and then file your taxes that way you don’t have to worry about it. Alright, so if you want to reach our office, you can at 615-367-0819.
Dr. Friday 45:45
You can also email friday@drfriday.com or check me out on the web. You get a lot of information out of there. It’s just drfriday.com. It’s a easy way and hopefully you guys are going to be staying warm, working on your taxes. Again, entrepreneurs or business owners make sure your W2 and 1099 have been submitted. You don’t want to get hit with fines and penalties for something that you can just take care of really, really quickly.
Dr. Friday 46:22
Hope you guys have an awesome Saturday and try to stay warm out there because you know what, it’s a bit nippy. And you know, it’s a crazy Saturday. So as we always say in Australia, call you later.