Welcome to another episode of the Dr. Friday Radio Show! In this episode, Dr. Friday shares all the updates on taxes and also the following topics:
- Have Your Documentation For Your 2020 Tax Returns
- The IRS Is Not Processing Tax Returns Until February 12th
- Unemployment Is A Taxable Income
- What To Do If You Haven’t Received Your 2020 Stimulus Check
- Self-Employed Individuals Can Apply For PPP 1 and PPP 2
- Do You Need Help Preparing Your 2020 Taxes?
- Is Timing Really Important When Filing Taxes?
- Small Business Money Is Available
- Do You Need Help Preparing Your 2020 Taxes?
- Why You Should Get Help With Tax Representation
and so much more!
No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or your financial woes. She’s the how-to girl. It’s the Dr. Friday show. If you have a question for Dr. Friday, call her now at 615-737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
Dr. Friday 0:30
Good day, I’m Dr. Friday and the doctor is in the house and are we having fun this season. I will tell you tax season, of course, has officially I guess you would say has opened but since the IRS is not processing any forms until after February 12, we are just accumulating them in a holding period until the IRS starts opening up e-file. But obviously we are getting them completed, making sure that we have everything we need. Don’t forget, some people get so excited about coming in. I know we’re excited people what can I say but you know, sometimes the mortgage statements, unemployment, the 1099 G’s, according to the Department of Labor, they weren’t going to be putting them out until as late as February 2. So you have time to get all your documentation together, make sure we have it all. So we can complete the tax returns 100% the way they are.
Dr. Friday 1:25
Also remember that it’s a little tricky with the $300 extra charitable contribution. So if you don’t qualify for itemizing, but yet you gave more than $300 to charity, make sure at least in our system, we have to complete the Schedule A even if you’re not itemizing, and then it will roll over that additional 300. If you don’t complete that it will not there’s no place to put it in, it’s rolling over from the Schedule A at least again in our software. So that way we have that information. You know, you don’t want to leave any money on the table, because a lot of people do give to charity, but they’re not getting enough to be able to get the you know, the rest of the view or whatever they have. So just if you have charitable contributions, maybe you only did $100-$200, whatever it might be, then you have what it takes to do what you need.
Dr. Friday 2:16
So if you’ve got questions, you can certainly join the show 615-737-9986. We’ve got callers on the line. You’ve been a busy boy in that studio, haven’t you? Alright, go ahead and hit the first one. Hey, Bob, what’s happening?
Good to talk to you. Hey, I have a question for you. There’s been a lot in the news lately about proposed tax changes by the Biden administration, one of which is to eliminate the step-up in basis on inherited property. Right. And what I wanted to ask you, are there any strategies that someone could take on right now to possibly get around that later on for their heirs down the road?
Dr. Friday 3:16
I mean, we are talking a lot about that too. And I find it hard to believe, because that wasn’t even something that was actually put into by the Trump administration, we’ve had the step-up in basis for a long time. But I know they’re trying to find ways. I mean, they’re spending trillions of dollars, and they’re needing to find ways to get that money back into their pockets. So they’re eliminating things that doesn’t make sense. Since throughout your life, we’ve paid tax on that property was in a tax deduction in many cases. So in answer to your question, there is some that they’re working on, but we one on one. Obviously, there’s the ability to possibly sell the property and have the person that is the owner go ahead and report a sale so that the step up is already going up. But that’s going to cost nothing right now, that’s going to completely save you in tax dollars, you cannot gift or move it without somebody paying the taxes, the question will be will the taxes be lower? Now, go ahead and move the property, sell it to the kids, whatever. So that’s been reported, and there’s a higher income? Or do we wait in until after we pass away? It’s always been better to let your children inherit because of the step-up in basis. But stay tuned on that one, as soon as we know more about what they’re actually considering not to allow because there’s also a conversation that it may just be on real estate, but not on stock. There are others, you know, so answer your question, Bob, I think we’re just going to have to keep rolling with the punches until we really know what they’re going to get past because I think that’s going to have a huge effect on some of the markets when you consider without the step up and basis.
Yeah. So theoretically, could you sell it to one of your Children today and establish a new basis for them. And then take the one-time capital gains exemption that there already?
Dr. Friday 5:08
If you sell it to your children, you’re not allowed to take that exemption, because they’re saying, so I think you’d have to sell it into a trust or something, and then get a life estate. This is again winging the conversation a little bit. But there would be some possibilities of doing just what you were saying, in essence, getting it paying that the parents or whoever owns the house paying the tax, so that way when the children get it, it’s already at a higher basis than the basis. Some people have owned their properties for 30 and 40 years, they have very little basis left in those homes compared to the current prices.
Let me ask you another real quick question. For my 2019 taxes, the IRS sent me a letter in October and I needed more information, and I sent it to them through the mail. They’ve not processed that 2019 returns it’s a real easy return. Are they behind handling paper processing?
Dr. Friday 6:00
Way behind. I mean, we’re talking what used to be 30 days is now 90 days, what used to be 60 days, 180 days. Yes, I know they’re trying to catch up. But we still have tax returns that were mailed in October, not processed. They were mailed on time with an extension, still not showing up in the system.
Okay, so the best advice is just to wait it out.
Dr. Friday 6:22
Wait it out as long as you have proof that you sent it and that they received it? If not, go ahead and resend it. But if you do just wait it out right now.
Okay, perfect. Thanks.
Dr. Friday 6:32
No problem. Bye. Bye. All right, let’s go ahead and go all the way up to Andrew. Looks like he’s been on the longest.
Dr. Friday, thank you. Checking account, the main person that owns a checking account, put a second name on there, just in case they would need to write a check wouldn’t be able to such as that. That is not a relative. That main checking account person has passed away, there is a relative that is 100% beneficiary in the Will. The question is the person that was put on there the nonrelative was put on as a survivor. Does that person own the checking account? And can they because they feel they shouldn’t have the money, deposit that money into the account of the person who is the beneficiary of the wheel?
Dr. Friday 7:27
Yes. I understand exactly what you’re saying, I want to put a little caveat, I’m not an attorney. But I’ve handled closing estates a couple of different times. And my answer to that is theoretically, the person that was the friend that was put on the account, maybe just to basically cover things in the case, because maybe they’re the closest person in that situation, that money is theirs. I mean, if it was left to the account, it’s usually jointly held to the person still living would be the inheritor of that account. They can gift that money. I don’t know how much money we’re talking about, it may require a gift tax return. But since the money in that bank account is not taxable, making the assumption that whatever income went in there was already taxed before it went in, then they could physically gift all of that to the person that they feel was rightfully supposed to inherit that money.
Okay, it’s less than $10,000.
Dr. Friday 8:23
Then they can do it without having to file a gift tax return. So as long as there’s Yeah, they can just write a check deposited, and that’s under the 15,000. Anyone can give anyone that. So it would then be null and void as far as they’re doing what they feel is right.
Oh, excellent. Okay, one more quick question. I’m on Social Security, total income was $25,900. Do I have to pay taxes?
Dr. Friday 8:48
Is that including your Social Security? The 25,900?
Dr. Friday 8:52
How much of it was Social Security?
Dr. Friday 8:56
yeah, no, you won’t have to unless you haven’t received all of your stimulus. And if you have not received it, you’ll want to file a 2020 no matter what. But if you have, then you do not need to file a tax return. Unless the income was 1099. Meaning like self-employment.
I got the 600. All right. Well, thank you so much. I appreciate it.
Dr. Friday 9:17
No worries. Thanks, mate. Okay. All right. All right. If you guys want to join the show, if there’s a question here, you want to ask, you can call 615-737-9986, and let’s do it real quick. Let’s go up to Drew. Hey, Drew, what’s happening?
Hello, Dr. Friday. Thank you for taking my call.
Dr. Friday 9:36
I’ve got a question about the home office deduction. My wife was sent home back in March, to work from home. Am I still are we still eligible for that? Or will we? Is there something that we can claim? Other than that?
Dr. Friday 9:58
It’s a great question, and I will be asked that a lot during tax season I have a feeling and the answer is right now under the current tax law, if your wife is on a W 2, you have no place to claim a home office. Only self-employed individuals working under 1099, or self-employed period can claim a home office, all the individuals that worked from as early as mid-March to the end of the year, so almost the entire year at the home office. There is no place at this point for that on the tax return.
Well, that sucks.
Dr. Friday 10:31
I know I know. And I bet that’s the exact response I get a lot of people saying their electric bill went up, their utilities went up. And there is no additional. I think the hope was at some point that maybe bosses would give small amount raises for those inconveniences, but you know, that didn’t happen. So yeah, so at this point, nothing you can do.
Okay, thank you, Dr. Friday.
Dr. Friday 10:54
No worries. All right. Let’s hit the last one real quick. So, Kim, what’s happening, Kim?
Hey, I’ve just got a question about I was fortunate enough to receive the PPP program and it’s been forgiven. Is that something I claim as income?
Dr. Friday 11:11
Nope, because in the whole conversation, he was forgiven. So even if it hasn’t yet, because some clients I’m dealing with haven’t received the first PPP loan forgiveness. Either way, it’s more like I guess the simple is more like a gift. As far as there’s no taxable income to report and you can write off the expenses that they offset in my you know, in most people’s their payroll, right? So it’s not income to you, and it’s not going to report anywhere on your tax return.
Perfect. All right. Thanks so much.
Dr. Friday 11:44
No worries. Great question. Thank you. Bye, bye. All right. So we’re gonna take a quick break here in just a second. But if you do want to join the show, you’ve got a question. Remember, there are no silly or stupid questions, because if we don’t know the answer, the best thing to do is ask the question, if I don’t know the answer, we’ll get it. But all you have to do is pick up the phone at 615-737-9986. We’ll take your calls, answer them, when we get back from this break.
Dr. Friday 12:23
All right, we are back here live. I am an enrolled agent licensed by the Internal Revenue Service to do taxes and representation. So at least if nothing else, I will get you on the right track. So better to ask the question now then the file your taxes and deal with the IRS if it’s wrong. All right, let’s go right to the phone lines. Let’s see what Bill has to say hey, Bill.
Hey, how are you? I got a question. If you got on unemployment checks from the state of Tennessee and then you got your stimulus money, do you have to pay taxes on the stimulus money?
Dr. Friday 13:00
Have you applied for forgiveness on your stimulus?
No, I didn’t know how to do that.
Dr. Friday 13:06
Well, whoever’s doing your taxes might be able to help you. It’s open, you need to file for forgiveness. And the answer is most likely no because the unemployment covered like 13 weeks or so. And I don’t know your situation. And then the stimulus covered up to 2.5 is what most people got the money for, but you could have spent it within 24 weeks. So as long as the total amount offset your income, you probably can get forgiveness. Now you’ll pay tax on unemployment because it’s taxable. It’s not forgivable, but I would definitely whoever you got the loan through. I don’t know who that was. But you might want to try to contact him and ask him what the forgiveness packages. It’s pretty straightforward. And as long as you wrote checks, your business is still in business. There’s a way of getting forgiveness most likely.
All right, thank you so much.
Dr. Friday 13:57
No worries. Thanks, mate. All right. I love it. The phone lines are lighting up keeping my boy busy in the studio. Not like he doesn’t have a million things to do. Alright, let’s go ahead and hit Mike before he get the next line. Hey, Mike.
How’s it going?
Dr. Friday 14:12
It is going great. How about yourself?
Going pretty good. I had a quick question for you. So I drive vehicles for it’s a company we deliver all over the United States. Generally, I ended up getting a 1099 at the end of the year. I have to cover all the expenses fuel. Sometimes I stay overnight, flights, that kind of stuff. I prepay all that. They just send me a 1099 what all. Can I write off against that 1099? Can I write off mileage, fuel, the expenses?
Dr. Friday 14:48
Anything it takes for you to do your job is basically the best definition I can give you. So if they’re using your cell phone to contact you a portion at least of the cell phone may be tax-deductible. Obviously the wear and tear on the vehicle. Are they providing you the vehicle or is it your vehicle?
I take my vehicle to a location, pick up a vehicle that they supply and drive it somewhere, either fly back.
Dr. Friday 15:16
So the wear and tear on your vehicle to the first pickup would be possibly a tax deduction. Then, of course, the rest of the wear and tear is on their own vehicles. Now you’re still putting petrol possibly in the vehicle that you’re driving. So you’ll have to keep actual receipts on those since you don’t own the vehicle, you’re gonna have to use actually. I would definitely keep a calendar of where you’re going with each of them if that’s possible, and you may have some receipts or whatever you have. So something that you could justify this fuel receipt was for the delivery of this car kind of thing. Then you have you know, and if you’re spending the night, because again, you’re going out of town to do these things, lodging, food. There may even be a small per diem for incidentals, but anything like that would be what I’m suggesting. Yes. And I may be missing the moves. But yeah, everything anything you could think of that takes for you to get that car there.
Gotcha. That’s kind of what I mean. I appreciate your help.
Dr. Friday 16:11
No problem. Thanks, Mike. Appreciate the phone call. Thank you. Thanks. Let’s go to rob, let’s see what Rob’s gonna have to say, hey, Rob.
Hey, how are you?
Dr. Friday 16:22
I am awesome. What’s going on?
Yes, if a family member is trying to give you property, how is it taxed?
Dr. Friday 16:30
So if a family member is going to give you property, it would be gifted to you at the value that the family member has into that property, if that makes sense. So you’re not going to get the step-up in basis unless you’re going to buy it at fair market value and do it through a regular closing. But if they’re just going to gift you a piece of property, I mean, for your side not taxed at all, the person receiving a gifted whatever it is, is never going to be taxed. If it’s worth more than $15,000 or 30, if it’s a husband and wife giving it to you, they will be responsible for gift tax return, which most likely still would have a zero tax under the current laws. They would need to report you to know the value they have into it and gift it. Then your basis is the same value that they had into it. So if you ever decide to sell it later, let’s say this property’s worth $30,000, even if it appraises for 130, you would still only have a $30,000 basis.
Okay, it’s a farm, and it’s about 60 acres. And it was it’s going to be the third generation. So they gave $8,000 for it back in the 40s.
Dr. Friday 17:44
Okay, but then if it’s a third-generation someone inherited it. Or is that person would have gotten what the gentleman called earlier a step up in basis. So at the time, they inherited that property, whatever the property was worth at that time, would be what the current basis is. I don’t know how many generations if you’re the third yet Grandpa, dad, and then you or whatever essence of those steps are. So you know, they paid 8000 originally, then when the next generation, whatever it was worth, when they inherited, we’d be the basis that the third generation would be inheriting it at assuming that they’re not going to if they’re just going to gift it to you it’d be that basis. Does that make sense? And if not, you might want to get, you know, an attorney or actually a real estate person that can pull up the basis is all the way along from the time that started maybe and gets an idea of what the current what the basis was when the person inherited if they don’t know that number.
Yes, I understand. And with that being said, what is the $11 million gift lifetime gift?
Dr. Friday 18:52
That’s what we actually have, but you can’t give something valued higher than what the basis is when it’s coming to gifting. So even if the farms are worth, let’s just say the farm is worth $10 million, but the person that wants to give it to you only inherited at 100,000, they would actually have to pay the tax between the 100,000 and the million, which would be a huge tax. Normally when you’re gifting, the idea is he this person is going to gift it for their basis over. Otherwise, they can get an appraisal and sell it to you for that dollar amount and theoretically gift that sale to you. But they would have to then pay tax on that difference for the step-up in basis. Someone’s got to pay it if it’s not coming through. Like the gentleman said, if that person dies and you inherit it, then you would get the automatic step up the basis under the current tax law. But since they’re doing it before their death, they’re eliminating that basis that’s allowed.
Okay, I completely understand. Thank you so much!
Dr. Friday 19:52
Cool. Thanks, Rob. Appreciate it.
All right. Bye. Bye.
Dr. Friday 19:56
All right. If you have a question, if I haven’t confused you on all of that, please. Feel free to give us a call at 615-737-9986. We are taking your calls. Meanwhile, don’t forget for all of you because a lot of self-employed individuals, I have found out that we’re qualified to obtain a PPP 1 personal payment of the the the loans that are going out that gentleman called on and there is two there’s a PPP 1 and a PPP 2. If you’ve never applied for the first one because you didn’t think you qualify, because all you ever heard about was the fact that you had to have payroll, which of course, self-employed people that own their own business, don’t have a payroll in the traditional world. But on PPP 1, whatever you pay tax on the schedule C was your payroll. You paid self-employment tax, you paid income tax, just like an employee. So that would be the direction you want to go. So if you did not actually get the first PPP, it is open for you to get it now. Again, that is the one. I mean, they’re both theoretically forgivable, but that is the direction you’re going to want to go. So if you haven’t, you might want to look to see if it applies in your situation. I think it’s important that if your business is hurting that you really need the money, it’s out there, and you can use that money to help pay for payroll for this year help pay for expenses this year so that you can keep your doors open because some businesses are getting to that verge of what’s coming up. You know, we don’t know what’s happening, and it’s still creating a lot of issues. So we’re going to keep that going and making sure they have it. Alright, boss, if you have a second, why don’t we go ahead and hit number one. That’s David. Hey, David, what can I do for you?
Hey, are you doing doctor Friday?
Dr. Friday 22:01
I’m doing awesome.
I’ve got a question. You see, now this year, for our stimulus I’ve got a wife, we filed married filing jointly. And I have a 17-year-old son and an 18-year-old daughter. For the stimulus check this time around, I got a total of $900. And that was it. Just seemed like half of what my wife was supposed to get. And then, 600 for myself, and then nothing else. I was wondering if I was supposed to be getting more? And if so is that something that I can bring up with my tax return?
Dr. Friday 22:39
So the kids obviously because they’re 17 and older are not going to get any stimulus. Now if they’re in college? That’s one thing. The one sounds like you don’t be in high school at that age. Don’t ask why. But the tax law stops at the age of 16 for them. But I’m going to make the wild guess, on your 19 tax return you made as a joint couple around 150, 000 gross? I don’t you know, yes or no. But that’s the reason you wouldn’t get it if that’s not the case because this is going to be based on David on your 2020. So I don’t really care what happened on your 19. When you put in your 2020, there’s a question to be asked, Did you get the first stimulus, which would have been $2,400, depending on when your child changed age, you might have gotten 600 for the youngest one. So you know, whatever that number, and then they’re going to ask about the second, you should have gotten $1,200 as a married couple if you only got nine, that extra 300 would come on your tax return as part of the refund. It just depends on if your income is going to be over 150 or not. Because if it is it’s going to means test it out. You know, they’re going to give you less,
Right, okay, yeah, won’t be over 150.
Dr. Friday 23:47
Okay, so if it’s not, then they’ll give it to you on your tax returns. Any tax preparers should be asking because it’s one of the questions we have to ask, have you received the first how much, you know. And they should automatically get that in there. So yes, you can get your refund or the additional refund on you and your wife at least on that one.
Okay. All right.
Dr. Friday 24:09
I appreciate the call. Thank you very much.
All Thank you. Bye-bye.
Dr. Friday 24:13
All right. What do we get for Jane? Hello, Jane, what’s happening?
Hi, Dr. Friday, how are you?
Dr. Friday 24:20
I am doing pretty good.
Okay, my question is about an IRS tax lien. Okay. That was on a piece of property that is jointly owned by my spouse. We’re divorced. In that divorce settlement, I quit claim deed the property to him. He is making payments on that lien. Am I still responsible or how do I get myself clear of that lien?
Dr. Friday 24:47
Well, in theory, there’s no easy answer, Jane, you are responsible because the IRS doesn’t care what happened in a divorce. I can’t tell you how many times I’ve had people come in and say “Here’s the divorce papers. This person Since both the pay off the tax debt in exchange for this” or whatever it might have been in the situation the IRS is whoever we can get the money from is who we’re going to get it from. Because at the time, you both filed a joint return for whatever tax situation. So there’s no easy way as long as he’s in a payment plan with the IRS. He’s complying, right? I mean, and they won’t come after you or anything else, as long as there’s a legitimate payment plan, and one of the two people are making the payment that the IRS expects against that you’re safe, but there’s no way of removing the lien until it’s actually paid off. Or at least paid down, you know, under 25,000. Sometimes you can get a lien removed if it’s against your credit. But as far as against the property, well, I guess you don’t really I mean, as long as your name is off, and you know about the property or anything else, but the government’s like, we’re holding on to everything we can, because something could happen, and they won’t get their money. So they’re using the property as the main lien holder. But in essence, they’re gonna keep you and him tied to that until they get it paid in full in truth.
Okay, so there’s no way to get it off of my credit.
Dr. Friday 26:12
Not really. Do you have any idea what years we’re looking at?
I think it started in 2017.
Dr. Friday 26:21
So 2017 and 2018? Or is the tax year that the problem was 2017?
It was 2016.
Dr. Friday 26:30
Yes. Oh, 2016. Okay, so 2016 was the year. So one way or the other, In 2027, It will be gone. Or no, I mean, you know, he may get it paid down. I don’t know how big it is. But if it gets down to less than 10. Normally, if he’s been on electronic draft automatic payment with them for more than 90 days, and it’s under $10,000, there’s almost always a chance of getting that removed from your credit either of you at that point. Because it shows that he’s got the intent, it won’t remove it from the property, but from your name, you probably could get that taken care of. But again, I don’t know how much it is, and how long he’s paying? Or if he’s just writing a check every month that doesn’t, they have to have it as an auto-draft to get it set up that way.
Well, it is set that way. So say everything is working right. And he’s got it down below the 10,000. How do you get it off your credit?
Dr. Friday 27:23
You just want to send a request to the IRS under a lien release, I think is a 6000. Look it up as I babble here. There’s a form you can download and just request that release. So it is 12277. So if you Google “Form 12277” It’s pretty straightforward. It’s going to ask you what the lien is, etc, etc. Fill it in and see if they will take it off, they’ll probably take it off both of but you can just do it in your name.
All right, thank you very much. I do appreciate your help.
Dr. Friday 28:06
No problem. Alrighty, we’re gonna take our second break. If you want to join the show, you can easily enough pick up your phone at 615-737-9986. And we’ll be right back with the Dr. Friday show.
Dr. Friday 28:31
All righty. We are back. live here in the studio. You want to pick up the phone at 615-367-0819. Let’s go ahead and go right to the phones and see what Jim has to say. Hey, Jim, what’s happening?
Well, there’s a lot going on. Every time I get a letter from the government, it’s like, I have no idea what the hell they’re talking about. I got a letter. So they took my Medicare, which I hope I want to just educate people to notice because I wasn’t aware of it. But my taxable income went up significantly because I had 1099 from a casino. So they whacked my Medicare from 144 to 386. For me and my wife for a year. I tried to explain to him by a letter that that was a one-time possibility of happening will be never, and they really don’t care. They whacked me to penalty anyway. Now if I want to appeal it. They said I gotta send them my tax forms. I gotta go to court. I’m going for God’s sake. I said this is just like they’re just trying to vary in paperwork. I have no idea what to turn or where to go or what to do. It’s just kind of confused me because I’m not working. It’s not an income. I tried to explain to them, it’s not earning income. It’s luck. I’m just totally confused.
Dr. Friday 30:01
Right. And I will be honest with you. It’s almost two years, by the time you actually do the mathematics, it’s something that a lot of us have kind of had a lot of argument because sometimes somebody will sell a piece of real estate that they have an inheritance. You know, these aren’t earnings. These are things that happened once in a lifetime, in most people’s cases. There are ways of repealing it. But I’m going to be straight out honest unless somebody that listens to the show has had a lot of success in this. I’ve never had a successful situation where I’ve gotten it repealed. We’ve tried some pretty different situations, and we’ve never yet. So I know exactly what you’re talking about. And it’s very painful. Because when you have a fixed income, and someone’s now taking two or $300 each out of your retirement. That’s something that is just really hard to deal with. So I don’t have a perfect answer for you on that. But I know what you’re saying. As I said, there is supposedly if you go to medicare.com, or whatever, there’s appeal process, but I have never yet successfully won an appeal on it.
Here’s a question because they don’t their offices aren’t open. First of all, they’re all working from home, you know what I mean? So it’s like, talking to your hand gives you about as much satisfaction but talking to them, this is not an income. You asked for a life-changing event. I gave it to you. I told you what to deal with. But yet you said “no.” I said I’m not quite standing, where you’re coming from other than your very muted paperwork, which is going to cause me to go to alert, which is just costing you more money. I was just I’m just totally frustrated with the whole situation. I don’t know what I do anymore.
Dr. Friday 31:45
Theoretically, they say it’s for 12 months. But I have found out again, from dealing with it for my clients that they do a full year after you filed the tax returns, and when you refile the following year. So it seems like it’s closer to like 18 months, that that you’re actually penalized for that transaction or for that situation is only thing I can tell you. You know, I’m not being a lot of help on this one, because I really don’t have a good answer. I know exactly what you’re saying. But unfortunately, there’s not a way of getting around it that I know of. Again, if there is someone listening to that has had a lot of experience or some experience on this, I think there’s a lot of people listening that would like to know the answer because I would be one. I’ve tried several cases, and I’ve never yet one.
I think the most disheartening thing is watching what they’re doing with our money now, with the stimulus programs and giving them all over the world. They’re penalizing me, and I tried to explain to him, I took out of my 401k, which I worked for for 45 years, and paid medicare Medicaid tax. And now you’re taxing me again on the tax that I’ve already paid. Yet, no answer.
Dr. Friday 32:59
Yeah, it’s like talking to the wall. People that work there, I understand you’re following whatever rules, but then they don’t have a very good self-explanatory situation. So, unfortunately, I’m glad you called just to kind of let other people know that they’re not the only ones in that boat. But on the other hand, not a whole bunch I can do to help because there isn’t a system that I have found yet that says, “Hey, follow these steps. And you too can have this happen.”
As a conclusion to this, you know, they were after I wrote this letter to them appealing because I didn’t believe what they’re doing to me. I tried to explain to them, this is a one-time thing. So to go to the next process, which is a lot more paperwork. So really, what you’re saying is I’m better off watching paint dry. Is that pretty much what you’re saying?
Dr. Friday 33:45
From my experience, yes. Never give up. Keep trying. But from my experience, I think you’re gonna go through a lot of it and find out that they’re still not going to waive that increase until the next year you follow file and then submit that as fast as possible, and then make that so that they can get in their system and start reducing it.
I appreciate your honesty. If I’m just beating the drum to death, there’s no point in me doing that’s true where I was figuring because I got a stack of papers in there. They just whack $400 from me and $400 from my wife, so we lost $800 off of our Social Security, you know?
Dr. Friday 34:23
Yeah, I’m sorry about that.
I appreciate your honesty very much. Thank you.
Dr. Friday 34:28
No problem. Thanks, buddy. Okay, let’s go right to the phone and hit Alan. How about Alan, number three. There you go. Thanks, Alan. How you doing?
Dr. Friday 34:44
What can I do for you?
Hello. I’m calling I have a question. I am a new business owner. I’m filed my license made it all legal. It was February of 20. I’m looking to do the PPP because you know, this has really ravaged me. I don’t know how to go about it.
Dr. Friday 35:09
I don’t honestly think you qualify because most of the PPPs are looking for people that were actually in business. I mean, you don’t have any history. So they’re looking at 2019 and comparing it to 2020. If you didn’t start till February of 20, I’m not sure. I mean, maybe again, someone listening may know the answer, but I don’t think there’s a lot of I think there is something I read something about using the first quarter and comparing it to second or third to see if it’s a growth, but they don’t have any way of knowing that you would have succeeded or not. So I’m not right off the top of my head, I don’t think you can apply for the PPP.
At the beginning, I told you I made it, you know, I got it legally started in 20. Well, since 2013, is when I actually started as subcontracting. And that’s, you know, it’s been for now construction since 2013. It’s just up to 20 is when I got it started, does that matter? Or?
Dr. Friday 36:11
Well, it could I mean, if you’ve been filing taxes every year, Alan as a self-employed contractor, then you would have some history on it, that you might be able to show that it was the same company that you just went from a sole proprietorship to an LLC or something. That would be a more logical approach. Exactly.
That’s exactly how I did it. From a self-proprietor to an LLC.
Dr. Friday 36:33
I think you might need to get one of those specialists that work for like Lindo, or you know, if you have a banker or something, but I do believe you would be able to do something. Yes, sir.
Okay, do you know what the forms would be or anything?
Dr. Friday 36:47
Well, you’re basically gonna need to have financial statements, and you’re going to need copies of your schedule C for 2019. Then, if you went to a single-member LLC, then it would be the same from the federal it still be a Schedule C on your 2020. So they could use those two to do the comparison.
Do I just go to the IRS website?
Dr. Friday 37:12
You’ll apply this right through your bank or through QuickBooks or Lindo, or there are all kinds of Google PPP. And you have a ton of lenders.
QuickBooks. Okay. Thank you very much. Okay.
Dr. Friday 37:27
Appreciate it. All right. Let’s see, we hit a couple more want to take a break. Let’s go to Bob. He’s been on for eight minutes. Hey, Bob.
Dr. Friday 37:38
Hey, what can I do for you?
You were talking about it inheritance and I didn’t catch all of it. Here’s my situation. My mother died in October. We were gonna wait to sell her house this spring. But would it be better to sell it now?
Dr. Friday 38:01
Well, I mean, not knowing what the current administration is going to do. Because we’re all wondering what that is. I don’t believe they’re going to backdate any tax laws, I think it would be something that probably would come into effect in 2022. That is a guess, though. But right now, under the law that we know if you were to get whatever the house was worth on October 20, or October 2020, when your mom passed away, for example, let’s just say her home was worth $100,000. Then if you sold it for $100,000, you would have zero tax due under the current tax law. I mean, just as the gentleman that called earlier, there’s a lot of talk in Washington of changing tax laws. So there’s no guarantee how long and I mean, theoretically, we have seen them backdate tax law. So yeah, so the question is, financially, it may be better to wait to the spring, probably a better time to sell something. But if it’s a question that we know right now, if you sell it while it’s still under the current tax law, they can’t make you do something that doesn’t exist. As a tax person, I’m thinking, maybe you should do it sooner versus later if it’s at all possible.
Okay, well, I think we can work it out. I sure appreciate your time.
Dr. Friday 39:22
No problem. Thanks, Bob. I appreciate you. Alright, let’s see if we can hit Alan. Number two real quick if we can. Hey, Alan.
Yeah, thanks for taking my call out. My wife was on unemployed during the summertime. We’re getting ready to do our taxes. We haven’t got anything in the mail. Will we get in the mail referring to her unemployment that I need before I file my taxes?
Dr. Friday 39:48
Yes, sir. There is a form called a 1099 G. And according to their website, they weren’t going to get those out until as late as February 2, which is around the corner now but so you’re gonna need to probably wait until you receive that form or next week, call them and see if they can give you the information.
She said they held taxes out on her.
Dr. Friday 40:09
Right. So and a lot of people they did a lot of people chose that. So you’re going to need that form to know how much came out in taxes and what did they show is the total gross income?
Will you get a refund on that?
Dr. Friday 40:21
Absolutely. Yes, sir. If it applies, yes.
Okay. Well, okay, so we will wait for that tax form before we do our taxes.
Dr. Friday 40:30
Smart, man. Good deal.
Okay, well, thanks for helping.
Dr. Friday 40:34
No problem, thanks. All right, let’s hit Brian. And then we take a break, it’d be a real short one but go for it. Hey, Bri,
Hey, my wife is worried I’m not. I had the good year 2019 2020 got hit with COVID, I ripped my shoulder and all that. So instead of me making, let’s say roughly 55-60,000, made about less than 17. And she’s afraid I’m gonna get audit.
Dr. Friday 41:00
You know what, I think if any year people show a loss of income if they’re going to audit you, Brian, they’re going to audit a heck of a lot of people because I have a lot of people that were directly affected by COVID, and their income has gone way down. So I honestly do not think it’s going to be something that’s going to trigger an initial audit. Normally, I’m not gonna disagree with your wife. I like consistency to a point, if most of us all earn roughly the same amount of money, self-employed, people go up and down all the time. The drastic difference that a lot of people had in 2020 I think you’re gonna see that across the board. Alright, so I think she’ll be good.
Okay, thank you.
Dr. Friday 41:38
Okay, you got a buddy. Thanks. All right. Let’s take a quick break. And we get back. We’re only a few minutes, but you can join the show. 615-737-9986. We’ll be right back.
Dr. Friday 41:58
All right, we are back here live in the studio. And we’re gonna have a little less than three minutes to get these two calls. Let’s see if we can get Roger first. Hey, Roger, what do you have? Yes, ma’am.
I bought a house. It’s my son’s house. But the mortgage is in my name. And we are about to we’re refinancing. And we’re gonna take some cash out. And if I just take that check and turn it over to him, is he gonna have any tax liability?
Dr. Friday 42:34
Well, if you’re taking cash out, it’s actually a loan, right? I mean, it’s secured against the property, but that money would be real money that’s being loaned. If he’s paying it back, if he’s going to take that money and make the monthly mortgage payment on it, in theory, he’s paying and he can prove he paid for that home. If it’s ever questioned, I mean, it sounds more like you’re securing it because maybe your credits better or assets are better, or whatever comes of that conversation.
He makes all the mortgage payments.
Dr. Friday 43:04
Right. So that shouldn’t be a problem at all, because it’s really more security that you’ve put your name on that loan than it is. You’re not really gifting the money to him. It’s not like you’re taking it from your bank account and giving it to him. This is a loan that’s being paid, and he’s paying that back with interest to that bank. So in essence, it shouldn’t be a problem. No, sir.
Okay, he’s going to do some improvements.
Dr. Friday 43:29
So he’s going to improve that property on the house. And then eventually, he may be able to get enough equity where he can refinance it himself, or you can make sure that at the time of your passing, that the house is titled to him.
If I just cut him a check for the amount, there shouldn’t be a problem, correct?
Dr. Friday 43:48
No, sir. It shouldn’t be a problem at all.
I appreciate your help.
Dr. Friday 43:54
Hey, no problem. Thank you. Alright, let’s go to Jim real quick. Thank you, Roger. Hey, Jim, what’s happening?
I just had a quick question. So if I don’t respond to them at all, because I’ve already sent him one letter, and they reject it. I’m not gonna be penalized or anything from them. Am I anymore?
Dr. Friday 44:11
No more than you already have been. So, no.
I was worried they’re gonna come back and nail me for some more. You know what I mean?
Dr. Friday 44:21
No, no, you’re at what it is. And like I said, then you’ll be fine after that. Yes, sir.
Thank you again. Thanks.
Dr. Friday 44:29
No problem. Thank you. Okay, guys, that’s pretty much the end of phone calls, because it’s almost the end of the show. So I just want to make sure before we get into the closing stuff, that everybody when you’re getting ready to prepare your taxes, just as the one gentleman called a little earlier, make sure you’re not forgetting forms. I mean, especially that 1099 G. I know I have at least three returns on hold because they haven’t received it. So don’t rush to file because again, the IRS is not processing law tax returns until February 12. So even if you’re doing it with h&r block or any of the other companies, and they allow you to send it unless you’re getting a loan through them, it’s really not going to come any faster. Take the time, make sure that everything you have is in there and it’s done correctly. So you’re not looking over your shoulder or having to file amended returns because you’re like, “Oh, now I got something and it’s already mid-February.” So just take your time, make sure the taxes are done correctly. So you don’t have to do amended return. Make sure again, especially if it’s seniors or children that are over the age of 17. Last year, we had some problems because some of those kids got stimulus because they filed nonfiler returns and it created quite a problem. So check with your kid to see what you got going.
Dr. Friday 45:49
All right, I hear my music so here we go. Phone number if you want to reach me on Monday morning 615-367-0819. Email firstname.lastname@example.org. Or you can check it out on the web at Drfriday.com. You can set up a tax appointment. If you don’t see anything on the internet, then give me a call again and we’ll see what we can do to help you we’re getting pretty full here. So I hope you guys have a wonderful Saturday. Thank you so much for participating in the show. We’re gonna be live again next Saturday to take your questions to talk about tax issues. Talk to you later.