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On this episode of the Dr. Friday Show, the doctor is in to dissect the massive new tax law, the “One Big Beautiful Bill” (OBBB). Have you heard that Social Security is now tax-free? Dr. Friday clarifies the misinformation and breaks down what the new $12,000 Social Security tax credit really means for retirees. Are you an employee who earns tips or overtime? She explains a new deduction that could put thousands back in your pocket and what this new reporting means for both employees and employers. Plus, she covers other surprising provisions like new “Trump Accounts” for newborns and the expiring electric car credit. Later in the show, she answers listener calls about avoiding estimated tax penalties, the specifics of the Social Security credit, and the strict rules for selling investment property. Tune in for essential, practical advice to help you navigate the 2025 tax year!
Summary Points
- De-Mystifying the “One Big Beautiful Bill”: Dr. Friday breaks down the key provisions of the new tax law passed on July 4th, focusing on what you need to know now to prepare for the 2025 tax year.
- The New Social Security Tax Credit: Learn about the new credit of up to $6,000 (single) or $12,000 (married) for Social Security recipients. Dr. Friday explains the income phase-outs and the many unanswered questions about how it will be applied on your tax return.
- A Big Change for Tipped and Overtime Workers: A new deduction of up to $25,000 (for joint filers) for income from tips and overtime could mean big refunds. This also creates new reporting responsibilities for employers and highlights the need for employees to be vigilant about their pay stubs.
- Advice for Employees and Employers: Dr. Friday stresses the importance of checking your pay stubs now to ensure tips and overtime are tracked correctly. She advises employers to get their payroll systems ready for the new W-2 reporting requirements.
- Planning for 2025 and Beyond: Discover other OBBB provisions like government-seeded “Trump Accounts” for newborns and the impending phase-out of the electric car tax credit in September 2025.
- Warning on IRS “Pennies on the Dollar” Schemes: Dr. Friday cautions listeners about misleading ads for tax settlement. She explains the reality of IRS negotiations and that the IRS will look at all your assets—including 401(k)s and home equity—when determining your ability to pay.
- Caller Q&A: Listeners get answers on how to avoid estimated tax penalties, the specifics of the new Social Security credit, and the strict rules of a 1031 property exchange.
Episode FAQ
Q: The government sent a notice saying my Social Security benefits won’t be taxed anymore. Is that true?
A: Not exactly. While a new tax credit has been introduced for 2025, it’s not a complete elimination of the tax for everyone. Under the new law, taxpayers with a Modified Adjusted Gross Income (MAGI) under $75,000 (single) or $150,000 (married) may receive a credit of up to $6,000 or $12,000, respectively, to offset the tax on their Social Security benefits. The standard calculation of taxing up to 85% of your benefits still applies; this credit then works to reduce or eliminate that tax liability. The credit phases out completely at higher income levels ($175k for single, $250k for married).
Q: How does the new tax deduction for tips and overtime work?
A: For the 2025 tax year, workers can take a deduction for up to $12,500 (single) or $25,000 (joint) of their combined income from tips and overtime. To claim this, the income must be properly reported on your W-2 form by your employer. This is a new requirement, so it’s crucial for employees to check their pay stubs throughout the year to ensure accuracy and for employers to update their payroll systems to track and report this income separately.
Q: I sold an investment property and want to use the money to buy another one to avoid capital gains tax. Can I do that?
A: You can only defer capital gains tax on a property sale if you follow the strict rules of a Section 1031 Exchange. This must be set up at the time of the sale. The proceeds from the sale must go directly into an escrow account held by a qualified intermediary and cannot be touched by you. You then have a limited time to identify and purchase a “like-kind” replacement property using those escrowed funds. If you have already received the money from the sale into your personal account, it is too late to perform a 1031 exchange.
Transcript
Announcer
No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or your financial woes.
Announcer
She’s the how-to girl.
Announcer
It’s the Dr. Friday Show.
Announcer
If you have a question for Dr. Friday, call her now, 737-WWTN.
Announcer
That’s 737-9986.
Announcer
So here’s your host, financial counselor and tax consultant, Dr. Friday.
Dr. Friday
G’day, I’m Dr. Friday and the doctor is in the house on this somewhat rainy Saturday.
Dr. Friday
If you want to join the show, you can at 615-737-9986, 615-737-9986 is the number here in the studio.
Dr. Friday
I’ve gotten quite a few emails and phone calls concerning a couple of different issues on the OBBB, the one big beautiful bill that’s passed back on July 4th. And we are getting more and more information. I don’t actually yet have like what tax forms these are going to fall on.
Dr. Friday
But one of the big questions, apparently Social Security Administration sent out something back around, I don’t know, the 7th or 8th or something. That’s when the phones started ringing anyways.
Dr. Friday
And they basically said that there’s no tax on Social Security. Let’s clarify that there is still social security for many people. There will be some that if you’re making less than $75,000 modified adjusted gross and 150 married modified adjusted gross, if you’re making 150 or 75 or less, you’re going to get a credit of $6,000 or 12,000 again, six for single 12 for married.
Dr. Friday
That’s supposedly going to help you pay whatever tax might’ve accumulated against your social security. Um, they haven’t come back and said, well, if the tax on that social security is only 4,000, are they going to only be giving you 4,000? Is it an automatic credit of six or 12? Um, we don’t have that information and it does, uh, completely phase out for, um, married couples making 250 and single making 175 again, a marriage or, you know, I call it a marriage penalty, right? Because it’s not equal. Um, but, um, that being said, you know, it makes, makes no difference at this point. It will means out then, uh, at that point they’re losing like 6% for every thousand above the 75 or one 50 up until the time that it phases out.
Dr. Friday
Uh, so, and it doesn’t change the way we’ve always looked at 85 up to 85% of your social security can be taxed. Um, if you’re receiving social security age 65 and older, and this has to be social security, it doesn’t, um, as far as I know, it does not qualify for disability, which is also paid through social security. Um, most people that hit the age 65 and older, um, a lot of people are on social security anyways, but because of that phase in and phase out, theoretically, like my age, it won’t be till 67 that we actually qualify for full social security.
Dr. Friday
So, um, so the, the biggest thing is on this email, many of you may have received, or at least what I’m being told by the people that contacted me is that said their social security wasn’t going to be taxed. That’s the way they interpreted the notice from social security administration.
Dr. Friday
The bottom line is nothing has really changed. You’re still going to have the same calculation up to 85% of your social security can be taxed. Um, and this is only going to be active 25, 2025 through 2028. So again, um, can you turn the phones on just so we have them on? Uh, so that way, uh, we are able to make sure that we have everything going through. Um, and, uh, so again, I just want to make sure it, your social security is going to calculate as always, uh, any tax is going to calculate. And then supposedly there is going to be a someplace on the current up to date 2025 tax forms to be able to put the 6,000 or 12,000, depending if you’re single or married.
Dr. Friday
So hopefully, and again, once we start seeing how they’re going to put some of these things on the tax form, it’s going to make it a little easier for all of us to really understand how that’s going to calculate. They’re not going to give credit for people that only owe, I’m guessing, it says up to 6,000 and 12,000. It doesn’t say automatically six or 12. So I’m going to assume based on how much money you get for social security, your other income, your tax brackets, et cetera, it’s ordinary income tax, not offsetting capital gains tax or anything else since social security is taxed at ordinary income rates. So we’ll see how that that’s going to come by and work. Probably the other big question coming through our office is about tips and overtime.
Dr. Friday
So let’s talk a little bit about what we do know on how that’s going to work. And also I’m going to talk to most of us or many of us that are listening, including myself, our employers. So we have certain responsibilities that we have to deal with the federal department of labor, certain criterias that we have.
Dr. Friday
And one of those was if you were paying individuals tips and overtime, we have to identify that, right?
Dr. Friday
So you have your regular time, you have your overtime, you have your tips, you have your bonuses, et cetera.
Dr. Friday
And I think it’s kind of smart on the government side because a lot of times, especially in small businesses, restaurants, especially with tips, bars, sometimes tips are left up to the employees to report.
Dr. Friday
So sometimes people will, let’s be honest, not reporting 100 cents, especially if it’s cash, they’re not reporting these tips. So which means they’re not paying Social Security or Medicare on these tips. So now they’ve got this new rule. They’re going to say, hey, whatever’s on this W-2 tips and overtime, we’re going to be giving you up to $25,000 compensation of tips and overtime.
Dr. Friday
We’re going to give you back your money. Now you still have to pay Social Security and Medicare.
Dr. Friday
Employers still have to pay Social Security and Medicare. But now people are going to be looking at their W-2 and they’re all like, wait a second, I made more than $2,000 in tips, even though that’s all you may have reported because you were always trying to keep your taxes down and not have to worry about it. But now I think it’s going to be interesting to see if people are going to be, you know, really concentrating on reporting more of their tips and over time, which is going to be a great way for the government to be able to track companies and small businesses that maybe hadn’t been reporting all of that because the employees are going to want to report it because they’re going to get basically it’s free money, right? They’re going to get that ordinary income tax is going to come back to them on their tax return. And it does come back at the end of the year on your tax return. As employers, we still have to do whatever the code and right this second, as of last week when we were doing a regular and overtime pay in our office, we were still matching Social Security, Medicare and ordinary income tax rates were applying to everything.
Dr. Friday
So it will be interesting to see how, um, people do a better job in tracking their overtime and their tips where maybe they weren’t getting tracked as well.
Dr. Friday
We’ll find out, but that is again, a deduction for qualified tips and overtime.
Dr. Friday
Um, workers will qualify up to $25,000, uh, 12, up to 12,500 for single 25 for joint filing.
Dr. Friday
Um, it will phase out at higher earners and the information that’s going to be reported.
Dr. Friday
It’s not going to be used telling the government it’s going to be what is on that W2.
Dr. Friday
As you know, I mean, other employers listening at least, or if you’ve ever, if you work and you have, you don’t usually see tips or overtime reported on a W2.
Dr. Friday
That is going to be something by the end of this year, because this goes in effect in 2025 employers or, or software is going to have to change.
Dr. Friday
So at the end of the year, they’re going to have that reporting probably in box 12 or one of the boxes there that’s going to identify how much was tips, how much was overtime.
Dr. Friday
And that’s something that’s going to have to be tracked.
Dr. Friday
So if you’re an employer, maybe you haven’t always been reporting all that.
Dr. Friday
You’re going to want to make sure all of that is properly done because it’s going to come back to us as employers to make sure that the information that we’re providing, because it’s going to go right on there.
Dr. Friday
And then the employees are all come back and say, I have more tips than this.
Dr. Friday
And they didn’t report those or you as an employer didn’t report them, whoever.
Dr. Friday
So employees, listen up.
Dr. Friday
If you have overtime or paid overtime or you’re paid and there are tips, you need to be looking at those pay stubs now.
Dr. Friday
Don’t wait till the end of the year and realize that the information is wrong.
Dr. Friday
And always, I mean, being an employer and also running an accounting firm, it’s always shocking to me when somebody finally gets their W-2 and they have had pay stubs, pay stubs, pay stubs for 52 weeks in some cases, and they realize their name is wrong, their address is wrong, their social security number is wrong. The information, all this is coming back. And at this point, it’s much harder to correct. You need to make sure you’re doing that now, right? Look at your pay stubs, especially if this is going to apply to you. If you’ve got overtime and tips, You need to be looking because on a pay stub, it will show how much is overtime, how much they paid you in tips, how much is, you know, federal withholding, Social Security, Medicare, et cetera, et cetera, et cetera.
Dr. Friday
It’s all on there. And if you don’t have the information you want to see, talk to your employer before the end of the year.
Dr. Friday
It will make your life so much easier besides just delay your whole tax, potentially your tax refunds because you don’t have the ability to get your taxes done because something is wrong on your W-2.
Dr. Friday
And I will tell you again, also, it’s easier to deal with an employer, even if you have had not the best relationship than it is to try to get something corrected, having to go through the IRS.
Dr. Friday
For one, the IRS then has to go back to the employer.
Dr. Friday
Then they give them 40 days and 45 days, and then it goes back and forth.
Dr. Friday
And it can be months before something is actually corrected, where normally, in most cases, I’m sure there’s somebody listening saying, oh, my employer would never do this for me.
Dr. Friday
But most cases, you know, it doesn’t take much for the employer to get something fixed, especially if they’re using a payroll service.
Dr. Friday
That way they can just push it to them and they can get it fixed relatively quickly.
Dr. Friday
So it’s, it’s deals with the separation properly.
Dr. Friday
Um, so anyways, uh, if you have questions about this or other tax issues, that’s coming down the line, obviously, you know, the social security tips and, uh, over time are two that’s been coming through our phone all week.
Dr. Friday
Uh, so I think a lot of people are finally seeing that this is coming down the line, but there are other important, um, I think there’s like 200 or two, yeah, hundreds of provisions, several hundred anyways, that’s actually in this tax bill. So we’re going to continuously try to give you things that we think might help you understand what the tax and what ways it may help you save money. Is there a way that we can do something? And now, right, it’s only July. So you can make adjustments. You can put more money into retirement. You can, you know, make things work so that you’re not getting hit at the last minute. And then you’re sitting there going, oh my gosh, I didn’t know I could do this. And then it’s almost too late sometimes, to do what you have to do. So this year is also the year we want to think about making sure we’re up to date. We have this huge window allowing you not to have to pay penalties for not doing quarterlies and things, at least for the first three. So this would be the time for you to think about, okay, what can I do to try to make 2025 a better tax year than maybe you had in 24?
Dr. Friday
All right, we’re going to take our first break. You can certainly join us live here in studio, 615-737-9986, 615-737-9986.
Dr. Friday
This is the Dr. Friday Show.
Dr. Friday
And when we get back, we’ll get to more things that are happening in the OBB bill, as well as take your calls.
Dr. Friday
We’ll be right back.
Dr. Friday
All right, I guess we’re back.
Dr. Friday
I can never hear the intro going into these things.
Dr. Friday
You can reach the Dr. Friday show at 615-737-9986, 615-737-9986.
Dr. Friday
So for all of you that want to buy an electric car, maybe you’ve been thinking, oh, I really think it’d be great to have an electric car.
Dr. Friday
I am probably not one of those individuals, but just so you know that the, um, the green credit is going to expire if you don’t buy it before September of 2025 under the new bill. Electric car tax credits will phase out by September of 2025. There still is some EV credits that will go through June of 26, but obviously those directions. Here’s one that I haven’t heard a lot of people talk about, which is the Trump accounts. It’s great for people that have just had children. So included in this is where the U.S. government deposits $1,000 on the birth of the child born between 25 and 28, the parents may contribute up to $5,000 per year with the money growing tax deferred with use for higher education, job training, or a down payment on a house, which kind of sounds like a Roth IRA for your child, but the government is physically putting $1,000 for every child born in 2025 through 2028. They have to be U.S. citizens. And this is a U S government deposits of 1000 on the birth of the child. And then between 25 and 28 government, um, uh, you can put as a parent, at least every year after that $5,000 per year. And obviously 18 years later, they can go to college job opportunities. So it’s a way of helping, I guess, a kickstart to, um, having a, uh, college fund or an educational fund, if nothing else for your child, but they can also use it as a home down payment on their home. So it’d be interesting to see where that’s going to go. I hadn’t heard a lot about that. And again, I don’t believe the thousand dollars is taxable and the 5,000, I don’t know. It sounds like, I don’t think it’s going to be deductible. It’s like a Roth where you put it in and it grows tax-free, but we are going to get more of that as we go to find out, you know, more, like I said, there are hundreds of tax deductions and tax changes in this bill.
Dr. Friday
And so it’s going to make for a difference of what’s going to happen and how it’s going to move across.
Dr. Friday
And if you’ve got questions or maybe you’re thinking about, you know what, we still have taxes due for 2024.
Dr. Friday
We are under a federal disaster extension, which means that most of us will not have to file, I’m assuming individuals, because this happened around April 8th.
Dr. Friday
So anyone that had a tax return due after that due line, does not have to file till November 3rd. You do not have to pay until November 3rd, even including your estimated payments. And this also goes for 941 taxes, payroll taxes, pretty much all funds due to the government, IRS, not the state. The state is completely saying, unless they’ve given you approval, unless you are basically fully affected by this disaster, they want to continue as is. But in this case, if you have had, and that’s why I say this is a perfect year to think about how do I get myself back in control, into compliance? How do I make things? And this is when you’re sitting there going, wait a second, you’re saying if I file my taxes and I know I owe $2,000 and if at all possible, by November 3rd, you can pay that money where every year you’ve been adding to a payment plan, you haven’t filed for a number of years because you just know you owe money every year, which to be quite honest, if you kind of know you owe money, maybe you need to make either two adjustments.
Dr. Friday
One, to your withholding, even if maybe your part-time job and you have a full-time and somehow the two together aren’t withholding, or you have a self-employment and a real job, or maybe you’re just in self-employed.
Dr. Friday
And anyone that tells you as a self-employed person, which I am, um, that you’re not obligated to be making estimated tax payments, that somehow that is a volunteer situation, um, is fibbing to you. There is a penalty failure to file your estimated payments on time. It is not the worst penalty. It’s a 0.6%. Um, so 0.5% of, of, of what you have.
Dr. Friday
And, and, uh, it’s not, it, you know, it’s like total 6% for the whole year is 0.5.
Dr. Friday
That’s what it is.
Dr. Friday
0.5%, 6% for the year.
Dr. Friday
Um, and so some people choose to do that, which is perfectly fine.
Dr. Friday
Uh, but in my opinion, if you’re looking to stay out and get yourself back into compliance and you’re having a tough time as it is, you need to figure out how you’re going to pay the partner in your business.
Dr. Friday
As a self-employed person, we all have to eventually come to a way of doing that or the business isn’t going to succeed.
Dr. Friday
I know there’s always going to be that person that says, I haven’t filed taxes in 20 years and I’ve been self-employed.
Dr. Friday
That’s fine.
Dr. Friday
And maybe it works for them.
Dr. Friday
I don’t know.
Dr. Friday
I mean, I know I’ve been self-employed now for 30 years and I want to sleep at night.
Dr. Friday
I want to be able to go buy a house.
Dr. Friday
I want to be able to save for retirement, et cetera, et cetera.
Dr. Friday
I don’t want to have to be worrying, is the government going to be looking at me?
Dr. Friday
And I want to make sure that I’m doing my best, at least to comply with whatever rules we have to comply with.
Dr. Friday
And, you know, as a business owner, we have to do business taxes and franchise exits and payroll taxes and unemployment and insurance.
Dr. Friday
And I mean, there’s a lot of other people that are also asking for things, not just the IRS.
Dr. Friday
There’s many different things.
Dr. Friday
So your best bet when you’re wanting to do this is really just sit down and figure out how you’re going to make that happen and then start making those payments.
Dr. Friday
Because sooner you start making, you’re going to figure out, I mean, we all start someplace and it’s easier once you start getting used to, okay, you know what?
Dr. Friday
I need to sit inside 20, 25, 30%, depending on your business, depending on the income.
Dr. Friday
That’s how much your partner, the IRS, in your business is getting of your business.
Dr. Friday
It’s that simple.
Dr. Friday
And you get used to that.
Dr. Friday
Then you find out that if you’re setting that much aside and then with miles and maybe a new purchase of a piece of equipment, except you’ve actually got money in savings.
Dr. Friday
Now you can put money into retirement or you can pay off back debts.
Dr. Friday
There are ways if you’re not living off 100% of the money that you’re putting in your pocket.
Dr. Friday
And again, I’m not saying it’s easy.
Dr. Friday
I’m certainly not.
Dr. Friday
And I’m not saying that it’s something that happens overnight.
Dr. Friday
But you have to start somewhere, guys.
Dr. Friday
if you really want to build a successful business, you have to consider how you’re going to pay those.
Dr. Friday
And getting in trouble with payroll taxes, fiduciary taxes, which are the worst ones, in my opinion, to get in trouble with, because at least when it’s your own personal tax bill, it’s you and the IRS dealing with this situation.
Dr. Friday
When you’re talking payroll taxes and you not paying those, now it’s fiduciary in the government.
Dr. Friday
Actually, the IRS gets a bit intolerant to those situations.
Dr. Friday
Probably the best word I can use.
Dr. Friday
They basically have a very short window of time to pay it back.
Dr. Friday
They have a very short window of time to deal with the tax issues.
Dr. Friday
They want to make sure that that money is paid in because you’ve taken that money out of someone’s paycheck.
Dr. Friday
They’ve actually given that money to you.
Dr. Friday
And therefore, that money is yours to give to the government as you take it out.
Dr. Friday
Another reason why I do think most businesses will probably benefit from an outside payroll service.
Dr. Friday
I do believe it should be something that is licensed and registered.
Dr. Friday
I know there’s a lot of small bookkeeper.
Dr. Friday
Heck, we’ve done it for years before.
Dr. Friday
Now we use ADP.
Dr. Friday
But it is nice to have a company that is basically obligated to making sure those payments.
Dr. Friday
Because I have a case right now, which I’ll be honest, in 30 years I’ve had one or two cases where there’s been any kind of misuse of people.
Dr. Friday
funds. Um, and I’ve seen a lot of people, but it does happen. And in this case, a, a revenue officer, um, I’m not revenue, I’m sorry. Um, a, um, tax or bookkeeper, that’s what I was looking for.
Dr. Friday
A bookkeeper was doing several different companies for different people. And, you know, just like anything else, you like your bookkeeper, you tell people, and then they tell people, and next thing you know, this bookkeeper is a good business. And, um, and apparently he was not making the payroll taxes. He was using QuickBooks, but he was putting the money somehow in his pocket. I don’t know how that works. I’ll be honest with you. Um, because if Intuit is doing the payroll, it says Intuit has taken it out, but he basically told him, yeah, we took the money out and he showed, you know, showed the draw, the people assumed that it was going for payroll. Cause that’s what it was supposed to go. And long story short, now that gentleman is in jail. These people are dealing with theft. Um, and, um, and they’re having to also deal with penalties and, and all that because, um, because we are quite honest with you, the IRS is like, well, you should know this. It’s not easy to know. And I think there is some argument on that, how much you can know or should know. But even if you don’t, you are still the responsible party. The employer is the responsible person that needs to make sure these things are done. And it’s easy, uh, to just let other people do.
Dr. Friday
So if you’re at all thinking about those or dealing with those, you know, you need to go in there and make sure everything’s done and just, you know, make sure and, you know, double check, make sure that if there is, I mean, you can easily go on to the IRS website or once you have power of attorney as an employer and to your own accounts and you can check, check what’s going on, make sure everything’s going good.
Dr. Friday
love letters will come usually pretty quickly. And then, you know, that there’s a problem. But by that point, like this particular person and my client actually all in all compared to many other ones was very minor. And we’re still talking tens of thousands, but, um, it was much less than some of the other victims of this particular gentleman. So all I’m not saying, but really just making sure that those taxes. And if you, this is the year, because if you haven’t done all your payroll taxes, this year you can get caught up and not have to pay the penalty, not be behind like you may have been before.
Dr. Friday
Figure out how you can make that work so that you can make sure that this year, 2025, gets you caught up and you’re able to move forward on how you’re going to move it.
Dr. Friday
All right.
Dr. Friday
So we’re going to get ready to take our second break.
Dr. Friday
We’re about halfway through the show.
Dr. Friday
You certainly can join us here live in studio 615-737-9986, 615-737-9986.
Dr. Friday
The number in the studio for any of you that may have just caught this because it’s a rainy day out there and maybe you just jumped in the car and you turn the radio on.
Dr. Friday
I am Dr. Friday and enrolled agent licensed by the Internal Revenue Service to do taxes and representation.
Dr. Friday
I have never worked for the IRS.
Dr. Friday
I have just been licensed by them to help represent you in front of them to helpfully give you the power to be able to understand what the IRS wants and also how you can actually, what, you know, what they can and can’t do help put a little bit of a shield between you and them.
Dr. Friday
So that way you can get your resolution taken care of without having some of the stress that comes with it.
Dr. Friday
All right.
Dr. Friday
You can join the show.
Dr. Friday
6 1 5 7 3 7 9 9 8 6.
Dr. Friday
We’ll be right back with the Dr.
Dr. Friday
Friday show.
Dr. Friday
all righty we are back here live in studio you can join us again at 615-737-9986 615-737-9986 taking your calls talking about taxes preparing for the 2024 and 2025 it’s going to be interesting 2025, another interesting year. We’re going to have a number of changes that may affect one or all of you guys listening. So I would definitely suggest making sure that you have your documentation together. Go ahead and start making maybe that folder up because, you know, it’s already almost the end of July and you’ll be able to finish up and, you know, start putting your taxes together.
Dr. Friday
It’ll be also finishing up 2024.
Dr. Friday
We haven’t done that for a large number of clients.
Dr. Friday
And so it’s time to get all of those things finished, filed, updated, and then go ahead and make your first three estimated payments before November 3rd.
Dr. Friday
It can be done in one big check if you want, or you can spread them out as long as they’re all done before November 3rd.
Dr. Friday
And then of course, the fourth payment will be done on January 15th.
Dr. Friday
So if you’re dealing with that, there is going to be some other changes under this tax bill.
Dr. Friday
But at this moment, we don’t really have all those other details to work with other than, again, the Social Security.
Dr. Friday
It is going to help some of you.
Dr. Friday
It probably, for a larger number of my clients at least, it probably isn’t going to have a huge effect.
Dr. Friday
If you happen to make more than $150,000, it may have a minor change, but, you know, as a married couple, $150,000, especially if you had good investments and or you’re working still for one, even if the other person is on Social Security.
Dr. Friday
So, you know, just figure how that’s going to work in your situation.
Dr. Friday
But there has been other tax situations we’re going to be looking at.
Dr. Friday
I had a situation with a younger person that started a business.
Dr. Friday
I say a younger person, 16 year old that started an online business.
Dr. Friday
And the, the parents hadn’t filed the taxes because they were thinking, well, this is more like, you know, kind of a hobby for our kid, our child.
Dr. Friday
And, but the child had a shop on online and was selling certain types of services anyways.
Dr. Friday
And, and did over $40,000 worth of sales in the first year.
Dr. Friday
And so obviously the government comes back a year or two later. It was two years, I guess later And um, they said hey, we’ve we’ve changed your tax return, you know, this you know, this person your daughter or whatever had um 1099k in her name and uh, so the parents are like wait a second We didn’t you know, how do we report this?
Dr. Friday
And you know, so we have to just keep in mind if you happen to have a very gung-ho teenager that is making money, especially nowadays with organizations now having Venmo and Cash App and some of them, if you have someone that’s being paid a lot through those and it’s not being tracked as family, then you could have a teenager with a lawn service, for example, that could physically be making more money and that’s going to turn around and become a business. That business then is going a turnaround and have to be filed under that child’s name and number. And then you may lose that child as your dependent, which means your turn, your return then has to be corrected.
Dr. Friday
And you’re going to end up having to either give back money or have penalties. In this case, it was, like I said, two years earlier. So all this kind of got caught up. And so it, it took a little while to clean up, but there was money due and there was penalties and interest.
Dr. Friday
Now, I know a lot of you guys listen, you know, hopefully you’re listening today, but listening on the radio and many of you will hear where it says we can negotiate with the IRS.
Dr. Friday
You know, we can do it 10 cents on the dollar.
Dr. Friday
You can get, you know, not have to pay barely anything.
Dr. Friday
What you are.
Dr. Friday
Okay.
Dr. Friday
All of that kind of stuff.
Dr. Friday
And I won’t tell you there isn’t cases where we have successfully done that.
Dr. Friday
I do that all the time.
Dr. Friday
been doing this for 30 years, having to deal with the IRS, negotiate, offer and compromise payment plans. One, they’re not done quickly. Two, yes, we have had a handful of people where that has been very successful because of the fact they had nothing. They were minimal pay job and they had no way of paying the government. But in many cases, if you’re sitting there and I mean, I’ve had more than one person and they say, well, I don’t, I don’t have the money to pay the government.
Dr. Friday
It doesn’t mean just because you don’t have the money per se in cash, then you don’t have the ability to raise the money.
Dr. Friday
And that’s really where the trick of this conversation comes back in and it becomes part of the conversation.
Dr. Friday
Is that if you have a 401k, if you have multiple cars, if you have a house or maybe multiple houses, last person was just totally shocked that the government would expect them to have to take out or even sell their summer home.
Dr. Friday
because that just didn’t seem fair.
Dr. Friday
They’d worked so hard to get this house.
Dr. Friday
And now they, you know, the government was like, you sell it or you mortgage it, which, you know, is a lot easier said than done sometimes.
Dr. Friday
And they, you know, they couldn’t believe it, but you know, you have to sit there and look, I mean, you don’t have to, but the common sense thing would be to see what the IRS has seen.
Dr. Friday
You’re sitting there in a home with two homes in which you made payments on throughout the last couple of years in which you also owed the IRS. Therefore you made a choice to keep your mortgage versus to pay them. Therefore the mortgage or the equity in that home, the equity in your cars, the equity in your 401k, the equity in just about anything from the moment you owed the IRS is now the IRS equity. So you sitting there and saying, well, I don’t have the money or I shouldn’t have to take a mortgage to pay the government.
Dr. Friday
Sounds great.
Dr. Friday
It’s a wonderful concept.
Dr. Friday
But the fact is you wouldn’t have those assets.
Dr. Friday
You wouldn’t have that money if you did not pay the government in the first place.
Dr. Friday
Because you did use that money to keep your lifestyle going, therefore building equity.
Dr. Friday
So, you know, it doesn’t seem crazy if you look at it from that.
Dr. Friday
I get it.
Dr. Friday
And there have been certain cases where, I know there’s one case where there was a senior, a person 65 or 66 years old, basically could not make the payment, but they have a home with a lot of equity in it.
Dr. Friday
And they were able to prove that was the only money they had for retirement that was going to make them an undue hardship.
Dr. Friday
And they were able to win a case against the IRS.
Dr. Friday
Now, this was about 10 years ago.
Dr. Friday
I’d be curious to see if that would still even hold water under the current way of looking at tax evaluations and things like that.
Dr. Friday
But they did, which means there’s precedent that says, hey, you know what?
Dr. Friday
If all you have is your home and you’re on Social Security, that there’s a possibility that that money could could stay with you and you could make a deal.
Dr. Friday
But, you know, again, the whole point of this is as an enrolled agent, that’s what our job is to tell you.
Dr. Friday
What does the IRS expectations, where can they, you know, how much can you afford to pay them?
Dr. Friday
How can that money be paid out?
Dr. Friday
What’s the expectation of all that?
Dr. Friday
And then working together with you and an agent or the internal revenue service to get it squared away.
Dr. Friday
That’s what we do.
Dr. Friday
But just be careful when you hear some of these organizations, and there’s not one particular, but sometimes they basically have a very successful sales force.
Dr. Friday
And all I mean by that is you’ll call one of them you hear on the radio.
Dr. Friday
and then next thing you know, you’re making a $500 a month payment, but you don’t know what they’re really going to do for you. Because the first thing they say is, hey, can you afford to pay this? We’re going to charge you roughly this at this point. Let’s say it’s $5,000 and you need to pay us $500 every month for the next 10 months. And then we’re going to do this, but do they do it? That’s the problem I have is that so often they have the sales force. Now that person that sold you this whole package is not even a tax person. They are truly a salesperson. Then in some cases, that number you called, they then package this up and send it out to enrolled agents or lawyers that do do offering compromises or IRS negotiations. So at that point, this basically, this big sales place is basically selling you to another person that’s going to handle the case. And so at that point, you’re going to start all over, find out what it is.
Dr. Friday
They’re going to have to find out if they can even help you. And I, I mean, I always tell people this story, but I had a situation where a guy called up the, um, some, one of those fraud companies called him and said he owed money and he was freaking out. So he immediately called one of the, uh, 800 numbers he had had off the radio. And, and, uh, the guy certainly said, Oh yeah, yeah.
Dr. Friday
I, you know, but you know, he gave him a thousand dollars, $500, agreed to pay $500 a month.
Dr. Friday
And it was a fraud.
Dr. Friday
The guy did not owe anything.
Dr. Friday
He was in compliance.
Dr. Friday
He was just afraid of the IRS.
Dr. Friday
And this salesperson basically convinced them, I mean, cause they’re not pulling transcripts people.
Dr. Friday
They’re not calling the IRS first and saying, here’s your issue.
Dr. Friday
They’re not collecting love letters and saying, oh, I see you have three years.
Dr. Friday
You haven’t filed taxes or you filed them, but you owe said dollar amount.
Dr. Friday
No, they’re basically just saying, Hey, yeah, we’ll help you. We’ll help you. But here’s what you have to pay us to do that without even knowing a, if they can truly help you and be, if you truly owe the money. So just again, just be careful as an enrolled agent. There are great people out there. There are other CPAs, enrolled agents that do a great job, but sometimes there are just salespeople that are handling some of this and you want to make sure you are talking directly to the person that’s going to represent you. Because then at least you can see, is this person on the same page? Do they understand where I’m coming from? Do they understand how this is going to work? Do you understand where their plans are, how they’re going to make this work?
Dr. Friday
Kind of a two-way window. You know what I mean? You need to be able to both understand and be able to meet those compliances, right? All right. So we are going to wind down. We’ve got one more exit here, um, or break, I should say. Um, and it’s going to be just a few more seconds. So if you have or want to make a phone call now would be the time because after this next break, we’ll be pretty much winding down. So the number here is 6 1 5 7 3 7 9 9 8 6 6 1 5 7 3 7 9 9 8 6 taking your call. And I know guys, it’s not easy to call the radio. It’s not always a fun thing to call the radio. But if you have a question, I guarantee you there are other people that also are curious about that same kind of question, especially tax questions. So again, if you want to join the show, 615-737-9986, 615-737-9986. I’m Dr. Friday, and we’ll be right back with the Dr. Friday show.
Dr. Friday
All righty, we are back with the last part of the show, and we were fortunate enough to get two callers to come in let’s start with susan she was first in hey susan what can i tell you
Caller
what can i help with well just have a question about tax payments and irs stuff um this past tax year after we filed our taxes we paid everything they said we owed but we got a notice later that we were getting a penalty for not having done quarterly payments so we need to know what we need to do to prevent that happening in the future. Sure. Um, you should have, um,
Dr. Friday
I don’t know who’s does your taxes, if it’s me or someone else, but you should have what’s called 1040 ES or estimated vouchers that you can use and you can pay it on irs.gov or you can mail them.
Dr. Friday
Um, usually easier. And, and this year to prevent that from happening in 2025, you need to find out how much your estimates would have been for 2020, you know, based on 24, we always base on the year before how much you need to pay. And you can pay all three of the first ones by 11, three, and you won’t get that penalty. Normally there’d be one due in April, one June, one in September, and one in January. Uh, but there are four equal payments that they have a request. Otherwise you can get hit with a 6% penalty based on timing. Uh, but that’s, yes, exactly. So, um, if you do your own taxes, you should be able to go back into the system and find out if someone else does, I’m asking them to send you your estimated vouchers.
Caller
Okay.
Caller
I did it myself.
Dr. Friday
Okay.
Dr. Friday
So just go into the software and just see, you should see where it says estimated payments or estimated vouchers, 1040 ES.
Dr. Friday
It should tell you what the calculation requirement would be, because I’m assuming you might be self-employed and employed.
Dr. Friday
So it doesn’t mean just a hundred percent of what you owed.
Caller
Right.
Dr. Friday
If that makes sense.
Caller
And our income will probably go down this year, but it’d be better just to go ahead and do it.
Dr. Friday
Exactly.
Dr. Friday
I mean, you can, if you can make the first three as equal, you can always, I know people will say this wrong, but you could always adjust the fourth one, which is January 15th.
Dr. Friday
If you think you’re like way over pay, you’ll, you’ll have a better idea by that time.
Caller
Okay.
Caller
January 15th.
Dr. Friday
January 15th, the fourth payment.
Dr. Friday
So the first three would be due 11-3 this year.
Dr. Friday
And the fourth one would be 1-15.
Dr. Friday
Okay.
Caller
Sounds perfect.
Caller
Thank you.
Dr. Friday
Thank you.
Dr. Friday
All right, let’s see what Dean has.
Dr. Friday
That was a good one.
Caller
Hi, Dr. Friday.
Caller
Hey, Dean.
Caller
I’ve talked to you before.
Caller
You’ve always been a good coach.
Dr. Friday
Thanks.
Caller
Here’s our situation.
Caller
We’re both on Social Security.
Caller
We anticipate the $12,000 credit.
Caller
We have calculated in such a way that we anticipate we probably won’t have but about a $500 refund when we file next year.
Caller
But if the government is saying we’re going to give you a $12,000 adjustment, are they saying they’re going to reduce our AGI in such a way that we might get back something?
Caller
Or will the new tax code for Social Security actually be any good to us if we bid our math that tight?
Dr. Friday
And that’s a great question, Dean. And I’m going to probably you and I are going to have to have a few more of these conversations before I know the exact answer, because I don’t know if it’s a credit or or deduction. Right. So I don’t know if it’s going to adjust the modified adjusted gross, if it’s going to be a credit that’s refundable or is it just going to.
Dr. Friday
And even if it’s not refundable, money that you paid in could become refundable because they use those dollars.
Dr. Friday
And is there any wiggle room in some cases to be able to do some sort of conversion to eat up some of those credits if we don’t use them?
Dr. Friday
You know what I’m saying?
Dr. Friday
To have the break even so we don’t leave money on the table.
Dr. Friday
So I have a ton, to be quite honest, I have a ton of questions on how they’re going to give this $6,000 and $12,000 or how it’s going to report on our tax credit.
Dr. Friday
forms? I don’t know the answer yet. I haven’t yet seen anything. And I was looking before the show today. I haven’t seen anything yet that says, okay, you know what? Schedule one, they’re going to do the calculation or on the actual social security where they show the taxation up to 85% on there, there is going to have some sort of extra math that’s going to be bringing it down to zero. So theoretically it’s going to change your taxable income or your modified adjust by zeroing the social security there’s so many different ways they could go dean i don’t know if i can answer
Caller
that yet well that means i need to continue to be a listener well i appreciate you calling it’s a
Dr. Friday
little quiet today and yes i appreciate you listening as i get more information i will try to share it here so we can all kind of figure out the math to see if there’s um advantages or disadvantages to how the tax law is going to work for some of us okay that’ll be great thank you Thank you. Appreciate you. And that was a really seriously, it was a great question. And I have a ton of those questions. So hopefully Dean will keep listening. But we have those questions because I don’t know how they’re going to, I’m assuming it’s going to fall onto the calculation sheet for Social Security Administration. I mean, for the Social Security.
Dr. Friday
Um, and then somehow add that additional to basically be able to zero it out.
Dr. Friday
But if they zero out social security, is that going to give us room to keep you in a higher tax bracket, maybe doing conversions or something else to, to be able to keep, you know, to actually stay in the 12% tax bracket.
Dr. Friday
Um, you know, I don’t know yet, but hopefully guys, I will be able to give you more and more.
Dr. Friday
I have another class I’m going to be taking in another week or two, about two weeks from now, and see if I can get more information on how that’s going to calculate.
Dr. Friday
Because, like I said, I went on the IRS website before this, and I did not see any new tax forms on how that’s being done.
Dr. Friday
And I’m assuming they’re trying to figure that out just as well, how that’s going to come through the system and work for us or whatever.
Dr. Friday
If you want, we only have a few more minutes, just put Jacqueline on and I’ll see if I can answer her question really quick.
Dr. Friday
Hey, Jacqueline, sorry, just almost the end of the show.
Dr. Friday
What can I do for you?
Caller
Okay.
Caller
Hi, I have a really quick question.
Caller
In the 2024 tax year, we filed an extension.
Caller
So I guess it’s like October.
Caller
But in 2024, we sold some property.
Caller
and I was willing to find out there’s something where if you buy another property that you’re going to maybe possibly wash out the tax that you might owe whenever you sold the other property.
Dr. Friday
The only way you can do that is what’s called a 1031 exchange, and that has to be done at the time of the sale of the said property.
Dr. Friday
So you can’t just go and buy another property and wash this one.
Dr. Friday
You have to have used the 1031 exchange, meaning the money had to go into escrow and then go buy the new property from that escrow account.
Caller
Okay.
Caller
So if the money is still sitting, not necessarily in the escrow, but sitting in a, were they, okay.
Dr. Friday
Yeah, it had to, yeah, it had to be at the time of closing.
Dr. Friday
The money had to basically, the point is you can’t have had access to that money.
Dr. Friday
It had to stay escrowed with a 1031 lawyer or whatever.
Dr. Friday
And then at that time, when you buy the new property, they transfer the funds.
Dr. Friday
If you’ve touched the funds, theoretically, it null and voids that transaction.
Dr. Friday
Even if it’s just sitting to save.
Dr. Friday
Yeah, I know.
Dr. Friday
Sometimes it’s nice.
Dr. Friday
But yes, I hear you, girl.
Dr. Friday
All right.
Dr. Friday
Thank you.
Dr. Friday
Thank you.
Dr. Friday
All right.
Dr. Friday
I really appreciate the phone call.
Dr. Friday
Seriously, it makes the show go so much quicker.
Dr. Friday
So we are winding down.
Dr. Friday
We only have about a minute and a half left.
Dr. Friday
So if you have questions and I can help, you can call my office at 615-367-0819 on Monday morning.
Dr. Friday
We’ll be there to help answer some of those questions.
Dr. Friday
Or if you haven’t filed taxes for a number of years, or if you want to see if you really do qualify for some sort of offering compromise or partial payment plan, we’ll be more than glad.
Dr. Friday
Initial meetings are always free.
Dr. Friday
So that way we can see if we’re going to be on the same page or if we have other issues, you know, that we need to deal with, or if you really don’t meet the criteria and you really just need to go pay off the IRS. People don’t like to hear it, but to be honest with you, it is sometimes what has to be done. Um, so again, 615-367-0819 for any of you guys that tuned in and you’re like, who is this person? I’ve been on the radio for about 15 years. So that. For all you newbies, I am Dr. Friday, Dr. Friday tax and financial firm, an enrolled agent licensed by the Internal Revenue Service to do taxes and representation. Pretty much all I do.
Dr. Friday
So if you have a tax issue or you have a friend or a family member that hasn’t filed taxes in a number of years, you may be surprised. I just did one the other day. They haven’t filed in 12 years, didn’t need to file on the last six of that. They ended up with leaving money on the table, But the good news is they didn’t owe any taxes.
Dr. Friday
So they got everything filed.
Dr. Friday
Now they can go ahead and move forward.
Dr. Friday
Take a deep breath and say, you know what?
Dr. Friday
I’m good.
Dr. Friday
I don’t have to worry about the IRS.
Dr. Friday
There may be other issues, but not the IRS.
Dr. Friday
So if you need help with those kind of issues or maybe just make a payment plan or you’re not even sure if the taxes you’re filing seem right and you just need a second opinion.
Dr. Friday
Again, did one of those on Friday.
Dr. Friday
Tax person did a great job.
Dr. Friday
There was nothing that was extra.
Dr. Friday
But they, you know, sometimes you just need that second set of eyes to make sure that everything seems to be going in the right direction.
Dr. Friday
If that’s the case, again, 615-367-0819.
Dr. Friday
You can also email Friday at drfriday.com or check me out on the web at drfriday.com.
Dr. Friday
Hope you guys are truly enjoying this Saturday.
Dr. Friday
I know it’s a little wet, a little quiet.
Dr. Friday
And my kids have been quiet the whole show pretty much.
Dr. Friday
So I’m pretty happy.
Dr. Friday
But hopefully you guys enjoy this Saturday.
Dr. Friday
Coppulata.