Welcome to the Dr. Friday Radio Show! In this episode, we have tax expert Dr. Friday take on the latest tax updates, answer the caller’s questions, and talk over the following topics:
- More Than 2.1 Million Paper Tax Returns are Still Waiting for Processing by the IRS
- Tennessee Sales Tax Holiday on Clothing, School Supplies, and Computers begins July 29-July 31
- Tennessee’s General Assembly Approved Sales Tax Holiday on Food & Food Ingredients August 1-August 31
- Small Estate Probate Is Being Taken Away.
- Gift Tas Rules Changed for 2022 to $16 million Limit
- What You Need To Know About Hiring Children and FICA Taxes
- October 17 Deadline for Filed Tax Extention
- How Do You Know If You Filed Your Tax Return Correctly?
- How To Get Back On Track With the IRS
and much more!
Transcript
Announcer 0:01
No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or financial woes. She’s the How-To Girl. It’s the Dr. Friday show. If you have a question for Dr. Friday, call her now. 615-737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
Dr. Friday 0:30
Good day, I’m Dr. Friday, and the doctor is in the house. What a beautiful first Saturday of July. A bit nippy out there, my best bit hot out there. I was doing some yard work earlier, and I’ll let you know a little rain came down. So that cooled it down. So if you want to join us today, we’re going to be talking about obviously my favorite subject, taxes.
Dr. Friday 0:52
We still have taxes that many people may have filed extensions for the year 2021. And we’re going to talk a little bit about 2022. And also, we want to talk a little bit about amended returns. Because I know that the IRS has put out a new thing on June 11, so this is back a little bit. But on June 11, the agency said they had 2.1 million unprocessed amended tax returns. Normally it will only take them 16 weeks to handle an amended return. Now they’re saying it can take 40 or 50 weeks.
Dr. Friday 1:29
So we’re looking at basically a year to process an amended return, which sits perfectly with my cases where we had filed an amended return. We finally just got the notification. They showed that they received it, and it was processed practically a year ago. And now they needed additional information. So not only did it take them a year to actually get us a letter saying that, that they needed information, but it took that long for it to get in. You can go to irs.gov, click on “amended or corrected returns,” and you can look to make sure at least then you’ll see that the returns are in the system.
Dr. Friday 2:08
And the sad part of this conversation is throughout that whole year. We have received probably four to five love letters from the IRS trying to make collections for something that we are correcting for this client. And in the big picture, they don’t owe any money, they actually have a refund coming back. But meanwhile, they keep getting letters that the amount due is larger and larger. We continuously submit copies of the amended return back to the IRS, we contact them and let them know that we are in the process of dealing with the IRS. But you know it in all honesty, it doesn’t seem to make a lot of difference.
Dr. Friday 2:47
I think they’re just far behind on the letters that we’re mailing back, and getting a hold of someone on the phone is very difficult. So we usually try to certify copies. So we can prove that we are in communication with the IRS, but it is a bit frustrating. So again, if you have a large number of amended returns that happened in the year 2020. A couple of reasons. One, we had serious storms that year. So we had some possible corrections for some people.
Dr. Friday 3:17
And then, of course, 2020 was just a wonky year for a lot of business owners, especially where PPP money may have gotten picked up accidentally as income or you know other situations where they just, you know, the tax returns not knowing how to process some of the grants and different things people either forgot to put in a grant or forgot to or pay tax on some of the grants that were tax-free.
Dr. Friday 3:41
So if you’ve got questions, you can join us here in the studio. I do realize this is a holiday weekend, so we’ll see if anyone is actually listening 615-737-9986 is the number here in the studio. Hopefully, you guys are making some good plans for the Fourth of July.
Dr. Friday 4:04
One of the things that do happen in July that a lot of people should be kind of looking forward to and I’ll keep telling people throughout the month because it doesn’t actually happen till the end. But July 29 through 31st, the 29th through the 31st is the tax-free sales weekend, and for the first time, I think I don’t. I don’t remember we do also have from August 1 in Tennessee. Now, this is a Tennessee from August 1 through August 31. They have a sales tax grocery week, the month, I guess you would say, so those are both ones you might want to put on because keep in mind school is getting ready.
Dr. Friday 4:46
I’m assuming it hasn’t started. Some people, I think, start before July 29. But you can buy clothing that costs $100 or less per item. You don’t pay sales tax. You would have anything that is more than $100 dollars, but you won’t do it. Now I did have someone tell me straight out that it was interesting only because she basically said she goes up there and she rings up if you know if it’s $50/$20, or whatever, and it’s going to add up to, it says anyone apparel items priced at more than $100.
Dr. Friday 5:18
So you might want to just pull out the things that are under and the things that are over just to make it work. Items sold together, such as shoes, cannot be split, obviously, you know, it’s too and then handbags, jewelry, sports, recreational equipment, those are not part of the sales tax weekend. Art supplies, school supplies normally again, any one item under $100, you get to claim and then of course computers under $1,500.
Dr. Friday 5:50
This is a great time to plan. Even business owners, if you’re thinking about maybe, you need to upgrade a computer or something. It used to be Black Fridays, which we no longer really have. Because now Black Friday’s like in July or something. But anyway, it’s something to think about if you know, again, why not save money while you’re doing it? So July 29 through 31st is the deadline for that. And then again, in August, the whole month of August, there is no sales tax on groceries in Tennessee.
Dr. Friday 6:20
So that’s going to come pretty soon. It will sneak up on us very, very quickly. So if you have a question, you can join the show at 615-737-9986. We’ll answer a couple preparing that baby. A lot of people are kind of out of town. So I’m gonna go to the emails and go through some of the ones that we had in the last week or so. So that way, we can see if any of that hit any individuals.
Dr. Friday 6:51
One of the biggest ones that we seem to get almost every week, of course, is dealing with inherited properties. So, in this case, this person has inherited multiple properties, and then dealing with that inherited property, how do you report it on your tax return? Are you even supposed to report on your tax return? Is it in a trust? Is it something that was gifted directly to you? Did the title just transfer?
Dr. Friday 7:19
And just for anybody that follows, I mean, obviously in our office, we handle people’s estates for them sometimes when they don’t have family members or situations where they really want an outside fiduciary person to handle running an estate. And so when we do that, sometimes we have to do what we call small probate.
Dr. Friday 7:46
For example, we were lucky enough. And the reason I found this out is one of our mom’s handling, there is a car, everything else went through the trust everything else, but for whatever reason, because the way the car was titled to the deceased individual, not to the trust, we don’t have power, so we have to go through probate for this car to be retitled so we can sign it over to the beneficiary.
Dr. Friday 8:08
And let me tell you, it’s taken us a year and a half to get to this point. Well, we found out that there is not as of last Friday, there will be no more small estates. You have to go through full probate. There will not be any small probate. So if anyone knows more about that, that can be important to understand. Because many times the simple probate is something because you don’t have to usually file pay for a lawyer. It’s usually just a little bit more simple for individuals. And now they’re taking this away.
Dr. Friday 8:41
I don’t know the reason behind it. I’m not an attorney. As I said, I’ve only had to deal with a handful of these situations. But it is one of those situations where you do want to make sure that you have the right information and that you’re maybe talking to your attorney if you have an estate of trust. You know, my attorney, Russ Cook, handles all that. But if you have a trust or an estate, this may change it. I don’t know if there are any updates any of us will have to have that we’ll make sure things are titled to the trust. Everything is titled to the trust.
Dr. Friday 9:17
So that way, when we pass away, we don’t have to worry about having a car that is outside of the trust. I never thought about it. I don’t think any of my cars are titled to the trust. So that’d be an interesting conversation. I’ll have to see if I can get my attorney to join us on the radio here in the next couple of weeks and talk a little bit about what we might need to know about this change and if it has any direct changes to what we want to do, to make sure that we’re all living and doing and I mean, most of us just like to kind of deal with that issue and then forget about it. Just you know what? Everything’s in the right place.
Dr. Friday 9:51
If something happens, great, but now let’s just live our lives and not worry about it. But you know, again, when they change these rules, and many of us don’t follow them, I don’t think I would have known about it. And unless Russ would have called me and said, “Hey, we’ve got to update something on your state because of this,” or, as I said, we were fortunate enough to be talking to somebody that actually worked at the probate court. And then they told us to make sure we had everything in the right place.
Dr. Friday 10:19
So if you have questions about taxes, that’s what the show is about. But I just sometimes think that if we’re going to be dealing with life issues, we need to make sure we’re dealing with what we want to be dealing with, we’re going to take some phone calls, if you want to join the show at 615-737-9986. Like I said, we have an email. Here, we’re talking about inherited properties. And the biggest question was, how much money should I be setting aside? Do I owe any taxes?
Dr. Friday 10:51
We also get quite a few emails last couple months, concerning people in their primary homes, because there’s a lot of myths out there, I have one that just kept coming back with all the different ways. I mean, obviously, in the last 40-50 years of my life, in dealing with taxes, you would have situations where at one point, there was if you sold your primary home, you had two years to reinvest. That was the prior tax law than what we operate under.
Dr. Friday 11:21
Now we have exclusion. So the exclusion is $250,000, for an individual $500,000, for a married couple, on your primary home, you had to live in two out of the last five years, it could be it could have been a rental for a year or two. And then it still would have been considered your primary, but there would be some possible recapture. So again, making sure you understand how taxes are gonna affect you is how you’re going to keep more money in your pocket. Right?
Dr. Friday 11:49
So if you’ve got a question, you can ask it 615-737-9986. We’re going to talk a little bit about hiring your children. I mean, summertime might be a great time for children under the age of 18. Some ways that you can either build up future retirement, college funds, or just look at what you know, if they’re working for you, why not have them being paid, and therefore, you might be saving quite a bit of money on income tax.
Dr. Friday 12:23
So when we get back from this break, we’ll talk more about that and maybe find some ways that you can put those kids to work and then also save on taxes. We’ll be right back with the Dr. Friday show.
Dr. Friday 12:34
All righty, we are back here live in studio. If you want to join us you can at 615-731-9986. I think that’s right. 615-731-9986. Hopefully that’s right. It’s been only been 10 years and I went blank. So let’s go and hit Phill on the phone. Hey, Phil.
Caller 13:04
Hey, funny all this happened and I just got in the car to take out the trash and you’re talking about everything that just happened to us. Amazing how all this works. Mom just passed away and she had an estate and we were finalized in the Monday but she passed away before that. But in 13 Dad died and she sold her house last year and it was for 445,000 and she understand that some there was some kind of law that says that the person that the head of household or whatever. And I’m confused with all that and you know we have a car and I don’t know what to do with the car and everything that you were talking about just then it just hit home.
Dr. Friday 13:49
Yes. Because it’s frustrating to a point. Yeah, I mean, you think you have everything your mom may have thought she had you know everything pretty much set up and then you know when you’re trying to do it, it’s not as simple. I think they tried to make it more complicated. But on your mom’s house, she sold it last year she would have had since she lost dad theoretically in 2013 when Pop’s passed away, she would have received a step up and basis for his share.
Dr. Friday 14:17
So depending on how much money they originally purchased that house at and then what the what it was worth in 13 another step up in basis, you would have been had a $250,000 exclusion on top of it. So for example, let’s say they purchased the home for 200,000 and they sold it for whatever 450, she would have zero tax under that situation now if they purchased it for 20,000 I’ve had several of those Phil where you know mom and dad’s have lived in these homes for 20 years or whatever. And you know, so do you have any idea what they purchased the home for?
Caller 14:54
We kind of stick built in. They were Mom was a nurse and dad worked in a [inaudible] and they had four of us, back in 74, I would say probably no more than 30,000 to put it in the house.
Dr. Friday 15:09
Right. So, basically your whole family built that house. So it would be interesting to see what it was worth. Now did did mom sell it before she passed away?
Caller 15:21
Yes.
Dr. Friday 15:22
Okay, that’s what I thought you said, so what you’re going to need to try to find out is to the best of you know, unfortunately, since she’s not here, we’re going to have to try to do our best recreation. And you know, bottom line is find out if we can do the best you can and then find out what it was worth back in 2013 When your father passed away, because that’s gonna have a big step up.
Caller 15:45
Yes, I already got that. It was worth 170 in 2013.
Dr. Friday 15:51
Okay, so half of that would be the step up that mom gets plus half of whatever it was worth. So let’s just say it was 30 back in 74 and 170 ib 2013. So she would have had 15 and 85. So $100,000 would be her basis in these rough numbers. And then she sold it for 400 than the difference she would add 250. So the first 350 would be free money, and then anything above that would be probably taxable under these rough estimates.
Caller 16:25
Do you know at what rate?
Dr. Friday 16:28
Did she have any other income?
Caller 16:32
Just her Social Security, and she had like a $200 a month for my dad’s retirement.
Dr. Friday 16:38
Okay, so up until she hits $200,000. So how much they sell the house for roughly just the ballpark?
Caller 16:47
445.
Dr. Friday 16:48
Okay, keep it simple, we got 100,000 plus that. So she would be at the 15% tax bracket. Like the $100,000 that she doesn’t have covered. Okay?
Caller 17:00
This is kind of what we were wondering. Just where we’re at, and how much of this money to set aside for all that because and then I will get and how do we file income tax for a dead person?
Dr. Friday 17:10
It’s basically the executor you whatever would prepare the form and sign it as the executor. And then there’s a form called a 1310. If there’s a refund, if there’s money do well, then you just issue the funds. And in there’s a place basically goes across the top of the return saying deceased and the date of the passing. So that way, they know that you’re filing on behalf of the deceased individual.
Caller 17:33
Will they require a death certificate as well?
Dr. Friday 17:36
They do if if was a refund to be quite honest, if there’s no refund, no.
Caller 17:41
Okay. All right, and the car?
Dr. Friday 17:46
Like I said, depending on your situation, I the state I have and we have been working for a year and a half on this. With this particular case, we had to take it to probate to get someone to sign off so they can change the name from the person that passed away to the estate so that now the estate can sign it to the beneficiary. It seems absolutely ridiculous. But you know, are you trying to sell it, keep it, what’s the deal?
Caller 18:11
Well, we were in the process of selling it because she couldn’t drive anymore and just was it was gonna sell it and bank it.
Dr. Friday 18:17
You might be able to go to someplace like Carmax or something I’m just saying and they probably have with your power of attorney for the estate. They probably are better off than what I did, to be honest.
Caller 18:30
That’s where we just went last week before she passed.
Dr. Friday 18:34
See? Yeah, it’s a great place to take it.
Caller 18:38
You know, you get in the car. And there you are Dr. Friday. My God, what a God thing you know?
Dr. Friday 18:45
Well, no worries if I can be of any help, just let me know. Thanks, Phil, for listening. I really appreciate it.
Caller 18:49
Well thank you. That really enlightened me alot, dearl Thank you and have a great Fourth Happy Independence Day.
Dr. Friday 18:54
Thank you. Bye. All right. All right, thank you for calling. And if you want to join the show, you can 615-731-9986 is the number here in studio. And we’ll we’ll take your calls. I did want to give a couple different updates. One, is the gifting. You know, obviously the last three years it’s been $15,000 for each person you want to gift money to. 2022 I did not catch this and we’re already in July guys, it is $16,000. So 2022, you now can give $16,000 to your children or any single individual for the purpose of of gifting.
Dr. Friday 19:38
If for some reason you gift more than that, then we have to file a 709 gift tax return. Keep in mind that the gift lifetime gifting is $12 million. So you know, there’s a little wiggle room in there for most of us that will at least I know I will never hit the $12 million. So that would be something you know that you can consider better, but sometimes gifting out the 16th, a lot of times people try to help.
Dr. Friday 20:04
I know I have one or two, I know I talked to a client last week that she was, she had inherited some money. So now she wanted to pay off her daughter student loans. And by doing that she needed to give the money to her daughter. And it was over what the time thinking was 15,000, but it was in the 30,000. So she was gonna gift part of it this year, and then part of it next year, but she could have gifted the whole thing not cost $1 of tax to anybody. But that would come out of her lifetime estate.
Dr. Friday 20:34
And again, probably would not affect a lot of individuals on that. So we’ll have to figure out where that is. But that will be the way that’s going to work. So again, $16,000 gift annual exclusion increase from 15 to 16. Lifetime exclusion went from 11.7 million to 12.6 million. And then of course, the lifetime skipping generation follows the same as gifting tax. So that is important.
Dr. Friday 21:04
And if you’re married, and you both have one child or multiple children, each individual can give that $16,000. So you can give as a married couple to anyone child $32,000. Hopefully, that will help some individuals that may be thinking about doing different things on that situation you have to move forward on. So if you have questions on taxes, or again, because we all live in the real world, there are things that happen like amending a tax return, or hiring our children.
Dr. Friday 21:36
Let’s cover that real quick. So if you want to hire your children, great idea, no FICA taxes do which is what we refer to as self employment. If a sole proprietor or husband wife partnership employed their children under the age of 18, Ditto if they shall works for a pardon. For the parents one person LLC. That’s a disregarded individual. You do not also have to pay federal unemployment tax owed for any salary under until they reach the age of 21. No FICA tax, which is self employment tax.
Dr. Friday 22:07
Also, the same children can earn theoretically up to $12,000. Where if you make $100,000, and you make 12,000, you’re going pay most likely, at least if you’re married, you’re going to pay the 12% tax. If you’re single year and making 100,000 on that you would be facing the 22% tax. So when it comes to that situation, you want to be able to do this, but it has to be legitimate guys, you have to put them on payroll, you have to say to my statutory employees, and you have to make sure they are doing something and pain, you’re paying them to do it.
Dr. Friday 22:45
And I know I have some people that have sent me emails and says, “Well, my children we take and put their picture on the Christmas card.” I’m not gonna say you couldn’t do a very, very small modeling fee. You know, but in all honesty, you know, this is supposed to be for work so they can clean the office, they can take out garbage, they can scan documents, I have 13-14 year olds handling, scanning and putting in transactions into QuickBooks, you can do any of that.
Dr. Friday 23:12
Alright, let’s hit Matthew in green hills before we hit the break, so he doesn’t have to stay through it. Hey, Matthew.
Caller 23:18
Hey, how are you, ma’am?
Dr. Friday 23:19
Hey, I’m great. Thanks for calling.
Caller 23:23
So this year, I filed married filing jointly with my wife. And we didn’t fudge on anything like charity and all that. We just did regular W2. That was it is. Simple. I did it with TurboTax. And it said I was supposed to get back 4771. Well, we still didn’t get it. We still didn’t get it. And then I get a letter in the mail from the IRS. saying that is that they have adjusted it to 3996. And I said, “Oh, okay.” So we still didn’t get that we didn’t get that. And then I got another letter in the mail that says it’s 1926. And we never got that. And then we finally get 1200 and some dollars from Santa Barbara tax company out in California.
Dr. Friday 24:21
Oh, Santa Barbara is a system that’s used. I mean, normally, you maybe when you use TurboTax you asked for the money to come in, or did you get an advance on your on your money by any chance?
Caller 24:31
No. Just whenever we got it.
Dr. Friday 24:35
Yeah. Well, I mean, I would first in those love letters that they sent you. They there should have been. Now I know, I’ve gotten some of these that don’t, but there should have been explanation. Like they changed it. Like did you have anything in there for not receiving stimulus money? I’m just asking, you know, I mean, I know you said you were pretty straightforward. But the question is, was there any of the money that you were asking for? Was it the $1400 that you may or may not have received?
Caller 25:03
No, we both got all of that money.
Dr. Friday 25:05
You both got all of that money. Okay, it will be interesting to find out why they went from 4771 down to 1200. And some dollars, that’s a three over a $3,000 adjustment 3500, almost.
Caller 25:21
When I get on the IRS site, it says $1,926. So this Santa Barbara tax company charged me like 500 bucks?
Dr. Friday 25:32
Well, that’s it. I mean, normally, when Santa Barbara, that company gets in there is because there’s been an advance on the pay the amount due. So I would be curious to find out if and I don’t know, if you do your wife does it or whatever. But I would be curious to find out because the only reason Santa Barbara gets involved is if they give you an advance on your refund. So then I would call, because I’d be concerned that somebody else got an advance on your refund. And that they because normally what happens is you get the advance on the refunded, then goes to Santa Barbara, Santa Barbara pays off your debt, and then they send you a check for the difference. So, it’s a very big possibility. And I would definitely contact them and find out.
Caller 26:20
I’ve tried to call them and I tried to call the IRS and it’s like, you just can’t talk to anybody. I tried to call Santa Barbara and they were the same?
Dr. Friday 26:38
Well, I would pursue it. Because if you know that you didn’t do that, that’s when that Santa Barbara has nothing to do with the IRS. It’s just a loan company that works on the websites. So that would be, you know, that’s really something you want to make sure you continue. Because, you know, basically some fraud may have happened against you. And you may want to get a pin number with the IRS. So it doesn’t happen next year, you know, in case somebody’s found some way to tag into your refunds.
Dr. Friday 27:08
I’d also be concerned if some of these changes happen because somebody filed a return, you know, like another return under you or something. So you just might want to make sure that all of that is correct. You know, I mean, just double check, because with all those changes happening, it’s just weird. Normally, you get one letter, not three letters, and each one reducing you down and reducing you down. So I would definitely I know you did it yourself. But I do know TurboTax online. I mean, I use the professional version, but I do know they have people you might want to call someone from there and say, “Hey, when I did my return I had $4,000 I’ve gotten these but this doesn’t make any sense. And who’s Santa Barbara?” And just say if they can’t help you.
Caller 27:51
Okay, yeah. I’ll try to get with them because I haven’t had much luck getting with the IRS.
Dr. Friday 27:57
Well, that would be the last person you’ll get a hold of trust me, gosh, knows I make a living doing it. It’s hard to do. But But into it, you should be able to or TurboTax whatever, you should be able to maybe get somebody on line there because obviously you paid them for the service.
Caller 28:12
All right. Okay. Thank you, ma’am.
Dr. Friday 28:14
Hey, no worries, man. Thanks for calling. All right, we’re gonna take a quick break here and we get back we’ll come to some of your phone calls if you want 615-737-9986. We’ll be right back with the Dr. Friday show.
Dr. Friday 28:36
All righty, we are back here live in studio. And you can join us live 615-737-9986. Sorry, guys. I know I had a typo there. 615-737-9986. And let’s go ahead and hit Adam and Brentwood. Talking about a very popular subject. Hey, Adam.
Caller 28:57
Hey, how are you?
Dr. Friday 28:58
I am good. So stimulus checks. Not necessarily receiving them?
Caller 29:05
Yes, ma’am. So I didn’t get my the last stimulus check. And I did it through your TurboTax and put it I didn’t receive it and everything got accepted. And then I got a letter R
Dr. Friday 29:19
Go ahead. Go ahead. Adam.
Caller 29:21
Can you hear me? I got a letter from the RSM that it had been amended. What do I need to do about that?
Dr. Friday 29:31
So according to the IRS, if you’ve received the letter that basically says that you didn’t get it, then you need to go ahead and pull. First you need to pull your transcripts to find out if they refunded the money. Second is at least two of the cases we have found out in our side and it’s not a perfect science. I’ll tell you that right now.
Dr. Friday 29:55
We found out that the address they had on these individuals were wrong So they actually they mailed about. So the IRS is showing that the checks went out. But they actually got returned. So we have to wait for the whole process, which can take Gosh knows how long. But meanwhile, they got refused on their 2021 tax return because the IRS is showing that it was sent out. So we’re told that we had to put a tracking, which basically took us having to call the IRS and find out where the money was because it never was cashed.
Dr. Friday 30:27
So we were told by someone at the IRS just for you, and anyone else listening is that once they are working, but keep in mind, they’re like three years behind, I think, but anyways, they’re working on reposting these checks that were rejected, or returned or people destroyed or whatever, and going from there. But your first thing would be personally what we did and what I think you need, you need to pull your transcripts because on there, we’ll say the date that they issued the original checks, then you need to go to your bank and just make sure at them that they did not end up in your bank as a direct deposit. In none of my cases, has the money ever hit these people’s banks.
Dr. Friday 31:08
Then you can go ahead and call the IRS and say, you know, “I’ve got proof, I didn’t do this, can you put a trace on my checks, because I never received them.” And then the process will start and supposedly four to six months from now we’ll hear back from them. That’s what we’re being told.
Caller 31:23
Okay. All right. Well, thank you very much.
Dr. Friday 31:25
Hey, Adam. Thanks, bye. It is the most disappointing part of my conversation, because I really did not help Adam at all. Because the problem is the the IRS is telling. I mean, all these people just like the gentleman that called earlier, you know, Matthew that said he had a refund, I first thing I was thinking, okay, because many of the people that we have changed on tax returns and 20 and 21 was because stimulus checks were rejected.
Dr. Friday 31:52
They said that that people had gotten them, the people are telling me they never got them, we pulled every bank statement on these cases, to make sure the money never showed up in the bank, at least to the best of our ability, no direct deposits from the IRS, not always easy to know if you actually physically deposited a check. But in most cases, in many of these cases, we have that deposit would have been larger than most deposits going in because most of these don’t have very large deposits.
Dr. Friday 32:21
So and then, of course, calling getting them to put a trace, we are told that this is a process that’s going to be happening. And if anybody listening and deals with this kind of situation, or has had a better experience, totally would appreciate either contacting me emailing me or even joining us on the radio here. But letting people know if there’s something I’m missing, because we have hit every type of box we could find trying to track down the stimulus money. We did find out in several of our cases, when we finally were able to talk to a revenue person, that the some of them had back child support.
Dr. Friday 33:05
And in a couple cases, the money was applied to back IRS debt. Which, if it’s claimed on a tax return, they can do that. So again, it would not have been like these letters that say we’ve changed your tax return, it would say that this money, you had a refund, but now we’ve applied it to this other tax period. So not the exact same situation. But we have had a couple of those situations with the child support and back state income tax, they can take the money for both of those as as part of it, but there should be a letter that says that versus just you know, you don’t unless we’re seeing at this time is usually no you just didn’t get it didn’t qualify, you know, whatever.
Dr. Friday 33:49
And, you know, to be quite honest, the tax programs telling us these people qualify, and then the IRS is saying no view, you know, we changed your tax return because you claim something you shouldn’t have. There’s no explanation, nothing in there. Very confusing for most people. So just putting that out there. Really quick here for all people that do what I do tax people. Now obviously, if you’re an enrolled agent, this is not probably going to be a big deal. But if you just prepare taxes and you e file taxes, just last month, they basically individuals are required to use the IRS authorized vendor for fingerprinting.
Dr. Friday 34:31
Each new principal and responsible officer listed as a new E file application and added to an existing application needs fingerprints must have an appointment with the IRS. All these forms must be in I think by September 15. So if you are not an enrolled agent or a CPA, but or an attorney, I guess all of us because that way you’re already registered. But if you are just a tax preparer, nothing, but you do if you won’t be able to do e file Unless you update your application with fingerprinting, that just came in the news yesterday. So many of you guys may have saw the emails on it, but just want to make sure because I know I have quite a few people that listen that also do taxes.
Dr. Friday 35:14
Now, many of you guys may be professionals like myself, an enrolled agent, or a CPA, but some of you I think, are just people that do taxes. And if you do e file, then you know, again, you need to make sure that you read this email, if you don’t know where it’s at, go to irs.gov Look under news under there and you should be able to, you know, see, see where it tells you what to do and how to follow through with it. So that way, come the busy season, we all know and love, you will be able to continue doing exactly what you do all the time, which is basically making sure that you are dealing with E file correctly.
Dr. Friday 35:50
So we’re going to take another break, we’ll get back we can talk, uh, take phone calls at 615-737-9986. If you’ve got questions, if you have children, again, I can’t tell you how many times I talked to parents, and they have children, they’re self employed, the parents are and I’m surprised when children are not part of the payroll, they’re not part of the business. There’s so many ways where you can have the child they work, they do their time, and then they take the money and then they pay for their their, you know, their dates are there cars or whatever with that money.
Dr. Friday 36:32
So you want to make sure that you have that there. So you you know, teaching them how hard it is to make money, but also it keeps more money in your pocket in the household pocket. My family, unfortunately, at that time never had those particular benefits out there. But we all worked in my dad’s accounting firm. That’s how we all end up mostly in the business. So if you have questions you can 615-737-9986 this will be our last break. When we get back. We’ll take your calls and any questions you have. We’ll be right back.
Dr. Friday 37:13
Alrighty we are back here live in studios have about oh, eight minutes, 18 minutes left to the show. So if you’ve been waiting, I have a question concerning inheritance or concerning a land sale or maybe you sold your primary home. Those are big questions. And if you’ve done right may or may not have anything but with the way real estate has been happening. It is making some interesting conversation.
Dr. Friday 37:36
So if you have a question 615-737-9986. We are taking calls talking about those, again, just an update for anyone that may have just joined us, we were talking about amended returns, individuals generally have three years to amend a return and get a refund. You can sometimes request an amendment earlier than that, but you won’t get a refund if you haven’t filed. If 2019 20 and 21 are the three years in which there’s a refund.
Dr. Friday 38:09
So if you have I have cases where we have 678 years, we have to file and many cases that people have left money on the table. And so those anything prior to 2019, you’re not likely to get a refund for. So that’s just important to know, we talked a little bit about what you need to be doing. Again, get prepared for this year. Again, it’s going to be another crazy year, we do have until October 17 to file if you filed an extension, the due date for 2021 is October the 17th. If you haven’t filed an extension, then you’re late. And if you’re late, then you need to just think about filing those taxes as soon as possible.
Dr. Friday 38:51
Just making sure that you basically don’t forget to file because if you don’t file taxes, you’re just going to end up having a problem later it’s better to be dealing with the taxes do than it is for failure to file a tax return in the first place. So making sure that you actually have what you need when you need and you know, the best you know being organized especially for small business owners, because you’re so busy wearing so many different hats Been there done that still limits and you know in doing that sometimes you forget miss deadlines or you forget to track the paperwork properly.
Dr. Friday 39:27
So make sure that you have something set up some paperwork set up so that way you’re not carrying a box around with receipts that can be fading. Hello, I’ve got a couple of them on my office. It’s a little hard to read. So if you can’t read them, I can’t claim them. Alright, let’s go ahead and hit Lee and Hendersonville. See if I can help out Hey, Lee.
Caller 39:43
Hey. I was wanting to know, my mother’s 90 and she we’re selling her rental property one rental property in Tennessee and our primary residence in Kentucky and we are going to move her closer to us, but she very much wants to stay in a single family residence. And so if we bought a house that we’ve set, the rental property money that the proceeds help proceeds and the Kentucky home, it’ll only be part of that. Will that have helped any on the taxes?
Dr. Friday 40:26
So, basically, there’s two different tax codes, you’re going to have her primary home that she lived in, and Kentucky, that’s going to be whatever she paid for it plus 250,000. For simple math, there could have been a father, and there could have been a step up in basis while he was alive. But is that going to cover pretty much what she had her? She lived in Kentucky forever?
Caller 40:51
She’s live there. Yeah, pretty much forever.
Dr. Friday 40:55
Yeah. I mean, just like the gentleman called earlier, where his parents had built the house back in 74. Right. So there wasn’t, in those days, 30, 40, 50,000 was a decent home. And now, you know, so do you have any idea what her primary home is going to sell for?
Caller 41:13
Yeah, sorry, I’m going through some lanes here. So it might might interfere. But yeah, the absence properly going to fail is going to be right around 300,000. And the rental property will likely be 300,000.
Dr. Friday 41:31
Alright, so under the primary home, if you take the 250,000 exclusion, plus, she probably at least paid 50,000 Or has a step up, she’s probably going to end up with zero tax on the primary. But the rental property, which is an investment, that’s going to be mostly, I mean, whatever they paid for it, less what they sell it for is the capital gains tax, and then there’s ordinary income tax based on the recapture of depreciation, not as not as simple to give you a calculation on that one, because it depends on when she purchased that property and for how much and you know, if it, you know, kind of thing, but so there is going to be some taxes on that particular second property. So you and there is no tax law that allows you to roll it into another property, that’s going to become her primary. So she will have to pay taxes before she actually buys out of their home or at least has the money set aside for it not that stops her from buying another home.
Caller 42:30
Okay. All right. Good to know. Okay, thank you.
Dr. Friday 42:35
No problem. If you need more help, you can give me a call and we can crunch the actual numbers, if that would help. But at least you get something to kind of start with. All right. Thanks, Lee, for calling. I appreciate it very much. All right, we’re going to almost wind down here on the show.
Dr. Friday 42:53
So we have a couple things we want to talk about. One is if you do have questions, I mean, these are important questions. And before you go and reinvest money, or go and do something where you have to, you know, where the money is going to be tied up in something, you do want to make sure that you’ve talked to someone.
Dr. Friday 43:11
If mom has a tax person, in this case, or if you don’t have somebody, then you can certainly call our office or check with the tax person that’s doing the taxes, they can give you an estimate because especially when you’re talking about selling investment property, primary homes, I can give you a rough idea over the you know, over the phone, whatever that’s, that’s somewhat simplistic in comparison to rental property, which somebody could have had for the last 20 years, some of it may not be recaptured.
Dr. Friday 43:39
While some of it is you could fully have depreciated that home, I’ve got several cases. But um, you know, it’s ordinary income tax, which is actually lower in some cases than capital gains tax. But that’s really important to actually get all those numbers together. So that way, you know, if you owe $40,000, you don’t want to put it all out there and then say, oh, my gosh, I owe Uncle Sam, you want to have that money available, to be able to do something with it.
Dr. Friday 44:06
So if you don’t have someone to talk to and you need some help, we’re more than happy to try to help you figure out that money so you don’t end up getting in trouble with the IRS, which is the one thing we don’t want anyone to do. So if you want to reach my office on Tuesday, this week, since Monday, we’re closed, Happy Fourth of July to everyone on Tuesday 615-367-0819. Again, 615-367-0819.
Dr. Friday 44:37
You can also email me directly at Friday at like Friday, like the day of the week, friday@drfriday.com. So friday@drfriday.com and I can do my best to give you a rough estimate of preparation for taxes again, unless you’re an existing clients. Most of my estimates are going to be based on a generic set of questions but it will give you something to start with. And then you You can go from there and get a better estimate.
Dr. Friday 45:02
If you have again, somebody that does your taxes usually can help you. But if you don’t have anybody, then we can, we can get you some numbers. So at least that rather overcompensate or at least have some money set aside than then doing your taxes. And at the end of the year, there’s nothing worse than having to go sell and do and then come back and the IRS getting hit with penalties and in pain. So that’s never a pretty thing. If you don’t have any idea who I am, you can also go to drfriday.com. That is drfriday.com. And you can check out who I am. What I do how long I’ve been doing.
Dr. Friday 45:39
I found out that we’ve been doing this for nearly 28 years did not realize I had my business quite so long. But that’s what I’m being told. And so if you need someone that can help you out, explain to you why we’re doing things. Again, I can’t always explain why the IRS does what it does. There are some basic rules that all of us know and understand. But sometimes getting to the facts or understanding where those facts are coming from big difference. So that’s a huge change in what you what you have.
Dr. Friday 46:11
But if you need help, you can certainly do that. 615-367-0819. Again, we’re open on Tuesday 615-367-0819. And again, if you also need just someone to you know, say, “Hey, I’ve got this concept, you know, or I’ve got this scenario, can you give me a rough idea?” We’d be more than glad to try to get back with you or at least ask you some questions and try to give you the best idea that we have, and getting an estimate.
Dr. Friday 46:42
Because anytime I don’t care if you’re taking money out of a 401 K, selling your primary home, selling stocks, any of those things that are different than your normal, everyday situation can cause big tax problems. Because a lot of times people are doing some of those things to get out of some other issue and then they end up in an IRS issue. So if you know before that happens, you know, talk to your tax person or give us a call because if out that you’re going to make some choices that might not be the best for you. One more time. 615-367-0819 you can also go to friday@drfriday.com. friday@drfriday.com or check me out on the web at drfriday.com. I hope you guys are going to celebrate and have a wonderful Fourth of July and we’ll talk to you next Saturday. Call you later.