In this episode of the Dr. Friday Radio Show, Dr. Friday, an enrolled agent licensed by the Internal Revenue Service, discusses various tax-related topics and answers caller questions. She provides valuable insights on tax planning, IRS issues, and financial strategies for individuals and small business owners.
Topics covered:
- Capital gains tax implications for inherited property
- Step-up basis for assets in revocable and irrevocable trusts
- Tax deductions for business equipment purchases
- Required Minimum Distributions (RMDs) from retirement accounts
- Converting traditional IRAs to Roth IRAs
- Gift tax rules and annual exclusion amounts
- Dealing with IRS debt and resolution options
- Tax implications of divorce
- Medicare’s Income-Related Monthly Adjustment Amount (IRMAA)
- Importance of filing tax returns for FAFSA applications
Transcript
Dr. Friday Tax and Financial Firm.
For tax services, planning, business, and IRS negotiation, visit drfriday.com.
(upbeat music)
No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or your financial woes.
She’s the how-to girl.
It’s the Dr. Friday Show.
If you have a question for Dr. Friday, call her now.
737-WWTN.
That’s 737-9986.
So here’s your host, financial counselor and tax consultant, Dr. Friday.
– G’day, I’m Dr. Friday, and the doctor is in the house.
So if you have questions, you’re getting close to be filed an extension.
Obviously, we only have until September 15th on businesses, and we have until October 15th for the individuals.
And then of course, for all of us that are trying to actually prepare for the 2024 year, you’re already halfway through.
So if you’ve just figured out, you filed your taxes and you owe money and you’re not too sure what you need to do, probably adjusting your W-4 will be a start in the right direction.
So, and you’d only have six months to make that adjustment instead of the normal 12, right?
So we’re gonna be talking a little bit about that and how we have it.
Let’s go to, I think it’s John in the borough, and it’s got some capital gains.
That’s perfect.
Just put him on that way.
I don’t have to keep talking.
Hey, John. (laughs) John, can you hear me?
Someone on the line from Murfreesboro?
– Yes.
Hi, Dr. Friday.
It’s John from Murfreesboro.
Thank you for taking my call today.
– Sure, thank you.
– So unfortunately, my mother recently passed away and she left me and my sister real property in the form of a home in Ohio.
And the house at one time was placed into an irrevocable trust on 12/28/2019.
So we’re planning on selling that.
And yeah, my questions are to capital gains tax implications.
I talked to probably three different CPAs and I got different opinions from each one of them.
I was wondering about if this step- – Let me see if I can be an eye breaker.
It’s pretty straightforward.
Even though it went into a irrevocable trust, nothing was, you had no control over that property till the day she passed away.
At that time, you inherited it and through the trust.
And so at that point, the value of that property, unless it was a grant or trust, the value of the property is the value it was when she passed away.
And then whatever you sell it for, this is just an example.
Let’s say the house was worth $200,000 the day she passed away and you sell it for $200,000, you would have a zero capital gains.
– Okay, yes.
All right.
Is stepped up basis allowed on, is that what we’re doing here?
– Absolutely, yes.
– Okay, okay.
And I actually had one of these individuals telling us we had to place that trust into an LLC.
– No, the last thing you really wanna do is turn a trust into a business.
– Right.
– I mean, if this was investment property, I have one, for example, they own commercial buildings and when they passed away, they did actually turn it into an LLC because there’s like 12 people now that are inheriting a portion of that rental and no one has the ability to sell.
So there is times and places, but nothing to do with normally a primary home or the person that passed away.
– Okay.
And I did a little research on the IRS website.
So if an individual makes less than 80,000 a year joint married filing, there’s no zero capital gains.
– True.
It’d actually be about 105 ’cause the 80,000 is after the standard deduction.
So you would be able to, just to let you know.
But that being said, it would, if for some reason the house was worth 200,000 and I had a client that ended up selling the parent’s house for more than it appraised for, it was back in the 2020 when everyone was bidding upwards on things.
And they did end up with a small capital gains in that case.
But normal situations, whatever it’s worth is what you’re gonna sell it for.
Sometimes the value is even higher than what you can sell it for because of repairs, maintenance, or how much you might wanna put into an older home.
You know, again, not knowing your mom’s house.
– Okay, all right.
Thank you so much, Dr. Friday.
You are fantastic.
– Thanks for calling, John.
I appreciate it.
Let’s hit Maria.
Marie, sorry.
Marie, hey girl, what’s happening?
Hey Marie, you there?
I’m not sure where you’re coming from.
Marie, step up in value, Marie.
All right, well, let’s put her back on hold and see if you can get her on the line.
If not, then she may have gotten her answer from the last call and hung up or something.
So again, only thing, John, I did wanna say is if this is in a state where there’s a state income tax, Ohio, you may want to just double check.
I don’t do a lot of Ohio states or I have a couple of people that we do individual tax returns on, but I do just wanna make sure that you file whatever needs to be filed there.
And there’s a possibility that there may be a small tax there.
I don’t think there will be.
Most states follow, for these purposes, follow the federal, but some states can be unique in that situation.
So, could not hear him name.
Okay, so we’re in good shape.
Okay, no worries, mate.
Let’s go to the phone lines and hit Ruby.
Is it Rudy or Ruby?
Ah, there’s my girl.
– Hey, and I did get kind of part of the answer while I was on the phone, but let me give you my situation.
– Please.
– I have no intention of selling my home or some shares in an S-corp that owns rental property.
I have every intention of leaving it to my children and grandchildren.
Now, what I need to know is about step-up in basis.
If I leave it in a revocable trust, will they have the benefit of step-up in basis if they decide to sell the property or the stock?
– Yes, because they have no control over the revocable trust until after you pass away.
So, they take control of the revocable living trust when you are no longer here.
Otherwise, you have full control of everything that is in the revocable living trust.
– Okay, so they will have the benefit of step-up in basis for tax purposes if they should sell the property.
– Right, because at the time of your death, a revocable trust becomes an irrevocable trust, right?
Nothing can be changed at the time you pass away.
And then it goes through, theoretically, probate, even though trusts don’t really go directly through probate, still the same process.
And then the house can either be sold through the trust or the house can be distributed to the beneficiaries and they sell it outside the trust.
They still will qualify for the step-up in basis.
– Okay, that is exactly what I need to know.
Thank you so much.
– No problem, and I think your family will appreciate you putting it into a trust.
I think it will make life a lot easier than just the will.
Personally speaking, I’m not an attorney, just for anyone that’s listening, I’m not an attorney, but I have worked with a lot of people in the States and I think trusts are just easier to manage than going to probate and having to pay a lot of attorneys and who knows what will happen in the court.
So, good job, Rudy.
– Well, I was already doing the revocable trust and then I heard something that made me think, oh, they might not get step-up in basis and I certainly don’t want to put an albatross around their neck that makes them keep it or help pay a lot of taxes.
Anyway, this gives me exactly what I need to know and I certainly appreciate you.
– No problem.
– And I loved listening to your show.
– Well, thank you for listening.
I do appreciate it, thank you.
– Okay, goodbye.
– Okay, bye.
All right, so this is the Dr. Friday Show.
So if you’re in the process of trying to figure out that, I would always suggest also, I’m sure Ruby is, but obviously deal with a lawyer when dealing with trust, either grant or irrevocable, revocable disability.
There’s a lot of different types of trust out there.
Make sure you get someone, I deal with Russ Cook, Russ Cook and Associates, but Jack McCann’s another great attorney in the area, but any of those, make sure you have someone that can not only be there, but be there when you’re not, that hopefully the attorney firm or the law firm would be able to walk your family through all the decisions that have to be made in a very difficult time of life.
So just choose well, so you have someone that can help.
Okay, so let’s see here.
We are talking about my favorite subject, usually taxes.
We’re gonna be dealing with taxes, what we can do, what we don’t do with taxes and how we’re gonna make it work.
You also have the fact that you’re gonna deal with the situation of what we need to be doing for 2024.
Obviously this is a big year.
There is always the possibility of additional tax changes happening.
One of them that I hope they actually do make movement on is the accelerated depreciation, double depreciation, accelerated, whatever you wanna call it.
Right now, I think we’re at 60%.
So if you go buy something for 10,000, you can take 6,000 if it meets the criteria for acceleration doesn’t give us the ability to take 100.
A lot of clients of mine buy equipment throughout the year.
And one of the reasons they do it is to help save tax dollars.
Now, I wanna put a caveat out there that buying a $10,000 piece of equipment isn’t going to save you $10,000 in taxes, right?
It’s gonna reduce your overall income.
So if you’re in the 20% tax bracket, it will save you 2,000.
So never ever, in my opinion, go buy a piece of equipment just to reduce your taxes.
It’s never going to work because it’d be cheaper to pay the government $2,000 and keep the eight in your pocket if you do not need that piece of equipment, right?
It’s if it is something that’s going to either generate you more money, something is breaking down all the time, there’s gotta be a reason that you’re getting it.
Don’t just get it to reduce taxes.
That’s almost safe because if you are, then you’re gonna end up with a situation where you don’t want to deal with the situation where you just keep spending the money.
You get a bigger asset.
You pay personal tax on all those assets.
You have to pay franchise tax on your net worth.
Sometimes increasing and growing your business isn’t always a good tax situation, only if you need it.
If you need it, it’s a great plan.
If you have to buy a piece of equipment versus give Uncle Sam money, yeah, go ahead and spend the money and do it.
But just again, don’t go spending money just because you can.
Because after a while, if you’re just buying a big pickup truck and every year you’re updating that pickup truck, and I do have clients that do that, you’ve already kind of maximized the deduction because you’re trading in the truck and getting another one that’s for the same value or more, and you have to recapture the depreciation on the old truck, it comes down to where it’s really not maximizing your tax dollars as far as I’m concerned.
Again, there are times when it is a good idea to be buying equipment.
We can’t grow our businesses, we can’t have salespeople if we don’t have vehicles for them to use, et cetera, et cetera.
But make sure you’re investing your money in the right place.
All right, we’re coming up to our first break.
If you wanna join the show, 615-737-9986, 615-737-9986.
We’ll be right back with the Dr. Friday Show.
(upbeat music)
We are back here live in studio.
And I wanna put a caveat, I just wanted to make sure everyone heard me when I said irrevocable trust there is, but if you have an irrevocable grantor trust, anything that says grantor in it, so someone else has control of your assets, a grantor trust, which there are reasons for, those are the ones everyone’s thinking about that do not have the step up in basis.
Irrevocable or evocable, as long as the person maintains control of the assets in it, those are the ones that do get the step up in basis.
So if you have the word grantor in your irrevocable trust, then you will not get a step up in basis.
But if it’s just a regular irrevocable trust or revocable trust, those do get them.
So I just wanna make sure, ’cause I have a couple people come back and I thought I said grantor is one of them that you do not get it, but just wanna clarify, again, I am not an attorney and I would suggest anyone that has a question on that to go to a lawyer just to make sure all of that is good.
I’m just dealing with revenue code 2303-2, 2023-2 that talks about something, they just upgraded that in 2023.
Okay, let’s hit Jack in Nashville, small business owner.
– Yes.
– Hey Jack, what’s happening my love?
– Greetings, salutations, how are you?
– I’m doing very well, sir, very well.
– Good, I think I’ve gotten some misinformation last year.
Okay, I had to pay quite a bit of taxes and I didn’t really like that, but there’s a flip side to that.
But I was told that if I bought new trucks, new machines and all this stuff, I could have wrote 100% of that off last year.
Now, instead of paying X amount of taxes, it would have brought it down 100% of what I gave for the equipment and stuff, you follow what I’m saying?
– Right, well, for one, they only had 80% last year available on the books, 100% is not even there right now.
Second, it would only reduce your gross profits by that percentage, but your tax rate would still be 20% or whatever.
So let’s say your bottom line was $200,000, you spent 100,000, now you’ll pay tax on $100,000.
So it will reduce your gross profits, but not your tax bill by 100%, if that makes sense.
Sometimes people will say, well, I’ll go spend 10 grand and not give the government money.
Doesn’t work that way, that 10 grand only saved me $2,000, it didn’t save me 10 grand.
So– – Okay, well, I heard you before say it don’t make sense around here to buy new stuff if you don’t need it, you know what I’m saying?
– Right, but it sounds like you might’ve needed it.
And again, hopefully whatever you purchased is going to help generate or create better, easier life for you, ’cause that’s the biggest reason we do it.
But other than that, I have people that will just go and buy every year.
And it doesn’t make sense to me, because they don’t use it.
Sometimes it’s just stacking up, you know what I mean?
Just to have more assets, and that’s just more things to take care of.
So I’m not a big fan of that.
– Well, what it does, it brings down your total profit that you’re paying taxes on.
– You got it, 100%, Jack.
You probably said it better than I did, yes.
– Oh, really, you just get 20% of it, yeah.
I got, well, thank you.
You saved me a lot of time and effort right there.
And I got it straight from the horse’s mouth, right?
– There you go, thanks, Jack.
I appreciate it.
– All right, thank you, man.
– Thanks.
Carla in Huntsville, listening on the wild side.
Hey, Carla.
– Hello.
– What can I do for you?
– I should make my call.
Yes, we have a 290 acre farm, fifth generation to own it.
Getting in close to retirement age, what can we do to protect that for our three children and to keep it in some kind of trust or something to where they can, say, we got sued, my husband’s a minister, that we want to make him come back to the farm.
– I would definitely go talk to a lawyer.
I would actually ask them about the limited family partnership in that case, because this is gonna be something that will probably go, hopefully, on for generations.
So if it’s in a vehicle, that would actually allow them to run it.
And that way, then, you can have a managing partner if one child’s gonna manage it.
No one wants to have to ask five kids every time they wanna go write a check or whatever, you know?
But yet, the profit or the percentage, and you don’t really want to divide the farm up by the number of people, I’m assuming, either.
You wanna keep it intact.
So you’re going to need to leave behind, Carla, some, you know, I hate to say this, but some steps or rules that have to be applied by.
That way, they can’t just wait ’til you pass away and then divide the property or sell it.
So family limited partnership or a trust, and you have perpetual trust that can be used for farms or land, which means they just keep rolling, rolling.
They can’t close ’em.
They can’t sell the product that’s in it.
They get to reap the rewards of it, but they can’t sell it.
– What’s the difference between a perpetual trust and something else?
– Family limited partnership.
– Okay, okay.
– A lot of farms are put in those.
– Okay, and then say that they did wanna sell it.
Everybody has to agree to sell it?
– Well, you can put it in there or it has to be majority rules.
I mean, some will say just majority, ’cause the odds of everybody agreeing, there’s always gonna be that one sibling that’s not going to agree.
I guarantee you.
I have seven siblings, eight kids in our family.
There’s no way all of us would have agreed.
– Okay. – All right.
So you might wanna just say percentage, okay?
– All right, thank you very much.
– Thanks, Carla, I appreciate it, thanks.
All right, you are listening to the “Dr. Friday Show.” I’m an enrolled agent licensed by the Internal Revenue Service to do taxes and representation, which basically means if you’ve got a stack of those love letters sitting on your desk or maybe in a drawer that you decide to hide, now might be the time to take a look at them.
I will tell you, for anyone, even my clients, if we’re working with you, the last week, the IRS has been down.
They did some sort of update and locked themselves up.
They kept saying they were gonna come up and then they were down again and up and down.
I do believe this morning we were able to actually get in some information for a couple of our clients.
But what you want is, if you get an enrolled agent, we represent you.
The IRS has to contact us first, and then through us they can contact the person we’re representing.
We can help you get resolution.
I’m not gonna be like some of those things you hear on the radio and TV, though, guys.
I’m not gonna tell you that you can save 10 cents on the dollar and pay off the IRS, yet save your 401k, save all the equity in your home, keep the money in the bank.
The fact is, and you may or may not wanna come to me, ’cause I’m gonna tell you the truth, because the truth is, if you’ve got enough money in the bank to pay the IRS and you just don’t wanna pay ’em, there’s no way you’re gonna get away with that.
If you have a house with no mortgage, or very little mortgage, and yet you owe the IRS a couple hundred grand, and it’s sitting in the house, the IRS is saying, hey, you made mortgage payments, you didn’t pay us, therefore that equity is ours.
So you either have to get the equity out or they’ll put a lien against your house, so if you decide to sell it, it will go away.
Now, if you have no plans to sell the house, and you can wait out the 10 years with all the irritation, they can’t really do a whole bunch.
If you’re working, they can go to your employer and take your paychecks, but if you’re not working, they can take your social security, any government payments that you might have, military or social security, and pretty much anything, they can put liens against.
If you own rental real estate, or a second piece of property, if it’s not rental and you owe the IRS, they can force you to sell.
These are just the facts.
This is truly not just trying to scare you, these are just the reality is, you brought that second piece of property, or you inherited it, or whatever, and now it is theirs to get because you have not paid them.
This is the way they look at it.
I’m not saying it can’t be, I’ve had situations where we had a couple seniors that had equity in their home and we were able to prove that was the only retirement they had, so we were able to preserve some of the equity, therefore make a deal with them on what they could take out, but the odds are if you have assets, 401ks, IRAs, SEPs, home, real estates, even a number of vehicles or collectibles, all of that’s gonna come into play, and that’s how you’re gonna find what the IRS says you have to pay them.
I mean, I’ve had more than one person come in and basically say, I don’t wanna pay the government.
You know, well, none of us want to pay the government, but at this point, you filed the tax return and said that you owed, or they filed the tax return on your behalf that says you owed, and now you’ve got to deal with that issue.
You know, I’ve had cases where the IRS is trying to collect millions of dollars, but yet most of it was based on assessments.
Once they filed the actual tax returns, you got down to a couple hundred grand and made a payment plan.
It’s doable.
It’s not a fun day, but it’s a lot better than a million, and then you make a deal or you can make a resolution.
The government can’t take more than what you really have, so if you’re at a point now where, you know what, I rent, I have a car with a car payment, I have a job, but I have really no money in anything else, your perfect plan for those ones you hear on the radio that says 10 cents on the dollar, depending on how much money you make, obviously.
I mean, I have some people that, you know, they make $150,000 a year, and, you know, they owe the government a couple hundred thousand because they haven’t paid them, but the fact is that they will have a difficult time coming up with enough money to a payment plan, but government’s gonna say that they’re making too much money not to have a payment plan.
So there is these kinds of conversations, and I’m going to share those with you if you want.
If you’re in a situation, you wanna really get resolution with the Internal Revenue Service, you can give our office a call on Monday.
Let’s set up a time.
Let’s do a free consult to see if I can help you, if your case is the kind of case I like to deal with, one that I feel I can actually make headways, and be prepared.
I have a gentleman that’s been working with me very patiently, may I point out, and we’ve been looking for an audit reconsideration for 2020, and it’s been a good year and a half, and we just finally got the reconsideration last week, and it’s taken us that long.
So nothing is going to move quickly.
Nothing’s gonna happen quickly, but it is gonna happen if you wanna work and do what you need to do.
That’s all I’m gonna say, because there are ways of resolving your tax issues, ways that you can live with it, but it doesn’t mean they’re going to accept it, or that it’s gonna be fast and easy.
That’s what the biggest problem is.
All right, so that being said, you can join this show at 615-737-9986.
615-737-9986.
We’re gonna take your calls, talk to you about taxes.
Again, remember, you only have ’til October 15th for individuals and September 15th for businesses to get them filed, otherwise, assuming, assuming you filed an extension.
And again, extensions do not extend the money due.
So if you owe money on October 15th, you’re gonna be paying penalties and interest and all that that goes along with it.
You only extended the paperwork, right?
We all know that.
You’ve been listening long enough.
All right, we’re gonna take our second break here.
When we get back, we’ll take your calls.
615-737-9986.
We’ll be right back.
Calls live here in studio.
If you’ve got questions, please feel free to give us a call.
We’re talking about taxes and getting yourself everything prepared and ready to go.
Let’s also talk a little bit about 2024, besides the fact that we will have an election coming up.
Everyone should vote, as far as I’ll go on that one.
But also, let’s look at if you owe taxes in 2023, and let’s say something’s happened this year.
Divorce is always a big one.
And if you are going to end up divorced by the end of this year, and you’ve claimed married the whole year on your W-2, that could be a problem, right?
So you may wanna consider, if that’s even on the playing field, let’s go ahead and make an adjustment to that W-2 now to single and zero, pay in some extra.
And that way you know what you have going on and what you’ll be living off of once the divorce does go through.
We have a number of cases where people end up with some serious tax issues because of the fact that they aren’t prepared for the tax change, really is what it comes down to.
So when they’re actually doing, they’re doing their normal thing, they’re paying everything, just making it in some cases, and then they file their taxes and they find out being single and zero because they can’t claim the children this year, or they’re doing every other year, or just because going from even married to head of household, you lose some of the standard deduction.
You end up with a situation where you end up with the opposite of what you want happening.
So you now, instead of having a refund that you might be getting, now you owe money which you didn’t or were not prepared for.
And then, so I hate surprises like that.
I’m gonna be quite honest with you, dislike surprises like that I should say.
And it’s better to sit back.
And if you’re not too sure, and again, we’ve seen that last year or two, it seems like with the change of the W-4 form, some people haven’t been able to go through and do what they wanted to do with that.
So I’m just gonna say it’s created and made more of a hardship.
So just if you’re not sure, there is, I believe it’s line four of the W-4.
The first box of course is one that says single or married filing separately.
I think married or head of household or whatever, you have your choice.
Then it says how many children at 2000 for all children that are 17 and under.
And then the last one, I think it’s down on box four, it’ll say, do you want additional withholdings?
That’s where I usually play with the information.
If we know that we were $2,000 short, they will have an extra $50 a paycheck.
And again, keep in mind, you are only, you have six months left this year now, not a whole 12.
So if you just filed and we’re finishing many of tax returns now, a lot of people filed extensions or have for one reason or the other.
Normally it’s when we’re waiting for financial stuff, but either way, filed that extension.
And now they found out that they owe $2,000 and they only have six months to make that up ’cause it’s not gonna really change next year.
It’s the same situation.
Especially if you’re on W-2 is not self-employed.
So again, you have options.
You can always go and put something, you can put something in mind.
If you have the money, you can always send it out to Uncle Sam, go to irs.gov, click pay.
You have some options.
One of them would be making an estimates for 2024.
If you owe the IRS and you just wanna make a couple of payments because if you get into a payment plan, you have it paid off by that point.
Again, I do love the IRS website.
I think they’ve come a long way when it’s working and most of the time it is.
And so I think if you wanna make a payment to the IRS, one of the best ways to do that is to do it through the website.
And that way then you can make sure that you have whatever you need to pay and then you have proof and it comes up usually by the next day.
And you can do it through your bank account.
There’s really no fee.
If you use credit cards and you can, there is a, I think a 3% or 2.6, depending on which one you use a fee for that.
But other than that, guys, it’s pretty straightforward.
It’s always easier.
Especially if you’re in a situation where you just wanna be in control of making that payment to the IRS, it’s a lot easier to deal with that.
So if you wanna join the show, you can.
615-737-9986, 615-737-9986.
Not really seeing a lot of change on the current tax code going through.
Like I said, there’s a few small things that would be nice if they actually made those adjustments for us, but I’m not really seeing anything major and I really don’t expect any kind of movement to happen, especially right now when everyone’s running for office and doing their thing.
But it would be nice if we could actually have, again, 100% depreciation.
I know that in Biden’s original bill, he wanted to remove or reduce the inheritance, which is like 11 or $12 million per person, back down to either 5 million or 1 million.
Either of them was kind of ridiculous if you think how the dollar is going.
Everything you own is worth more ’cause the dollar is physically worth less.
So hopefully that will all come out and hopefully no movement will come along in that.
Oh, here’s a question someone asked about, “How much money can they gift to their children “or can they gift to their parents?” It’s a good question.
A lot of times people call up and they wanna gift money.
So just so you know, gifting right now, $17,000 per person, you don’t have to do a gift tax return.
If you do wanna gift 100,000 to somebody, it is doable.
There’s no taxes.
I should caveat again, as long as the money you’re taking out has already had taxes paid, the person giving the money.
So if I want to give my brother $100,000, then I have to have already paid tax on that money.
Then I can transfer it to him.
I would then file a gift tax return, subtract the 17,000, put the rest of it on there ’cause it would come out of my lifetime of gifting.
So the dollar amount isn’t as steep as others ’cause I have had parents that had to give money or want to give money for down payments on homes.
I have a really great client I’ve known for years.
And I like the idea.
His grandchildren have graduated from college and he wants to pay off their student loans.
And they’re over, I think one’s a little under and one’s over the 17,000.
What a great grandparent.
But that being said, it’s doable.
Again, you can pay off 100% of that student loan and then worst thing we have to do is a gift tax return.
You can also pay it off in two cycles.
You could put 17,000 in one year and the remaining difference in January of the next if it makes little to no difference at the interest rates.
But right now, you might be making 5% to 6% on interest, but if the student loan is earning, you having to pay 7% or 8% and I have no idea, then it would be better to pay it off now.
There’s no penalty for him as long as he takes the money out of a after tax account.
So that’s the, and you can do this for your parents, anybody, you can walk down the street and physically gift any individual $17,000 or less.
It’s not a tax deduction to you.
It’s a gift.
And you can do that to any one person you want to do.
And you could do as many times as you want to do.
If it’s under that 17,000, there’s no reporting of it.
So you can give it to your parents.
You can give it to your siblings.
You can give it to your children.
You give it to your grandchildren, et cetera, et cetera.
You can give it to your postman.
It doesn’t make a difference as long as it’s under that $17,000.
I would say if it’s not a family member, just in case, I would probably get name and address and stuff, but it’s not required.
We’re not 1099 in them.
There’s no movement on that.
So, you know, it’s just a matter of having the right information so that you can file your taxes.
If it falls over the 17, that’s only when we have to, you know, take it out and do what we need to do.
But that’s hair no there.
So again, so that was a good question.
Anybody you want, you can gift $17,000 or less, and that will then make it easier for you.
So you can give it to your parents, which I think is an awesome deal.
You know, my parents helped all of us kids out.
Now you turn around and you’re helping your parents, but not everyone.
But anyhow, if you pay them more than 17,000 or you pay off something, because that’s where the client, he’s like, well, I’m not giving the money to them.
I’m paying off their student loan.
In essence, you’re giving the money to them.
Okay, so if you go and pay off a parent’s house or you pay off a kid’s loan or whatever it is, you are going to need to make sure that you have, if it’s over 17,000, that individual is the person receiving it.
Again, not taxable to them.
As long as you take it out of an after-tax account, not taxable to you.
But you, the giver, will be the person doing all the taxes.
Okay, so hopefully that makes sense.
And if you’ve got questions, you can either email friday@drfriday.com, or you can join us here live on the radio at 615-737-9986, 615-737-9986.
And yes, another email.
Yes, I have been out of town.
Glad you guys are always listening.
I did actually go to my niece’s wedding in Cancun.
It was totally awesome, guys.
So if you’ve got questions or you have something you wanna do in the show, you can.
We’re gonna take our last break here in just a second.
Again, I am an enrolled agent licensed by the Internal Revenue Service to do representation and taxes.
That is all I really do.
I either prepare taxes or I represent tax clients in front of the state or the IRS.
If you need help with that or you have a question for the show, the phone number here in the studio is 615-737-9986, 615-737-9986.
Remember, putting all those letters in a drawer, taking and just ignoring the IRS is never the right answer.
You may have gotten away with it.
I have people that haven’t filed taxes for 20 plus years.
There are people that get away with it all the time, but you might be the person that doesn’t.
If you’re a person that’s been working the same job for years, haven’t moved around a lot, you’re most likely not exactly hiding, maybe hiding in plain sight, and the IRS would be able to find your employer based on the W-2s.
Obviously, self-employed individuals have a little easier.
So again, studio number here, 615-737-9986, 615-737-9986.
We’re gonna take a quick break.
When we get back, we’ll get to your phone calls and your emails.
Again, email is friday@drfriday.com.
If you wanna send us a question, we’re gonna be right back with the “Dr. Friday Show.” For tax services, planning, business, and IRS negotiation, visit drfriday.com.
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– We are back here live in studio.
And if you wanna join the show, we got about, oh, eight minutes or so left.
615-737-9986, 615-737-9986, taking your calls, talking about my favorite subject, taxes, taxes, taxes.
And if you’ve got a question on that, or maybe something that’s happening in your world, and you need to figure out, if nothing else, you can always bounce the idea off me.
Remember, if you are starting a new business, you may want to consult with an attorney or a tax person to make sure you set up the right type of entity to make sure you understand what your obligations are gonna be.
A lot of times people get talked into doing LLCs and that kind of thing.
And you’re sitting there going, really, I mean, maybe it’s good for some, but I just don’t know if it’s actually the best idea for every person to be an LLC.
There are certain limitations, and especially with attorneys that can pierce them.
And a lot of small business owners don’t have a lot of breakage between their personal accounts and their business accounts.
They’re not really set up yet that way.
And so, you end up getting yourself this high-end business and you really don’t have the shield.
So it would be interesting to see what is the shield really for and what you can or can’t do with it, because it’s kind of one of those deals where you’re like, okay, this is kind of silly.
It seems like to me, we should be able to, if I have a shield, no one can do anything.
Again, no one wants or plans to be sued or audited or any of that kind of thing.
But life happens.
Anyone that’s been in business, we’re getting close to 30 years of business here.
And it’s been a very blessed individual, to be honest with you.
You got great clients, returning clients.
I have my very first client still with me.
And we are able to do things.
Earl Stocks, if you’re listening.
If you’re not, that’s all right.
You know who I’m talking about.
All right, let’s hit Russ real quickly in Cookville.
– Yeah, Dr. Frye, thanks for taking my call.
On these required minimum distributions, the RMDs, how do you know how much to take or how much to, you know, you’re required?
How do you figure out how to require?
– So the custodial will tell you.
At the end of every year, they have to send you by account what you’re, so whatever it is as of December 31st, 2023 would be what you use to do your RMD for 24.
So they should be sending you out a letter if you’re 73 or older.
This is your, you know, this will be your 2024 RMD based on 23 and et cetera, every year, the same situation.
It’s roughly 3%.
– That would come from the government or would that be from Dr. Frye?
– It should be from the custodial.
So TD Ameritrade, Fidelity, whoever you might have it with.
– Okay, I’m about six years out from that.
But can I convert that over to a Roth now if I’m not working?
– You can, you can do a conversion anytime you want.
Only thing I would suggest is to talk to your tax person or calculate yourself so you don’t kick yourself up into a 36% tax bracket where if you said you got five years, do so much every year, you know, that may keep it low enough.
Even if you keep some in it, it won’t be a big boost one way or the other.
‘Cause you also have to, when you do those conversions, you can, if you’re on Medicare, you could hit Irma if you do too big of a conversion in one year.
– Okay, you haven’t heard any word about them raising above 73 yet, have you?
– I have not.
I will be surprised.
I mean, I was one of those people that I liked it because most of my clients are really, I mean, no one wants, I mean, they’re hoping to save the money for the next generation or whatever, you know what I mean?
They’re not in a rush to take it.
So 73 was nice, but yeah, 75 would be even better, personally. – Okay.
Okay, well, I need to talk to a tax expert then.
All right, well, I appreciate your information.
Love your show, take care.
– Thanks, buddy, appreciate it, thanks.
All right, so that was a good question.
And again, just wanna point out that anytime, something I don’t think a lot of people talk about is Irma.
Anybody that is on Medicare right now, let’s say you decide to sell a piece of real estate.
I believe it’s 110,000, anything that goes over 110.
So you take all of your social security, you take all of your other accounts.
And then in some cases, I have people that sell something that could be 100, 200, $300,000 profit because they’ve sold a piece of real estate they purchased 10, 15 years ago, whatever.
And so they’re all set up, right?
They know we’ve come in, we’ve calculated, they’ve done the math and they know exactly how much money they owe Uncle Sam.
And then six months later, after that tax returns filed or thereabouts, they get a sweet little love letter from Social Security Administration on Medicare that says, “We now have changed your Irma,” or how much money you’re paying for your Medicare benefits.
And it can be fairly drastic.
I got people paying upwards to six, $7,000 a year in Medicare because of their income or because of now it will only run for a year, basically 12 months, I should say, ’cause it’s not like a time, 12 months or so.
And then by the time you file the next one, that will get in the system.
And then if it was a one-time situation.
Now there was on the books, and I say was, because I’ve not had a client successfully do it.
If someone has, it’s supposed to be an unusual situation or something, a one-time situation.
And some of my clients, it does follow there, but the way they’re reading that law now is basically it has to be an extraordinary, almost like something out of your control that you ended up with this money.
And then maybe an inheritance or something that might be considered a life-changing event, I believe is the word they use.
So there’s no way, I mean, from my opinion, there’s no real way around dealing with the government on IRMA and that.
But you can, just like the gentleman just called, he can work it out where he keeps his income under a certain dollar amount because he’s basically in retirement and maybe he can convert some of, he may not be able to convert all of his IRA at that point, but, and it may be worth it, biting the bullet for one year, taking the big number and just getting rid of it so it’s done.
I have a large number of clients that have done a lot of those conversions.
I would, personally, I would consult with a financial planner on that.
Hank Parrott’s mine, but anybody that you feel or someone you work with, ’cause doing those conversions, I mean, obviously I know why you’re doing it, trying to get the IRS out of your account.
But on the other hand, you don’t really want to have no money in a taxable, my understanding is you want a little in tax deferred, you want a little in taxable, and then you want some in the bank and et cetera, et cetera.
So you have all kinds of different buckets to choose from.
So just be smart in the way you handle it, what you do with it, it’s all I’m gonna say.
Again, not my expertise, so I will not say I understand or know what I’m totally talking about there, but Hank Parrott would.
So if you need some referrals on financial people, I can certainly do that.
You can call my office on Monday.
So if you’re dealing with IRS issues or you know someone that’s dealing with IRS issues and you want to try to get them the first steps of trying to deal with how to get out from under it, we do, my initial consultations are always free because if I can’t help you, I don’t want to have that relationship where it’s all based on how much time.
So the situation would be, you can call my office on Monday at 615-737, oops, 615-367-0819, 615-360, oh my goodness, 367-0819.
My mouth needs to slow down sometimes, eh?
And that’s the direct line.
And then you can also email friday@drfriday.com.
Again, friday@drfriday.com.
You can also check me out on the web.
It’s drfriday.com.
If you never heard this radio show or you’re new to this show, it’ll tell you about who we are.
We’ve been doing the radio now probably 13, 14 years at least, so you can certainly catch us up.
I believe it goes out to the blogs and everything else.
So, and again, if you haven’t filed taxes in a number of years, my suggestion is let’s get resolution.
You might be surprised on what you have to file and how to get that document so we can help you put together the information that you need to get everything straightened out.
We can help you get resolution, right?
I mean, that’s what we really want.
So that way, I had a couple that came in just last week and they’re finally getting to the point.
Part of it is their oldest or their son is gonna get ready to go to college, right?
And you’ve got to do FAFSA.
You can’t do FAFSA if you haven’t filed taxes.
So it’s important to have your taxes up to date for many reasons.
One might be helping your kid go to school.
Another might be to buy a house or anything between there.
There’s a lot of different things.
So if you need help getting yourself back on track, filing your taxes so you can go back and enjoy everything you have in life, then that’s what we’re here to help you with.
If you want to contact us, phone number in the office, 615-367-0819, 615-367-0819.
You can also email Friday@DRFriday.com, Friday@DRFriday.com, or check us out on the web at DRFriday.com.
I really hope you guys are having a wonderful Saturday, and we’re gonna be live again next Saturday.
So if you’ve got questions, call us in the office on Monday, or catch us again next Saturday here live in the studio.
And hopefully you’ll enjoy your Saturday and do all the things you want to do.
One more time, 615-367-0819, direct line to my office.
Let us help you get your tax issues straightened out and make sure everything is going well for you.
As we say in Australia, call you later.
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