Welcome to another episode of the Dr. Friday Radio Show! In this episode, tax expert Dr. Friday answers callers’ tax questions and covers the following topics:
- What Are the Interest Rates In Tennessee?
- Over $1.5 Billion in Tax Refunds That Have Not Been Claimed
- Tax Rules For Buying a Vehicle For Work
- Tennessee Residents Given Until July 31 to File Federal Tax Returns
- How Do Capital Gains Work on Inheritance?
- What Is the Fastest Way to Talk to the IRS?
- Is Private School Tuition Tax Deductible?
- The Tax Deadline Is October 18 for Individuals
- How To Do Tax Preparation and Financial Planning The Right Way
And much more!
Transcript
Dr. Friday 0:00
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.
Dr. Friday 0:25
Good day. I’m Dr. Friday and the doctor is in the house. It’s a wonderful Saturday out there. And many of us are trying to get some things together, especially still trying to work on tax returns. But right now we’re really working on a lot of cases, dealing with the IRS directly as soon as back taxes or making offering compromises.
Dr. Friday 0:50
Remember, I’m an enrolled agent licensed with the Internal Revenue Service do taxes and representation, which basically means guys, that’s all I do is Texas and representation. So if you are a person that has been dealing with IRS issues, if you’re thinking, I don’t know how I’m ever going to get the IRS off my back, or how, you know, where do I even start? Because a lot of times you’re gonna haven’t filed for 10, 15, 20 years, what does the IRS have expectation for you to do? Where do you stand? And that’s where we come in?
Dr. Friday 1:20
To be honest, there are so many different things that you need to understand. How far back do you really have to go? What is the IRS has expectation for you moving forward, as well as moving backwards? What do I pay? If I’ve got a little money? Should I be paying forward? Should I be paying backwards? These are really in it’s different. I’m not going to tell you there’s a perfect science that I could say right here on the radio, this is the step step steps you’re going to take. And that’s how it’s going to work. No, it doesn’t always work that way.
Dr. Friday 1:20
What I might suggest for one individual will be completely different for a different individual, depending on how many years we have to do. If there’s been assessments in past years. What’s the window of collections? You know, I mean, there’s said date. So what are those said dates? Had the clocks been stopped? The IRS really only has 10 years to collect. But if you haven’t started the clock, or if the IRS started for you by assessing you in those tax years, what does that really mean? Do we need to amend do we need to just get the taxes filed because we’re going to be doing an offer and compromise anyways.
Dr. Friday 1:48
So making the right information, and then making sure not only dealing with the past, but also dealing with the future, right? Because in the future, we have to stay current for five years, otherwise, the IRS will go back and they’ll say, “Sorry, Charlie, you didn’t keep your end of the deal. So we’re going to eliminate everything.” So if you made a deal that saves you hundreds of 1000s of dollars, and you didn’t keep your deal with them, they’re going to come back with penalties interest and continue to collect that money.
Dr. Friday 2:57
It’s important to have a plan, have the steps and have someone that’s in your corner that can help explain how all this works. Because, you know, it’s it’s not as simple as just saying, Hey, I’ve got a little money, I can’t tell you. I mean, people walk in all the time, and they’ll say, “I have enough money to pay the IRS this much.”
Dr. Friday 3:15
Will they take it as if what you have in the bank, or what you’ve saved up is going to be the number they want. There’s a whole system. How much money are you earning? Are you married? Or are you single? Is was the tax that part of you before you got married or not? And then how many children? You know, what kind of money? Do you have a 401 K are in your house? How many cars do you own? Do you have any collectibles? All of this is going to be calculated to come back up with what money can you afford to pay? And what money should you have to pay?
Dr. Friday 3:50
Because in some cases, it may be more or less in most cases, people are always sitting there and they’re like, “Well, you know, I have to send my child to private school because of you know, it’s it’s a better school.” But the IRS isn’t going to take that into account, if you’re making a deal with them. You know, I mean, they’re not there to put your child into private school.
Dr. Friday 4:11
So they’re going to come up and say, “Well, that is a elective, this is a choice, you’re putting them but you’re going to pay us first. And then if there’s extra money you can put your child into private school.” That being said, if your child has special needs, and that private school is a mandate to give them the quality of life that is required. That’s a different conversation.
Dr. Friday 4:30
So again, really understanding how tax law works and how it’s going to apply against you, the individual that we’re talking to. And before any of that can be done, you must file your taxes and be current you must be up to date, depending on what your situation is a minimum of six years have to be filed in a row.
Dr. Friday 4:51
And then if there’s been assessments or other years that we’re still dealing with back situations, what does that mean and do we need to address those as well? Besides is the fact that if you were in business, maybe a fiduciary taxes or you have some sort of corporate back tax or late fees, trust fund fees, these are all ones, we also have to bring into the same situation, we have to come back and look at the entire package.
Dr. Friday 5:16
Because sometimes again, people say, “Well, you know, the business has gone out of business. So I don’t really have any money to pay the IRS, the PAC taxes.” Well, if it’s fiduciary tax, or payroll taxes, the IRS is immediately going to assess you and basically say, “Unless you can prove that you had no authority to pay those taxes, in essence, you made a choice, you didn’t have your name on the checking account, and you didn’t have that ability.”
Dr. Friday 5:41
That’s one thing. But if you chose to pay the rent, trying to keep your business open, and not pay the payroll taxes, that can be a problem. So it’s how it’s approached. It’s how it’s put together. And it’s making sure that you have addressed all of the issues. When you’re doing this.
Dr. Friday 5:58
I’ve had one that came in recently, where they had been doing some of their own negotiating, and didn’t realize that they had to be a current. So they had the offer and compromise brought back with and which is why they came into my office. And they were just trying to make a deal for the one year that the IRS was collecting on not for the entire time period, that they did have taxes even filed not even knowing if they actually owe money or not.
Dr. Friday 6:21
They were just trying to deal with the one issue that they saw in their in their way, you can’t do that it is an entire package and process and you need someone that can at least help you through that process to make sure and this is not a fast process.
Dr. Friday 6:36
I mean, from the moment you probably meet with us to the hope that the moment that everything goes relatively smoothly, you’re looking at at least a year of working together, just trying to get back taxes filed, then they have to get posted, then we have to open up the negotiation for either an offering compromise partial payment plan payment plan, or the ability to delay while you’re in the process of trying to get a loan or a second mortgage, and then getting all that and then possibly some penalty waivers that will be will to follow up with once we have the taxes and assessments have been done.
Dr. Friday 7:08
Those are the basic sets for each person is going to be a little different. So if you’ve got questions, of course, it’s tax time, we’re still working on 2022. So keep that in mind that if you haven’t filed your 2022, hopefully you have an extension out there, you know, on filing the taxes.
Dr. Friday 7:28
But if not, you need to file them as soon as possible. If you have an extension you have until October, but if you don’t have an extension, you should look at that as soon as possible. Not waiting to that last minute, even if you owe money, it doesn’t benefit to drag your feet to not not have the information prepared. So at least you now know how much money you need, is there a way of getting that money together? Do we need to merge it with multiple years?
Dr. Friday 7:56
And even if you may, or may not qualify for the offer and compromise you can payment, you know, get into a payment plan, or even just a non collectible. In some cases, sometimes people are so afraid, because they don’t have any money. They’re basically without a job. They’re transitioning, they’re on a fixed situation, and they’re like I can’t I’m afraid if I tell them then they will come after what I have. And it doesn’t quite work that way either.
Dr. Friday 8:18
The IRS is not truly looking to take and put you you know in a one bedroom home and and you know you have nothing to eat or anything else they have certain rules that they have to follow. And those same rules apply to everyone.
Dr. Friday 8:33
So if you’re at a hardship, which is why I always try to tell people, the IRS when they’re dealing with offering compromises and things, that’s another huge thing is that everyone’s always looking for that perfect time when they’ve actually kind of gotten out of the hard times and they’re going into better ties now they’re sourcing a lot at the end of the tunnel and then they’re like wait, I’ve got to deal with the IRS.
Dr. Friday 8:55
And when you do that, it’s kind of important to understand that you know, you’re dealing with them at the wrong time, the best time to deal with the IRS. It’s truly when you’re at your bottom when there isn’t anything worse that they can take or touch. That’s when you kind of want to start the conversation the IRS doesn’t predict that you’re going to continue to be at this place or that place they’re looking currently where are you in what is your situation now I’ve had a couple situations where they feel that people may be underemployed or whatever the situation but the IRS can’t make you work they can’t make you go back into a profession that maybe you got out of even if you were making good money.
Dr. Friday 9:35
So these are the kinds of things we really need to address so that way when you’re going out and dealing with these issues, sometimes you think, “Just gotta wait till I get my back on my feet a little bit then I’m gonna deal with this.” You know, but you know dealing with it when you’re in a bad situation dealing with it when you’re single versus getting married because even if your your person you’re marrying, is not legally responsible the IRS can’t touch them financially, they found a way of doing it, because they do combine the incomes.
Dr. Friday 10:07
So therefore they can take the person that owes the IRS all their money because they basically will say, Well, your spouse makes enough money to support the family. So therefore, your money is disposable. And you know, so that can make it very difficult. There are some ways around some of that, but all in all it you know, the IRS is not going to say, well, that person doesn’t have any responsibility. So we’re not going to take their income into the household and account for it. No, no, no. They say, “Well, we can’t touch your payroll, but you can now pay for all the bills, even though that wasn’t kind of the agreement. And you know, and we’ll take the money that’s disposable now from your spouse because of that situation.”
Dr. Friday 10:46
So again, one of those situations, you just want to make sure you understand how it’s going to affect you. Now is the time guys, because who knows what the next year is going to be bringing us with the new revenue, people being brought on more audits, more reviews, the status, certainly I was just at a meeting with Tennessee Department of Revenue, one of my clients was going through, we’ve been working with an audit there and and they were just saying that they have brought on a number of new employees to help with the audit situation.
Dr. Friday 11:19
So again, even the state of Tennessee is hiring, everybody’s going to eventually end up with a probably a Tennessee and if they have their way, it’s like the the personal T tax audits. It’s the same situation with sales tax franchise excise business, they look at businesses that have, you know, one, two, or all three of those. And auditing is something that they’re going to be doing many, many more of once they get the process down because it is it well, let’s be honest, most of the time they find errors, therefore, they’re able to come back and deal with it.
Dr. Friday 11:53
I even have one that’s getting audited on the hall stacks, which obviously we no longer have. But back in 2019, there was one and they’re getting called for that. So. So yeah, audits are up, definitely more audits going on. We’ve been hired for many more audits than we’ve had in the last three years. So just getting your documents in order, making sure that you have all of your paperwork is going to make your life a lot less stressful.
Dr. Friday 12:18
All right, if you want to join the show, you can 615-737-9986. We’re gonna take a quick break. When we get back we’ll get some of your phone calls and emails. We’ll be right back with the Dr. Friday show.
Dr. Friday 12:43
All righty, we are back here live in studio. And if you want to join us, you can 615-737-9986 I did want to bring up and remind people Tennessee residents that were impacted by the tornadoes and severe storms back in March, were given until July 31 to file their federal returns. This includes your business returns and your personal tax return.
Dr. Friday 13:15
If you had a March 15 partnership or corporation, or you had individuals that were doing April, even nonprofits that were doing in May, all of them were extended until July 31. Without extension these are for people in Cannon County, Cannon county Hardyman county Hardin, Haywood, Lewis, Macon, McNary, Rutherford, Tipton, Wayne, are the counties that they’re giving me listed biggest one for most my listeners probably be would be Rutherford, the Murfreesboro area, you guys all were extended, even if you weren’t affected by that storm, you are still extending until July 31.
Dr. Friday 13:55
So if for some reason no extension was filed, you were just busy, or you’re not thinking or maybe even filed taxes in a number of years. And you’re like, you know what, you can still make this deadline because you live in Rutherford County, you’re not late, you can get your 2022’s filed on time maybe even paid, which will eliminate some of the penalties. So, it’s a thought, if you don’t have it, you don’t have to. I mean, in theory, the the extension would be able to be extended at that point.
Dr. Friday 14:28
So you could file an extension but just want to make sure that you know, if you haven’t filed your taxes or if you forgot to file an extension this year and you’re in those counties, it might be a great time for you to think about, you know, what can I do? What can how can I make this work? What can I do to make it go so July 31.
Dr. Friday 14:49
Again, in those areas, also, some other states who are affected so if you are not from here and you’re listening on iHeart Radio or something like that you might want to check the irs.gov website and find out if you had any extensions that you can take full advantage of, because that’s what we want to do, we want to take as much of advantage of this as we can to make sure that we’re dealing with the type of stuff that we can get into.
Dr. Friday 15:16
So if if you want to join the show, you can 615-737-9986, we are taking calls talking about taxes, and other issues. But the big one, obviously, is taxes right now. And today, really just wanted to hit on individuals that were wanting to really just get back on track, right? I mean, you guys always hear all those ads, “We can settle for 10 cents on the dollar.” You know, and to be honest, I always find many of those are stretching it if lack of a better term.
Dr. Friday 15:55
I’m not saying we haven’t filed cases, I filed cases as low as $25, which is the minimum, I’ve gotten people that evolved the more than 100,000 for that. But let’s think about individuals and the more of the reality that individual had absolutely nothing, no home, no 401k, no car in this particular situation. You know, they had no assets, and they were living on Social Security.
Dr. Friday 16:20
So there was nothing there for the IRS to continue to try to collect this back money on. But that isn’t going to always be the case. And so you know, if you want you can get a free consult. That’s what we do. We can sit down, give you a plan it you know and work with you to figure out what’s going to be the best way to get you from where you are now.
Dr. Friday 16:20
Maybe you’re with some back IRS issues, to basically be able to build your credit, go out and buy a house if that’s your dream buy car if you I know you don’t need tax returns to save for that, or one of the biggest ones that lead people into mind is the children are getting old enough where they’re going to have to start thinking about college and college requires FASFA, which requires you to have filed tax returns.
Dr. Friday 17:06
So you’re not going to qualify for FASFA if you’re not current on taxes. So if if your children plan to borrow or have, you know, any hope to do much in credit in college, then that’d be something the parents, you guys will have to take care of, and make sure that you have whatever it takes to deal with those, those situations. So other things that we have happening here right now is like, again, you know, obviously it’s we’re getting a little faster time for anyone that’s trying to deal with an IRS issue, the IRS is working a little quicker as far as getting us power of attorney and then that way giving us the ability to, you know, resolve or get to resolutions.
Dr. Friday 17:55
But everyone or anyone that might be on the net, you will also see where the IRS is, is hiring a lot of new people and doing some training. If you go onto the website I was trying to see because I know some of the funding got lost. But apparently they have some some funding because they have in this area alone, they taking on about 400 jobs, according to the website.
Dr. Friday 18:23
So that’s going to be interesting to see if they can fill those new jobs, what they can do, and you know, but that means the one job they’re going to file guys, you know, it’s always wonderful to say, You know what, the IRS is going to get more people on the phone so we can get better resolution so we can have a better conversation. And we don’t feel like every time we call we end up going in circle.
Dr. Friday 18:45
I had a client yesterday, she called me her husband and finally called there was a an old IRS issue and she got on the phone with them started talking to them. And they were saying that there was a tax return that might have been filed. But yet this one was filed late or and then it was it was filed early that none of the dates they provided was the actual date that the tax return was filed, which we have E-file confirmation on. We don’t even know for sure what this person was looking at. It was almost like they were just trying to come up with an excuse or reason why the IRS had or had not done anything with the request that this client, you know, had requested from the IRS to do something.
Dr. Friday 19:34
So you know, you get on the phone, you get a lot of people in there and then you don’t really seem to to get somebody that knows what they’re talking about. And if you do, unfortunately, sometimes at least one of my situations had where they basically dropped the ball, the phone got hung up, I was not able to call that person back.
Dr. Friday 19:58
So that was not a good day for me, was really making headways. And then unfortunately, Now sometimes you’ll get really lucky. And they may have taken your number down, and they’ll be able to get back with you on that. But I will be quite honest, that that is not the situation with, you know, with that.
Dr. Friday 20:18
So if you have questions, you can join the show guys 615-737-9986, taking cars doing all the wild and crazy things that we have happening. One of the tips that the IRS is providing out there is to make sure that everyone has updated their W 4 for their W 2. And I will say I’m not very happy with the new W 4 form because it doesn’t seem like it isn’t really taking out the right amount of money.
Dr. Friday 20:56
In this last year, a large number of people seem to have owed money where we haven’t voted in the past, which is kind of funny because 2022 If you have children, I can see if you you broke even in 20 to 22, because you had a lot more credits coming back to you. And then maybe in 2023, it didn’t happen.
Dr. Friday 21:15
But what I have found is that we’re having to go back in and not really changed the W 4, we’re just asking the employer to take additional money out, because it’s not taking I mean, we used to be able to go married, single 05 dependents whatever head of household, and you said married and zero, right or single and zero. And then everything was supposed to be calculated out Natalie to do it based on $2,000 per child, if this is your first or second job, this your spouse work, these are all questions on the new W 4 that you have to answer to try to get this correct.
Dr. Friday 21:52
They just it doesn’t seem to be really working the way that they had planned it. So my suggestion to anyone that has done their own taxes and have found that they are not getting any kind of refund back, they’re not getting any information, you know that they’re not getting? And you’re like, “Well, I filled out the W 4 it says that I’m married and it says, you know, I didn’t take any credit or I took $2,000 because I have one child on it.”
Dr. Friday 22:20
My suggestion is plain and simple. Make sure that whatever you were short this year, and I don’t I’m going to be honest, I don’t want you to get 1000s of dollars back is not why why would you want to have huge refunds unless it’s some sort of credit you’re getting, I would say you know, like educational credit, or, you know, child credit or earned income credit. You don’t want that to be the case.
Dr. Friday 22:44
So if you know I want you to break even I’m fact if you can owe two or three or $400, there’s no penalties, there’s no interest, that would be perfect, because then you lived off your money, you’re giving the government their few dollars at the end of the year, and everything is great. But if you actually have either huge refunds, or you owed more than 500, or let’s say $1,000 At the end of the year, then you need to be making an adjustment to your W 4.
Dr. Friday 23:11
And again, we do this a lot in our office. And so it may be that you just go in and ask for an extra $25 per paycheck to come out and you multiply that and it comes out and you should have it we’re already six months through the year. So you may need to double up on that.
Dr. Friday 23:26
If you’re really trying to make sure at the end of the year. You don’t have to write a big check especially if you don’t have it. I mean you know basically owing the government is never a good thing. Never a positive situation. But it is one of those situations where you want to make sure you have the money because interest penalties they just brought up the interest rates in Tennessee I don’t know you guys if you’re small business owners, and let’s say you get a penalty because you filed your business license late and they charged you penalty and interest 13.25% It was what I was told that my last audit 13.250 Am Gee, that is high interest for for a state but I mean interest rates is are what you know there is a discouragement I guess you would say but I mean it went from eight that’s a huge jump from eight to 13 You know, on the on the on the scale as far as I’m concerned. Huge, huge, huge. So we’re I’ll take a look I’m not sure if the IRS is supposed to be bringing theirs up as well.
Dr. Friday 24:30
I’ll take a look and let you guys know after this break we’re gonna take a quick break. You can join the show 615-737-9986. We’ll be right back with the Dr. Friday show.
Dr. Friday 24:51
All righty, we are back here live in studio again. If you have a question concerning taxes or maybe has a friend or someone that hasn’t bought Alder, you know, just wanting to get striped for this year 615-737-9986, the IRS just put out a final reminder for 1.5 billion in tax refunds they’re estimating for unfiled tax returns in June. Sorry for 2019. So they have estimated there’s over $1.5 billion in tax refunds that have not been claimed here in the United States for the filing of 2019. If you have not filed your 2019, the deadline is July 17 to get the refund.
Dr. Friday 25:39
So if you filed it, great. If you have not filed it, then well, you have 10 days, no nine days, Why mine, nine days to get that file than any filed. So see if you can get it out to where you need to get it. So maybe you’ll get your refund. That’s a lot of money sitting out there that has not been claimed by taxpayers. So this is what we’re always talking about. I mean, how many times have I share with you guys stories of people that I do 6, 7, 8 years of taxes, and it wasn’t that they had money do they were either just busy, something had happened, divorces always a big reason, anything like that, and then they turn around, we file them and we find out they have refund after refund after refund.
Dr. Friday 26:25
And they’re leaving the money on the table. They don’t have an IRS issue. They just haven’t filed taxes. And in some cases, they just don’t want to file because they don’t you know, they know they didn’t have any money do so they’re fine. But now they need to have some tax returns done. So now they’re thinking about why would you leave money on the table, especially with the Internal Revenue Service people.
Dr. Friday 26:45
I mean, I’m not saying that any government agent would be an awesome place to be living that. But personally speaking, that would not be a win win situation for any of us, and what’s going to happen with that situation. So again, 1.5 billion unclaimed, if you haven’t filed your 2019, you may be one of them. So you might want to get that filed ASAP to try to get some resolution on that.
Dr. Friday 27:11
So, again, July 31 is the deadline for people that are in the storm damage, mainly the people in Rutherford and cannon counties that might be able to hear my wonderful voice and you haven’t filed your taxes, you have an automatic extension. So even if you didn’t extend, it might be a perfect time to try to get an order everything so you can get that done while you can. So we’ll we’ll continue with those questions. If you haven’t, if you have a question, feel free to give us a call here at 615-737-9986. And from the email bag, it’s an interesting question.
Dr. Friday 27:50
And I will tell you, I have had a number of clients try to pull this off. And I mean, some people are going to say I’ll I would do it, some aren’t going to say, All right, so this individual decided to go buy a camper, they do construction, so they bring the camper to the construction site. And they use it while they’re at the construction sites. But they also use it for personal use. They they use it to travel into to do things.
Dr. Friday 28:19
So it’s not staying on the construction site all the time it is being used personally. And they want to write it off as a piece of equipment for the business. Because they do take it from time to time out to the job sites. So I’m going to tell you my opinion on this, my opinion is you cannot deduct 100% of that camper for the purpose of business because it’s not being used 100% for business, if you had told me that you bought the camper, you use it at the job sites, you leave it out at all the job sites, there’s someplace for somebody to stay change shower, whatever and you find that it’s you know, it’s a good use, then it’s a definite piece of equipment, you’re using it at the job sites, it is exactly what is being used.
Dr. Friday 29:04
But when you say that you taking that piece of equipment and you’re using it for vacations, you’re using it for family use. You’ve taken it from being a business piece of equipment to maybe a partial, possibly a usage, but not going to be a and this is this is $150,000 camper just to let you know, we’re not talking about some five or 10 or $15,000 piece of equipment. It doesn’t change the purpose of that equipment, but it would change the situation as far as how much you can do.
Dr. Friday 29:35
There is a section 179 and this is the same one that at every end of every tax season for the last 25 years. I had people telling me the call week two weeks before the end of the year, I’m gonna go buy a big truck. I’m gonna go buy an SUV, because I want to take that section 179 I know that you guys probably know this because you Listen to me, but I’m going to say this, again, any individual that purchase an SUV or a large vehicle for work only.
Dr. Friday 30:10
And that that’s the first part, guys, if it is a vehicle that you’re using, it has to be 100% for business, it cannot be your personal vehicle that you’re using for business. And I don’t care if you say I don’t do anything but work, I have no life, I do nothing. But you do. You go to the grocery store, you go to the you go other places, to restaurants and different things for personal use, the vehicle is not being used 100% for business, you use it, especially if you don’t have any other vehicle. Because nobody works 24/7 Even if we feel like it’s sometimes.
Dr. Friday 30:48
So let me reiterate first check off, is this a 100% business use vehicle, you have another vehicle you can use, and it’s actually a running vehicle, not a vehicle. It’s a new Drive. So you think, Oh, the IRS will think well, there’s another vehicle. But if it doesn’t run people, it’s not another vehicle. Second, is this vehicle necessary? necessary. So if you go by yourself out a Land Cruiser, or a Land Rover, whatever for, you know, $150,000 or Tesla truck or something, and you are a person that runs a local restaurant?
Dr. Friday 31:29
Is it really necessary for you to have a vehicle like that? I mean, that’s what the government’s going to ask, “Was it necessary to go spend $150,000 on a business vehicle because you don’t use it personally? Therefore, it’s only driven while you’re in business, why do you need a vehicle to do that unless you have a true purpose, your delivery service.”
Dr. Friday 31:51
A prime example is most construction guys have trucks, because they have to haul things back and forth all the time. They have to pick up things. So the truck is an essential part of earning money. I have the same problem with some real estate because there has been several court cases recently, where the IRS has taken the exception that they didn’t need a high end vehicle to sell real estate.
Dr. Friday 32:20
Many of them have brought Ferraris and many things like that. And, you know, do you have million dollar listings and the people you’re dealing with deal with those, so you need to look successful and be able to sell their home? That’s what the IRS is asking. That’s specifically what was asked. And in the case of one of them, the person didn’t sell million dollar homes, they sold homes for two and $300,000.
Dr. Friday 32:42
So driving up in a Ferrari, was that really going to generate you more income, and was it totally they wrote it off as a work vehicle. So therefore, they wrote it off as if it was only driven for work. And the IRS did win that case proving that that wasn’t the case. So again, it’s not that you can’t write off your vehicle. But in most cases, it people are not using it 100% therefore you can’t depreciate if it’s not a 100% usage on a section 179 It’s not going to fly.
Dr. Friday 33:16
Now if you want to go lease a vehicle and part of its being used, you can do a percentage of rental and lease and all of that for the work for the purpose of work. But I honestly think miles especially right now, when mile rates are so high that you don’t have to worry about actually trying to find a better situation, mileage rates are already at an all time high.
Dr. Friday 33:42
So, you know, again, making sure that you have what you need to do your taxes is one thing, but if you don’t have that, you know, it’s 65.5 cents a mile for for 2023. That’s a pretty good return on your Petro even for people like myself who drive a diesel. So if you’ve got yourself a hybrid or a small little car, you’ll probably even do better at that 22 cents a mile for medical and 14 cents a mile for charity is the current rates that are on the table again, 65.5 for standard business, miles 22 for medical and 14 for charity. If you’re itemizing, make sure you don’t forget the medical miles. It’s so important.
Dr. Friday 34:24
I mean, if you’re gonna if you’re able to actually hit that number, which is 7.5 of your adjusted gross income you have to deduct before you can start itemizing your medical and then you have your your property taxes and mortgage interest and charitable contributions. But if you’ve hit the mile marker, make sure that you are also putting in your miles for medical because, well you have to go see the doctors you have to go to the pharmacy and many times you have to you know go the physical therapy and all those miles are countable to help you get through the threshold of doing Your medical deductions.
Dr. Friday 35:02
So very, very important when you’re thinking about it. All right, we’re gonna get ready here to take our last break before the end. So if you’ve been sitting there saying, oh my gosh, I do have a question, but I don’t know if it’s gonna sound silly. A no silly questions, no stupid questions. If you don’t ask the question, how are you going to know what the question is? I mean, what the answer is, I mean, let’s be honest, if we all knew everything, then we’d be Alexa or something, you know, I mean, I’m just saying you have to be able to pick your your battles.
Dr. Friday 35:33
So if you have a question, pick up the phone 615-737-9986. We’re gonna take a quick break, and we’re gonna done we’ll be at the end of the show. So at this point, you need to give us a call. Otherwise, you can call us at the office on Monday, because I know not everybody enjoys calling radio shows.
Dr. Friday 35:54
I totally relate to that. I didn’t ever do it before I was on the radio, still have only done it about two or three times. Alright, so we’ll take a quick break with the Dr. Friday show. We’ll be right back. Today we are back here live in studio on Dr. Friday, we we have Mike from Clarksville. What can I do for you, Mike, thanks for calling.
Caller 36:22
My grandparents Harrington property. It was really good. My uncle. And upon his death, it was supposed to go to me and my brother. But he’s, we’ve all decided to sell it before he dies. So we’re gonna split it three ways. How does the capital gains work on that?
Dr. Friday 36:42
Yeah, it’s not it’s not going to be beneficial. To be honest. I mean, obviously, it may be good for him because that way he has some additional income to live with. But the capital gains is going to be so the basis since it’s in his name, it’s not in all three of yours. Correct. Right now it’s in his name. And then when he passes, you would have inherited.
Caller 37:06
All three of ours. We’ve all gotta go to close.
Dr. Friday 37:08
Okay, so when did you inherit when when your grandfather died?
Caller 37:17
It was in 99.
Dr. Friday 37:18
Okay. So whatever the value of that property was back in 99. OB what you guys are half for a basis. And since you’re already audit, only, only step up we would get would be his share Anyways, if he had passed away, so at this point, it’s not going to be a huge difference, Mike. But whatever this land was worth back in 99, fastest and easiest ways, just look at property tax, you might want to get a better appraisal, but that will give you an idea at least. And then whatever you sell it for today, the difference will be capital gains.
Caller 37:53
If I reinvest that capital gains into my property now, do I still pay for it?
Dr. Friday 37:59
Yeah, you’d have to do the taxes first, the only thing that you might be able to do would be what’s called a 1031. Exchange, you’d have to talk to an attorney, they do it or closing agents do it. But you can take that money without paying taxes theoretically, and invest it into another piece of land, but it can’t be a piece of land that you already own.
Caller 38:22
Okay. All right. Well, when this closes, can we can take care of all this?
Dr. Friday 38:28
Oh, absolutely. Not a problem at all.
Caller 38:31
All right, I appreciate it. Man.
Dr. Friday 38:33
Thank you talk to you later. All right. And that is one of those questions that we have that often comes through, obviously, and handle parents and grandparents, siblings. It’s amazing how we can try to make things what we think we’re trying to simplify. A lot of parents, for example, will put their children on their home titles.
Dr. Friday 38:57
And by doing that, you are kind of messing up the process of the step up in basis. That the reason you do it. I’m not actually sure maybe there’s legal reasons. I’m not an attorney at all. But for tax purposes, you really want your children to inherit your stock your home through the inheritance process through the death and then the will or trust, be that irrevocable or revocable trust that will happen so that way it you know it comes through for for you.
Dr. Friday 39:31
But it is important to make sure that you have all those documents up to date. But don’t put your children on your bank accounts. Don’t put your children on your homes or in your portfolios for stock because then you’re you’re going to make the taxes more expensive.
Dr. Friday 39:52
In most cases, you may not be able to avoid certain things and I know part of it is to try to avoid long term care and all These are the things that might come along with the price tag. But if you are, I would definitely suggest talking to an attorney that does estate planning, and your tax person, have them work together to find out what your options would be, other than just going into the bank and signing over and putting your child’s name on your bank account.
Dr. Friday 40:22
Did you know I have a Russ Cook, great friend of mine and attorney in Brentwood, and we’ve known each other for a long time, and I can remember years ago now need to get him back on the radio show. But years ago, he’s on the radio show. And he came out and said, you know, he had a case where a child they someone had gotten in a car accident or something like that. And they got no, it was a divorce, they were getting divorced.
Dr. Friday 40:49
And the person had their name on their parents bank account, and one of their, you know, just in case mom had put it in there just in case. And that became part of the assets of the divorce because they had their name on that account. So your mother’s money in this case could have become part of the assets of an a divorce, because the mother had put the child’s name on that tax on their thinking that if something happened to her, her child would be able to continue to write checks and take care of the situation.
Dr. Friday 41:26
If that’s not scary, for other people, it’s scary for me, there is power of attorneys that you can get from the bank, you can get from your attorneys, you can probably download from Legal Zoom, that would take care of this in case you became incapacitated, then then your children would have the power of attorney to take care of all of your wishes, there’s also a medical power of attorney again, you need to make sure you have a financial medical, some cases a pour over will or will, you need to go to Ross Cook or in a good attorney that can help you with setting up these documents.
Dr. Friday 42:04
Because we now know besides the big guy upstairs when our last day will be here. But what we do know is that we’ll never be able to predict when that is. So that being said, you’re going to want to make sure that you have everything in line without putting in jeopardy your taxes. Because when you do some of those things, you now have eliminated the taxes on this scenario, where I mean even like Mike they called you know, I mean, now he sounds like he inherited part of it, his brother and his uncle.
Dr. Friday 42:38
But if it was supposed to stay within the generations, you know, it may have been better to let the uncle and then the uncle, pass it on to the kids. Again, not something that you always going to have full I mean, you really do want to keep it directly in your own bloodline, you’re directly down descendant wise, as far as I’m concerned.
Dr. Friday 42:57
That’s why you want to make sure you also have trust for children that are married. Because why would you want I mean, the last thing you’d want is you pass away, the money gets given to your child, they of course, put it into the marriage, the marriage breaks up, then their spouse now gets 50% of everything, if not more, in some cases, if there’s children, etc, etc. And your money now has been used. If it’s in trust, hello, can’t be brought into the marriage.
Dr. Friday 43:25
So these are the kinds of things you want to think about because we none know what’s going to happen. And I’m not an attorney again, guys, but that’s the way we want to preserve our taxes. That’s the important part of this conversation, taxes, taxes, taxes, and the step up and basis. And the child inheritance laws, they’re, they’re trying to mess with some of those, you know, we all know that Biden doesn’t want to do the 1031, he really wants to eliminate that, which is one that we can use, like the gentleman, if he wanted to Mike could do what I said to him at 1031, go buy another piece of property in his name and use all of the money.
Dr. Friday 44:02
And that way he can preserve that money and not have to pay taxes today, he has spaces will stay good. And he’ll just keep moving on. Those are especially business owners or people that are into real estate. Many of my clients do 1031 exchanges, because it’s a great way to take the entire investment and move it to another investment and keep growing that investment. Instead of having to pay the taxes each and every time that will likely you’ll lose 20% or whatever of that money every time Biden wants you to pay the taxes.
Dr. Friday 44:37
Hey, if the tax law says we don’t have to, let’s take advantage of it. If they change the tax law, you and I will deal with that when it happens. But right now we’re talking about the step up and basis. And what we want to take the advantage of and again, this is something you really do want to talk to an estate attorney to make sure there are Medicare trusts and things you can do to preserve your power. Are several funds. But you do want to have someone that’s an expert on that.
Dr. Friday 45:04
So just put that in there. All right, guys, we’re winding down to the last part of my show. It’s been a quiet Saturday, which is, I guess good every once in a while, even though, you know, I never really like to hear myself talking. So we’ll, we’ll hopefully bring in some more exciting topics as we get going here. But if you want to have help with your taxes, or if you’re thinking it’s time to get straight with the IRS, you can give my office a call on Monday morning at 615-367-0819.
Dr. Friday 45:43
Again, I’m an enrolled agents licensed by the Internal Revenue Service to do taxes and representation. I am local, I’m going to be the person you’re going to meet, not just some phone number with an 800 that you’re connected with somebody else that they sell, sell the connection so that some other attorney or Enrolled Agent, you’re going to be dealing directly with Dr. Friday so you know who you have. If you want you can also email friday@drfriday.com. Again friday@drfriday.com or check me out on the web drfriday.com you can find out who I am been doing this for 25 years I’ve been on the radio for almost 15 years here.
Dr. Friday 46:21
So again if you need help 615-367-0819 I hope you guys have an awesome Saturday. It seems to be a little bit crazy with the weather but I hope you enjoy it. Catch you later.