Welcome to another episode of the Dr. Friday Radio Show! In this show, Dr. Friday shares the latest tax updates, answers callers questions, and talks over the following topics:
- What Is the Best Business Type for Taxes?
- The Difference Between Each Business Tax
- Why Have I Not Received My Tax Return?
- Reasons Why You May Not Have Received Your Stimulus Check
- How Many Years of Taxes You Need To File To Get Back Into Compliance With the IRS
- Do You Have An IRS Issue That You Need Help With?
- Where To Find the Best Social Security Advice
- What Taxes Payments To Make If You’ve Sold Property or Inherited Property
- Second Quarter Payments Due On June 15, 2021
- Do You Need Help With Tax Representation?
- The Best Way To Convert To A Roth IRA From An IRA
and much more!
No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or your financial woes. She’s the how-to girl. It’s the Dr. Friday show. If you have a question for Dr. Friday, call her now at 615-737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
Dr. Friday 0:29
Good day, I’m Dr. Friday and the doctor is in the house. We are here live on this wonderfully warm, boy is it warm, Saturday. And life is definitely getting interesting. I’m sure some of you guys may even have some questions. Maybe you’ve gotten some of the letters from the IRS. We’ve been really busy here with either IRS or state. A lot of times people haven’t done quite everything, like renewed their annual reports or their business licenses. And they’re getting those notices. So if you’ve got a question on those or anything else, all you have to do is give me a holler. Meanwhile, it looks like we have Mike on the line. Let’s go ahead and hit Mike.
Thank you for taking my call.
Dr. Friday 1:10
Thanks for calling. What can I do for you?
I’m an executor of a will and the deceased person died in February 2020. And only had ten months of taxable income of $1,027. I have an employer ID number for that account. Do I need to file since it was only $1,027?
Dr. Friday 1:36
Well, I will tell you that normally when I’m handling them, I’ll always filed the last year no matter what. It will most likely be a zero effect, you know, obviously, unless there was some withholding on that money. But more just because on the tax return, it will ask you for the data passing and you can put that on there and close those forms off.
Dr. Friday 1:55
I know that the IRS is, you know, Social Security and everything has already been turned off if they hadn’t even, but they’ve been probably notified. But it’s just part of my process, I always just file a final. And if they were receiving any kind of Medicare benefits, maybe they were in a nursing home or something if there was a Medicare, I always get a waiver from them as well with filing that so that way I make sure that I can close those off. And then you know, I don’t know the size of the estate or anything, just those but it’s not mandated. You don’t have to with that small dollar amount, you know.
Dr. Friday 2:27
Unless it was 1099 miscellaneous would have been the only time that I can think of where there may have been taxes due if they were working self-employed. Otherwise regular income coming in ordinary income or capital gains income, there would be no reason that you have to file it.
Okay, thank you. I had closed everything off, you know, a couple of weeks after she had passed away, so.
Dr. Friday 2:50
Yeah, and then that’s typical most the time, you know, that is the case. As I said, it’s probably more on my side. You know, obviously I do living for taxes. So I just make sure all those things are closed off. But again, f there’s nothing, if there’s no tax liability, there’s no mandate for you to file it.
Okay. But if I do, if I had to, would it be 1041?
Dr. Friday 3:12
No, 1041 would be under the federal ID number. But the money well…
Dr. Friday 3:19
…Would still be under their Social Security number, correct?
Yes, Uh-huh. Okay.
Dr. Friday 3:24
And then so you would do a regular 1040. And then the estate where the federal ID number would have 1041, which you’ll file as a final on that to close that federal ID number.
Okay. Okay. Thank you very much.
Dr. Friday 3:37
Thanks. I appreciate you. Well, I just love it. All right, Chris, what do you got for me?
Yeah, I had bought a house. And of course, it was purchased from a family member. So house, I didn’t have to pay nearly as much for the house is what it was actually worth. So a gift of equity was involved in it. Now, I guess the question is, at the end of the year when tax time comes, who is responsible for the gift of equity?
Dr. Friday 4:01
The person that gave it to you.
So he would have to pay taxes on it?
Dr. Friday 4:06
Not necessarily. I mean, if that person had it in a tax-free fund, meaning in a bank account, they’ve already paid tax on it, most likely, there would be nothing.
So the house was for 160. I took the loan out for 175 to close all closing costs, everything else. The house was actually worth 305. So we use the gift of equity for me to pay closing costs, tax title deeds, and everything else that way, nobody was out of money.
Dr. Friday 4:35
Right. So basically, they gave you 130. So they would be doing one of two things, or maybe both. They would have to file a gift tax return of 706 which would show that they gifted you that money because that would come out of their lifetime estate or half of half unless the 15 they could give you.
Dr. Friday 4:52
And then if it was their primary home prior to you doing it, they would just need to show that it was sold to an individual you know for the primary situation. If it was an investment property at that time, they would show that they actually did sell it for 305,000, or whatever the value of the home was. Because they would have to possibly pay tax on that or recaptured depreciation.
Okay, well, yeah, it was his house, but I moved in and took over the mortgage. And then he refinanced the house that I was living in to pay down the new house for him and his wife.
Dr. Friday 5:27
Well, If you sold it within two years, if it was his primary home two out of the last five years, then I’d still claim that is his primary residence, and he would be able to avoid capital gains. If it became a rental property during that time, there could still be recaptured depreciation. But that’s pretty minor in comparison to what we’re talking about here. So that would be the way it would work.
Okay, so then he’d just have to file a 706 and then just claim it as the primary resident?
Dr. Friday 5:57
Right. And then claim it. If he’s claiming it, then there’s a home sale on his tax return, he needs to report that home sale, and then show that it was sold. One of the questions, you know, I mean, did you live in it two out of five years, etc, etc. And he should be able to exclude any capital gains up to 500,000, at least and it doesn’t sound like that’s the situation.
Okay, then. Thank you very much.
Dr. Friday 6:16
Thank you, mate. I appreciate it. That happens more times than you like to think sometimes to just as a point of interest. All right. Well, I appreciate you guys getting right on the phone because it makes my show so much more entertaining than just hearing my voice all the time.
Dr. Friday 6:30
So if you want to join the show, you can at 615-737-9986 is the number here in the studio, if you’ve got a question. Maybe you’re thinking about starting a business or you have started a business. And I’m not too sure what’s going around. But there seem to be quite a few people, they’re talking to someone. I don’t think it’s a tax person, because I’ve had a couple of cases come in, where they’ve gotten talked into doing C Corporations, on startups. And again, there are some tax advantages. But the problem with a startup starting out as a C Corporation is there’s also a lot of other taxes that can happen versus pass through, and the requirement for payroll.
Dr. Friday 7:13
So it’s kind of important to understand the overall effect of if you’re an LLC if you’re a multi-member partnership LLC, a Sub S Corp, or C Corp, or just a sole proprietorship, and there are good and bad for each one of those things. So you just want to make sure whatever it is that you’re doing. That you have a good understanding about how that’s going to help or not help. Because sometimes, you know, when you’re starting something you’ve never done before, you have absolutely little to no experience.
Dr. Friday 7:44
The idea may take off, and you may become extremely successful. But you know, on the other hand, maybe you just need to make sure that you’re protecting yourself, you know, with insurance as well as a general as limited liability protection, possibly, but maybe you don’t need to go all the way to the form of corporations and worrying about SEPs and, and deferred incomes and all this, you know.
Dr. Friday 8:05
So you need to really understand the tax advantages and disadvantages of that. So just putting that out there that you kind of need to make sure that you’re moving in the right direction, when it comes to how what you’re doing when you know, on those situations. So, again, if you want to join the show, call 615-737-9986 and we’re gonna go to Sheila. Hello, sweetheart.
Hello, I have a question. Does the 70 and a half rules still apply for that you are required to make a distribution from any 401k?
Dr. Friday 8:44
No. They move that to 72.
So at 72, you have to make a distribution from all of your 401k?
Dr. Friday 8:54
Right. 401k, IRAs, 403 B’s but yes, all of your retirement accounts to make it simple besides Roth’s. But you have a little bit more time.
I’m just getting close to 70. And I didn’t want to take any money out. I wish they would remove that totally.
Dr. Friday 9:12
I know. Well, the problem is the IRS money is in our retirement accounts, right? Because it’s growing with their money as well as our own. And the way they’re spending money, Sheila, I think they’re looking for every dollar. In fact, some of the things that Biden’s talking about are actually taxing the value of those accounts, which happened back in the 80s. And I think he’s trying to bring something similar back so we’re going to have to keep an eye on that and see what that means for most of us. That’s not going to be a good thing no matter what.
No, it is not going to be a good thing. It’s a Biden bad thing.
Dr. Friday 9:45
I’m not disagreeing with you, girl. Totally on the same page.
I know you’re aren’t. Thank you so much. Thank you, bye-bye.
Dr. Friday 9:54
Thank you. Diana, what you got? Hey sweetie.
Hi, there. My question is, I never ever have to wait for a refund from the IRS. Some years I have to pay and sometimes, you know, sometimes I get a refund. And last three years, I’ve gotten a refund. And I mean, it was there within 10 days. This year, I filed around March 10, or something and I am still waiting for a refund and when I check where it says you can track it, It says something about “your refund is still being processed.” And I’m wondering what’s going on?
Dr. Friday 10:26
Wonderful. Thank you for calling with this question. Because seriously, I probably get 5-10 phone calls every single day, either from clients or not from clients, just people you know, like yourself or whatever. I would love to tell you I know the answer. But that’s the exact thing. So every time I usually say, “Okay, let’s go on the IRS website. Let’s see, it makes sure the IRS received it,” right? Because that’s the first prize. And they’re all saying the exact same thing where your return processes will update this later to tell you about when you get your refund or something along those lines. Right?
Dr. Friday 10:57
And I mean, yours is most I mean, a lot of my people, my own personal clients are hitting 60 to 70 days, I have people easily hitting 60 to 70 days, not receiving any refund and no love letters, nothing that says hey, you know, the reason we didn’t give it to you. Because in some cases, they may be received the stimulus money because they didn’t get it, you know, in the first ones or whatever. So I got his refund in a couple of people at some pretty large refunds. So we thought, well, maybe they’re needing more time, whatever.
Dr. Friday 11:28
I don’t have an answer. In fact, Lavidius, who is my engineer listening to the show. I was gonna ask him and put him on the spot. But he’s also got a situation or clients like that where maybe we file them early. The IRS said, “No, don’t amend anything, they’re gonna give you a refund right back to you.” These people were I mean, I probably I think it was 84 clients that I filed before they changed the tax law in early March.
Dr. Friday 11:54
And a lot of those people, I’m just curious if you are one of those that filed your tax return, and you did not. You know, they paid taxes on their unemployment, and they were supposed to correct it. I’m just curious if any of them have actually received their refund, not one of my clients has yet that I know of. But a lot of people are in your shoes.
Well, thank you. My daughter, you know, I have recently retired, my husband only works part-time. And so we have a very low income compared to what we used to make. My daughter, you know, she filed it here, you know, she’s got all kinds of, you know, breaks where, you know, she got to the stimulus, she’s got the childcare break and her husband works.
Dr. Friday 12:34
They got it immediately, right? Withing 21 days?
Yeah, and my goodness, yeah, like, seven days and I never have to wait and I use to like the, you know, the online h&r sometimes TurboTax. And they check you, you know, so I feel kind of comfortable with the figures I put down. And, you know, I double-check those. And then what, you know, I go along with the program.
Did you guys have any unemployment last year?
No. It’s really in any way other than the stimulus. You know, everything was like it was the year before, which the year before that we did get a refund. Prior to that, we did have to pay income taxes. Since I retired that now we’re getting a refund. And this one is a hefty refund, you know, that I’m waiting on.
Dr. Friday 13:20
And they keep talking about how people need money. But this is money. That is a typical thing. I mean, all I can say is I think what happened is they had the $600 that went out late December, early January, which is the beginning of tax season. They changed the tax law on March 12 or 14th. The IRS is having to, you know, recalibrate for all of these things.
Dr. Friday 13:39
And then, of course, they did the $14,000 stimulus check at that same time, which the IRS has to issue. I think maybe they just overwhelmed the system. I mean, you can’t reach anyone on the phone, I would say, you know, and I have had some clients that said lately, they have had more luck. So I would say you could try to call 800-829-1040. It’s the regular number 800-829-1040 call and sees if they say there’s any reason that they can see in the system that you have it. Because again, I’m getting concerned 60 days is it’s like three times what we normally would be waiting, you know, and so, but I have no other idea other than that fact.
Okay, at this point, I have exceeded the 60 days, I think I’m into the 70s. And my cousin who kind of is the same as me, he recently retired, is saying he also is waiting. And maybe you’re right, maybe it’s just the overwhelming of the system. But of course, in my mind, I’m thinking, “Oh my goodness, what did I do?” You know? I know. I’m glad to know it’s not just me.
Dr. Friday 14:44
No, it’s not and I wouldn’t be surprised that interest isn’t being accumulated because if the IRS doesn’t do it in a timely manner, they have to start paying interest. But you know, just doesn’t compensate for the fact that we expected to see our money and why are we not seeing our money is the big question. But great question, horrible answer but a great question. I’m sure a lot of people listening. And if anyone has a suggestion for Diana or any of my clients, please feel free to call the show because we’re ready to start looking at alternatives.
Great. I appreciate your information. Thank you so much.
Dr. Friday 15:15
Thank you, sweetheart. All righty, guys, we’re gonna take our first break here. I’m a little bit over the clock, you can join the show at 615-737-9986. And we’ll be right back with the Dr. Friday show.
Dr. Friday 15:40
All righty, we are back here live in the studio. And again, loving the show, guys. You guys are all joining the show, which makes it so much more interesting, I think for the listeners as well as for me, so I appreciate it. All right. So it looks like we have maybe John that was first sorry, John. Hey, John.
Hi Dr. Friday. You were asking about the refund on employment. My wife had some unemployment insurance that her company signed her up for for a while. I mean, it wasn’t a whole lot is, you know, right there at the limit. We filed in February with TurboTax. And they told us to expect two weeks when we got the first part of our refund that I went and figured out, it was $212. And we got that three days after we filed her taxes in February. It showed up in the bank account. And last night, I always check my checking accounts every day, and last night the part for the unemployment is on hold going to the bank.
Dr. Friday 16:53
Oh, okay. So you filed in February in the unemployment. So it looks like maybe they’re finally getting to reconciling those particular numbers. That’s great news. That is wonderful.
Turbo Tax sent us a thing, not to amend our return because we amended our return it would take longer. So I just waited to see and check-in and it showed up yesterday. Why it’s not on hold. It was supposed to went on the 16th.
Dr. Friday 17:26
That’s great news. Thank you for holding, as well as calling because I know, there are quite a few listeners. And like I said, I know we sent in like 84 returns before they changed the rules, and almost all of them had unemployment. So we’re like, okay, we can’t amend it. And there’s really no easy way to check it. Because in some cases, as you said, they got their first refund. So we didn’t know how to really check on the second like you can’t really check that online or anything. So that’s good news. Thank you for calling and letting me know that, John, I appreciate it.
I called you a couple of weeks ago about some 1099’s on the contest-winning too. You answered those.
Dr. Friday 18:05
Thank you. I’m glad we were able to share with each other then. I appreciate the call buddy, thanks.
I try to listen to you every time I come into town.
Dr. Friday 18:12
Thank you very much. All right, we’re gonna go on. But let’s get Mark. Hey, Mark, what’s happening?
Yes, ma’am. I just wanted to echo what John just said. The same thing occurred to me, I got my unemployment, tax refund, two Fridays ago. And it was unexpected, I really didn’t think that it was going to happen so quickly. None of my other co-workers have received theirs yet. I worked at a large manufacturer. So we were off at the same time, we all made the same amount of unemployment.
The only caveat to that is I’ve been reading some of the information that I’ve seen online from the IRS and others. They’re going, from what I can tell, they’re going with the simplest solutions first and then working up from there. So single, I’m the only one in my workgroup that single, no dependents. And then I’m going to go single dependent and then married, filing jointly or married filing separately. So I think that that’s where we’re gonna see, you know, the staggering with people getting their money back from the IRS.
Dr. Friday 19:26
Well, I’m just glad you know, because again, everyone’s looking for their refunds, which means that they’re at least moving forward on that. So thanks again, I really appreciate you guys calling in because, you know, unfortunately, I can only tell and you guys are actually living it. I didn’t have any unemployment. So I didn’t have anything outstanding to know. So a lot of people listening at least they’ll know to keep an eye on their bank and see if it’s not already hit. If not, it’s at least coming in the next maybe 30 days. So again, thank you, Mark, appreciate it. Alright, let’s hit Mike. Hey, Mike, what’s happening?
Hey Dr. Friday, how are you?
Dr. Friday 20:01
I am good.
Good, good. Love your show, by the way. Thanks for what you do.
Dr. Friday 20:07
Thanks for calling. What can I do for you?
Well, I have a question. The state is widening the road that runs right along the back of my property. And they’ve made us an offer, actually, we’ve already accepted the offer for a little chunk of our property that they’re taking. And I’m just trying to find out what the tax implications of that are, as far as is that income? Or how is that going to count?
Dr. Friday 20:34
Well, I actually had a big situation where I found out a lot more about this than I would probably ever care to know later in life, but it is not considered income. An easement is considered a reduction of your original investment. So you will receive it. Now, they may send you 1099. And hopefully, they’ll send it in as a 1099 S as if you’re selling real estate. Are you actually giving right away? Or are you selling it? And there’s a difference.
Well, we are selling a portion. Well, then there is a portion that they’re just using for a temporary right of away, but I mean, this is gonna be like a four or five-year project.
Dr. Friday 21:12
Right. Well, sometimes they’ll pay rent right away. Like it’s part of it.
Oh, they’re just offering. Yeah, they just made the offer, I guess, just for the part that they’re actually taking.
Dr. Friday 21:25
Right, you’ll want to double-check that in the case I had, that was exactly what we were told by a revenue officer that it was supposed to remove it from basis, it doesn’t actually become income to you, I suppose there could always be a catch to that if, in my case, the person had a million-dollar property, let’s just say, and they were getting $100,000 for the easement for simple math. So his property then became his original investment was 900,000 instead of that. So that was the way they calculated it. So you can always but I don’t know how much your numbers are. Hopefully, it doesn’t put you upside down from what you paid for it because that would change the conversation.
No, actually, we’re very fortunate. There are some people that are losing, as their whole house. Yeah, we’re just losing a little bone. They bought like a 10-foot section right along the back.
Dr. Friday 22:13
So it’s not interfering with your day-to-day.
Although it is an inconvenience while they’re doing construction. It’s not a big deal.
Dr. Friday 22:21
At least it’s at the back of the house. Right?
Dr. Friday 22:25
I mean, I would hate to have that. In Franklin, they were doing some repairs for a while. And right in front of some of these houses and big old holes and dozers, it doesn’t look a good thing. But thank you, Mike, for calling. Hopefully, I answered your question.
You did. Thank you very much.
Dr. Friday 22:38
No worries, mate. Thanks. All right, guys, you are listening to the Dr. Friday show. We are live here in the studio. So if you’ve got something on your mind, you want to share concerning taxes or money. I’d be glad to hear from you. If you’ve got even a story if there’s something that you’ve done, or if there’s been a phone number, anything that can help other listeners. Because there are seriously quite a few people that are waiting for refunds. And it can be a bit frustrating. We’re all kind of set up for those 21 or fewer days for our refunds. And we’ve been doing really well with that in the last number of years. And now we’re looking at a lot of people that are out 60-70 days. And no news.
Dr. Friday 23:19
I mean, it wouldn’t be so bad if the IRS actually sent a letter or something saying, “Hey, we’re delayed. We’re reprocessing your return.” Because when the IRS doesn’t do something first thing people are thinking, “Oh, gosh, I forget something. Am I being audited?” You know, and that’s not I don’t believe that’s going to be the case at all this year. I really think as the one listener that mentioned, they’re starting at one point a lot of times some of these other cases may just be taking a lot longer to do what needs to be done.
Dr. Friday 23:47
But if you’ve got a question about taxes, because we are still working on taxes, or maybe you’ve received a love letter or you haven’t filed taxes and a number of years, we get back we’re gonna talk a little bit about the expectations of what the IRS is going to think as compliance and where we need to move that in any other questions. The show number here is 615-737-9986. And we’ll be right back with the Dr. Friday show.
Dr. Friday 24:28
Alrighty, we are back here live in stereo. And again, the number here in the studio is 615-737-9986. We are taking your calls if you’ve got some questions, and hopefully, we’re helping out a little bit to help you figure out where your tax money may be or what you can do or not. Again, the number I had gotten a couple of texts during the break, and they basically when the IRS number and I said it, put it out there so. I’m sorry, the IRS number you want to call is 1-800-829-1041, 800-829-1040. That’s the best number probably to reach individuals to deal with maybe finding out the status if you’re not getting much help from the online.
Dr. Friday 25:18
So again, I have an email here where someone saying they found out after they filed their taxes, that they had actually received one of the stimulus checks that they asked for. And again, under any of those circumstances, if you claim you did not get a stimulus check when you filed your 2020. And then you found out later that you made the mistake, do not amend that tax return, the IRS is actually doing a match of the stimulus. Now in some cases, I think we’re going to have some interesting conversation, once we get the letters back or the money back. And people are like, “Wait, they took out my money, and I never got it.” And we’re gonna have to find out if you were claimed as a dependent if your parents received the money.
Dr. Friday 26:02
I have a case that I know, with a close friend where the daughter received the stimulus money, and the mom had also received the $1400 stimulus money. We had her send it back because you know, you don’t need to have two of them, you only need one. So anyway, so I don’t know the scenario on each and every individual of what’s going to happen, but I think we’re going to have quite a few or at least a number of people that will say they never received it, and possibly somebody else did receive it. And you know, again, the IRS is only going to mark what’s been received and not received. Otherwise, we don’t have the ability to follow up with that. So if there are any questions you have on that or any other tax issues you might be dealing with.
Dr. Friday 26:48
And one of the big things, obviously you guys know, I’m an enrolled agent licensed with the Internal Revenue Service to do taxes and representation. So that’s what I do all the time, and have been for 20 plus years doing that. Insane. Obviously, things change. And one of the things that have come down, and it’s been a little while, but it’s what really makes compliance? I haven’t filed taxes for 20 years. Do you think I need to file all 20 years tax returns? Now, there are cases when we’re going to say there’s a caveat to this. But all in all, if you haven’t filed taxes for 20 years, the IRS has not done any, they will sometimes help you out and file taxes on your behalf. Not really. But they will file those taxes not always in your favor.
Dr. Friday 27:32
But if basically you haven’t heard from them, there are no taxes that the IRS six years is all you would have to file. After six years of taxes, we get you back into compliance moving forward. So so you know, even though you haven’t filed for 20 years doesn’t mean you’re going to file 20 years worth of taxes, because the logic is who can easily go back 20 years, the IRS doesn’t even have access, or I should say we don’t have the ability to download transcripts for anything more than 10 years. And so that brings up the next question, which was if you’re self-employed, and you receive a lot of 1099, a lot of times the IRS will calculate tax returns. And once they’ve done that, then it’s considered a tax return on you would have to amend or in this case, you’d file an original return. But you may have to go back more than six years in those situations.
Dr. Friday 28:24
So I have cases where we have to go back to 2006 or 2008. Now, it really depends on when the IRS I have a case right now where the individual, the IRS audited 2011 and 12. But that audit didn’t actually take place until 2017 and 2018. So obviously the time clock and what they posted. Unfortunately, this person just didn’t do anything. So the IRS said, “Oh, fine, you don’t want to show up for this audit, we’re just gonna say you had no expenses, report the income that we know. And then you can deal with it later.” And so we are dealing with it later. But that’s one of the problems we’re having in some of the situations.
Dr. Friday 29:01
So if you have an IRS issue, you don’t know where to start, you don’t have any idea what the situation you know, what kind of can of worms are you opening? The first thing we need to do is set up a free consult because I can’t guarantee I’m going to give you the answers you want either and I know there’s a lot of things that advertise on TV and radio “Oh, we’ll give you 10 cents on the dollar. We know how to negotiate.” You know, guys, I want to be quite honest with you. There is a system which we have to follow to get an offer and compromise which is the deals that you’re talking about. It’s called a fresh start.
Dr. Friday 29:33
And then those situations really depend. If you have no income, or you’re making a minimum wage and you’re living on your own and you’re barely making it the IRS has no hope in getting money from you. If you’ve got 401 K’s, equity in a home. You know, you just inherited some property or you’ve invested in real estate or something else and you owe more than your primary home. you’re not going to be as likely to get away with 10 cents on the dollar as a person that has rent, an hourly job, and no other assets. So just keep in mind when you hear those things, it sounds really good, but the reality is a little bit different. So we will give you the truth of what kind of deal the IRS may or may not take. And if it doesn’t, then the next step is, of course, a payment plan, partial, full, even noncollectible as possible in some cases. So you just have to remember that the IRS does have a set of rules, it’s pretty straightforward. They know what they are, we know what they are. And we just have to comply with those rules to make sure that we’re getting or doing what we need.
Dr. Friday 30:38
So if you need help getting yourself back on track. Maybe you have kids that are going to be going to college soon because you can’t get FASFA without tax returns. You know, of course, I know quite a few people that missed out. Now, hopefully, we don’t have another pandemic during my lifetime, it was not that fun the first time and I would prefer not to have to go through it. But some of the people that were not filers and weren’t in compliance missed out on theoretically what I refer to as free money, COVID money, for business owners and things and there’s no money, it’s not like you can go back and get it sure you can get the stimulus. But even the stimulus is thought of as a rebate now, rebate credit and from what I’m seeing unless they change something in the tax law, they’re applying that to your back tax issues, they’re not issuing those checks to you, even though if the original check came to you, they couldn’t have kept it. But on the tax returns, from what I’m seeing, and if someone understands differently, all the ones I have filed, the IRS is keeping applying and doing something with it.
Dr. Friday 31:37
So again, we need to get you in compliance. So you can start living your life, you want to buy a house, you want to, you know, do something, you don’t want to be looking over your shoulder every time you make an investment or have to do something. So these are the kinds of things you want to do. And make sure that you have it in the right direction. So that was a big thing. So again, six years is all you’re really looking for. And we can pull transcripts, at least get the income side and to the best of our ability. And then the expense side, we may have to use a little bit more technology or information that you can provide to us to get what we need. But either way, we want to make sure you guys get in compliance. This is the year everybody needs to start filing and living their life the way they want to, and not be leaving money and things on the table if we can help it.
Dr. Friday 32:24
So if you want to join the show, you can at 615-737-9986. We are taking your calls talking about all of my absolute favorite subjects. And if you’ve got a question. I have someone that actually just emailed right now it just says, “I received an email from the Tennessee Department of Revenue and they’re saying something about a business license, can you help?” And if you are getting these emails and a business, and it says business tax, what they’re talking about is not anything you would have filed at the end of the year. This is your annual business tax. So if you have a gross business receipt, almost all businesses have to have one. And you would have to go on to TNTAP. If you’re not able to do that, or you don’t have a TNTAP account, then you’ll have to go back in and either set up a TNTAP account or make it work for you. Either way, it is something you need to be able to move forward and you know, make sure you pay because it’s late. Remember, gross business receipts, I think we’re doing the 4/15 date, they did not extend a lot of these things. Tennessee did not extend much of anything. I know my office got caught a little bit because we thought when we extended the Fed that they extended the state for us and that did not happen as far as I can see. So you know, just be careful because they’re liking to give us wonderful little letters telling us that they’re late or that there’s some other issue going on.
Dr. Friday 33:54
All right before the break. Why don’t we hit Doug, we got Doug on the phone. Hey, Doug.
Hey, how you doing?
Dr. Friday 34:01
I’m awesome. What can I do for you, sweetie?
I’m looking for some direction on where to get social security advice as far as you know when I should take it based on my you know, working situation and so forth. I turn 66 in June and this month actually and just I need some direction. So who do I go to, is that you
Dr. Friday 34:28
No. I would love to tell you that I have to someone for this, just sharing. Let’s be straight out. If you got a tax this year you need tax preparation, Friday is your girl but my financial planner is Hank Parrot. He runs a company called estate and financial strategies right down the block from me in Brentwood. And he will give you a free consult. Just tell him Friday sent you and he’ll work that up along with any other questions you might have as far as investing, you know when RMDs are required, and he’ll do a pretty cool little workup. I’ll show you if you take it out on your regular retirement, for example, take it out at might be a breakeven situation or take it out at 70 when it’s maximized, and you have to take it out, what’s the advantage and disadvantage, because we all know there’s a catch-up period, right?
Dr. Friday 35:14
I mean, just saying, if you take it out at 66, or whatever your full retirement is if you wait till 70, depending on your income bracket, or it’s going to go up by 8%, every year. So you know what you can earn in your retirement. That’s what they always tell me. But the problem I have is, in my retirement, I’m not going to lose it the day I die, where the Social Security, I don’t get all the time. So even though it’s growing. I mean, if you have longevity, I have some clients that their mothers are still alive, and they’re like, almost 100 years old or something. My family is not one of those, Doug. We’re not long-livers, I don’t think so. And I’m sure that’s something he asked. But that’s my biggest from the tech standpoint, I would tell most people, to be quite honest, unless you’re working. And it sounds like you’re still are.
Dr. Friday 36:02
But even if you’re working just figure you’re gonna pay 22 to 24%. It’s free money. That’s why I look at and then I can reinvest that money and grow it for the next number of years, even if you are working. So that’s Friday’s advice. I am not going to tell you, Hank will say I’m crazy or who knows what he’ll say. But I would get a free consult from him. And then you can kind of play with the numbers and say, “you know if I left my IRA alone, and I start drawing early, and I get myself a big nest egg from Social Security, my IRA or my 401k or whatever, it will grow. And I’m living off money that I gave the government is never going to really grow.” That’s Friday’s two cents. Let me give you his number though if you want.
Okay, great. Yeah, we’re on the same page. Everything you just said is kind of the way I’m thinking so that’s good. Okay.
Dr. Friday 36:50
Yeah. Like I said, brace yourself. Hank will give you, he is the history of everything. And he’ll give you other reasons. But he’ll give you a logical give you something to think about, but I already gave you my two cents. The direct number for his company is 615-376-5327.
And his name was Hank Parrot?
Dr. Friday 37:10
Hank Parrot, like a bird. Yes.
Perfect. Dr. Friday, thank you so much. I really enjoy your show. It’s awesome. ,
Dr. Friday 37:17
Thanks, sweetheart. I appreciate you. Alright, guys, we’re gonna take a quick break. It’ll be our last break. So if you’ve been waiting to ask a question, and now it’ll be a really good time to get on the phone lines. Call 615-737-9986 we’re gonna be right back with the Dr. Friday show.
Dr. Friday 37:37
All righty. Hopefully, you guys can hear me, this is life in the studio. I’m Dr. Friday, this is the Dr. Friday show. We have about eight minutes left. So if you want to join the show, you can try again at 615-737-9986. Hopefully, we’ll be able to get you on the show and love the questions as you guys all know. So that would be totally awesome. All right.
Dr. Friday 38:02
So we’ve been talking a little bit about different things. The biggest thing, I just want to make sure that you guys are all set to be able to understand how the IRS and get in compliance and making sure things are working. As our last caller, Doug called in obviously, my opinion on Social Security probably will not necessarily match maybe some financial planners, but probably not many. Because I know many of them, like the idea of things growing and doing things? Is Don ready? Let’s hot Don while you get to the other phone lines if you can. Thanks. Hey, Don.
Hi. I have a question I have some, well, I had some I sold them because I was in a bank, I had some partnership investments inside of my Roth. And I read about unrelated business income tax, which can reach even into your IRAs Roth. And how common is it to show up on like a K1 or something isn’t very common or not?
Dr. Friday 39:02
It’s not necessarily very common to be quite honest with you. When you’re dealing with, you have investments like your partner in these investments, just to make sure I’m on the same page?
Just stocks within my self-directed Roth IRA. I just bought these as an investment and became concerned when I heard about UBIT which is unrelated business income tax, and there’s a section where it says you’re probably or it’s possible that your IRA will have to file a tax return. [Inaudible]
Dr. Friday 39:40
Right and I’ll be honest, most of the time, whenever I’ve seen those kinds of things, that they usually there’s quite a few exemptions and exclusions that fall under that. Okay, just let you know. And normally, is yours being managed, or is it self-directed?
Dr. Friday 39:57
Self-directed, okay. So potentially, the problem I have when I see UBI, I usually see it when somebody or UBTIorry, I had to put it in my head real quick. I’m like, wait, that didn’t sound right. It is when people are doing self-directed, and they actually use the money for real estate. And they brought properties. And I’m not saying this is you at all, but the only circumstance I’ve ever had it was when they then did self-repairs and tried to build the ROTH for the repairs under their time, you know, I’m saying and you can’t do that it’s a conflict. But that was a one. I mean, that was the only time I’ve ever run into anything along those lines at all. So I don’t think it’s that common considering I do quite a few tax returns.
Good deal. Well, it made me scared to invest in partnerships, limited partnerships, within, you know, buy stock in companies.
Dr. Friday 40:56
No, I mean, that’s a, it’s a good thing to be considered for. So no, I understand what you’re saying. But I think you’ll be fine. I really do. I don’t think this is common as people like to think it is.
Well, I’m not used to looking at K1’s. And I guess you’ve seen quite a few.
Dr. Friday 41:13
Well, yeah, we prepare them and we have to look at a lot of them. Yes, sir.
All right. I just want to know what your perspective was on the unrelated business income tax. So not be worried in most cases?
Dr. Friday 41:25
Yeah, I would say it’s pretty. I mean, if you’re investing in normal, regular businesses, not startups or anything like that, Don, I think you’re gonna be safe.
Good deal. Okay. Thank you so much. Appreciate it.
Dr. Friday 41:37
Yes, my husband and I have been trying to convert to a Roth IRA, out of our IRA. And we’ve made like, you know, $65,000 transfer or $35,000 transfer, and it’s going slow. And we’re kind of afraid that the tax rate will go up, because I know we have to have, you know, we have to pay our taxes. So I was wondering, what would your advice be for someone like us? We’re retired in the low 60s and 70 years old. And, and we have a lot to move?
Dr. Friday 42:15
Well, I would say, I don’t know if you heard me earlier. But I would actually, do you guys have a financial planner that’s helping you work with it?
We do. We have a managed account. Yeah.
Dr. Friday 42:24
Okay, great. Because I mean, that your tax person. Because I would say, “Well, what do we consider what the future taxes versus now? How high can we go up? Can we go to 20? ” I’m saying, depending on your situation, we have some clients that are willing to pay 24%. So what can we do to maximize 24%? Married couples somewhere around 350 to 400,000? I mean, you could do some of it pretty quickly. But how, you know. And then reinvest it and let it grow for the rest of your life. Because a Roth is so much easier than a regular IRA or anything else.
Yeah, we got into our Roth as soon as we could, and you know.
Dr. Friday 43:00
Like a lot of us, but I may have been a little late, we had years of still 401 K’s and stuff and employers. You know, I’m just saying that, yeah, we didn’t have those options. I think it was in the 80s. But anyway, yeah. So my suggestion would be is to sit down with your tax person along if they can do a phone conference, or whatever, and maybe you do it, but have them crunched the numbers and say, “What are you most comfortable with?”
Dr. Friday 43:21
Because if it’s a conversion, part of it is mostly my people don’t want to take the money out to pay taxes, right? I am just saying, they really want to convert and pay the taxes on their own. That’s what limits and then the percentage. 22% I’m happy with 24 or higher my opinion, in my lifetime, I’m in my 50s I think I need to spread it because my current tax code base, we all know we’re gonna go up. So 22 is going to be 25 and 2025. You’ve only got three more years, roughly? Of conversions, and then you’re going to go up automatically. 3% unless they do something before that, because listening to the current president, who knows where taxes are going, that’s what makes all of us a little nervous.
Dr. Friday 44:05
Yeah, as long as you make 401. Don’t worry if you make less than 400 well, there’s a lot of loopholes in that number of 400 in my personal opinion, so.
Oh, okay okay.
Dr. Friday 44:15
Yeah, I’m not holding my breath the 400,000 is going to be the bottom number of people affected as all I’m saying, I think we’re all going to see it anyhow. But yeah, so if you bite the bullet, now, you get it done. And then it’s got time to grow and your kids are gonna love you too because they inherit tax-free.
Right. We’ve got I mean, we’re gonna talk to our advisor, but I just wondered what your perspective was, and we can pay the taxes. It’s not a problem. We don’t have a problem with that. We have some, you know, cash on the side.
Dr. Friday 44:46
Other investments in cash that you’ve had. Yeah, well, my opinion is yet, and then have your tax person crunchy because you don’t want to get, in my opinion. You want to stay in the 22 at the max. But what’s the maximum for you with all your other incomes to keep it there and then try to come those in a faster increment?
Dr. Friday 45:02
Because some people like to pay zero to nothing, you know, I mean, and then that takes a really long time. 12% 100,000 that you can’t, you really can’t do much converting under that. But 22 you can get another 100 and some 1000 out of that easily and that may be enough to help make a bigger dent. Maybe not a full dent, but a bigger dent.
Well, maybe what about a year, every year? Would you suggest that?
Dr. Friday 45:23
No, I would do it every year. Yeah. Every year until the taxes reevaluate.
$100,000 every year?
Dr. Friday 45:29
Yep. Yes, ma’am.
That’s what we were thinking. We’re going to talk with Joyce and see. Yeah, but I just wanted to know, what’s your perspective? I listen to you all the time.
Dr. Friday 45:39
I appreciate that very much. Thank you very much. All right. Okay, talk to you later. All right, we’re getting to the end of the show guys. So if you want to reach me, you can reach me on my phone on Monday morning at 615-367-0819. You can check out this crazy blonde on the internet drfriday.com or email probably email or text. The phone number I gave you is also a cell phone so you can also text or you can email firstname.lastname@example.org. Just like the day of the week email@example.com.
Dr. Friday 46:15
Hope you guys are having an awesome Saturday, just as I am. It’s a little warm outside but getting lots of work done inside and as I always say call you later.