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:
- How To Audit and Proof Your Business Documentation
- What To Do If You’re Receiving Letters From the IRS
- How You Can Make A Deal With the IRS
- How the IRS Decides If You Can Afford To Pay Them
- Why Entrepreneurs Should Be Paying Quarterly Taxes
- 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?
- Are There Advantages To Spreading Your IRA of 401K?
- Do You Need Help With Tax Representation?
- What Changes Is The Biden Campaign Making?
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 live here today. So you can join us at 615-737-9986. I am an enrolled agent licensed by the Internal Revenue Service to do representation and taxation. So guys, that’s pretty much what I do. So if you haven’t filed taxes, or you’re getting all those love letters, there’s liens, levies, and you’re tired of it. Guess what, there’s someone local here in town, not one of those national advertisers. There’s someone here you can sit down face to face, and we can find a resolution.
Dr. Friday 1:09
I’m gonna be honest, I’m always straightforward with my clients. This just basically means if you can make a deal with the IRS, we will make a deal with the IRS. But if you’re not able, because of Home Equity, 401k equity, you have the money you’re inheriting or you have a second house, then the logic is you can pay someone all you want, but they’re not going to ever get a true offer and compromise through. But we could resolution in other ways. So if you’re interested in doing that, or you’ve got questions about letters you may have received, and I’m sure we’ve got listeners right now that have some questions about where in the good book is my stimulus money and or refund?
Dr. Friday 1:50
And I’m gonna be honest with you guys, there is no easy answer on that particular one. But if you want to join the show, or if you have received, you know, your refunds and you have been waiting for a long time, it might be reassuring for other people to hear and say, “Hey, I waited 60 days, but I finally got my stimulus money.” That would be awesome. You can reach us here at 615-737-9986. And let’s go to Pat in Marshall’s. Nashville, sorry. I’m like reading that sideways. You had to be there. Hello, sweetie.
Hey, how are you? My husband and I are having a complication. My husband had changed his job last year, his job ended in March and because of COVID and everything he went and you know, be he was going to turn full retirement age in July of last year. So he went and applied, didn’t enroll. But I mean, he applied to get his full benefits four months down the road. He went and applied for Social Security and they forced him to take Medicare Part A causing the last seven months of his HSA contributions to be eligible.
So we had to back out of everything, the employer wouldn’t contribute to the fix in the first year because it overlapped 2019 and 2020. So we undid the excess ourselves, added it to the 2019 return as other income according to the IRS rules on the 889 Form instructions. And then in 2020, the employer had put in some money as well as my husband at pre-tax. We undid my husband’s contributions for the first three months and 2020. The employer we begged them to do the correction and give them a W2 corrected from the get-go for 2020.
They did it but they did it at the end of December of last year and it hits the bank account in January, deeming it ineligible to recoup. And so they won’t respond to emails or phone calls. So we need to file our taxes. None of the tax preparers including the IRS have any help related to this matter. The person who did our 2019 taxes seemed to do it right but we’re getting 1099 for the 2019 access, they call it a 1099 SA box three code to distribution for x. So we got 1099 lumped into the 2020 corrections. So now we kind of we the cart before the horse we pay the excess in the 2019 return and have a new guy doing 2020. The preparer is saying that “Well, we shouldn’t have done that you didn’t have 1099 yet to be including that.” And so we got to put a note in for 2019 explaining what we did. But now he doesn’t want to do that. Oh, are you trying to talk I didn’t hear you?
Dr. Friday 4:58
No, you’re perfectly fine sweetheart. You are 100% correct, though what you’re thinking, I think is correct. You’re going to need to amend 2019. Because of the timing, it’s gonna fall in 2020, you’ve got the 1099 SA, then you can pay, you know, they’ll refund you the money on 19, you’ll pay it in 20. And you may actually have another 1099 SA, for 2021 depending on the timing. It sounds like that’s what’s going to happen. But you do need to apply them in the years, just by telling the IRS, “This is what we did,” that’s not going to work, they’ll never get on the same page as you.
Dr. Friday 5:33
There’s always going to be that other form. So you’re just going to need to take that income reported in 19, back off, get the refund and then either roll that refund into 2020 or, you know, get the check-in and then pay it. But it’s not going to, it’s never going to match up so that is going to have to go. I mean, the tax preparer should have known that before making having do that.
So the 2019 return has to get amended?
Dr. Friday 6:02
And so what we do is basically redo it and take that income off. And then they’ll refund me the money from the IRS?
Dr. Friday 6:11
And then you basically put it on 2020.
But in on 2020. Isn’t it too late to do an amended return for 2019?
Dr. Friday 6:20
Oh no, you have three years.
Three years? Okay.
Dr. Friday 6:23
You’re it’s still within the change year. So that’s not a problem and you can still get the refund.
So then isn’t that considered see the IRS instructions don’t say they say if you don’t get a W2 for your employer, to put it in his other income, they don’t tell you what tax year to stick it on.
Dr. Friday 6:41
Well, and that’s the problem is that the employer was doing everything in hindsight, in essence, he’s waiting until the end of the year and then making the adjustment, which was really in the first the next year. So and I will tell you, that’s fairly typical in those kind of situations. So you know, if you try to keep it in the year that had happened, the IRS is always going to have a 1099 essay in another year, they’re going to double charge you. They won’t care what you put on 19 because they have no documentation for it.
Oh. Interesting. So now we can’t recoup, the employer recouped the 2020 money. So don’t we have to, they won’t respond. But we’re not going to be able to get that money back. So we’ll get a 1099. But should we just pay the tax on it and not worry about it?
Dr. Friday 7:32
I would wait till you get the 1099 and then report it because for them to reconcile they will have to issue it. But it may be in 2021.
Yeah, yeah, they will issue in 2021. But we’ll just pay the tax even though we didn’t get the money since we didn’t get the money back, just to be done with it?
Dr. Friday 7:53
Right? I mean, depending on how they actually send you 1000. If it was the employer’s contribution, then the employer took it back out. That money should not be showing on your line W2 or anything else. That’s an employer contribution. Nothing to do with your personal. It does add to the total, but it was a benefit, not necessarily income. The employer portion, right, and the good portion you should have gotten back, right?
Code box three, code two, it’s not going to say who got the money. It’s just gonna say the money came out?
Dr. Friday 8:27
Again, it should. I mean, on the backside of that if the employer put the money in the employer took the money out, you are not going to pay tax on that.
But if it’s on 1099, how do we tell them that?
Dr. Friday 8:39
Well, if they actually put that on 1099, I’d be shocked. I think they’re only gonna put it on they should only put on the 1099 SA the money that you contributed.
Yeah, but it’s gonna, they told us we’re gonna get a code three, three code, the bank said they’re going to send us a 1099 next year.
Dr. Friday 8:59
Well, you know what, I think at that point, yeah, I would have, we would have to go and approach the IRS saying this was an employer contribution and employer payment never received. You can’t pay tax on the money you never received. I mean, that you might put that as an explanation on the 8999 or whatever. But it would be an explanation required.
Dr. Friday 9:23
For the year that you received that 1099, yes.
Okay. So we need an amendment for 2019 and 2020.
Dr. Friday 9:32
You file your 2020 and then file wherever you have the one and then if and when you get the other one, and they say they’re getting it, but sometimes employers don’t know what they’re talking about. If you do get that one, then I would approach that one when I receive it, and then deal with it directly with the employer. Because if you’re paying tax out the employer needs to give you the money, period.
Well, the employer is not even answering our calls.
Dr. Friday 9:52
I know. But I mean, that way, then, you know, you’d have to do something on the other side, going through the IRS and we can do that even if requires the tax advocates office to get involved you could you have ways of getting that to be corrected.
Do we have to do get the IRS involved to get them to give the money back?
Dr. Friday 10:11
That or to remove the 1099 SA off you so that you’re not paying taxes. I mean, at this point, we just don’t want to pay tax on money we never received. That’s the point.
I just want to get this thing off my back. I don’t care.
Dr. Friday 10:24
She’s like, “At this point, I don’t really care Friday, I just want the IRS not on my back and just get it done.” But right now, your most important thing, amend 19, and file 20.
So we can’t file? Will the IRS kind of turn if we do the amended return pretty quickly? Can we get them to turn around?
Dr. Friday 10:43
Nothing is going to happen quickly, nothing’s going to happen quickly. I would get 19 filed and very likely, it could take up to three to six months to get that money back.
But then we can’t file 2020 until we get that money back?
Dr. Friday 10:56
Well, my theory would be to file 2020, and then pay the bill and wait for the money to come back from later on. I don’t think it’s gonna be that much money. I mean, I don’t know how much we’re talking here. But I would file my 2020 and pay it on or before. And if you owe money for 2020, you really need to do it. I don’t know what county you’re in Nashville. So you have an extension until August 2 under the federal extension, but you need to get that money in ASAP. If there’s money due for 2020.
There’s no money due. But there’s, you know, we need to report that 2019 money on the 2020 return that we’re amending, we need to wait till we get it back to do the 2020 return.
Dr. Friday 11:38
Not necessarily. I mean, you can amend 2019, they’ll send you a check back on 19, you can file today 2020 and pay that money so that’s all out of the way you’ll eventually balance out but it might not. You may be out a few dollars while you’re waiting for the money to come back from 19.
Okay, so we can still go ahead and report it and then just get the money back later. Okay. I have to wait to do 2020 to amend 2019.
Dr. Friday 12:04
Okay. And so try to get the IRS involved to get them?
Dr. Friday 12:10
Right. Well, first you got to get the first you’ve got to receive the 1099 SA with the number on it. First, you have to receive it, which I don’t believe you received the new one yet, right?
For the one the corrections they made too late, we won’t get till next year.
Dr. Friday 12:25
Right. So wait till that comes in before you do anything else on that one. Wait, until you physically have that paper in your hand before you get anyone involved.
Okay, so don’t ask the IRS to fix that one now? Okay.
Dr. Friday 12:38
Can’t because they don’t have a copy to fix. They don’t know what to fix. So, you know, you’re jumping ahead, they have to have a copy in their system to even understand what you’re talking about. So you got to wait till that happens.
Okay. Okay. All right. So that sounds easy. I mean, do the amendment, get the money back, file 2020 with 1099 we have. And just wait till next year for the other stuff.
Dr. Friday 13:03
You got it.
Oh, thank you so much. And if we need you, can you handle doing this as a return? And is that going to be pretty involved?
Dr. Friday 13:11
I can it shouldn’t be that involved at all. It’s not that complicated.
All right, if we need you we’ll call you back. Thank you.
Dr. Friday 13:16
Thanks, guys. I appreciate the call. Bye-bye. All right, we’re gonna take a quick break here. And we get back we’ll take more of your phone calls, you can join the show at 615-737-9986. We’ll be right back.
Dr. Friday 13:38
All righty. We are back live here in the studio and you can join us at 615-737-9986. We were talking earlier about what you might need to do if you’re receiving love letters, or if you have IRS issues, and Pat was good enough to call us. And that’s the kind of things that happen. Obviously making corrections, amending. I’m working on a case today that was someone that has to go back to 2011. Normally, to be quite honest, at this point, we’re pretty much looking at 2014 through 2020. Usually, we only have to go back those six years. But in some cases, the IRS has already filed returns on your behalf which is always so very, very helpful. And when they do that we do need to go back to those years and either get into an audit reconsideration and or just amend those years because tax returns were never filed in the first place.
Dr. Friday 14:40
So whichever way we need to deal with those issues, that’s the way we would. And then once we know once we have the real numbers, whatever those numbers are an offer and compromise a payment plan a partial payment plan or even non-collectible can be done. Keep in mind the IRS can take your Social Security benefits they can make money from 401 K’s, IRAs, they can put liens and levies against the home, if you own multiple properties, they can seize properties. So it’s not something you want to just let ride, in my opinion, you want to get on board, you want to start getting in there. And there are a lot of systems we can use to try to get you on track.
Dr. Friday 15:18
Now keep in mind, I have several times people will walk in and say, “Well, I can’t afford to pay the IRS” yet you can afford to pay your kids private school. I will tell you, the IRS does consider that their money. Now again, I’m not saying you can’t, but if you can’t afford to pay them, they’re gonna say you can’t afford to put your children in private school. Or if you have multiple cars, or you have multiple properties. And you’re not paying the IRS. These are the kinds of things we have to get a head start on last thing you want is the IRS auctioning off your assets. They’re not likely to put people in jail. In fact, they very rarely do that they don’t really make money when people end up in jail. But they can make your life a bit more challenging than you wish. And it can roll into other things in your life, including, you know, your children, your wife, husbands, whatever.
Dr. Friday 16:09
And so the best thing to do is to make a deal live up to that deal. And then you can get back on track. And most of my or large number of my people are entrepreneurs, self-employed individuals where, you know, you make 100% of your money, and you put it in your pocket, and then you go spend it and you forget that you have a one quarter or 25% partner in every business. I don’t care what you say, between Social Security, Medicare, and ordinary income tax, most people have a partner called the Internal Revenue Service in their business. And you need to have a separate bank account and from the profits of the company, you should be setting up every month, how much at least my opinion between 20 to 25% should be going into a tax account.
Dr. Friday 16:52
So that way, when it comes time to make quarterly estimates year in tax payments, franchise excise business licenses, annual business news, you know, all the things that we have personal t-tax that we have to file as business owners, the money is already over there sitting in that account. If you don’t, you’re sooner or later going to need the ability to make a deal. And that is never as simple as one might think it is. So if you’ve got questions, you’ve received letters, or maybe you’ve got a friend or family member that you know has heard it kind of get themselves into a tight spot in life happens guys, I totally understand that. It’s not like we’re saying, “Hey, this only happens to this,” this happens to all walks of lives, all individuals, it’s really a matter of who wants to get back on track, because that’s really what we want him to do.
Dr. Friday 17:41
Get back on paying your quarterlies to start learning how to handle the money properly. That way, hey, if you want to go buy a house, you want to put your children through school and you have to get through FASFA. You know, you want to even get I mean, I’ve had people come in prior to getting married. Because if you get married that even though the IRS cannot go against your new spouse, guess what they can do, they can basically say, since your new spouse works, and they make so much money, no matter what it is $30-$40,000 a year, that means you can now afford to pay them more money, because it’s combined income. So even though they’re not responsible for paying your IRS debt, their income is now in the household, and now becomes a part of the amount that you can afford to pay the IRS. These are the kind of things you guys need to understand.
Dr. Friday 18:31
And we need to start talking about maybe audit proofing your business. Find out the proper documentation, the best way that you can actually keep track of your information. A lot of times people think, “Well, if I use a credit card, then I’m tracking everything properly.” But it’s not the way the IRS looks at it. Because if you’re going to Office Depot, how do they know that you didn’t buy school supplies or something other than that, they don’t. They need to see the physical receipt to see that you purchased toner or you purchase paper or what you purchased at that location. You know, just because you’re putting petrol in your car doesn’t mean you’re entitled to taking off your miles. How do they know it was your car in the first place? All they know is that money came out of a bank account that’s a business account possibly that someone used to put petrol in their car. It could be your child, it could be your best friend that you filled up their gas tank, there is no way of using that as a source of saying “this is how I came up to my gasoline.” You need a mileage log and the IRS is pretty darn strict about this kind of thing. It basically has to cover the essential information the day you met.
Dr. Friday 19:36
“Why did you go to this meeting? How far was it from point A to point B?” And they want to see your odometer from the beginning to the end of that day. They want to know what the purpose of this meeting was. This needs to be maintained on either an Excel and some people can use like mileage IQ. I’m all for the apps I think it’s a little bit easier and it does track everything
Dr. Friday 19:58
But they want to log they want to see what, I mean, It’s probably more important than the vehicle you drove is what were you doing the driving for? Then we get into our drivers, right? Are people that are doing different kinds of car pickup services around in those individuals. How are you tracking your miles? Because in some cases, you can be extremely straight up and basically say, “I only to use the miles that they’re showing on my year-in statement that they paid us for those number of miles.” Are you tracking having to go back to the airport after you drop somebody off? Because you pick up a lot of people at the airport? How are you tracking that information? These are the kinds of questions you have to be asking yourself because the IRS will be asking it of you. And if I didn’t get his way, there’ll be a lot more audits coming down the line than there has been because he wants to put a couple billion into the IRS for audits.
Dr. Friday 20:52
So let’s think about audit proofing ourselves now because if the IRS finds more than 20% of a discrepancy between one year to the next, they can open up another year’s audit, and this can go for three years, not really the most enjoyable thing in the world to go through. I’ll just be quite honest with you. And I certainly wouldn’t suggest anyone representing themselves when it comes to that kind of thing. But you do need to make sure that you’re dealing with the issues because we’ve had a couple of issues come in here where audits were apparently done back in 2011, 12, 13. Some of them were done for the years 11, 12, 13. One of them that didn’t close till 17 or 18. But the individual never saw the paperwork never signed off, didn’t know it was actually being audited. And the IRS can do a lot of paper audits. So now we have to do a reconsideration, we have to open it up, it’s going to be a lot more work. And we don’t have any guarantee the IRS is going to see it our way for the purpose of this audit. So you know best to try to deal with that from the front end.
Dr. Friday 21:52
So if you’re receiving love letters from the Internal Revenue Service, open up those lovely letters. See what they say. Is it say intend to levy, does it just say this is a reminder notice saying you owe this much money, it could be pretty straightforward and pretty simple. Or it could get extremely complicated. And next thing you know, your boss at work is saying, “Hey, we can’t give you a paycheck this week. Because we got an intent to we’re supposed to levy your paycheck because the IRS says you owe money.” I have one of those that came in just the other day for someone that didn’t even realize that they had a major tax issue. That’s because the IRS basically turned around and had filed some tax returns for 12, 13, and 14, I think it was. So you need to stay on top and the IRS job is not to track you down, just keep in mind, they can use the last known address they have on file. And if you’ve moved or relocated, again, not their job to track you. So you need to keep them up to date on your addresses. Even though you’re like, “Well my W2 gets turned in.” I get it but they’re not going to track that down.
Dr. Friday 22:56
And if you ever need some help, remember as an enrolled agent, I can get power of attorney and represent you. So that way at least you have somebody there with you that knows what the tax rules are and able to go through and help you navigate the way around some of the questions and some of the situation that you have at least you have that information, so you can make sure.
Dr. Friday 23:17
Okay, So enough about offering compromises or payment plans. But you know, if you really truly want to get back. And I have to keep telling people when you want to negotiate with the IRS is when you are not at your very best. Because at your very best you probably can afford to pay the IRS. If you’re not at your very best, then probably going to be a good time to have that conversation because they have to look at where you are now. They can’t do some sort of projection saying “Oh, he could be back at what he was making two years ago.” Be great. We don’t know that for a fact those guys so the IRS will be working with where you are today. So now is the best time to consider that and you can call my office and set up an appointment for that kind of free consultation, sit down and see what we can do to help out.
Dr. Friday 24:02
All right, we’re going to take our second break. When we get back we’ll go to the phone lines at 615-737-9986. We can take your call you got questions about your refunds about your taxes about what you need to do next, how you can get started if you’ve got some tax issues. Don’t have to use your real name. No one really cares. Just call and ask the question. We’ll be right back with the Dr. Friday show.
Dr. Friday 24:34
All righty, we are back here live in the studio if you’ve got a question concerning taxes, or maybe you have a friend or someone that hasn’t filed taxes for a number of years. This is the show to listen to because you know, we’re expecting there’s gonna probably be some changes to taxes but if you want to join the show, 615-737-9986 is the number here in this Studio. So basically, we know that there are some changes possibly being put out there by the Biden campaign, or President Biden. And some of them are talking about removing the benefits of capital gains.
Dr. Friday 25:19
Possibly removing the 1031 exchange, and the step-up in basis for inheritance. Now, I don’t want to scare anyone, because honestly, at this moment, there’s just a lot of talk, even his own parties, not advocates for a lot of these different situations. So I think it’s gonna be a matter of coming down and just, you know, kind of winging this, this part. But I mean, obviously, there’s a lot of people that come in my office every day, and many of them are like, “Well, what will happen if this passes to our current tax situation?” Some of my clients live off of capital gains, dividends, interest, those kinds of things. And, you know, instead of being a favorable long-term capital gains rates, they are talking about eliminating some of those, for now, Biden’s always talking about having something over 400, or under 400. I really hope we don’t become a country of splits. Because we have enough of the tax code that’s progressive.
Dr. Friday 26:18
So as you make more, you pay more, it’s just that simple. I don’t care what anyone says. But you know, as you make more money, either in capital gains, or anything else, it’s going to come out as more I mean, I had quite a few people, not quite a few, but a number of people that did very well in the stock exchange, buying and selling stock last year in 2020. And doing just as well in 2021. And most of them are doing short sales. So that means that they’re not holding the stock for a year before they sell it. So I’ve got people that are, maybe their average income may be under 400. But with their gains, they’re now going to be well over $400,000, which is making them if they’re single into the 37% tax bracket. And then if you’re married, it may bring it down a little bit, the same income bracket, but they really start in the 34 or 32-34, they kind of stopped eliminate, they start adding the marriage penalty in there.
Dr. Friday 27:14
So by the time you get to the 37%, it’s like a single person can make 550,000 as it 37%, and I’m a married couple. So singles 550 and married is like 650. Instead of doubling it, they’ve eliminated and you get penalized for being married at that point. So there are that’s one tax strategies and advantages of maybe married filing separately, and different things may come into play, assuming that the income is being earned equally between two individuals. So if you have questions, maybe you filed your taxes, maybe you haven’t, we do still have a federal extension in play till August 2. That’s August 2.
Dr. Friday 27:54
And so if you haven’t filed your taxes are paid them I would say get on board, get it done, make it happen. We’ve had a lot of room, I did have an individual come in yesterday that, you know, he had taken some money out of his retirement account, and he just couldn’t afford he didn’t have any withholding taxes, which a little crazy, you don’t normally take money out of your retirement account without expecting to pay some money in taxes. But he didn’t have any money really come out of it. And so we were able to help him because he was unable to work last year due to COVID took the money out, he qualified for the COVID exemption, and we’re able to spread it over three years, which just tax alone by spreading it over three years saving about $3300. But without having to come up with the first year he actually had enough. So he ended up paying the first year already and having a couple of $1,000 in the second year already there. So he eliminated the penalties, which could have been almost 25% on $20,000.
Dr. Friday 28:51
So it was a good little saving for him to be able to get it done and eliminate the early withdrawal fee on his case because he did turn 59 and a half that year, but not to the later part. And he had taken the money out prior to that time. So these are the kinds of things if you’re filing your own taxes or if you need help understanding how the taxes are being calculated. Are you in the right place? You know, you always, at least my opinion, get a second opinion, have someone review your taxes, make sure they’re being done. You know what, 80% of the time the taxes are being done correctly, there’s not a lot you can do. But there’s that other 20% of the time that whoever’s doing these taxes are missing simple things sales tax not being reported in people that are actually itemizing, which is obviously a lot less now than there used to be, you know, not being asked if they had charitable contributions or something like this last year with the COVID.
Dr. Friday 29:44
Are there any advantages to spreading your, you know, IRA withholding, or draft or 401k taking it out from that over a three-year period? These are the kinds of things you need and you need someone that will be there year-round to answer questions. Because guess what? We are creating tax issues every day. “Should I buy? Should I sell?” I can’t tell you how many times my clients will call up and they’ll say, “Hey, I’m thinking about selling a rental real estate, what’s my tax going to be if I sell it for this much money?” That is so very helpful to the client, because it makes them understand. Especially right now, when people are making putting things on the market for 200, and getting 230, or 40, or $50,000, and then how much of that is going to be Uncle Sam’s, and a lot of times, I’ve heard people talk and they’re like, “Well, I’m not gonna, you know, pay that much in taxes.”
Dr. Friday 30:33
Well, if it’s extra money, that’s a good plan, if it’s a matter that you really want to get the top dollar for it, the government’s not taking more than 24%. Anyways, from a normal long term, capital gains situation, assuming you’re at the highest tax bracket, it could be as low as 15, it could be actually as low as zero, if you have no other income, and you’re keeping it within the 12% tax bracket. This is the kind of information you need to understand what your taxes are going to be about and how you’re going to save more money in taxes. It’s not like there’s a secret really, it’s just the matter that you need to understand your particular situation on the radio here. A lot of times people are awesome enough to call, ask a question. But the answer I give that person may not be the same I would give someone else sometimes some it depends on your income bracket your situation, you know, and where you’re going with it.
Dr. Friday 31:23
So just saying, you need to make sure that the tax advice you’re getting or that you’re planning for is going to be what helps you the best. Don’t just take this show and say “Well, Friday said to do this.” I’m gonna tell you right now, but a little caveat out there that the advice I’m giving one individual does not necessarily apply to another individual in any time off this show, you should get a second opinion from a tax person, ie myself, I’m not looking at your tax information. I’m giving you someplace I’m hoping for you to start to look into and then start reviewing your information, make sure that that information is best for you. Because I know, you know a lot of people are worried about the stock market crash, I got an email in here saying, “Well, what happens if I lose a lot of money in the market this year, and I had a huge gain last year?” Well, theoretically, you can, in stock, you can’t really roll back or roll forward stock losses. So you would only be able to roll forward up to 20 years the losses you have. So it’s not like you can offset last year’s profit by this year’s loss doesn’t work that way in capital gains, there are some if it’s ordinary income loss, then there is a way of rolling it backward. And then you know, also forward depending on your situation.
Dr. Friday 32:37
So you need to figure out what’s going to be best for you. Okay, guys, join the show at 615-737-9986. Take your calls talking about all kinds of fun subjects, mostly money, right? Are you in the right place? Are you doing the right thing? Do you even need to file taxes? Have you got people you know, that haven’t received their stimulus? Because maybe they haven’t filed taxes? And what can they do now, because tax season is kind of over? Well, there are answers for all of those and more. And you can obviously reach us here if you want to, and the phone number right now is 615-737-9986.
Dr. Friday 33:19
We are talking about all kinds of fun and exciting subjects. But mostly, if you guys have something you want to add to the show, that would be awesome, because that’s the easiest way for us to actually make sure I’m talking about something that you really want to talk about and see how that’s going to help you moving forward and what you have and how you’re going to get it done for yourself. So again, if you want to join the show 615-737-9986.
Dr. Friday 33:51
We are talking about taxes and issues that you have going forward, what you need to know, because the most important thing is, especially if you’re dealing with long term capital gains is you know, what’s your income bracket, how’s that going to affect you, because like ordinary-income brackets, obviously, for a single person, you know, goes up to 37 at 523. And that’s what is a married couple at 37% would start at 628, barely $100,000 difference by the time we get to that the dollar amount and what we have gone there. So we have that going and making you know, making sure that goes into what you have, and how’s the best way for you to plan on what you have and where you’re at. Because, again, you know, a lot of people think, well, I can make all this money or I can do something like that. But you know, if you’re in long-term capital gains 20% kicks in at 250. And that’s, you know, that’s actually a little bit higher than that because you also had the Medicare tax of 3.8. So all right, can we hit Carlos?
How are you doing today?
Dr. Friday 34:56
I’ve got two big questions. I filed the IRS and [inaudible] was rejected? I don’t know why. So I took all my deductions out. And now it is correct. I filed a citation because I didn’t want to get in trouble. Do I have to file the [inaudible] one more time?
Dr. Friday 35:23
Oh, well, I mean, I don’t know why they’re getting rejected. I did actually get a letter from someone recently where they said that 2019 got rejected. And I mean, a, you should never file a tax return that doesn’t have all the information you need on it, you know, taking it all off, and just trying to comply is never a good plan, because now they’re going to look at you owing a lot more money than you are entitled to have to owe. So you need to amend whatever year that was.
Dr. Friday 35:51
And then I would see if you can get. Are you filing these yourself, Carlos? Or do you have someone filing them?
By myself. And I use a program.
Dr. Friday 36:04
Okay, right. Well, I would, I would try again. And then if nothing else, I would print it out and mail it, I would certify it. So you have proof that they received it. But I would certify mail it. And I would never send something in that doesn’t include all your expenses, because they’re not going to give you any benefit of the doubt.
Okay. Now, what would be the best choice? I can do that before they close. I don’t want to get penalized, I will get a refund of $899. So it’s the money that I don’t want to lose. I already filed years and years and I didn’t have any problem whatsoever. This year I’ve got a problem, okay?
Dr. Friday 36:48
Okay. I still think I would amend the year that you have, I would not lose $800 to the IRS. I would just mail them a corrected return if they did accept the first one, then I would mail a corrected return and then file 2020, or whatever. If you can’t get it through electronically, I would say that you then it’s a possibility you have an identity theft situation going on that they might need to give you a PIN so that you can file electronically. It’s a six-digit PIN. And then that way you might be able to file electronically, but it may be that your name has been compromised.
Okay, okay, I can do that. The second question I got for you. I was gonna see why I bought my house in 1997. I pay 120,000. Now the value of the house is 340,000 that I can sell. I got plenty of offers. Do I want to get penalized for that gain? Even though I will buy a house on what else? What do I need to do?
Dr. Friday 37:48
Right. Well the answer is you do not have to buy a house somewhere else. And as long as the gain is $250,000 or less, which in your case it would be you don’t have to pay any taxes on the gain. And you don’t have to reinvest it.
Okay, so I don’t have to pay any taxes to them. Okay, that was the answer we are looking for when I was a show I didn’t want to get nailed by the IRA. I didn’t want to get in trouble. Thank you for your time. The amendment that I put on, was affected. So I need to do right now is the 2020 paperwork with the [inaudible] that I’m going to mail, correct?
Dr. Friday 38:24
Okay, thank you for your time. I’m looking for 2020 right now. Thank you.
Dr. Friday 38:30
Thanks, Carlos. Bye, bye. All right. We’ll take a little break here. And if you want to join the show, I think we may have lost a call or two you can at 615-737-9986. We’ll be right back.
Dr. Friday 38:48
All righty. We are back here live in-studio and you can join the show. 615-737-9986 only has a few minutes left. So if you’ve been waiting, well, you need to get on board. Let’s see if we can get Larry from the boro. Hey, Larry.
Hi, Dr. Friday, how are you?
Dr. Friday 39:06
I am awesome.
That’s great. I have a question for you. I just moved with my wife from New York to Tennessee. And my wife still works remotely with her company. The company she works for is based in New York State. I’ve tried getting information on this, but it seems very confusing. Does she have to pay New York state taxes even though we reside and live in Tennessee?
Dr. Friday 39:40
You do. I have a couple of clients that actually had the same situation in New York and California very good about this. Meaning that if you’ve got an income coming from the state, no matter if you don’t put a foot in the state, you still have to file a nonresident tax return. And if your income is past their standard deduction I don’t remember I want to say it’s like 10 or $12,000 then you’re going to file and pay taxes.
Okay, so, and this goes for as long as she keeps working in New York?
Dr. Friday 40:11
Yeah. And they just basically consider it. Yes. and answer your question. Yes, basically, as long as she’s there, and they don’t have an operation in Tennessee, then they’re going to consider her a New York employee, no matter what state she, California does the same thing.
So it wouldn’t help if she became, would it help if she became an S Corporation or an LLC? Would that do anything?
Dr. Friday 40:40
Well, in that case, yes. But I don’t think they’re going to let I mean, I don’t know the situation. But if she’s an employee, that means they’re paying half of her social security and medicare, possibly offering retirement plans and all that, right? If she becomes an S Corp or an LLC, they’re going to 1099 or pay her gross. And she would then have to do her own W2 out of the state of Tennessee, which is certainly a doable concept, but she would go from employee to contractor. So I don’t know if that’s on the table to be able to be done.
Dr. Friday 41:10
But that would be the only way for her to avoid. And I don’t know, you know, what kind of income bracket we’re talking about, it would have to be for someone that’s making a fairly healthy income to really make the difference of the pain and the irritation of dealing with her own business versus just being an employee.
Right, that makes a lot of sense. Okay. Thank you very much.
Dr. Friday 41:31
Thank you for listening. I appreciate it. All righty. We are live here, guys. For the next oh, I don’t know four or five minutes. Have you got a quick question, you can join the show at 615-737-9986. We are taking your calls talking about my favorite subject. Some of you guys may actually have a little bit of a passion for but taxes.
Dr. Friday 41:57
So basically, when it comes to doing any state tax, most states define if the money has been earned in their state, it is going to be basically taxed in their state. But I will tell you that places like New York and California where I do quite a few different returns for both of them are pretty clear that it doesn’t even make a difference that the individual doesn’t even go into the office, right? Because I mean, a lot, I have several they’re like doing tutoring and different things like that. So they’re not even working from a location there. And they still have to deal with the taxation in some of these areas. And then of course, in New York, I think it’s even worse than California to the extent that they have like Yonkers in different areas in which you actually have, you know, some additional taxes by the city as well as by state.
Dr. Friday 42:47
So it makes a difference on how are what they’re going to make happen and where they’re going to get it for. So it looks like we’re going to have our last caller come in really quickly here. Let’s see if we can get it. Put her on as soon as you’re done, typing sweetheart. Looks like we’ll have Beverly on here in just a second. Because we’re only gonna have about two minutes for her. So we’ll have to make sure we get the question in. So anyway, if if you do have questions or need help, then go for it. All right, here we go. We got Beverly. Hey, Beverly.
Hello. My mom passed away in January of 2020. But she was in a nursing home, she did not file taxes 15 through 19. Today, we went we got a letter from the IRS. We went to a tax preparer. He prepared the taxes for all those years. And I signed as her POA. Today I got a letter for 2015 stating that the signature is not valid because she had passed away and the power of attorney was not valid. What do we need to do? I don’t know how to go about getting a valid signature on this form that they sent me.
Dr. Friday 44:10
So you do you have a POA for her? Did you just have the fact that when she passed away the state came to you?
No, I have a POA for her.
Dr. Friday 44:20
Okay, I would first try a simple effect would be just to send them a copy of the power of attorney explaining that, you know, the mother had passed away. Here’s the power of attorney I had the power of attorney before her passing, you know, to handle all of her documentation. You know, but you know, I mean just to see what they say. Because in all honesty, it probably may be a null and void question because of the taxes, did mom pass away with an estate?
No, she did not have an estate. She was in a nursing home and pay all of her own fees.
Dr. Friday 45:01
I just I don’t think the IRS is even going to be coming after them for those. All you really probably would have had to do is come back and say you know income tax for these people has already passed away. I don’t have a final return, you know, we are power of attorney covers this particular situation.
Dr. Friday 45:18
But all in all answer to the question, I would send a letter with a copy of that power of attorney to the address that’s on the letter there. You may have to get a tax advocate involved just to help you get the paperwork to the right person. But mom not being in compliance may not be something you’re never going to be able to get fixed.
Okay. Yeah, they provided a fax number.
Dr. Friday 45:44
Oh, perfect. Then that way, fax it over to them. And also make sure you include your phone number so they can call you and get that squared away that way.
Okay. All right. Thank you so much.
Dr. Friday 45:55
Cool. Thank you. All right, we’re not gonna have time for the next phone call there, love. Sorry to say we only have about 30 seconds. So if you want to reach me, you can at my regular phone number 615-367-0819 is our direct line you can call Monday you can check out the web, drfriday.com or email me friday@drfriday calm and if the Beverly if you’re listening. So you could also email me and I’ll send you exactly what the process would be what we would use to contact on behalf of someone that has passed away. Again, firstname.lastname@example.org.