Welcome to another episode of the Dr. Friday Radio Show! In this episode, tax expert Dr. Friday answers callers’ tax questions and covers the following topics:
- Changes To Tax Laws for The 2023 Tax Year
- How To Audit-Proof Your Tax Returns
- Is My Cell Phone A Write-Off?
- The Effective Tax Rate If You Don’t Pay Taxes On Your Pension?
- The Trump Tax Cuts Expire At The End of 2025
-
Can I Still Get Medicare If I Retire Early?
-
How Much Will the US Debt Interest Payments Be in 2023?
- How To Get an Extension to Pay Your Taxes
- How To Do Tax Preparation and Financial Planning The Right Way
And much more!
Transcript
Announcer 0:01
No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or your financial woes. She’s the how-to girl. It’s the Dr. Friday Show. If you have a question for Dr. Friday, call her now. 737-WWTN. That’s 737-9986. So here’s your host, financial counselor and tax consultant, Dr. Friday.
Dr. Friday 0:31
Good day, I’m Dr. Friday, and the doctor is in the house on this beautiful, fairly warm outside Saturday. And it’s not the midst of taxes. But we do have some interesting conversation that’s going to go on about the new debt ceiling bill that the House and Biden have put through, I don’t think we’re going to find huge changes today.
Dr. Friday 0:56
But just looking at the numbers, when you think about the budget act of 2011, which was about $1.3 trillion, that they were supposed to spend over the next 10 years. And that went up to 1.6 and 2025 $1.61 trillion, roughly in 2025. And then every year after that it’s up about now our debt for the United States, just the dollar amount that we have to bring in just to pay the debt is 15.6% of our GDP. So it’s really, really important to understand that, you know, yes, we managed to keep everybody getting paid. But no resolution has actually come out of any of this. So we know when the GDP averaging is going to be up by the time this bill is supposedly it’s a 10 year bill, theoretically.
Dr. Friday 1:50
So we’re in 2023. So 2033, they’re saying that the it’s going to be 24.2% of the GDP, is what our debt is going to be 25% of the income brought into the United States, or what they bring from all of us is going to be close to what we’re just paying in debt. Yeah, that’s it. I mean, if we don’t catch what’s going on, guys, if we can’t change what we want to spend, and instead of encouraging people to use the systems that’s out there, instead of wanting the government to pay for everything that’s happening.
Dr. Friday 2:28
We’re going to become a point it’s going to happen, that your children or your grandchildren are going to have so much debt on them, that they’re no longer going to be in a capitalize situation, they’re not going to get out there and be able to work because it’s not going to be beneficial for them to go and make a living on their own because the government’s going to take all of their money.
Dr. Friday 2:51
Because there’s already what 50 to 60% of the United States right now receive some sort of benefits from the government. That’s ridiculous. I’m sorry. I mean, we can I come from a very big family, eight kids, 10 people in our family with our parents. And at no point in my life did I ever see anyone in my family take any coin, and it wasn’t that we didn’t have rough times I can remember my mom just taking fruit and vegetables and putting them on the table when there wasn’t a you know, Dad didn’t get paycheck for a few days, there was cereal for dinner, whatever it took to keep us fed.
Dr. Friday 3:29
We were always fed, don’t get me wrong, but it wasn’t going to be, you know, a perfect meal every single time. And there was a roof over our head. But we lived in a duplex with one restroom. Come on people, two bedrooms, one restroom 10 people, you can imagine how busy that was. But we didn’t know the differences, kids, they just thought it was a great place to live. So I think sometimes we expect too much from the outside world instead of fighting for what you need as a family as an individual.
Dr. Friday 3:59
So that’s all I’m gonna say the bill itself isn’t going to make huge changes to our lifestyle, besides the fact that we’re going to have a lot more debt that we’re going to be coming on by 3033 2033. Excuse me. And then, of course, we still have security medicare issues that that we haven’t fixed, you know, at this point. So according to this information, so Security and Medicare are due for a shock that the trust fund supporting these programs are depleting over the next decade. So they’re saying in the next decade, we could be looking at having less in the Social Security and Medicare or even heavy at zero out they could have been saying that.
Dr. Friday 4:38
And I think they’re going to fix that problem by means testing so people that make more than $30,000 a year in retirement or something will get less and less social security even though you paid it in so we’ll find out that’s the way it kind of works sometimes, but I do do think that many people should plan for retirement a little bit Letter. I’m not a financial planner in any sense of the world. But I will tell you that if if you plan to take care of yourself in retirement, you probably need to plan for that retirement to make sure it’s happening.
Dr. Friday 5:11
And that you have Alright, so we have a big event coming up here in, in my world, we meaning all tax professionals or even just interested in taxes. We have two of the nation’s best speakers coming to Nashville, mark the bumps II, he is I’ve seen him speak multiple times mark is awesome. And he is an NTP program. He’s at level two, he has been doing this for probably 20 or 30 years. And Marilyn is Marilyn Young is a PhD that works at Belmont. She is also a wonderful speaker.
Dr. Friday 5:51
So you might want to if you’re interested in coming to something, and the next, it’s the 15th and 16th, I believe 14th and 15th, we will get that information directly out. In fact, if you’re interested in give me a call 615-367-0819. That’s my direct line 615-367-0819. And I will get you hooked up to come to this event. And if you want to if you want to hear from the best of the best, then you need to come to this event and find out more about what’s happening in taxes and also how we’re going to be dealing with some of the tax changes coming down the line. All right, let’s go to Rosie in Nashville. Hey, Rosie, what’s happening?
Caller 6:30
Hey, amen. Sister. I mean, we were raised six girls and eight years to parents families a very similar upbringing. And 900 square foot house, one bathroom. Yep. You know, three bedrooms. You know, we slept on a couch bed. And it’s like, my, my mother, would you say? Yeah, I’m feeding my kids, my family hamburger. And the people on food stamps are getting sirloin steaks and T-bone. You know?
Dr. Friday 7:03
It was pride. Our parents weren’t going to, I mean, they had the children, they were going to raise the children and they were going to make sure we had the important things in life. And we did. I mean, to be quite honest, we are good education’s, we we always had something in our stomach. And like you said, Yes. You know, I mean, my I got fortunate because I had six brothers before me.
Dr. Friday 7:24
So are six of them usually end up in multiple bunk beds. And, and my sister and I ended up in a separate room usually, but it was still, you know, one bathroom. And nowadays you can’t find if you go on vacation with my family, every family at least has to have one or two. So it’s ridiculous. Yeah. Nowadays.
Caller 7:42
Exactly. So it was, you know, I mean, they were there. Well, through two of us were surprises. And so that’s where they had a three bedroom house. And, you know, my dad built the house. He’s an auto mechanic. But yeah, he built the house. And he no two of us slept on a couch bed. And we put our clothes in my parents bedroom, because we didn’t have a bedroom. You know.
Announcer 8:01
And I mean it. In some ways, it never hurt you. It may have wanted you to be to grow up and have more to make sure you you know that you would have your own things or whatever. But it didn’t hurt you. If nothing else, it gave us the drive to want to get out there. And I mean, I guess the pride of my parents, they never did. And I don’t even know. I’m in my 50s I don’t know if there really was food stamps and things available but certainly was never brought up in my family.
Caller 8:27
Yeah, there were definitely food stamps because I was raised in Gary, Indiana, or close to Gary, Indiana. So very similar demographics to Nashville. And so yeah, there were definitely food stamps and definitely, you know, abused and, you know, generations.
Dr. Friday 8:43
That’s hilarious. I was born in Munster, Indiana, which is neighboring by Highland and Griffin. Yes, small town. But thanks for calling. You’re right.
Caller 8:59
Yeah, we were actually raised in Maryville. So, but yeah, Gary. So you know, you know, the demographics of Gary.
Dr. Friday 9:05
Absolutely. Gary was a definitely and probably still is, you know, that kind of demographic. Yeah, I mean, but you know, what, you know, you turned out fine, you fought, you’re probably better than your parents had, but they gave you the, you know, like I said, my faith to work ethics. We have everything all my brothers all my sister, you know, my sister, I mean, we all have the same ethics that my father and mother had, when it came to, you know, if we want something, there’s nothing stopping us from getting it besides hard work.
Caller 9:37
Yeah, exactly.
Dr. Friday 9:38
So that’s the way it works. But you know what, I’m not too sure if the next generation has that, and I don’t want I don’t like lumping anyone because I can tell you I have kids, their friends that have 20 and 30 year olds, I have one that she wrote essays to go through college, she got 20 and 30 grants every single year so she can have a free college, you know, I mean, she found a unique way I have, you know, getting in and getting what she needed. So I’ve always found that to be unique compared to all these people that say, Well, someone else should pay for my, my education, no one paid for us. You know, we get student loans.
Caller 10:14
But we have to break the cycle of food stamps and handouts. I mean, yeah, it’s like, it’s not, you know, it’s all grown up. And, you know, three generations later, it’s still happening. You know?
Dr. Friday 10:27
I mean, they encourage it. I mean, let’s be honest, that, you know, the Democrats, especially, they want more people on the line, so they can actually have, you know, more people that will vote that direction just for that it’s not anything to do with their core belief of these people believing in their politics or not, it’s just keeping the people dependent. And that’s what’s scary. Alright, girl, I’m gonna go to the next person. But thank you so much. Appreciate you.
Caller 10:55
You’re welcome. Take care. Thanks, bye.
Announcer 10:57
All right. Let’s get Jimmy before the break. Hey, Jimmy.
Caller 11:01
Hey, how you doing?
Dr. Friday 11:02
I’m good. What do you have for me?
Caller 11:04
Yes, I was wanting to retire in September of this year. And I’ll be 65 in September. So I was wondering, will I be penalized for the money I make from January to September?
Dr. Friday 11:20
No, you will not be because you if you start your Social Security, that would be considered early retirement. you’ll qualify for Medicare, but so secure, but in the year you retire, you will not be penalized?
Caller 11:33
Okay, just call this my first year. I’ve been in a lot, right.
Dr. Friday 11:37
So basically, since you’re going to start drawing your Social Security, let’s say you draw it in September, you’ve earned the money prior to drawing it. Now if you make $20,000 or thereabout over in from September to December, for example, like you’re still working, then the penalty could happen. But if it’s earned before you start drawing the Social Security, you won’t have a penalty.
Caller 11:58
Okay? So totally don’t matter the amount.
Dr. Friday 12:03
Does not make a difference.
Caller 12:05
Okay. All right. You’ve been very helpful. I appreciate it.
Dr. Friday 12:08
Thanks for listening. All right, we’re gonna head towards our first break here and we’ll get back we’ll get to more of your phone calls. 615-737-9986. Taking your calls, talking about taxes, and how they may affect you. We’ll be right back with the Dr. Friday show.
Dr. Friday 12:34
Okay, we’re back here live in studio. I’m Dr. Friday. And if you have to join or like to join the show, you can at 615-737-9986. Again want to talk a little bit about our Tennessee associates of enrolled agent, Tennessee associations of enrolled agents with a tongue twister there for me conference. It’s in Mount Juliet this year, residence in we’ve got to have nation’s national nationally recognized speakers coming. We have Mark, dumb Roski. Yay, awesome guy, Mark is one of the best speakers you ever going to have. And then we have Dr. Marilyn Young, she is a professor here at Belmont.
Dr. Friday 13:19
I have been to many of her seminars and where she has spoke. And if you ever have any questions on accounting taxes, even if you’re a small business owner, she runs the accounting division or department for graduate accounting program at Belmont. Mark can talk to you about if you’re if you’re a tax person if you prepare taxes if you want to do a few.
Dr. Friday 13:43
And you really want to understand what some of the things that maybe you could be doing on taxes that you’re not, or maybe you’ve even got a case that you’re not too sure about. And you need some help with dealing with the IRS. This is a conference you’re going to want to attend. Again, this is the 15th and 16th of June right here in Mount Juliet.
Dr. Friday 14:00
And you can contact me at 615-367-0819 we will get you on board you can also come unregistered to the events and pay when you come in. But if you want to register early, and we will have all the documents and everything from both of the speakers. It’s going to be a lot of fun guys, I will tell you every time I listen to Miss Young, Dr. Young and Mark Dobrowski I learned something I’ve been doing it for 25 years, there’s always something you can learn about taxes.
Dr. Friday 14:30
So if you have any interest in knowing more about if especially if you’re a tax person, this would be a great conference, to get to know some people that are and learn a lot about because we’ve had changes every year, right 19, 20, 21, 22, 23 We’re going to have more changes. And we need to know what those changes are going to be. What’s going to be falling out what’s going to be staying in all kinds of interesting conversation we’re going to be having just to be able to keep things going Then the government, they’re going to have to I mean, we keep hearing, they’re going to want to change the capital gains, they’re going to have some changes in, they tried to overturn, obviously, the Trump tax cuts, those expire at the end of 2025.
Dr. Friday 15:15
Anyways, so we only have a few more years of those one way or the other, unless the next party that comes into office extends them, it’s going to be very important to be able to make sure that we have all the information every year, so that we can do the best we can either preparing your own personal tax returns, or even making decisions, I have some people that have held off on doing things because they’re not sure exactly how it’s going to affect their taxes, always better to make sure you know, don’t just go sell something, turn around, and worry about the taxes much better if you can preempt that information to the best of your ability.
Dr. Friday 15:15
Many times I’ll have people that will sell or do something. And then And then afterwards, we talk about what the taxes are. And they’re always shocked. So if you inherit property, if you’ve sold some real estate, especially investment properties, how is that going to affect should have you done a 1031 is a 1031 even a great idea. And if you don’t even know what I’m talking about, when I say a 1031, and you have investment properties, you should probably talk to a tax person before you agree to go sell something, just because sometimes some of that information that you have some of the things that you need.
Dr. Friday 16:25
It could be more beneficial to know what your choices are. That’s almost say it’s not for everyone. And I don’t think any decision when it comes to taxes is ever going to be a straight across the board and say, “Well, everyone should do this, because it’s going to be great forever,” never going to happen in taxes. That’s why I love taxes, because what might work for me might work for one, someone else but won’t work for this person because their tax situation is totally different than me or someone else. So just if you have questions, and you’re not sure you want to go ahead and ask the question first, there’s no dumb questions. Come on.
Dr. Friday 17:00
As I were working on my car, I’ll probably have to ask so many silly questions, because I would have no idea what I was looking at other than how to open the hood, probably. That’s the same way with taxes. If you have something you want to know if there’s a question out there that you’d like to have, and you’re just not sure, it’s not going to be to be honest, we don’t take names or numbers or anything down anyways.
Dr. Friday 17:21
But the question isn’t going to be silly, it’s going to be a good question. Because when people are, I always say people are some people are made to be able to call a radio station and ask a question. Other people, not so much. I can’t say I was ready for that kind of situation. But until I started talking about 15 years ago on the radio, I know I never call the radio show in my life. I think what he called a handful of times normally to bug Dr. Electric when it came to something on his show. But other than that, I never really did. But I know that when people walk in my office, they Oh, yeah, that person called and they asked this question. That’s why I wanted to ask you this question. All right, let’s go to Randy in Tennessee. Well, that’s good. I’m in Tennessee suit. Randy, what do you have going buddy?
Caller 18:06
Hey, I’ve got a question. I keep getting calls about this. 20 this possibly $26,000 that I’m into this COVID money. And I have a I have a job that I get into from but also maintain, and through that time, and I was the only employee. So I do follow schedule. Is that something good? I need to check into or I’ve always kind of thought it was just me. I mean, I know certain businesses, or people that have been and it was beneficial.
Dr. Friday 18:47
Right. And that’s great. Thanks for calling about that question, because I even get a lot of them. And you would think if I could qualify, I would have done it. But they don’t know. I think it’s robo calls Randy then answer your question, you would not qualify, you have to have had employees and it can’t be family or related employees to you. So in your case, you were the only person working it there was another W2’s working under you. So you would not qualify for what’s called employee retention tax credit or ERTC. That doesn’t stop them from calling you but that’s a great question.
Dr. Friday 19:21
Because I have a lot of people that asked to say I mean, you know, they’re, they’re like, oh, and then when we go in what people don’t understand is if you did qualify for some of the PPP, and you would have possibly, you know, gotten some of that may or may not have apply but can’t go backwards now. But they back that out of those numbers.
Announcer 19:41
So even though you might qualify for $22,000 in employee you might only get 5000 because of other benefits you took through the time through the year maybe you didn’t have as much hardship could prove as much loss of income. So all of that comes into play, but in your case ready just like mine. I did have employees but three of the five employees in my office are related to me in some way. So we didn’t really have, and I didn’t really have the hardship that’s qualified for forgetting ERTC. But it’s a great question. I’m sure a lot of other people listening, myself included, have been getting, I think a phone call a day, telling me that I’ve lost money, I need to be doing this. And there’s nothing more irritating than having someone call me and leave that information. But they don’t listen to me. This is a great call. Thank you, Randy, I appreciate that.
Caller 20:31
Thank you very much.
Dr. Friday 20:32
No problem. So again, if you’re gonna need those phone calls, like Randy and I that just basically say you could qualify for are you worry, you’re leaving money on the table, I have one that said, I’ve already been qualified for the funds, which is hilarious, because to be honest, yet to be qualified, you have to have, I don’t know 2019, 2020 and 2021, 9941, do you have to have income reports by by quarter for 1920 and 21, you have to have proof of loss of income, PPP, records, all kinds of things to get qualified.
Dr. Friday 21:05
So anytime they say that you you know that you qualify or anything else, it’s just, it’s a scam as far as I’m concerned. But if if you’re not sure, you can certainly give our office a call. And we’ll be more than glad to at least give you some rough numbers to figure it out. And then see if it’s something you should pursue. But again, you only qualify is if there was W2’s produced by your business.
Dr. Friday 21:28
And if those W2’s were young people that were not your employees, not your family members. And then obviously if you did get PPP one or PPP to some of that’s going to reduce the amount of money you you are see from the ERTC, so just information out there. But if you I mean, you still have time to get some of that it’s the time clock is coming down, I want to say we only have until I think the end of July, or it may be as late as September, I’ll have to look that up.
Dr. Friday 21:58
It’s coming up though you only have a couple of years to make that correction. And that’s coming up on the on the time clock. So you will if you think you can or you might qualify, then you need to go ahead and pursue that. And if you have a payroll company, most of them are running those numbers for you. So again, if you use a payroll company be that QuickBooks ADP paycheck, any of them, they all run the ERTC for you.
Dr. Friday 22:23
So if you need help. So if you have a question and something else, that was a great one, you can reach us here at the studio at 615-737-9986. Taking your calls talking about all things taxes. That’s what I do. I’m an enrolled agent licensed by the Internal Revenue Service to do taxes and representation. So when it comes to if you have tax issues, you’re getting the love letters, you haven’t filed taxes in the last 10 years.
Dr. Friday 22:53
Do you even need to file 10 years worth of taxes? And what would it take to get you caught up? Can you make a deal? You know, I have people that say, Well, I just want to pay them I have this much money, can I just pay them offering compromises aren’t always based on exactly what you think you should pay them but based on a system of what you can afford to pay.
Dr. Friday 23:10
So there is a system, if you want to find out what it would cost to pay off the IRS what you may or may not be liable for and if any of it has fallen off the time clock. If your see said dates have passed, then you may not owe as much as you want. But if you need help understanding that and first thing you have to do no matter what guys is we have to get quality get you up to date, so that you’re in compliance, compliance compliance that is so important for the IRS and also for anyone that’s going to help you deal with your tax issues.
Dr. Friday 23:42
So if you want to join the show, if you got a question about either maybe you’ve sold something or you’ve gotten some love letters, you can reach us here at the studio 615-737-9986. We’ll take another break here. When we get back we’ll get to your phone calls, talk a little bit more about other tax issues that might be coming down the line and how you might be able to repair or make yourself a little bit more audit proof by just making sure that your documentation and the numbers that you put on your tax return match.
Dr. Friday 24:14
We’ll be right back with the Dr. Friday show. Friday we are back here live with the Dr. Friday show talking about my favorite subjects at least taxes, money issues, mainly taxes, because when it comes down to it taxes lead most things when we were talking a little bit about some ways you can make yourself audit proof and one of the business ways to do that people to be quite honest with you in when we go in and a lot of times you get the love letter from the IRS, you prepared your own taxes.
Dr. Friday 24:48
The IRS comes back question some of your deductions and then you come in and you’re like, “Well, I don’t know why they’re questioning how am I supposed to prove it?” Well, it really comes down to plain and simple. How did you put the information on the tax return and the first place. Now I don’t want to certainly lump a lot of people into this category, because I have some people that they are probably more meticulous than even most accountants are, when it comes to their entries on their tax return.
Dr. Friday 25:13
They have everything scanned in everything documented everything coming through to the best of their abilities. Keep in mind, though, sometimes the IRS can question even when something that you think is a tax deduction, probably some of the more gray areas is 100%. Use of your cell phone, if you are a self employed individual, I have seen people just write off their cell phone.
Dr. Friday 25:34
And in that case, sometimes that cell phone isn’t for just them, but their entire family. So you know, be careful. I mean, obviously, if it’s a cell phone, and it’s the only phone line you have, then you are going to take personal phone calls, it’s just going to happen, you’re going to have personal phone calls, you’re going to be able to take them and you’re going to make sure that with those personal phone calls, that is not a tax deduction. So 100% of your your cell phone, if it’s the only phone you have, is not logical. I know one of the biggest things people come in and they say, “Well, I brought a truck, it’s over 6000 pounds. So I took a 179 on this truck.”
Dr. Friday 26:17
And then the first question on my mind is or out of my mouth is, “Well, is this your only vehicle?” “Yes, it is. But I do have another car.” Is the other car running? Because when I asked that one time, then well, “No, it doesn’t, run.” Well, how can you have a vehicle section 179, which means that it’s 100% use for business. And you don’t have another vehicle that’s going to go and pick up the kids or go to the grocery store or just day to day life that you’re using that vehicle for?
Dr. Friday 26:52
Because again, tax law says if you’re taking a section 179 on a big vehicle that that vehicle is being used for business only business and I know people will turn around to me more than once and they’ll say, Well, I do I only do business, I never have a personal life. Well, for one, the government is not going to buy off, IRS auditor is not going to sit there and say you’ve never went to the dinner by your you know, went to dinner, you’ve never went shopping for clothes, you’ve never picked up your kids from school, you’ve never grocery shopped, you only work and all of that.
Dr. Friday 27:25
So the fact is, you would have a very difficult time proving that necessity is you had to eat. So therefore you had to abuse the vehicle most likely to go do it. But if you could justify it, that’s fine. But if you’re going to have a vehicle that’s over 6000 pounds, that you’re going to claim as a business vehicle only, you need to have a fully operating second vehicle that justifies your personal use, because personal use is going to happen.
Dr. Friday 27:50
And therefore they could disallow that section 179. And even though a section 179 is great, for an individual, it’s a one time situation because then you go and sell that car, two years, three years down the line, you have to recapture some of that depreciation, whatever the value of the car is, and then you have to go buy something big again, to go and offset that.
Dr. Friday 28:10
Otherwise, you just picked up income and you have no offset. It is awesome to have a section 179 If you are, I don’t know electrician that has you know, trucks and and vans on the road continuously, and you’re buying one or two every single year, then you you have some advantages to doing it. So it’s very important to understand how tax law works. And even though it sounds good when people say, “Oh, I went and brought a $60,000 vehicle, I was able to write that off my taxes.” Let’s hope they can justify it if the IRS comes back at him. All right, let’s see what we have from Bill in Nashville. Hey, Bill.
Caller 28:44
Good morning. My wife died just before the end of the year. And she had been taking a withdrawal from her investment accounts. I couldn’t get the January payment shut off in time. So, I’ll get a 1099 I’ll get that. Yes, for this year. So I guess the question then is.
Dr. Friday 29:23
How old are you?
Caller 29:26
I’m 73.
Dr. Friday 29:28
So you’re going to be in was her investment accounts? Were those like retirement like IRAs, maybe, 401 K’s that were converted into IRAs, or were they after tax accounts like Roth’s or something?
Caller 29:41
Well, the answer to that is yes, that was she had a Roth and she also had a traditional IRA.
Dr. Friday 29:48
Okay, so you could apply the January one to the required RMD that you would have to take in 2023.
Caller 29:58
Well, according to Mr. Vanguard. Because I inherited a spousal, and it won’t have to be RMD until my wife would have turned 73. I don’t know if that’s true, but they gave me some IRS citations.
Dr. Friday 30:29
And you’re correct and inherited a spousal inheritance will roll over to you. And then when, when, when she, well, I thought it would happen. And again, I’m not a financial planner, we put that out there bill for you. But my understanding was that it would roll into your, I mean, you would convert it basically into your own as a spouse, you don’t have to meet it.
Dr. Friday 30:49
But then when you hit 73, or the age of RMDs, you have to take it from all of them. That was my honor. But they may know a lot more than I do when it comes to that. So because normally what happens is a spouse just merges the retirement all into one account, once the other spouse has passed away. And the only time you can do that, because it’s not really an inherited IRA, it’s a spousal, then, you know, is that time most of us inherit them? And then we have to immediately 10 years was it 10 years, you have to cash them out nowadays or something, if you inherited IRA.
Caller 31:27
That’s correct. It’s not a spousal.
Dr. Friday 31:31
Sponsors are only ones that that work for you. But so obviously, they will not let you put the money back in because you couldn’t stop it. So I guess the answer to your question, if I’m getting it, right, is yes, you’re going to have to pay tax on that one distribution from January at this point.
Caller 31:51
Yes, ma’am. So the real question is, how, how will I be filing? You here? Obviously, I filed joint. And at the top, it says spouse died whenever.
Dr. Friday 32:08
Right. In the year of 2020. So she passed away in 2022. Correct?
Caller 32:13
Yes.
Dr. Friday 32:14
So 2023, you will you will need to file as single.
Caller 32:20
Okay.
Dr. Friday 32:21
I mean, in theory, I mean, unless, I mean, there is a widow, but widows only apply to children. I mean, you know, spouses left with young children. So in your case you’re going to, but if she died close to the end of the year, you may still have documents coming in her name. Or do you think you were able to close everything out? Okay, good.
Caller 32:42
No. We’re doing good on that part. I don’t have a lot of income. So. So a $5,000 distribution is not going to generate a huge amount of tax for me.
Announcer 32:57
Right? Well, that’s good news, at least. So that way you can control whatever you have on that situation. But yeah, so you’ll be you’ll be back to single and have the file it at the you know, unfortunately, you’ll be at a little higher tax rate than you were when you’re joined.
Caller 33:14
Yes. All right. Well, thank you.
Dr. Friday 33:16
Thank you, sir. Sorry, for your loss.
Caller 33:18
I appreciate it. Bye.
Dr. Friday 33:20
Thanks. Bye. All right. So we’re gonna keep going here. And if you’ve got questions on taxes, or you have questions on dealing with, maybe you haven’t filed taxes in a while, or maybe a family member that hasn’t filed taxes in a while, and you’re not too sure exactly how to start.
Dr. Friday 33:39
But the first thing you’re gonna want to do is call my office because this is something we do a lot of, we help individuals get back on track, help them file, and take. And it’s not something that’s going to happen extremely quickly, especially if we have to get power of attorney to get the tax documents from the IRS. But once we do, we can get all that then we can figure out if we’re gonna be able to pay payment plans, offer and compromise make you non collectible. You have different options in different situations.
Dr. Friday 34:08
So you just want to make sure that what you have going, you understand what the options are, I wanted to say in 20, they just came out every year they come up with these dirty dozen summaries. And when Randy had called earlier he was talking about the ERTC credits. And they’re saying that there is also a large number of people being scammed with those credits.
Dr. Friday 34:28
So again, if you don’t think you’re entitled to that money, you don’t want to get pulled into something where the government comes back because somebody fraudulently filed something in you not really understanding the system, allowed them signed off on something and apparently you got the money and then they take their share of that money and then you end up owing the government back that money.
Dr. Friday 34:51
And they’re also taking identities when they get that information. They’re doing false documents. So very important to understand that. If you don’t Know if you apply, go to somebody’s rep will talk to an enrolled agent, talk to a CPA, talk to somebody that has done, you know, is in the business and understand your particular situation so that you don’t get yourself caught up in something that could end up I have already two or three people that apparently, the state of Tennessee unemployment during the COVID, everybody was supposed to be able to get unemployment that was unemployed, no matter if you were self employed, or if you had been an employee of someone else’s.
Dr. Friday 35:30
Or if you were partially employed, if the if your employer wasn’t able to give you usual hours? Well, it seems like and again, I’m not an expert, but I have received three or four phone calls in the last week or two. So they must be actively trying to collect now, money for people that said that they weren’t entitled to the unemployment that they had received. Again, these people applied, they did everything proper, and then they turned around, and now they’re being told that they shouldn’t have received the money in the first place. And the state is trying to collect the money back.
Dr. Friday 36:01
So if you have one of those situations, be curious to find out more about it. Because it just seems to me, especially on unemployment, I have more people saying they weren’t qualifying for that should have been, then people getting in and not being able to give it back or whatever. So if you’ve got questions where I’ll take our last break here in the show.
Dr. Friday 36:20
If you’ve got a question, you can join us live here in the studio at 615-737-9986. Taking your call talking about taxes, we’re gonna be talking a little bit about the seminar coming up, and how exciting it’s going to be to make sure we have all the right information to go into the 2023 tax season, which before you know it, it’s going to be on top of us. We’ll be right back with the Dr. Friday show.
Dr. Friday 36:57
We are back here live in studio for this wonderful Saturday. And if you’ve got any questions, now will be the time to pick up the phone and call we’re gonna start with the show 615-737-9986 again, putting a shout out there to all tax preparers or CPAs. That might be looking for some good EA point or CE points. And you want to go to something that’s going to be right here locally in Mount Juliet. It’s a wonderful event, Mark Dombrowski EA is going to be speaking, as well as Dr. Marilyn Young, awesome, both of them.
Dr. Friday 37:39
And if you haven’t heard either of them, you’re going to be totally entertained. And all people are thinking, well, how can taxes be entertaining, but trust me, when these guys teach, you’re going to listen and you’re going to learn and it’s going to be a lot of fun. You get to meet a lot of other enrolled agents, and other tax people in town you might be you’ll find some other connections as well.
Dr. Friday 37:59
So very important to go if you would need to join us, you can either just Just call me at 615-367-0819 and I’ll get you hooked up. All right. Let’s see here. We’ve got Lisa getting ready to come on the phone. I’m rushing my boy here, but we’ll get Lisa in before the time clocks happens. Hey, Lisa, what’s happening? Lisa, are you there?
Caller 38:24
Yes, I am.
Dr. Friday 38:26
There’s my girl, what can I do for you?
Caller 38:29
Okay, I’m single 62 years old. I have a pension come in from a previous employer, which is not government. It’s actually a grocery store. Pensions and my pension date is age 65 That I can draw the full pension. My actual Social Security age is 67. So I was considering drawing the pension at 62. Would it benefit me to do that now or wait until I’m 65? Or do I need to wait till I’m 67 as far as the taxes?
Dr. Friday 39:07
So I’m gonna give you the tax side of it again, not a financial planner. So are you are you are you working still right now? Lisa?
Caller 39:15
Yes, ma’am. Okay.
Dr. Friday 39:18
So, at this point, you’re 62 you’re thinking you can start early social security. I’m just saying theoretically, you could take early social security, you can certainly draw your pension and still earn the pension would not count into earnings is just to let you know, for early social security. It’s only earnings that offset that. So if you were drawing your pension, well, you said that doesn’t have till 65 But if you were still working and when to take early Social Security as long as you make less than $20,000 You would not have to pay anything on the Social Security. But if you earned more than $20,000 You basically have to do for every dollar you’ve earned over every $2 you earn Where you get $1? You have to pay back.
Caller 40:02
Okay. It’s not just the security that I’m asking the question on, it’s actually the pension. I’m going to wait on my Social Security till I’m okay. Seven
Dr. Friday 40:10
years trying to figure out if you should take your pension early. I thought I guess I misunderstood that. You said the pension kicks in at 65. So if you take it at 62, how much do you lose? What’s the difference in? I’m assuming there’s a
Caller 40:22
point, like $29 a month? Oh, very little. Yeah, that’s very little. It’s tax wise, is my curious, my,
Dr. Friday 40:30
what’s your income right now? Lisa?
Caller 40:33
Like Park 32,000.
Dr. Friday 40:36
Okay. And if and what if we add the pension? What would that make your total income? Or how much is the pension?
Caller 40:43
The pension is going to be about with with a penalty, it’ll be about $975.
Dr. Friday 40:51
Okay, so simple math into the $12,000, on your 35. So it still keeps you under 15, you’re still in the lowest tax bracket. So there’s no reason not to. I mean, if I were going to do it, I probably have them withhold 10%, just for tax purposes. But but you’re you know, you’re in anything under $55,000, total income is in the lowest tax bracket.
Caller 41:15
So right, but I do have to pay taxes on them, you will
Dr. Friday 41:18
pay taxes, no question, you’ll pay taxes, because your earnings kicks you already into a taxable income situation. So unless you wait for Social Security, and theoretically, I’m just saying if you waited until you were 67, and you took your Social Security, and then you took your pension or whatever social security would not be taxable with that. 12,000. But you’d have to live off both of those without but you would be tax free. So it makes sense. So
Caller 41:44
it wouldn’t be seven if I don’t want to pay taxes on my pension.
Dr. Friday 41:50
Yeah, I mean, that’s, that’s the option. But there’s always that, again, not a financial planner, but there’s always that concern, not knowing how long your family longevity is, you know, losing $29 and being able to either pay off the house early or get yourself you know, better situation. I’m sure the financial planner, people would say no, but I’m just thinking it’s a fairly low cost, because your actual tax on that will probably only be five or 6%. In all honesty, if your total incomes under 55. Yes, your effective rate I’m saying would be that low.
Caller 42:26
Yeah. And like I said, I’m single and debt free. So it would be a nice extra, you know, income for me to have now,
Dr. Friday 42:36
rather than we can enjoy it wonder what we’ll do something?
Caller 42:39
And if it’s not very, it’s not very much, then I really want to consider taking it now. So I can enjoy that money now.
Dr. Friday 42:47
Well, if you want I mean, you could also if you want a more specific number, give us a call Monday or Tuesday or whatever. And we without being on the radio, we could throw in and say single 35 salary, how much would it would the taxes be on $12,000? In that scenario, you know exactly what the effective rate would be. And it would be taken a few minutes, and we can get the true effective rate. And then that will give you the tool to make sure you’re making the right decision for you. You know, in that situation.
Caller 43:14
All right. Great. Thank you so much.
Dr. Friday 43:16
No problem. Appreciate you. Thanks. All right. Well, we’re getting down to the end of the show. So just so everyone knows if you want if you’ve never heard of me, I am Doctor Friday. Friday, Burke, if you want to use the whole name. I have a PhD in economics, but I am the owner of Dr. Friday tax and financial firm. I’m an enrolled agent here in the Brentwood, Tennessee area.
Dr. Friday 43:42
And we’ve been doing this for about 25 years, but 15 years here on the radio. And if you have questions, you can always go to the website, drfriday.com. Check out who I am. See if you need the kind of assistance that we do. We are very lucky to have been in this area for as long as we have. And then if you’ve got a question, just like Lisa or any of them, and you you’d like to get a little bit more up you know, personally because on the radio, I can’t really give exact numbers.
Dr. Friday 44:10
If you want you can go to our website and you can either send us an email or just go to friday@drfriday.com. Again Friday at drfriday.com is my email and that way we can respond back to you and see if we can get you either in the office to do something or if we can do it over the phone, whichever is going to be easiest for you one more time on the conference that’s coming up on the 15th and 16th of June right here in Mount Juliet the residents in if you have any interest of knowing more about maybe you want to start doing taxes, understand the tax business or maybe you’ve been doing it and you just want to get more education, get some credits CPE credits, whichever way works best for you are just interested in these two speakers that are going to basically be able to wow you with tax information.
Dr. Friday 44:59
You can find out more information by going to by obviously, either emailing or calling me again, email Friday at Dr. friday.com. You can also give us give me a call directly to my cell phone 615-367-0819. Again, 615-367-0819 is the number here. And if you, you can also text to that number 615-367-0819. And we can send you the link and get you scheduled for joining us in Mount Juliet.
Dr. Friday 45:32
Or if you just want to set the tax appointment or maybe you just need somebody to help you get straightened out, get back on track understanding exactly what it is to you need to do to be able to get into compliance and then get the IRS off your back. It’s very hard to live in this world. I know people do. But you know without having tax returns it you can’t really easily go and you can’t certainly buy a house, you can’t go do anything else unless you have tax returns.
Dr. Friday 45:58
So those tax returns are the bread and butter of loaning money. Also if your children go to school fastball requires you to have tax returns. So if you’re in the point where you need to have tax returns, and you need to get straight with good old Uncle Sam, no matter if you like it or not, then we can certainly help you do that. Again, you can reach us at 615-367-0819. That’s my direct number 615-367-0819. You can also email friday@drfriday.com. Friday@drfridy.com.
Dr. Friday 46:35
Or check us out on the web at drfriday.com as an enrolled agent licensed by the Internal Revenue Service did your taxes and representation that’s what we do. We keep you guys, we can be a shield between you and the IRS. We can take over audits, if that’s what you need, or we can mainly try to get you back on track. That’s what we like to do. We like to give people not only just currently but to keep you on track making sure that what you’re doing today is going to keep feeding that direction. So you don’t have to deal with the IRS in the future with you. Hopefully you guys have a wonderful Saturday. And as we say, call you later.