Dr. Friday Radio Show – June 8, 2019

Listen to this week’s episode of the Dr. Friday Show, broadcast live every Saturday at 2:00pm Central on on 99.7 WTN!

Transcription

Announcer : 00:01 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 doctor Friday show. If you have a question for doctor Friday. Call her now 737-WWTN that’s 737-9986. So, here’s your host financial counselor and tax consultant Doctor Friday.

Dr. Friday: 00:30 Good day. I am doctor Friday and the doctor is the house. It’s been little dry out there right this second, but coming in it was raining so hopefully you guys are driving safe if you’re listening. But if you want to join the show, (615) 737-9986 (615) 737-9986. I’m an enrolled agent licensed with the Internal Revenue Service to talk about taxes, money issues. Maybe you’ve received some love letters, maybe you’re not sure what you need to be doing because you really haven’t done much in the last couple of years and you’re like, well, if I do something now, is the IRS just going to come knocking and take everything I own? It doesn’t really quite work that way. What the IRS is really looking for guys. And you know, you can talk to many experts. The bottom line, what they want is really for you to get back in the game. You know, pay in taxes, getting yourself caught up, start paying quarterlies. You know, I’m talking to my entrepreneurs because let’s be honest. We are the ones that have most likely a bigger or more important time of doing things. Entrepreneurs have a tendency to be a little bit more, you know. We want to get 100% of our money right? So that way we can deal with the situation and we have to move forward and make sure we have what we need. But if you don’t pay your quarterlies, what really happens? How does it work? So if you want to join us, it looks like the phone line (615)737-9986 line up (615)737-9986. We are gonna take your calls and talk about other issues that are kind of coming up in the news. What do you do if you have a love letter? And you’re not sure what’s the best way to respond. I will tell you this last couple of weeks, I have been handling two separate different audits. One of the best things I can tell you, number one thing, don’t represent yourself. I have more than once had to step in the middle of an audit and it never goes well. If you can start with a rep and enrolled agent, someone that actually knows what to do, what to provide, how to organize the documents. You will find that the stress on yourself is so much less than when you actually try to do it all yourself. I’m just being honest. Sometimes it can be overwhelming and you know, they’re threatening that they’re going to charge you this much money and how this works and you need to really know how that’s going to go forward. All right, we’ve got Charles on the line. Let’s go right to the phones. Hey Charles.

Caller: 02:52 Hi, good afternoon. Question for you. I’m 68 years old on social security and I’ve started a little bit as a sole proprietor. Can I contribute into a SEP? I don’t have any employees but it’s my understanding on a SEP I can contribute. I think it’s up to $55,000 of my net?

Dr. Friday: 03:20 Well, You have to be making like $200,000. It’s based on a percentage of your income, but you can defer up to 54. Are you at your full retirement age?

Caller: 03:31 I’m 68. I started drawing close to 66.

Dr. Friday: 03:34 All right. So, you can contribute to a SEP up until the age of 70 and a half at that time you have to start taking distributions are required minimum distribution unless you want to consider. Depending on how much money you’re making, you may want to consider a Roth only because you can continue as long as you’ve got earnings to a Roth past the age. Because there’s no required minimum distributions. And with the lower tax codes right now, it may be that you’re not really saving that much money and you may never need this money if someone can inherit tax free. Theoretically not knowing your situation. Charles, you want to talk to someone that’s an expert, but that’s a suggestion.

Caller: 04:15 Okay, So I can set up a SEP. Even though I’m 68 and contribute up to the Max and then at 70 and a half. I might not be able to be doing it anymore.

Dr. Friday: 04:26 At that point, yes. My understanding is they’re going to require minimum, they’re gonna require you to start taking distributions so you can’t contribute at that time any longer. The IRS wants their share.

Caller: 04:37 That makes sense, All right. Thank you Dr. Friday.

Dr. Friday: 04:40 All right, let’s go to, oops! I hit the wrong button. We’ll come back to that. Hey Jb.

Caller: 04:47 Hey, how are you doing doctor Friday?

Dr. Friday: 04:48 I am awesome.

Caller: 04:50 I have a question about property, owning property out of state. Recently bought a secondary home in Florida. So is there any advantages or disadvantages? Tax-wise?

Dr. Friday: 05:02 Well, you chose a wonderful state. Quite a few people from Tennessee, like Florida probably because it’s the closest beach to most of us. Probably Alabama’s closer anyways, but it doesn’t have a state income tax just like us, Right? So we don’t have, the only time that you may run into anything would be if you pass away and you own property in any other state, you would have to do an estate closing in both states. Wherever the property is and may be a zero tax situation. But you would have to do an estate closing in Florida reporting particularly that property depending on if it meets the criteria. I don’t know how much we’re talking JB. And then obviously, you know, if you have a home here in Tennessee or if this is your primary residence, then you’d have your estate here. Now, Tennessee follows the feds. So unless you have a pretty high estate, there’s not a whole bunch to worry about, It’s just a little extra paperwork. But really I would not buy a place property in Florida just because of a little extra paperwork if it’s even there when we get to that age.

Caller: 06:09 Okay. Now what about record keeping? Should I open up a second checking account to cover all the expenses.

Dr. Friday: 06:15 Is this going to be a rental?

Caller: 06:17 No, no. This is a secondary vacation home.

Dr. Friday: 06:19 Okay. Then, I don’t know if I’d keep a separate, I will keep record. Let me put it that way. I don’t know if you physically need a separate bank account for it, but I would obviously keep the closing documents where you purchased because there’s some fees, you’re not going to get the waiver. You know, if you hold onto it again until you pass away, there’ll be a step up in basis. So therefore people inheriting, won’t need those documents so much. But if you decide to sell you want all the expenses that it took to create the home that you have now. So that you don’t pay any more capital gains than necessary.

Caller: 06:53 Okay. One other tax question I have is.

Dr. Friday: 06:56 Go for it.

Caller: 06:59 I took a small plan distribution from my 401k to actually make the purchase of a home. What is my tax liability on that? Should I do an estimated tax and just go ahead and pay it now?

Dr. Friday: 07:17 My answer is probably, yes. Did they take anything out JB?

Caller: 07:22 No, I did not.

Dr. Friday: 07:23 Okay. And you didn’t take it as a loan, you took it as a distribution?

Caller: 07:27 Yes.

Dr. Friday: 07:27 Depending on your income bracket, you know. I would definitely go ahead and start preparing sending in something. Last thing you want to do is have to come up with the money. Theoretically within 90 days of that draw, you should have made or you should make an estimated payment.

Caller: 07:46 If I’m like in a 15% tax bracket.

Dr. Friday: 07:48 Right. I mean if you’re in the 12 or 22% bracket. There are two basic brackets. So, it may kick you into a different bracket, right? I mean, you may be in the 12% tax bracket if you’re, single or married?

Caller: 07:59 I’m married.

Dr. Friday: 07:59 Okay. So if you guys jointly make $100,000 or less, that’s 12%. Anything above the $100,000 is going to kick you into 22. If that helps.

Caller: 08:09 So, pay about 22% on the money that I drew.

Dr. Friday: 08:12 Worse scenario, we overcompensate and you end up with a nice refund. But last thing you want to have is, you took $50,000 out and now you owe 10 and you don’t have it, because it’s all invested into a piece of real estate that you can’t get it back out

Caller: 08:26 Correct. What form is that?

Dr. Friday: 08:28 1040 ES and you can go to irs.gov 1040 E as in Edward and S as in Sam.

Caller: 08:34 Okay. All right. Well, I appreciate it. Thank you.

Dr. Friday: 08:36 No problem. Bye. Quick questions always love you guys listening and asking questions. You know that because after nine years on the radio, I kind of count on the fact that you guys are going to call and ask me great questions. All right, so we’re gonna move forward and keep talking about different things. But if you have a question, I want to reiterate what we always say on the show, but the bottom line is there really is no stupid questions. Only time there’s a stupid question, if someone doesn’t ask the question because you can’t be expected to know everything because, I don’t even know everything in the tax world. Therefore, if you’re not working, living at 24/7 don’t think that you’re supposed to know everything. In fact, you’re a smart person. If you’re asking the question and you don’t even have to ask it for yourself. I have a friend ask it or pretend you’re a friend. We have no idea. We don’t take down names, we don’t take down numbers. All we do is answer the basic questions. So if you’ve got a question and you think, well, it’s a silly question, no such thing. And I really appreciate you guys calling because I’ve been told that every person that calls a radio station, there are hundreds or even thousands of people listening that will never call. So sometimes the questions you ask, even if you kind of know the answer, but you think it’s a great question, please call the station (615) 737-9986 because you might be helping someone else that has either made a mistake that you didn’t know the answer to before or you know, might save them some thousands of dollars by making the right choices. So, I was talking before I took some of the calls of course about representing yourself as an enrolled agent. I am licensed by the Internal Revenue Service to do representation. So if for some reason you are looking. You got a letter in the mail, they say they’re going to do an audit nowadays, it could be a paper audit, it could be a face to face audit, you know, depending on the situation and maybe a paper audit that we want to turn into a face to face audit. Really just depends on the situation. But you do want to at least get a second opinion. If you think you’ve got this thing wrapped up, you can prove every single thing. Awesome. Just keep in mind that, you know, if you’re a doctor, you most likely do not want to operate on yourself. You do want to make sure that you’ve got someone that’s going to help you represent. We also deal with trust funds, which is payroll tax issues. If you’re a small business and you know, like I said, you need to pay your quarterlies, guys. If you are not paying quarterlies, I guarantee you that every year you’re paying a penalty. Now I will be straight out with you. I have some clients that say the penalty is less than what it would have been if they had the borrow the money or if they have to process it through. They rather just pay it off once a year. It’s risky because you know, probably number one person that I’m dealing with back issues are people that are entrepreneurs. You know, I mean there’s no specific type of business. It’s just people that get a 100% of their money, they deposited and they spend 100% of it and they don’t have anything left. And the government is sitting there going, wait a second. For entrepreneurs, you guys need to be paying a minimum, an absolute minimum of 20% so every dollar you make, 20 cents needs to go into a savings account for taxes. Plain and simple. Very rarely does that change, Sure. There are some people that are single with three kids, they make only $25,000 self employed. Therefore they may have earned income credit, something like that. But you know, I don’t think he should really count on that. Sooner or later, those kids are going to grow up. You want to make sure that you’ve dealt with that issue. I’m going to talk about a case that I just recently got when we come back from the break about claiming, should I be head of household? Should I be married? Maybe I can be either one. Maybe I should be single this year and there are rules guys. There’s a right way of doing this and a wrong way and I will just kind let you know that the government is kind of looking at this thing. So, we’ll get back with you after the break. If you want to join the show. (615) 737-9986

Dr. Friday: 12:44 Here in studio. So if you want to join the show I have to do is pick up phone (615) 737-9986 (615) 737-9986. Let’s go right to the bank. We’ve got Darrel. Hey Darrel. I said to the bank instead of the phone, I was reading the question, Darryl? We lost him. I’m not too sure if he had a bad zone or if he was just shocked when I said, let’s go to the bank instead of the phones. If you’ve got a question give us a call back (615) 737-9986 (615) 737-9986. So I was going to tell you about a situation. I had a couple come into my office last week and their son is now in college. Everyone that knows anything about having kids in college, the FASFA situation comes in and the young man filled out his FASFA showing that his parents were married and that they file married and all this. Bottom line is they tried to pull the tax return as a joint return and these individuals went to a big box location. That’s as far as I’m gonna go with that one. And when it comes down to it, they basically were filing head of household with one child and he was claiming single with no children. The problem with that is maybe you guys already know the problem, but the problem is her income was fairly high, I mean. She was qualifying in one year for earned income credit. Second year, not such a big deal. We had to do 17 and 18 because they actually had to go back and get both of them. So all I’m saying here is this, sometimes it seems like a great answer because the government’s going to give you a lot more money most likely if you make $20,000 or $30,000 head of household and you’ve got a child versus being married with someone else that’s making $20,000 or $30,000 now you’re outside of the earned income credit. Child credit won’t change. Standard deduction doesn’t change really, well. It does. Head of household and single would mean that you actually claimed more in the standard deduction that you are entitled to. So when it’s all set and done, this particular couple is going to owe about $10,000 back. So, you know, I mean. Now you’ve got penalties, interest and you just got to play the game guys. You’ve got to play it right because sooner or later it may come back and bite you. That’s the lesson on this one. Hey, Darrell. Got me back.

Caller: 15:21 I’m here now. I was in Florida, had a business that did well. But then when the economy took the massive sink, we had to do a bankruptcy. The bankruptcy it just came off my credit report supposedly in January. So I’m waiting to see things happen. But I want to refinance my home and I’m wondering, since I’ve moved here and I’ve done well. What’s the advantage of doing a 401k and putting that into the refinance versus keeping the 401k where it is? And just doing it 401k or just without that.

Dr. Friday: 16:08 Okay. So for first, when you put the money into the 401k, it was all deferred. So if you take any money out of the 401k, you’re going to pay ordinary income tax. So that, personally, if you’re going to do a refi, I’m not too sure why I want to clean out my 401k. I know what you’re thinking. Well, lower the mortgage, possibly. The dollar amount, you know, if you want to do that, stop contributing. And again, I want to put out there just the preface. I am not a financial planner, I’m your tax person. So just saying, but if you want us to do something, stop the 401k and take every dollar that you were paying towards the 401k and keep making extra payments on the mortgage and you’re bound to pay it off a lot faster, which means less interest. But, when you hit retirement, the house may be paid down but you may not have any money to retire on. Your house is not going to appreciate at the same value most likely, as your 401k. Average 401k my understanding from other financial people should be around 6%. You’re not going to get 6% per year on your house. I mean, that would be so awesome even here. I mean, to be quite honest, I mean, I am sure there are some people that will say, you know. I doubled what I paid for the house and we all see those stories on TV and stuff. But statistically, I don’t think most of us, I mean, you may live there for 20 years and pay the mortgage off. I mean or whatever, you know, I’m just saying, but it doesn’t mean the house appreciate it just means that you had more equity in it, you know. So my opinion would be at least to contribute to the 401k up to. Does your employer match, any? Does he do a match?

Caller: 17:50 Yeah.

Dr. Friday: 17:51 So, that’s free money too, right? I mean cause they’re matching up to two or 3%, whatever it might be. So at least contribute up to the match and then anything extra if you choose, you want to pay the house down faster. You know what it said. One mortgage payment per a year is like cuts the mortgage. I mean something like if a 30 year mortgage you pay an extra one or two, it makes it a 15 year mortgage. And again, I’m not totally an expert, so my suggestion would just pay some extra money down on the house, just keep paying the extra and you might find out it pays off a lot faster. I wouldn’t touch my 401k I mean, I really want. I mean you sound fairly young too. How old are you? I mean unless you know, if you’re 59 and a half you can take it out without penalty if you’re under 59 you pay a penalty plus ordinary income tax. So anyways, probably wait until after that age to at least consider paying it down.

Caller: 18:54 Thank you. I appreciated.

Dr. Friday: 18:58 Hello Sweetheart. What can I do for you?

Caller: 19:03 I am 69. I do work full time participating in my employer’s 401k, which is all in a Roth IRA. And I’ve found that the foreclosure property on one of the national realty websites that might be interested in, but I cannot find details about it. Who’s handling it, the foreclosure notice, etcetera. So first of all I’m wondering how I can find the particulars, maybe including the foreclosure notice. And then secondly, I know you had to take cash or cashier’s check. Is that payable to whoever is handling the foreclosure, the name of the party who is interested?

Dr. Friday: 19:41 If its foreclosure it’s often turn into like an auction kind a thing. So normally what happens is you have to rent a cashier check for a certain dollar amount and the person would probably need to have the answer on would be Tania Escobel, because she knows all about real estate. But if you’re thinking about taking the money out of the 401k, is that the thought? To take the cash out of there?

Caller: 20:05 I wonder if they were any tax consequences on that. Is it better if I make a withdrawal? Is that possible? Can I take a loan? I think there’s maybe 60 days to pay it back in some cases?

Dr. Friday: 20:17 Well, you can take a loan as long as you stay employed. You can pay off that loan up until they fire you and then you have 30 days to pay it back or turns into income. Beautiful thing about a Roth is that the principal part, You’re already over 59 and a half or five years and you’ve put it in there. Most of this probably deferred, so you probably one way or the other won’t have a lot of taxes involved in this situation.

Caller: 20:42 All right.That’s sounds good.

Dr. Friday: 20:47 Do you have a pen where you’re at? I am going to give you a phone number for Tania Escobel. She does a radio show here too, but she does everything real estate and she probably could give you a little better heads up on who to track down on that whole foreclosure thing. Because it’s outside of my expertise (615) 308-9859 (615) 308-9859 That may be her cell phone and she may not like me hitting that up but hey Joyce, we gotta do what we gotta do. We’re live on radio here and I will make sure you get your answers. So see if she can do it. All right girl, thanks. All right, again, we are live here in studio so if you want to join (615) 737-9986 (615) 737-9986 taking your calls. If you’ve got questions about what you want to do, I will tell you. Up right now there is a bill being introduced, which may be great for some of my clients because often having to hit 70 and a half, just like the young lady she’s still working now given even if she hits 70 and a half and her 401k is with the current employer. She would not have to take her required minimum distributions until she is no longer working for them. But any other RMDs that she has from other employers, she would be required at the age of 70 and a half. But they’re trying to move this to the bill says to 72. So, they’re basically saying in 2023 they’d like to make it 72 and by 2030 they like to move it up to 75 because people are working longer and many people are really just not needing some of that money. I mean, obviously this isn’t for every single person, but I have several clients, which I mean people are living into their mid to late eighties and you know they hit 70 and a half and they still either partially working and then they get taxed really high, which at the time that required minimum distributions were happening. I think the average age of a retired person was living was like 68 or 72 or 73 so it wasn’t such a burden. Now people are living into their late eighties and that makes it a lot harder on individuals that are taking or having to be mandated to take out the 70 and a half. And people are always like, Why? Why does it make a difference? Why the mandate? Well, keep in mind that for the last 40 years that you’ve been contributing to your 401k, part of that money was actually the IRS, right? I mean because you deferred it so you never pay tax in the first place. And in all honesty, they’ve got a bit of a deficit. So probably would like to have a little of that money paid in so that this way they’re able to actually pay their bills. So even though we’re able to grow tax free at some point we need to pay the Piper and pay that money back in. So you know, none of us like to have to pay it. But if it comes out, we’re hopefully paying it in full retirement at that time. Hopefully we’ll be at a lower tax bracket. Nothing else. Everybody right now that retired four or five years ago is at a lower tax bracket no matter what because the tax brackets went down. So that’s awesome. So you may want to also consider doing some sort of conversions or reevaluating. Do you need to take out a little bit more money, had some projects that you’d like to take on. Maybe now’s the time to talk to your financial planner and make sure that they know what’s going on. So if you want to join the show again, (615) 737-9986 (615) 737-9986 and we’re gonna take the next break and we’ll be right back.

Dr. Friday: 24:35 We’re back live in studio. So don’t hold your breath, guys. Were growing fast with this show. So you want to join us (615) 737-9986 (615) 737-9986 And we’ve got Wayne on the line. Hey Wayne.

Caller: 24:51 Hello. How are you doing?

Dr. Friday: 24:52 I am awesome. Thanks for calling. What can I do for you?

Caller: 24:56 Yeah, I’m wondering, I was reading once you retire and begin to draw your social security. Why is it that if you happened to want to do some consulting or something like that. Why is it that once you reach like $17,000 the IRS gets a dollar for every $2 that you earned?

Dr. Friday: 25:31 So when you, when you say you hit retirement. You actually are taking what the Social Security Administration says early retirement. Once you hit your full retirement, which is in many cases around 66, 66 and a half. I think my sister said hers was, somewhere in that ballpark. But if you take it earlier than that, then you are limited to. I think it’s $17,444 or something like that, and then you are going to exceed and half of that is your social security itself. It’s called the provisional tax code. So if you make $20,000 in social security, every $10,000 towards it and then whatever else you earn. So you have to be very, very careful. I have some clients that, to be quite honest, it’s not beneficial to take it early and you can stop if you end up getting a job again. Some people have, when the recession hit or whatever, other people want to refer to it as. They had to, they couldn’t get a job, they weren’t hiring people that age group and you know, it was sink or swim kind of thing. But then once they did get a job, you can stop receiving your social security until your full retirement and they’ll recalculated. So, that is why it is because it’s actually early social security.

Caller: 26:46 I see. So there is no way to really work around that?

Dr. Friday: 26:51 Not really. Not to pay the penalty obviously, because you’re consulting. If you have a child or spouse, you might be able to put them on payroll and bring your consulting down by having them work with you. I mean, sometimes the spouse works with you anyways. Does the bookkeeping, things like that, and they could receive income from you and then therefore it would bring down yours possibly. If they’re not at the same place or if they’re not working at all. And you guys are both working in the consulting business, it has to be a legitimate job, but theoretically there may be a way of spreading it, if it was something that both of you are doing and you’re married.

Caller: 27:33 I see. Okay. All right. Thanks. Bye.

Dr. Friday: 27:39 That was a great question because I will tell you, I have several clients. Like I said, somewhere along the line, they ended up taking social security early because they really for a while there. Especially in 2010, 2011 when the jobs were very hard to get to, they turned around and they were taking early social security because at least there was something coming in the house and able to pay their mortgages and things like that. So, it is such a hard limitation and I will tell you that number really hasn’t changed much. So, it’s a way of getting like a kind of testing in some ways. Its kind a like, well. If this person can make. And the problem is, if you’re making $30,000 on social security because you were in a higher income bracket and you’ve paid it in, and so that’s 15 of the 17 so half of it is going to go towards that. So just be really careful because it can be painful. All right. So I had a client come in recently and they were asking about on the tax return that they prepared. One of the questions on a schedule E is rental activities are passive in nature. So, real estate professionals. So let me explain a little bit about the limitations, why you want it and why you don’t. For one, it’s a big audit area, so if you’re working a full time job and you say, I’m still a real estate professional, I work every single weekend. Well to be quite honest, you have to have more than 50% of your time being spent doing real estate. So if you work a full time job that’s around 2,000 hours, I think a year. So that means you need to have at least a thousand more hours. That’d be 3,000 hours a year in total working, 1,000 for real estate plus the 2,000 for the job that’s actually paying for things. And then if you have that 50%, that’s great. If you and your spouse are doing it, you can’t add them together. So can’t be well combined. We have more than 50% of our time being spent doing real estate. Now, if you are in real estate professional, it could be a combination of development, construction, reconstruction, acquisitions, conversions, rental management, leasing and brokerage. So if you’re a real estate professional making money as a real estate. Why does this really matter? Why do people want to have it? Well, because if you’re at a certain income bracket or even not, but let’s just say you make $125,000 or less, you can take $25,000 as a married couple off, of your tax return for losses. That sounds like a lot of money. But if you’ve got a number of real estate rentals and things, that’s not necessarily that high.

Dr. Friday: 30:16 If you’re a real estate professional, you have no limitations. So if you physically have lost $40,000, you’re not having to carry forward that money. Now you are able to take all of it if you’re a legitimate real estate professional. So a lot of people click the button on, I think when they do their own personal tax returns and then they click it off and that’s the same thing as, well, am I married or am I head of household? Right? I mean apparently you guys kind of just figured out, well, I get more money back if I click this button, so I’m going to go with this option. Well, there’s a lot of rules guys. You can’t just click the best deal because you think it’s going to get you the largest amount of money because penalties and interests, you’re going to be paying back almost a hundred percent of whatever you think you’re getting now. So if you get a refund of $3,500 just be prepared. Once Uncle Sam figures is out, you’re going probably paying back $7,000 that is a very expensive loan. So try to think about other ways to maybe reduce your situation and not using tax dollars or expectations. Now I know there’s a lot of stuff in the press. A lot of people say, I did not get the refund. I’m entitled to. I will give you the head up that I do have some clients. My individuals that were W2 employees that had used to take their home office and their vehicles, because let’s say there were a district manager, we’re not paid for their auto reimbursement, so they always took it off their tax return on a 2106, on non unreimbursed employee expenses. I have people that lost 6, 7, $8,000 came out of their pocket because of the reduction of that particular situation. But other than those individuals, I don’t believe many people probably lost money in the current tax. Now I will say I think a lot more people got bigger paychecks and they didn’t really look at that Part. When my clients come in, I really tried to show them compared to last year how much money they had in federal withholding and then how much in 2017 versus 2018 and said, hey. You pay it in $1,000 less yet, we’re getting about a thousand dollars less in refund. Therefore that’s where the money came from. It wasn’t the change in the tax law that you got less, it was that you put more money in your pocket. If you had a situation this year though, and you’re sitting there going, hmm, you know what, I had to pay money this year, which shouldn’t probably happen if you’re a W2 employee ever. My suggestion is this, Redo your W4, there are new W4 forms. There’s information out there for you. You need to basically go back and revisit. Maybe you’ve had children at home, kids in college, so you’ve always been getting some extra money. But maybe the youngest one is now 17 or older. So therefore a $2,000 credit to you just went down to a $500 credit. Maybe the one went to college or they start claiming themselves. So you lost up to $2,500 an educational credits plus the standard deduction or the personal exemption. Excuse me. So you, might have had changed and things in life. I mean, I can’t believe sometimes some people will come in and say, I’m claiming married in six and they’re married and zero and you’ll wonder why you had payed all. You know, you have issues every single year with your tax returns. Again, it’s a lot easier to pay $15, $20, $25 a paycheck if you’re paid weekly and make up the difference than it is to come up with six, $7,000 sometimes. Because everybody’s been getting such a larger dollar mind. I may have one person, I think their W2 it was like $45,000 and they had paid in like $45. I mean, come on. And they were single and zero. But they were claiming married and six. Well, uncle Sam’s it’s gonna sit there and say, well we figured that out. If some of you guys that may have some tax issues, you’ve probably had your employer notified that says no matter if you’re single, no matter if you’re married with five kids, they’re requiring you to claim single and zero because you owe the IRS money. And they get to claim or get to keep all of your refunds, so that’s kind of make something a little bit interesting for you when it comes into that scenario. So they get to make sure that at least they’re getting something towards the deficit. I had a client that they owed for back taxes a number of years and they went both to single and zero even though they’re married with two kids and this year will be their last year. All the refunds when to them and they have finally paid off, I don’t know, about five years of back taxes with penalty and interest. So it’s an awesome thing. Hey Mark, what can I do for you?

Caller: 34:56 Well, You were talking about real estate professional. I wanted to piggy back on that and ask you a question. You’re aware of the election you filed a group properties to qualify a real estate professionals though having to have hours on every single property?

Dr. Friday: 35:12 Correct. It would be anything you’re doing in the real estate profession. It may be that you’re flipping homes, plus you’ve got rental properties, plus you’re doing some sort of management for other people. I mean it would be a combination.

Caller: 35:27 Okay, well for 2017 this before the new tax file on the qualified business deduction. But what if you didn’t file that election?

Dr. Friday: 35:38 Well, they didn’t have losses. It doesn’t make a difference.

Caller: 35:42 Well, since I’m talking about taking big losses over 25,000

Dr. Friday: 35:46 okay, then I would amend if you qualify, I would amend 16, 17 or 18 because I want my money now.

Caller: 35:54 Well, I’m asking you if you audit you and you do not have that election on file. Are you going to be disqualified from being a real estate professional even if you got 20 properties? Because they say, we can’t spend that much time on any one property.

Dr. Friday: 36:08 No. I mean you will not be. And if you’ve got, I mean seriously, if you’ve got 20 properties and well, the biggest thing is can it meet the criteria. Do you work a full time job plus manage?

Caller: 36:19 No. I dont have any Problem with the hours and stuff. I’m worried about the election. Googleing and reading about it There’s back in 94, 95 years probably to start filing this election. And you had the file ahead of the year.

Dr. Friday: 36:31 You can actually do it every year now.

Caller: 36:33 {inaudible}

Dr. Friday: 36:34 You can do it every year now, you can choose it each year based on your schedule. So it’s an election

Caller: 36:43 {inaudible} 2017 but now that you don’t have the election. You can file another amendment and there’s been one in with it?

Dr. Friday: 36:48 You could actually, theoretically you could go back and do it. You can amend that particular election. It doesn’t have to be pre done.

Caller: 36:55 Wonderful. Okay. Because I’ve never filed an election. So that’s why I’m asking you. It’s disqualifed because it seems like you had to have done that together, getting pulled, you know, for somebody to examiner or return.

Dr. Friday: 37:06 No Sir.

Caller: 37:08 Great. Thank you.

Dr. Friday: 37:09 No problem. Thanks. All right, we’re gonna take our last break. If you want to join the show. (615) 737-9986 we’ll be right back.

Dr. Friday: 37:30 This is the last part guys. If you been holding your breath, we’ll first take a breath because you might faint. But if you want to join the show is (615) 737-9986 (615) 737-9986 taking your calls, talking about all kinds of fun and fabulous subjects. Most important, I’m an enrolled agent licensed by the Internal Revenue Service to do taxes and representation. So maybe you receive some love letters, maybe your haven’t and your concerned because well, it’s that time of the year and you probably should at least make sure you’re getting ready to file. If you have not filed an extension, you do not get an automatic extension. You do need to make sure you filed them. Also, if you have problems with fiduciary taxes or trusts or estates, we also deal with tax issues along those lines. So if you need help with the IRS or have questions about, maybe you’ve received something or have a question about one of these things, then you can actually do it. If You’d like to join us on the show , you can (615) 737-9986 (615) 737-9986 take your calls about those questions and more. So if you’re wanting to make sure that you have the right person doing your taxes. I mean, one of the things we’ve been doing a number of years is we also review taxes, because sometimes you know what? You’re sitting there going, I’ve heard Friday on the phone for a radio or whatever. And maybe I’m not getting all the tax benefits that I should. So if you’re looking for someone just to give you a second opinion, you may find out that you actually have a really good tax person. And that’s great to know too. So if you want to join us, you can, but we’re going to go right to the phones. We’ve got Jay. Hello Jay.

Caller: 39:14 Hello. How are you doing today?

Dr. Friday: 39:15 I am living the life. What can I do for you?

Caller: 39:19 Well, I just want to know. Why do we put up with such a complicated tax code? You said yourself, you don’t know everything. You know, I think our tax code has made more liars than the sport of Golf. And why can’t we go? Why can’t we settle on something like the fair tax?

Dr. Friday: 39:35 You know, I would be the first person. A lot of times people don’t realize it, but I would be the first person that would be in line for my opinion at least is the consumption tax. If I want to buy something, charge me 18%, whatever. I’m just throwing a number out there, but charge me a percentage so that when I buy it, it goes to the business or whatever, and then it goes to the IRS or the state or whatever. We don’t have a state income tax. So, you know, whatever it might come down to that way if I choose not to spend my money, but I’ll be honest. That will never happen either of them because the IRS would lose power, let’s be honest. They’re probably are the biggest employer as well as probably one of the most powerful, companies or businesses or whatever you want to refer to government offices in the whole United States. I mean, if the IRS decides the CS, Lovey, lean, whatever, they’ve got their own courts, they’ve got their own judges, they’ve got their own code. So, I think the simplification, and I mean we all joke around in the tax business because this was a simplification and all it did was move what we had on two forms on the five. So, not simple, you know. There’s no such word and then there’s always an exception to the exception. So I would love it because that way then the IRS would have no input into the individual lives because they wouldn’t need to know where my money is, how much money I have, anything.

Caller: 41:01 Amen.

Dr. Friday: 41:02 Not gonna happen, You know. Not gonna happen because they would lose the power. Can you imagine the people not being afraid? I mean, money laundering all kinds. I’m sure there’s a lot of things. I’m not thinking of Jay, but from the tax standpoint, I would love it. I mean, just, I would never have to file a tax return.

Caller: 41:21 Like four of the largest economies in the United States use the consumption tax. The State of Tennessee, Florida, Texas, Nevada. Why couldn’t they do that nationally? They could.

Dr. Friday: 41:33 Well, they could. It’s all about changing the tax law. The fact is people freaked out when we reduced, when they increase the standard deduction because they say. Well, no one’s going to give to charity. Well, I don’t know about other tax people, but my people have not changed the amount of money they give to charity. I’ll be honest, we have a very giving state. So most people don’t stop something just because it’s a tax thing or not. But all I’m saying is, I think it gives the government a major amount of control over every single tax payer. Which right there is the end of that conversation because the code stays complicated. We put a lot of people out of business. Think about all those auditors, all those people trying to collect money, they could audit businesses on a monthly basis and keep those people. Then probably find a lot more money because let’s be honest, everyone tries their best not to pay taxes. So this would be a way of them making sure that every dollar collected would end up in there till. I don’t think it’s gonna to happen. Well, good question though.

Caller: 42:34 Thanks for your opinion. I agree with you 1000% I still think one day it could happen.

Dr. Friday: 42:40 Okay, well. You know what? I like the positive attitude. I’m right there with you. Thanks buddy. Bye. Alright. And I do, I think it’d be awesome. I personally think for many of us it would not even put us out of business because I mean businesses would still have to continue to file an account for. You could have an auditor on every freaking block of businesses, every business within no longer be able to be creative, lack of a better term. And they would get every dollar because it’s impossible for the IRS to audit everybody right now. It’s physically impossible. Millions of tax payers in Tennessee, I don’t know how many people are in Tennessee, but I think we only really have about maybe 10 auditors at least in the Nashville office, maybe less than that. So you can just imagine how many people are falling taxes and the odds of being audited. Basically, if you’re in a less than a million dollar a year person, your odds are probably 0.1% 0.3%, something like that. If you’re a person that makes more than a million dollars, I think you are like 10%? They audit more people as the income bracket goes up. But that being said, it either way, it’s a great concept J. I love the way you think. Unfortunately, politicians are right now trying to give themselves a raise because they think they’ve worked too hard. Now given according to what I heard, they haven’t had a raise since 2009 still making an average of about $175,000 assuming they’re on any committees or anything else, they make a little bit more money. I think what people forget on that one is they also get like half of that or more than that. I think when they hit retirement, as long as they’ve served like two terms. So none of us, if we work eight years, something like that, we would get a 50% or even, I’ve heard different stories, I’m not an expert on it, but somewhere around 50 to 100% they get continuously. So I think we need to reduce, have them contribute to their retirement, have them contribute. This should never be a life job. There needs to be terms. I never hear him bring it up. But instead of a raise, let’s make it terms and then we can talk about raises because that’s the end of my rant on politics. All right, so if you are a bit shy or you’d like to make an appointment with my office, it is so simple. All you have to do is pick up the phone. (615) 367-0819 call on Monday, (615) 367-0819. I realized that a lot of times when you get those love letters or you know what? I haven’t filed taxes in number of years. I don’t even know where to start. Guess what I do? I do it all the time. We filed people with 10, 15 years back taxes. We help you get organized. We help you find a way of getting, moving forward with your taxes. It’s so important to just get in compliance. I can’t tell you. And then once you’re there, you can make it move forward and get more and more the information of what you need. But if you got love letters, you haven’t filed taxes or maybe you just looking for someone to help you with your current taxes. Again, (615) 367-0819 check me out on the Web drfriday.com we are working on a new website, so hopefully I’ll be a little bit more exciting. It hasn’t changed a lot lately, so maybe we’ll get some updates and more movement. So be patient with that, but we’re going to have a new release on that one. So, if you need help with taxes. You want to reach me, email friday@drfriday.com phone number (615) 367-0819 or just try to figure out who this crazy girl is. Go to drfriday.com hope you guys have a wonderful Saturday. Call you later.