To support those who have been affected by COVID-19, the IRS has provided an extension for the filing of tax returns. Learn more about that here with Dr. Friday and host John Haggard at the Dr. Friday Show. They also covered topics such as the following:
- New Tax Scams
- Process of IRA Distribution of an Inherited Estate
- Medical Miles
- Proving Your Identity After Filing A Return
- How Accurate Are Tax Preparation Programs?
- What to do When You Have Something On Your 1099-R’s Box 5
- Itemized Deductions on Installing Elevators for Medical Purposes
- When You Get A “Warrant” from IRS
- Is It Better to Spread Your Tax Bill Out?
Transcript
Announcer 0:01
No, no, no! She’s not a medical doctor, but she can 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 737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
John Haggard 0:29
Live from America’s Music City! It may be Saturday where you are, but it’s Friday all day every day all the time with the tax doctor, the tax lady, the doctor of accounting. Known in these parts of America as Dr. Friday and right here she is. Hello Doctor Friday.
Dr. Friday 0:46
Hello John and no I do not have the coronavirus. I just got a tax virus. I have a lot of taxes today.
John Haggard 0:53
Oh man, I bet that you do have a tax virus, I can only imagine. Speaking of that, there has been so much information and let me say, misinformation and misunderstandings that people have about what’s happening with the tax situation, extensions, and this and that. So this is a program folk that I encourage you to pay very, very, very, very close attention to so that you don’t get caught having to pay a bunch of penalties and things because well, I thought so. And so doctor Friday here with all of the answers. And I think the first thing we have heard about, and I know you’ve got all the details, but as it impacts the Nashville, Tennessee area, I’m understanding that the IRS is extending the April 15 and possibly some other upcoming deadlines for tax relief for victims. How does that work?
Dr. Friday 1:44
Yes, since we are a federal disaster area zone, a federal disaster area, the IRS stepped up knowing a lot of people were having to really focus on, you know, clean up, you know, especially the ones, anyone in the counties where these hits. So Davidson, Rutherford, and Cookeville, I can’t remember the counties therein. All of those counties that were initially affected with the tornado then have an extension until July 15. And so that way that’s your normal extension. So if you don’t make your payments by April 15, if you can’t get an extension filed on or before April 15, you now have till July 15 to do everything you need to do. That would even be theoretically making your IRA payment which you normally make on the 15th of April. All of that would be extended, but those individuals, also individuals that are business owners, maybe you weren’t able to make your tax payments. Back when it was due on March 18. March 3, they extended those individuals out to the 18th of March which is coming up a lot of business owners have a march 15 deadline if you have a corporation and LLC, I should say 16th. Because the 15th on Sunday, six, you know anything that’s a separate entity. LLCs, partnerships, corporations, all of those are due on March 15. They have not yet totally announced. Oh, they have allowed Yes, I’m sorry business returns that were due or other things that mean their effective tax will be July 15, as well. So this is great news because there’s just a lot of stress. When you have something horrible like that happen. The last thing you want to worry about is additional penalties because you weren’t able to do something on the time clock that you would normally have had no issue with doing it.
John Haggard 3:42
Alright, folks, we will be talking more about that too. And perhaps some proposed federal regulations as it relates to the IRS here and some new tax scams that are out there as well. So the number to call we are live from Nashville until three so that means we’ve got 53 minutes to get your questions and answers answered right here. So the number to call if you’re new to the show. By the way, what do we do here? Well, this is the Dr. Friday show. She is an enrolled agent with the Internal Revenue Service. No, she does not work for the Internal Revenue Service. She’s like, will say like an attorney who would represent you in a court of law – she can do that. If you’re in trouble with the IRS or you’re trying to negotiate with the IRS or as Dr. Friday says if you get a love letter in the mail that seems a little threatening and some things are going to happen. You do not have to speak folks to the IRS. You don’t ever have to if you don’t want to. But to find out whether you need to or not, call Dr. Friday. We’ll be giving you her number and she can tell you whether she could represent you in front of and before the IRS. The numbers here to call 737-WWTN, 737-9986. Now is the time to call because again, we’re here, what now, 52 more minutes. So you want an answer, now’s the time to call. The advice is here, it’s here on Super talk 99.7 WTN and let’s go to Pulaski. Jerry, you are on the Dr. Friday Show.
Caller 5:06
Dr. Friday, it’s good to speak with you. I’d love to know about the process of reporting in distribution from an IRA from my mother’s estate. What forms are involved and such and so forth?
Dr. Friday 5:24
One more time, Jerry. I’m sorry, I don’t know if there’s just a connection, but I didn’t hear the question. Could you repeat it one more time? Sorry.
Caller 5:30
Yes, the process for reporting the distribution from an IRA from my mother’s estate.
Dr. Friday 5:37
kay, so that distribution is going to either go if it was a trust that would go directly there should be a form called a 1099R. If it was a Roth distribution, you might have a letter Q or something in the bottom otherwise it would just be a standard distribution code seven, but you would have a 1099R that would have come from the judiciary, whoever was handling the estate. Okay.
Caller 6:04
Okay. And then just report it on…
Dr. Friday 6:09
Your personal tax returns.
Caller 6:11
… To my personal tax then, right?
Dr. Friday 6:15
That is correct. Yeah, they will report on the front just as if it was your IRA, in essence, but it’ll be on the front page of 1040. Yes, sir.
Caller 6:22
Okay. All right. And the K-1 was…?
Dr. Friday 6:28
If you have a K-1, so does your mother have a trust?
Caller 6:32
It was an IRA, a right, you know?
Dr. Friday 6:37
There won’t be a K-1. I mean, if it was just an IRA and you inherited directly, you should have a 1099 R. If it was an IRA that filled out to trust there would be a K-1. You wouldn’t have both. So if it was a trust, the trust would have received the 1099-R. Someone would have to do a 1041 return and created a K-1 for you and all the beneficiaries.
Caller 7:06
So, do I have to go back to my 1040 then?
Dr. Friday 7:10
Yes, sir. Then it would roll, the K-1 then would roll over to your 1040 off the Schedule E, yes.
Caller 7:15
Okay. All right. Dr. Friday, I certainly appreciate it. Have a good day and I hope to talk with you again sometime.
Dr. Friday 7:24
Perfect, thank you.
John Haggard 7:26
You’re on the Dr. Friday Show. Number to call now folks, we’re life. That means picking up the phone right now get the answers you need. Tax questions, a lot of things are complicated and we want you to keep as much money as you can and comply and do all you got to do so if you want that free advice just like you heard a moment ago, here’s the number 737-WWTN. 737-9986. Call now because if you sit around say well I’m going to call in a few minutes we’re going to be gone, it’ll be three o’clock so you’ve just you know need to get on the phones now. To Antioch, we go let’s bring Patricia onto the Dr. Friday Show. Hi, Patricia.
Caller 8:01
Hello. I have a question about, it’s an in the medical realm. I never have had enough expenses, whatever it is – 7.5% or whatever it is now – to use that for my tax preparation. But I’ve understood in the past that I could deduct my mileage. I tally up to and from every appointment for the whole year. And I’ve I’ve always done that, oh, I don’t know, for 10 years or so. And I’m wondering if that was bad advice. I couldn’t have even really use that or is it still in effect if it indeed is a legitimate way to add an expense.
Dr. Friday 8:45
It is medical miles, medical miles are still 100% deductible. Like you just said as far as taking them back and forth or going to pick up your prescriptions or seeing a doctor. You know, it is still a write-off along with, it still has to meet that 7.5% of your adjusted gross, you know. But medical miles in 2019 were 20 cents a mile. In 2020, they’ll be 17 cents a mile.
Caller 9:12
But are the medical expenses can be separate from that lump sum for medical treatment, which I don’t ever need?
Dr. Friday 9:24
Well, no, I mean, they’re all going to fall into your schedule. I’m not sure if I’m following, they’re all gonna fall on your Schedule A, as any medical will have to meet the 7.5% of your adjusted gross income plus if you’re married or single, the standard deduction.
Caller 9:37
So does the mileage go on top of that, or can I do the mileage just separate by itself?
Dr. Friday 9:43
No, it’s part of that it would just add to that to help you either meet your itemizing or not.
Caller 9:50
I understand. Thanks so much for the consideration of speaking to all of us.
Dr. Friday 9:56
Sure. Thank you for calling.
Caller 9:58
Of course. Bye
John Haggard 10:00
On the Dr. Friday Show. It’s 2:12, 12 minutes past two o’clock. And Dr. Friday based on some of the press conferences here just in the last day or so, as it relates to the IRS and what the President has said about, I think, maybe extended family leave or this and that or do we know or do we have to, I guess, read the bill and see what comes out? What kind of relief there would be for companies and this type of thing as it relates to the coronavirus and the impact on taxes and whether there’s going to be payroll tax with not withheld or you know, how that’s gonna work?
Dr. Friday 10:34
Well, that’s it. I mean, it sounds good on paper, but even unemployment benefits are taxed. So in, you know, the employer pays the tax to put it in and the employee pays the tax when they take it out. So all I can say is it sounds great to say that we’re going to make sure that everyone has enough money to live and we’re going to do this or that. But I am just we have not heard exactly how that’s going to be treated when the people receive it, is it going to be completely tax free money with which I find pretty rare, you know, I mean, to be honest? Is it going to be some sort of, I mean, like we’ve seen homeowners buy-in where they give us an advance and over the years, we have to pay it back. We’ve seen quite a few different types of tax bills. So it’s going to be interesting to see exactly what this does. You know, I don’t know if we have the exact answer, to be honest.
John Haggard 11:28
All right. So folks to understand if they are maybe perhaps for the first time going to be receiving unemployment benefits, those are taxable. How does that work?
Dr. Friday 11:38
So the state will give you a mean name and ask if you want taxes to withhold, but if you’re on unemployment, it’s treated as other income. So it’s taxed at the same rate as your other income would be starting at 12% and working your way up and if all you had was unemployment, and most likely it was less than $12,000, as a single person, you would have no taxes. But if somewhere in the year you got a job or you’re married and your spouse had a job, then you’re very likely going to have to pay tax on those if it’s above the standard deduction.
John Haggard 12:08
Now, is it that an employee does not pay into the fund for unemployment? Is that correct? Or do they?
Dr. Friday 12:16
No, you’re 100% correct, they do not. In the state of Tennessee, we do not pay in. California has a different one with the state unemployment where they pay a portion of it and plus in this the state Disability Act, but in Tennessee, no, we do not only employers pay in, and then when the employee gets it out, they then pay tax. At one point they made that tax free money. So as I’m saying we had a period of time when it was tax-free back in 2009 and 10, because of the recession, I guess you would call it you know, they had people being able to get the first period of time for tax-free the first 2500 or something, trying to give people a break. So it’s just going to be interesting to see how many people and how are you going to prove that, I mean do you have to have a doctor’s note to prove that you have the coronavirus? How’s that going to work? You know, am I gonna be attaching that to a tax return to get a waiver of some sort on taxable income? You know, I’m just not sure how that’s gonna work yet.
John Haggard 13:16
Right, get to see the details. But let me ask that question one more time. So there are some states or at least California if you are an employee that you do pay into the unemployment fund?
Dr. Friday 13:28
It’s disability insurance, but it is a form of unemployment. You only get it if you are unemployed.
John Haggard 13:35
Right, but you do pay endo. Correct.
Dr. Friday 13:38
Right.
John Haggard 13:38
Yeah. Are there other states like that you’re aware of?
Dr. Friday 13:41
Unfortunately, it’s only two states I’ve actually ever done a lot of work in. So I can’t say I know. I wouldn’t be surprised. I mean, a lot of people like the concept of the socialized things but if you live in Australia, the employer does withhold a lot of different taxes from you participate in the giving of the money to the state and the government. So they take out for health insurance, they take out for disability insurance. You don’t pay it all the employer doesn’t match or in some cases, depending on how large the employers, actually pay all of it. But again, it’s different in different states or in different federal unemployment. Obviously, most of us don’t collect from we collect from the state.
John Haggard 14:25
Gotcha. Folks, you’re listening to the Dr. Friday Show, all of the tax advice is here. T-43 minutes and counting. Now’s the time to jump on the phone lines to get all the free tax advice you could possibly want. It’s here, and it’s now at 737-WWTN, 737-9986. John Haggard in the studio, Dr. Friday is an enrolled agent with the Internal Revenue Service. And again that clarification, no she does not work for the Internal Revenue Service. What an enrolled agent means is that she can represent you before the IRS much like an attorney would in a court of law. We’ll take your phone calls all live and next on Supertalk 99.7 WTN.
And back we are at the Dr. Friday Show. Live from America’s Music City ladies and gentlemen. John Haggard in the studio but Dr. Friday is on the phone with all of the tax answers that you need. So now’s the time to call 737-WWTN, 737-9986. Be in the know get the knowledge know what you need to know so that you don’t pay too much tax or you miss out on an opportunity where you could have saved a lot of money but you didn’t do something. So you’re having to pay more. So get the advice. Now is the time to call. To Manchester, we g. Here’s Debra on the Dr. Friday show. Hi Debra.
Dr. Friday 15:55
Hi, Deb.
Caller 15:58
How are you?
Dr. Friday 15:59
How can I help you? I’m good, thank you.
Caller 16:02
I have a question. I had filed my taxes on January 28. And a week later I received that I was accepted. And about 10-15 days later, I get a letter in the mail stating that I have to come down to the federal building in Nashville to prove my identity. And so I did that. And now they’re telling me it is nine weeks before I get my money.
Dr. Friday 16:35
Yeah, you’re the third person that sold me that particular story, I don’t know if they ended up with a large number of I mean, we know that they got a ton of people filing on that day, but somehow if there was some sort of fraud that happened because it’s like they just grabbed by random because other individuals that I spoke with said no that you know, they didn’t really have any problem, they just need me to prove who I was. And then it’s like it had to go through paper mail after that to actually get it sent, you know, through the system or whatever. So, I don’t know, it’s kind of crazy.
Caller 17:13
She told me they would electronically put it to my account. But she said it could take up to nine weeks. I’m trying to figure out why would it take nine weeks? You know?
Dr. Friday 17:24
Yeah, I’m still thinking that there either it was if it wasn’t random that in your case that there was some sort of fraud done against you. And in that case, they’ve got to eliminate the fraud, to make sure that nothing else has been filed under your number. But normally, they require you to get a special pin. If that’s the case, did they give you any kind of special filing pin?
Caller 17:46
Nope, nothing.
Dr. Friday 17:47
Okay. All right. So that I would say that that probably wasn’t.
Caller 17:50
Yeah, she said that. It takes nine weeks to process.
Dr. Friday 17:55
Yeah, it’s crazy. It is crazy.
Caller 18:00
…Do I have to really wait for the whole nine weeks?
Dr. Friday 18:03
Yeah, well, I will tell you, they always tell everyone 21 days for us to file electronically. And I always tell my clients, we can’t do anything until after the 21 days, but most of my clients are telling me they are getting a refund in about half that time. So, you know, there is always that hope that she was giving you a scenario so that so you could come back and say, well, you said 30 days and you know, it took longer. So the hope that that wouldn’t be the case. But, you know, I don’t know for sure. Because like I said, my other two people, it took him a while to be able to make time to go down there to, you know, to get into the IRS office and then to get it done. So
Caller 18:40
But you know, what she did say to me, though, was unless you get a letter from the IRS, it will be within nine weeks. And I’m thinking what are they gonna do, audit me upside down?
Dr. Friday 18:56
Well, let’s hope that you know, that’s almost putting salt on your wounded at that point. So let’s hope they decide not to do any kind of auditing. But this point, I would say, most likely, it’s just a matter that they somehow randomly pulled you. And that’s a guess, you know, I mean, I don’t why otherwise?
Caller 19:14
You know what’s really bothered me about the whole thing is that the guy told me when I called the IRS. that both of us had to go down and show everything. And when we get there, she called me I didn’t have to bother getting my information out, she just needed my husband.
Dr. Friday 19:29
Oh, so maybe it was under the husband. He was the first name on the tax return, right?
Caller 19:33
Yeah, absolutely. That other person how long did they wait to get their track?
Dr. Friday 19:43
Well, they’re like you they have not yet received it, to be honest with you. Last I heard from them, they basically, you know, both of the other two people. One took one was 20 days or more to get into the IRS because they didn’t have the schedule to be able to just drop everything to do it. And the other one was able to. They’re older, so they were retired, so they were able to do it. But they were told the same thing. And I don’t know if that, they were under the impression they were at the wait for a check. So it may have been, you know, different. Who knows? I haven’t heard back from them yet to see if it actually, you know, has happened or not.
Caller 20:16
Wow.
Dr. Friday 20:17
So hopefully you’ll get it soon, okay?
Caller 20:19
You know what, I’ll give you a call back if I get mine earlier. How’s that?
Dr. Friday 20:23
That’s great. That would be awesome. That way, I know for sure that’s coming through.
Caller 20:28
Yeah, you can get further people, you know, let people know how long to actually be.
Dr. Friday 20:32
Yeah, I hope you call back in about three weeks and say it’s already been resolved. Good deal. Thank you.
Caller 20:39
Yeah. Thank you for your time.
Dr. Friday 20:41
No problem.
John Haggard 20:42
Folks, you’re listening to the Dr. Friday Show. It’s 2:26 PM that means about 33 minutes now left. If you’ve got a question, comment something you been on your mind or can’t figure out or just maybe you’re using one of those tax preparation programs that you have bought off the shelf and by the way, Dr. Friday You hear these things like if it’s our fault, and you know, we’ll cover you up to a million dollars or under whatever the tax is due or whatever. What’s your opinion, we do talk about this. And for new folks out there who have never heard your opinion about this, how do you feel about the tax preparation software packages that you can buy for, I don’t know $29, $59 $79? And what happens if you do run into trouble and the IRS writes you one of those love letters? How good are those programs?
Dr. Friday 21:28
So keep in mind that my opinion is based on the fact that many times I’m getting the client walking in my office because they did not get the kind of service they needed. But my understanding from those clients that did come into my office, they were sent a pamphlet telling them how to handle an audit. And they in one case, they were told, well, you look like you made a mistake. We didn’t make the mistake. So the insurance didn’t cover it because it has to be a mistake. Well in the type of insurance this particular person had, it was insured if the preparer made the mistake. And in that case, they said it wasn’t their mistake. And so the bottom line comes to this is that a) keep your documentation in good shape. If you do get one of the love letters that says that you have been a lucky person and we are now going to audit you, my personal opinion hire someone to represent you.
Not only because that’s what I do, but because it’s kind of like anything else. If you’re doing it yourself. you’ve got emotions and different things set up. The person like myself that represents you, it’s not about the money, it’s about what is the tax law going to do, how much can we produce, what can we do to do it. Because so often if I’m hired sometimes after the first meeting, where they’ve walked in there and they’ve been disallowed all the expenses because of the way they submitted the documents to the IRS. The agent’s job is not to make sure your documentation is submitted in the right way. Their job is to make sure that you have documentation that meets the IRS standards and sometimes it’s really is guys just a matter of putting it together with the right way, making sure your mileage reports are actually put together the way the IRS is going to accept them. Otherwise, they have the right to reject a basic mileage report.
John Haggard 23:11
Speaking of mileage reports, is the evidence good enough? Let’s say somebody says, “ell, I’m gonna build an Excel spreadsheet, and you know, I’m gonna have every day of the year. And if it’s, you know, March 21, or whatever, and it’s, you know, for the business miles start and stop and what the explanation was.” So if they got audited and said, Well, these are my records, you know, this handwritten stuff that I’ve put on the sheet or whatever that shows me where I’ve been. Is that good enough, or they need something more than that?
Dr. Friday 23:41
Well, in some cases, it is if you can justify it sometimes with showing where you, For example, if in my business before with I was selling to different businesses, I could prove I have a contract from this person that contract from that person or I’ve got a business card where I can show I had this person You can’t just have a report that has no backup. So who did you meet? What time was the meeting? You know, you need to have a little bit of information in there not that I just I went over here, I stopped at this, this office supply place and then I went to the bank. Well, you have deposits with the crew. I mean, just they could very likely pick out your spreadsheet and say, well, you said you went to the bank here, can I see your deposit slip? You know, they want to know that you really did this. So we’re getting miles any miles on the vehicle. You want to make sure that cash I mean, just a gas receipt is not good enough. A gas receipt doesn’t say what vehicle the petrol went into. So you know, you need to have Who did you meet with? Why was the meeting for, you know, how long was the meeting and then, you know, that kind of detail, so that they can actually see that this was actually a business meeting, not that you just went picked up your kids from school?
John Haggard 24:56
Good advice, folks. And you’re getting it here. T-29 minutes to go. You’re listening to the Dr. Friday show. That means jump on the phone lines get all the free tax advice you could possibly want 737-WWTN, 737-9986. When we come back we’ll be taking your phone calls. John Haggard in the studio, Dr. Friday the tax lady on the telephone with the advice. Here on Supertalk 99.7 WTN.
Segment number three. The Dr. Friday Show, live from America’s Music City. By the way, if you were ever outside the listening area of this radio station and you would like to hear the Dr. Friday Show, be sure to get that smartphone out download the I Heart App and search WWTN and Dr. Friday is there as our all programs 24/7 on this radio station. To Tullahoma, we go, let’s bring Gary on to Dr. Friday. Hi, Gary.
Caller 26:01
Hello.
Dr. Friday 26:06
What can I do for you?
Caller 26:07
Well, I’ve got a 1099R and a portion of it was reported in box five as just wanting to know what exactly I can do with that or what I’m supposed to do with it.
Dr. Friday 26:19
Well, box five would mean that you actually contributed a part of the money that was in that 1099. Which would be either mutual fund, annuity, IRA, or Roth, part of it may have been a Roth. I’m not too sure so but usually what it is, depending on your situation I had not looking at it. But you know, normally box one is going to be one number box two would be reduced by box five, and then you would have federal taxes possibly taken out a box for. Not looking at it, what is inbox two versus one? Are they the same number? Or is it undetermined?
Caller 26:55
It was from a rollover, so it wasn’t a taxable event.
Dr. Friday 27:02
Okay, so the code was for a rollover versus the other. So it sounds like maybe some of the money that was already in there. Is it possible that you had made some after-tax contributions to an IRA?
Caller 27:13
Back in back in the early 90s, I made some contributions, but that predated any Roth type of IRA.
Dr. Friday 27:23
Well, that sounds like to me, I mean, normally, that’s what that means. Just to let you know, you might have to contact your fiduciary, but normally, that’s what it means to us is that there’s after-tax dollars involved in an account that is a tax-deferred account. But since you did a rollover now, it’s all going to be tax-deferred already, anyway. You just did it. You did fiduciary to fiduciary. So this was just moving from one company to another. It wasn’t an actual conversion, correct?
Caller 27:51
No, there was no conversion. It was just a rollover.
Dr. Friday 27:54
Okay, then I guess it doesn’t really make a big difference in this particular conversation, for tax purposes. But an answer to your initial question, it would normally mean there was after-tax money in a taxable account.
Caller 28:07
Could I withdraw that money?
Dr. Friday 28:10
If it’s a Roth.
Caller 28:13
It’s just that that portion inbox five that the tax has been paid on.
Dr. Friday 28:18
You would have to, in all honesty, it would be treated as a Roth. But you would have to contact them because a lot of times the rules are they have to distribute first the taxable amount before they have to distribute the after-tax. So in answer to your question, no, not unless you clear the whole thing out.
Caller 28:37
Well, very good. Yeah. It sounds like to start as simple as it seems like it should be.
Dr. Friday 28:44
Well, there you go. That’s unfortunate the conversation I often have in life, but you’re right. It isn’t quite as simple as it should be. But I would definitely talk to you whoever is handling your account and just confirm if there is after tax. And I’m not a financial planner, so there may be a way of them moving that over into a Roth and then you could take it out.
Caller 29:06
Well, very good. I appreciate your answer.
Dr. Friday 29:09
No problem, sir. Thanks.
John Haggard 29:11
All right, folks, T-22 minutes. We always say that countdown because what happens toward the end of the show all of a sudden a flood falls come in and you don’t get on the air. So if you’re saying Well, I’m going to call in a minute, your minutes up now. 737-WWTN, 737-9986. Call now, we’re live. To Nashville, we go. Let’s bring Susie onto the Dr. Friday Show. Hi, Susie.
Caller 29:34
Hello. I have an itemized deduction question. I’m a senior citizen who’s starting to have some mobility issues, particularly when it comes to stairs in my home. And I know that with all the deductions that have been taken away from us, generally it’s not gonna do to most people any good to itemize. But the gentleman at the elevator company I’ve checked into about getting one installed said that sometimes your doctor can write a letter stating the reason that it’s medically necessary and it would be deductible. And I wondered if that is correct. What would I need that to say?
Dr. Friday 30:17
Well, it would be simply that you know that you are not mobilized and you need the elevator to keep it safe. So, you know, as long as you have a medical note that says that a doctor says that an elevator would be what was necessary to either keep you from falling and hurting yourself or being able to utilize your home, you know, to get from your bedroom to the kitchen, something like that, then then it can be considered. And, you know, then it would be part of your medical itemizing. You know, it does keep in mind though, an elevator would increase the value of your home. So, therefore, the IRS would look at part of it as an increase in the value of your home not necessarily just for medical procedures, so we would be able to write it off. But when you sell the home, you may have to do a recapture on that, but that’s probably not something we even have to worry about in all honesty. But right now, if you’re over the age of 65, you’re single or married.
Caller 31:21
Single, and I’m over 65.
Dr. Friday 31:24
So you have a $313,850 before you itemize. So, you know, making it a little easier, but certainly can see what you want to do. But I would just say I talk to your doctor, and if he’s willing to sign something saying that, you know, if an elevator is essential to keeping you mobile and living in the house and keeping you safe, then that would probably allow us to take a portion of the elevator off for the medical procedure. I don’t know if I would be I mean, I would have to look it up. And it’s not like an electric, wheelchair lift or a ramp for a house. These are things that are essential. I’d have to personally I don’t do enough disability, there may be someone listening that could help us. But, if you want to email me, I could probably send you the tax law to say what it is, but I’m not sure an elevator actually fits the disability law as far as the equipment. You know, I’ll be honest, I don’t know if that would fit the full criteria, but a wheelchair lift or a ramp gives you access to your home in stairs, you know, obviously are not something but they may say that it’s not essential to have an elevator. I don’t know I’d have to look up the tax laws to be absolutely I don’t want to tell you definitely yes if you go spend $10,000 for an elevator and then you find out it’s not a tax deduction that would not make you or me happy. So if you want my email to be given out and I’d be more than glad to send you or look up the tax law for you. But this moment, I don’t know for sure if it would be tax-deductible. If it was I don’t think a whole thing would be, but I’m I don’t know the exact answer. Sorry about that.
Caller 33:10
Well, technically, this is a lift, it’s not an elevator per se. The gentleman’s suggestion I get one that would accommodate a wheelchair. So in future years, if we need one, which I guess I anticipated at some point, that would be ready and set up. Does that make a difference? If it’s technically a lift as opposed to an elevator?
Dr. Friday 33:35
It still would come down to is it a necessity for you to get around is the elevator or the lifts an essential part or not? And that’s a big part of the tax law is the essentialness of it. A lift on your car may become extremely essential. You can’t get in the car can’t get around without the lift in the home. Is this a way you know, is this essential or not, and that would be the question. And again, I’m not sure that answer but I’d be more than glad to look it up for you. I’ve never actually taken an elevator off. I’ve done swimming pools and other things where there was a necessity for those things. I’ve just never had anyone with an elevator or a lift that wasn’t attached to a car or something like that to make it in there or that they are wheelchair-bound. And they needed it. But it doesn’t sound like you are wheelchair-bound at this time.
Caller 34:22
Correct. Well, thank you so much for your time. I’ll try to email you.
No problem. Okay, thanks.
John Haggard 34:28
And folks, you’re listening to the Dr. Friday Show, the tax lady if you have just joined us. And one thing, Dr. Friday, some people are maybe in a situation like this out there. They haven’t filed any taxes for maybe years could be 10 years could be longer. And they’ve got this huge, you know, amount of money that the IRS says they owe like maybe $500,000 or maybe it’s a million and you have had cases not all cases are the same. You know, individual results vary, they always say. But you have had situations where you had a client one-time client that owed over $1 million to the Internal Revenue Service that you got settled for about $100,000. Yeah, and of course, you hear some of these commercials and things on television where, you know, hey, hang on, we’re gonna do all this and all that, and some of its scams, and, you know, some of those companies have been shut down by the FTC or whoever. And sometimes when you hear something like that, you say, well, that’s just too good to be true. And we’ve been taught if it sounds that way, it probably is. But how did that happen? How did you take a person who owed over a million dollars down to $100,000 to the IRS would accept?
Dr. Friday 35:42
Putting them into compliance which is always number one, which means this particular person had not filed a number of years, the IRS all they knew about was 1099. So in business income that was reported under him from a 1099 K and so they just took a hunch, you know. It took zero expense, claimed him as single, and just figure it out his taxes. Then we ended up actually being audited. But the bottom line comes down, we were able to show he had rent, he had employees, he had expenses. So we were able to bring him down to much closer to the reality of what his tax issue was or is. So and that’s the biggest thing of most people, you need to get into compliance. First, you need to start paying your quarterly. Being a self-employed person, we none like them, but it’s a fact of life, Uncle Sam as a partner in all of our businesses, we have to give him his fair share with somebody may not pay his fair share, but it far as I’m concerned, you know, we got to pay our dues. And you need to get used to doing it. That’s the hardest thing, John, for most people that are self-employed, is really forgetting the paycheck. You know, someone takes out all your taxes and you get a net check. As an employee, that’s great. But as a self-employed person, no one’s taking out that extra tax dollars we get 100% and we’re not giving you know yet to learn to live off. 75 It’s just that simple. And if you’re in the higher bracket, it could be as much as you know 40 to them 60 to you.
John Haggard 37:07
Alright folks, last call. T-14 minutes, if you’ve got a tax question, this is your last opportunity today to call. 737-WWTN, 737-9986. John Haggard in the studio the tax lady right there she is Dr. Friday on the phone with all the answers. We’ll take your phone calls next on Supertalk, 99.7 WTN.
Here we go the final nine minutes so the Dr. Friday Show. Live from America’s Music City, you can reach Dr. Friday, by the way, friday@drfriday.com. And of course, that is the website as well, drfriday.com. Did you know on that website, by the way, that if you did miss a show folks that you can go on Dr. Friday’s website? Not only listen to the program but see a transcript of the program. Pretty cool stuff. So you need to check that out in case you missed something you will always be in the know and on the go. Dr. Friday on the phone and, by the way, we were just talking right before the break. Dr. Friday, we’re talking about a case that you had, where a person owed over a million dollars you got it settled for about $100,000 with the Internal Revenue Service. Could you name off a couple of like, you know, if we just take four or five say, hey, this one owed that and here’s what it was. This one owed that this is what it was. Just curious for the folks.
Dr. Friday 38:29
Right. Well, last three months I had one person that owed $158,000 they sell it for $23,000. Looking at my board here, I have a person that has $78,000 that settled it for $217. That’s a bizarre one. Just an extremely low amount. Keep in mind when you normally hear something really low like that the individual has no real estate, probably renting, you know, re-establishing themselves. They don’t have a lot to lose. I have another one. They’re pastors actually. And they owe around 200 some thousand dollars. And the offer that’s on the table right now is $51. We had an offer that we sent in, I think he owed around $70,000, we offered about $2,000. They countered offer $5,700, we’ve accepted that offer. So it’s not always what we asked for, they will take and do their own math and come back. And if that’s something that’s doable by the clients, we will, you know, we’ll be able to do it so. So all those cases are much better. In one case, the one at $70,000 in business and individuals. So he gets his business back on his feet and able to start, you know, building a business again, instead of having to continuously look over his shoulder. So that’s a couple of them.
I will I know you’re probably going to hit some of this. But I had a letter coming yesterday and I was going to copy you on John for the show, but then I’m like okay, I’ll just tell you but this person isn’t a payment plan with the IRS and they do owe a large number of money but the bottom line is they’re able to pay it, they’re making like $10,000 a month payments to the IRS. They get this letter it says warrant. And then in the paragraph, it says a warrant has been filed. This is not an arrest warrant but we are it’s a warrant to tell you that the IRS is looking for you or whatever and it’s a pretty detailed thing. So, of course, my clients sitting there going Wait for a second, we’ve been established payment plan they draft it every month, everything’s good as far as we know. I call this number and it was one of those organizations that were basically wanting to help you settle your debt with the IRS. But this thing was scary. I didn’t even think it was a fraud. I mean, I didn’t know you know, I mean sometimes you can read them and you’re like okay, this the collection company or whatever. So just really be careful when you get those and as soon as I told them that, you know as a representative and we’re in a payment plan, he hung up the phone on me. But it was a pretty threatening letter that would have scared a lot of people because I’m sitting there going, Oh, my God, it’s my client got a warrant from them. So, and I’m in the business. So just keep in mind, it can be very scary with some of these notices that some of these companies send out to get your attention.
John Haggard 41:15
Wow. That’s very interesting because that’s the first time I have ever heard of a warrant. Not to arrest, but yeah, so it looked that good. It looked that official and everything.
Dr. Friday 41:27
It did, and that is the first time I’d ever heard anyone use the word warrant. And, you know, I mean, we all know that they can put liens against your homes and things like that. But they made it sound like when you’re reading the wet, I’m sure it was legal jargon. But if you read that the first time through it sounds like the IRS was basically going to take any real estate or property you owned. And of course, this person’s, you know, trying to build something, you know, I mean, they, they’re doing everything that the IRS has asked them, they’re in good standing. It was a scary letter. So I’m thinking, I’m a tech professional. I see tons of stuff every single day, and it threw me back. Can you imagine the individual when they get this in the mail in an official-looking envelope? You know, just be careful, make the phone calls and try not to panic until after at least you’ve talked to someone and then get assistance. If it comes down to it. Don’t try to handle those things by yourself.
John Haggard 42:25
Well, that’s that is something right there. By the way, if you ever give the IRS permission to debit your account, you know, like to pay your yearly taxes or whatever that situation might be like that, can they just at any time if they wanted to go in there, if you weren’t paying later on something like that, just go ahead and debit your account since they already have your, you know, permission to have debited the other dollars?
Dr. Friday 42:46
Right. Well, they can’t. Yeah, they can’t do that. I mean, they do a levy against your bank, sure. They can do something like that without a problem because they’ve sent a notice to the bank and they could take 100% of whatever’s in your bank account up to the amount they say you owe. And a lot of times the amount of money that you owe is not the same as the amount of a levy, sometimes it will be more, sometimes it will be less because they only have so many years, they can levy at a time, certain periods where they can’t levy. So one doesn’t always match the other. But sure they can. They can sweep a bank account business and they can sweep your children’s bank account, if your names on it, they can sweep your mother’s bank account if your name is on it. If your name is associated with that account, they can sweep it and pay your debt with it.
John Haggard 43:31
Wow. So there you go. Let’s go to bring Scott on to the Dr. Friday Show. Scott, we’re just about out of time. But if you’ve got a quick question, let’s see if we can give you a quick answer.
Caller 43:40
Yeah, sorry about that. I just got a service. So quick question Dr. Friday. I have a business. The loan for the business was approximately a million dollars. We depreciated equipment portion out for seven years depreciated the structure out for 15 years. We’re now paying. We structured so we can pay it off earlier, we’re paying so much on the principle that of course, we’re having a taxable amount now. So we’re going is, is it better from here on out? If we ever do this again? Is it better to depreciate out longer? Where you spread the tax bill out, you have to pay a little bit you have to pay a little more on the front end, but it won’t make you so hard on the back end.
Dr. Friday 44:27
Great question. And the answer would be that would be what we normally all do, we want to take the depreciation on the front end because of a couple of different things. One is a building or anything gets older, a lot of times you’ll have more repairs that you’ll have to put into them. So you’ll have more money being invested. as the years go by the equipment will break down equipment will have to be replaced. So you’ll be able to get a take the junk out, but the good stuff in and continuously, you know has a depreciation. So that’s the theory behind the accounting side of it. I’m not going to tell you that you’re right if you’re lucky enough to have a really good set of equipment and building, we take accelerated depreciation on the front end. And in the end, you really have no deductions because you don’t have the repairs and everything. So you really aren’t going to have as much to do in the back end. But the theory normally is, is that a lot of machinery after five or 10 years will need to be replaced or upgraded. I may have lost Scott in that conversation.
John Haggard 45:23
Okay, Scott, we hope you got that answer that you needed. Dr. Friday, any last-minute tax advice for those who have not filed yet and put all their paperwork together?
Dr. Friday 45:32
So if you are someone that is in the counties where the tornado hit, don’t stress don’t go crazy. I would still suggest if you have a tax person, file an extension. I will tell you that we have pretty much gone through our list trying to make sure all the extensions because sometimes people are not thinking about taxes. If you miss it, you’ll be okay. And then don’t rush to file because I’m finding people still to this day getting some stuff from their investment accounts as an amended return so just make sure you have everything file if you need an extension. It is not the worst thing in the world.
John Haggard 46:09
All right there you have it from Dr. Friday. Ladies and gentlemen, if you’d like to get a hold of Dr. Friday, you can email her friday@drfriday.com. Also, the website is drfriday.com as well and if you want to get her on the telephone, the number is 615-367-0819. And tune in next Saturday at 2 pm right here for more of the Dr. Friday Show. And remember, you can always go to her website to hear the most current program, Supertalk 99.7 WTN.