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:
- The Importance of Paying Quarterly Taxes
- Inheriting s House That Is Paid Off
- How Do You Show Proof of an Elder Dependent?
- What Is a Homesale Worksheet?
- Can I Deduct the Value of My Investment Property as a Donation on Taxes?
- S Corporations Due Date March 15, 2023
- Who Qualifies for Employee Retention Tax Credit?
- The Importance of Accurate Tax Filing
- When Must You File a Tax Extension?
- What You Should Know About 1099-PATR
- 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 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. 615-737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
Dr. Friday 0:30
All right, hey, we are live in studio. I’m Dr. Friday and enrolled agents licensed with the Internal Revenue Service to do taxes and representation. So maybe you know, someone that hasn’t filed taxes for a number of years, or someone that just has gotten quite a few of those love letters. And if they have them, then we need to actually sit down and chit chat, it’s that simple. We need to make sure that everything is being done, because sometimes there are some deals, but I’m not going to be one of those firms that’s going to turn around and say we can save you 10 cents on every dollar or terrify you that they’re going to put you in jail.
Dr. Friday 1:04
I had a gentleman come in my office the other day, and he has a situation with the state of Tennessee and his first business first situation and he was terrified that they were going to lock him up because he had made this mistake on his state filing and you know, I get it, you do need to take taxes seriously, to the extent that we don’t want anything to happen as far as if you don’t file taxes on time. If you do things, they will take levies, liens, they can do all kinds of fun and exciting things. But there’s also ways of preventing that from happening, mostly communication, and then responding to whatever it is that they’re looking to get accomplished.
Dr. Friday 1:42
So it’s very important. If you’re dealing with the IRS, and right now, I know you guys are gonna start blowing up the phone schedule, say, Well, we’re trying to deal with IRS, right, we’re trying to deal with the situation. And you know, you can’t reach anybody, you don’t have any way of knowing if, you know, if you send something in via mail, it could take months and then by then you’re also getting other love letters saying that you’re still having to file or they haven’t responded to the situation. Most of the time, you get more collection letters than response letters that to deal with.
Dr. Friday 2:15
And so you know, I know many people I mean, if you listen to some of the the information coming out from the White House, one of the things he’s trying to do is increase the budget. Because for some of you, you may or may not have heard, but there was initially going to be a huge hiring for the IRS, and then funding kind of got pulled back on that. So they weren’t able to do that. So now under the new budget, I think it’s like 15% increase on their budget to help them try to find some funding. But you know, it would be great if they could increase communication. I mean, not so much. I mean, collections. Yes, it’s a part of the real world, everyone has to pay taxes, or you pay what you have to pay.
Dr. Friday 2:57
But the other side of that conversation is, if you have issues, the one thing you hate is to continuously get collection letters. And yet you can’t communicate with anyone at the IRS. Or if you get somebody after waiting an hour and a half, they say it’s outside of their jurisdiction, they can’t they don’t have any way of looking at that they don’t have any information. So you’ve just wasted half a day, and they didn’t get any more information or the exciting days is when you get on that phone, you wait an hour or so you think it’s gonna pick up and then they hang up on you. These are not, you know, let’s just put this way if there was a review system, most of us would be out of business if we ran our business this this way.
Dr. Friday 3:37
That being said, I can’t say that the tax advocate office hasn’t stepped up and helped a lot of my taxpayers in getting resolution or it really it’s the resolution side of it. They had a case where they were able to get but the trying to do it through snail mail or fax machines wasn’t working. And then it gets to a point where where I was looking at how are we going to tax court, what are we doing? How’s this going to work? So we want to make sure that we have all of those things in line and that everything is going the right way so that you can get done what you need done in the right order of getting it done.
Dr. Friday 4:11
Because otherwise you end up with a lot of situations. So if you’ve got questions, maybe you’re doing your own taxes, big notice, don’t forget that if you’re an LLC or an 1120 S, you’ve got a deadline of this Wednesday, March 15 An LLC now this is a multi member LLC, so I don’t want all you guys freaking out if you have single members. Those fall on your actual tax returns. Therefore, they don’t fall until April. But if you have a partnership LLC and or a hybrid and a Sub S Corporation, those are both due on March 15. Some corporations C corporations are also due at that time depending on what your deadlines are very important to file your extension even if you’re not filing taxes even if you get behind, even if you think you’re going to have time to file those taxes on time. I’m an advocate for filing extensions, because sometimes you don’t always know maybe you get an extra piece paper, you weren’t able to get something in, you’re still waiting for a document from somebody, which then makes your situation a little later.
Dr. Friday 5:17
All of that is part of life. And you want to make sure that you’re able to file everything you can at least on time. So if you want to join the show, it’s easy. 615-737-99866 is the number here in the studio, we take your call is talking about taxes, obviously, my passion in life, I’m always learning always doing new things, always trying to figure out what the next situation people are, I do want to tell business owners if you’re still if you haven’t already, and you have actual payroll, where you pay people on W2s, and you did that through the years of 2021 and 22, all three of those years, they do have the ERTC credits still going out there.
Dr. Friday 6:05
So it might be something to consider employee retention tax credit is out there, and they still will be giving refunds on those. So it’s something that you might want to if you haven’t done, you might want to consider going that direction. Trying to get those now keep in mind ERTC or employee tax, employee retention tax credit is taxable income, you have to go back to the year in which you get the credit. And you could end up paying penalties on top of it, the IRS has come down saying that those are corrections therefore, you’re getting the money from that year and you’re a pay taxes as well as a penalty. Now there may be a way of getting that penalty reversed or removed. But I don’t want anyone to count on that fact.
Dr. Friday 6:48
So if you’re going to do this, make sure you know that you are going to have to take care of that in the right direction. So that being said, if you’ve got a question 615-737-99866. Let’s go to Linda, Linda in Franklin. Hey, Linda, what can I do for you?
Caller 7:10
I am working on my railroad property section. One expense was $3,000. But golden. Can I take that all one year? Or do I have to depreciate it?
Dr. Friday 7:27
Yeah, that would need to be depreciated. It’s not a piece of equipment, so it doesn’t fall under the accelerated and it’s not really a repair, even though in your mind, you know, we might all consider that a repair. But it’s more like an update or replacement, which requires you to depreciate.
Caller 7:43
Thank you.
Dr. Friday 7:44
No problem. Thanks for the question. I appreciate it. Hey, Ron, in Nashville, what do you have happening?
Caller 7:52
Hey, yes. I appreciate you taking my call. I just had a question my mother passed away in August last year, and she had a trust that was set up under her social living trust. And we’ve got a new EIN number for that trust. Now, we haven’t ever filed anything under the trust we’ve always filed as her income under her social. But then when I got the EIN, the letter I got said that we needed to file under the Trust for the past years. But we haven’t. We haven’t done that. Because we’ve reported everything under her social and everything’s been reported and paid on. So Is that true or? Right?
Dr. Friday 8:43
No, no, all you want to do once someone passes away, the trust now becomes active, you get a federal ID number in that. And it only moves forward. There’s no backwards. I mean, it’s like you said it’s all been filed on assuming under her name and everything’s been done. But from the point that she passed away, I’m assuming the letter says to file a Form 1041 on or before for 15 or 18 or whatever the due date, depending on the year that you have it now sometimes trust can go into calendar years or fiscal year. So I don’t know which the deadline might be for you. But it’s only for the year. It’s only for after she has passed away.
Caller 9:20
Okay, and one other so for this year, then we will use her social for her final return.
Dr. Friday 9:29
You may have a split year this year, in all honesty, because she didn’t last until December 31 Unless she did it actually goes into effect. So theoretically, the trust picks up the day after she passed away. So you would do a personal tax return from January till she passed and then a trust tax return for the period after and they should give you separate forms. If they don’t you may need to do an actual spreadsheet because interest dividends all of that. If they’re giving you one as of December 3 First, obviously, you’re going to need to back into that number.
Caller 10:04
Part of it was before her death and part was after. Yeah. And that that brings me to one other quick question. I think she had farm income in the trust. And we didn’t sell any of the crop until after her death. But does do we have to include a percentage for the year that it was growing while she was alive? Or if we didn’t sell until after her death? Does that all go to the beneficiary of the trust?
Dr. Friday 10:35
Right, we do taxes. And I mean, most most, there’s always an exception, but most of us do taxes on the cash basis. So it’d be when she actually physically received the money, not not a receivable during her time. So we’d go into trust and answer that question.
Caller 10:51
Okay, so that wouldn’t you don’t have to do a percentage throughout the year?
Dr. Friday 10:55
Correct. And that one would not do that. Right. Yeah.
Caller 10:59
Okay. All right. I appreciate it. I think that’ll get us started. Okay. Thank you. Bye. Thank you. Bye, bye. Bye.
Dr. Friday 11:07
All right. Again, this is the Dr. Friday show. If you’ve got questions concerning taxes, or if you’re working on taxes, or maybe a love letter to that you’ve received, you can reach us here in the studio at 615-737-99866. Let’s get to Robin in the burrow. Hey, Robin, can I help?
Caller 11:33
Yes, Dr. Friday, my question is my mother is almost 83. And she has no wheel or anything. And my sister and I tried to get her to do as far as taxing taxes, you know, her house is paid for my sister and I would inherit it. What does she need to do?
Dr. Friday 11:53
Well, I’m not an attorney. I’ll put that little caveat out there. Because obviously, there’s probably some legal things that would be better. From the tax standpoint, the biggest thing that comes through in my mind is the potential of having to go through probate, right. I mean, again, I’m not an attorney. I mean, if there’s an attorney, they could share with us. But I mean, that’s the reason I like trust, I really prefer something even as simple as having the house now she can do pod is on her bank account.
Dr. Friday 12:23
And if she has any type of retirement accounts, those are paid on death. And she can do to both of you equally. So those will not have to go through probate or anything like that. But a house, I believe it would have to be go through probate be quitclaim to the two of you. That’s my knowledge, at least there’s little doubt I have on that. There’s if you sell it immediately after she passes away, or within a few months, you’re not really going to have to worry about any tax situation on a house because we get a step up and basis.
Caller 12:55
I just didn’t know if the state would take a lot of it without a will.
Dr. Friday 13:01
Is she on Medicare, or anything?
Caller 13:04
No, no, she’s actually at my house recovering from a surgery. Right now. has her own home. Oh, yeah, we took care of him.
Dr. Friday 13:14
I love it. So the answer to your question is no, there is nothing. I mean, the state has a plan. I mean, as far as I’m concerned, again, she needs to have even if, I mean, again, I’m not an attorney, but my understanding is, as long as there’s a basic someone goes on does an even illegal zoom one or something where it comes in and basically says I want everything split evenly between my two living children or something, whatever verbiage that needs him in, you know, but something is better because if you don’t have one, then you end up in probate and then there can be people that come in out of the woodwork as far as I’m concerned that don’t have any and you may not have anyone in the family that would do that.
Caller 13:52
I’ve seen that happen many times.
Dr. Friday 13:57
See if you can get mom at least agree maybe not going into a law office but at least having something where you maybe can have her sign something get it notarized of sound, mind and body or whatever they always say.
Caller 14:13
Alright, thank you so much for your time.
Caller 14:16
Thank you so much for listening. I appreciate it. Bye bye.
Caller 14:18
Okay, bye bye.
Dr. Friday 14:20
All right, we’re gonna take our first break and we come back we’re gonna come back to Brown and Rob. That way we can get it’s been a little time before my mic gentleman on the other end of this phone here will tell me that I need to get off the radio. So we’ll be back with you in just a minute with the Dr. Friday show.
Dr. Friday 14:42
All righty, we are back here live in studio and if you want to join the show again 615-737-9986. And why don’t we head right back to the phones. And it looks like Bob was the A brown brown will be the next one. Ready? You’re right, it was brown. Hey, Brown. Hey, how you doing? I’m doing awesome. What can I do for you?
Caller 15:10
Oh, I had a mother in law that had dementia. She has lived with us for two to three years. We found on last year, like the IRS was saying that they didn’t recognize social security number or something. Is there any way we can actually get that resolved through someone?
Dr. Friday 15:35
Theoredically, you might be able to the question will be and I’m gonna be quite honest, having she passed away last year, and you claimed her as a dependent? When did she pass away?
Caller 15:46
Around December?
Dr. Friday 15:48
Oh, okay. So it’s almost the whole year. So your best bet is, do you have some sort of documentation, you’re going to need to be able to prove she was living with you and that you were providing more than 50% of her care now, that would not include her Social Security. So if she was receiving Social Security, and that’s it, then you would be providing that?
Caller 16:10
Yes, we were paying, family was paying caretaker company to come in.
Dr. Friday 16:21
Did the nurse go to her house or went to your own house?
Caller 16:24
It was at our own house.
Dr. Friday 16:25
Okay. So she was staying in your house, and you had someone coming in to take care of her? Well, that’s what your document, I guess the question, or what we’ll need to do is take a look at the love letter they sent you to see if it was just the matter that they’re saying that the social security number wasn’t correct. You’ve been claiming her for a number of years. So I’m sure you have the correct number.
Dr. Friday 16:28
And then all we have to do is show justification that that she was truly a dependent that year. But it sounds like they weren’t denying you dependency was more like they were saying that the information provided wasn’t correct guessing here. Brown. If you want, you can get a hold of us. Yes, go ahead.
Caller 17:01
I know Norman Rollins personally I don’t know if you know him. He’s a tax alternative. But I’ll seek out help from you all.
Dr. Friday 17:17
The way yeah, if you know, if you know, that person use need to have sometimes it’s easier to have somebody on the other side, especially someone that does resolution work to see if it’s something that we can resolve, you know, either you call me or if you’ve got someone in another firm that works, you know, it’d be honest with you, it’s not going to be a complicated and you don’t want to be spending a ton of money because the dependency credits $500. So you know, I mean, you don’t want to spend 500 to get 500 is all I’m saying. So you know, you know, that’s really the biggest the biggest question I would have in that situation, you know?
Caller 17:50
Okay, all right. Appreciate it. Thanks.
Dr. Friday 17:52
No worries. Thanks. Bye. All right. Let’s see Bob. Bob in the tell Tullahoma. Yes. Hello, Bob.
Caller 18:03
I have a business that is doing doors ice. And I was wondering, what was Ali sees that he could take off is in contacts.
Dr. Friday 18:17
That’s a great question. A lot of other people listening probably do DoorDash, Lyft, Uber, any of those. So the truth is basically, the miles that he basically commutes to do his job is what he gets paid for. So in DoorDash, usually, he picks up from let’s just use an example. It may not be where he picks up, let’s say he picks up from Walmart, brings it to my house, and then returns back to Walmart. That would be the miles attached to his driving. The big misconception is all the driving around people think that they can do as a deduction.
Dr. Friday 18:56
So his best bet is and DoorDash tracks a lot of that on the statement he gets at the end of the year. But I would suggest if he’s doing DoorDash to have him download a free app called mileage IQ or any other mileage tracking app, it doesn’t make a difference and track those same miles on his phone, because then he may find that he’s getting some extra miles because he should be paid from Walmart to my home back to Walmart, you know, would be a round trip again on that delivery. And sometimes it doesn’t work out quite that way.
Dr. Friday 19:30
But he needs to have a very good mileage log. The second thing he can write off would be a portion of his cell phone because usually that’s what the app is and he gets his his deliveries off of that so he’d be able to claim a portion of his cell phone on there. That would be the two big things I don’t know if there’s anything else required through DoorDash like a special insurance or anything but miles and his cell phone would definitely apply.
Caller 19:57
Okay, so yeah, he already had it on his phone.
Dr. Friday 20:02
Oh, good. Okay. So that’s wonderful. So yeah, just tell him to make sure he keeps track of his miles. And then he’ll a percentage if he’s paying for his cell phone bill, a percentage of that.
Caller 20:14
Gotcha. Okay. I sure appreciate it.
Dr. Friday 20:16
Thanks, Bob. Appreciate you listening. I really do. All right. Let’s send this Steve on my side of town, Columbia.
Caller 20:23
Oh, hey, I just sold my house this year. And I have a simple income tax, usually just Just one. Just one, w two. And I need to know what I need. Do I do it? Well, how’s that gonna fit my income tax this year?
Dr. Friday 20:43
Well, you sold your primary home? No, it’s just make sure before I start babbling, okay. So the answer to your question is, is there is a form a worksheet that’s for a home sale, that you’re going to need to complete on your tax return? Try to pull up one of mine so that way they know because there’s a credit that you’re going to want to take on on your taxes. So you’re gonna put your W do you do it electronically? Are you a paper guy still?
Caller 21:11
Yes. I do. I was doing e-file. I was just wondering if I just worked it through, I’ve been able to file free for all these years.
Dr. Friday 21:19
I don’t think you should change it. I don’t think there’s I mean, as far as I know, I mean, again, I’m not absolutely sure what they charge and don’t charge for, but it seems like a home. So the homesale worksheet is, let’s see if I can find the number here as pulled on one up. It just says use this worksheet for so it’s basically you should be able to find it in your in the forms there if you type in home sale worksheet, and basically what’s going to ask is the address, the date the former home was purchased the date you sold it, the selling price, and don’t forget to include all the Commission’s and all the fees, they charge you, you know, on that, and then your purchase price.
Dr. Friday 22:00
And again, if there was any fees, those would all be on there. And then whatever the gain is, so let me use these examples for you. But they don’t apply necessarily. Let’s just say you sold the house for 500,000. And you purchased the house for 200,000. And you had 50,000 and closing costs fees. You would pay zero tax. Are you single or married? Single? Okay. So you have a $250,000 exclusion above whatever you sold it for. So whatever you paid for plus 250 will get you zero. Did you sell it for more than that?
Caller 22:36
Oh, heck no. I sold it for only 30 and ended up ended up it got damaged in and I got some health problems and ended up selling it for for less than that.
Dr. Friday 22:48
Okay, well, I’m not even too sure. But it was your primary home. Yeah, you were living. Okay. Did you have insurance claim or something? Or no?
Caller 22:59
No, no, no, it got it. Got it. Got them. It got damaged to where my insurance wouldn’t wouldn’t cover it. If they said they said mudslide, they don’t cover.
Dr. Friday 23:10
Gosh, oh, you’re right. They don’t in some cases. I know. I’ve heard that before. All right. Well, I’m sorry to hear that, Steve. But the good news is, is that it’s going to be a zero tax. Not that you had expected to pay that since you paid more for it in the first place. Not my normal situation. May I tell you, but but you still gonna want to put it on your return. Because when you sold it that will report to the IRS and they’re going to not know what you paid for it. They’re only going to know what you sold it for. And you don’t want to come back and think that there’s capital gains.
Caller 23:43
I see. Okay, that makes sense. But yeah, and that has to do with all the way back to when I bought it because they ended up. Okay. You know, it was paid off for several years before.
Dr. Friday 23:53
Yeah, it doesn’t make a difference. But if you bought it 20 years ago for 30 grand and you sold it for 10. Well, you’re upside down. Unfortunately, we can’t take losses on our primary home. And you just keep getting hit. You can’t win in this situation.
Caller 24:11
Yeah. All right. All right. All right. That was that was the main way it was was was clear to look for that. And that would be like just powers normally they should still be into that.
Dr. Friday 24:23
No, yeah, you’ll be fine. All right. Thanks, Steve. All right. We’re gonna take our second break here. If you want you can join the show at 615-737-9986. We’ll be right back with the Dr. Friday show.
Dr. Friday 24:50
Alrighty we are back. live here in studio. Wonderful. Saturday. And don’t forget March 15 is around the corner for all of you that do call because your returns and or ll Corp, sub S corporations, especially that March 15, is your deadline or file an extension? All right, we’re gonna head back to the phones. And we’re going to be going to Lisa, Lisa, what can I do for you, sweetheart?
Caller 25:17
I’m calling because my husband and his sister inherited a house from their parents. They’ve had it in their name now for nearly 20 years. My mother in law died four years ago, my sister in law had moved in right before that. She has her own home, but moved in this house. And now, it’s impossible to get her to leave the house. In the meantime, the roof is bad, the sewer system has failed. And there’s rot on one wall, where the fireplaces it’s kind of falling. And we also don’t think of on the way to be able to repair it. Because she won’t leave it. What can we do?
Dr. Friday 25:56
Well, I am not an expert on that kind of situation, I’ll be honest with you. I mean, the only way to really do it would be get the house condemned. And I don’t know if you want to actually do something like that. But I mean, I’m more reaching into what I might consider. I mean, getting it repaired. Theoretically, you could probably work around her to a point you might be able to block off parts of the home. But is that really beneficial to do? If, if really, you know, I mean, if we really need to get her out and just sell the house, you know, it might be better for somebody to sell it and then do it. But she’s not going to sign off on selling it since she owns half the home, correct?
Caller 26:34
That’s correct. And the other issue is the other property that was across the road in the house. My husband has owned the farm for years. But there was a shop there, that he had had tools and four wheelers and things in and she went over when not and started the fire, which she said was just a burn stuff. Anyway, she burned everything. And so we didn’t have any insurance on that. But it seems to us that that alone should make her willing to cooperate that we don’t know what thanks.
Dr. Friday 27:04
So but I think you might need to consider I mean, honestly, I mean, she may not be even one that should be living on her own. I mean, I’m just saying I don’t know her situation, I’m far from being a medical doctor. So my my suggestion would be probably contacting an attorney, because there may be a way of, of doing something legally, with with getting her out of the house and you know, into a safer position, possibly, because it sounds like she may not be a person that should be actually living on her own. And she’s doing things like that. You know, I don’t know how old she is, but just sounds like she might be…
Caller 27:40
65. She’s not that old. But no, she isn’t? Well, I appreciate your help, because we can’t determine what to do either. And I listened to you last Saturday afternoons.
Dr. Friday 27:52
I would love to tell you I would I would suggest seriously considering if there’s any attorneys down in the MO know where she lives or anything, someone local that might be able to help you a little bit more with what other options might be in there. I mean, condemning it would be probably your best bet. But you still have to get someone to come in and say that this black mold in it sounds like there could be and that’s not healthy for anyone to live in. Therefore the house is condemned until it’s fixed. And that would have to get her out of the house to do that.
Caller 28:21
Well, I haven’t thought of that. But at least we’ve got another idea. Thanks.
Dr. Friday 28:25
Thanks, sweetheart. All right, let’s head on to Richard and Alexander. Hello, Richard. Hello. What can I do for you?
Caller 28:37
Yeah, Dr. Friday, thanks for taking my call, Hey, I, I bought a piece investment property. And it was worth about 90,000 taxes, at least that’s what the tax amount not paid about 60. And I was thinking, I don’t have time to fix it up and really don’t want to. It’s in need of some repair. And I was thinking about donating that. And my question is, if I donate that property, and they sell it for less than what I’ve got in it, can I deduct that on my taxes? Where would I stand?
Dr. Friday 29:10
If you donate it to a legitimate first I had to say has to be to a true nonprofit, you would donate it at the value that the fair market value is what the appraisal value, not what you paid but what the current appraisal value would be. Now I don’t know if it’s going to be more or less if it’s if that’s the case, but that’s the value you would turn it into. And then you would write that off on your schedule as a donation, and then they will do whatever they want to do with it.
Caller 29:39
Okay, well, we’re the appraisal bank so far it gets from the tax assessor’s.
Dr. Friday 29:47
I mean, I would actually get at either a serve me and an actual appraiser to come or a real estate appraiser that can give you a letter of appraisal, you know, something that would give you something in the area that would say what is the actual because property tax appraisals are nine times out of 10, much lower than they should be, you know.
Caller 30:06
Yes, they’re running a business they’re making, they’re making a prophet.
Dr. Friday 30:10
a profit on that one. So my opinion would be as to get an actual either a real local real estate agent that knows the area or something else.
Caller 30:19
Okay, but if, again, if it was less than, I could deduct it or not deduct that?
Dr. Friday 30:27
You would only be able to deduct the value of the property that you’re donating, or how much you owe, whichever is higher, there’s no way of taking the loss because the donation value is going to be true value that you paid, or the value that is a step up in basis based on current values. Either way, you’re not going to get it as like a loss, because you’re going to donate it and you’re not going to lose money on that donation.
Caller 30:51
Okay, appreciate it.
Dr. Friday 30:53
No problem. Thanks. He’s like, That’s what I want to hear. But I understand what you’re saying. Okay, so if you have a question, we’re winding down to the latter part of the show. But with a few more minutes, you can reach us here at 615-737-9986. Talking about taxes. And what the gentleman that was on the phone did bring up keep in mind that sometimes we have things like stock or property or land that has appreciated, and you really don’t want to sell it because you don’t want to deal with the capital gains or, or any of that, you can donate that to a nonprofit, it has to be legitimate nonprofits, then you can get the value, the current value of many times people will do that with highly appreciated stock, or land, they’ll donate a portion of it, and that way, they can get the charitable contribution.
Dr. Friday 31:50
And I know it’s a lot more this year nowadays than others. But it is a way of giving money to charity that you have the other way for individuals that are 70 and a half and higher. This is only for individuals that are 70 and a half or higher. You have the qualified charitable deduction, we’ve covered this a lot with several people. And I mean, I was talking to a couple of my clients, obviously, as they come through, and we’re talking about this, and many of them are just used to writing their checks, right, they just write the check, because it’s what we’ve always done. But you know, I mean, I have great givers. And I’ve had some people that give 7, 8, 9 thousand dollars a year to the church, the same organization.
Dr. Friday 32:28
And in one case, we did a thing how much it would have been if he had done it through his i His required minimum distributions RMDs. Or if he had taken it out of his checkbook and paid it directly through now, keep in mind, he wasn’t able to itemize because eight grand on a married couple, or even a single individual wasn’t as much as the standard deduction. So we took it out, if you do it through your required minimum distribution, you save that $8,000 Talk to your financial guy that the person that handles your RMDs. And they would write a check and give it to you to give to the church.
Dr. Friday 33:04
So if that happened, he would have saved $2,800 By doing that. So it was well worth this individual. Now, this individual isn’t in the 12% tax bracket. But that being said it we did it again. And there was another one the same story. But she only had 5500 that she had done again did not itemize at a lower income bracket. But it was still $800 That she saved by doing it through her qualified charitable deduction through her RMD versus not being able to itemize it at all and paying tax on all the money.
Dr. Friday 33:39
So if you have an older parents that gives money to a church every month, or you have a friend or to you yourself, they have to be 70 and a half, they need to go talk to the custodial over their IRA. And most people are at that point or an IRA but could be a 401k I suppose when most likely it’s an IRA. And then they need to have that money come out directly to the charity, instead of being taken from they’re putting their checkbook and then writing the check comes up the same way guys, it just comes out directly through the RMD from there and it becomes 100% tax deductible versus trying to itemize which many people cannot do it’s just not in the current tax code.
Dr. Friday 34:22
And anyways, I have some people the gentleman I was talking about, he was so funny, because he’s like, Wait, if I do that I could have given $10,000 instead of eight. And they you know he he was trying to find new ways that he could even give more because he wasn’t looking to put money in his pocket. He was just looking to find what ways he could do something a little bit more. So it was it was a humorous way of looking at the entire thing. I’m trying to save him tax dollars. He’s trying to find out ways he can give the money back to the charities he wants. So it worked out as a win win situation.
Dr. Friday 34:52
So if you have someone you don’t have any idea what I’m talking about talk to your tax people I’m sure they’re going to be able to if they don’t, you can always give our office a call. We’ll be more than glad to at least send you in the right direction to talk to certified financial planner, or whoever’s handling your custodial ship on your RMDs. So if you want, you can also join the show, if you’ve got a question at 615-737-9986. We’re gonna take our last break here in a second. And then when we come back from that one, we’ll get to some of your phone calls. But also, if you want, you can also email friday@drfriday.com. Or check me out on the web at drfriday.com. No more, I’ll take a quick break and we get back we’ll hit the phone lines was this is the Dr. Friday show. Thank you.
Dr. Friday 35:49
All righty. We are live here in studio. And if you want to join the show you can at 615-737-9986. Why don’t we go right back to the phone lines, which I love that you guys are calling Gary in Nashville. Hey, Gary, what can I do for you?
Caller 36:11
Yes, Dr. Friday, thank you for taking my call. Appreciate it very much enjoy your show. What I was calling about I’ve had extensive health damage to the storm this past week in jesters come out there just insurance adjusters come out and said I think we can probably do a replacement on a lot of your damage, we’ll send you a check for that. If that checks, is it considered income? Or if I don’t use all of it for the repairs that the excess of that check? Is it considered income?
Dr. Friday 36:42
No, it basically is not either direction? No, it’s not income, because it’s insurance money that you’ve paid with after tax dollars theoretically, because we can’t write off our insurance on our primary homes. So it is not income. In theory, if the home is totally damaged, and you try to sell it, then you’d have to claim that as reimbursement. But in your case, if you don’t use every dollar and you still bring it back to the standard that it was, then you would have no taxable income and the home is still valued at what it was.
Caller 37:14
Does that help? Okay. That’s very good. Thank you very much. Appreciate it.
Dr. Friday 37:18
Perfect. Thank you. All right, let’s hit Tom and Britt would.
Caller 37:24
Good afternoon. I have a quick question concerning qualified treadle distributions. Okay. It’s my understanding that a QCD could only be made from a traditional IRA. But yet I think I heard you say it can be included a 401 K?
Dr. Friday 37:42
Well, theoretically, if you’re 70 and a half, in theory nowadays, of course, the new RMD date is what 73. But the law never changed for QCD. So at 70 and a half, if you’re maybe I should clarify that if you were required to be making RMDs at 70 and a half a 401k would have had to unless you’re still working for that company. Most people when you retire, move the 401 K’s to IRAs, but RMDs are RMD. Some people do take RMDs after the age and keep them in the 401k.
Caller 38:19
Okay. But I was under the impression that if RMD. To qualify, Charl redistribution could only be made from a traditional IRA that it could not be made from a 401 K, assuming you meet all the rest of the qualifications.
Dr. Friday 38:39
Aagain, I’m a poor little caveat, Tom, I’m not a financial planner. So I’m not going to be but my understanding is when you hit the age of whatever that age is where you have to do require minimum distributions. 401 k’s are part of that calculation. Therefore, if the money there, it is an RMD. Because you have to take an RMD from the 401k.
Dr. Friday 38:59
Again, making a few assumptions, you’re already retired, you’re not still working for that company, etc, etc. Four away at the time that you have to start taking required minimum distributions. So I’m not going to probably be the bet I’m not going to probably debate the the attitude, you might be correct. As far as the terminology, maybe I should have said from a retirement account. But once you hit the age, whatever age that is, and you’re no longer working for that company, a 401k does mean that you have to take RMDs from them.
Caller 39:30
OKay, thank you very much.
Dr. Friday 39:31
Thanks, Tom. All right. Hopefully I’m not confusing. Again. Guys. I don’t want to get too much into Tom, maybe the verbiage may be 100% Correct. I’m not gonna I’m not a financial planner. So if you again, I’m gonna say if you are at the age where you are taking, even nowadays, if 73 I guess the point I want to make was if you’re 73 and that’s when you have to take your RMDs you can do QCD at 70 and a half and start taking required minimum distributions at that age according to the law.
Dr. Friday 40:03
Now, I’m not a financial planner, I’m not saying that’s the best thing to do. And I’m certainly not going to say I know everything about that, because obviously taxes are my expertise, it it, but I would definitely suggest if you’re within that age group, and you know, somebody, or if you’re the person themselves, go talk to your financial planner, or whoever handles your required minimum distributions bring up the topic, because they should be truly the experts, but it will save you tax dollars if you can do it. I guess that’s probably the best answer on that question.
Dr. Friday 40:37
Because Tom, maybe correct that the term but I do know, I have some clients that their money is still in a 401k, they are fully retired. And when they calculate the required minimum distributions, they have to add in that 401k. So maybe it’s not being distributed from the 401k. But overall, numbers have to be for the percentage. That being said, that’s enough of that. Alright, so if you’ve got questions, we’re getting close to the end of the show. But if you’ve got questions, you can certainly give us a call at our office at 615-367-0819. If you are working on your taxes, just make sure that you’re double checking your information, simple things, as Marissa entered social security numbers, number one typo is putting the information in in the first place wrong.
Dr. Friday 41:32
So transposing a number on your tax return is very popular, I will tell you that happens. And you know, that’s when the IRS has the ability to come and take a look and change something on our returns. So we don’t want that to happen. So just double check your numbers, make sure everything is going the right direction that you’re able to make sure that you have if there’s a dependent on your tax return, make sure you’re really required or allowed or able to file, sometimes kids file their own tax returns.
Dr. Friday 42:07
And they’ll be quite honest with you, a lot of times people don’t seem to recognize that. But sometimes they do file their own tax returns. And then you try to claim them as a dependent and then it gets kicked back out. So you know, communication with dependents that you have, if if you’re claiming a parent or someone like that makes sure that that child or that person knows that they’re being claimed, we ran into a lot of that during the whole COVID time where people were claiming their parents, a lot of times the parents didn’t even really know that they were being claimed, you know, so it’s just you know, they need to make sure that if they are a dependent, they should.
Dr. Friday 42:44
And if they don’t required filing tax returns, that’s perfectly fine as well, just again, making sure the information that you input into your system is going to match what the IRS has for their system. And that’s really all comes down to just making sure that all the information is correct. And that we have, you know what we need when we have it and doing on that situation? If you have a question, then you can again, you can email friday@drfriday.com. Or you can give us a call at the office on Monday at 615-367-0819. Many of you guys probably hear my little puppy dog, my little girl barking outside, but she’s making sure everything’s staying nice and safe in the background there.
Dr. Friday 43:30
But if you need a tax appointment, I will tell you that we are at this point full unless you’re a returning tax client, we always have room for our returning clients, just sometimes new clients. At this point, we don’t have any openings for taking on new clients for this particular tax year. So if you need some assistance in doing taxes, we probably could give you some referrals to see if you can get some help with you on that. But again, if you want to reach us 615-367-0819. Or you can email friday@drfriday.com. If you have questions while you’re working on your taxes, you can also email friday@drfriday.com
Dr. Friday 44:20
We’ll do our best to get back with you on that information so that you can hopefully at least have a direction ahead. If you’re something you know coming up that you need, then we’ll be able to, you know, least give you the IRS code or an expert that may be able to give you better information on what or how to do something because I don’t want you know, no one wants to file their taxes and have errors or make educated guesses on it. That’s never a good idea. Let me tell you, we do not ever want to make an educated guess on a tax return never a good thing. So if you are working on your taxes, remember again one more time if you are a partnership, or 1120 s then you have a deadline of this coming Wednesday, the 15th of March is the deadline for those if you do not file the penalties can be a quite hefty hefty, depending on the number of partners.
Dr. Friday 45:13
And it’s an easy thing, file an extension. And then that way if you file it late, in most cases, there’s no money due with either the 1120 s or the 1065, because they’re passed through companies that pass on to the actual shareholders. So that way, make sure that you have filed an extension, and you’ll be able to not have any penalties. That’s the big thing. And then of course, if you are filing an extension, don’t forget that you do have franchise excise in the state of Tennessee due by the 415 or 418 deadline.
Dr. Friday 45:45
And with an extension to the state, they want you to pay the same as last year or a minimum of $100. You cannot just file an extension without payment is not really considered an extension in Tennessee. So we all have a minimum of $100 due. So paying that in advance is going to save you some pain and suffering later. Because no one likes to have to pay extra money to Uncle Sam or to the state for anything. All right phone number again 615-367-0819 email friday@drfriday.com. Or you can check me out on the web drfriday.com. I hope you guys are enjoying this Saturday. It’s actually a beautiful day outside. And I hope you guys were getting your taxes and have some fun. Call you later.