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In this episode of The Dr. Friday Radio Show, Dr. Friday dives into the heart of tax season with critical updates, valuable guidance for filers, and answers to real listener questions. She covers everything from business tipping practices and tax bracket planning to BOIR confusion and capital gains insights—plus what to watch out for when trying to “save” on taxes with big purchases. Whether you’re a business owner, parent paying college tuition, or navigating retirement, there’s something here for you.
Topics Covered
- Tipping & Payroll Compliance
- TN Dept. of Labor’s rules on tip handling by employers.
- Federal law mandates tips belong solely to employees.
- Risks for businesses using tips to supplement payroll.
- Filing Head of Household
- When you can claim it (e.g., adult children, elderly parents).
- Income thresholds and care requirements.
- Earned Income Credit Restrictions
- Not available for those over 65 or under 22 (with exceptions).
- College Tuition & Tax Credits
- Why higher-income families often miss out on education credits.
- American Opportunity & Lifetime Learning Credit phaseouts.
- Challenges with student loans and aid eligibility.
- Do You Need to File?
- Elderly individuals and filing thresholds.
- How to calculate whether Social Security income is taxable.
- BOIR (Beneficial Ownership Information Report) Update
- Correction issued: Most U.S. small businesses no longer need to file under the Corporate Transparency Act.
- 2025 Gifting Limits
- Increased to $19,000 per person without gift tax implications.
- Capital Gains Tax Brackets
- Yes, 0% capital gains tax exists—but income limits apply.
- Breakdown of thresholds for individuals, married couples, and trusts.
- How the 3.8% Medicare surtax can sneak in.
- The Myth of ‘Buying to Save on Taxes’
- Why spending $100,000 to save $16,000 in taxes isn’t wise unless the purchase is truly needed for business.
- Deadlines and Extensions
- S-Corp and Partnership tax deadlines passed (March 15).
- April 15 personal tax deadline approaching.
- Benefits of filing an extension—even if you still file on time.
- Live Callers’ Questions
- Can I claim my 28-year-old son as head of household?
- Widowed caller unsure if she needs to file taxes.
- What can higher-income parents do to lower taxable income while paying for college?
- Donating a valuable historical item and using it to offset a Roth conversion.
Transcript
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.
G’day, I’m Doctor Friday and the Doctor is in the house.
It is actually a gorgeous Saturday outside.
I stuck my head out a little bit, been working on taxes all morning.
I bet some of you have been working on your taxes, I am sure.
So if you’ve got questions concerning about how to file taxes, maybe you’ve run into something on your tax return and you weren’t sure how it works.
I’ve had some really interesting different situations coming up from, obviously the biggest is most people going, oh my gosh, I actually owe money.
And they weren’t prepared for it.
Sometimes it has to do with capital gains.
Normally it’s my self-employed, my business owners that come into play.
And I will say I had a really interesting phone call last night with an individual.
They’re not clients, but they were an individual that the Tennessee Department of Labor had come into their store.
And this is a store that does accept tips.
Well, their system does, even though the employees aren’t really paid based on tips.
But anyways, it’s really unique conversation because the state of Tennessee actually follows the federal tax laws.
They don’t really have their own on tipping in different situations like that.
And maybe a lot of you guys knew this.
I don’t get into payroll issues very often, especially nowadays.
We use an outside ADP does most of our payroll for our office and the people that we handle payroll for our bookkeeping.
But what was interesting is it says specifically that an employer cannot keep any of that money even to make payroll.
And, you know, it was an interesting approach because we were working when we were having this conversation, we were working under the idea that prior to COVID, you know, she was distributing tips every day and then putting them into the employees and then having a report.
But, of course, with tips, they don’t actually have enough withholding sometimes to cover that, the tips for the year.
So that a lot of the kids and these are all under 18 year olds and they were running into tax issues.
So instead, after and trying to keep people in and after COVID, they were building up a concept that, hey, you know what we’re going to do is we’re going to move you from the, you know, $12 situation to like $20.
And that way then we’ll just apply the tips across the board and everybody will have a higher wage.
But if that is your thoughts, if you are a person that has a business where you’re thinking as an employer, you could use those funds to help make the payroll in essence, even if you’re paying more money, because nowadays, I mean, people are making $20 an hour to flip burgers.
So it is illegal just to put that out there.
It is illegal for an employer to do anything but to distribute those funds to the employees.
And and I didn’t I didn’t realize that.
I think I thought that the money, as long as it was being paid to the employees, don’t get me wrong.
And in most cases, you have one employee, like if I go to the restaurant, I have a waiter in which I’m tipping that waiter.
And that’s pretty straightforward.
The business that I’m talking about does not have that kind of situation.
Nobody is serving.
Nobody is delivering.
It’s really just now, you know, nowadays, I mean, my sister and I joke around.
You can go to a gas station or a place that has packaged food and on the register it has.
Do you want a tip?
You know, and even though no one’s done anything besides pre make a sandwich, which what you thought you were paying for at the time, it now turns into you have to you know, they’re asking you for tips.
So if you are in the business side of that and the tips are something you need to really.
Think twice about how those tips are being paid out to the employees, because even if the employees are making more than two dollars and 13 cents that their wages, it says tips.
And according to the Federal Department of Labor, tips are solely for the employees.
And no matter how you apply it, that’s where they come out.
So I think they probably need to revisit that, because now there’s just everywhere you go, they ask for a tip.
Everything asked for a tip.
And it’s going to change.
I think we should call it more business appreciation, maybe, or something.
So it’s not tied to the employees.
But if anyone has that had that situation, then it’s something you need to be thinking about.
Get a head start on.
I know it doesn’t deal directly with everyday tax issues, but it is a issue of that being said.
So I just want to make sure it was fresh in my brain.
Something I didn’t hadn’t really put much thought to or anything else, how exactly it would work or, you know, how tips are being spent.
So if you want to join the show, maybe you’ve inherited property.
Maybe you know someone hasn’t filed taxes in the last 10 years.
Maybe you have some sort of situation where you’re like, I’m not sure if my taxes are going correctly.
615-737-9986 is the number right here in the studio.
Some of you brave people can pick up the phone and give us a call.
615-737-9986 is the number here in the studio.
So that way we can take your calls, making sure that we hopefully at least lead you in the right direction.
I will say that this is actually our 17th season on the radio.
So thank you for being listeners and participating with the show.
Really do appreciate it because sometimes you just feel like you might be talking to yourself.
And obviously it’s great to know there’s other people.
Let’s talk a little bit about your taxes are high this year in 2024 filing.
So what do you do?
What can you do that might bring your taxes down for the tax year of 2025 filed in 2026?
And of course, one of the first things everyone’s going to think about is a retirement, right?
You got a retirement source, either that being an IRA, a traditional, a 401k, a health savings account, any of those kind of things are going to be tax deferred.
Therefore, you’re going to end up with a situation where you can actually reduce your taxes today.
But we’re going to talk a little more about are we really wanting to reduce our taxes today?
I mean, really, when it comes down to it, is there an advantage to reducing your taxes today?
If taxes most likely, I mean, we don’t have any guarantee they’re going to stay low.
We don’t know if they’re going to go up.
At the moment, we do know the current tax law we’re working under will expire on December 31st of this year.
And everything will go up.
I know many people think that that’s somehow going to make the rich keeps richer.
But if you don’t like your tax numbers today, wait until January of next year, and you’ll see that you’ve went up three or six percent, depending on what your tax bracket is.
All right.
Let’s see if we can hit Rick in Hendersonville.
Something to do with his son.
Hey, Rick, what can I do for you, babe?
Oh, yes.
I was wondering if you could answer a quick question.
I have a 28-year-old son.
He’s lived with me about six months and one day out of the year.
Can I claim head of household on him?
You can if he is not making more than the standard deduction, which is $14,000.
If he’s making more than that, then theoretically he’s able to take care of himself.
I’m not going to claim that because I know how expensive it is to live.
But that’s what the code says.
So if he’s going to college or unable to work, then yes.
If he’s able to support himself and he’s just living with you, then the answer is no.
Okay.
That sounds good.
Well, thank you very much.
I appreciate you.
Rick, thanks for calling.
I appreciate it, too.
And that was really a good question because what I think some people forget is sometimes they’re taking care of their parents.
Let’s say their mom’s living with them or father or whatever.
And even though they’re getting Social Security, it may be a small pension.
Social Security is not considered income for the purpose of this conversation.
So if they’re only getting Social Security and they’re living in your house, you may be able to do head of household.
Even though the dependent care is really only about $500, sometimes not enough to make a huge difference, the head of household can make a big difference.
So being able to claim head of household and get the $500 and you’re still caring for that parent because you’re providing them more than 50% of their care.
There’s a roof over their head.
You’ve got the insurance.
You’ve got the utilities.
All the things it takes, the food.
And they may be contributing a little bit to their own care.
But many times that money stays for them to basically take care of their medical and other things that they need to have.
So, again, if you are taking care of someone, age really doesn’t come into play.
So really more about the 50% care that you have.
Sorry, guys.
My girl’s wanting to join the show.
So I guess we’ll have her on.
Come here, Rosie.
We’ll be able to do and make that happen.
Anyway, so if you have that situation where you have an older person that is living or obviously minor children or anything else.
I’m trying to do things with that situation.
Then just keep that in mind.
Because even being able to just claim them as a dependent, which married people, you know, you won’t have that.
But if you’re a single person and you are taking care of a loved one or a minor child or any of that, there is some advantages to that as well.
So just putting that out there that you might want to think about the head of household standing.
And it really comes to 50% of their care.
So theoretically, if they’re making more than the standard deduction, you pretty much already have them.
They’re going to claim themselves.
But again, that’s not always the case.
I mean, if they are unable to take care of themselves in other ways or maybe have grandbabies that are living in the house, any of that kind of thing.
Also, I did think it was interesting.
I have a number of grandparents that have taken care of their children.
And we were always trying to figure out, and I suppose I should always know this, but I learned this a few years ago.
And I had another case this year where a 70-year-old woman, grandma, was taking care of her kids.
And she’s like, why don’t I get any of the money everyone always talks about?
Well, one thing you need to understand is that if you’re over age 65, you don’t get earned income credit.
Just like if you’re under 22, you really don’t unless you have certain circumstances.
All right.
Let’s go to Gallatin.
Is it Kenan?
It’s Kenyon Friday.
Kenyon.
Ah.
What can I do for you, sweetie?
Hey, so I want to talk about college tuition.
And is there any loopholes for people like me to, like my daughter started college this year.
And I’ve got to write a check for $18,000, you know, next month.
And it’s, I know the difference tax brackets.
So what, is there any, I mean, it’s an expense.
I don’t understand why if you make a certain dollar amount, you can’t deduct that.
And what, what Kenyon is bringing up is the fact that basically after the $175,000, if you’re single, like $80,000, they start eliminating basically the college credit.
And so if you’re making as a couple more than basically $175,000, you’re not going to, to get any credit for the fact that you’ve just paid $18,000.
I don’t really have an excellent answer for you other than that’s the way that they’ve wrote it.
And the only other way is obviously at some point, there’s still not a lot of advantage.
But at this point, it’s too late in your situation.
If someone’s listening and they have young children, you might want to think about the 529 plan.
And, you know, again, even those have certain limitations.
But at least you wouldn’t have to worry about the college credit.
The money has grown tax-free and you can use it for college.
But in his case, if you’re making too much money, it’s kind of like if you’ve got rental properties and you have losses and you make more than a single person makes more than $125,000.
We can’t take those losses.
Same thing.
They just like to, supposedly they say they’re making the level playing field, Kenyon.
But to be honest, it’s just a matter that they basically tax the rich higher than they tax the poor sometimes.
Well, and it’s really punishing the successful because not only that, my daughter, she’s 18.
She’s in school.
And her financial, she can’t get any financial aid.
Her student loans, if she gets a student loan, she can only take out $6,000 every three quarters.
So $2,000 a quarter she can take out.
And they won’t defer the interest on the loan.
She has to start paying interest immediately.
So it’s like, why would you even get a loan if you’re paying for three or four years on a loan that you don’t make any payments on until after you graduate?
I actually saw a video, Kenyon, that basically said that the child emancipated itself so that way they didn’t get penalized for the fact that their parents had been successful.
I’m not saying that’s the way to go.
But I’m just saying that was the only way that she could find a way of getting out just because her parents, they’re penalizing your children because of you.
And again, no one says the world is fair, but I thought it was an interesting approach.
But don’t have a good answer for you, my friend.
Sorry.
Yeah.
All right.
Well, maybe there’ll be some blue poles in the future.
Yeah.
We can see.
We’ll keep it.
You got it, buddy.
All right.
We’re going to take a quick break here.
When we get back, you can join the show.
615-737-9986.
We’ll be right back.
All right.
We’re back live in studio here.
And we are going to go right to the phone lines and then we’re going to talk about a deadline that just passed yesterday.
I want to make sure everyone met.
Teresa, hey, what can I do for you in Milton, Tennessee?
I’m not sure if I know where that is.
Oh, it’s based in Murfreesboro.
Okay.
Well, there you go.
It’s out there towards Rutherford County someplace.
Yes.
Yes.
I am widowed.
I’m 73.
I live by myself.
And I am getting antsy.
I haven’t filed income tax since my husband passed 10 years ago.
Okay.
Because I didn’t think I made enough.
But this year, I’m just scared.
Do I need to file?
Well, kidney, tell me.
It’s a great question.
But obviously, you’re getting Social Security, I’m guessing, at 73.
Correct?
Yes.
Do you have an annual amount or monthly amount just to get me in the ballpark?
About $2,100 a month.
I’m drawing off my husband also.
And then I have his little bit of pension and then my little bit of pension.
And all total, it’s right at $32,000.
And $21,000 of that being Social Security, though, right?
$21,000 a month.
Yeah.
Right.
But I mean, I’m sorry, $25,000 being the annual for Social Security.
Yeah.
Yeah.
And then you said the total was $32,000?
Yeah.
Right at $32,000.
Not his hair over.
Right.
So roughly another $8,000 you’re getting from pensions or whatever.
Your pension and his pension a year.
Right.
So that would be $1,21,000 minus $16,000.
Get in the $4,000.
The moment you should be absolutely fine for not filing.
Okay.
That’s what I was scared.
I know every year when the Social Security goes up a tad and I’m just thinking, I don’t know what the limit is before I would have to file.
Well, they take half of your Social Security and then they add everything up.
And as long as it’s under $25,000, you’re pretty good.
Right now, it looks like you’re close to about $21,000.
So because it’s about $13,000 for the half of Social Security roughly and another eight in pension.
So that came out to about $21,000.
So you’re getting close, but not yet would you have to worry about it.
That’s great.
So if I live by myself, how would I even file?
Would that be head of household or how?
It would be single.
It would be single.
Single.
Yes, ma’am.
Okay.
Thank you so much.
Thanks for listening.
Okay.
All right.
Great question, actually.
And I do know it is getting, she brings up an awesome point.
And that is that as the Social Security goes up, because I’ve had some people where when they were married and then before they lose one of their spouses, they were not having to file because the combination wasn’t high enough between the two Social Securities and maybe a small pension.
But when it goes to the single filing and they get the higher Social Security plus the pension, it does kick some of them into having to file.
So you are going to want to double check your numbers, make sure.
And I will say AARP does offer free taxes.
And if you at all question that, I would say go to one of those and just see if we’re, you know, at least that way you’ll know, hey, I have plenty of room.
I’m fine.
I, you know, last thing you want to do is not file because you think that you didn’t have to worry about it.
Okay.
So before the last break, I said I had something I wanted to cover.
We’ve talked about BOI, business owners information reporting.
They canceled it.
And then we’ve been telling you that they have reinstated it.
Yesterday was the last day.
That was the mandated deadline for you to actually file your BOI information.
And it is very important because, again, civil penalty up to $592 per day for each report is late.
Criminal penalty up to $10,000 in fines and imprisonment for up to two years.
This is what they’re saying.
The beneficial ownership situation is business beneficial ownership information report.
Anyone that has a state charter says, according to this, says you need to go online and file this.
It is a free filing.
You do need to have a copy of your driver’s license.
Um, and I would, even though it’s a day late, if you have not yet filed it, I would suggest filing it.
It’s only one day late versus being, you know, two, five, 10, whatever.
I don’t know.
Um, I have heard some conversation saying that they’re, that they’re not going to be able to charge the penalty, but heck, I thought it was going to get kicked out of court when they did it because of the privacy issue that they had, but it, it went right through.
So they won that court case.
So, um, the penalty for not filing or, you know, or for doing things will be absolutely criminal.
They’re, they’re saying it’s criminal.
And the reason for this report for all of you are sitting there going, this is nothing I need to worry about.
They’re trying to make sure that there are no foreign investors in our businesses that we’re not disclosing.
Uh, one of the questions is, you know, is there any foreign investors, blah, blah, blah.
Um, it seems like to me, if it’s a single member LLC and we are the person filing it on our own personal tax return, that that would not be, um, a problem.
Uh, but it’s, is, is seemed to be a situation where we did have issues with that.
And, you know, just, just making sure, you know, that you understand that this is still out there.
Um, and, uh, you know, that there is penalties for you if it does not get filed.
So, um, you need to just do it.
You need to find, there are companies you can have that will do it for you.
You just need to make sure that you have filed to the best of your ability, uh, these reports and, uh, and make sure you have, uh, everything that you need, um, you know, to, to do this, this situation again, it’s B O I R.
I know that the one website is B I O B O I R.org.
Okay.
That was just something I wanted to put out there because I know we’ve been back and forth about it and we’re not too sure what we have.
Uh, 2025 is here upon us.
And for any of you that do do the gifting, uh, for your children, it is up to 19,000 this year.
Um, so, and this is family and non-family members without having to pay any gift tax if it applies or using up any of your available, excludable amount.
19,000 before you have to report anything.
Um, the estate and gift tax is 13 million, 990 per person, 27 million, 980 for a married couple generation.
And the state, uh, state taxes will start at about 40%.
So, um, definitely something you don’t want to have to deal with.
So, um, I guess most of us will never have to worry about that.
Um, when the gentleman called, uh, Kenyon called earlier, he was talking about his child going to college.
I was trying to find this, but I didn’t, but married finally jointly, the American opportunity credit, which is what we were talking about.
And also the lifetime, this is where you can get up to $2,500 or lifetime is $2,000.
Um, the maximum married couple can make is 180,000.
The maximum that a single filer can make is 90,000.
Um, so very, um, good.
And that those numbers run for both of those, anything above that is excluded.
Um, so, you know, again, just making sure that if you do have kids in college, student loan interest also, you know, a married couple that makes more than 200,000 will not be able to take any of their student loan interest.
And you can take up to 2,500 single person up to, um, a hundred thousand.
So again, one of those situations where it’s pretty much fair, um, where everything goes, uh, in the right direction as far as what we have.
Um, so we’re going to be dealing with also depreciation, accelerated depreciation.
Um, right now we are down to, I believe it is 60% unless he exceeds that or changes it.
So, um, if you buy a big truck and you’re trying to reduce your taxes and you’re like, oh wow, I can write this whole thing off 2025.
You’re going to get 60% of it.
So you might want to think, is it really the best investment?
I mean, if it’s a good investment, cause your business needs it totally do it.
If you’re thinking you’re just doing it to save tax dollars, when I get back from this break, we’ll talk a little bit about how spending a hundred thousand dollars may not save you a hundred thousand in taxes.
In fact, most likely won’t.
Um, but if you want, you can join the show 615-737-9986, 615-737-9986.
And we’re going to be, um, coming back talking more about taxes.
So if you know someone that hasn’t filed taxes or maybe you were doing your taxes and you found out that you weren’t able to save as much as you thought you would.
Um, or maybe you’re just questioning some sort of tax deduction that you heard about.
This is the show 615-737-9986.
We’ll be right back.
All righty.
We are back here live in studio and Mike, if you’re still listening, no, you don’t need to do your BOIR.
Um, I will get back with you in just a minute.
I just found out from Donna, who is also one of my best friends and thinking that she’s a listener.
She, uh, came back.
I knew it went to court.
I did not know Donna that they have a March 2nd.
They announced it is issuing the interim final, final ruling that removes the requirement of us companies and us persons to report the BOI to FinCEN under the corporate transparency act.
So I am being corrected, which is perfect.
I am happy about being corrected.
Anytime I can make sure, um, I am right.
I just kept getting, uh, the, the, um, the notices on my, uh, reports.
So I being tax season, maybe did not read as well as, uh, you, um, you’re funny, Mike.
Uh, anyways, that we have the situation.
So, um, I just want to back up here really quick and just say, after I did all of that about the BOIR reporting business owners information act on March 2nd, they came out and they changed.
They announced that U.S.
They announced that U.S.
And U.S.
Persons do not need to report under the transparency act.
So, um, so take a deep breath because this is great news to me.
I, um, will honestly say, um, I was a bit concerned because I thought that, uh, I’m sure that I knew a number of people that probably hadn’t, including my boy.
And I just, um, I just thought we, we needed to get it done.
So thank you, Donna.
Um, if, uh, if it’s perfect information.
So I just wanted to make sure that that was great news, uh, that we put out there to, to keep everything going there.
So we’re all so crazily done at, as it is at the moment, but, um, at least we’ve got that information.
That was a relaxing situation.
So, um, let’s get back to taxes.
Okay.
So something I’m probably more of an expert at, but I did want anyone to end up with those fines.
Cause I knew they’d be in my office at some point saying, oh, we need to get this waved.
And I’m not too sure I could have done that, uh, uh, on this situation.
So wonderful, wonderful situation.
I am happy that Donna was listening because I’m sure we have people, um, to that, that just, uh, we’re going to be including some of my clients.
I’m sure that would have been freaking out.
All right.
So I just got a text.
Someone saying if they sell something, is there truly a 0% capital gains?
And the answer is yes.
The problem is it has to be a fairly small sale.
So, um, a single person, and this is going to include all of your income, uh, all your taxable income, 0 to 48,000, uh, 350.
And this is in 2025.
And then married jointly, um, 0 to 96,700 head of household, 0 to 64,750.
So, um, and one of the things you do want to be careful on is there is a 0% capital gains for a trust or an estate.
And many times we always say we want to sell things.
Um, but as trusted estate, they only have a 0% capital gains rate to 3250, 3250.
Uh, then it jumps into 15 and many of you guys, which 15 goes all the way up to $533,400 for a single.
And here’s the marriage penalty, right?
For a joint married finally jointly, 600,050.
That’s only a roughly 66,000, $67,000 difference.
Um, and in there, what they don’t tell you about is why whenever I’m doing estimates for people is the additional 3.8.
I think they call it a Medicare tax, but basically it’s only done on investment income.
Um, so you have that 3.8 that kicks in after a single person has more than 200,000 in income.
And if you have capital gains and a married couple, if you have more than 250,000, again, the marriage penalty, uh, both of them are working very hard to, to make sure both of those.
So if you happen to sell something and you’re like, Hey, it’s under 500,000, um, my income and everything, I’m only got 15%.
When you get ready to do your taxes.
And if it is over 250, if you’re married and under 500 or 600,000, you will end up with some of that being taxed at really 18.8 or additional 3.8 tax.
So making sure that, you know, the percentages, because then it goes to 20%.
And theoretically, if you have something that you’re making a couple million dollars or even $800,000 capital gains, you’re looking at 23.8% on that.
So again, the numbers make sense.
You need to make sure.
And again, you know, I have so many people say, well, I’m not going to file.
I’m not going to pay the taxes.
So I’m not going to sell because I don’t want to pay the tax.
Um, taxes are still fairly reasonable.
If you really think about it.
I mean, most average people are, are 25,000 or 25% or less.
So you’re keeping 75.
Uncle Sam’s getting a quarter of it.
It’s not perfect, but it is, you know, a situation.
And in many cases, people are able to keep their income where it’s 15% of capital gains or even 12% ordinary income rates.
So, um, again, one of those things.
Now, if you are a person that wants to go and spend money because you think you’re going to save on taxes, I started that conversation before the last break and I thought I’d finish it now.
So if you go out and buy yourself a hundred thousand dollar, beautiful truck, let’s call it a Ram because that’s what I like to drive.
Beautiful Ram, big truck, over 6,000 pounds, able to haul something in case you’re, you need that.
Because let’s be honest, if you’re a real estate professional and you’re really just showing houses, having a 6,000 or bigger vehicle, 6,000 pound or bigger vehicle, it doesn’t really make sense.
I mean, you know, the IRS is going to question why did you buy yourself a huge vehicle?
Um, and, and then not, you know, my big 3,500 Ram, there would be questions on why would you need that?
Now, if you’re a construction guy or a handyman or, you know, many jobs where you might need that truck bed or a trailer to be hauled, sure, go for it.
But under the current tax law, you’re going to get 60%.
So first you’re only going to get 60,000 in the first year of that.
And depending on what your tax bracket is, but let’s assume you’re self-employed because it’s really the only way you could depreciate it.
Um, you’re going to have a minimum of about 20% ordinary income tax and self-employment tax.
So on 60,000, you’re going to save basically $12,000 in taxes.
Um, not, not petty cash, but it is something you have to question.
You spent a hundred thousand where, and you were able to get 12,000 in the first year.
And then the next few years you might save another four or $5,000.
Um, you know, so you have to spend a hundred thousand to save $16,000 in taxes.
Just doesn’t make sense to me.
Now, if you need that truck, if that truck is the difference between you making it, or you’re a truck driver and you’re hauling things and you need that because that’s how you make your living.
That’s where the money’s at.
Well, absolutely.
There’s no question by the truck, by the dozers, by whatever it is that needs to be done.
That makes either the job easier or you’re able to build money because of the fact that you can bill more because of the vehicle you have.
So, but many people come in my office and they’re like, well, I was told I could go out and buy myself a big, um, Mercedes.
Or a big, uh, land cruiser or whatever.
And I could write that all off and, you know, it’s $150,000 vehicle and I’m going to, you know, deduct.
And again, if, if it applies in the right situation, I’m not going to say some people can’t do that.
But in a majority of people, I’ve had more than one where they are, um, they own a, um, hotel or they own a, um, restaurant or I don’t know, just, you know, something.
And they’re not using this vehicle to pay people back and forth to something.
They are just using it for their own private use to go back and forth to these locations.
And maybe they have multiple, maybe they have many franchises, whatever.
Um, you have to really be able to, to justify the concept of it.
Don’t just think that because you want a big vehicle, you can do it.
You want to make sure that it is something that you can, uh, actually justify because I can’t tell you how many I’ve had that do that same thing.
Um, on, you know, doing that situation, uh, with all those different situations we have.
Uh, but if you can write it off, great, but don’t go spend a hundred thousand to save $16,000 in taxes.
It just doesn’t make a lot of sense.
You might not just pay the 16 and keep the other 82 in my pocket, um, or spend it, you know, go buy myself a truck for 40 grand and, and save what I can and the rest of it in my pocket.
Uh, because that’s not even taking into account that potentially, is it a 100% use for business?
Is there interest on this loan or are you paying cash?
Um, all of those little situations come in and out and I just want to make sure we’re all on the same page.
Um, all right.
So we’re getting ready to get, uh, take our last break here coming up in just a minute or two.
So I do want to make sure that we have covered my mistake.
We do not have to worry about BOIR.
Wonderful.
I will high five for that because it’s just something else I didn’t need to worry about in the middle of what I call my crazy season.
Um, taxes obviously are due.
If you, if you had an LLC, um, that’s as a partnership or you have a sub S corporation, those were due on the 15th, unless an extension was filed.
So, um, again, making sure you have those really important to make sure that that is going to come to play and do that.
So if you haven’t filed them or an extension wasn’t filed, you will be paying a late fee.
Um, so, you know, again, just making sure that you have your appointments and then come April 15th, which is only a few more weeks away.
We also have another extension being required or you need to file the taxes.
Um, so I, again, not knowing each and every one of you listening, but if you’re not sure if you’re going to be able to get it done, if you’re still waiting for a tax document, possibly a K one or something from an estate or another business, you might just want to go ahead and file that extension.
So that way, then you don’t have to worry about what’s going to be coming and you can take a deep breath and, or maybe you’re, you know, having health issues or something else and you just don’t want to have to deal with it.
So, um, again, just making sure that we’re all on the same page because now’s, uh, now’s a good time as any.
And even if, you know, I have people, it’s like, well, I don’t need an extension.
I don’t need, you know, filing the extension is not going to have any deprimental situations.
Why are you right?
I mean, there’s, it’s really no reason you shouldn’t because even if you file the taxes on April 15th or prior to that, having that extension just gives you that little extra.
What if something does happen?
What if you, um, you know, you’re unable to file either because of one reason or another.
Now you can take a deep breath and say, Hey, I already have my extension.
Right?
So again, just put that out there that it’s not a bad thing to file an extension and then follow up with filing the taxes, even if it’s all done before April 15th.
All right.
So we’re going to take our last break.
You can join us here.
615-737-9986.
We’ll be right back.
All righty.
We are back with the last part of the show.
So if you’ve been thinking of a tax question or a situation you’ve been wanting to share, feel free to give us a call.
615-737-9986.
Let’s go to James and see if he has anything I can help him with.
Hey, James.
Dr. Friday.
I gave a thanks for taking my call, by the way.
Sure.
I gave a original portrait of President Polk to a to Moray County.
Okay.
And I had it appraised correctly by an appraiser.
I had all of that done.
That’s all signed, sealed, and delivered.
Good.
And it’s just, you know, I mean, I think it’s a significant amount of money.
It’s about $10,000.
Yep.
So my question is, would this be a good time to take that deduction and transfer?
And I’m trying to get some money out of my traditional IRA accounts because I got way too much money in traditional IRA accounts and not enough in Roth IRA accounts.
Right.
And use that money to get it over into my Roth IRA accounts.
It’s a good question.
Is that a strategy that’ll work?
I don’t know if it will.
So first, I’m not a financial planner.
I just want to put that out there.
You’re making the choice on that.
But from the tax aspect of what you’re talking about, are you married or single, James?
Married.
Okay.
So here’s my concern.
You have to have more than $30,000 to itemize.
And you’ve got $10,000 of it in this gift.
Would you have enough of other?
I’ll have 30.
You will have over 30.
Okay.
Because you have to have over 30 to even make a dollar difference in your conversion.
So that’s all I’m saying.
So you need to go through.
And if this is the year you’re going to definitely itemize, you might want to pay your property tax twice.
If you have property taxes, because we can maximize that department and then pay up all your charities.
Impossible medical.
Anyways, I would maximize my itemizing.
And then depending on what that number comes up to, because let’s say you get up to 40, then you would have an additional $8,000, $9,000, depending on your age, of convertible and maybe putting you in a lower tax bracket.
So in my opinion, it would be a perfect time to sit down with, if you do your taxes yourself or with your financial, because they need to know that number and keep you in that 12 or 22%.
I don’t, again, don’t know you, James.
So you can do that conversion because it would be a good time.
If you’re going to itemize, it’s definitely going to give you some extra free money that you would normally not have if you didn’t give these large contributions.
Right.
I like your thought.
Okay.
Well, that’s what I thought.
Yeah.
So that’s why I was thinking this would be a good time to use that to try to get some of that money transferred over and not have to pay.
Right.
You know.
I like your thought.
I mean, why not do it if we can?
I mean, it’s a perfect, it’s a perfect plan.
I just think you need to sit down and see how much you’re going to be able to maximize on it and then be able to look at your conversions and see what tax bracket can I stay in to do what you want to do.
I mean, a large number of people and the tax rates this year in 2025 are still what we know.
Again, we don’t know what next year is going to bring, which could be a higher conversion rate if you wait till next year to do this.
So I think this year would be the year to do it right now.
It has to be done in this year because the gift was made in this year.
Okay.
Okay.
You’ve already made the gift.
Got it.
I wasn’t sure if you had had the appraisal or whatever.
Cool.
All of that’s already been done.
The gift has been made.
You know, all the appraisals have been done.
The county has given me the piece of paper that says, thank you for the gift.
This is what it was worth.
You know, everybody’s signed all the paperwork that has to be signed.
So it’s in this year.
So that was why I was wondering if, so it’s actually going to be, Oh, something just going to be in 2025.
Right.
You’re talking 2025.
So yes.
So you, you’re going to be doing all of this in the year we’re in currently.
So you just need to maximize everything else at this point.
It won’t be in the year we’re filing.
It won’t be in the year that we’re living.
Got it.
If that makes sense.
Got it.
Got it.
Yeah.
Sorry.
I get confused about tax years.
Trust me.
I’m always, I’m always a year behind most people.
So yes, not a problem at all.
All right.
We’ve got one more quick call before the break.
But James, thank you for calling.
I appreciate it.
All right.
Thank you.
Appreciate it.
You do.
Hey.
All right.
We’ve got a Douglas on the line.
Let’s see if we can get him to join real quick.
So we don’t have much time.
Hey, Douglas, what can I do for you?
I’ll keep it very short.
Missing documents for my deceased father.
He has pension and social security documents.
Those are missing recommendations.
You have two options or well, one main one would be since you have power of attorney, because I’m assuming you said deceased.
So you have the power of attorney.
You can go and file a 2848 and obtain copies of his transcripts.
That would be a first option.
Or you can hire a tax person like myself, where we can use your power of attorney to do that.
The other option would be to call directly to those, which I’m assuming you’ve already thought of Douglas.
So I’m probably repeating what you thought.
But the option two would be to call those areas of wherever he’s getting his pension or whatever, and ask them to re-send or fax or email you a copy of those documents.
Because unfortunately, some of them get step up in bases like social security and stuff.
So we can’t really use 23 numbers in 24.
And what gets deposited is after Medicare and stuff.
So not knowing him, it would be hard to get the exact numbers.
Okay.
I will be talking to you.
I appreciate it.
No problem.
Thanks, Douglas, for calling.
Appreciate it.
All right.
We’re going to get ready to wind down the show here.
It is, I am Dr. Friday, an enrolled agent.
Been doing this now for about 30 years.
I am licensed.
When you see EA, it means enrolled agent.
And it means that we are licensed to do representation and tax preparation by the Internal Revenue Service.
We do not work for the Internal Revenue Service.
We actually work for you.
Our goal is to actually be representing you in front of the IRS as a shield, a way of making things a little better and helping you understand what is your options.
What can you do?
What should I be doing next?
So that is what I’ve been doing and many others.
So if you’re looking for someone that needs to do taxes and if my calendar is full, I am pretty sure I can give you some other people that we can resume.
We actually have a new guy in our office after 30 years.
I now have a second EA working for me.
And Chris is awesome.
Chris Woodard, he’s been doing this for 20, 30 years himself and is working out wonderfully.
It’s, uh, is always, um, I mean, we enjoy taxes, which is nice to be with someone that actually enjoys doing taxes.
So he’s a little bit crazy like I am.
So if you need an appointment, you know, we have some here in our office.
You can also go to, um, drfriday.com.
That’s the webpage, drfriday.com.
Um, look on the schedule.
You can either pull up a time or you can call the, the phone number on Monday, 615-367-0819.
615-367-0819 is the direct number.
You can also email us at fridayatdrfriday.com.
I will tell you at this point, we are running probably a little behind on responding.
Um, we’re doing our best.
I will try to get caught up over the weekend, but until then, um, you can, um, obviously email fridayatdrfriday.com.
If you need help doing taxes or just getting an extension filed, um, again, making a phone call or sending us something, we’ll help you do that to, uh, just keep you.
And then after tax season, we can get you back into compliance, make sure everything is going the way you want.
Um, it is so important to file your taxes because people don’t realize if you want to have your children in college, if they, if you want to buy a house, if you know, a lot of those things do require us filing taxes.
And sometimes people find out that they haven’t filed for a number of years and they really don’t even have a major tax issue.
And then you have some that, you know, 20, uh, 10 years ago they filed and they owed a big child amount and they still owe it.
But how long has it been in collections?
What do you have to do?
You know, the IRS has a particular pecking order.
There is rules they have to follow.
Sometimes it doesn’t feel like it.
And I will even say that, you know, the left and right hand, the collections and the audit or resolution areas don’t communicate.
I ran into that here in Tennessee, a Tennessee department of revenue dealing with an auditor, um, on a, on a resolution situation yet collections starts levying and leaning up someone’s bank account because of the, uh, situation.
I thought we were copying people.
I thought everything was being done, but collections like, well, we didn’t get a cancellation.
And so anyways, if you need help, 615-367-0819 is the direct number in the office.
615-367-0819 or Friday at drfriday.com.