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:
- Cryptocurrency Is Not Included in Property Taxes
- How Do I Track Crypto Transactions for Taxes?
- How Long Can I Live in a Rental Property Without Tax Implications?
-
What You Need To Do if You’re Behind on Taxes
- The Importance of Having a Will and Power of an Attorney
- What Happens If Your Employer Messes Up your Tax Withholding?
- What To Do If Your Income and W-4 is Low
- The Importance of Paying Quarterly Taxes
- Who Qualifies for Employee Retention Tax Credit?
- 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
I’m Dr. Friday and the doctor is in the house. It is tax season and everyone is probably enjoying this wonderful Saturday outside says we had a pretty nasty storm last night. But for all of you that are like me sitting here working on tax returns, working on your personal tax returns or truly like me another person that is actually a tax person, an EA or a CPA, then we are all going to be talking about our favorite subject.
Dr. Friday 0:56
So if you’ve got a question concerning taxes, maybe a little bit about crypto we’re going to touch because I’ve gotten quite a few emails this week on cryptocurrency, what’s allowed what’s not allowed? Can they take deductions? Are they going to have a disallowance? If they take a lot of deductions, is it going to lead to an audit? All of these are really great questions. And we’ll try to hit on some of those while we’re waiting for somebody to get on the phone lines if you want to join the show you can 615-737-9986 is the phone number here and the studio.
Dr. Friday 1:33
So let’s talk a little bit about crypto since it seems to be on the news, or at least as far as I’m concerned, it’s been in a lot of my emails. So first thing about crypto is there is going to be some they are treating crypto. In essence, if you hold it for more than 12 months, you will be able to take long term capital gains, you don’t have to worry about wash sales. Crypto is not included in that. So you basically can take capital losses on its but keep in mind, here’s the big one. If the cryptocurrency became worthless, you cannot take that loss worth the security isn’t available for two individuals who invest in cryptocurrency, the IRS recently removed, released a memo on that topic.
Dr. Friday 2:16
So if you’re not too sure about what this is, because we all know, there’s been a huge change in the world of cryptocurrency, some currency has survived dropped, and then you know, is recouping. And then some of them have just completely disappeared. And if you happen to invest in one of those that is completely worthless. And the share story, I had a gentleman that had taken a self directed IRA and decided he was going to become the crypto king. And I am not a master in any sense of the word on the what happens in the world of crypto. But he was very knowledgeable, at least, he seemed to feel he had gotten the proper education to make this decision. And, and he invested it to several of them that became completely worthless. Now in his case, he thought, Well, I’m gonna be able to take some of these losses be able to do something with them. But it was a self directed IRA.
Dr. Friday 3:09
Nothing else, just the self directed IRA. And so it for of you that may or may not know this, but with a self directed IRA, no matter if he made money or lost money, it was still protected on the shield of an IRA. So when he lost over a million dollars in that IRA, there was no place for him to deduct those losses. Because of being in a protected IRA, he just reduced his retirement by that dollar amount. But if you happen to be a person to deal with after tax dollars, there may be some losses that can be preserved.
Dr. Friday 3:38
But if it was completely worthless, you invested into something that is completely now gone. And before we would have that potentially, if you went and bought a stock on the stock exchange and that company went belly up, you would have the ability to wash that but they’re not allowing that with crypto. So just be really smart and make sure you understand because again, I’m not gonna say I know everything about crypto, but I do have enough clients dealing with it that I try to stay on top of it. Alright, let’s see if we can hit David, who is on the road on this beautiful Saturday. Hey, David, what can I do for you?
Caller 4:11
Yeah, tax is due on sale, the limited partnership which is reported on the k one. It’s been in the family 100 years, I don’t know the original cost of the property. And both parents have now deceased.
Dr. Friday 4:31
So did you inherit? I mean, there’s no step up and basis in the limit because it stayed within that limited partnership all long, correct.
Caller 4:40
That’s right.
Dr. Friday 4:42
So, unlike property that might have been inherited outside that’s going to hold whatever basis and I mean, if it’s been 100 years, I’ll be quite honest with the exception of whatever accounting can be accounted for repairs maintenance, is this just dirt like land or is there buildings on it?
Caller 4:59
Excellent. And?
Dr. Friday 5:02
Well, I mean, you might be able to go back as far as possible under property taxes, but 100 years ago, they weren’t even collecting property taxes.
Caller 5:11
So I’m being a little bit facetious. It’s not been 100 years.
Dr. Friday 5:16
Okay, well, if you can go back as far as the 14th, I believe you can get into the property tax and see what it was selling, I am quite sure it’s going to be back in the hundreds instead of the 10s of 1000s. You know, I mean, obviously, the dollar was worth a lot more back then. So I would probably go and try to use property taxes to see if you can get an assessment as close to the date, at least, you’d make the best effort possible to get a basis for what it was, since I’m assuming they’ve been taxes filed for a number of years. But since its land, it wouldn’t have been depreciated or anything. So it may not have been on the books. I mean, that like rolling forward on the LP. Okay, sorry, that’s about the best suggestion I have for you, sweetie.
Caller 5:57
So it would be if we could find out to your original no appraisal, it would be a step up basis account.
Dr. Friday 6:05
No LP would not because it was in a business, there would be no step up in basis. Because it’s held, it wasn’t passed from your father to you to your your grandpa and a father to you is held within a limited partnership all those years. And back in the day, there was, well, even now there’s some good reasons to put big farms and different things like that because of property taxes. They put them in LPS so that they protected the land, but it doesn’t allow for a step up in basis.
Caller 6:35
They all pay only 10-15 years old.
Dr. Friday 6:39
Okay. Well, that’s good news. So before that it was handed down father to son or whatever the handed down from generation to generation. So if you can go back to before the LP was started, that would be where you’re going to start the basis most likely.
Caller 6:54
Okay. All right. Thank you.
Dr. Friday 6:57
All right, that was definitely more challenging. I would definitely suggest if if David has an accountant, or an attorney, be able to track it in a way that you could actually, you want to maximize any step ups that might have been allowed. All right, we’ve got Terry on the line. Hey, Terry.
Caller 7:18
Yeah, I have a question about what do you say, oh, boy, planned sales in December last year. But the record of that is showing up in January, on our bank account. And we already paid the taxes on that. Drop a red flag anywhere?
Dr. Friday 7:43
Not necessarily what you’re saying is it missed the close close enough to the end of 2022, that it really did not hit your bank account, or you were out of town and not able to deposit until early 2023? Is that what you’re saying? Tear?
Caller 7:56
That’s what I’m saying? Yeah.
Dr. Friday 7:58
Yeah, no, that is perfectly fine. That often that kind of thing happens to be quite honest. So I would not overly worry about it. It’s easily justified if some reason it would be told. But I mean, that’s pretty common sense. So I would hope that no one would come back. I wouldn’t worry about though.
Caller 8:15
I wouldn’t have to pay that bat all my taxes for this year, though.
Dr. Friday 8:19
Correct. You know, you’re only going to do it once. Yes, sir.
Caller 8:23
That’s why I wanted to find out whether it would be a problem. After All right.
Dr. Friday 8:33
Great question. Thanks, Terry. Bye. Thanks. All right. And that’s I do I do appreciate because a lot of times people are always thinking that and I am we I like to tell him, I’ve never had a problem personally. So I don’t think there will ever be an issue for Terry. But sometimes there is a timing where something will get delayed.
Dr. Friday 8:56
Sometimes just because somebody has been out of town to do something. Other times. It is because the the closing sometimes can take longer, even though you sign the documents and they do the 1099 s on the sale for that year, but sometimes it could take them a couple of weeks associate or holiday seasons to finish up and make sure they have all that proper information. So I did want to drop a line. One of my good clients, I get to see him. His last name is LaShawn. Lashley. I think it’s a unique last name, but anyways, he is a crypto guy. And he did want me to remind people because he provides me with the best reports for cryptocurrency I’ve ever received. Its coin tracker, or tracking, I believe coin tracker and it even produces the forms for capital gains.
Dr. Friday 9:46
So the Schedule D and all the the backup options because I mean, there’s hundreds if not 1000s of transactions when you have someone that’s seriously into crypto and it does help a lot. So if you are a crypto person and you’re trying to figure out How to put the proper information on your tax return. You might want to look into coin tracker, it does a wonderful job as far and I don’t get paid guy. So I’m just saying, as a tax person, that is a report that’s very helpful for us because it gives us all printed out on the form. So we can actually just scan and attach to our PDF into our tax program versus trying to enter 1000s of transactions out of a career. And a lot of times the information isn’t very clear out of some of the reports people get in Excel. So want to make sure that is what we have going on. All right, let’s hit mark and Murfreesboro. Hey, Mark, what’s happening?
Caller 10:44
Yes, I am fixing to sell my property, which handles the business and I’m retiring at a rental property owning house, but it also had my workshop on it too. And I’m thinking you know, about, either, you know, just selling it straight out or moving over there. For and I’d heard it was like two years that you can live in the property without tax implications. What what is my requirement? Oh, man, what was? What’s the mass?
Dr. Friday 11:21
Right, I have a number of people that will move into their rental properties live in them for two to three years, depending on how often they’ve sold another property. The tax law says you have to live in it at least two out of five years. So and you will still have to do recapture of depreciation if you had it as a rental. But the capital gains portion of selling these properties could be almost zero or or even, you know, you won’t most likely have to pay taxes, I’ve had a few, but at least it saves you 250 for an individual or 500,000 for a married couple of you’re both living in that house, it may be a great way to put more money in your pocket and only have to deal with recapture depreciation versus capital gains and recapture
Caller 12:08
well, okay, now is that I guess the depreciation or if I sold that has nothing to do with the business. Is that correct?
Dr. Friday 12:20
Right. I mean, again, if you’ve been on the property, and it’s a I mean, it’s got a it sounds like it has a metal building or something that you’ve run the business out of? That is correct. Okay. Is there a house there as well? Or is the metal building livable as a house?
Caller 12:37
No, it is there is a house there.
Dr. Friday 12:41
Okay. So you because the question would be is the metal building, I’m assuming is running on a business tax return in which you have depreciated those assets. And so if you sell it, along with the house is all one big package, you will be recapturing that depreciation as well. Now recapture is different tax brackets, then capital gains, as you probably know, so you could sell the business building and the House and the piece of property or whatever, and you will have capital gains, but then any depreciation that you’ve done through the business will be recaptured when you relocate or sell that property.
Caller 13:18
Okay. And capital gains on that is what?
Dr. Friday 13:24
Depending on how much money or profits you have, it starts at 15 and ends at 23.8. Anything over 500,000, including your income. So somewhere between there, the average I would say is about 20%. If you expect to have a couple 100,000 above your income, if it’s only you know, if we can move in it preserve 250,000 above what you already paid and not have any capital gains, then we’re just looking at ordinary income tax on recapture of depreciation.
Caller 13:54
Okay, good deal. Okay. Thank you so much.
Dr. Friday 13:58
Appreciate you, sir. Thanks. All right. So if you have a question, you can join the show 615-737-9986. We’ll take our first break. We’ll be right back with the Dr. Friday show.
Dr. Friday 14:18
Righty we are back here live in studio. And we’re ready to talk about taxes or other subjects if you have them on mine. Right now I am working on trying to make sure that we have everybody organized and ready to do your taxes. There is nothing wrong. I want to clarify, some people are like, “Oh my gosh, I can’t file an extension. I can’t file an extension. It’s not going to be any good. I can’t file.”
Dr. Friday 14:41
Okay. I want to clarify, you can file extensions. There’s absolutely nothing wrong with filing an extension person. The biggest thing you want to make sure of is that if you file an extension, it does not extend the money that you owe. Okay, so if you’re thinking okay, I haven’t gotten all my paperwork together. This year’s just been crazy, nothing’s happening the way I want it to happen. Then the next step that you want to do is obviously, you want to be able to file an extension, I file one every year, nothing wrong with filing an extension. But make sure that if you’re filing an extension that you have paid in enough money, because then you’re fine extension extends paperwork period, make sure you’re dealing with that.
Dr. Friday 15:26
And then you can go into the next level, which is then making sure you’ve got all of your paperwork, you don’t want to file amendment. I mean, I’m still dealing with some people that hadn’t had their 2019 process properly, or 2020s, or many returns are filed and they didn’t get them. It’s just turned into a whole big ball of wax. And it’s like, Okay, we just need to try to get them filed correctly the first time. And we all do try our best to do that. But if you’re at all questioning what you might have, maybe you don’t have all your documents, or maybe it’s just been a crazy first quarter, and you’re like, I just haven’t had time to really look at my documentation. Don’t sweat that. But what you do want to do is make sure that if you’re going to do it, you’re going to make sure that it is done correctly, and you’ve had time to review the numbers, look over the tax return, make sure everything is going the way you want it. So that way you can take care of everything else.
Dr. Friday 16:22
So just you know nothing reason to rush into doing your taxes. But also an extension is a great idea. Even if you file your taxes on time. Sometimes I mean, we usually start doing extensions in our office for all my clients, we do our very best if you’ve been with us, for the last year or two, we do our very best to try to make sure that we have filed all the tax returns. And to do that, you know, just because something could happen, you know me also help COBIT came in and march 20 of 2020, who knows what what is the next time so if there is a problem, if there is something else that’s going on, then we have protection against filing the paperwork. And it also extends penalty for failure to file.
Dr. Friday 17:07
So we want to have those those walls in place. So again, I got an email to you know, I don’t ever want to file an extension is probably going to lead to more problems. I’m not a firm believer of that. One never knows why someone half the time gets audited. But one of the biggest things you do want to do is make sure that if you are ill thinking that you might be behind a little bit or you have a few problems, guess what, you just want to file an extension, take that pressure off. But also if you think you can go ahead and head up to doing your situation where you can file that and put a little money on that now it’s up on buttons are sticking, oh, I can’t read and talk at the same time.
Dr. Friday 17:54
Apparently, that’s a problem I’m going to have to deal with. So next, what are we going to do, we’re going to take on your phone calls, if you want to join us 615-737-9986 taking your calls, talking about all the things we want to do and making sure that we are to the best of my ability give you guys a heads up on what is going on and what you need to make sure you’re dealing with one of my favorite things that I don’t know if I talk enough about maybe I talk too much about it. But one of my favorite things is making sure that people that are 70 and a half and older taking or have IRAs.
Dr. Friday 18:33
So I know right now you don’t have to be in you can prolong taking money, which is called a required minimum distribution until you’re 73 years old, if you haven’t already started, but at 70 and a half, because I will tell you, I must have the world’s greatest givers that come to me. I mean, I have people that their income is not nearly sometimes as much as they give when you think about least in our world is always 10% of whatever I made. These people have always given well, they give a lot. And if you are 70 and a half, or if you have a parent that likes to give money every every week or month or whatever, to their church, and they also have required minimum distributions.
Dr. Friday 19:20
Let’s clarify that you want to make sure that you’re going to have them pay zero tax if they do it through their RMDs. It’s called a qualified charitable deduction, your driving, think of QCD if you have pen and paper, write it down and go to your financial advisor. If you don’t have one and you have some, you still have IRAs talk forever the administrator is it’s so simple guys. You can go there. They can write a check once a quarter once a month, once a year. I don’t know how often I’m not in charge, but mostly I have people that do a quarterly and I have people that do it annually. And all you do is you go in and say Hey, this is the name of my nonprofit, I want to send a check for $500.
Dr. Friday 20:04
And they’ll make the checkout, then they send it to you. And then you give it to the the organization or you mail it to the organization. And it is awesome. It’s dollar for dollar. It doesn’t have to be part of itemizing. It doesn’t have to be part of the standard deduction or any of that. So totally make sure you have that on your agenda. If you are taking care of a parent and they do it or if you are a person over that age, talk to someone. Okay, let’s go to the phone lines. Again. We have looks like Vaughn from Columbia, just down the block. Hey, Vaughn, what’s happening? John Vaughn. Hello, Columbia. Hello, there. What’s your name? All right.
Caller 20:48
Got a question. You got a couple of houses here on South my econ, because the uncertainly last 71. They left it to her with a $10. And they sell it to her and for all that, once I got those capital gains and had.
Dr. Friday 21:08
Okay, so let me recap to make sure I understand. So did you inherit these homes from someone else?
Caller 21:16
No, it belongs to my wife’s mother who is deceased. And before, you know, she knows, she wouldn’t know she’s in good health. And she wants to make sure that my wife hated it. And I sold her for…
Dr. Friday 21:35
So basically, and this is why I tried not to have people do, she could have done many, many other things. But I know a lot of times people just want to make sure their children are taken care of. So they do this. So what she basically did was give the house to her daughter at her own bases. And the problem is her daughter may not know how much mom paid for these. And you’re going to have to go back and see if you can find any information on how much money or if she inherited these houses, how much it was when the mother inherited or purchased these homes.
Dr. Friday 22:06
Because when mom died, she eliminated what we call a step up in basis by giving them to her daughter before her death. By doing a quick claim, she basically quit claim at the value that she paid for them, and eliminate that step up in basis. So if mom paid 25,000, back in the day for this house, and it’s now worth 250 Well, you know, you’re gonna be paying tax and 225,000. And that simple example.
Caller 22:34
Got no capital gains, right?
Dr. Friday 22:36
Yep, it’s gonna be capital gains. So you might want to get a good attorney or tax person to help you work out what basis you can preserve, and see if you can find whatever information you have. But by quick claiming a house to your, by her quickly meant to her daughter before she passed away, she kind of messed up the step up and basis, which is what we all like, because it gives us the advantage to take today’s rates instead of what may have been 35 years ago, or whatever.
Caller 23:06
Yeah. Something like 12,000 for 60 or 60 plus years, right. And we just want to get out of our account, all the taxes, real estate here for the universe.
Dr. Friday 23:23
Oh, I hear you. It’s all went up a lot. I live in the Spring Hill area, but have some properties as well. And everything’s, you know, increasing. But all I can suggest is if you want to call our office or if you have a tax person, but you’re on need someone to help walk you through what we can do to preserve as much as we can, and then figure out what you might owe in taxes. So you’ve got that covered.
Caller 23:45
So you can feel the, what, 20% something like that now.
Dr. Friday 23:50
Capital gains would be 15% up until your total income and including the capital gains to 15% up to 250,000 from 250 to about 450 A be 18.8 and everything over that would be 23.8.
Caller 24:07
There’s no income, security and we just been living here paying live meals.
Dr. Friday 24:12
Yeah, your Social Security will become taxable that year. All righty. We’re gonna take a quick break here and we get back we’ll get to the phone lines of Joe and I really appreciate your phone call Vaughn and we’ll be right back with the doctor Friday show
Dr. Friday 24:32
All righty we are back here live in studio and we’re gonna go right back to the phone lines because Joe was good enough to hold through the break Hey Joe, what’s happening?
Caller 24:45
a few weeks ago and was asking you about being my company’s repurchasing some company stock and you sent me an email about some possible exemptions and looking through that at It looks like probably a little more than I could take on. And you’re talking about doing an extension. And I was wondering, you know, if I just went ahead and did the increase in cautious did as a long term without the exemptions that you could take, and then possibly get in contact with you after the taint, and see about getting an extension done.
Dr. Friday 25:29
Right, I would actually, I mean, the extension would need to be done before the 18th. And then you and I could get together even the week or so after that. And we can walk through what you might need to do to preserve, you know, possibility of some tax free.
Caller 25:46
I thought you just filed the best you knew and you just filed until September.
Dr. Friday 26:01
Let me stop you there. Yeah, no, you don’t an extension is actually what’s the phone number, I’m trying to look it up as I speak to you because there is a particular form. And I should know it by now. But I think it’s a 4000 something, I’m just looking 48, maybe, let’s see here, here it is 4868. So it is just it’s an application for automatic extension of time to file your US thing is a single form of 4868. And basically, it just says, This is how much I estimate my taxes, this is what I’ve paid. And in the case of the one I’m looking at no money do and you then can e file or mail this in. And then that is all you need to mail is just that 4868. If you do the other, then we’re actually talking about an amended tax return which…
Caller 26:47
Okay, I think, I guess that’s what I was thinking that given given the light timeframe that it by an amendment might be more likely? It looks lik there’s a lot of paperwork to pull together on this and things you have to do to justify that the company meets.
Dr. Friday 27:12
There is and I’m not gonna disagree, but I will tell you that you’re more apt to be audited on an amended tax return statistically, than a first filing, not to say we’d be doing anything that would ever question that. But, you know, no one likes to walk into something and just say, I’m going to get it. So my personal opinion file an extension and then go from there. That’s my personal Do you think you owe money without this stock situation?
Caller 27:40
Actually, I think I’ll probably get a small return, I’ve done everything except that and, and, and thus far would have money coming back to me. And it’s, it’s more than what, almost more than what the capital gain would be on the stock sale.
Dr. Friday 27:58
Okay. So I mean, personally, I would just send in the 4868, your your good candidate for an extension, because the ones that are more troublesome or people that want to try to just either they don’t want to file, so they just put an extension out there without any money. But in your case, there’s no money due at the moment. So you’d be a good candidate, and then we can get it filed. You know, really, I mean, I’m not a person that likes to put it off till September or October, which isn’t the due date. But I’d say we get together afterwards and try to get it squared away. So we make sure we get you the best. Do everything right. So you had the best information.
Caller 28:33
So you would do the 4868 but not, you know not right.
Dr. Friday 28:38
Okay, okay. Yes, sir.
Caller 28:41
Okay. And I had I appreciate you emailing me that information. I’d emailed back but I’m no contacting a tax person during tax season is probably a little futile.
Dr. Friday 28:55
Not as good as I like I’m sure the people listening that have tried, I will be quite honest with you probably haven’t got the normally I almost pride myself on being able to answer my own phones. I do. But I know I’m running way behind at this time of the year, every year. It’s the same thing. So I do appreciate your patience. And then we’ll talk soon. Okay.
Caller 29:15
Okay. Thank you.
Dr. Friday 29:16
Thank you, sir. All right. Let’s go see the talk to Tracy and Manchester.
Caller 29:23
Yes, doctor Friday. Me and my brother are talking with my parents about trust versus owning some rental properties they have. And we were curious about the how if we co own the property, how those taxes would go. If they received still all the rent that we were just co owners of the property that they received that and then also, at the end when when they pay Yes, we would be the, we would be the owners of it.
Dr. Friday 30:03
Right? My my bet my personal opinion is not to put your names at all on it, you guys can be beneficiaries in a trust, the trust, and you can even help manage it through the trust, but the trust owns the properties. And then the parents would get or however the trust manages the rental income. But by putting your name on it, you’ve eliminated just like the last one, you’ve eliminated a percentage of the step up and basis. And since they own them already, I’m assuming they would possibly even have to go into some sort of gift tax returns that No, not necessarily money do, but a gift tax return situation that you might be looking at as well. Because they would have to gift you portions of that property. So the easiest way is to put it into trust, you guys can help manage those trusts the as, as we all get older, it’s always good for people to understand, you know, socially people benefiting from those to know where the money is how it’s doing done, but they can still use the money to to live and then when they pass away, the trust then would disperse to you with the step up and basis.
Caller 31:10
With a step up and miss. Okay, okay. Yeah, we’re just talking it through. It’s about time, you know.
Dr. Friday 31:15
It’s a great conversation, to be honest with you. Yes, I’m a firm believer of trust. And I know a lot of people don’t like to have those conversations. But we’re never going to all live forever. So it’s conversation that everyone needs to have. So good job, I think it’s a wonderful thing to have it and just be prepared. So that way, you know, it’s a little bit easier when you do have to go through it. It’s organized. Yes.
Caller 31:40
Well, thank you for you hit, we really appreciate it. Thank you.
Dr. Friday 31:44
All righty. So if you want to join the show, you can, it’s fairly easy. 615-737-9986 is the number here in the studio, making sure that we’re talking and to even take that Tracy’s conversation with myself. step further. Because I think a lot of people think of trust and power of attorneys, and all of that as being something that we should do, because we’re all getting older. And I’m not saying it isn’t a step in the right direction. But I think you also need to think about that when you’re young.
Dr. Friday 32:21
And if you have children, if you’re married. I’ve read many cases, thank goodness in my life, I haven’t had any hands on direct. But I’ve read many cases where you have people that they’ve passed away, they don’t have a will, because they’re young children are now left to arguments between either grandparents or other siblings wanting to raise the kids, etc, etc. If you are an adult, and you have any responsibility, then the concept in my opinion, you might not need a trust necessarily, you might not have enough assets yet. But you certainly would need to have a power of attorney for finance and a power of attorney for for estates, you know, banking, and I think hospitalization is the second power of attorney, but either one or both. So that way, if something does happen to you, you can speak from the grave in essence, you know, hey, this is what I want.
Dr. Friday 33:17
This is who I want to take care of these things. This is how I want it done. I’m not an attorney guy. So you need to speak to an attorney, Russ Cook is an awesome guy, Jack McCann, both of them is people I’ve used for the last 25 plus years. But which you know, if you have an attorney, talk to them, make sure I mean, even something as simple as probably using LegalZoom. If you’re young, and you’re just wanting to make sure you have at least the first step taken care of think about it because the last thing you really want is the state of Tennessee who does have a plan. It’s not one that any of us would like to have, or, or the IRS either way, they both have plans.
Dr. Friday 33:57
And I’ve know I’ve had customers or clients that have lost their children that have not had wills, and it can get a little difficult for them even because then you have to go to court, you have to be pointed custodian so that you can take care of their their estate instead of having it all already documented up. So it’s just really important that you do that and make sure everything is you know, being done, right. You don’t want to leave a mess. And you’d also especially with those children, that’s the biggest thing, especially if there’s children. All right, that’s enough of that. Let’s talk more about taxes, we’re going to actually go into our last break. So if you need help with taxes. Right now, I will tell you, our firm, totally booked we don’t have any more openings, we will always make openings for our returning clients. Hopefully you’ve all called already or emailed and we’ve already got you on the calendar because it is quite crazy.
Dr. Friday 34:48
But we can help you file an extension. We can help you get back on track. I’m an enrolled agent licensed by the Internal Revenue Service to do taxes and representation. So if you haven’t filed taxes for a number of yours you get love letters you needed to deal with a tax issue. It’s nice that sometimes have that wall between you and the IRS so that you have someone helping you get it straightened out, it may not always be the way you think it’s going to be, it may be alternative a little better. Sometimes. I mean, to be quite honest, a lot of people think well just make a deal with the IRS.
Dr. Friday 35:18
It’s not quite that simple. So you need to understand how the game is played and what you need to do. So if you have questions, you can certainly give our office a call Monday 615-367-0819 is the office number. But if you’ve got a question, you want to join the show, we’ve got another 10 minutes left of the show, you can do that by picking up the phone 615-737-9986. The number here in the studio so that you can actually ask a question. We don’t need to know your legal name, we don’t need to know. And sometimes just calling in and ask a question is helpful for other people, because not everybody has the bravery to call a radio station. Like I always tell people I never did before. And I always appreciate when people do. So we’ll be right back with the Dr. Friday show.
Dr. Friday 36:18
We are back here live in studio. And if you want to join us you can we’ve only got a few minutes left but 615-737-9986. And let’s see if we can get Dan from Spring Hill on the phone. Hey, Dan, what’s happening?
Caller 36:39
Hi, this is why I started working at a little place have left the place. And they think I might be taking my taxes out. Last year. Last year, they I don’t know what they did. But this year? Well, you know, for this year’s taxes. I’ve only been there a year. It was a year in December 22.
Dr. Friday 37:02
Can I ask if your income is relatively low. I mean, like 1020 20,000 for the year?
Caller 37:09
Less it was like, what, 13,000 for a year.
Dr. Friday 37:15
Okay, so the problem is you’re probably doing I mean, I’m assuming you mark that you’re married and zero that’s married on the new W-4. So you’re going to have to request because the tax code doesn’t really even if you mark the box, it says My husband works or if you’re partially retired, whatever. Whatever situation, it doesn’t work. Let me put it that way. So what you’re going to need to do is file a new W four. I would check in a single for one. Go ahead.
Caller 37:47
Single. I did. Yeah, I did put down to them to take extra taxes.
Dr. Friday 37:52
Did you?
Caller 37:54
I put $10 a week, I dont know.
Dr. Friday 37:58
That’s perfect. No, but and you know, the easiest way to do that is to kind of look at the taxes, I’m assuming it’s probably making either your refund a lot less or worse, where you owe money at the end of the year because no taxes had come out of that 13,000 years going to have to go back in there and change. I mean, that’s the easiest way I tell my clients anyways, is to just go back in and say, okay, you know what, we need to have another 25 A month coming out. So how often you’re paid if it’s weekly, bi weekly, semi divided up, and that way, we have enough coming out to cover the tax situation. So you can try going single and zero, but you probably can control it just as well by what you’ve already started, which was smart, which is just to go ahead and go in there and say maybe $10 isn’t enough per payroll, but you know, something, whatever that number needs to be to compensate for other incomes.
Caller 38:50
Right now, I’m only part time and I just now, after the taxes were, you know, this year just started making $12 an hour. And I worked 15 to 20, sometimes 30 hours a week, but nothing more. So I’m not breaking the law or anything.
Dr. Friday 39:08
Oh, no, that’s not I mean, that’s not my concern at all to be quite honestly. And what you’re asking is a great question. Because there’s a lot of people listening. I know, they come in mind and they’re like, my employer is doing it wrong, because he didn’t take the taxes out. Well, the problem is, they all use a payroll service and the payroll services use what the IRS has regulated as poverty. And they think that that’s all you’re making is that 13,000 is standard deduction is 12 Eight. So you know, theoretically with that you would not owe any money. But the fact is, you weren’t living solely off that, thank goodness. So, you know, you just need to balance it out with your other income. But it’s a great question, but I think the easiest thing is just to go back in and ask for a little bit more money to come out of your check probably.
Caller 39:52
Okay, so would it help if I change the W-4, whatever it’s called to a single.
Dr. Friday 40:00
It probably but I don’t know, even for a single person making, you know, 13,000 or 15,000 would still be considered not no withholding requirements because of the standard deduction right now. Because you’re planning on just asking for more money is a better one.
Caller 40:15
Okay, because, yeah, they said the people he used this for this said that anything under 500 a week, they didn’t have to take taxes out. Right.
Dr. Friday 40:25
Right. And it’s, it’s, you know, because that’s what the tax code tells us, you know, in the system, but it doesn’t make sense because you obviously owe taxes. So you’re just gonna have to work around the system like always, right. Okay. Okay. All right. Thank you. Thank you so much.
Caller 40:42
Bye. Bye, bye.
Dr. Friday 40:43
All right. Let’s go to Kevin Kevin in Nashville. Hey, Kev, what’s happening?
Caller 40:50
I have a question about my mom has a piece of property. It’s a personal residence and some rental houses on this property. And we have it under contract. And we’ve taken in some non refundable funds. Basically like a deposit or escrow earnest money. But it’s but it’s non refundable funds is where the contracts written. Absolutely. So she’s got some money in 22 years, and she’s taken and she will take some money, and then 23. And then the property will close and 24. If all goes as planned. If it didn’t go through just go. I need to know how to account for the money that she took in this year.
Dr. Friday 41:38
Right? So right now, it’s still tied to an actual contract. So it’s not taxable. Because it’s time of closing, all of that’s going to be part of her capital gains. You know, depending on whatever she’s selling, it sounds like it’s selling a primary plus rentals. So at the moment, it’s under an actual contract, if that contract falls through, now you’re talking about actual income, other income, because at that point, the contract but at the moment, you don’t need to do anything, because it’s basically just being held as security for her not to go sell to somebody else. And as long as they live up to their end, hopefully next year, you’ll be able to, because on that contract, it will reduce those dollar amounts or added in as additional income at the time of sale.
Caller 42:23
Okay. Okay. So if so, for the 22, then we don’t need, we don’t have to do anything and 23.
Dr. Friday 42:32
Well, theoretically, if it takes them till 24, yes. As long as it’s the same contract held?
Caller 42:37
Yeah, it’ll be the same contract and it won’t, they won’t contemplate it until 24. Spring of 20 I
Dr. Friday 42:43
gotcha. That’s why they’re giving her the money, you know, to hold it while they’re trying to get rezoning or whatever they’re trying to do. Oh, but yeah, so that’s it. Yep. You’re good. Right now. It’s basically just being held. And then if they default, then you have to worry about income.
Caller 42:58
So like, let’s just say that, for some reason, something we had a bump in the road was far zone and like, and then we they reneged on the deal, the money that you took in in 22, would you need to pay tax on that in the next year and just say, how do you account for that next year?
Dr. Friday 43:19
Yeah, it’s just gonna go into schedule one under other income at that point. Because you know, it’s basically just going to be income for backdown ordinary income. Yep. Ordinary, not capital gains ordinary. Okay.
Caller 43:34
Okay. Okay. Okay, do I appreciate that so much.
Dr. Friday 43:38
No worries. Thanks, Kev. All right, let’s see if we can hit Tara we got a few more minutes. Hey, Tara.
Caller 43:46
Hey, this is Sarah Farah question I have a My employer last year I quit and changed jobs and they paid me three extra paychecks and I notified them but they didn’t get with me to recoup the money they were figuring out how to backup taxes and 401k and everything. And so in January they sent me an additional w two but the only thing filled out and the additional w two was box 12 with DD what it’s not an adjusted it’s not a W etc it’s just now I have two w two from my employer for my ex employer.
Dr. Friday 44:27
So it did you say it was DD like Double D? Yeah. Okay. Double D is actually just insurance it would have no effect on your on your your tax return. I’m not sure why they must have paid insurance longer than they thought maybe your something so they just sent that out to account for the insurance that was paid. But that’s all that is Sarah is insurance. So I mean to me they sound like they need to get you a corrected w two and my concern would be is that they asked for the money back This year, you know, and then you’re gonna have to go back and amend because obviously, they’re going to need to amend that w two, or they’re just going to write it off and, you know, not make any changes, which might be what they’ll do. We’ll have to wait and see, I guess, but, but that that will the second one they sent, you will have no effect. There’s no no big deal. It’s just company sponsored. Health insurance is what it is.
Caller 45:23
Okay, so I, my plan was to file and then just wait to see if they come back to me and make an amendment.
Dr. Friday 45:31
Absolutely. That’s what I would do, too. I mean, at this point, I mean, they’re already late to the game since you they’ve had half a year to figure it out, because you don’t know when you quit or whatever. But they’ve had time to make that correction. But if they decide to make the correction at this point, you know, they’re going to have to go back and then I would have been my taxes at that time. But who knows, they may, they may not even correct it. Like I said, they may just find that easier to you know, show it as more like a severance to you and just let it ride.
Caller 46:01
Okay, I appreciate it. Thank you.
Dr. Friday 46:03
Thank you. All right. We’re going to have about five seconds here. So if you want to reach Dr. Friday, you can at 615-367-0819 I hope you guys are having an awesome, awesome Saturday. I know I’ve got to get back to doing taxes. Make sure when you’re doing your taxes, you’re checking your numbers twice, just so you don’t have to amend unless like Sarah, who may have to do it because of a bad employer. If you’ve got any questions, give us a call. Call you later.