Welcome to another episode of the Dr. Friday Radio Show! In this episode, Dr. Friday gives all the updates on taxes and the following topics:
- New Tax Filing Deadline Is May 17, 2021
- What To Do If You Haven’t Received Your Tax Refund
- The New Proposed Inheritance Tax and Estate Tax Changes
- The third Stimulus Coming March 15- April 15
- Stimulus Check for All Dependants On Tax Return
- Tax Extention Date Will Be Extended
- The IRS Won’t Take Taxpayers Refund Money To Pay Off Federal Debts
- If You Didn’t Recieve Stimulus 1 or 2, You Can Claim Them On 2020 Tax Return
- Do You Need Help With Tax Representation?
- Stimulus Check for All Dependants On Tax Return
and answers other caller’s questions!
Transcript
Announcer 0:01
No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or your financial woes. She’s the how-to girl. It’s the Dr. Friday show. If you have a question for Dr. Friday, call her now at 615-737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
Dr. Friday 0:30
Good day. I’m Dr. Friday and the doctor is in the house. It is a stormy, kind of not a very happy outdoor Saturday. But we are still working taxes, guys. For all of you procrastinators, you do have another almost 30 days, it will go till May 17 is the new April 15 deadline, I guess if that makes sense. We usually file on April 15, they’ve extended it out to May 17. So you do have a little bit of time where you can go and make sure you’ve got all of your records, make sure you understand all the forms coming in. For small business owners make sure that you’re getting those tax grants in your tax numbers. Because we don’t want to have to come back later and have to amend those tax returns or you know deal with those.
Dr. Friday 1:17
If you want to join the show, you can 615-737-9986. As an Enrolled Agent, I’m licensed by the Internal Revenue Service to do taxes and representation. So that means guys, this show is about taxes or tax issues. So if you are working on your own tax return, or maybe you’re trying to figure out what’s going on with your refund. This morning, I’ve had a couple individuals texting and emailing me saying they haven’t received their refunds yet, and what can be done about it. So we’ll talk a little bit about that. Or if you’re just trying to complete your tax return, and you’re a little confused about some of the new things going on. We do want to reiterate out there for all of you that might have filed your taxes. I know I have about 40 returns who filed your taxes before the March 12 signing of the American Rescue bill. Do not amend your taxes if you have a change due to the $10,200 waiver. Now, I want to reiterate that there is a $10,200 waiver for people on unemployment but only for those individuals that earned $75,000 or less as an individual or a married couple making $150,000 or less. So if you did get unemployment and you made more money throughout the year on those, you are not going to be able to take the waiver for the $10,200. It’s supposed to only be helping those particular individuals. But if you have questions about that, or something else going on, this is the show be interesting and also helps all the listeners. So let’s go ahead and get to the phone lines. Let’s go hit Larry. Hey, Larry, what’s happening?
Caller 3:03
Quick question about IRA. Actually, cashed one out last year, about 160,000, and took out 418 taxes for that made a mistake by doing that. So I’ve opened another one for [inaudible] trying to offset some of the penalties and interest that I took. But I don’t see how to claim that on my taxes. How does that work?
Dr. Friday 3:34
Okay, so you’re gonna go and when you put it on, there’s going to be an 8606. And on that there is a new one for just this year, where a lot of people took money out for the COVID situation, it’s called the COVID waiver. So you have an option to show how much you took out how much you reinvested back in and then also you can spread whatever you took out over three years instead of one year, and there is no penalty up to $100,000. Now you exceeded the 100, so there would be some unless you reinvested some of that back in paid it back. You would have some penalty because you exceeded that, but you might want to see what you have there. Do you see that in your taxes, Larry?
Caller 4:19
No, what’s the form again? 8606?
Dr. Friday 4:29
Yes, that’s where you’re gonna see where you can enter some of the information about the COVID stipulations, and that’s what you’re going to want to look under.
Caller 4:36
Because they took out for taxes.
Dr. Friday 4:44
How old are you? Are you over under 59 and a half?
Caller 4:51
Over.
Dr. Friday 4:52
Okay, so now you just kicked yourself into a higher tax bracket. Now you said something about putting some of that money back in did you actually reinvest some of that money back into a retirement account?
Caller 5:07
A 160 into an IRA.
Dr. Friday 5:09
Okay, a regular IRA, not a Roth correct?
Caller 5:13
Correct.
Dr. Friday 5:15
Use the 8606 and you should be able to say you took out 210 or whatever you put back 160 I don’t know the exact numbers but look at the 8606 you should find what you need there to be able to eliminate some of the tax issues that you’re looking at for the whole dollar amount.
Caller 5:32
That’s what i’m looking for. Thank you.
Dr. Friday 5:34
No worries thanks mate. All right now let’s see Susan in Tennessee.
Caller 5:40
Hi. I have a question my son is no longer considered a dependent so i’m helping him with an amended return. We were messing up and I realized it’s line item number 30 the recovery rebate credit. Is that a number where I would put 2000 because I’ve realized that he’s not gotten any stimulus but I’m thinking he should be eligible for all of 2020 so that would be the 600 and the 1400s?
Dr. Friday 6:12
No. The 1400 was actually for 2021 the one that just came out in the last two weeks so it’d be 1200 was the very first stimulus and 600 would be the second stimulus and that’s all you can recoup on the actual 2020 tax return. 1800 in total.
Caller 6:28
Okay thank you so much. I appreciate it.
Dr. Friday 6:30
No problem. That is a great question she brought up. Again, if you’re filing your kid’s tax returns and you did not receive or they didn’t receive the stimulus because of the way the stimulus was written, they did not qualify for the 1200 or the 600. But be careful because on the last one and that’s not able to be claimed on the tax return but check your bank account because if you did claim that child in the year of 2019 you may have already received the $1400 for that child because the tax law change or the rules changed because they then issued $1400 for every dependent on a tax return no matter of age or situation. So if you filed in 19 and you claimed your 19 or 20 year old child and even though in 2020 they became single or non-dependent you may still have received the $1400 for that child so just keep an eye on that information and see what you have there. The same thing for some people you know they did receive the first 1200 because it was based on 18 and that child may have been at the age of 16 at that time , 19 and then 20. So just make sure that the money dollar amounts are right and i will tell you guys it is slowing down the system.
Dr. Friday 7:53
I know a lot of people aren’y gonna probably like this because most people don’t like the irs but just think about what they’re having to do. They’ve had to issue three stimulus they’ve had tao their second tax season they’re in the middle of which is what their job is to collect money and they’re basically a huge collection company. That’s the job of the IRS. So they’re now collecting now issuing the third stimulus making tax changes going backward because of the whole unemployment. You can’t just be unemployed and all first 10,200 no no no we’re gonna base it on a percentage of income so now they have to make sure their system is looking at the income, married filing separately all these little things that people try to kind of outsmart the system and then they have to match up all of the stimulus to see who received what. Because we have divorces we have his and hers we have every other year that we claim the children and these tax stimulus checks were issued sometimes based on a prior year situation so we have people getting money on all kinds of different scenarios so just saying, they’re backed up. Not too much of a shocking situation but it comes down to you’re going to have to have a little bit more patience. I believe this year especially if you’re trying to recap the stimulus. Now I will say I’ve had many of my clients no issues at all but i mean like I said this morning I had two of the direct clients that are saying they haven’t yet received it we know one of them received the IRS has confirmation of receiving it on february 19 still no refund and I know that a lot of people are looking to receive that money sooner versus later. But in all honesty if you are looking or waiting for your refund keep in mind the irs physically or legally has six months or more to actually give you your refund.
Dr. Friday 9:51
We always say 21 days or less but that’s making the assumption that everything you have filed matches everything they have and it goes nice and smoothly It doesn’t always do that sometimes employers don’t get W 2’s filed on time. Sometimes people’s information doesn’t match what the the employers filed. Then that usually holds up for paper audit, or at least a quick review, to get that straightened out before they can refund. They’ve been trying over the last five or six years to do a better job of matching so there’s less fraud in the tax code. Again, not always an easy thing, when you consider all the different moving parts required yo accomplish that. I have three cases I can think of right now where the individuals that actually have custody and have the children living more than six months in their home, are being rejected because other people have claimed those same children on their tax returns, even though legally, they’re not allowed to and or should be able to do that. So you’re gonna have to have a little patience, I think this year, guys, with the IRS more maybe than some of you guys are I’ll say we’ve already had patients, we’ve already had issues. Again, I don’t work for the IRS. But I have to at least say they have a lot of things going on right now. And it’s going to make it a little harder for all of us because we don’t have the ability to call them any longer and just ask questions. So we’re going to have to use more tools that we have to try to get more information and try to figure out what the situations are. Because calling the IRS I will tell you is a bit frustrating. They’re there, their phone lines are just not working very well.
Dr. Friday 11:27
Alright, so if you want to join the show, you can at 615-737-9986. We are taking your calls talking about taxes, my absolute favorite thing to talk about in the world. And you know, you have to admit there’s nothing boring about taxes every day, every minute, it seems like lately, we have had some serious changes in the tax code that is affecting or making all of us need to make alterations. So making sure that you file it making sure you have all of your tax documents. Remember, if you’re an investor in LLC or small businesses, you need to have those K1’s or if you’ve got trust, then you need to have those K1’s before you can file your own tax return. And some of them had to file extensions, because all LLC or 1065, 1120 1120’s, 1040 ones, all of them most likely, if you haven’t received it, that means they filed an extension, and in theory have until September 15 to complete that return. And so you may need to look at filing an extension yourself and filing an extension does not extend the amount due. So keep that in mind when you’re thinking about filing those extensions. All right, we’re gonna take our first break here, if you want to join the show, it’s really easy. I know it takes a little bravery, but you can do it 615-737-9986 and we’ll be right back with the doctor Friday show.
Dr. Friday 12:58
All right, we are back live here in studio, nice little rumbling going on outside. But if you want to join, maybe you’re doing what I’m doing, which is taxes. And you’re thinking, “Okay, how do I get these done? What do I need to do?” Then this is the show you need to listen to, and you can reach me at 615-737-9986. So making sure we have a couple of different things if you haven’t received your stimulus for the first or second. So individuals over the age of 17 theoretically or are individuals not being claimed on a tax return would have received $1200 children that were 16 or under would have received $500. And then you would have had the second one which was $600 for basically adults and children under the age of 16. Now if you have a 17, 18, 19, 20 or 21 or etc. in your house, that is still a legitimate dependence, those individuals would not have received either of those particular funds. Now the last one that just came out, and you may not have gotten it yet because they signed the bill on March 12, which was about 15 days ago, so about two weeks. That bill and they that is for $1400 for everybody on the return. I don’t care about age doesn’t make a difference that one is going to go to everyone. Now I have found is that some of these individuals unfortunately may have called their own tax returns and then they ended up getting the parents may have gotten it because it was based on 19 not 20. So we have all kinds of little deadlines and filing there for things but you want to make sure that you are doing what you need to do and when so you need Follow that up. And if you’re not sure, I do believe you can go to irs.gov, click on “your payment” and you can find out where the status of your payment is. Now I know people are going to be listening, and they’re going to say, “I’ve tried that.” Well, you know, all I can tell you is that’s what they’re giving us for information. So we’ll take a look and see what we have there and how it’s going to work out. But that is a place to start. Alright, let’s hit Amy in Nashville. Hey, Amy, thanks for calling. What can I do for you, sweetie?
Caller 15:34
I know the federal deadline for filing has been extended to May 17. But what about this state deadline for filing?
Dr. Friday 15:43
Tennessee State has also changed to the Hall income tax, which is the final year for the halls income tax is this year, we’re down to 1%. Assuming that they follow through and turn it off. It is actually been extended at the same time, it follows the Fed.
Caller 16:00
Thank you.
Dr. Friday 16:01
Thank you very much, Amy. Appreciate that. Again, great question, guys. Because I forget, I mean, a number of my clients do end up having to file for the halls income tax, but a lot of people and everyday individuals may not even know who actually is and what should be filing. But good news is guys, for all of us that have been filing it, it’s our last year at 1%. Not too bad. Then hopefully that will actually be turned off. And it’s a little worrisome because you know, as we know, every year they had to vote for that. And with the budgeting issues and the increase in property tax and everything else, there is a concern that they don’t actually turn it off. And they end up you know, keeping around at 1%. And then who knows, they can always change it. So that is a little concerning. But right now, that is the plan. And they have lived up to that plan right now all the way through this time. And we started out at 6%. So it’s been going down every year.
Dr. Friday 16:59
Alright, so we want to make sure if you have a child or I should say a grandparent, or maybe you know someone that never files, because maybe they’re on disability, and they have not been able to receive any of the stimulus for some reason. Keep in mind that the IRS is telling us at this time, forget the first two stimulus, you have to file a tax return. Even if you normally do not file tax returns, it is a requirement for you to file a tax return. As one of our earlier callers called in and was talking about line 30 I think it was Susan, that is the line you need to fill out for those individuals. So you know, you may have a zero return, but you’ll have to go to line 30, put in $1800. And then that will roll over to your refund and then obviously file the IRS has already put a thing on their website saying if you are paper filing, they are already way behind. When they’re telling us they’re way behind. That’s a bit nerve-wracking because let’s be honest, we already know that they’re running behind. And now they’re saying they’re even further behind than what we might think. So you know, just if you’re looking for your stimulus money, write down this address is about as easy as it gets IRS.gov. You can get the status of your stimulus by clicking get “my payment” and you can find out the status of your refund. By clicking “get your refund status.” You can also view your tax transcripts and everything else. This will save you in some cases it will save some of you guys a lot of work because if you’ve been trying to deal with the IRS try to find out set up a payment plan. I know I’ve got several people have called me and said we were in a payment plan. Then last May or March or April the IRS basically came down and said “Oh, we’re gonna stop all payment plans” with the idea that they were going to turn around and turn them back on. But for some reason, it did not get turned back on and so people have been going without payment plans and now they’re getting the love letters. “Intend to levy if you don’t call us if you don’t pay us in full, we’re going to start doing more aggressive collections.” So if you’re getting one of those and you can afford a payment plan, even if it’s just a small one, I would suggest go on to the IRS website and you know, click on “pay” and under under pay you have the option to set up a payment plan. And that would be a really smart idea.
Dr. Friday 19:33
Also, I’m going to tell people mailing checks. I know a lot of you guys still prefer to mail a check-in but we ran into a lot of issue in 2019 filings in 2020 when COVID hit and everything with people’s check sitting in the mailroom forever and then trying to prove they were filed because they were mailed because people ended up not certifying them so they didn’t have the tracking. I suggest If you are all comfortable, and most of us have automatic drafts coming from our bank accounts anyways. And let’s be honest, if you’re sitting there thinking the IRS does not know your bank account number, then you’re kind of living in your own world because it’s already out there. You put your Social Security down, when you file or open up a bank account, the IRS has access to everything under your social security number they know about it. So instead of just waiting or hoping I suggest making the payment directly@irs.gov. And that way, you have the instant proof, it comes right out of your bank, you prove it, you have it, make sure you get it to the right year, I’ve had a couple of people make some back payments, and they made them to the wrong years. That doesn’t always work perfectly, because the IRS is looking for you to pay off one year and the money sitting in a different year. Not always a good thing. But we can even get that corrected if necessary.
Dr. Friday 20:53
If you’ve got questions, maybe you’re sitting there thinking, “Okay, do I need to have my college son or daughter filing on their own?” Not always guys, I know this 3200 total for individuals is out there. But keep in mind that if you have a college student, you could get $2500 a year for that child. And this is spread over two years, right? So you have 1200 and, and 600 for one year, and then this year, supposedly 1400. So you know 32, but if you have a college child, and they’re in college, that’s 500 for the dependency plus $2500. For the educational credits, that’s $3,000 a year. So just because every other kid is getting his 1200 or 600, it doesn’t mean it’s going to be the right thing for you. So don’t just assume that you’re dependent isn’t your dependent, because there’s money to be had out there. You know, make sure that you’re taking advantage or full credit for those children and getting the most for what is truly happening, not just trying to collect the money, I keep saying money, hate rent raining down from heavens, because not too sure how that’s all going to come out in the wash in another few years. I really would love to have a video or some pictures of all the people wanting this money and then turning around when the tax rates go up and helping you remember that these monies were handed out and you aren’t complaining when the tax rates go up. But either way that works, you’ll find out because that’s going to happen sooner versus later.
Dr. Friday 22:25
If you want to join the show, you can at 615-737-9986. We are talking about taxes. I’m an enrolled agent licensed by the Internal Revenue Service to do taxes and representation, which basically means that I’m kind of a shield between you and the IRS. If you’re having IRS issues, and you just don’t know how to get going, how to start what to do with it. That’s what we do. It’s what we’re trained to do. We can help you get yourself back on track. And make sure you’re doing what you need to do and how you need to do it. Alright, look at that, buddy. I just got those phone lines all lit up for you. So I’m sure you’re excited there. Let’s hit number five real quick so you can get to those phone lines. David, what do you got going for me?
Caller 23:11
Yes, ma’am. I’m on social security disability and still have not received the $1400 stimulus.
Dr. Friday 23:17
Well, the 14 $100 could take a bit of time. Again, it’s only been two weeks since the bill was signed. It was signed on 3/12. Today’s the 27th. So about 15 days. There are still millions that haven’t received it yet. There’s millions that have. I mean, they’re not done handing it out yet. So it’s still coming out. So I would say give it time. Have you checked on the IRS web page where it says “get my payment”?
Caller 23:43
Yeah, it always gives me the status unavailable.
Dr. Friday 23:47
Okay. I will tell you, David, that seems to be a pretty traditional thing that it comes up with. I know that’s more frustrating and probably even giving people that address to go look at. But that’s about the only suggestion I can have. Now you may have gotten it early, but the $600 did have a four-week, and then of course they add it to the tax return. So hopefully, people will get it way before we have to worry about another tax return.
Caller 24:13
The first round I got it the first day.
Dr. Friday 24:17
Oh, really? Yeah. Most, most of my listeners haven’t had quite that fast. But I would say give it a little bit more time since you received the other two there is absolutely no reason you won’t receive this one. Nothing’s changed in your life. Right? Banks the same, house the same?
Caller 24:30
Correct.
Dr. Friday 24:31
Yeah. So there’s no reason to think you won’t get it.
Caller 24:34
All right. I sure appreciate you.
Dr. Friday 24:36
Thank you. All right, let’s hit Mike. Hey, Mike, what’s happening?
Caller 24:41
Hey, how’s it going? I just had a few questions on the new proposed inheritance tax and estate tax changes.
Dr. Friday 24:53
I’m not liking them. But yes. Do you want me to tell you what I know or what do you have a question?
Caller 25:01
No. What do you know?
Dr. Friday 25:03
Okay, so my understanding is what they’re going to be doing is eliminating the step-up in basis is the biggest or most concerning part of most of it. I mean, we know in the last, what, 15-20 years, we went from an a million dollars to like $5 million to $11 million. You know, and he wants to bring it back somewhere between the million and five there, I haven’t heard an exact number. But the reason I worry about the step-up in basis is solely the fact that if, if I pass away, and I leave my home to my, my niece or whatever, she would not have to pay tax on that home because she would get a basis or step up, so not what I paid for it, but what it’s worth the day I pass away. Which is a great way for generational wealth that they continuously say they want to help people with. That’s how it’s established. Home sales, number one, stock sales, number two, but those that will be the most concerning. If that doesn’t happen in my knees could end up with, I mean, a lot of people two or $300,000 worth of taxable income, because the house will then have to be sold to cover the tax bill. That’s a concern. I mean, that’s why they eliminated that in the first place, because people were losing family homes, and the tax man was having to be paid. So they eliminated that to help compensate for that situation. Now he’s talking about going backwards 40 years.
Caller 26:29
Right. What about cash? How would that be?
Dr. Friday 26:36
Cash is fine, because assuming that the cash is sitting in a bank or something like that, then there’s no real tax on that because it is worth whatever it’s worth. It’s more the step up in basis things like cars, homes, stocks, that we now get an advantage on, but cash is fine. I mean, cash doesn’t change.
Caller 26:56
So what the proposed deal is, is if I inherit the house, they will step that up to the current values, and possibly tax me on that?
Dr. Friday 27:07
Right. I don’t know how they’re going to know what the value is. I mean, some people in Tennessee here have lived in their homes for 20 or 30 years, I would have no idea what you know, they paid for their home when they die, or when they purchased it originally. So how do we even get that basis? I mean, you know, that’s gonna be a whole nother nightmare for US tax people. But that’s what he’s saying. So if I brought this home for 100,000, and when I die, it’s worth 300,000, then somehow, they’re gonna know I brought it for 100. And they’re gonna be taxed on the difference between the purchase price and the sale price.
Caller 27:40
Okay. All right.
Dr. Friday 27:43
All right, Mike. Thank you very much. All right. We have to take a quick break. So we’re going to and if Steve and Barb can hold through the break, we’ll get right back with you with the Dr. Friday show.
Dr. Friday 28:01
All righty. We are back here live in the studio. I’m Dr. Friday, and this is the Dr. Friday show and we are going to head right back to the phone lines because Steven and Barb are awesome to hold through. And Steve, I guess you’ve been on hold longest. So we’ll start with you.
Caller 28:17
Dr. Friday, thank you for taking my call. I’m an insurance broker, I operate as a sole proprietorship. This is my second year in business, our revenues absolutely exploded in 2020. we’re predicting the same type of growth in 2021. With the tax extension, can I still convert and file as an LLC? And should I do that?
Dr. Friday 28:43
The answer is no, you have to do it as of the year in which it actually happened. So if you became an LLC, you can’t backdate I guess is what I’m saying. So at this point, you’d have to be a 2021. To be honest with you, I’m not necessarily for single-member LLCs. I mean, I’m not an attorney. But from the tax standpoint, there is no huge advantage. We run them as schedule C’s on our tax returns as single members, you have the franchise excise, which is basically $100 unless you have rent and some other things which can cost you. Now I suppose if there was some sort of lawsuit there would be a shield between you and your personal assets. But I’m also thinking that most of us carry E and O general liability, we’re comp, we’re covered pretty good with insurance period that would actually have lawyers to represent us. So I’d say you may want to talk to an attorney just to outdo me, but for tax purposes, there is absolutely no advantage that I can see for a single-member LLC versus a sole proprietorship.
Caller 29:43
Fantastic. I appreciate the answer. Enjoy your day.
Dr. Friday 29:46
Thanks, Steve. I appreciate you. All right, Barbara. What’s happening, girl?
Caller 29:50
Yes. I’m 87 years old and in an assisted living place. I have a house for sale, and we believe it will bring him at $450,000. Now, we sold it back in the early 70s. And of course, we didn’t say anything near that. I want to know was this, I have to sell the house to help save for my expenses for where I am. Medicare will pay some of it. But the other part I have to pay, so I want to sell the house. I was hoping to leave it to my children, but that isn’t going to happen. So what do I do with the $450,000?
Dr. Friday 30:45
That’ sperfect. So were you married, Barbara? I mean, did you have a spouse that lived in that house until he passed away? Or what was the situation originally?
Caller 30:57
Yes, I did.
Dr. Friday 30:59
So here’s how this works a little bit, it’s a little bit easier than what you think. So in theory, what happens is that when he passed away, he passed over and the home was owned by both of you, I’m assuming. So his share would have jumped up to be the value of $250,000, or half of the house value at that time. So in theory, you might be able to and again, I don’t know what you pay, but back in the 70s I’m assuming that that house was probably 40-50,000 maybe? Okay, so we have a profit of still 400. What year did you’re sorry to ask, but roughly, when did your spouse pass away?
Caller 31:42
He passed away that two and a half years ago.
Dr. Friday 31:45
Okay, so the house would have had a huge influx. So what you need to do is see if you can get someone or maybe one of your family members since you’re in assisted living, but you need to get a tax person to help you work out the basis because, in theory, you have 250,000, that’s gonna come off the top, that’s free money for you. That leaves us with roughly 150,000 or $200,000, and then 50 for the original cost. So we just need to find out what the house was worth back when your spouse passed away because half of the value of that home at that time would become your basis as well. So we need to do a little research, get little details. And then that way, we might be able to bring your tax bill down to minimal and maybe still a little bit of taxable income. But keep in mind, you can earn almost 50,000 are you living off of basically just social security?
Caller 32:38
No, I’m not. I’m living for myself to security, which is $200. Yes. My husband’s insurance.
Dr. Friday 32:53
Was he military pay or just the pension?
Caller 32:55
No, he was not. He worked for the federal government. But he was in the military. For four years but that was like, when he was 18020 years old.
Dr. Friday 33:07
Yeah, he served his time, no worries. So bottom line is, it sounds like your income is rather low. So some of the profit could be zero tax, because you can sell the house and make 30 or 40, and pay zero capital gains on some of that. So someone just needs to help you calculate the taxes. So you can make sure you set some aside if necessary. But also make sure that you don’t pay too many taxes on this primary home so that money can be put into your account and help you pay for the lifestyle, or pay for your care at this time.
Caller 33:38
Thank you. So you suggest we see a tax person?
Dr. Friday 33:50
Exactly. Either have him call me or call somebody that can help you guys, work out the numbers. So that way, when you get ready to file next year, you will have to file a tax return to show the home sale, but hopefully have the numbers worked out so that your you know, whatever you might owe you have the money set aside for but hopefully reduce that down to a minimal amount of tax.
Caller 34:10
And the minimum would be approximately what?
Dr. Friday 34:14
Well, I mean, based on what I’m looking at, you may owe taxes on $50,000. So you’re looking at 15% of that. That’s just a rough estimate from the numbers you give me.
Caller 34:25
All right. Thank you so much for your information. I love the show. Thank you.
Dr. Friday 34:30
Thank you. Bye bye. All right, Eddie. What’s happening, Eddie?
Caller 34:35
Hello, Dr. Friday. How are you? I’m trying to find out my mother has put mine and my sister’s name on a quick claim years and years and years ago. I don’t know I heard you mentioned one time I tried to get hold of you last weekend. But anyway, what what do we need to do?
Dr. Friday 34:53
So is your mom still alive?
Caller 34:55
Yep, still living in the home and I just didn’t know.
Dr. Friday 34:59
My opinion would be is to reverse the quick claim, while she’s still alive, because it will still be better for you guys to inherit that home through true inheritance, because when most people do a quick claim, they don’t quick claim at the value at the time, they just put $1 on there, which means there’s no basis for the people that really get it. I know why they do it. But for tax purposes, and there are other legal ways that she could do it if she’s worried, about you guys, sometimes there’s his yours, ours, and you know, they just want to make sure, but whatever the reason, I would actually really talk to an attorney and see if that can be reversed. And then that way, when you inherit the house, you guys don’t end up with the tax situation, which is not what mom wanted in the first place. She was just trying to protect you guys.
Caller 35:45
Is that something you guys do at your office or just find a tax attorney?
Dr. Friday 35:49
Yeah, Iould actually have Russ cook, or jack McCann. That’s the two attorneys I work with all the time. They’re both awesome, one is in Nashville ones in Brentwood. Or an attorney that knows about quick claims probably doesn’t have to be a specialist. But no, I don’t do that part of it.
Caller 36:03
Okay. All right. Great. All right.
Dr. Friday 36:05
Thank you. Okay. Bye. All right, guys, we’re gonna take our last break here. And if you want to join the show, you will have a few minutes when we get back 615-737-9986. And we’ll be right back.
Dr. Friday 36:27
All right, we are back here live in-studio for the next eight minutes or so. So if you’ve got a call or a question, and you want to ask it, you can at 615-737-9986. We are taking your calls, talking about my absolute favorite subject, which I know not everybody loves taxes like Dr. Friday does. But you know, we have to know what the taxes are. So we know how not to pay too much in taxes. Sometimes we need to know what the taxes are. So we know what to prepare to pay in taxes. I think one of the hardest part of taxes that I’m running into this year is quite a few people have sold real estate, not their primary home. But so their rental real estate, which does require a bit more information, because keep in mind, you have to taxes do when you sell rental real estate because you have recapture of depreciation tax at ordinary income rates. And then you have capital gains based on gains of the sale of that real estate. Both of them are going to be due, you could actually lose money on a capital gain sale and still owe money due to the recapture. So you do want to make sure you have all of that information when the time comes and make sure you understand what’s happening and where we’re at. And we’re going to you know how you’re going to come up with the money and not re-spend it because a lot of people think, “Well, if I just reinvested in real estate, I won’t owe any taxes.” It’s not quite the same thing. There is a 1031 exchange. But that is not the exact same thing. Alright, let’s hit number three before you go to line one. Thanks, Betty.
Caller 38:10
Hello? First of all, I don’t file taxes, because I’m retired. And, you know, I don’t have that much income. But did I understand you to say that to get this last stimulus that you had to file a tax form?
Dr. Friday 38:29
No, what I said was to get the first two stimulus, you now have to file a tax return to qualify if you missed those two. The third one right now is in the year of 2021. And that one, right, the second is still being distributed. I don’t know what they’re going to do for the individuals that don’t receive it. But I’m assuming Steve, have you received the other two?
Caller 38:52
Yes I have. The second one was really, really quick.
Dr. Friday 38:58
Right. So I will tell people, if you receive the first and the second one, as long as nothing has changed, either the same bank or the same mailing address, just be patient, the third one will be coming your direction. They basically did a lot of the direct deposits, and then if they got bounced back for some reason, then they went to the next side. You know, but that’s how it works.
Caller 39:20
Let me ask another real quick question. My daughter, as far as I know, I don’t think she’s lying to him. She has not received any, any at all. She’s really sick. I mean, you know, diabetes, and she doesn’t work. She’s disabled. But what can a person do in that situation?
Dr. Friday 39:39
In that case, she does need to file a tax return. All she needs to do is a regular tax return, I would suggest trying to do it online if possible. And then she can buy a line 30 which would be $1800. She’ll get that refund and then that will put it back on line for the other. I mean, I don’t know why she’s not getting it, but that will be the best way to receive it.
Caller 40:00
Thank you very much.
Dr. Friday 40:01
Thanks. All right, let’s do it. Let’s hit number five. Will, what’s happening?
Caller 40:10
Thanks for taking my call. My question about the American Opportunity Tax tax credit. My situation is my wife, she’s doing school right now. She has a bachelor’s degree, but overseas is not from here. And when I dig a little bit, I see this secondary education is determined by education situation. I checked on the list, and her college is not in this list as an overseas college. So what’s your recommendation, Dr. Friday?
Dr. Friday 41:09
She’s probably not going to have an accredited, it’s not going to be allowed. So unless the college can provide us a 1098T as in Tom, she won’t qualify for the credit doesn’t mean that she isn’t have a good education and that she won’t qualify for the degree, but it won’t fall onto the tax credits for the tax return.
Caller 41:27
Yeah, her college already gave her a 1098.
Dr. Friday 41:32
But the one overseas won’t, and it’s not accredited according to the United States, so that whatever she did over there is not going to comply. She can’t use it.
Caller 41:49
She doesn’t have a four years education. Right?
Dr. Friday 41:53
Right. She will not have a four years degree here. So she will be using the American Opportunity credit not taking the lifetime credit.
Caller 42:02
So she will not take it she will be eligible for the ORTC, right?
Dr. Friday 42:10
Yes, because she doesn’t have an accredited four-year degree in the United States.
Caller 42:15
Okay. Sounds great. Thanks for taking my call.
Dr. Friday 42:20
Thanks, buddy. Next one number. Mark, what’s happening, Mark?
Caller 42:27
Hey Dr. Friday. I own property in the state of Virginia, which I have hired two separate individuals to find out both they’re not actually licensed in the state of Virginia, doing work. They are rip offs, scam orders. They have taken several different families for 1000s of dollars within a period of two years. One of them’s actually ripped me off by about three or four files, and I know labor one files income tax. And I was wondering how I can go about reporting these jokers. They both have been charged by attorneys, they went to court, basically, but yet all for now, nothing harder than 90 days,
Dr. Friday 43:21
Not much you can do, unfortunately, Mark. The IRS does have a line that you can do. But normally, to be quite honest, something like that. You’d have to have a lot more information on them. I mean to know a lot about them. If the state can’t do anything, I doubt the feds can do anything.
Caller 43:38
It does not state can’t do anytime. It’s the state is not spiking their butts.
Dr. Friday 43:45
Yeah. They’re not charging them with enough fines or penalties to make them stop doing what they’re doing.
Caller 43:51
The thing is they’re not paying them back. They’ve been ordered to pay restitution back to some of the people. And then the state turns around in knowledge a couple of cases.
Dr. Friday 44:09
All right. I don’t have an answer on that one real quick. Let’s see we’d hit for number four really quick. Yes, sir. Hi, Alan. What’s happening?
Caller 44:17
Well, I’ll tell you my situation. We went file taxes we’ve been using the h&r block online service. We filed this year and we kept getting kicked out every time we would file. So my wife actually got online, went to the IRS website. It showed that we actually made zero income. Of course we were splitting the income we actually made last year on our return this year because they asked for it. And IRS showed that we made zero income last year so she put zero income on it except in our taxes. It’s been almost 40 days now and we’ve not got any kind of confirmation on a process and our taxes or a return date.
Dr. Friday 45:06
So you looked online and there’s nothing in there but keep in mind if you haven’t filed currently if you haven’t filed all the other years and you’re maybe holding your money until you actually finish filing the back taxes, I don’t know this for a fact but go ahead we got the hang up on Alan real quick because we’re like 10 seconds away from the break. Alan but I would say go to irs.gov click on “where’s your return” if it says that they’re still working on it most likely that means that you need to file other years but i’m sorry i had to make that so quick because we know a few minutes.
Dr. Friday 45:35
Hope you guys have an awesome Saturday. If you want to reach me after the show, call 615-367-0819 on Monday morning so we’ll be there. Call you later.