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:
- Is the Employee Retention Credit Real or A Scam?
- IRS Warns Taxpayers of New Fuel Tax Credit Scam
- How to Avoid Getting Ripped Off By Your Tax Preparer
- How do You Qualify for an Offer and Compromise?
- What Happens If I Don’t Know How Much I Owe in Taxes?
What Kind of Form is a 1099-K?
What Happens If I Can’t Pay My Taxes on Time?
- How To Get an Extension to Pay Your Taxes
- How To Do Tax Preparation and Financial Planning The Right Way
And much more!
Dr. Friday 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 0:29
Good day. I’m Dr. Friday, and the doctor is in the house on this overcast Saturday. And for many of you tax season for 2022 is kind of over. For a few of you that might have been procrastinating a little bit if you live in Rutherford County and a couple of the neighboring ones. Remember, you’re under a storm, federal storm damage. So you guys have until July 31.
Dr. Friday 0:54
Theoretically, if you did not file an extension, if you’re under extension, then you’re fine for right now. But if you haven’t paid your tax bill and you still have the ability to get the money, you might find that you don’t have any penalties until that date. Unless, of course, you have to make quarterly. But the actual amount due would be less for those that are in that area.
Dr. Friday 1:14
So really important to make sure that you, if you are in that situation that you’re dealing with, what you want to do and how you’re going to take care of your taxes as an enrolled agent licensed by the Internal Revenue Service, I do taxes and representation that is what I do a lot of.
Dr. Friday 1:34
So if you have been getting love letters, or maybe you haven’t received any love letters, I’ve had several that come in this last week, no love letters, they’re just tired, they want to get even, they just want to get everything resolved. And they’re just ready to get, you know, to figure out what is it gonna take to get back on track with the IRS so they can file their taxes on time not worry about their banks or their paychecks or their homes, having levies or liens against them.
Dr. Friday 2:01
It’s very, very important to understand what your rights are, how you can do it and what you’re going to be able to do. And the first thing I know many of you guys listen to this station, there are other people other than myself that does this, a lot of them advertise, they don’t do their own radio show.
Dr. Friday 2:17
But just be careful with anyone, including myself, get that first initial meeting, do a face to face talk to them about how this is going to be about you what your particular situation is going to be. It sounds so great. I had a client that text me, and she had had some organization.
Dr. Friday 2:38
Of course, as soon as there’s a lovey or lien or anything that the IRS has put out there on public knowledge, they then start bombarding you with all these great deals, wonderful situations. And one of them. They she sent me a text and said, well, for you know, $400, they said that they would do all the representation and they would and if they didn’t get it done, they weren’t charged or anything.
Dr. Friday 3:05
Well, I’ll be honest, I would be just as nervous about those than the ones you hear that says it’s $5,000 $2,500, down and 500 a month until we get caught up. And then we’ll be able to start representing you and this because to me that seemed like it was extremely low. I mean, it takes hours to get an offer and compromise or payment plan or anything else organized that mean with clients that have been dealing with me for a number of years, you know, as well, as I knew that sometimes it can be six, eight months. I mean, I finally just got a reconsideration.
Dr. Friday 3:39
And we did this back in like November. And now they’re they’re contacting us with the ability to resubmit the information on something that we had opened up. So nothing is going to move fast with the IRS, no resolution is going to be, you know, hey, I want to get all evening because I’m getting married next week, well, that’s not going to happen, unless you have an awful lot of cash. And you’re just going to try and even then to be honest, if if you haven’t filed taxes, they still would have to be accepted.
Dr. Friday 4:09
You still have to pay the tax bill, you would still have to worry about penalties and interest, no matter what there will be a time period that is required for you to file your taxes. So if you’re an individual that’s sitting here listening, or maybe you know somebody, you know, let’s get that initial meeting. Let’s figure out what we can do to find out if we can even help you are you in a point because I’ve had again last week I had a gentleman who came in seemed like he was ready to talk about doing it.
Dr. Friday 4:40
But when I outlined what was going to be required, making quarterly estimates making sure that he was setting aside money, working on a budget and doing all the requirements that we’re going to need and to be quite honest, most of us are self employed that run into more tax issues, or somebody took money out of a retirement plan. And that didn’t know that was going to be taxable or something like that a one time situation.
Dr. Friday 5:04
So, all of that being said, you, you know, when he left, he was going to get back with me because he wasn’t ready and it’s, you know, I can do the best job, I can get you 10 cents on the dollar, which is not for everyone, let’s just be honest. But let’s say I do. But if you can’t stay current for the next five years, and you pay your taxes on quarterly fees, if you’re self employed, you don’t owe or if you do you pay that tax bill, at the end of the year, you can’t have a payment plan, etc, etc.
Dr. Friday 5:34
If you can’t do that, if you’re not at a point where you’re really ready to be serious about really making a different life change with the IRS, then all the work all the money, all the effort would be out the window, because the IRS says, Hey, if you don’t stick to this deal, which means we’ll give you an offer and compromise, you pay us a lot less than what you owe us. But you must stay current for the next five years. And you can’t do that.
Dr. Friday 5:59
Guess what? It’s all out the window, all that and then now you’re back to owe in them the same amount plus penalties plus interest and now new debt because of the situation. So just saying this is a very good time. I know, you know, people keep calling about the 80,000 IRS agents that are becoming onboard, we now know how many agents are really going to come on, we know that the original funding fell through, but there was additional funding added a 15% increase, but that wasn’t going to hire 80,000 people.
Dr. Friday 6:32
So the question is, are you ready? Or are you not ready to actually take on the new lifestyle you want so that you’re not chasing the IRS with debt, but doing the opposite, where you are actually paying them every month. So that way the IRS is not in your bank account, the IRS is not in your 401k The IRS is not in your house? Because when you are behind on anything with the IRS, what do you think they think they think you made your mortgage payment.
Dr. Friday 7:00
So guess what, now that house is ours, because you didn’t pay us you put money into a retirement plan, guess what? That money is now ours because you didn’t pay us. That’s the way the game is. So when you hear a lot of times people saying well, I’ve gotten them 10 cents on the dollar, we have we have had many very successful offering compromises that were amazing.
Dr. Friday 7:23
But also keep in mind, those individuals did not own homes, they did not have retirement accounts, you know that were large dollar amounts didn’t have any real assets. So the government had very little opportunity to be able to collect in 10 years, what was owed to them. That’s what they’re looking at. And there is a way of the there’s a calculation, there’s a system that is in hand, but you need to make sure that you are dealing with someone that you’re going to be dealing with for a while.
Dr. Friday 7:52
So if you’re looking for someone that’s going to help you start dealing with the IRS, guess what, I’m your girl, you need to give us a call free consultation. Let’s find out if we’re on the same page. And you if you have any questions, sorry, got onto a whole little wagon there. You can join us here in studio right now. 615-737-9986 is the number here in studio maybe received a love letter or you have some questions about something that’s come back.
Dr. Friday 8:24
I know we have had a couple interesting phone calls this week also from from existing tax clients that have received letters saying that they needed more information, they need you to call the IRS to prove your identity. So if you have one of those letters, it isn’t a false letter. I had one person that just swore it could not possibly be the IRS.
Dr. Friday 8:46
But it was and it is the IRS is working very, very hard on identity theft. And so they are most of the ones I have had in my office are people that are older, that have filed tax returns, and they’re just checking to make sure that that person truly filed that tax return, not something that’s going to come back at them. So again, if you have a question about that, or any of the love letters you may be receiving, then it’s important to be able to ask that question. And again, we’re not taking down names and numbers.
Dr. Friday 9:17
So you know, no question is, you know, lots of these people think I don’t want some stupid on the radio, but there really isn’t stupid questions. You know, I don’t want to say it’s stupid, because that’s very rude. But if you don’t, if you don’t ask a question, how will you ever know what the answer is? And if you don’t know the answer, and keep in mind the questions that you ask a lot of times other listeners are sitting there thinking yeah, now I wish I had asked that question. I’ve had that more than once.
Dr. Friday 9:43
I’ve had people come in the office and yeah, I was listening in that one person they called and they asked that and that’s exactly what I was thinking. Not everyone’s made for asking questions on the radio Gosh knows I would not be if I wasn’t always talking on the radio, but it is important. So if You have a question or you have something you think would be an interesting subject 615-737-9986, we’ll take your calls talking about my favorite subject, IRS taxes, filing your taxes. If you filed an extension, remember, you now have until September for your business September 15.
Dr. Friday 10:23
And for individuals October 15, unless you’re under the federal extension, for storms, and then many of you have a right now until July 31, to file those taxes. So want to make sure that we are dealing with the IRS. I also will say I have not yet I don’t know about any of your guys’s experience, but I’m still not having a great time trying to reach under the one 808 to 910 40 number, the just the regular individual phone number to try to get questions answered for clients.
Dr. Friday 10:56
We are doing a little better on the hotline that we have for tax practitioners. But even that’s still taking three, four or five hours to get something done. So we’ll be interesting to see if we do get a few more people out there trying to deal with that. So let’s hit Lisa before the break that we shouldn’t have to wait through Hey, Louise, thanks for calling, what can I do?
Hi, my son is permanently disabled. And he was receiving SSI. When my husband started drawing Social Security. I received a letter from Social Security saying that my son might be eligible to draw off of him now. So we had to do some paperwork. And that went through and they approved it. So now he’s receiving more money plus i back paid him to the point to where my husband was receiving. Right. So he is now like I said he’s now getting it based off of his father. So will he now be responsible to pay taxes on that since it’s a different thing than SSI?
Dr. Friday 12:03
Great question. And the answer is no. Even though it’s not social security disability, it’s just regular Social Security for a disabled child or spouse is same, same thing? No, it’s treated the same way. So he is still most likely your dependent. It’s not considered earnings, but he will not pay tax if his only income. Is that Social Security?
Yes, it is his only income and you know, that’s all he’ll ever be able to get. Okay. Good deal.
Dr. Friday 12:33
Great question. Thank you very much. Thank you. All right, we’re gonna go into our first break. If you want to join the show, you can at 615-737-9986. We’ll be right back with the Dr. Friday show.
Dr. Friday 12:56
We are back here live in studio. And if you’ve got a question I have to do pick up the phone, 615-737-9986. Taking your phone calls talking about my favorite subjects. One of the things that came up over the break, was looking at some of the scams that the IRS is talking about.
Dr. Friday 13:24
And one of the big ones that I think people need to watch out for, because I’ve actually had people calling me as well, is the employee retention, credit, employee retention tax credit, ERTC, you guys are also getting many phone calls where people are saying that, you know, we can get you 20 You’ve already been pre approved for $22,000 per each employee. And they’re saying that there is all kinds of different radio ads and different things and to be very, very careful. First, let me point out unlike PPP, and some of the other advanced or or funds that we received during the stimulus and all that that we received during COVID The employee retention tax credit is a taxable, B, you have to go back to the tax years that they gave you the refunds for and file.
Dr. Friday 14:21
And if you I mean and you’re going to owe taxes because obviously we’re reducing your tax bill unless you had a really big Nol then we have to pay penalties because they’re going to say that you filed and the correction was late. This is all on the books you can ask your tax person you can go through and make sure but if you’re getting a lot of information, a lot of calls I know I probably get four or five from clients saying how do I qualify their sole proprietors they never had any employees you do not require or you do not qualify for the employee retention tax credit.
Dr. Friday 14:55
You didn’t have any employees, but they’re being told that they are and so just be careful when You get that question? All right, let’s go to Billy who’s been nice enough to give us a call. Hey, Billy. Hey, what can I do for you?
Okay. Hey, I was just just wanted to ask you a question. I had a I have a friend that I’ve loaned money before. And he loaned me. I loaned him some money last year, and I forgot to add that onto my taxes. The interest that he paid me on it now, I was wondering if I could wait to do that to next year, not tax, or are still with my tax lady that fills them out for me. And she hasn’t called me I figured they ought to be filled out by now and turned in never say but haven’t even received a call from her.
Dr. Friday 15:51
Well, let’s hope that and I’m not gonna say got busy during tax season in our office as well. But let’s hope that she actually sent you a copy. And had you sign off before she may have just filed an extension. But the answer to your question is no, you need to file the interest in the year in which it was received.
Dr. Friday 16:08
So she there needs to amend which is very simple to do. And then you need to send and maybe a few pennies more depending on you know how much we’re talking about. And, or if it hasn’t been filed, yet, she can still update the tax return. And then you can file it, you know, with that information on the original taxes, but either way, you need to touch base with her and see what she has.
Okay. I’ve been needing, just have, she usually calls me and tells me they’re done, you know, and everything.
Dr. Friday 16:38
And she may be well, you may be like me, where there’s a stack on her desk still. And she’s working her way through all of them had extensions, but she may be still working on on your taxes. But I would just say give her a quick call and just get an update if nothing else. And if she says they haven’t been filed, she filed an extension, then just let her know about the situation either way.
Okay, appreciate it. And I really enjoyed listening to you.
Dr. Friday 17:02
Thanks, belly, I appreciate the phone call. All right, so we are talking about some of the scams that are out there. And another big one that jumped up and I’ve never never had any one. But there’s a fuel tax credit meant for off highway businesses like farmers and things like that. And the IRS is really auditing this information.
Dr. Friday 17:21
They’re finding that many of the people are not even farmers are the or have businesses off highway where they’re using the fuel, but they’re pumping in big numbers on that line to get this credit. So again, if you’re if you’re looking at your Schedule F and you see a large dollar amount, under fuel tax credit, you might want to make sure it’s one of those things that you should be providing. And in some cases, if you’re a large farm, and you got a lot of farm equipment, sure you apply and that’s exactly 100% correct.
Dr. Friday 17:55
But if you’re just a little hobby farm, and you’re writing off $2,000 with the fuel, I would say that would probably be questionable unless you have the receipts. So again, one of those things, you just want to make sure that if you’re even though you are going to somebody, it is your responsibility as the tax payer, or your names on that return to make sure that the numbers make sense.
Dr. Friday 18:17
Sometimes if that refund is just too big. I mean, I can’t tell you how many audits a year we deal with where the IRS has picked these people. And then they have no idea that these people even had schedule C’s or anything else. So just just make sure your taxes really represent you, not just some figment of someone’s imagination. All right, let’s go to Kenan Hendersonville and see if I can help him out. Hey, Ken.
Hi, Dr. Friday, thanks for taking my call. Thanks for calling. I wanted to do. Yes, let me explain my situation, I just got a new job offer which I’ve decided to accept. But it will require me to spend $9,000 to have some equipment for it. And I’m going to need to take it out of my IRA account and wonder whether I should take it out of the traditional IRA or the Roth IRA and what the tax implications would be for that?
Dr. Friday 19:08
Well, there won’t be a simple answer, but if you’re gonna take it out, I guess it would be What are you single or married? Here’s Well, I recalculate. Married?
Dr. Friday 19:20
What is your wife work?
Dr. Friday 19:25
So the question I would have is, are you guys making more or less than 100,000 in that given year? If you say it’s going to be less than I would personally take it out of the traditional IRA. Keep in mind, I put this little caveat. I’m not a financial planner. So this is how I would personally make this decision. But if your income and everything’s going to be you know, all of your incomes added together is under 100,000. I would take it from that because that’s going to put you at roughly 12% But as low as it’s going to get in life. If it’s over that 100 Then I would actually have to consider possibly taking some Part are all from the Roth.
I see, because with the Roth, you don’t Yes, you don’t pay tax when you take it out with a Roth, right?
Dr. Friday 20:08
That is correct. Are you 59 and a half?
I’m gonna be 68. Actually, so yeah.
Dr. Friday 20:15
Okay, so you’ve exceeded, so there’ll be no penalty, and you can take it out. So that’s the, you know, and it may even be, you know, five from each. I mean, I’m not saying it’s black and white, but I would try to keep it as low as possible for the taxes. So, again, under 100, you’d pay basically 12% on that. And that’s pretty good, because you’re gonna pay it sooner or later on a traditional more possibly later. But on the Roth, obviously, ex tax free money. And so, you know, it would be a no tax situation on you, but it really comes down to is what’s your combined income? And how much tax are we looking at?
Right, I think combined incomes a little over 100,000. So we’ll have to make sure I consider that option there. What I’m going to do, but that does give me some insight into it. Thank you very much. I appreciate your answer.
Dr. Friday 21:04
Thanks, Ken. I appreciate the phone call. So we’re gonna Yeah, sure. Thanks. We got another person coming through here real quick. Oh, Jim is on the line. Let’s say Jim. Hey, Jim.
Yes. How are you?
Dr. Friday 21:20
I am awesome. What do you have happening in life? What can I help you with?
Sure. Thank you so much for sharing your wealth of knowledge, my dear, perfectly centered play plan to an IRA. That’s not taxable. Correct? You make an institution institution?
Dr. Friday 21:37
Correct. I think you might have done that one. But yeah, 457 plan is just a tax deferred plan, as long as you roll it over to another IRA, or most likely, it’s an IRA, then you should be custodial to custodial. You’re perfect. But you don’t Alright, thanks. Bye. All right. That was wonderful questions. I appreciate it. All right.
Dr. Friday 22:02
So we’re gonna go one more time. And another thing I want to hit on, and I know probably people like, but unscrupulous tax preparers, you know, every year, as a tax professional, we get notices, we get flyers we get if you’re on a phone call with the IRS. And there’s a lot of time, there’s open forums, you hear about these different things, one of the things you have to be careful guys, is whenever you’re picking a person, a CPA, enrolled agent, they have at least the education and the ability not only to prepare that tax return and the education to do it, but also to represent you and stand behind the tax return that was prepared.
Dr. Friday 22:41
You also want to be careful with anyone that gives you the idea that they’re going to take a portion of your refund, I’m sorry, as soon as you hear the word that they’re going to take apart, hey, we can get you five grand, and we’ll just take a percentage and you can keep the rest walk out the door. No person that is an ex professional doing taxes is going to take a percentage of your refund, not going to happen. You know, I mean, it doesn’t make a difference.
Dr. Friday 23:08
If you make money, you don’t have money, most of the time, it’s your own money coming back to you. If they’re doing something to get you a larger refund. That is a problem. Another big problem I have is people not signing. So it says self prepared at the bottom of the return doesn’t have their federal ID number or their P 10. Or anything else on that tax return.
Dr. Friday 23:28
It just says self prepared. If it says that and yet you’ve paid someone to prepare your tax return, no matter how good that means that person’s not going to be accountable for whatever is going on there. So again, very important that you do not just walk away and say, “Oh, wait, you know, this is great. Thank you for preparing,” but there is no accountability. So if you’re looking at getting someone to do your taxes, ask some questions, make sure they’re going to be accountable. You know, I mean, I’m not gonna tell you that mistakes and things don’t happen sometimes.
Dr. Friday 24:02
Just like the gentleman called maybe his tax person is running a little behind it sounds like he still had a lot of confidence in her and knew that she was going to follow through and that she take care of him that’s that’s the relationship you have with your tax person. But if you don’t have someone that’s going to give you that confidence, then why don’t you just preparing yourself you probably could do just as well and at least you know that the information going into that return wasn’t made up very, very important because if the IRS finds out there’s a mistake, guess what that person that prepared the return is not responsible.
Dr. Friday 24:35
No matter what it’s not responsible. It’s only responsible is you the person that signed and your name on that return. So the only accountability is many of us that are professionals will have you know Eno insurance and things like that, but the people that don’t want to put their name on the return. Let me tell you people walk back out the door fast, fast, fast. All right. We’re gonna take a second break. If you want to join the show you can at 615-737-9986, we’ll be right back with the Dr. Friday show.
Dr. Friday 25:16
All right, we’re back here live in studio. And if you want to join the show, you can at 615-737-9986, taking your calls, talking about all of our favorite subjects, making sure that we have everything we need to check, make sure that we can either file our taxes on time, make sure we understand what’s coming down the line as far as taxes, making sure we’re not missing out on any kind of tax credit. That’s available to us. You know, and again, under the employee retention tax credit, we know the Cares Act did some additional pavement went through 2021.
Dr. Friday 25:59
But again, that is going to be expiring very soon. So if you have not done your employer, the legitimate employee retention tax credit, that is for employers, individuals that had w two employees there in the 2020 2021 tax years, and that they kept those employees during the hard time, and that there is some retention. Now again, that is going to turn into taxable income for you.
Dr. Friday 26:25
So it is important to make sure that you have that information and that you are using a reputable company, and that they are going to make sure that the information is submitted properly. And you know what’s going on. For all of you that may actually have some tax issues, maybe you haven’t filed all your taxes on time, you don’t know exactly what the options are, there are a few options.
Dr. Friday 26:49
But keep in mind when we talk about offering compromises, I saw an email come in and wanting to know who qualifies. It’s not that simple. There are different types of ways of qualifying for an offer and compromise. And that usually is when you hear when you hear the term offering compromise. It’s usually when we’re going to be making a deal. Because I have people says, Well, what if I just go into the IRS and say, hey, I’ll pay you $50,000, even though I owe you 80?
Dr. Friday 27:17
And see if they’ll, you know, will they just negotiate with me? And the answer is no, there is a process. And sometimes people will owe less than what they thought they will sometimes they’ll owe more, because of what you have in assets and other type of funds, usually assets, stocks, something like that, that’s going to come in and come back at you that you have the ability to pay the IRS, just because you want to make a deal with them doesn’t mean they’re going to take the deal.
Dr. Friday 27:46
And sometimes I think people don’t give bankruptcy an option that a lot of times from certain generations, it comes down and you’re like, you want me to go bankrupt and like there is ways of going bankrupt that may save you. But again, bankruptcy, a lot of bankruptcy attorneys don’t look at IRS issues when they’re putting in the bankruptcies.
Dr. Friday 28:07
So there are rules again, you have to be more than 31 months, you have to have been out in the system, you can’t have an offer and compromise pending if you’re doing it because unless the 31 months of collections already been out there. So there are some things you have to consider when you’re doing it. But hey, when it’s done, and you actually can make a deal or you can take it into bankruptcy, remember under bankruptcy, they can’t touch your home.
Dr. Friday 28:32
And in many cases, they can’t touch vehicles or anything like that. So even though we deal with the IRS under certain types of formats, I’m not a bankruptcy attorney, they are better at their job. But there are some out there that really do understand the tax law as well. And so you want to make sure you’re dealing with somebody that is dealing with the IRS, if you have IRS issues along with other debts, and maybe you do it I have people that have solely went into bankruptcy because of the IRS, and it has worked, not everybody’s gonna get it. But again, if everything was for everybody, then the world would be a very boring place.
Dr. Friday 29:09
So if you want to join the show, you can 615-737-9986 taking your calls talking about different issues. And again, I want to make sure that you understand if nothing else right now it’s between tax season right I mean, if you have a big bill from last year had a gentleman come in, and we did as normal 2022 taxes just last week and and the year before he owed like eight and this year he owed like six and and and then 2023 They actually had a baby.
Dr. Friday 29:46
But anyways, the question or the conversation because every time I have that I usually say hey guys, we need to readjust your withholdings, but due to the fact that there was a pregnancy and unfortunately some other health issues with In the work, the job he works at, they weren’t able to adjust. But this gentleman was, was prepared. He just set aside money every paycheck, and was prepared to make the payment.
Dr. Friday 30:10
But if you are an individual sitting there and you’re listening, and you’re like, yes, every year, I have to write a check for four or five $6,000, then you know that your withholdings are not correct. And a lot of times you’ll you’ll sit there and people will say, Well, I’m claiming married and one and I have a wife or I have a husband. And you know, first thing if that’s all you have married, and one would be one too many, because married already means what to write. Otherwise, there wouldn’t be the word single on the tax return.
Dr. Friday 30:42
So you have married, and if you’re married in one, and you don’t have a child at home, you’re claiming then you’re already claiming one to many. And that explains why you probably owe taxes. If you and your spouse both work and have, you know, decent jobs, you’re most likely exceeding what the tax code against says married, married means you’re supporting someone else.
Dr. Friday 27:46
And if your spouse is working, you’re not really supporting them. So most likely, one of you probably needs to go to single and zero. If you’re at the higher tax bracket single does not mean on your W-4 that you are really single, the IRS doesn’t care as long as you pay in enough money. If you don’t want to change, then there’s also a four on the W-4 form, there’s a lot and that says I want additional withholdings. Well, guess what you owe $4,000, you get paid every two weeks.
Dr. Friday 31:04
So you’re now going to have an additional amount, so that at the end of the year, that money has been withheld, because the last thing you really want is the bank account that you will live off of and you pay your rent, and you plan for your vacations to have IRS money in there. As an entrepreneur or business owner, most of us and most of my clients, we set up a separate bank account just for taxes. Because I don’t want to look at my general checking account and think oh my gosh, wait 25% of what’s in there is going to be the IRS. And I don’t remember how much is went through there.
Dr. Friday 32:07
So I can be upside down and every dollar that I think I have might be Uncle Sam’s. That’s the game you don’t want to play guys, it isn’t that hard to estimate how much money you owe the IRS every year. It is harder in some ways for entrepreneurs, because some years they’re up in some years, they’re down. And keep in mind, when it comes to what our requirements are, we’re supposed to make four equal payments based on the prior year.
Dr. Friday 32:35
That’s great for the years that were really low. And then the next year, you’re doing really well. But the next year, when you do really well and you’re now your tax payments are $10,000 A quarter, and you’re only making $40,000 for the year, that will be a very difficult texting. So you have to have some common sense. And you have to be able to estimate at least how much do I owe? Because the last thing we want is to have the IRS in our business, it’s easier if we don’t. But you will always have a partner in business, if you are having rentals. If you have a small business.
Dr. Friday 33:10
If you take money out of an IRA, like the gentleman that called he was smart because he’s thinking, if I take it from a traditional IRA, I have to pay taxes. If I take it from my Roth IRA, I may not in his case, he wouldn’t owe any taxes because of his age is over 59 and a half, assuming that his Roth IRA had already been there for five years. So those two questions would lead to Well, first answer is oh, let’s just take it out of the rock.
Dr. Friday 27:46
But we want to keep his effective tax rate as low as possible in 2026. People remember we are going to be changing tax laws. If it doesn’t happen before then right? The tax laws that we have go, they expire December 31 of 2025. So that 12% becomes 15, the 22 becomes 25, etc, etc, etc. Everything goes up. So if you’re in the 28% tax bracket, you’ll now be in the 32. So you’ll go 15, 25, 32 which means you’ve jumped up like nine times to do that. So just really important to be able to understand your situation and how it’s going to go. So understanding what your money is today and also predicting to the best of our ability, what our tax situation might be in the future.
Dr. Friday 27:46
Because right now we have the lower tax bracket lowest I’ve ever seen in my 50 plus years and for many people there may I’m sure my dad always talked about when he was young. he you know he was in the of course he wasn’t working. He had a large family, but the tax brackets were up to 60% 60% tax we freak out when we hear 37% so just to say taxes have been higher in the past, no question with the way spending and the government’s going, it’s going to go higher again.
Dr. Friday 27:46
So maybe making some adjustments today may help us in saving tax dollars later, especially with most of our IRAs already at the lower points than they have been in the last few years. So you should talk to your financial planner, see, maybe a Roth conversion is a good time for that kind of situation, even though you’re still gonna have to pay the tax and maybe paying the tax now and let it grow the next 10 years or something tax free, you may end up in a better situation. Alright, so we’re gonna get ready for our last break.
Dr. Friday 27:46
If you’ve been wanting to join the show, now will be the time to jump on board and give us a call here at 615-737-9986. We’ll talk a little bit about more about a few the scams that are out there to make sure you’re protecting not only you, but the seniors in your life, because a couple of them are targeted directly at people that are used to just you know, talking on the phone, sharing information and what you can do to help them. We’ll be right back with the Dr. Friday show.
Dr. Friday 33:39
All righty, we are back here live in studio got a few more minutes left. So if you’ve been holding your breath, and you’re like, oh, my gosh, I need to talk to Dr. Friday. Well, now would be the time 615-737-9986 Is the number here in the studio. Okay, so one of the things we need to also talk about is what we need to know about the 10 99k that would came up on one of my emails here and it was someone asking, okay, so they have a small business always starts out with that conversation, I’ve had a little business, and “I sell things on Amazon. And I just go around to swaps, or I go to discount stores and I buy products. And then I list them on Amazon and I sell them.” And she says I don’t really make any money. And it’s but keep in mind here, people 10 99k is a business form all of us that have had merchant services, for a number of years received this, you are now going it was delayed. So they pushed it out.
Dr. Friday 37:19
And now 2023, they will be sending them out in 2024 for the year of 2023. Initially, it was 2020, 2021, 2022. They delayed it 2023. They’re telling us it is going to happen and you will get it in January early February of 2024. For anything that you use merchant services now says Tinder is still required to be sent out in 2022, if you had more than 200 transactions, so a few of my clients did get them. But many of you guys did not. Now it’s going to change because in 2023, it’s going to be based on $500. So if you sell more than $500 using merchant services, then you’re going to merchant services could be PayPal, be using Amazon, any of the Venmo Cash App, any of those that you have, it’s going to come down.
Dr. Friday 38:16
Now again, they have not yet I have not yet seen anything that tells us how we can do the difference between like Venmo me sending my brother some money to pay him back for dinner or that being income to him, or myself. I don’t know the answer. But that answer is that you need to start accounting for your expenses. This is the secret here people you’re in business, if you’re taking money in and you’re giving a product of any sort, be it your brain doing some sort of artistic thing, or you’re using products and you’re buying and selling them on on Amazon, you need to be making sure you’re treating this like a business, which means you’re putting receipts you’re going out and tracking that information, you’re making sure all that information is going through.
Dr. Friday 39:05
And then when you get the in the year, you’re able to take the income and the expenses out and whatever profits or inventory you’re sitting on. Because a lot of times people don’t understand that if you go and spend $20,000 on on a bunch of supplies maybe brought a crate full of something. And so it’s still sitting in the house, but hey, I spent the money, but the product is still there.
Dr. Friday 39:30
So that means you still have equity in them. product that’s sitting there. So you need to sit down. Ideally, this would be a good time for you to find an accountant or bookkeeper or a tax person that can explain how the 10 99k is going to affect you. If it’s going to affect you at all. I have a couple people that are on disability. So they’re limited to what they can actually earn.
Dr. Friday 39:54
And they’ve been doing this amend my opinion on the side. And now it’s going to come out that they actually have this little business. And so they need to be addressing this to make sure everything is correct. Because if you do things wrong, you’re going to end up with the IRS. And I mean 10 99k audits have been around goodness, since least 2014 2015, when they started coming back out with Obamacare, where they actually started really pushing having those, and they would match them up with people that would have their schedule C’s or corporations.
Dr. Friday 40:26
And they would come in and say, well, your 10 99k showed 250,000, but you only reported 248,000 as income or 250. And you’re saying you didn’t receive any cash at all. And I’ll and I have found, we had several situations where that was true, the individuals were in areas where they didn’t even take cash, they only accepted payments through electronic currency.
Dr. Friday 40:50
So that being said, it’s also important, and for all of you guys that are in virtual currency, Bitcoin or any of those other electronic currencies, keep in mind, that is still a big deal with the IRS, I was on a call that’s a few weeks ago, and they were talking about how they were planning to do certain audits and, and try to get they do these, I call them like small audits where they choose a certain industry or certain type of thing.
Dr. Friday 41:18
And they try to figure out what they can audit within it and what the audit issues are, so that they can then take on auditing those areas. Locally, here, we had one about two years ago, where they did use car lots, and they just picked a whole bunch of them and started auditing them, because they found that there was certain things that they could identify or not identify with them. And that was important to be able to identify.
Dr. Friday 41:44
So if you’re a business owner, if you’re an individual in you might not even think of yourself as a business owner, I’m only selling things in my house or my thing. But the government will consider you a business owner if you’re using a marketplace where people are paying you with Venmo, or cash app or any of that. So very, very important that you take on the idea. Now we’re already five months into this. So if you’ve already been doing this, and you’ve already sold $500 worth of something through these, you need to be sitting down and really thinking about how am I going to report this.
Dr. Friday 42:15
So it doesn’t create a huge tax issue for yourself. What kind of documentation can you start collecting? Is it carrying cash books, so you go to garage sales, and you write the date of the garage sale, the address of the garage sale and you take pictures and attach a receipt for what you paid for. So you have some documentation because we all know a lot of times you use cash when you do that kind of thing. Nothing wrong with it, there is a way of doing a proper paper trail for the IRS. But you need to start doing that.
Dr. Friday 42:45
Otherwise, you’re going to be the one saying well, I went out to the garage sale, I paid cash for all this and I sold it guess what the IRS gonna say your cost basis is zero. That’s right, you have no cost basis if you can’t prove it. Alright guys, so that’s my two cents for the day. I’m going to be here next Saturday. So if you have questions, or if you want to reach us after, obviously, Monday morning, you can Our office number is going to be 615-367-0819.
Dr. Friday 43:16
Again, I’m an enrolled agent licensed by the Internal Revenue Service to do taxes and representation. It’s what we do, we also have a small bookkeeping firm. So if you’re a small business owner, we can help you with that. But my expertise is taxes. So if you haven’t filed taxes, or you’ve got love letters, or you just want to see what the status of something, and you need some help, because you haven’t had any resolution, again, office number 615-367-0819.
Dr. Friday 43:44
Also, you can email me email@example.com. And that way, you can try to get an outline of what you want, how it’s going to work for you. Or if we’re even going to be on the same page, our initial consultations are always free to make sure that we can help you do whatever it is we need help doing. Because I’m not one that says gonna go out there and say, “Oh, this is what we’re gonna do. And this is how I need to make sure I can do what I’m saying.”
Dr. Friday 44:08
So again, as an enrolled agent, we are licensed by the Internal Revenue Service to do taxes. That’s what we do. So if you have tax issues, or you need help filing taxes, or if you just want to get a second opinion on maybe a tax issue you have going, you can call our office on Monday 615-367-0819. You can also email firstname.lastname@example.org. Or you can go to my website. If you have no idea who I am. Maybe you just were flipping channels and you got started to listen to the show and you’re like wait a second, I might need this kind of situation.
Dr. Friday 44:45
You can go to drfriday.com. That’s how we deal and what we’re going to do when we’re dealing with your tax situation. And if you have questions on financial planning or if you’re trying to figure out some of these other tabs, I do have references if you need somebody to help you with your financial planning or an attorney.
Dr. Friday 45:04
Remember, if you have your name, and you’re dealing with the IRS, and let’s say you have children and their your name is on their bank account, someone just sent that thing over here, an email, and they were saying, well, if my name is on a bank account with my children, and I have IRS issues, I think all of you listening, if you’ve listened for any period of time, you know the answer to that the IRS can take the money from any bank account that has your name on it. It’s one of the reasons we don’t suggest having your name put on your parents bank accounts.
Dr. Friday 45:34
And we don’t suggest you have in your name on your kids. Now, sometimes you don’t have a choice because minors can’t have their own bank accounts. But there are ways of protecting it. So you want to make sure if you have IRS issues and you have your name on a bank account that really isn’t yours, then you might want to think about reconsidering how or what you’re going to do with that because the IRS gonna consider any money in any bank account with your name on it, their money.
Dr. Friday 46:01
So again, you can reach us at our office Monday morning at 615-367-0819. You can email email@example.com. firstname.lastname@example.org. Or you can go ahead and go to the web at drfriday.com. Hope you guys truly enjoy this Saturday and Mother’s Day. Happy Mother’s Day for all those mothers out there. I have one of the best moms. And I hope you guys tell your moms you love them. Call you later.