Welcome to the Dr. Friday Radio Show! In this episode, we have host, John Haggard, and tax expert, Dr. Friday, take on the latest tax updates, answer caller’s questions, and talk over the following topics:
- Counties That Have a Tax Extension Until May 16, 2022
- What Is Earned Income Tax Credit?
- Will Congress Pass This Huge Tax Increase?
- Earned Income Limits for Taxpayers Who Do Not Have Qualifying Children
- What You Should Know About the Build Back Better Plan
- What the IRS Considers as Earned Income
- How The People You Vote For Affect Your Taxes
- Do I Need A SSN To Be Eligible to Claim the Earned Income Tax Credit?
- Child Age Requirements for Earned Income Credit
- Gifting Property Away and Capital Gaines Tax Consequences
- Why You Should Trust Dr. Friday With Your Taxes
- How To Get Back On Track With the IRS
and much more!
Announcer 0:00 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.
John Haggard 0:28 Live from America’s Music City. It may be Saturday where you are but it’s Friday, all day, every day all the time with the tax doctor, the tax lady, the doctor of accounting, ladies and gentlemen, known in these parts of America as Dr. Friday. Right here she is. Dr. Friday, how are you?
Dr. Friday 0:49 I am awesome. What an intro. That’s why I love having you do my shows. Because John, you really know how to bring in an intro.
John Haggard 0:57 Well, I’ll tell you what, you are the one. And that’s why we like to do this because folks who have questions who have been running from, who haven’t, you know, filing an income tax return in 10 years, because they think, “Well, you know what, I ain’t done it in 10 years, what’s another 10 gonna be?”
John Haggard 1:13 They’re gonna learn some things today from Dr. Friday, that could save you a lot of trouble. I’m going to just promo one thing folks, you’re going to hear especially those of you who are new to Nashville. If you have not met or heard of Dr. Friday, and you’re just tuning across the internet, or maybe hear on the radio, especially the folks from California and Chicago and New York and Philadelphia and other markets.
John Haggard 1:36 We’re meeting new people, it seems like every week in Nashville, as people move here, I’m gonna give you something here that you might want to know. If you are one of those who hadn’t filed an income tax return or let’s say, you know, you’ve gotten the last as Dr. Friday would call it “love” letter. And now including taxes and interest and penalties, you owe a million dollars.
John Haggard 2:01 And you say, “You know what? I mean, forget it, you know, I’m just gonna go off the grid. There’s no way.” I’m going to tell you this. And we’ll prove it later, in that particular case, Dr. Friday had client folks who owed over $1 million, not a typo. I said $1 million. And you settled it for about what Dr. Friday?
Dr. Friday 2:21 A little over 100,000. Just right around 102,000.
John Haggard 2:27 Now, you know, folks, I mean, every case is different. But imagine that? How would you like to be staring at that? Or maybe you’re staring at a bill that’s 500,000 or 100,000? Or it could be 25,000? Anyway, it’s more money than you’ve ever got. You don’t think you could ever make it? That’s the type of work she does.
John Haggard 2:42 Do you know why? Here’s one of the things you should know, and listen very carefully to what I say because some of you might run when you hear this. So let me tell you what the definition is. Dr. Friday is an enrolled agent with the Internal Revenue Service.
John Haggard 2:55 Now when you hear that, “John, I don’t want to talk to nobody from the Internal Revenue Service.” No, she does not work for the IRS, she works for you. An enrolled agent means she’s basically a federally-authorized tax practitioner who can represent you just like an attorney would in a court of law.
John Haggard 3:15 So now that you know about Dr. Friday, that’s only the beginning. We have a lot of questions and things that people want to know. So here’s how the show works. And especially for you new folks out there.
John Haggard 3:26 This is a live program. When we say live, that means you can call in now and get an answer. But we’re only here until three. So we got 53 minutes basically to go get that question together and jump on the phone. Here’s the number to call: 615-737-WWTN. That’s 615-737-9986.
John Haggard 3:48 Our best advice to you call now because a lot of people say, “Well, I’ll call in a minute,” and it doesn’t get any better later. It just gets later. And then it’s three o’clock and we’re gone. So jump on the phones now. You know a lot of people, Dr. Friday, hear these terms when they’re trying to do their taxes. We don’t quite understand it. But we’ve heard him for years and years and years like, you know, “What is the Earned Income Tax Credit? Can I get it? It seems like people are getting tax credits. But I’m not.”
John Haggard 4:17 Just start out with that one if you would, what is the Earned Income Tax Credit anyway?
Dr. Friday 4:23 Yes, and it is I mean, its changing taxes have been changed in the last couple of years, as we all know, but the earned income credit is actually going out to more and more Americans. Earned income credit is basically a tax credit that provides tax breaks to people making less than or the lower to moderate-income workers.
Dr. Friday 4:41 You know, maybe you’re a single mom and you only make $20,000 a year. You’d be qualified as that so you’ll get more money in your pocket. It’s a way that the IRS has told us they try to level the playing field that for some individuals that may not be able to earn as much as other individuals this is a way to try to get everybody in a livable wage.
Dr. Friday 5:02 So earned income credit canal, you know, affects a lot of individuals. So you want to make sure if you’re in that lower to moderate-income level, you know, if you do your own taxes or selling doing them, find out if you qualify.
John Haggard 5:16 Simple enough right there. And so, you know, here’s another thing, Dr. Friday, people want to know, and I know you don’t have a crystal ball, but there is so much going on in Congress. Do you have any indication? Are they going to, and I guess maybe nobody can answer this, but just sort of, you know, you travel in other circles that most of us don’t, because you’re in that business. But are they gonna pass this, you know, do you think they’ll pass this really huge tax increase that’s going to make it I mean, really, really bad on folks?
Dr. Friday 5:49 Well, last year, we kept following the Build Back Better plan in which they had tried to push through a higher tax on capital gains. We all know, in 2025, unless something is done, everyone across the board, everyone, no matter what income bracket you’re in unless it happens to be zero, then you all are going to have an increase in taxes because tax rates will go back up to pre Trump rates.
Dr. Friday 6:19 And you know, and then, of course, in the Build Back Better. Another thing we’ve been watching is the step-up in basis, and a lot of people are sitting there going, “What is that, John?” But, you know, that’s huge. When someone passes away, and we inherit, maybe the only asset that your parents had or parents had, and it’s finally been passed down to you, because of the loss of your loved ones, we get what’s called a step-up in basis.
Dr. Friday 6:42 And most likely, you’re not going to pay tax on that home. They want to eliminate that they want to say, “Nope, we don’t think that that’s a fair situation. So we’re not going to have…” you know, in the Build Back Better, they’ve eliminated the step-up in basis, which would change inheritance tax, it would change a lot of other things.
Dr. Friday 7:02 So to answer your question, that, I guess my biggest concern is, we have spent a lot of money in the last two years trying to buy our way out of COVID. And, you know, we don’t have the money from the general normal taxes, because we were upside down before that. So you know, without raising taxes, what are they going to do.
Dr. Friday 7:26 We’ve all seen inflation hit. So we know that’s a part of it, because now you know, everyone fought to make more money. And so most people are making higher minimum wages than they were two years ago. But now the cost of Petro is for diesel $5.35. Where I was paying closer to $4 or even less, per gallon pre COVID.
Dr. Friday 7:51 So, you know, yes, you got a raise. But now everything you do from eating out to buying petrol for your car, or anything has gone up, you know, 60-70%. I mean, inflation is definitely double digits. So, I think we’re going to have to see higher taxes.
John Haggard 8:08 All right. Now, folks, one thing you may want to think about this is, that we’re in the middle of May, it’s almost Memorial Day. And you’re thinking, “Well, I don’t want to be thinking about no taxes till the end of the year, first of the year.”
John Haggard 8:20 And we don’t know what’s going to happen up there. As Dr. Friday said, she’s tracking all of this type of thing, because she wants to be able to tell people like you, “Well, this thing is looking like maybe this.” So you want to do some planning, don’t wait until the last minute because you may give more money back to the IRS than you should have you done what you should have done. So, Dr. Friday can give you that advice as well.
John Haggard 8:43 We’re going to be giving you her personal phone number that you can call and of course, the website: drfriday.com. Real simple drfriday.com and the email address as well. If you don’t get on the program today, so the number to call if you’ve got a question, maybe even something bugging you, maybe somebody has told you, “Here’s what you need to do to get out of your situation.”
John Haggard 9:04 Because oftentimes Dr. Fridays are on the back end of this, you know, it’s like it took years to get in this bad situation. And they want Dr. Friday to solve it in 24 hours, just like any other problem we have that’s the big problem. So before you get into that, or even if you’re in one of those maybe our that case that we talked about at the IRS, you know, says, “You owe hundreds of 1000s of dollars” and you’re thinking, “I just…I can’t. I mean there’s no sense in calling back or doing anything because I’d be going to jail” or whatever.
John Haggard 9:29 I mean, she can tell you what you need to do. And to take a million dollars to a little over 100,000 It’s just one example. Every case is different, of course, but there are ways to work things out. So jump on the phone here: 615-737-WWTN. 615-737-9986. So let’s go back to that Dr. Friday dictionary of some of these terms that we’ve heard of, you know, what is what isn’t?
John Haggard 9:56 So if someone said we learned about Earned Income Tax Credit a moment to go, but what about just plain old income, Dr. Friday? What is really defined as earned income? Or what can I keep for myself that I don’t have to declare?
Dr. Friday 10:12 Right. And that’s important because I have people come to me sometimes and they’re like, “I didn’t earn enough money, and I’m not getting earned income credit.” And that’s the reason that they’re not getting it 99% of the time because they only show passive or rental income. So when we say earned, it has to be earned. Salary, tips, I don’t know, 1099’s. Anything in which you are required to pay Social Security and Medicare tax.
Dr. Friday 10:38 That might be the easiest way for you to think of it. So if you’ve received money from a lottery or you won at gambling, or you have rental property, and those are not incomes, you didn’t earn them, you may have won them. And even some rental people may say you have to work every month to get that, it’s still not earned income, no Social Security Medicare tax claims.
Dr. Friday 10:59 So it’s very important that you understand what that is so that you would be able to deal with something that you know, again, if you think, “Hey, I’m only making $20,000. Why have I never seen this earned income credit that Dr. Friday is talking about?” It’s because that 20,000 was earned not doing actual labor, but using you know, rentals or some other format of getting funds other than through the traditional earnings that you might have.
John Haggard 11:28 Ah, interesting thing, folks. See the difference? See the difference? All right, you’re listening to the Dr. Friday show. That’s the end of the first quarter. You know, we have four quarters this hour every 15 minutes. So that’s the end of the first quarter. And here’s the number to call to get on this phone now: 615-737-WWTN. 615-737-9986. When we come back, Joe from Nashville has got a question about some tax returns. And Dr. Friday has the answers here on Super Talk 99.7 WTN.
John Haggard 12:08 All righty, welcome back everybody, quarter number two. Dr. Friday shows an enrolled agent with the Internal Revenue Service. Now wait a minute, no, she doesn’t work for the Internal Revenue Service. She works for you. An enrolled Agent simply means like an attorney. Would you like to have a representative before the IRS?
John Haggard 12:26 You know, she calls them “love” letters. Some of you don’t think that’s very lovely. She can take care of that for you. So she steps in between the pain of dealing with the Internal Revenue Service. Now, Dr. Friday has said this too, because, you know, she talks with the folks so it’s not that the IRS agents are bad coming after the money.
John Haggard 12:49 Now, there are a few bad ones, of course, like there are in any career. But you have to remember that who you vote in, says Dr. Friday, who you vote in, those are the people who pass the legislation. And all the IRS does is take the code that’s handed down to them. And they enforce the action. Did I get that right, Dr. Friday?
Dr. Friday 13:14 100%. Yes, sir.
John Haggard 13:16 All right. Simple enough. Let’s go to Nashville, Joe on to the Dr. Friday show and see what’s going on there. Hi, Joe.
Caller 13:24 Hi, Dr. Friday and thank you for helping me out. Well, my question, here’s what I got. Three years ago, I had that ID verification issue with the IRS. A year later, I finally made contact with one of their reps, with an agent and satisfied them. I was who I was. Right away almost, I got my refund. I got my check. Now, two easy returns behind. Each one of these will get me back about $1,000.
Caller 13:59 But last year, I have not filed, the year before that, I have not filed. What’s the best way, can you help me? Will you file those for me? They’re like easy, no earned income, no special frills to them. They’re just as simple as you can get as far as returns.
Dr. Friday 14:22 Right, we can do that. But our simplest return may be more costly than you trying to do it. It was $150. So we could do it each year at $150. That would be our cost to do it easily. And we would e-file and get them directly to the IRS. Your alternative would be to actually I’m pretty sure and I’d have to double-check.
Dr. Friday 14:44 I know you can get the forms from online QuickBooks, I mean, irs.gov. You may be able to go right to irs.gov and click “file returns” on the first page and it may be able to give you past returns of at least the last three years because those are the three that would be refundable. Anything else would not be refundable to you.
Caller 15:05 Okay, I’m only two years behind. And that’s what I was told. Once you’re out three years, you’re out of luck. So, and I would pay you more I would give you $200 apiece to do that. Your thing is not unreasonable at all. How do I contact your office, Dr. Friday?
Dr. Friday 15:23 John will be giving out my number in just a few minutes and you can take that down and give us a call.
Caller 15:30 Thank you so very much. Thank you.
Dr. Friday 15:33 Okay, thanks.
John Haggard 15:34 All right, Joe, we appreciate the phone call. Now, if you’ve got a situation going on out there folks, just like Joe, call in right now. We’re t-minus, here we go. Are you ready? 38 minutes and counting. Time is flying. Now is the time to get on the phone. 615-737-WWTN. 615-737-9986.
John Haggard 15:54 Let’s go back to that dictionary of terms that we’ve been hearing about for years. And as Dr. Friday to help us kind of explain what it is. Dr. Friday, you were talking about earned income a moment ago, but are there or what are the earned income limits for taxpayers who do not have qualifying children?
Dr. Friday 16:19 Right, without qualifying children, an individual who has earned income in 2021, that would be about $21,400, I think, would be total or less, so that would be the top, so you get the minimum amount of earned income if you were closer to 20,000, or 17,000, you would get more and more.
Dr. Friday 16:42 And it’s kind of funny because it also works the other way, John, where if you’ve only made $2,000 or $3,000, you’re gonna get the very minimum. And as you work towards the middle, somewhere around 12,000 or 14,000, then you’re gonna get the maximum amount of earned income you can get.
John Haggard 16:58 Interesting. And so is there alike, how old does someone have to be to claim?
Dr. Friday 17:04 The person would have to be at least 19 years old. And there’s also just as a point of interest if you’re 19, and you’re living at home with your parents or your parents are paying for your college, then you’re not going to qualify for earned income.
Dr. Friday 17:22 There’s one other question is, “Do your parents provide more than 50% of your care or of your financial situation?” And in most cases, if you live in a home that pretty much meets it because consider what you’d have to pay in rent, utilities, insurance, and then most of the time, the car insurance and the health insurance, all of that will be more than 50% of your care.
John Haggard 17:45 All right. And this will seem to be pretty obvious. You seem to have a Social Security number for everything, but do you need one as well to be able to be eligible to claim the Earned Income Tax Credit?
Dr. Friday 18:01 That’s a great question. And the answer is, yes, you and your spouse if married filing jointly needs to file on a valid SS number by the due date of the return or any extension date. Keep in mind right now, we have a funky year just to bring up extension dates for anybody that’s living in Cheatham, Davidson, Decatur, Dixon, Dyer, Gibson, Henderson, Henry, Lake, Stewart, Sumner, Weakly, and Wilson. Remember, May 16 Is your filing date.
Dr. Friday 18:36 You had an automatic, due to federal storms, you have an automatic deadline. So those are the people even if you did not file an extension, we’re on an extension until May 16, which is pretty much coming up, I believe on Monday. Then you’d have until September for businesses 15th and October 15 for all of us individuals that filed an extension.
Dr. Friday 18:58 So if you filed an extension, you are waiting for your Social Security number to come in, or for your child. I have a couple of cases where we’re not able to claim the new child because we don’t have a social security number for them. You must have a valid social security number for all of them to authorize. Because without it, just as a point of interest, you’re really not legally authorized to work in the United States. So you couldn’t have earnings, which is qualified for earned income credit. So that’s why they require it.
John Haggard 19:28 Alright, simple enough. All that folks. No SSN, no play, no pay. So, it’s a fairly simple thing there. Are there any though age requirements for claiming the earned income tax credit if they have a qualifying child or you got to be a certain age, you said something about 19. But what was that about?
Dr. Friday 19:48 That is if you’re a single individual and you want let’s say you have moved out of your parent’s house and you’re making $15,000 a year. You would then be qualified because your parents can’t claim you they’re not supporting you. So they can’t claim you to take the children or take the earned income credit. So they can’t claim you as a dependent.
Dr. Friday 20:08 Most of the time, in many cases, 19 is the youngest, obviously, but by 21/22, many people are on their own at that point in this situation. And as far as children, you get earned income credit, even if the child was born on December 31, if they were born in 2022, you will qualify if you had the right thing come to get the credit.
John Haggard 20:35 Gotcha. So now, as we’re talking about qualifying children. What about a technical child? I would say in other words, I mean, it’s the child or the mother or the father would. Let’s say they’re still living in the house. And they’re 35, or 40, or 29? Or is there like an age limit on something like that to be a qualifying child is like, “Well, hey, once you reach this age, bud, you’re you’re cut off?”
Dr. Friday 21:01 Right. For earned income credit, there is a qualifying situation where let’s see if I can find the ages because theoretically, for earned income credit, you will need to be under the age. Oh, make sure I’m saying that right, John because I know what the maximum is you can do.
Dr. Friday 21:23 I would think that you wouldn’t be able to exceed the age of a regular child, which is usually 18, or 19. But here we go. However, certain students under the age don’t qualify. So there is a special exclusion for anyone that’s 18 years, if you have 18 years in the age of 21, you do not qualify for earned income credit. And 25 to 64 dependents.
Dr. Friday 21:51 So, if you have a child that is, in some cases, maybe a disabled prime example, and you’re making the income is being made under 25,000, or whatever, and you have a child that’s 33, living at home, then they would be qualified for earned income credit. But if you have a child, that doesn’t go to school and doesn’t want to move out of the house, theoretically, if your income is that as well, that child also claims. Up until the age of 25 to 64.
John Haggard 22:22 All right. And you know, speaking of that, see how complicated that is, folks? I mean, do you know, Dr. Friday, you may know this, it’s just an interesting question. If you were to take all of the law that has been handed down to the IRS, you know, people say, “If you stack all the books, you know, they reach halfway to the moon!”
John Haggard 22:39 You know, or something like that. Is there ever been anybody who has done something like that? People don’t know how much the IRS regulation code, again, passed by Congress, IRS does not make the rules, they just enforce them. How many volumes of all that stuff is there? If you were to stack it all up? Do you know? Just kind of curious.
Dr. Friday 22:55 I know it is curiosity? And I’d like you I’ve heard several different times, you know, it’s 10 times the King James, it’s 100,000 copies of, you know, a standard Gone With the Wind, whatever. You know, I don’t know. I know, there are more than 100,000 pages of tax law. So depending on how big the texts and everything else that would be, and just in the last year, I mean, between COVID 2020 and 2021. I think they said it’s one of the largest because of some of the changes. We had, like 600 pages of tax law be added into the text.
John Haggard 23:33 Wow. So over 100,000 pages, folks, I mean, so really, what am I saying there? I mean, just simply like, you know, you gotta get some advice. I mean, it’s hard to understand some of that stuff. You gotta read it four or five times anyway, but that’s why you need Dr. Friday. And if you’ve got a question, there are no dumb questions, by the way on the Dr. Friday show.
John Haggard 23:56 Call and ask anything doesn’t matter what it is. Dr. Friday just wants you to be able to be in the best financial position you can. Don’t give away any more money than you should. Don’t overclaim because if they catch it, you know, you’re gonna have to pay and probably some penalties and interest and who knows what else but she can advise on that.
John Haggard 24:14 So we are sitting at t-minus 29 minutes, folks, now’s the time 615-737-WWTN. Call us now. 615-737-9986. And that marks the end of the second quarter. John haggard in the broadcast studio with Dr. Friday, an enrolled agent with the Internal Revenue Service and if you just joined us, let me say it again. No, she does not work for the Internal Revenue Service. That’s just a designation.
John Haggard 24:43 They call it EA in the business. But she is like an attorney who would represent you in a quarter law. She stands between you and the IRS. When you give her that authorization, folks, you don’t even have to talk to the IRS again, as long as she’s handling your case if you don’t want to. That can be some real peace to the mind and we’re gonna give you her you know, email and her web and her telephone number again this hour so be standing by for that. We’re taking your phone calls next we’ll do it all live and we will do it here on Super Talk 99.7 WTN.
John Haggard 25:23 All right everybody. Welcome back quarter number three, 2:34 pm Dr. Friday all the time, Super Talk 99.7 WTN and if you are in tax trouble, you may be in pain, maybe you owe more than you think you could ever pay.
John Haggard 25:38 I told you at the beginning of the show if you just joined us that Dr. Friday had a client who the IRS said, “You owe now $1 million.” How would you like that? And she got it settled for a little over 100,000 all cases are different. But you know, she can do a lot of that. And you hear a lot of these, “Call this 1-800 number, tax resolution, blah, blah, blah.” We say, you know deal with somebody you know who’s local, you know, you can touch Dr. Friday, you can shake her hand, you can see her you know if you need to, and she can get stuff done.
John Haggard 26:09 And she’s got quite a track record, I think we’re probably on the air maybe 12 years, Dr. Friday, so that would be somewhere around and see if I can do my math. Let’s see, that’s 52 shows a year times 600, over 600 radio shows you’ve done.
Dr. Friday 26:23 That is amazing. I mean, it’s been always so much fun, John, to do it. But I mean, both having a show like mine, and on a station, for you know, the entire year. In fact, I’ve never yet ever heard of another tax person that has a radio in any small town or any town at all, you know, that’s run for more than 10 years, you know, so it’s been a pleasure. Seriously. A very big pleasure.
John Haggard 26:50 That’s gotta tell you something, folks because you know, you hear those, you know, “Call this 1-800 for a tax resolution,” they’re here today, going tomorrow. Some of them, you know, get into some serious trouble, been shut down, all this kind of stuff. And you know about Friday has been around a long time. If she were a bad girl, they’d know it by now!
Dr. Friday 27:07 25 years tax seasons this year. This was my 25th year in business in the Nashville area. So we’ve been here a little while. And, John, I’m glad you always, you know, again, anyone who doesn’t know John Haggard probably doesn’t deal in the media side. But he’s very good at what he does.
Dr. Friday 27:25 And one thing you brought up was, what’s different about Dr. Friday is, most of those companies you call no matter who they are, the first thing they say is, “It’s going to cost $5,000. Send us 1500, 500 a month,” something like that not knowing if there’s really a resolution available that you’re going to want.
Dr. Friday 27:43 They’re just saying, “We can take care of this, this is what we want.” We don’t do that at our firm. I want to be able to tell you how and what it’s going to cost to do it. Or if I can even do it. I don’t want to be taking the money if I’m not working for you. So it’s very important that if you call one of those companies, ask them exactly what plan they’re going to do. How do they plan to do this resolution? And you know, why is it $5,000 or 10,000? Or 20,000? I mean, I’ve seen cases that are 20,000 and 30,000. But again, you know, what are they doing for that before you just start making a payment plan and signing the contract?
John Haggard 28:23 Absolutely. Folks, don’t be so desperate and feel like you have no other hope. Dr. Friday here. As I said, I mean, she’s live and local. So there’s a lot to be said for that. You’re not dealing with somebody you would never see on the other end of an 800 toll-free number.
John Haggard 28:38 Let’s bring Barb on line one on the Dr. Friday show. Barb, what’s going on? What can Dr. Friday you with?
Caller 28:46 Hi, Dr. Friday. Yes, my husband’s friend passed away. And he left him his home, all of his belongings. And my question is about capital gains taxes. And I’ve read that they’re short term and long term. And that if you sell something too quickly, you might end up paying as much as 7% more in capital gains taxes versus if you wait for a little over a year, and then sell the property. Can you enlighten me on that a little, please?
Dr. Friday 29:27 Absolutely. And you bring up a couple of good causes. But let’s start with the fact that your husband inherited, that’s kind of a big part of the conversation because when we inherit something, get to get a step up in basis.
Dr. Friday 29:43 So really, what that means is whatever the house was worth when your husband lost his friend and he inherited that property, whatever is worth on that day or within 60 days of his death, or her death. You would have, that’s the value your husband has for that home. So the first thing I would do is get a real estate person, especially if you plan to sell the home at some point.
Dr. Friday 30:10 Get a real estate friend or somebody, real estate people are really awesome usually, and ask them to pull comps for around the date of this person’s passing. Because that’s what your husband’s going to need to prove his basis. Does it make sense what I’m saying?
Caller 30:29 Yes, ma’am.
Dr. Friday 30:30 Okay, cool. And then for anyone listening in Barb’s situation, may have been different, let’s say they had a second home. And at that point, they wanted to sell it, that’s when Barb was bringing up short term and long term. The short term is 12 months or the long term is 12 months in one day. And it is, as she pointed out, a very big difference, actually, because the short term is ordinary income rates. So theoretically, you could be as low as 12% tax on a short term up to 37%. Or in long term, you know, 15%, 18.8%, and 23.8% are the different rates.
Caller 31:12 So, you’re saying that, because he inherited it, this falls in a different category called the step up?
Dr. Friday 31:20 It’s called, you would get a step-up in basis. You could Google that if you want. It does fall in a different category. He would hit capital gains, if he sells it for more than it’s worth, from the passing of his friend. And it would not fall into the short term, it would automatically be capital gains. But he also gets that step up and basis. So he may pay zero tax, because let’s say the house is worth 200,000 at the time he passes away, and the time that your husband sells it is for 200,000, there would be a zero tax due on that property.
Caller 31:59 Gotcha. Okay. Okay, that helps me a lot.
Dr. Friday 32:04 Cool. Thank you for calling.
Caller 32:06 I appreciate it. Thank you so much.
John Haggard 32:09 All right. Let’s go-to line two. Alexander, Tennessee it is. And Richard is on the Dr. Friday show. Hi, Richard.
Caller 32:17 Hey, thank you. Thank you for taking my call. And thank you, Dr. Friday, for your service. My question is, and my question is, I’ve got two pieces of property that I bought about 25 years ago. And I’ve got two daughters. And I’ve built a house on each one of them. And, of course, when I built the houses they were probably like 150,000 apiece, and the property was worth about $1,000 and it’s 55 acres with each one. And now they’re right at around 600,000 apiece, and I was giving them to my daughters. What kind of tax situation will they or am I inherit by doing that?
Dr. Friday 32:57 So the reason you want to gift them to your daughters is that why?
Caller 33:05 Well, I love them. And I’m trying to give them something I didn’t have.
Dr. Friday 33:11 No, no, no, I guess, I am never very great on those questions. What I’m saying is just like the prior color, if they could inherit those properties, when you pass away, there’ll be a zero tax for everybody. Okay? But if you want to gift them, there’s $11 million worth of gifting. So you can theoretically gift these, but you have to gift them on the current basis, which would be let’s say, 101,000, you know, 100, for the house that you paid for plus the $1,000, or whatever you paid for the property, that would be their basis.
Dr. Friday 33:43 So if they ever decide to sell, they would pay the capital gains later in life. Now, they also would have the home exclusion, which is 500,000 they would get if they sold it, you know, and you still being alive and everything. So, I mean, that would be your option, gift it to them at your basis, which is what you originally paid for this property along with whatever cost to build the house. And then when they sell they would deal with their tax situation, depending on what it is.
Caller 34:16 Okay, but I could get out and gift it to them free of charge, right?
Dr. Friday 34:20 Free of charge. Nobody has to do anything. You need to do a gift tax return, but it’s minimal.
Caller 34:26 Okay, you know, I have two or three other pieces of property, and the taxes, it’s that much about a gross about 18 to $20,000 a year on income. And my wife and I both are retired, and we probably are about $60,000 a year. Is it worth it for us to just do a simple tax return or to come to say Dr. Friday and let her take care of this? Would it benefit us?
Dr. Friday 34:50 Well, you’re already in the minimum tax bracket. So there’s probably not a whole bunch, assuming that you’re maximizing on your rentals, which is what sounds like you have Some rental properties. Other than that, no, I think I mean. When you say a simple return, you would be filing a Schedule E, I’m assuming for the land, or farm, or something. I don’t know what it is. But other than that, you’re very straightforward. So I don’t necessarily think you need a savvy tax person to save your tax dollars. Because it doesn’t seem like you’re probably paying very much in taxes. If you feel you are, then we can reveal them to you. How’s that?
Caller 35:27 Well, I appreciate that. Is he going to give up your information later on? Because we want to swap where we’re at because this year, we have to file an extension because the people we’ve been going through for 25 years, she showed it to someone else and it’s not working out for us.
Dr. Friday 35:45 John will be putting my information out in just a second. Okay?
Caller 35:49 Okay. Thank you.
Dr. Friday 35:51 Thank you for calling.
John Haggard 35:53 Alright, folks, that’s the end of the third quarter on the Dr. Friday show. T-minus 15 minutes. This is your last call. Now’s the time to jump on the phones. Why do we say that? Because, you know, it takes more than just 30 seconds to answer tax questions. And we want you to get the answer if at all possible. So right now, if you’ve just joined us, here’s that number to call. We only got about 15 minutes to go 615-737-WWTN that’s 615-737-9986. When we come back, we’ll be talking to Ron in Lawrenceburg and taking your phone calls, John Haggard in the broadcast studio, and Dr. Friday right here with us on Super Talk 99.7 WTN.
John Haggard 36:44 All right, everybody, here we go. The fourth quarter of the Dr. Friday show as the clock counts down. T-minus 11 minutes. Let’s quickly go to the phones Lawrenceburg, Ron, you are on the Dr. Friday show. What can Dr. Friday answer for you?
Caller 36:58 Hey, Dr. Friday, I really enjoy all the information that you provide for us. My question is that I have we bought originally bought 10 acres and a house and put a house on it. And we bought three different parcels over the years. And right now I was thinking about selling 20 acres of mine that but not my house partial itself. Now I’ve owned it for 12 or 15 years, what would be my tax liabilities on that? I mean, as far as capital gains tax?
Dr. Friday 37:29 Can you tell me what income bracket you roughly are in? If you’re married, yours and your wife, you know what do you guys have for like just a ballpark? 100,000 or 50,000?
Caller 37:39 Generally 60/70,000. Normally. But this is going to be quite a bit going to add quite a bit to it.
Dr. Friday 37:47 So what is he going to sell the 20 acres for now? What’s the ballpark on the 20 acres?
Caller 37:52 Approximately somewhere around 220?
Dr. Friday 37:55 Okay, how much did you pay for that property when you purchased it? Ballpark, again.
Caller 38:00 25 or 28.
Dr. Friday 38:05 Okay, so if you’re going to sell for 220, let’s just go with 30,000. So 190 would be your profit, and you guys are making 60 to 70. So I’ll take the worst scenario 70. So that puts you at 260 adjusted gross income, it would be long-term capital gains tax on that versus ordinary. So you would be looking like a married couple with a 260. So most of it up until you hit 250 combined the sale price and your home. Your other income which we’re only like 10,000 over that you would be looking at 15% Capital Gains. Roughly.
Dr. Friday 38:49 So basically and there’d be some closing costs, fees, and everything. So up until you hit anything you bounce over soon as your total gross income, anything above it, not all of it, but at above it for the next 100 and some $1,000 would be at 18.8. So I think you’d be safe. If you’ve multiplied the sale of the home by 15%. And if you set that aside for taxes you would probably be very close to what you would need the tax dollars.
Caller 39:15 Okay, I thank you so much. Thank you for your information.
John Haggard 39:18 Thank you for the phone call. Back to Nashville we go. Here’s Will on the Dr. Friday show. Will, you’re on the air. What do you have for Dr. Friday?
Caller 39:27 Yeah, thanks for taking my call, Dr. Friday. I wonder what’s wrong with the IRS. I filed the 2020 taxes twice in 2021. The first time I filed, I did an e-file for my personal income tax. And then they kicked it back and said that I did put that code number in there because I had the OLT [inaudible] taxes when I did it online. And so they kicked it back. And the question is, every time I called, well, I refiled again. This time, I sent the paper file in, but they still every time I call, they still don’t give me the status of my refund. I know I’m supposed to get about $500 something back. But, what’s the problem with the IRS? Do you know?
Dr. Friday 40:40 Well, I mean, we’ve run into a couple of different problems. I know myself, we’ve gotten a few calls over the weekend here where people are getting checks that they shouldn’t be. It’s kind of the opposite of your situation. But that being said, it sounds like to me, there’s been enough time but keep in mind, the IRS has put out several newsletters saying if you paper filed a tax return, you know, it could take a year for them to process.
Dr. Friday 41:05 So, you know, I don’t know. What I’d be most concerned with or most interested in would be to find out if they truly received your return. Do they have it in their system? You can check that out. If you have internet access to IRS, you could sign on to the irs.gov and get your transcripts kind of situation but you need to make sure that they have a copy of your 2020 before you know because the time clock could be ticking away. And they may not even have them because of the mailing system and you know, people are so backlogged. It’s a nightmare.
Dr. Friday 41:40 So I would double-check that first and foremost, if they say they have it, and it’s been six or eight months, the only positive I can give you is if they owed you 5000, they are paying you almost 8% interest on that. Now given, that’s not going to make up the money that you’re not having. But I would definitely take a day and start calling at 7 am and see if you can find out if someone can tell you that they’ve actually had a copy in the system for your 2020. If they can’t find it, you need to certify another copy to them.
Caller 42:13 Wow. Okay. Well, thank you for the information.
Dr. Friday 42:18 No problem. Thank you for calling.
John Haggard 42:20 All right. All right. Super Talk 99.7 WTN and you’re listening to the Dr. Friday show. You know, we’ve been talking about money so much this particular hour, Dr. Friday. And what if you do owe the IRS money? How long do they have to collect it? Is there a cut-off? And you say, “Oh, I’m free after that!” Or how does that work exactly?
Dr. Friday 42:42 Yeah, well, you’re kind of right, there are rules, the IRS doesn’t just make it up as they go, they have codes that they have to follow, the IRC. And in most cases, you have 10 years from the date the IRS has accepted them. So theoretically it’d be from the extension date or April 15. But keep in mind, if you haven’t filed taxes, and the IRS has not filed taxes on your behalf, that time clock has never started.
Dr. Friday 43:10 Also, if you did file taxes, but let’s say you did an offer and compromise that was rejected, or that we established a partial payment plan for the period that the IRS was processing the application that may have stopped your time clock and it may be longer than 10 years because of resolutions and things that have been happening.
Dr. Friday 43:31 So answer to your question, the basic is there are 10 years from the date the IRS has received the return to do collections. But sometimes that time clock can be delayed or stalled or even stopped completely doing depending on the offer and compromise, partial payment plan, or non-collectible. You know, we have options to help make taxes a little bit more suitable for each individual.
John Haggard 43:58 I think I heard you say maybe one time that there may be one exception to that. And that is if there’s a fraud, they could go back forever, I suppose. Is that right?
Dr. Friday 44:08 Well, fraud, definitely, if they usually in which it that usually audit. So normally, if you’re in an audit, the IRS will only audit back two years, and the current year you’re in. But if they find fraud or more than $25,000 difference, they can actually go back, you know, a long time. I mean, I don’t know if there’s actually a time clock on how far back.
Dr. Friday 44:30 Normally we’re only concerned with an audit for the last two years. In most situations, you know, but you’re right. If you do that an auditor can go back and keep going back if he keeps findings that this person has. And that’s the hindsight you know, there’s only point .1% of people that end up in jail for tax fraud, but those are the ones that happen.
Dr. Friday 44:54 Or you have people like Wesley Snipes that came up and swore he was never going to pay taxes because he was told it was a choice. And he didn’t file or pay taxes for a number of years, or you have people that file taxes, but lately lie on them. And those are the two that are the biggest ones.
John Haggard 45:09 Another great hour here on the Dr. Friday show, here’s some important contact information for you. If you did not get on the program, here’s the email address very simple” Friday@drfriday.com. You know, like Friday@drfriday.com. The website: drfriday.com. And the telephone number is 615-367-0819. That’s 615-367-0819 for Dr. Friday.
John Haggard 45:31 And you know, we’re all in one of three stages in life and we’re either in a crisis, coming out of a crisis, about to go into a crisis, and had no idea was coming. Has that ever happened to you? Never question will there be, but when. So we just need the power to make it through. And 1 Corinthians 2: 15-16 in the Bible tells us how those who are spiritual can evaluate all things because we have the mind of Christ. Very simple.
John Haggard 46:03 If you want that power, the power to get through life you can have the same power that raised Jesus Christ from the dead. Can you imagine that folks? Yes, you can. It’s called the Holy Spirit. And when you accept Christ as your Lord and Savior, you can have that Holy Spirit. All you got to do is just say, “Jesus come into my heart. I make you my Lord and Savior. Forgive me of my sins.” And God willing, we’ll see you next week here on the Dr. Friday show on Super Talk 99.7 WTN.