Welcome to another episode of the Dr. Friday Radio Show! In this episode, Dr. Friday gives all the newest tax updates and answers the caller’s questions:
- Why You Need To File An Extention
- Do I Report My Stimulus Check As Income?
- Tax Extensions Expires October 15, 2021
- Go To Irs.gov To Find Your Stimulus Check
- What Can I Deduct From Charitable Contributions?
- Tax Filing Deadline Is May 17, 2021
- Where can I Find My Tax Refund?
- How To E-File Your Tax Returns
- File The 4868 Form for A Extension
- Unemployment Is Taxable Income
- Do You Need Help With Tax Representation?
and 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 the last weekend before tax day, a lot of people thought Friday was tax day, our phones went crazy. But it is actually Monday, so of all of you that may have procrastinates that last or didn’t get ahold of somebody, or me, hopefully, I’ve returned everyone’s phone calls or text texting at this point is probably the fastest. But extensions can still be made IRA payments can still be done on Monday. So you have until Monday to hit the button, pay the taxes. And remember, if you’re filing an extension, it only extends the paperwork. So just means that if you owe money, filing an extension isn’t going to stop that from happening. It’s going to basically continue and if you don’t file an extension and you owe money, you’re going to have 5% per month. If you file an extension and owe money, then it only points to 5% per month. So there’s a huge difference no matter what. So filing that extension.
Dr. Friday 1:34
Let me clarify the extension doesn’t last for years, it does expire come October 15, 2021. So, people that come in a lot of times, they’ll say, “Well, I file extensions every year,” but they never filed taxes for the last 5, 10, 15 years. So you know you were good up until you pass the October 15 deadline. At that time, you just kind of fell off the radar. So very, very important to file an extension, you can go to irs.gov. There are some free ones on there. The 4868 is the form you’re looking for. So if you have a tax form, and you’re looking to file something, you can do that 4868 you can also go to irs.gov, click on pay, and you can either make a payment with a credit card or your bank account. That is now just kept in mind, if you’re filing money and you file it under the 48 extension, that doesn’t mean an extension has been filed. All it means is that you’re making a payment with an extension. So you need to make sure you have electronically filed ideally, the 4868. If you owe money, put some of it towards it. Anything’s going to be better than nothing. I understand it’s difficult, but it is crazy. Alright, let’s go ahead and hit the phone lines. We got Jim in my town of Smyrna. What’s happened in Jim?
Caller 2:52
Hey, thank you for taking the call. Here’s my question. My wife inherited an annuity from her aunt who passed last year. As far as filing tax, we took it and rolled it into another. I don’t even know exactly what it was, but in the Merrill Lynch and they took it and put it into basically a tax-deferred product. So my question is when we’re filing taxes, do we put this into our income tax?
Dr. Friday 3:29
Great question. I get it. So here’s the deal. The year which we inherit something like an IRA or a 401k. I’m not too sure about an annuity, if it’s in essence, it’s in a tax-deferred account, she will have, I believe the law is 10 years to empty that out, she has to take required minimum distributions. Now in 2020, those were waived, therefore, it wasn’t required to take but normally she would have and you would get a form called a 1099 R. As long as they kept it in the retirement account and she didn’t take the money out, you should be fine. You probably didn’t receive anything in the 2022 reports. I would probably just double-check with Merrill Lynch to make sure there was no taxable situation because I will tell you, a lot of the cases that come through my door when people do it is because of something like that, where they didn’t think they had to file it. They didn’t think that it went became taxable or whatever. And then the IRS received something different. And then they changed their tax return and then they owe quite a bit of money. So I would just double-check with Merrill Lynch to make sure the money that there wasn’t a 1099 R issue to your wife. As long as there was not there’s nothing that she needs to report in 2020.
Caller 4:43
Okay, yeah, there was a 1099 R that was came so the company is called the bright house, and there was a 1099 R that was sent to us, but Merrill Lynch has put it into a different account. Now they told me that it’s going to be coming to us in May but they didn’t say when in May and obviously, you know, we’re here we are.
Dr. Friday 5:06
I know you’re not sitting where it’s at, but if you look at the 1099 R, you got the original one, box seven should have a G, which would mean that it rolled over from their custodian to Merrill Lynch, which means it’s a zero taxable situation. If there is a code four, which would mean death benefits, that’s a problem because that means they’re saying that it got cashed out and given to your wife in then you’ll have to file an 8606. Anyway, showing that Merrill Lynch got the money within the 30 day period, that you have to roll it over to them. So it’s kind of important to look at that box seven, just make sure it says G, then you don’t have to worry about it from that standpoint, you may need to file an extension though. Because if Merrill Lynch is saying, they haven’t really got it out to you yet, you don’t really want to have to do an amended return if you don’t need to.
Caller 5:55
Gotcha. So if it says G on box seven, or you said number 4?
Dr. Friday 6:02
Number four because it would be death benefits. If it says a four, it means it’s taxable income, whatever is in box two. If it says g that means rollover, it means it just went from custodian to custodian, your wife never had any involvement with it. So it’s sometimes they make mistakes on that. So you just want to kind of look at that box seven, just to see what you need to be concerned about. Because just I mean, the bottom line is, it’s what we in the IRS need to know. Sometimes they make the mistake, but we pay the price.
Caller 6:31
Okay. Thank you very much. I appreciate it.
Dr. Friday 6:34
Thanks for calling. Appreciate you. All right, and you are listening to Dr. Friday with the Dr. Friday Show. My goodness, we have been doing this for over 10 years. So I guess a big congratulations to all of you guys for listening. I get to see you guys, usually once a year, at least a very large number of you come into my office and you know, totally appreciated. It’s been a long two-year tax season, it seems like it last year went through July this year going through May. We are appreciative of all of our clients. And hopefully, we’ve been able to get most of you guys all taken care of and filed extensions, at least. So we can get you guys done in the next few weeks and caught up.
Dr. Friday 7:12
If you have tax issues, or if you’re dealing with IRS issues, or you haven’t filed your taxes yet, we really need to get that extension file, then we can get you in the office and try to get you you know up to date and file correctly. Don’t just rush to get it done. But if you know you’re going to owe money, look at 2019. If nothing’s changed, and you owed money in 2019, the likeliness is you’ll owe money in 2020. If 2020 was like an upside down and sideways, meaning you lost your main job, you were on employment, you work two or three other jobs, you did Uber, I’ve had a lot of those clients. And it’s hard to justify, it’s hard to try not to justify, but try to estimate the taxes. So if you’re in that kind of situation, all you can do is your very best. If you’re not able to file your own taxes, and you haven’t been able to get a tax appointment, my suggestion again, go to irs.gov at this moment, file an extension. Then that way, then you’ll be able to get the information and get it done right. And even though there’ll be a slight penalty, at least you can get them done in the next maybe the next week, and therefore the penalty will be fairly minimal and being able to do what you need to do and how you’re going to do it.
Dr. Friday 8:26
All right, let’s hit the let’s hit Donna before the break. Hey, Donna.
Caller 8:30
Hey, Dr. Friday. How are you?
Dr. Friday 8:33
Thank you. I am good, almost done with tax season. I’m excited.
Caller 8:38
I know I can feel for you. I know you’re going to be very busy today. But I got a question on record retention. How long do we need to keep the actual tax forms? And how long do we need to keep all the supporting documentation?
Dr. Friday 8:56
That is a wonderful question because I’m gonna tell you I’m a little bit old school. So I still tell my clients we need to have copies of your tax return along with whatever documents for seven years. The IRS really will only go back three years unless there’s fraud or something else. But the other documents you might want to make sure you always hold on to would be like closing documents for the home you live in. Or if you have other properties, stock certificates if they exist within your portfolios or anything, anything like that titles, obviously for cars and all those kinds of things. But all of those would still hold on to they don’t drastically. They’re not really taxed forms per se. But those are really important when we get ready to do taxes later or something happens to one of us those documents are extremely helpful for us tax people to be able to get cost of goods are a basis for some of the things people may have. But for actual tax forms, W2’s, 1099 I still go with the seven-year number.
Caller 9:58
All right. That’s very helpful. So I’d like to clean out some of these 10,000 little pieces of paper.
Dr. Friday 10:05
Yeah, that’s a good idea. And a caveat to that Donna is you don’t have to have the original you can scan in. And I’m not saying but you can scan in and keep digital copies of all those years. You don’t have to have the originals any longer.
Caller 10:20
Oh, thank you.
Dr. Friday 10:21
No problem. But thanks for calling. That’s a great question. Appreciate it. No problem. Bye, bye. All right. And that was a good question. Because to be quite honest, a lot of times people ask that question when they come in, because I have people that have liked their very first tax return, and they’re now in their 60s. So you know, 40 years of tax is maybe a little overkill. Pretty sure Uncle Sam will not be going back that far. But you know, again, when you’re cleaning out all those important paper boxes, and I will say it’s, it’s quite annoying, I mean, my parents were really good about not saving every little piece of paper. So when they passed away, I did have a couple of their original tax returns, which was kind of funny, kind of neat to look back and see what they were earning back in their 20s. But other than that, I didn’t have to worry about having 40 years of tax documents, so might be good to clean up some of that just so when we aren’t here any longer, we’re not leaving that kind of thing to the next generation to have to try to figure out what’s important and what is not important for paperwork.
Dr. Friday 11:24
So if you want to join the show, it’s really easy guys just call 615-737-9986. As an enrolled agent licensed by the Internal Revenue Service to do taxes and representation. So just a note, I have never worked for the IRS. I have worked for clients, tax clients, people that pay taxes or have tax issues against the IRS. So I’m a little bit like a shield between you and the Internal Revenue Service. They have licensed us for doing representation and helping people with audits and different things like that, so that we can make it through. Alright, so if you want to join the show, 615-737-9986 we’re gonna take a quick break and we get back from that break, we’ll get to the phone calls that are coming in at which I appreciate always makes the show more exciting. We’ll be right back with the Dr. Friday show.
Dr. Friday 12:25
We are back here live on the radio from my Skype station. You can get on the phone with us at 615-737-9986. We are fortunate enough let’s hit Patrick. First Patrick in my town Spring Hill.
Caller 12:42
How are you?
Dr. Friday 12:43
I am good.
Caller 12:45
Good. We’ve sold our house in Tennessee here in Spring Hill. And we’re using the equity to purchase our new house in Florida. We’ve closed on both of them next month. So when we pay cash for the house in Florida, I’ll have money left over from the sale of our home here. What what what is that money considered? Is that money for us to use? At will? Or what is that considered since it’s from the sale of a home?
Dr. Friday 13:14
Right, great, question. We normally I would say it’s capital gains, because most things we sell, we have to pay tax. But assuming that you sold your home in Tennessee, your primary home that you lived in it more than two years, and that you didn’t sell it for more than 500,000 than what you paid for it. Then any gains you have from the home in Tennessee, you do not have to reinvest it into another home. It is all yours. You can choose to do that. But it’s not a mandate.
Caller 13:41
Okay, so we are I mean, we are buying another home with it, but we’ll still have money left over. So that is just money to buy a boat with or something.
Dr. Friday 13:51
Anything you want to do to enjoy yourself. That’s what I would say anything that makes life better because you work for it.
Dr. Friday 13:59
Thank you.
Dr. Friday 14:00
No problem. Appreciate it. All right, let’s go to Jim, Jim in Cookeville. Hey mate. What are you up to?
Caller 14:13
Well, just fiddling around listening to your show today. But I have two questions. Number one, if you have a full-time college student, how long can you receive the tax credit on that?
Dr. Friday 14:29
So college education will be for the first four years of college? Pretty much there is an educational credit that may run into depending on if they go into getting their masters or whatever, but most the main $2500 a year pretty much is going to be on the first four years.
Caller 14:48
Okay. All right. And then if you have a tax liability that you’re having to pay in, how long after The filing deadline, do you have to pay that?
Dr. Friday 15:03
Well, theoretically, you want to pay it on or before the tax deadline. So this year, May 17. If you wait till after, and you file the tax return, you’re going to get hit with a point 5% penalty. And depending on if you were supposed to make quarterlies, and a couple other wonderful little penalties they can hit you with, it’s going to add up relatively quickly to probably in the ballpark of two to 3% a month that they’re going to charge you.
Caller 15:29
Okay. Well, that answers both my questions. Thanks so much, I appreciate the show.
Dr. Friday 15:34
Thanks, appreciate you calling. All right, and you are listening to the Dr. Friday show, cuz I’m Dr. Friday. And if you have questions, or you’re working on your taxes, because I know I’m working on taxes, and you’ve got questions on those, and if it’s something I can help with, you can give us a call here at 615-737-9986. We are taking your calls, talking about taxes, and doing taxes. If there’s something that you aren’t really quite sure about how it’s going to work or what you’re doing, then you can certainly give us a call and see what we need to do to make it happen for you. But, you know, again, we’re talking taxes, so if you need help with those 615-737-9986.
Dr. Friday 16:17
So this year, really pretty straightforward taxes, I mean, there’s not a huge number of differences or anything. Probably the largest thing, which depending on your tax bracket, higher up your tax bracket, better tax deduction it is, is the $300 no matter if you’re single or married for a charitable contribution. So if you normally give to charity, and you’re able to deduct it, normally, we can’t. So normally, we just put that as part of the 12,200 or 24,000 standard deductions. But this year, they’re giving us the standard deduction plus the additional $300. So, again, when you’re in the 12% is not going to have a huge deficit. But if you’re in the 24%, it will be a little bit better. So just don’t forget that you have those and what you’re going to do with them.
Dr. Friday 17:11
Alright, I love it when we get all these phone calls coming in, even though we keep losing a couple of them. So anyway, if you need help with that, or you have a situation, let me know. Can we go to Joe real quick, and then you can get to your phone line, boss? You’re awesome. Hey, Joe, what’s happening?
Caller 17:32
Good afternoon. My mother-in-law is about seven years old, she gets Social Security and about $1500 in alimony. On her taxes there’s a question for her, Is she over 65? Or is it over 65 and blind? I can’t remember that.
Dr. Friday 17:58
One would be 65 and older. Right? I mean, if anyone that’s over the age of 65. We get additional if you’re single 1500. If you’re married, 1250 to the standard deduction. Then if you’re blind, there is an additional deduction for them.
Caller 18:14
Okay, all right. Well, that she did not take. So would that be enough to make it worthwhile?
Dr. Friday 18:26
Did you have any taxes due?
Caller 18:27
Yeah, she owed $300 I think it was.
Dr. Friday 18:32
I would say if she did not check the box, and she’s over the age of 65, that $300 would definitely been reduced. So it would be well worth getting her money back. She works hard for it, or she had worked hard for it. So definitely something she should do.
Caller 18:47
All right, next question. If I could ask another one. Her alimony was $1,000 a month and then her ex retired and started his retirement. She was supposed to get an additional $500 from him from his retirement. Would that still just they consider that considered alimony?
Dr. Friday 19:12
It would depend, some of them will actually split it like the military. They’ll actually send the spouse that’s receiving benefits a form a 1099 R and then the ex-husband would have his so it depends on where she got the money if he if the ex-husband check. Is that how it worked? Did he give her a check?
Caller 19:36
Yeah, he gives her a check and it just comes out his retirement that he is invested in or maybe the company worked for but it’s definitely not military or anything like that.
Dr. Friday 19:53
So then it’s just going to show up as alimony. Yes, whatever he wrote checks for that would just be part of the whole package.
Caller 19:59
Oh, All right. Well, thank you so much. I appreciate.
Dr. Friday 20:02
Thank you for calling appreciate it. Alrighty, so let’s go ahead and hit the next person Rose. Let’s hit Rose. That’s a pretty name. Oops, we lost rose which was not good. How about Dave and Madison since we scared off Rose. Hello Dave.
Caller 20:18
I filed my taxes last week, went through the online learning the regular services I’ve used for years. And when they came up to my CalPERS pension, they said they had the information. So I think I bypassed it and finish the whole thing. Then when I looked at my printout, there’s nothing about that. But I think I didn’t report my CalPERS.
Dr. Friday 20:44
Well, you know what you need to do.
Caller 20:47
No, I don’t.
Dr. Friday 20:49
Okay, well, then that’s why you’re calling, and let me tell you what you need to do. You need to amend your taxes. You want to catch that before good old Uncle Sam, they’re going to know about anyways. So I would just do a 1040X. If you use software, it should prepare it for you. So I would just go in there, add the difference. Then if you owe if you do, if you don’t but go ahead and correct that. You can electronically file 1040 X’s now we don’t have to mail them any longer. So you should be able to do it right through whatever tax software. My assumption is the tax software should be there for you to do that.
Caller 21:23
Okay, 1040 X?
Dr. Friday 21:27
Exactly, I would think so. If not, give me a holler Monday or whatever. And I’ll be more than glad to help you. But I’m assuming the software would be set up for people to be able to make corrections if they’ve made a mistake. Life happens.
Caller 21:38
I appreciate it. Thank you.
Dr. Friday 21:40
Thanks, mate. All right, we are going to go ahead and take a quick break here. Oh, no, we got Rose back. Let’s see Rose.
Caller 21:52
I filed my taxes with [inaudible] on March the 17th. And I am doing a refund of about $3,000 and I have not received my refund. What could the problem be? What do I need to do?
Dr. Friday 22:09
Was any of this stimulus money? Did you get all your stimulus checks? Or some of this may be stimulus money?
Caller 22:16
Yes, I did get both my stimulus checks.
Dr. Friday 22:19
Okay, so this is not going with the stimulus? Have you had a chance or they’re the people that helped you? Do you know if anyone went online to look for a status update?
Caller 22:28
No. And it so happened that the people at 50 forward with AARP. And once they file your taxes, say they are through. You have no recourse with them. So I’m just out there in the dark not knowing what to do.
Dr. Friday 22:46
Do you have anybody that’s computer somewhat savvy? I mean, it doesn’t take much. It’s pretty user-friendly. But is there anyone that you have that may have the ability to use an iPad or a computer?
Caller 22:56
Yes.
Dr. Friday 22:58
I would ask that person to go to irs.gov and right there on the first page is going to say “Where’s My Refund,” and if they click that and they have a copy of the tax return in front of them, it will take them about two minutes to be able to tell you what the IRS at least is saying is the delay for your return it could be that they need you to call them for identity because they’re doing a very big identity theft thing this year. So maybe they’re afraid of fraud or it may be that the tax return was never received. irs.gov. govt Yes, ma’am. All right.
Caller 23:38
Thank you so much.
Dr. Friday 23:39
No problem. Thank you for calling. All righty. I’m so glad rose got back with us. Okay, so while we take our next break here, if you want to join the show, it’s pretty easy. Pick up your phone and call 615-737-9986. You can reach me here talking about taxes. If you have a question or maybe a statement who knows. But you can reach us live right now. We’ll be right back with the Dr. Friday show.
Dr. Friday 24:19
All righty. We are back here live in-studio on the last Saturday before the end of tax season for 2020. And we’ve got Jake that held through the break. So let’s get him on to do is patient enough to do it. Hey, Jake. Did I lose you, Jake?
Caller 24:42
Okay, sorry. Thanks for taking my call about I’m doing my mother-in-law’s taxes. And it’s very simple. She just had Social Security and her minimum required distribution. But last year she had to make extra money out when we moved her out of a nursing home into a mother-in-law’s apartment, we had she had to invest some money to get it to set up. So I saw on the tax return said, “Hey, if you took extra money out, but due to Coronavirus, you could spread the taxes that you owe over a three-year period. I want to know Is there any catches on that?
Dr. Friday 25:21
I have not found one catch so far, Jake, almost everybody’s life was affected somehow by COVID. I mean, to be quite honest, from people trying to move loved ones into safer residencies or whatever else because of it. So we’ve used it a lot. We haven’t seemed to have any, you know, kickbacks.
Caller 25:47
Here’s a for instance. So I just heard you say that in 2020, you didn’t have to take an RMD. So let’s say her RMD was just 50,000 talking purposes, and she took out 75,000. I mean, if they did count the RMD, she could only apply the 25,000 towards this three-year period, is that correct?
Dr. Friday 26:08
That would be correct. I mean, if she took out, but theoretically, there was no mandate for her to take out. So I would probably argue she never took out an RMD that she took it all out for the purpose of surviving COVID or the patient because of it.
Caller 26:23
Alright, so if you did that if she had tax withholding coming out of her distributions so that you wouldn’t have to have a big tax bill, does that mean if you normally would get back $2,000, you might get back 8000?
Dr. Friday 26:36
Probably, if I was doing our taxes, I would probably roll that over. She’s lived without that tax refund. So I would roll it over. So next year when she has additional income that she’s not normally having, she already has the taxes pre-paid, maybe not all of it, but a portion that would cover that additional third that she wouldn’t normally have, because she did take the money out for some of that at least in advance.
Caller 26:59
Okay, so the bottom line is she’s you don’t pay the taxes, no matter what it’s just it can be spread over three years and give us a little bit of breathing room this year?
Dr. Friday 27:08
Right. And it will kick some people. Some of my clients will actually keep me in a lower tax bracket by doing that. So it does give them a little better tax situation where she has to put all let’s say 80,000 kicks her into a 22% tax bracket where if she can split three ways she might stay in the 12. That’s a nice little break for mom since she’s having to take that extra money out anyways.
Caller 27:28
Gotcha. Okay. Hey, Doc, I appreciate the explanation. That clears up a lot of questions I had.
Dr. Friday 27:34
Thanks, sweetheart. Appreciate you. All right, let’s get Christie in the burrow. Hey, Christy.
Caller 27:42
I’m also as well with Texas accountants, and on the tax record part, I’ll tell everybody to keep them because we have caught some folk’s security errors when they retire.
Dr. Friday 27:55
I see I’ve never had that. But I hear what you’re saying yes.
Caller 28:00
They’ve got to match up and it’s not in the clients, right? It’s always something they’re gonna miss out on Social Security. So tell them to keep the tax return. You don’t have to have all the documentation but just keep your tax return. I would keep everything because it proves how much you made that year.
Dr. Friday 28:23
Okay, that sounds like a lot of paper. I have to keep Christie. But on the other hand, if I hear you, we can’t replace it once you shred it, so and the government won’t give it to you.
Caller 28:34
I want to tell you one other thing. I did work one year briefly for the IRS. I got fired down there. It was a mess when they moved to Brentwood because I wouldn’t do what they were telling because it was wrong. They didn’t know the tax law, they didn’t tell us what to go home and then the little old eight-year-old lady was fixing to blow her brains out. I had to ask the girl to take that call, and she found her family, she thought it would pass on to her children. You know the tax law is not passed on to your children, it ends at your death. Let everybody know that that, that lady was gonna blow her brains out. We had to wait for the police and fire trucks. She held $20,000 or worked 10 years ago and she had a gun to her head.
Dr. Friday 29:29
Well, and that’s the kind of thing that I think people like yourself and that’s one of the reasons I try to do the show because if you can take the fear factor. The fact is the IRS isn’t going to take your house, IRS isn’t going to take your kids or they’re going to take you you know. They don’t want to objects they just want to be paid so it’s not as scary as it needs to be in gosh knows we don’t need to kill ourselves over taxes that is just.
Caller 29:53
$10 a month if you only get Social Security and I was telling the girl to send her $10 a month check. if you’re elderly, what can they get? [inaudible]
Dr. Friday 30:03
Death is not the answer. Wow, that is crazy. Christy, thanks for sharing.
Caller 30:08
I have listened to you a lot. I do mostly private people, my friends, real estate people stuff like that. You’re great. I’ve listened to you. You’re awesome. Thank you so much for educating the people. Sometimes they don’t believe me on the listen to your show. Have a great day.
Dr. Friday 30:29
Thanks, Christy. I appreciate you. Bye, bye. Wow, she is in what Christie just for some of you that were kind of maybe not hearing exactly what she was saying. And you know, all of us have to have 40 quarters, 10 years of security paid. And then they take the highest over our last time or 30 years. And what she’s saying is sometimes people get close to retirement age. And that’s when people start looking at their Social Security statements. You don’t see a lot of 30-year-olds looking at their Social Security statements. But you do see a lot of 60-year-olds checking them out. And then they find out that back in 1980, whatever, that there was not income reported in some of those years. And what Christie was pointing out is if you have tax returns, and you can prove you file taxes, and I will even go a little further. And she kind of said it there, but not only the tax return but you kind of need that W2, especially for W2 people. But if you’re a self-employed person, you need to prove that you filed taxes and paid Social Security and Medicare tax or self-employment tax all the same for that same situation.
Dr. Friday 31:38
Otherwise, I don’t do a whole bunch with that. But it sounds like to me that Social Security basically says if you can’t prove it, you don’t get it. That I can believe. I know I had a situation where someone came into my office and was similar. I mean, we were basically looking here and filing taxes and a number of years. So by not filing, of course, Social Security didn’t show them. AHe was like, “Well, I’ve worked as a W2, shouldn’t they show it anyways.” And that was a prime example. Apparently not just having the W2, but filing the tax report may be the final step. So again, if you are thinking about doing any kind of tech shredding of the old tax records. Before you do that, I guess my caveat to that is to pull your Social Security statement, make sure that all of your years are accounted for. If they are, go ahead, you shouldn’t need them, I hope unless someone else can think of another good reason to have more than seven years. But that was a really good reason. If you go in there before you shred them all, and you don’t have all your quarters, you can’t go back and get them. And I will tell you the IRS does not keep copies of 20-30-year-old tax returns, you would think they have them but there’s no way of obtaining them. So we really can barely go back seven years, we’re actually for copies, I think it’s three or four years that we can actually get the tax returns transcripts. Otherwise, we just have the ability to see what was filed but not really documentation to back it up.
Dr. Friday 33:05
So really, really important to be able to have that documents because you don’t work for 40 years and then not want to go and get Social Security or be told you didn’t have 10 or 40 quarters, or 10 years listed to even be able to qualify. So that would be a total downer guys. Alright, so if you’ve got questions or comments, I love those kinds of things. Even though I’m really glad I didn’t, wasn’t in the office with Christie that day when someone was. I know guys that the IRS feels threatening, and I have more than once had people cry in my office because sometimes you just need someone else to help. I’ve been blessed enough to be able to get people into a situation where they can actually breathe a little bit not worry about every time they put $1 in the bank that it might be seized or that their paychecks are levied, or their homes have liens and levies, but there is a path there is a way and as Christie said, these are things that you need to be able to approach and deal with and not put your life on the line for them, not for the IRS.
Dr. Friday 34:12
I’m pretty sure anybody that works for the IRS at this moment is sitting there saying nobody needs to kill yourself over IRS debt. It may feel like it’s sometimes life may feel pretty hard. You know, there is a pretty straight path there are rules and regulations and most of us can get what they need to be done. It may take a little change and may take a little hard work but every day we get lucky enough to usually get somebody in there that we can start them on that path to you know, to tax getting out of debt with the IRS. It’s a really important thing and sometimes it’s just a matter of changing your withholdings you know? Have a little bit more extra come out so you can pay him back faster learn to live off a little less. In the long run, I’ve had people that did that. Oh, I had a client come in about 10 years ago they were upside down with the IRS every year they were owing to the IRS and they were W2 people, they just didn’t understand why was I still owed money at the end of the year, I’m claiming this. It was because there was a two-income family. And sometimes the tax code doesn’t work perfectly for two-income families, especially if the children are 17, 18, 19-year-olds.
Dr. Friday 35:17
So I told him, “Hey, both of you go single and zero.” And in five years, they paid off the IRS. And every year after that, they were getting very nice refunds. In fact, we were able to start doing stuff with IRAs, and different things like that, because they were used to living off a different mount. And that’s kind of important. Alright, so if you want to join the show, we’re gonna be at the last break here, we have about 10 minutes when we get back. So if you want to join the show, you can at 615-737-9986. That is the phone number here in the studio. We are taking your calls, talking about my favorite subjects, guys, and we only have a few more days, and tax season 2020 will come to an end. It’s almost like the Olympics or something for Friday. Alright, we’re gonna be right back with the Dr. Friday show.
Dr. Friday 36:12
All righty, we are back here live in the studio we have Oh, I don’t know, maybe about 10 minutes, nine minutes left of the show. Let’s go-ahead hit, Doug. While we have time. Hey, Doug, what’s happening?
Caller 36:24
Hey Doc, my [inaudbible] comes to an LLC as a self-employed this year. And don’t understand the QBI how it reduces his tax liability. Can you help us with that?
Dr. Friday 36:37
I can do my best. Qualified Business Income. So if he is a partner in the business, you should have a part A to the K1 that gives you a breakdown on how much is wages? How much is UBIA? How much is the income from box one, all of that would roll on to the bottom half, and then it’s going to be giving you up to 20% of the income that he earned. Now, this may or may not include his self-employment, because, on a K1, he may also have line four, which is partner guaranteed wage, which may also qualify for a different QBI. I’m assuming he’s an active partner in this business?
Caller 37:24
Yes, he’s the only one.
Dr. Friday 37:26
Okay. He’s also a single member so if he’s an only member, then you can’t have a K one because single-member LLC has to be on Schedule C’s, QBI still kicks in. But it’s going to be on a Schedule C on his personal tax return if there’s only one member.
Caller 37:44
Yeah, he got the income that was a 1099 NEC, I believe is what it was. Okay. So that is it that reduce it by 20%?
Dr. Friday 37:56
Well, it will, I mean, he’s gonna have expenses and you’re not looking at the gross, you’d be looking at the net gross, where after expenses, what is his taxable income? Then it will be calculated based on that? Yes. He should have that, on the bottom part of the Schedule C that he’ll be filing.
Caller 38:14
All right. Thank you very much.
Dr. Friday 38:18
Thanks, sir. All right. Let’s go to Ted in Tennessee. Hey, Ted, what’s happening?
Caller 38:24
Oh, how are you today?
Dr. Friday 38:26
I am awesome. How about yourself, sir?
Caller 38:28
Doing great. Doing great. And you have probably been asked this question numerous times already. But I was late tuning in so please forgive me. Do we have to report our stimulus checks as income?
Dr. Friday 38:44
That is great. Ted, you are the first person today to ask that question. And the answer is no. The tax return will ask if you received them, or at least my system does ask but only for the purpose of making sure you got 100% of what you were entitled to. None of it will be taxable to you.
Caller 39:02
Excellent. That’s all I wanted to know.
Dr. Friday 39:04
That was a great question. Thanks for calling Ted.
Dr. Friday 39:07
Especially very much. No problem. All right. And I did have someone call last week and they were calling me about the advanced child tax credit payment that’s going to be for 2021. He was kind of asking how do we go about getting it and it’s apparently right now the IRS is basically saying you have to file for 2020 to get on the list. The credit amount will increase for each taxpayer, they will be giving you credit for children who turned 17 in the age in the year of 2021 or younger. So if your child is 16 or 17, whatever at this point this year, you will be getting the advanced child credit which is $3,000 per child for children between the age of six and 17. You will get 3600 for children that are six and under who, as long as they stay six through the year of 2021, so 3000 for children that are six through 17, 0-6 years old is 30 $600. Under the prior law, the amount was $2,000. So next year, there’ll be quite a bit more money, and they are starting to make some. If you put your direct deposit information on the tax return, they will start trying to make direct deposits into your bank account every month to help offset the difference between the 2000 and the third and the 3000 or $3600. For each person that they that is eligible for this.
Dr. Friday 40:41
It seems like they’ve kind of defined the eligibility straight out single person 75,000, head of household 112,000. And married couples $150,000 will be the maximum set. So if you make less than 75,000, as a single person, Head of Household individuals, if you make less than 125,000, and a married couple that makes less than 150, you will be qualifying for these credits. So hopefully, you’ll be able to get more information, it doesn’t look like at this point, there’s any place that I can see. If someone knows something different, I’m not seeing any place online, you can sign up, they are solely using your 2020 tax return to get you into the eligibility. So there’s nothing you need to do if you filed your 2020 tax return this will automatically go into play. Also, another person asked me about and I don’t have the answer yet, guys, I will try to find out next week since I’ll be done with the tax season. But in our office, we had about 41 people that we filed taxes before the new tax law that had ended up paying tax on their unemployment benefits. There was a couple of people that had paid tax because they had ended up with too much income. And there on the marketplace, both of them would end up having changes to their tax return, the IRS did put out a newsletter that basically said that they did not want anyone to amend their taxes, what they do want us to do is just to wait and they will be sending us the difference. But for many people, this is getting close to 60 days where this has happened.
Dr. Friday 42:20
So I’m going to find out what the what if there have been any updates on how or what we need to be doing to try to get these people their refunds because that’s held up the entire refund, not just the individual’s difference, I think so it’ll be interesting to see what we have going on. Again, maybe they got their refunds, but just not the difference. So we’ll find that out. Other than that, we only have two days left Sunday, Monday, the last day of taxes, and Monday the 17th file an extension if you haven’t filed taxes.
Dr. Friday 42:56
If you haven’t filed taxes in a number of years file an extension 4868 is form number 4868. You need to file that so that we can help with penalties. If you need help after that, you can certainly give our office a call that number would be 615-367-0819. And we’ll be more than glad to help you resolve tax issues. I’m an enrolled agent licensed by the Internal Revenue Service to do tax representation and taxation. So basically, if you have IRS issues or you need to file back taxes, or you just keep getting those love letters, this is where we want to start by just doing an initial consultation and find out what we can or what you’re willing to do to try to get that resolution taken care of.
Dr. Friday 43:44
You can also go to drfriday.com check me out. And if you need to send a message, you can send it through there. I am hopefully going to be finally caught up through my emails through this weekend, making sure everybody has had everything that they need to do so that we can get everything caught up and make sure everyone’s extensions and or taxes if you’re one of my clients. Hopefully, you’ll be hearing from me within the day here to make sure everybody’s taxes are where they need to be or an extension has been filed. Again, if you can afford to put money with that extension because you know you owe money, then it might not be a bad idea. You can do that easily by going to irs.gov and click on “pay” at the very top. You can certainly go there and check out your stimulus. “Where’s your stimulus” you can check “Where’s your refund,” those would be the main things that you want to do. If you have no idea what you have going next you can go ahead and obviously get your transcripts there as well. But that will be a way for you to be able to get in.
Dr. Friday 44:53
One of my clients came up and said if you go onto there and the transcripts, you can actually take a look at if there’s a problem with your tax return. There’s actually information in that section that will give you that detail because sometimes people have moved and relocated. If you haven’t received your refunds, you’re not sure what you have. Alright, so we’re down to the last minute here. You can reach me at 615-367-0819 you can email friday@drfriday.com or check me out at drfriday.com. And hopefully, guys, hope you had a wonderful 2020 tax season. Next time we talk I will be done with taxes, which will be next Saturday at 2 pm. But if you do have a friend or you know someone that might need some help with taxes or understanding their tax situation, again, the easiest thing, it’s a free consult. We make sure we can do something to help it doesn’t help to just start sending money in, you need to make an appointment, you can call us 615-367-0819 and we’ll be more than glad to help you out. Make sure that you get your taxes straight. So you don’t worry about having taxes using it on to the bigger and better things of life enjoying life. So I hope you guys have an absolutely wonderful Saturday. I don’t plan to have a wonderful one but I plan to work through it and get through this. I hope that you’re enjoying the weather, so call me later.