Welcome to another episode of the Dr. Friday show! In this episode, she answers all your questions about the tax filing as well as the following topics:
- Can I File for a PPP Loan?
- If I’m Still Working, Do I Qualify for the PPP Loan?
- I Still Haven’t Received My Stimulus Check
- Do I Qualify For Unemployment?
- Is The Stimulus Check Returnable?
- What Taxes Do to File to Qualify For the Stimulus Check
- When Are Estimated Tax Payments Due?
- Can I Claim a Home Office On My 2020 Tax Return?
And so much more!
Transcript
Announcer 0:01
No, no, no, she’s not a medical doctor, but she can share cure your 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. We are live, so if you want to join the show call 615-737-9986. I know there are many of you still listening to the show that has not received your stimulus check. At this time, all I can tell you is the website is not necessarily giving all the information that you’re needing. Obviously those situations where people are talking about details and it’s coming back that they can’t match it. If you have your adjusted gross income and you’re putting it in for 2018, it doesn’t match what the IRS is showing. Many times that is happening, do not get too stressed over it. I do realize that money is getting tight for many people. So you’re really needing that extra assistance. But to be honest, I do have good news, at least people that are on social security and VA I will say as of this last week, I have received calls from many of the listeners that are keeping me in the loop and they are starting to receive their stimulus money. Again, not everyone has received it so you’re not the only person out there that hasn’t received their stimulus. If you have questions, the easiest or the only place the absolute only place I can suggest you going to is IRS.gov and go to the stimulus check to see your status. If it’s not giving you a good status, I am under the understanding that the IRS phone numbers are working. It’s just that again, there are millions of people that still haven’t received the money or trying to get answers to other questions. Therefore, the phone lines are backed up for hours if not hanging upon you as soon as you call, which is what happened to me. So I’m just making the assumption.
Now, if you’re a small business owner, a self-employed individual that receives 1099, there was still as a Friday at least PPP money out there for all entrepreneurs and small business owners. You can use your schedule C which had to be prepared, at least prepared for 2019. If you have received your PPP money or your EDIL money that’s forgiven. Remember, there are some steps we must take from the date of receiving it, you must prove that 75% or more was used on payroll and that does not include the payroll that you have for your company portion of the payroll tax, it is only the employee portion health insurance for the employees. I can’t see on my monitor just in case I don’t see the screen. If there’s any callers or anything, I don’t see the screen there. So maybe you can help me put that on there. I’m not sure how to do it usually comes up on my screen. So we have that and then forgiveness. We want to make sure that forgiveness is forgiven. We do not want to have a situation where the forgiveness is sitting out there, and then the next thing you know you have a 1% loan for two years. The reason they’re not forgiving the company portion is that there is already forgiveness where you can delay it and then pay half of it in 2021, half in 2022, at least until the time of forgiveness on your PPP. So there is a lot of things happening and it really means that you need to have very good records for small business owners if you have received PPP money or the forgivable EDIL, the disaster funds, the $10,000 up to 25, I think is forgivable. If you’ve got your own loan through that, then you might want to make sure that you’re using those funds. I think that’s a bigger period of time, but we do at the build into the budget. After the first year, you start making a 3% payment on a $200,000 loan. That can be expensive. So make sure that you have that built into the current situation.
So if you want to join the show, call 615-737-9986. If you are on social security and you have received your stimulus if you can call in. I know I get probably 12 to 15 phone calls daily from individuals that are saying they haven’t received it for other reasons. So if we can just give people hope saying, “Hey, I’m only on Social Security I don’t receive, I don’t file taxes,” and you have received your stimulus check that would be helpful probably too many people to know that that is still being delivered out there. Again, if there are individuals that haven’t received it yet, try to go to irs.gov and see what you can do on that one. But again, it may or may not be something that we can really control. So we’ll have to wait and see and see what we need to do on that to make that, you know, move or happen on that. Remember, we are filing taxes, we are working on taxes. We’re open and you may want to know what you have going on when it comes to your calendar or it’s time to start looking at your tax return. Okay, let’s go to G. Hey, G what’s happening?
I am awesome. How about yourself?
Caller 6:01
Good, thank you. Thanks for taking my call. I had a couple of questions here. I am in 1099. I’m realtor by trade. I applied for the PPP program through one of the supportive banks that are certified to do it. The PPP program said they would lend. Lendio is the lender who I used to apply to I haven’t received. They received my application and they said afterward, I would get another email that says whether you’ve been approved or not, but it’s been more than probably eight days now. I’ve yet to receive anything. Good or bad.
Dr. Friday 6:46
I will tell you Lendio sent us to Bluevine for a lot of our people. So you might want to try Bluevine had money as a Friday. They were still processing, just type in Bluevine and they’re the ones that sent us from Lendio to blue vine so you might want to try to put a second application my understanding is no problem in putting multiple applications in to do something like that. I think it was smart bank that initially sent us the Lendio, and then sent us over to Bluevine. So it’s worth a shot. Hopefully that will help you because you know it is helpful money if you can get it.
Caller 6:51
Alright, I will do that. Thank you so much for your time.
Dr. Friday 7:32
Thanks, I appreciate you. All right. Again, if you want to join the show, it’s really easy. 615-737-9986 taking your calls, talking about taxes. It is tax time is here, even though normally let’s be honest people, April 15. Then we wait until September for the businesses in October for the individuals. We don’t have extensions. Everyone, well most people unless you did file an extension, most people are going to be filing on or before July 15. So if you need help with doing taxes, if you haven’t filed your 18 or 19, maybe you’re leaving money with the stimulus checks on the table. Keep in mind that even though you may not get the money immediately, for anyone that’s listening, if there has been a delay for some reason, bad bank accounts, wrong address on your tax returns, maybe there’s been a holdup on your paperwork or delays for that. Awesome news that when we file our 2020 and I know this isn’t going to help you today and it would be nice for you to have the money today but in some cases, it will come back to you on your 2020 tax return. So it is something to think about or something to deal with to make sure that you know that if it doesn’t come in the mail today, it could still come back to you. Alright, let’s go ahead and hit Earl. While we’ve got him on the line then we can take a break. Hey, Earl.
Caller 8:56
Hi Dr. Friday. I can barely hear you, hun. Am I on the understanding that if you owe the IRS money that you can expect the 1200 dollars anyway?
Dr. Friday 9:10
You are correct, Earl. If you owe money to the IRS, you will still get this refund. The only people are if you have back child support.
Caller 9:19
All right, that’s how I want to know.
Dr. Friday 9:21
Good question. Thank you. Yes. So, a lot of people are filing their 2018s and 19s even though they may owe money, or at least one of those because the IRS can’t keep the stimulus on you even if you owe them money. So, file your 18 tax return if you haven’t filed it or just file your 19 tax return. If you haven’t filed it and you haven’t filed for a number of years. You have to have 18 or 19 filed to be able to get the stimulus money. I would suggest moving forward and going ahead and taking care of business while you’re at it. There’s nothing worse In my opinion than having Uncle Sam as a loan officer, sooner or later, it just becomes a lot more work than you really want to put into it. My opinion again, guys, I deal with the IRS on a daily basis and the best thing to do file, stay in compliance, and then make a payment plan, make an offer and compromise. I realized again, that right now, many people that had payment plans or whatever you’re out of work, you don’t have the ability, well, you know, they put a freeze on most payment if you contacted them. There was a freeze put on, on payment plans. There are ways of people doing things so that they’re able to make things work for you. But you need to contact the IRS and make sure that you have everything going and make sure you’ve got all of the information you need. If you haven’t filed the IRS does have a plan for you and it’s not the plan you probably won’t. It is going to be a plan that’s going to be more in their favor. All right. Why don’t we hit JB? Hey, JB, what’s happening?
Caller 11:03
Hey, Dr. Friday, thank you for taking my phone call. I had a question on the stimulus package. I filed my 2018 taxes, and I did qualify for the stimulus package, but I have not found my 2019 taxes yet. Now, I believe my income is going to fall into the above qualifications for 2019. Why? Will I have to pay that money back?
Dr. Friday 11:31
According to the way they’ve done it. No, to answer your question. Everything that’s come out of the IRS is if they’re using your 18 numbers, and even though you’re reconciling this on basically your 2020 there is no payback. So at this point, you’re just going to be one of those lucky people and I won’t say I’m sure there are quite a few people that held off filing 19 knowing that they might be outside of it and get the money for 18 because right now getting the money may be more important than anything else but my understanding JB is no, you will not have a payback.
Caller 12:04
Okay. Appreciate it. Thank you.
Dr. Friday 12:07
Thank you. Alright, let’s see Bill real quick and then we’ll hit our break. Hey, Bill, what’s happening?
Caller 12:15
I was wondering if I’m on disability and my wife works but we do a joint return. Will that stimulus comes in all at once or will I get a separate one?
Dr. Friday 12:25
You should get 2400 as a package.
Caller 12:29
Okay, and then you say it’s been taken up too slowly getting to people?
Dr. Friday 12:35
Exactly. Every day I get phone calls from individuals saying yes, they have received them, but I also get a lot of phone calls from individuals that say they haven’t received it yet. So it is going out just not necessarily to all my listeners as fast as I like it.
Caller 12:52
One more question here. We haven’t received our 2019 tax refund yet. Would it be that’s holding it up or just wouldn’t matter?
Dr. Friday 13:07
It shouldn’t. I don’t know if you have internet access or not. But if you do, on irs.gov, you can check “where is my refund.” It’s a completely different place than the stimulus. You might be able to find out if they’ve mailed it and usually will say the date of expectation or the date it was mailed, or if it’s a direct deposit, the date that it was direct deposited. So that would give you something to track but those as far as I can tell. They’re a little bit slower and they’re hitting the full 21 days on some of my clients were before it would be, you know, 10 or 12.
Caller 13:43
But they wouldn’t put the two together and just give you one check for both?
Dr. Friday 13:49
No, sir. No, they will not.
Caller 13:53
All right. Well, I appreciate all your help. I appreciate your show. Thank you.
Dr. Friday 13:56
Thank you, Bill. Appreciate you. All right, why don’t we take our first break, and when we get back to we can get some more of your phone calls. you can join us here at 615-737-9986. We’ll be right back.
All righty, we are back live in the studio. So some of the things you need to know about first estimated tax payments are both going to be due so first and second quarters are due on 7/15. So instead of basically having, for now, you can pay estimates if you are still working and you still have your use. Well, I suggest sticking to the usual schedule, April 15, June 15, and then going into September and January. But if for some reason your first quarter or first two quarters, you haven’t recuperated and obviously businesses are just reopening now. So if they are reopening now, then I would say that you need to make. The law does stipulate four equal payments, but this year is a little different guy, because July 15, is a lot like our April 15. To the extent that you will have the balance due from 2019 as well as your first two-quarters due. That’s why I say if you’re not a person that is being financially affected by the COVID the fact that you’re still being able to work, then I suggest sticking to your usual schedule as far as making your estimates, even if you’re delaying paying your 2019 because you have few extra months to raise the money or to pay it out. I would suggest keeping your quarterly if that’s possible.
Dr. Friday 16:07
Another thing that you want to do, I’ve gotten quite a few emails because people are working from home, and they’re wanting to know because they’re working from home, will they be able to claim a home office on their 2020 tax returns? The answer is, no, unless your employer is basically doing a reimbursement and that would fall on your paychecks. It would not be an itemized deduction on your personal tax return. So in some cases, some employers may give you a reimbursement for an expense for a home office, maybe pay you so much money on your paychecks to cover your utilities and phone bills and things like that. I have found very few to be doing that. But if you do have something like that, it might be something to consider but otherwise, you will not qualify for the itemization on your personal tax return.
Dr. Friday 17:03
I got a text earlier from someone that asked if you’re still working, do you qualify for the PPP loans? Now there are two different types. But the biggest thing is the newest part that came in on April 24 was the hardship filing. So in many cases, even though people may be working, their sales are still 20-50% down, they may have been able to keep their employees, they may have been able to keep the business open, but they weren’t creating the same amount of income as they were prior to. In that case, those people would still qualify for PPP. Then I haven’t actually seen the forgiveness documents. The only ones I have seen were from one of the local banks on one of my clients and all they were asking for at this time was proof of payments of utilities, rent, and payroll to exceed the hundred percent that they had received. And that’s where they came back and said that the employer portion was not being calculated in, but the amount that the company paid for employee’s health insurance was going in. So just again, this is not a perfect science. So if you have anything you can add to that if you’re an expert at BPP loads, and you know exactly how the forgiveness process is going to work, none of my clients have hit the eight weeks yet so we have not gone through any of the forgiveness situations. And worst scenario is if you get the PPP loan, and for some reason, it is not all forgiven. Some may be some may not be it would be a 1% loan for 24 months. So it may give you that extra breathing room that you need to be able to make it through this hard time.
Dr. Friday 18:54
Again, the biggest conversation that I’m having with many of my entrepreneurs and people that are in the business world is, what if we get this again? What if there’s another shutdown? They keep talking about, there’s a second wind of this and that could actually turn into again, another shutdown. If that happens, what would we do? Because we all know the government can’t afford another free check. I mean, let’s be honest, this $1200 and $2400, free money is not free. We all know that, right? I mean, I’ve got people calling me left and right saying I don’t want this money. How do I send it back? What can I do? I don’t want to have to worry about paying the government later for something that they’ve given me now. Of course, there is no sending it back, okay. My suggestion to them and actually my big sister Kate gave it to charity, do something good with it. If you don’t need the money yourself, help those that are really having a hard time in this situation, but we all know that. This is going to come back the PPP money that’s free, the EDILs, the free stimulus checks, you don’t give trillions of dollars away prime example. Many of you guys probably saw the thing on the mayor in Nashville. What was his answer to help with revenue? A face 32% increase in property taxes. Now I don’t live in Davidson County, nor do I live in Nashville. But I have a lot of points in those areas and something like that would be a huge setback for homeowners, for business owners, the real estate markets, that would be absolutely crazy. But this is the kind of thing I think we need to expect when you hear free money, the stimulus money’s coming, everyone’s getting this money.
Dr. Friday 20:43
Sooner or later, you’re going to pay the piper. Your property taxes are going to go up, your sales tax is going to go up. They’re going to probably try to have that conversation again. Should we have a state income tax, all these different things that are going to come back on us? Be prepared when that happens. I don’t want to have all those phone calls saying, “Oh, why do I have to pay all this money?” Because the stimulus money is part of that package. And it’s something that we have to be very open when it comes to the concept that sooner or later, hopefully, we won’t have a second wind, we’ll be able to get back to work. Business owners will start generating sales, sales credit sales tax, which helps the state survive. Keep in mind, they closed down downtown Nashville, all those bars and restaurants are completely closed down. Without those, you’re talking millions and millions of dollars that have not been generated in sales tax. So we have one of the highest sales tax in the United States since we don’t have a state income tax, which I think most of us would agree we’d rather have a sales tax than income tax, at least, maybe I should say I agree. But if you want to join the show, it’s not hard to do and if you have an opinion, feel free to join it. 615-737-9986 is a number right here in the studios. I am alive today. So if you need to have a question or you’re preparing your own taxes. Again, we’re revisiting the conversation, you have an 18-year-old at home, that’s working a part-time job, do you really want to claim them as a deduction as a dependent? Or should they be filing their own taxes as a single individual?
It’s going to be a question. I mean, if they’re in college, you’ll get the college credit in some cases, so my clients obviously don’t qualify for that. But if you do that would be better to get the college credit than it would for them to get the $1200 dollars. But if they’re not in college, and they’re living at home, and the value on your tax return is $500 credits, they’re going to get $1200 dollars, which way is the best way to file? So that’s the kind of questions you’ve got to be asking yourself. 2019 is a unique time. I can’t tell you how many amended returns, I’ve either walk somebody through or done myself to, you know, try to capture as much as you can of the stimulus money or other things.
Dr. Friday 23:10
So, again, if you’ve got questions or you want to join the show, it’s really easy, guys. 615-737-9986. We’ll be taking your calls and talking about my favorite subject guys taxes this year, taxes are crazy. We have an extension, which delayed things, and it made it harder for some people. Now if you have a refund, there’s absolutely no reason you should be extending anything. I will tell you again if you haven’t checked checks are taking a little longer direct deposits, at least in my world. I’m seeing them taking the full 21 days to get the money now. So my clients will say, “Oh, I got it back in 8 or I got it back in 10. But in other cases, we had this situation where we had the difference. Hey Greg, we’ll take a break, and then when we go ahead and wait, then you can do the caller if that’s okay with you. I’m gonna go ahead and go into my second cut here. Then that way, when I come back, we’ll get to Allie and any other phone calls we have. If you have a question 615-737-9986. Maybe he’s telling me I shouldn’t take this call first. Alright, let’s go ahead and do that. Let’s take the call. Sorry, Ali. Go ahead. Hello, Ali. What can I do for you?
Caller 24:34
Yes, ma’am. So, if an adult has been claimed as a dependent, are they getting the $1,200. Let me say like 17 to 21 years old.
Dr. Friday 24:47
No, sir. Any dependent will not get it if they’re over the age of 17 If they’re over the age of 16. Basically, there is no credit to the parents. So no, there will be no money sent for any child that’s 17 or older living in your house as a dependent.
Caller 25:02
Even, let’s say what about old people, sometimes their claim and they take Social Security. Even they will not get it?
Dr. Friday 25:09
No. If anyone’s getting a dependent because you’re whoever is claiming them is getting money, the $500 for them. So it’s either the $500 on your return or you don’t claim them and they get 1200 dollars.
Caller 25:22
All right, good. Thank you. Thank you.
Dr. Friday 25:25
Thank you. I appreciate you too. Thanks. All right. Let’s go ahead and take a quick break if you want to join the show call 615-737-9986 and we’ll be right back.
Can you hear me now? I’m hoping you guys can hear me I hear myself so I’m not sure if you hear me or not. Greg, let me know if you can hear me up. Okay, good. Sorry. This remote doesn’t always work wonderfully. All right, why don’t we go ahead and go to is it Nabhi? Maybe there is something like that.
Caller 27:02
Yes, ma’am. How are you?
Dr. Friday 27:04
Doing good. Thank you. What can I do for you?
Caller 27:07
I’ve got a quick question. So I received some money from overseas, some inheritance as well as some I had some land overseas that I sold recently. I was trying to figure out what is the best way to really bring that money over, put it in a bank and put it as a down payment on my house or something of that nature without really paying too much in taxes or making it look like a drug deal or some crazy?
Dr. Friday 27:37
Yeah, I’ve had that question before. Okay. So can I ask is the country that you have the money coming from, did you pay taxes, can you prove the tax return was filed in that country and paid their income tax?
Caller 27:53
We did pay taxes on the portion from the land because when we sold the land, we had to pay taxes. But the inheritance piece we did not pay any taxes on and the money’s already been transferred here to us.
Dr. Friday 28:07
Okay, so the biggest thing is, are you a US citizen?
Caller 28:13
Yes, ma’am.
Dr. Friday 28:14
Okay, I just want to make sure. Okay, so in most cases, inheritance even in the United States has a step-up in basis. So you need to sit down and figure out if it was cashed in the bank from the person that passed away and you inherited it, most likely, there are no taxes going to be required even in the United States. Now the land sale, you may need to report it and then you would report the foreign tax that you paid and if there’s a difference in the tax code, you may owe some on the sale. But in the United States, if we inherit a piece of land, we inherit it with a step-up in basis so it’s valued at the same value from the date of their passing to the day you sold it in a sense. Whatever it was worth the day they passed away and you sold it for the difference would be only the capital gains in our country. So you probably need to sit down and see. You may have zero tax, but you might need to document that you received these things. So that doesn’t look like you’re bringing money in that is like you said unreported.
Caller 29:17
Okay. Is that something that I can just go to a bank and be able to help you out with that, or do I have to get with a tax professional on that or?
Dr. Friday 29:25
You need to go with a tax professional, they’re going to need to file it on your income tax return.
Caller 29:30
Okay, already. Sounds good. Thank you very much.
Dr. Friday 29:34
Thank you. All righty. That was a great question, actually. Let’s go ahead down to Andy and see if Andy can help us. Hey, Andy.
Caller 29:42
Hi, how are you?
Dr. Friday 29:44
I am good.
Caller 29:47
Yeah, I’m self-employed. I’ve never filed quarterly any returns. I just wait a year and take a penalty is that bad?
Dr. Friday 30:04
Well, it’s it really it just comes down to the word penalty, right? I am a person, that unless that money is generating more than 6% a month, and creating more money for you, then I’d rather pay it quarterly, then pay the government a penalty. So I have some clients, they basically have shown me “Hey, by keeping my quarterly I have generated more because I was able to get inventory I flipped that and I made a bigger profit, etc.” For 25 years I’ve had this conversation with some of my clients. So really is if you’re in a business, you just don’t do it, right. The money’s in the bank anyway, it’s sitting there, you know, you’re not making interest on it anyhow, it would be smarter to give it to Uncle Sam, get it out of your bank. And then at the end of the year, it’s no big deal filing your taxes because a lot of times people will drag their feet. Especially entrepreneurs because they know they’re going to have to write a big check and then have to pay penalties of a couple of thousand dollars or whatever on top of it, it’s just painful. So if you pay quarterly, then you don’t have to worry so much about paying, you know, those that penalty or failure to pay on time penalty because they hit you with two of them if you want.
Caller 31:16
Yeah, a lot of times my income is sporadic, and maybe a quarter or two, I don’t make any money and then a lot of my income comes in the third quarter.
Dr. Friday 31:30
That can be typical with some of mine because you know, the tax law stipulates for equal payments, you know, I will tell you so my clients do only make two but sooner you pay it in let me put it this way sooner you pay it in the penalty is less than if you wait till April of the following year, right. So if you could pay it in September and January the full amount, even though you didn’t make the full you would still save money on penalty versus waiting until April when you actually file your taxes.
Caller 32:02
What is the right on the penalty, do you know?
Dr. Friday 32:05
It’s .6% per month on failure to pay quarterly and then you got a failure to pay. So you’re looking at least .6%. All right? It works out to be about 8% a year.
Caller 32:22
Okay, on the total tax I would ow normally, right?
Dr. Friday 32:26
Right, but you have two of them you’re going to have a failure to pay and failing to pay quarterly. And if you take both of them now you’re at 16% almost.
Caller 32:36
So if I made 100,000, 16% might come off and taxes and penalties. Right?
Dr. Friday 32:42
Right. Just in penalties. Yes.
Caller 32:44
So like, $16,000, right.?
Dr. Friday 32:47
Yeah, if you owe the government $100,000 it would be $16,000 if you owe the government 10 it would be 1600 dollars. So yeah, I mean, just depends on how much money you owe in taxes. Not You earn but what you owe in taxes.
Caller 33:03
Okay. That’s specifically for self-employed people primarily, right?
Dr. Friday 33:08
Yeah, most quarterly. Well, I should say I have quite a few people that are retired that have to pay quarterly as well because they have so many different sources of income. So they actually end up making quarterly estimates. So I will say that the sad thing is it’s either seniors are self-employed or retired.
Caller 33:28
Thank you for your answers.
Dr. Friday 33:30
Thank you so much for calling. I really appreciate it. Okay, let’s go out to Gary. What’s happening.
Caller 33:38
Hello, I wanted to check with you now. What is the filing date? It’s been moved. Is it July 15?
Dr. Friday 33:48
Yes, sir. 7/15.
Caller 33:50
Okay, now, I’m 74 and I’m still working. I don’t listen to the news very much. But do I get a check from the government for some money or whatever?
Dr. Friday 34:07
Right? Well, you might qualify for the stimulus, but you might not. If you’re single, and you make 50,000 to 90,000, you’ll get a check. If you’re married, and 150,000 to about 198,000 you will get a check 1200 each. So if it’s married, it’s 2400 a single person 1200 and then they take all 5% as it goes up after you hit the minimum income, so I’m not sure where you stand but you should have one it may be delayed. I mean, some of the people are not quite received them yet. So they haven’t sent out all of them yet, Gary, but it should come to you if you’re in that situation.
Caller 34:42
Right? I’ll probably see it on my bank statement cuz I have social security and stuff like that direct deposit. When are you going to start taking clients again to do the taxes?
Dr. Friday 34:55
My calendar has reopened. We are back in business. We’ve been I’m trying to see him once a week. But we have about two days a week that we’ve opened up the calendars. If you go to Dr. friday.com, you can click a date there or call me at my regular number, we could look something just over the phone, whichever is easier.
Caller 35:14
Okay, I’ll do that. Thank you.
Dr. Friday 35:15
Thank you, Gary. Appreciate it. All right, let’s go hit Dan in Franklin. Hello, Dan.
Caller 35:23
Well, hello. This is my question. I have typically itemized my deductions. I’m retired, I draw as required minimum distributions to my 401 K’s. I’ve asked the GIA who manages it to pay the rather significant contributions to make to a couple of places directly and I understand that that will reduce my taxable income. The thing that bothered me a little is that as they sent me these statements of [inaudible] last year, they did not make the taxable the number that they put in is taxable income less than the total amount to pay it first. I was wondering if they had done that right?
Dr. Friday 36:28
It is from Dan. On the form for the 1099-R when you’re completing it in the tax return, I don’t know if you’re using a software paper. But there is a place to put qualified what they call qualified contributions on there and you would reduce it. So it automatically will reduce what’s in box two of 1099 are on the form so that would shoot over the difference. So let’s just say you had $20,000 taxable income and you pay 10 in qualify contributions You would only show 10 on 1040 as taxable income.
Caller 37:05
Okay, second part related question. Can I put some of that required minimum distribution into something like a college fund or grandchildren and not have it counted as accessible to me.
Dr. Friday 37:25
No. Just short and easy. No, there’s nothing that I know of at least. They may be able to talk to your financial planner, but there’s nothing I know that you can defer your RMD because that’s the IRS income right? I mean, they deferred it when you put it in, so they’re now getting their taxable dollars. I don’t believe there’s anything out there 529 plans and all those do not differ for tax purposes. It just becomes available for the kids when they get ready to go to school.
Caller 38:01
At the time that it was being drawn out of my income, if I had flipped some of it into one of these college funds, then I wouldn’t be taxed on it. But because I didn’t then I am, right?
Dr. Friday 38:22
Pretty much yeah, you would have had to go into something like a Roth. Because then you would have paid taxes on it when you put the money in and then it would have grown tax-free. Otherwise, you took the advantage when you put it in, by deferring it to the time that you were supposedly going to be retired and not working then. But you know, whatever happens in your situation, but yeah, those RMDs can be quite healthy and they also usually end up taking Social Security taxable, so it can be a problem.
Caller 38:53
Well, to one step further. Is there any other place other than charitable contributions that you know that I can put some of that required minimum distributions to reduce my taxable income.
Dr. Friday 39:10
No, I was so excited when they finally added it as a permanent tax, the qualified distribution. So no, there is nothing else I can think of that would actually be a direct deduction from the IRA RMDs to that, nothing that I can think of. Now, again, you might want to sit down with your financial planner, I’m not a financial planner, but from the tax standpoint, Dan, there’s nothing I can think of.
Caller 39:35
Okay, well, thank you.
Dr. Friday 39:37
I appreciate you, sir. Thank you. All right. We’re going to take a quick break and we’ll be back with the rest of the show here in a few minutes. You can reach me back at 615-737-9986 and we’ll be right back.
All right, we are back live in the studio. You want to join the show you can at 615-737-9986 taking your calls. We’re talking about taxes. But I also know that many of you are concerned about what you’re receiving as far as the stimulus, unemployment for the entrepreneurs, I do understand that they are giving some people unemployment and then other people it doesn’t seem. One of the most important things seems to be is that you have to be receiving 1099 to actually qualify for unemployment. So it should be interesting to see where that goes. All right, well, when we go through the phone calls, it looks like we had Michelle in Nashville. Let’s start with that. Hey, Michelle. How are you? I am doing awesome. What can I do for you?
Caller 41:06
Wonderful. Hello. We are actually clients of yours and we were listening to your show today. So we thought we call in and just ask a quick question.
Dr. Friday 41:15
Sure.
Caller 41:16
Okay, so with the unemployment that a lot of people are receiving, we do we are aware that some business owners are able to get it. Do you know as LLC owners are able to get unemployment if they work for the business and they are not working at this current time?
Dr. Friday 41:33
That’s a great question. I have not found where anybody, no matter if it’s a PPP or unemployment where LLCs members draw or rental people are able to get any of these benefits. So far, I have not yet had a successful transfer with an LLC individual, they seem to want it on a form 1099 Schedule C or W2. So at the moment, Michelle, all of my Limited Liability Companies either partnerships or single. Now if you’re a sole member LLC, not a partnership, you might be able to qualify because you do have your schedule C still, but if it’s a partnership one, I would say no. So far I have not at least been successful.
Caller 42:17
Okay well, thank you so much.
Dr. Friday 42:20
Thanks for listening. I appreciate you listening. Thank you very much. All right, guys. Let’s see here. We’re going to go ahead and go up to Lee. Hello, Lee.
Caller 42:33
Hey, Dr. Friday, I’ve got two questions. I know the funding for the EIDL is been depleted. Do you think that there’s going to replenish that program at all?
Dr. Friday 42:48
My understanding is the EIDL actual loans, the ones that are going out not the emergency fund per se, but the ones that are 3.25 for 30 years. I’m getting clients that are still getting approved on that. So I’m assuming Lee that there is still some funding. As far as the emergency 10,000 or up to 25,000 instant to help carry you over. I have about 200 monthly clients, and I’ve not yet heard one of them that has successfully received any of that. But if it’s there, it’s not coming to our direction.
Caller 43:24
Okay. That kind of leads me to what you were talking about, as far as unemployment because here’s the situation, we’re self-employed. We don’t get very many in 1099. We do file Schedule C, and our income is, not to where we would be over the threshold for PPP, but close to that limit. So from what I’ve been told, like what you just said, can’t get unemployment. If we don’t have 1099 and the PPP, we have to fill in our 2019 schedule C. It doesn’t have to be filed from what I understand, but if we fill it in, and it’s estimated, how does that work when it comes to reconciling that when we actually file if it’s a different amount?
Dr. Friday 44:12
Well, that’s a great question and we have had that debate quite often in my office because people aren’t ready to file their 2019 yet. In some cases, they won’t be until October. So what we’re doing is our best of our ability, and that’s all it says on the forms. So we are preparing them for the best. Now I’m assuming when it comes time to get the forgiveness if we can’t justify that the money was paid the way we are supposed to pay it, then we would be in trouble. But as far as I know, they’re not really matching. I mean, they’re not really testing us on our schedule C filing as much as if they give you $25,000 you have to use it for wages that you paid yourself based on the 2.5%. SO If you’re not paying it out in wages to you, because you’d be the only person receiving it, or if you have people on W2s, then your income would have to at least exceed what they gave you in money for PPP.
Caller 45:14
What about unemployment? Because you mentioned 1099 there. Can we not use the Schedule C for that? We’ve had them for five years back showing what our income level is?
Dr. Friday 45:26
Right. Well, the problem is, is you know, you don’t pay into unemployment. No entrepreneur does. It’s not part of the tax law you’re not required to. So they’re somehow tying it into 1099. They are not even asking for schedule C’s on the unemployment side. So I’m thinking they’re looking at misclassification of 1099 is what they’re looking for or hoping to get something back Lee, but that’s about the best I can tell you.
Caller 45:54
Okay, Dr. Friday. I appreciate all your help.
Dr. Friday 45:56
Thank you very much. All right, Rio. I’m sorry. We’re getting some music. So I’m gonna have to shut down. You can reach me directly on my phone at 615-367-0819 as soon as the show hangs up. You can also check me on the web. Dr. friday.com is my website you can also book your tax appointment on the web. If you’ve got a question and you don’t want to try to reach me on the phone, you can email at friday@drfriday.com.