Welcome to another episode of the Dr. Friday Radio Show! In this episode, tax expert Dr. Friday answers callers’ tax questions and covers the following topics:
- Changes to tax laws for the 2023 tax year
- Earned income credit increase for 2023
- Annual exclusion for gifting increase for 2023
- Lifetime estate exclusion increase for 2023
- Adoption credit increase for 2023
- Rollovers and conversions for 401k accounts
- Capital gains rates for 2023
- Student loan forgiveness and tax implications
- Changes in tax brackets due to life changes such as divorce or marriage
- Importance of staying current on taxes and making necessary adjustments
And much more!
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. 737-WWTN. That’s 737-9986. So here’s your host, financial counselor and tax consultant, Dr. Friday.
Dr. Friday 0:30
G’day, this is the Dr. Friday Show and we are here live in studio. So if you want to join us, all you have to do is pick up the phone. 615-737-9986. 615-737-9986. Taking your calls, talking about my favorite subject, which is taxes. But if you’ve got some IRS issues or if you’re dealing with any of the usual, um, I’m getting love letters, I don’t know exactly what I need to do with them, or maybe you’re at the point in your life where you’re like, boom, I am so ready to get the IRS in control so I can go do what I want to do. Maybe that’s buy a house. Kids are getting ready to go to college. All of those are usually the requirements we have when it’s people start thinking about, or maybe you’re even getting close to retirement and you’re like, wait a second, my biggest assets, my home, and I owe the IRS, so I can’t really sell the house because if I do, I have these issues. And maybe there’s something you can do. Maybe there’s a way of either making payments or getting something so that the resolution is done, taken care of, and then we can go forward from there.
Dr. Friday 1:39
So if you want to understand more about those options, or if you’ve got questions, maybe you haven’t filed your 2022 or you’re thinking about 2023, maybe you’ve sold some property, maybe you’ve inherited or thinking about selling a rental property and you’re not too sure what’s the process. How do I know? So that way, the biggest mistake people make is they don’t think about the taxes. They go and reinvest that money someplace, and then they have to file their taxes and they owe 30, 40, 50, $60,000 on the sale of something. And now the money is tied up in something else. Very important for you to be able to understand how this is going to affect you and what you’re going to need to know. Don’t reinvest unless you’re doing a 1031 exchange. Do not reinvest the IRS money. It’s never going to be a good thing. So let’s go back. Oh, looks like Pat from Franklin or Patricia from Franklin is on the line. Let’s go ahead and hit her. Hey, Patricia.
Caller 2:41
Good afternoon, Dr. Frey. Thank you for taking my call. I received something last week, supposedly from the IRS, but it’s from Boston, Texas, and it’s a different kind of form I’ve never received before. And they’re asking me to fill out a form and contact them in a different number than normally IRS. It says we received a tax return for tax 2022 using your name and Social Security number. I have to, if I file, I have to return and call the IRS at verify return. We need more information to verify your identity so you can get your tax return. I don’t know if that’s legitimate.
Dr. Friday 3:15
It is legitimate. And thanks for calling about that because we are getting a ton of those this year. And I think really, yes, I mean, a number of my number of phone calls coming through our office because it doesn’t look like the normal. And I tell people I end up doing it about five years ago and heck, I’m fingerprinted by the IRS. I’m pretty sure they should know it’s my return or not.
Dr. Friday 3:35
But that being said, it’s probably I think it’s their process of trying to eliminate fraud. You know, I mean, so it’s hard to argue. So my I mean, if you’re not comfortable doing it online, you can set up an appointment at one of the IRS offices and they will do it in person there. Just to let you know, some people aren’t really comfortable, but I will tell you, it is a legitimate form. They are trying to do some sort of identifying to make sure that the tax returns being filed are truly the tax return. You have to have I believe it says to have at least the last tax return or last two years of taxes. So if they ask you information, you know, they can verify it off of that tax return.
Caller 4:17
That’s correct. They did ask for that. Yeah. That’s just if I had to do well, my husband passed away. I sold my house and I bought a new one. So there’s been a lot of changes in my IRA. Exactly.
Dr. Friday 4:28
It’s possible. It’s, you know, consistency with the IRS is often good in some ways. But when you’ve had something like that, they’re probably like, wait a second, different address now, either single or or widowed. You know, I’m just saying whatever your situation might be. So it may have just triggered this identification just to make sure that your identity is safe.
Caller 4:50
So it is a legitimate. That’s fine. I’ll send it in. I just wasn’t sure about this. Waiting until Saturday so I could call you. That’s what.
Dr. Friday 4:58
Well, thank you for doing that. I truly appreciate it, sweetheart. Enjoy your Saturday. Thank you.
Caller 5:02
Thanks. Have a good day. God bless you. Bye.
Dr. Friday 5:05
All right. Well, I do appreciate when you guys take the time to actually listen to the show and call in. As we all know, I love my Call-ins. I did get an email earlier today from a gentleman who had sold some real estate and was looking to see roughly what his capital gains would be. And one of the questions he he had asked is to also explain the child tax credit for the twenty twenty three tax year, because as we know, in twenty twenty one, twenty twenty two, every year seems to have had some slight differences.
Dr. Friday 5:33
This year, we’re back to the normal, which is the maximum tax credit for the year of twenty twenty three is two thousand dollars for children under the age of 17. So basically it’s for 16 and under. Right. So if your child turns 17 in the year of twenty twenty three, you will not qualify for the child tax credit of two thousand dollars. You’ll qualify for five hundred if your child is 16. By the end of the year, you will qualify for two thousand dollars. Very important when you’re trying to budget or guess what you’re going to owe in taxes. And this is a part of your credits that are issued. No refundable credits like they did in twenty twenty one where they were giving you an advance on them. And of course, at that point, they were what, thirty six hundred dollars for under six and like three thousand dollars for over.
Dr. Friday 6:25
So very important to understand the child tax credit. And what is a child? Because for a while there in twenty twenty two, they had up to what, 18, I believe. Now they’re back down to 17. So very important to understand. But if you have a child that is 16 by December 31st of the year, then that child is considered a child and every child under that age. Any child that is over the age or turn 17 within that year doesn’t make difference if they were 16 for part of it and 17. It’s whatever their age of your dependents are as of December 31st of any given year. If that point they were 17, 18, 19, then they are going to qualify as a dependent, but not a child tax credit. And then obviously, eventually, if they go to college, you’ll get the child, the college credit for them. But there’s usually a year or two in between there from where the child tax credit and the college credits kick in. So really great question for for the individual.
Dr. Friday 7:27
And then also just, you know, if you’re working on your taxes, planning your taxes, what do we need to know? And these kind of changes happen all the time. Right. We know that there’s going to be alterations almost every year on what we need to know as far as tax planning and, you know, where or what we can do to to reduce our taxes. We are still in the 10 percent to 37 percent tax bracket. The taxable income above five hundred and thirty nine thousand nine hundred for a single or six hundred and ninety three seven hundred and fifty. I always love those numbers. I know they’re big guys, but if you’re single, you can make five hundred and thirty nine thousand dollars and stay basically under the 37 percent tax bracket. And if you’re a married couple, you can make six hundred and ninety three. So like one hundred and fifty sixty thousand dollar difference instead of. So if you’re two single people living in the house, you can make over a million dollars and pay less than thirty seven. If you’re married in that same house, you’re going to make six hundred ninety three thousand. Marriage penalty is in existence. So any time you have high income or high end situations with those kind of situations that come along, very important to understand how that works. And married filing separately isn’t going to help you in those situations. It doesn’t split the tax code to the extent that you can make an alteration on that.
Dr. Friday 8:54
We have obviously huge tax inflation, which is affecting many of individuals, especially small business owners, to be honest with you. I think a lot of the people that are trying to run a small business, you know, it was funny. I was doing some analyzing of a business of mine. And and one of the things I thought was interesting is in twenty nineteen for this one product, it was like two hundred dollars for the product this year, which is what, twenty twenty three. So within about four years, that product is now four hundred and nineteen and the client isn’t making more money. It’s not like, oh, wow, they must be profiting like anything. No, the whole effect was it cost them more for the product. The labor cost is way up. They were paying twelve dollars an hour. They’re now at eighteen dollars an hour, which means as an employer, we’re almost paying 20 because we have to match Social Security and Medicare. So that is a huge difference. And of course, cost of rent for the for the location. Everything is up. So that’s why the cost everyone thinks, well, the cost of anything is going up. But it’s not because the person is looking to make a killing on the product. No, what they’re looking for, to be quite honest with you, is to still make the same profits equivalent to what they were making before the change.
Dr. Friday 10:12
So very important when you’re looking at all this and you’re budgeting or doing anything. I know we’re in my house. We’re looking at some vacations. And I will tell you that we some of these vacations are much higher than they were prior to covid. I guess we always think of thinking, you know, pre covid, after covid. And the difference in those in those numbers are pretty devastating. So obviously a lot harder to get what your your dollar just doesn’t go as far as it used to. But when it comes to paying the IRS, their penalties, their interest have also went up. So keep in mind that, you know, if you don’t pay the IRS their money and, you know, immediately you’re going to get hit with penalties and interest. Right. So the penalty is going to be a minimum of five percent interest, eight percent per year, five percent per a month, five percent per a month.
Dr. Friday 11:06
So an eight percent annually is pretty much the rates up until you hit 25%. And then in most cases, the penalty will stop. But the interest just keeps going and going and going. So it’s not something that you’re going to be able to change. Now there are ways or requests that you can put out to possibly, you know, reduce those, but you really have to have an idea of how you’re going to make payment, the government’s not just gonna say, Oh, well, they don’t have any money. So we’re not gonna collect I mean, if you have a house, if you have a 401 K, if you have cars, if you have collectibles, there is places where they have the funds to be able to pay. Alright, let’s hit run real quick. And then we’ll take our break. Hey Ron, what can I do for you?
Caller 11:51
High income, taxpayer, like $200,000,
Dr. Friday 11:57
Single, married?
Caller 11:59
They have Rental property, and of course they can’t take the loss. The rental loss. Now, they also own a C Corp. If they transferred the rental property into the C Corp is it’s my understanding that the rental income and expenses lose their character. And you can simply simply take the revenue and expenses like that. Can Am I into this?
Dr. Friday 12:44
Well, I’m thinking more of at some point they’re going to want to sell it. And are they going to be paying? And again, right now we know the tax rates are actually lower in a corporation than some of the higher income brackets, but capital gains rates are still compatible. You know what I’m saying? So I guess I would have to just make sure that if we sell it in a corporation, again, they could do a 1031.
Dr. Friday 13:12
I mean, if they want to continue with rentals, but the management side, I could see, could they not hire them as a management corporation and still keep the asset in the name of the people? Could you just do a contract as a management company and let the management of that asset go through that corporation? And then if there is a profit, there’s either payroll dividends or whatever. On the other side, as you know, on a C corporation, there is double taxation, but you’re saying there’s a loss anyway, so we don’t have to really worry about double taxation on a loss for rental.
Caller 13:47
Yeah, I think they plan to keep it for a long time. If they’re going to miss capital gains, if, if it’s an A C Corp, they’re going to miss with capital gains treatment. Now, you say a management now,
Dr. Friday 14:02
But then they could depreciate it. That’s the problem. The asset wouldn’t be able to be depreciate because it’s not owned by the corporation.
Caller 14:12
But if we transferred it to the corporation.
Dr. Friday 14:15
Yeah, if you transfer it to the corporation, I mean, from the rental side, as long as they’re going to hold on to it for a long time, I would not disagree. I mean, I have people with corporate commercial rentals all the time in C corporations and situations like that. And then that way the loss stays with the company. I mean, in theory, it doesn’t get any. There would be no tax advantage to the individual either way. Keep in mind, because a C corporation pays its own tax. So it’s still not going to help the individual any more than if it was a Passover and they just accumulate the losses either way. Right. I mean, what advantage would the C corp, unless there’s a lot of income in the C corporation, then it may reduce the taxes for that C corporation by taking losses.
Caller 15:01
There there there is a lot of income on the C corp that doesn’t show up on their personal return, but there is enough to accommodate the losses.
Dr. Friday 15:15
OK, yeah, well, I would say that’s a good number. I mean, Ron, I would say that that’s certainly a good situation to crunch the numbers to see how it would affect the overall. But from the quick conversation, I’m not seeing any disadvantage to moving it into a C corporation. It actually shows gives it a better protection if something were to happen at that property as well.
Caller 15:40
That’s a good point. Thank you for taking my call and going over that with me.
Dr. Friday 15:47
No problem. Thanks for calling. I appreciate you, Ron, very much. All right. We’re going to take a quick break. When we get back, we’ll take more of your phone calls at 615-737-9986.
Dr. Friday 16:03
All righty, we are back here live in studio. And if you have a question, all you have to do is pick up the phone 615-737-9986. 615-737-9986 is the phone number here in studio. And let’s hit Mike in the burrow. Hey, Mike, what’s happening?
Caller 16:25
Not much, how you doing?
Dr. Friday 16:26
I am doing awesome. What can I do for you today?
Caller 16:30
Yes, I wanted to ask a question. I buy and sell sports cars, sports memorabilia on eBay quite a bit and was wondering, should I get an LLC? And what are the benefits? Are they on an LLC? Well, is that something?
Dr. Friday 16:50
Yeah, so I can give you I’m not an attorney, but from the tax standpoint, the answer would be is limited liability. Protection. And you’re basically going to be still doing exactly. I’m assuming you put these on a schedule C right now since you’re asking about an entity. So I’m going to guess. And it really won’t change as a single member LLC. You will still put them on to the exact same tax form because the IRS think of you as still sole proprietors. Basically, it’s a state status. So I will say that there will be at least a minimum of three years.
Dr. Friday 17:19
I will say that there will be at least a minimum of three hundred dollars for the annual charter and one hundred dollars to the state of franchise excise. But that does give you some protection if somebody comes back and tries to claim some reason they want to sue you. And it doesn’t take a whole bunch when they can sue for hot coffee, obviously, you know, so it would be a way of shielding your personal assets, theoretically, from your business assets. And with the new law, with the ten ninety nine are coming through and where they’re going to be making small business owners that have been using eBay and other forums like that because of merchant fees.
Dr. Friday 17:59
You know, not that you have it, but I’m just saying it’s going to be that they’re going to make more people businesses, even if they don’t think of themselves as businesses. So, you know, my opinion, Mike, it would be better to have an entity versus a sole proprietor. That’s really more of a tax. I mean, an attorney would probably be able to give you more legal reasons that the advantage, at least my attorney has set up a couple LLC’s for different side businesses. I have because of, again, mainly just the protection of if something were to go wrong, you have an extra step that someone has to pierce before they can come after your personal assets.
Caller 18:39
Okay. All right. Thank you.
Dr. Friday 18:42
Thank you very much. I appreciate it. All right. So if you have a question for six one five seven three seven nine nine eight six of the number here in studio six one five seven three seven nine nine eight six. We’ll take your calls talking about my favorite subjects. But I love the idea that many of you guys I mean, let’s be honest, it’s past tax season. We’re not here doing taxes now. What we’re doing. Well, I shouldn’t say that I am actually working still on taxes and I will be probably until October in my office. But most people, once you file them, you put them to bed, you make sure you’ve scanned all of your documents and then you can put it to sleep. It’s done unless you get a love letter. Now, I’ve had a couple of people.
Dr. Friday 19:22
We’ve got a couple of them on our desk here. One was just that Patricia had called earlier about we have one here that had the exact same question where she was wanting to know if or when or why she was getting this letter. And was it legitimate? Because, again, it’s not something it’s not like they’re sending back saying we’ve changed your tax return. This is saying we’re trying to verify this is your tax return. And so just, you know, the changes or whatever has triggered that. The second type of love letters are usually where they say we’ve changed your tax return for 21 or 22, depending on when you filed. And they do a very good job of matching or they try to match information.
Dr. Friday 20:03
One of the cases I have here, the gentleman had filed his taxes and he did three of the four financial like stock accounts and he didn’t do one of them. And it wasn’t that he made money, but in this particular one, especially with some of the bitcoins and Robin Hood accounts, the basis is not reported to the IRS. So all they knew is that he had sixty five thousand dollars worth of sales. No idea that he made money or lost. So they changed his taxes, saying now you owe us money because we found sixty five thousand dollars more of capital gains than what you reported to us. And so we have to go back, amend that, show them the basis, give them the proper paperwork and information. And then usually on those letters, you can fax it. But you don’t want to ignore thinking they’re going to figure this out.
Dr. Friday 20:56
Right. I mean, I had a case and actually it’s funny with two of them, but one of them, it took us a year, two years, probably almost two years to resolve it. And finally, it was actually the tax advocate. And you guys know how I brag about them, because honestly, I know not everyone likes the IRS when you hear the word IRS. But the tax advocate office truly is a great office here in Nashville, Tennessee. And they they they I did a 9-1-1. They took on the case and then we actually had to take it all the way up to the tax court. But we didn’t go to actually tax court. It’s just the attorneys for tax court will call you. And she was awesome. She basically understood. It took us that long to realize that the same home was being reported twice on this individual’s tax return. And the government came back and say, wait a second, you owe us 300 and some thousand dollars because you can’t have two home exclusions. And they weren’t giving us credit for either first. And they were having it done twice.
Dr. Friday 21:55
So these people look like they made a million some dollars and the tax on it and the penalties finally, finally got somebody that looked at it and realized that this was the same home being reported twice. But it took us forever to get that. And I mean, first we tried just sending the letter, sending proof. Hey, this is the closing agent. This was the the buyer’s closing agent. And both of them reported on the same person. But these kind of things happen. And I just want to you know, it can be frustrating. I had a couple of came in just yesterday and they basically had some fiduciary payroll tax issues. And so it was again, a situation where you sit down, you explain, here’s some of the options we have. Here’s some of the things we can do. But all of this is going to take time, you know, and they’re they’re like, well, should we sell our house? And I’m sitting there going, well, from the tax standpoint, there’s no advantage for you to sell the house. But obviously, I can’t tell them to do or not to do.
Dr. Friday 22:56
But the advantage would be they probably be able to pay the government. But, you know, they wanted this fixed or I think they felt it should be able to be somehow is going to have this magic wand and I’d be able to go directly into the IRS computer, resolve the issue, showing everything and just everything would be good. That’s not what we do. We deal directly with the IRS. But for us to even get a revenue officer and to be able to get the resolution, it can take months. Even like I said, the last case that took almost two years. And every keep in mind, every few months, this person’s getting a letter saying you still owe this money, and you have now additional penalties and interest and they’re afraid they’re going to end up losing their bank or their home or, you know, whatever, because we keep responding.
Dr. Friday 23:44
We weren’t not responding to the letters, but nobody was actually doing anything. So really important for you to be able to understand how the process works. So you have your expectations a little bit more normal. All right, so we’re taking our next break. When we get back, we can get to your guys’s phone calls. If you’ve got questions, 615-737-9986. This is the Dr. Friday show and we’ll be right back.
Dr. Friday 24:18
We are back here live in studio. Again, the phone lines are open. If you want to join us, 615-737-9986, 615-737-9986, the number here in the studio. Some of the other changes that we will be looking at for the 2023 tax year that they’ve put out is the earned income credit, a refundable tax credit for low and moderate income workers who also has a bump in 2023. The total tax amount, depending on the income and the number of people, people without kids can still qualify for tax year 2022. The earned income credit was 560 to a maximum of a 6,935. In 2023, it’s going to be a maximum of 7430 for qualified with three or more children.
Dr. Friday 25:06
I think it’s maximum three, actually, they don’t give you for more. That’s almost a $500 difference there, so it will help. The annual exclusion for gifting has went well increased to 17,000 for the year of 2023, which is up about, well, exactly $1,000 from 2022. Lifetime estate exclusion is 12.92 million. This is not subjected to state tax and that’s up from 12.06 million. Many of us will not have to probably worry about that particular problem of having too much in there. Adoption credits did increase to the maximum of 15,000 from 2022, sorry, 14,890 in 2022 to 15,950 in 2023. So these are, again, if you are looking at your taxes and you’re sitting there going, is this a good time to maybe do a rollover? Because a lot of people, I will tell you, we’re taking quite a few meetings with just my existing tax clients that are like, my 401k is really low right now.
Dr. Friday 26:14
My financial advisor is suggesting since my income and this and that, we might want to do some sort of conversion. So let’s look and see what kind of taxes that’s going to be. Because right now, if I roll over when the fund is low, we all know eventually it’s going to recuperate. And then when it does, it will recuperate as a Roth IRA, which means it will grow tax-free. So you convert when the accounts are low and you hope that the gains will all happen when they’re in a tax-free. So that’s the theory behind it. So if you’re an individual wanting to think about that and you’re having, in some ways, it’s not your higher earning year or whatever, you definitely want to talk to a financial planner. If you’re doing conversions on your own, unless you have the background for it, I know myself, I would not. But if it sounds like, or it is a good idea in your situation, it’s good to know, because keep in mind, we know at the end of 2025 or the first of 2026, the current tax of 10% to 37 is going to go up 15 to what? 39.5, I believe it is.
Dr. Friday 27:21
So we’re going to go up in all steps, so you will pay quite a bit more in taxes if you wait until 2026 to do what you’re already thinking in 2025. So that’s important to know. It’s important to figure out how that’s going to affect you. And then also doing your standard deductions, obviously, again, that is up almost $1,000 from the year before. So that extra money may be able to be used to help do something. And also, if you’ve sold something, we still have the 0% capital gains, right? So if you’re looking to do, you’ve sold something, or you’re looking to do something along that line, it is also good to understand that we still have in 2023, if you are a single individual and your income, including the sale or the capital gains is under what $58,000, you’re going to be in a 0% capital gains rate.
Dr. Friday 28:22
If you are married filing jointly, and you have what, 200, I mean, 109, I think it is, you’re going to be in a 0% capital gains. You can check those numbers, make sure they’re spot on because it’s basically 44,625 plus the standard deduction to keep you in the capital gains rate. And it’s married filing jointly, after your standard deduction, it would be 89,250, that we keep you in the 0% capital gains. Then we have the 15. And for most people, the 15 goes up to 200,000 for a single, 250,000 for married, then they add in the 3.8 Medicare tax or the investment tax. And then, so you go to 18.8 for anything between 200 and 492. And I know these numbers are huge. Bottom line is there is steps. There are numbers that are making sense. If you’re going to sell something and you’ve sold it for $300,000, and maybe that’s all the income you have. It’s not going to be straight across 15%. It’s certainly not going to be zero, but if you sold something for $10,000 and you are at the income brackets where a married couple making less than a hundred, and that includes the capital gains and a single person making less than 50, then you might be at a 0% capital gains. And also if you have a large capital gains and you have some other funds or accounts, you might want to talk to your financial advisor again, because it might be the year to do a rebalancing. Maybe take some of those losses that are sitting in your investment account. Now this would make no difference if it’s in an IRA or Roth,
Dr. Friday 30:03
I’m talking after-tax investment account that might be able to offset what you have going. Okay. Question is going on with student loans. Was a previous student paid for student loans or is it wiped away? Is this the matter of taxable if the pay off the student loans or the loans? Okay. Great question. And the answer is usually when a student loan is forgiven, it is going to be taxable income to you, just like if it’s a credit card or any other loan forgiveness, you’re going to receive a 1099 and you’re going to have to, now there are for low income individuals, there are ways of becoming insolvent or being considered insolvent. And therefore you don’t qualify and you won’t have to pay tax on it. But otherwise, if you get forgiveness of a $30,000 student loan, that could become $30,000 income to the students that received that. Again, if you’re in the lower tax bracket, that may be a lot better to pay that than it would be to have to continuously pay interest and everything else.
Dr. Friday 31:04
So it’s a good thing to consider, but if you’re doing it or if it’s something that’s on the table for anyone that’s doing that, then it would be really, really, yeah, really, really important for that person to think about how much that’s going to be. And they might want to call their tax person if that happens, so that we can make sure that anything that is going to cause taxes, that we know exactly how much that’s going to be so we have that set aside, or we know we’ll have to set up a payment plan. So again, always a good plan. I’m not against forgiveness. I had a client that came in and when they were talking about going to the credit card companies, hiring a debt consolidation company, I’m going to say from the tax standpoint, anything like that’s going to generate income.
Dr. Friday 31:55
So if someone, I had a person, they got over $35,000 forgiven on their credit card, but they didn’t realize that the credit card company a year later, after they had already done all the forgiveness, they thought, oh yeah, we’ve got this great. And then the next year after that, the credit card company had actually probably finished up their side of it, sent them a 1099 and then they owed $7,000 to the IRS. Again, I’d rather pay seven than 30. So that’s simple math, it’s still a great way to do it, but be prepared that IRS is not a good loan officer either. So if you don’t have the money for that, you’re going to want to make sure that you can take care of some of those situations where you don’t, you know, you just don’t want to have going from one person to another and then end up with that same exact situation. Now you owe the IRS. I don’t want you owing the IRS if we can help it. So again, if you want to join the show, we’re going to be getting ready to take our last break before the end. So if you want to get on the show, you can 615-737-9986, 615-737-9986. And on student loans, I know there’s still some talk about what’s going on, on those situations.
Dr. Friday 33:17
Last part, sorry for that little glitch if you have one, because obviously I hit the wrong button. So anyways, we have a time. If you have a question or two, you can come back on the show, 615-737-9986, 615-737-9986. 9986 taking your calls, talking about my favorite subject, which is taxes or things that go along with taxes. Um, obviously as an enrolled agent licensed by the Internal Revenue Service, that’s what we deal with. We deal with offer and compromises. We deal with payment plans.
Dr. Friday 33:52
We get a waiver of penalties, but I, I am probably a little different than many of them because we’re going to shoot right straight. We’re not going to tell you that we can do something without knowing we can do it. We’re going to do our best to achieve it. Obviously there is no guarantee in any situation that their IRS is going to agree with everything, but like anything else, there is a process and you need to understand that process so that you are, um, set up to achieve what you’re wanting to go after. And you know, if you’re behind on taxes, first thing, you can’t make a deal with the government if you haven’t filed your taxes, you must be in compliance. If you are trying to buy a home or anything else and you’ve got a lien or a levy, there are ways of insubordinating those loans, but you also have to prove that you’re going to be able to pay those loans.
Dr. Friday 34:44
Normally at a time though, the subordinate alone is when they’re going to get the money or a portion of the money from redoing that. So the government isn’t going to let go of a house or any kind of asset just because it’s going to make your life easier or it’s only fair. I had someone say, well, I have to feed my children and you know, I have to make sure I have all these. Well, the government doesn’t necessarily want you not to feed your children or have a roof over your head, but it’s not necessary for your child to be in private school. It’s not necessary for your child to be living in a big house. I mean, you know, there are aspects of what the government’s going to consider excessive. And so it really comes down to, and I think one of the hardest things for most people to understand is why would the government want my home? Why would they believe me have any right to my retirement account is a question I get asked a ton.
Dr. Friday 35:40
And it’s very straightforward. If you really think about it, your paycheck came out or you were self-employed, whatever, but you managed to put money into a retirement account. You managed to pay your mortgage and chose not to pay the IRS. So why would they not be interested in the one asset that you use their money to purchase or to invest? You may not think of it as their money, but they definitely think it as their money. It’s very important for you to understand that because once you get the idea of what the IRS is thinking and how they look at what your situation, you’re going to have a better grasp on how we can resolve the situation. And there are many, many ways of doing the resolution that’s required.
Dr. Friday 36:27
But first thing you have to do is be willing to make those changes and adjustments, because keep in mind, I could have the best deal on the table. I could settle your case and I could say 25 cents on the dollar, whatever it is. But if you don’t stay current, you’re not making court, if you’re self-employed and you’re not paying your quarterlies, you’re not making the estimated and then paying your taxes at the end of the year and you’re not doing what’s required. Guess what? They’re going to come back and they’re going to dissolve my deal.
Dr. Friday 36:59
They’re going to come back with all guns blaring, whatever the proper term is, and they’re going to resolve it. So they’re going to say, well, you know what? That $200,000 that we just wiped off our books, we’re going to bring it back with all penalties and interest plus now what you owe for this new one. So it’s not only my job to make sure that resolution is done or even the IRS’s job. What they want to know is after the resolution is done, are you still able to continue to make the same kind of situation? Are you able to pay your quarterlies? Are you able to do what you need to do to stay out of problems or trouble with the IRS? So that’s really a big part of an enrolled agent’s job is if we’re going to be making now, some may just come in and resolve the issue and that’s it. Wash your hands of it. But in all honesty, many of my clients, I still have one of my very first clients and that would be almost 25 years ago, still in business, still doing his thing out there.
Dr. Friday 37:58
And you want to have that longevity with your clients. I mean, that’s part of what’s enjoyable about our career. And so if you’re going to have that and you’re going to help try to make this a more doable situation, then you have to have people in line to want to make the change. Otherwise it’s really not worth it. So again, making, in my opinion, it’s only worth when you’re able to go and do what you want and how you want to make it work. All right. So if you receive a love letter from the IRS, the first thing you do is what? Throw it in a drawer, don’t open it. Because if that is your plan, probably not going to succeed very well with that.
Dr. Friday 38:35
The IRS does expect you to open their letters and they don’t care if you do or don’t. Once the deadline on that letter exceeds, in many cases, it locks our hands as negotiators, because at certain points we cannot open cases in tax court. We can’t request the reopening of an audit. There are limits and times that all those dates make a difference. So again, I can’t really, if you know somebody or you are listening and you are that individual and you haven’t filed your taxes or you’re getting love letters from the IRS, it’s so very, very important to get a handle on it now. And again, we all know one of the priorities of this particular administration is going to be hiring more revenue officers, and they’re not going to be customer service, which is who I would love for them to be, because we need more resolution officers, not more collection.
Dr. Friday 39:28
But I pretty much guarantee you from what we heard when they were going to hire the 80,000, which did lose its funding. But I mean, again, that’s where the collections, keep in mind, collections for the IRS is the money just like if you have a business and your account’s receivable, right? I mean, that is the same division and that’s what their job is. So you are now thinking it’s a good time to get even with the IRS, to get off their radars, to start doing what you need to do.
Dr. Friday 39:59
You need to give our office a call. And that number at my office, you can reach it on Monday morning, 615-367-0819. That is the local office right here in Brentwood, Tennessee, my only office, 615-367-0819. If you are already in a payment plan and everything’s going good, and you just need someone possibly to do an evaluation or to review your taxes, we can also do that service for you. Make sure that you are getting the best tax advice as you can. Maybe something has changed. Maybe you’ve sold a home or you’ve moved or you’ve divorced or you’ve married. All those usually have pretty unique changes on a tax return. And I have had more than one that says, well, when I wasn’t married, I was getting big refunds. Now that I’m married, we owe money. What’s the difference? And you obviously know what the difference is. But the difference was in many cases, they were single, but they were actually head of household with a child. They got married. Now they’re married with a child, but that does not give you the same credits as a head of household and a child.
Dr. Friday 41:09
So marriage is great, just not always good for taxes. I mean, often there are penalties when it comes to doing taxes. So if you’re going to go through a life change of any of those sorts, a divorce, it can be huge because if you were filing married with one or two children and then you end up divorced, then remember as long as that divorce is final by December 31st, that means you were single or divorced, whichever, which makes you basically single or head of household as of the entire year. So if your withholdings on your pay stub was for married in one or married in zero and you divorced that year, and that means you’re single in zero, your tax bracket just went up and you didn’t have enough taxes come out of your paycheck. So normally in the, in, especially when you’re looking at having make child support payments and other things, they do look at your withholdings as well as everything else.
Dr. Friday 42:03
So you do want to make sure that you’re having at least enough withholdings coming out to cover the taxes, especially with the current alimony situation where the person receiving alimony, anyone that divorced as of, I think the 1st of 2020, I believe it may have been the 1st of 19. Um, the, anyways, if you’re receiving alimony, you don’t have to pay taxes. Everything is on the burden of the person paying the alimony. So you want to make sure that you can actually deduct or make sure you have enough deductions coming out because again, you know, the person receiving it, which only made sense to me, but Hey, I’m not writing tax law that somehow that was a good plan to have the lower tax bracket person now not paying government’s getting a lot more money on alimony than they were in the past. That’s for sure.
Dr. Friday 42:55
All right. So if you’ve got a question, my office number six one five three six seven zero eight one nine six one five three six seven zero eight one nine. You can certainly email my first name is Friday, like the day of the week, F R I D A Y @ D R friday.com friday@drfriday.com. Or you can check us out on the web at d r friday.com. Um, again, I am a licensed enrolled agent licensed by the internal revenue service to do taxes and representation. We also have a conference. So if you are a tax preparer or someone that’s interested in doing taxes coming up next month, I believe at the 15th and 16th 14th, yeah, 15th and 16th, um, right here in Mount Juliet, there is, um, and if you’re interested in that, you can always email me if, uh, if you can’t find the link, it should be 10 T N S E a.org.
Dr. Friday 43:49
But, again, the conference is coming up. We’ve got some great speakers this year. Um, Mark DeBomb and, uh, Marilyn Young, um, are both going to be doing speaking and they are excellent. If you’re at all interested in learning more about the tax profession, you’ll find many EAs there and CPAs and the speakers will definitely give you more information on what to do and how to do it. So again, if you want to come and join us in Mount Juliet next month, you can just email Friday at dr friday.com. I can send you the link to, to join us or TN SCA, um, and then click conference under Google and it will bring up our conference schedule. And if you want to reach me directly 615-367-0819 or email Friday at dr friday.com. Again you can always, if you’ve never heard of me or you’re not too sure, always go to the web at drfriday.com. And I’ll see you next time. DRFriday.com. I hope you guys are having a wonderful, it’s a little wet out there. I will give you that, but hopefully it will be a nice weekend for you. Special Olympics going on at Vanderbilt, so, cop you later.