Welcome to the Dr. Friday Radio Show! In this episode we have tax expert, Dr. Friday, take on the latest tax updates, answer the caller’s questions, and talk over the following topics:
- What Are The Biggest Common Mistakes Taxpayers Make?
- When Is The Right Time to File Your Taxes
- What To Do If You Haven’t Received Your Tax Refund
- The Primary Purpose of Form 3911
- The IRS Will Not Be Giving Out Advanced Child Tax Credits in 2022
- How Dr. Friday Can Help You Find Tax Resolutions Offering Compromises
- The Consequences of Gifting Property Away and Capital Gaines
- What Is ID.me and Is It Safe?
- Why Avoiding Social Security and Medicare Is Not Good Tax Planning
- How To Get Back On Track With the IRS
and much more!
Transcript
Dr. Friday 0:00 No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or financial woes. She’s the How-To Girl. It’s the Dr. Friday show. If you have a question for Dr. Friday, call her now. 615-737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
Dr. Friday 0:30 Hey, I’m Dr. Friday, and the doctor is in the house. We are here live in the studio. So if you’ve got questions, and you’ve been working on some tax issues or problems, or maybe you’re just trying to figure out how to deal with some of those problems, this is the show you want to listen to. And hopefully, I can get you in the right direction.
Dr. Friday 0:49 We always try. Call 615-737-9986 is the number here in the studio is 615-737-9986 is the number. So if you want to join us, you can basically what we want to talk about a little bit today is, you know what should we be looking at for 2022. We are now five months into the new tax season, we haven’t had a lot of current tax changes, or things that are going to go into effect. So pretty much your tax planning will be consistent with what’s happened in 2021, give or take a few minor adjustments to the cost of living.
Dr. Friday 1:26 But it’s always very important, especially with the current changes that we have happening in real estate and stocks. We all know the stock market right now has come down quite a bit. So many of you are some of you may be looking at potential stock losses. If you’re like me you’re holding and waiting for that to hopefully bounce back so that I won’t affect any of my tax losses. But sometimes a tax loss could help if you had large capital gains.
Dr. Friday 1:56 And I want to put a caveat out there, I am not a financial planner, I am totally talking about taxes, and how to potentially save on tax dollars, never take a tax loss just to save tax dollars. Because anytime I’m talking about a tax loss, in most cases, you would be losing the value of your tax bracket.
Dr. Friday 2:17 So for example, if you have a $10,000 tax loss, a physically lost $10,000, and you’re in the 20% tax bracket, you would only save $2,000 in tax dollars. So never a good idea to just go lose money just so you can save money. Now sometimes you can by having a loss, it could kick you into a lower tax bracket, or things like that.
Dr. Friday 2:41 So it may help help you even more than a few 1000. But all in all, it’s never a $ 1-for-dollar loss. So always make sure you’re consulting with a financial planner if this is something that’s going to have a major effect on your finances, right? Because, again, if you’re only talking to someone like myself, an enrolled agent, that’s what we do is taxes, we do representation, I’m not looking at what’s going to be happening in the big picture under my expertise.
Dr. Friday 3:11 My expertise is how to save you taxes today, tomorrow, or in the future. I had a really interesting conversation with one of my clients been doing this for the last couple of years. And they were doing some Roth conversions. And they came in because they’re just trying to figure out the math. And a lot of times financial planners, especially ones that really just look at your markets, where you’re at in the stock market, don’t really necessarily do big financial planning for you.
Dr. Friday 3:39 Sometimes they forget some of the moving parts. And one of the big ones that I’ve found in this kind of situation is really plain and simple. If you are over the age of 65, and you’re wanting to do conversions, because you’re thinking, “Well, if I convert it now I won’t have to pay taxes later.” Sometimes that’s great, so she with a lower tax bracket.
Dr. Friday 4:00 But if you’re doing large enough conversions, this gentleman who is doing a couple of 100,000 a year in conversions, he’s kicking his Medicare into a $700 a month deduction versus what’s usually three or 400, which in his case is normal. So he’s almost doubling the cost of Medicare. And he still has another five, six years before he has to take what’s called the requirement on distribution.
Dr. Friday 4:27 And in all honesty, this gentleman’s done very well. So his requirement on distribution, once he hits 72 will be high enough to make him into the higher bracket anyway, so we were doing some number crunching just trying to figure out okay, he is paying lower tax today than he is in the future. He will help possibly, you know, whoever inherits the money may be in lower tax brackets.
Dr. Friday 4:49 These are great things, but he’s also paying some pretty hefty penalties for doing it. And so we were crunching some numbers and everyone’s numbers are going to be different but it’s important that you Look at all the moving parts, not just that, “Oh, I’m in lower tax brackets almost save three or 4% if I convert today,” but what effect is that having on your other incomes? Are you actually paying more in taxes or in some cases, I know I work with Hank Parrot a lot.
Dr. Friday 5:17 And so often when we’re sitting in doing tax planning, he’s also in there doing financial planning. In his case, sometimes it’s just better to let you know, have a couple of low years where you’re not paying as much in taxes, and take the advantage of doing that. So when the RMD came in or starts at 72, this gentleman will then have it at that point, he has no choice, it will start kicking in and he’ll have to start paying higher and on top of it, his wife at that point will be on Medicare.
Dr. Friday 5:46 And so you know, she’ll be paying a higher Medicare as well. So I’m just saying make sure when you’re thinking about all the numbers, sometimes people just look at, “Okay, capital gains rates is, you know, 15, 18.8, 23.8, or ordinary income 10, 12, 22, 24, as a football player. Hut, hut, hike! No. But those are the numbers that we always have in our heads. But sometimes you can get hit with other penalties from other benefits or AMT tax that comes in alternative minimum tax.
Dr. Friday 6:17 They call that the kind of the leveling, playing field kind of tax doesn’t really agree, but no one’s asking me. But these are the taxes you have to know about and make sure you understand where and how that’s going to affect your taxes.
Dr. Friday 6:32 So when you’re doing your taxes, that’s one thing, putting the numbers on a tax form, preparing tax returns, making sure they’re done, right. That’s, you know, obviously the goal. But that’s often, you know, January through April. Then you want to really start and I always suggest, if you file extensions, that’s great. I’m big on extensions myself, but also the window that you have between now and October is a time to also be looking at tax planning.
Dr. Friday 7:00 You want to be able to sit down and say, “Hey, what if I do this? What if I sell my piece of real estate? What if I sell my primary home? What if I sell stocks? What if I have this much capital gains? What if? It’s a huge game to play, so that way you now are armed. If you decide to do this, or you decide to do that, you know how that’s going to affect your taxes, as well as any other benefits you might be qualifying for.
Dr. Friday 7:25 So it’s very important to play that game with your tax person and get that kind of information because they myself when I’ve already done your taxes, it’s easier for me to do because just like I started the show, I said, taxes really haven’t changed between 2021 and 2022. Not a big change. As I said, there is some minor cost of living changes, things like that. But if you’re really doing some basic estimating, it’s you know, it’s one of those things, it’s gonna be a bit different story in the year of 2025 when we expire some of these tax changes, and you know, you’re going into 2026. So we have the advantage of doing this right now.
Dr. Friday 8:02 And we just want to make sure that you are taking full advantage of that information. So if you have some questions I might be able to answer here live on the radio, why not take advantage of 615-737-9986. I want to run through really quickly, the IRS put out a brochure.
Dr. Friday 8:27 I think it’s for everybody, but we received it here in the office. And it’s the biggest common mistake taxpayers make. And I think a couple of these are kind of interesting, you wouldn’t think you’d be able to but some of them apparently, if you mail in a tax return, this would apply. Because if you are e-filing a tax return, you can’t have, for example, a wrong social security number, it won’t accept it. So therefore they accept sec, but one of the second biggest mistakes people put is missing or inaccurate social security numbers. The first thing they put in was filing too early.
Dr. Friday 9:02 So this is what’s funny the IRS right says, “While taxpayers should not file late, they should also not file too early.” So when is the perfect time? That’s a great question. I don’t know if I know the exact answer. But I think what they’re saying is sometimes people rush to get their refunds, they prematurely forget that they had something else that needed to come in and they often have to amend the tax return which often leads to delays. So just you know, make sure when you file your taxes to the best of your ability, making sure that you have all of the information that you have, and that you’re working it.
Dr. Friday 9:41 The third thing was a misspelling of names. Now I will say one on one my clients have come back and said, “Friday that is not quite how I spell my name.” But I again with e-filing. Now that one can be funny because if the first four letters of the name is correct, that’s what they check when e-filing. And so I could still have a typo in the name. So making sure that the name is spelled correctly is a very important situation.
Dr. Friday 10:08 But for that, and then accurate wages, dividends, interest, this is always the hardest thing because the IRS will send back and I know a couple of you guys listening, you got love letters back because in 2020 and 2021, we, of course, had the stimulus. And in many cases, people said they did not receive the money, and that they needed to be able to get that, you know, they want to put on their tax return. And we did that we put on the tax return.
Dr. Friday 10:38 And the government came right back and said, “Guess what? You already got your money.” But they’re still saying, “No, I didn’t.” Well, guess what? Friday found out how to get that money. Okay? So if you are listening right now, and you said, “Hey, I have not received” or the IRS may have issued a check, but you never received it, you need to go online and download a form called a 3911. That is a 3911. It’s a taxpayer statement regarding refunds, this is what you will need to be filing to request a second check, a direct deposit, you know, bottom line, if there was a mistake with your bank, or if they sent the check, and you were already relocated.
Dr. Friday 11:26 This is where you’re going to be able to get your stimulus and or any refund checks that you might be entitled to. So if you’ve got questions on that, again, I know I’ve been saying for a while, that I really wasn’t sure the process we were going to be using to try to go back and get the stimulus money and or any missing refunds you might have had refunds are a little bit more direct stimulus was a little bit harder, but they have come back. And they’ve given us instructions for doing this form.
Dr. Friday 11:54 So if you’ve got questions on that, we can take those after the break. Or if you’re trying to work on your 2022 tax planning, maybe you inherited something or you’ve sold something you’re not too sure you just want to make sure how much money you should be set aside. And when should you be pre-paying or making an estimated tax payment. This is the show. We’re going to take a quick break. And when we come back from that break, we’ll take some of your phone calls. Or we’ll continue on some of the questions I’ve received through the week through email. But you can join the show at 615-737-9986. We’ll be right back with the Dr. Friday show.
Dr. Friday 12:38 All right, we are back here live in the studio. And we’re taking your calls if you want at 615-737-9986. I realize it’s an awful beautiful day. And nobody really wants to be sitting around probably dealing with tax issues. But you know what, you know, they seem to love to send us love letters.
Dr. Friday 13:03 That means there’s always something out there. That’s just kind of… I had a fascinating one this week that just happened on Friday. This gentleman brought a business back in 2013. And for any of you that have purchased businesses in the state of Tennessee, there’s a kind of a unique law that basically says if you purchase a business in the state of Tennessee, you do not get a tax waiver from the state of Tennessee, Tennessee Department of Revenue, basically saying that the prior owner was in good standing, then you the new owner are responsible for the taxes that they owed. Right? It’s kind of scary, kinda freaky, because you’re like, “Oh, my gosh, what?”
Dr. Friday 13:44 Well, in this particular case, back in 20 1314. This is how I actually found out about this ruling. We ended up with this particular ruling coming up and we ended up having to negotiate and come up with the dollar amount that we had to pay the states. Okay, so we’re thinking all’s good, I guess you would say.
Dr. Friday 14:02 And now like I said, yesterday, they got a love letter from this old business that was done into I mean, this is Tennessee Department of Revenue sends a letter to my clients, but under the name of the prior owners for the year of 2004 business license, and they did an assessment and they charged penalties and interest, and now they’re looking only for 8000 and some dollars. Oh, well, that’s not a good thing.
Dr. Friday 14:27 Let me just share that with you. So call the state No, honestly that the letter basically says this is not necessarily a collection notice. But you know, they’re working on it on their side, but these are the kinds of things we have to have our eyes open on because so often when we buy or sell something, we’re always sitting there going, “Okay, I’ve got that covered, kinda like close that door.”
Dr. Friday 14:51 And, you know, sometimes those doors can get reopened or maybe it comes in through a window, but I’m just saying make sure you have that information and that you do if you are talking to someone and you’re thinking about buying an existing business. Because usually, that’s a good idea, especially if you’re starting from, you know, it’s harder to build a business from scratch than it is to take over a business, it’s already has a good reputation.
Dr. Friday 15:12 But getting a tax waiver is not a hard thing to do and doesn’t really cost anything. And it could save you in this gentleman’s case. I mean, obviously, 1000s of dollars. So, all right, let’s go to Jerry in Lebanon. Hey, Jerry, what’s happening?
Caller 15:30 Trying to figure out what to do.
Dr. Friday 15:32 Okay, let’s see if I can help you. Give me the situation.
Caller 15:38 My grandmother passed in October, and she left a farm for my dad and me to split. We are fixing the sell it, and my part of it is going to be around a million-plus. And I’ve never had this much money before, I don’t know what to expect, as far as taxes, I don’t know what I need to do, after the fact to make the money work for me. And I need to just get somebody to find out what I need to expect and what I need to do when I sell this property.
Dr. Friday 16:17 Well, there’s some good news I can give you, you may still have a few capital gains because the price of the property is going up every month, it seems like but one of the things you and your dad, it may be very done. But you need to get a basis for the property at the time that your grandmother passed away.
Dr. Friday 16:34 So you need the real estate people, we call them comps, you need to get something that’s like a light kind that would tell us how much was the land worth back in October of 2021. So we know what we have for bases. So whatever it was worth at that time, is what we’re going to be able to use as your tax basis, and then whatever you sell it for. So if it was worth a million, and you sell it for 2 million, then you’ll pay tax on a million dollars, you know what I’m saying? But it’s probably not going to be that drastic of a difference. But I will say it does change every month around here.
Dr. Friday 17:10 So it could have been more worthless in October than it was worth in May. Right? I mean, you may have still had some growth, but that’s what you’re gonna want to do. So first thing, both your father’s tax person and you are going to need those comps. The ideal person to do is if you have a real estate person handling you know the sale, most of the time, they will do those for free because they’re very happy that they are making a commission on you.
Dr. Friday 17:38 So get that and then as far as once you sell it and we determine whatever taxes, then I would suggest you get together with either Hank Parrot, my financial guy, or you might want to shop and go to two or three different individuals making sure that their train of thought is your train of thought, right? You don’t want to be tucked into a bunch of annuities or you don’t want I mean, my personal opinion, obviously, Jerry or you don’t want to be all invested in the market, because obviously, we see well, roller coaster ride.
Dr. Friday 18:08 So you need to have good diversification, things like that. But we can certainly sit down once the sale is completed, and I can help you with the tax. And then I can give you some referrals on financial people. And I would definitely suggest going to two or three people, every one of them should be free as far as the initial consultation and make sure you’re on the same page with that person. So you because they’re going to know a lot about you, you know?
Caller 18:32 Okay. All right. Okay. Well as soon as I get a hold, I will get in contact.
Dr. Friday 18:37 No worries. Sounds good, Jerry. Thanks. So that’s the kind of situation we’re running into quite a few not necessarily, in some cases is inheritance just like Jerry’s. And then the other case are people just selling primary homes for more than the exclusion. Keep in mind, if you’re selling your primary home, and you’ve lived in it two out of the last five years, and you haven’t taken the exclusion in the last two years, then you can get 250,000 for an individual and 500,000 for a married couple.
Dr. Friday 19:11 I can tell you right now I have three that I can think of, incidentally, that sold their homes for more than that. So they paid 200,000 They had the 500 exclusion and they sold them for 1.2 million or whatever the ballpark. So you could end up having to pay tax on the sale of your primary home. Not as much. But you can, the harder ones are really winning.
Dr. Friday 19:36 And it’s a little bit of a game but you know you were married 25 years and your husband and you lived in the house and then one of your husbands passes away in this example, and then you lived another 10 years in the house, but now you’ve sold it. You’ve got the step up and basis from 10 years ago with your husband’s half and then yours, but you’re still not near what the market value is. So again, I have one in California.
Dr. Friday 19:59 We’ve been doing probably, she’s been with me almost from the beginning. And I’ve been in business now 25 years. And, you know, we lost her husband over 10 years ago, she sold the home, and it was for almost a million little under a million dollars. And they originally built it for less than $150,000.
Dr. Friday 20:20 Back in the day, and it’s been 30-plus years. So when you’re when you have that kind of longevity, and yes, she’s done quite a bit of repair and improvements over the years and, and things like that, and that will come into play. But she’s still probably going to be above the 250 that she’s allowed at this point. And her bases.
Dr. Friday 20:38 So very important to understand how the bases work. And if you don’t know, you need to probably talk to somebody that does an enrolled agent, a CPA, somebody that does taxes. That way, then you can sit down, work up the basis have that especially like in Jerry’s case, there’s going to be two individuals, you really want to use the same information because that way it makes sense, both of you using the same comps and the same information for the calculation. And then you know, writing off real estate fees, and if there was any, any money that had to be put into the property, but sound like it was a farm. So it might have just been landing.
Dr. Friday 21:16 But who knows, you know, again, just making sure that you write off all the, what you can write off. And, you know, just keep in mind cutting the grass and things like that for your primary home. That is not an add-back. That’s not something that improves the value. You can’t necessarily write that off. If you redid the kitchen, you got to the kitchen and put a new one in, that would increase the value, you put a new roof on your house that increases if you repair the roof on the house that does not increase the value.
Dr. Friday 21:42 So really understand how that works when you’re dealing with it. And like I said, we have a lot of people selling and buying real estate right this second. So you know, if you’re looking at those kinds of things, you want to deal with that. And really quickly, I got an email here, and it’s about someone that is buying and flipping real estate. And they were filing it on a Schedule E and they were told by their banker that they shouldn’t, you know, can’t always say every banker knows what they’re talking about. But this particular banker was right.
Dr. Friday 22:12 Keep in mind, if you are flipping a piece of real estate, it is short-term, ordinary income. And it’s not rental or passive, which is what a Schedule E is this should be on a schedule C or it’s an LLC or a corporation, a separate entity, but it is not passive income passive would be rentals. And not flipping or doing something like that most of the time I find people trying to do that is because they’re trying to avoid social security and medicare self-employment tax.
Dr. Friday 22:45 You know, in the big picture, guys, I know everyone’s always trying to find ways around there. And there is if you want to be a Sub-S Corporation, pay yourself a fair wage, but you’re making $350,000 a year and maybe a fair wage for the jobs 150, you could possibly but just think about it. What are you saving? You’ve already got it. I mean, Medicare’s the only thing and that’s 1.45% because you’ve already maximized Social Security, the IRS has already come down and said that an average person being self-employed, basically makes $75,000. If it’s less than that, and you’re you know, you’re paying yourself 20,000, but you’re making 150,000, but your W2 is 20.
Dr. Friday 23:26 The IRS has the right to come back and disallow and charge you tax on that. You know, so just keep in mind, that avoiding Social Security and Medicare is not good tax planning is not a good way of doing it. There are correct ways of doing it. There are ways of deferring certain things but making sure that you do it right. So you can sleep at night and also collect your social security when the time comes.
Dr. Friday 23:50 I had a couple come in. And you know, she had never really worked and she had the ability to put some money in her name, but she just didn’t do it because they were husband and wife and the husband had always put it in his name. And then she became disabled and she wasn’t qualified for disability because nothing had ever been paid in her name for retirement, it had all been under the husband’s name. And again, sometimes that’s you know, nine times out of 10 It may not be a big deal, but it does make a difference sometimes.
Dr. Friday 24:18 So thinking again, trying to teach people don’t just think about what it costs in taxes, what benefits are you may be losing or not getting because of these situations. All right, we’re gonna take our second break. Again you can join us at 615-737-9986. We are living here in the studio we’ll be right back with the Dr. Friday show.
Dr. Friday 24:18 All right, we are back here live in the studio and we are having a great time if you want to join us in the studio, you can 615-737-9986 I’m an enrolled agent licensed by the Internal Revenue Service to do taxes and representation. Just want to clarify, I have never worked for the IRS. Not too sure if they want me to work for the IRS, but either way, not something I have ever done and don’t plan to do, but I have been licensed by them to do representation.
Dr. Friday 25:25 So basically, my job is to represent my clients in front of the IRS to make sure that you know, what your tax law what’s, what’s good, what’s bad, what’s maybe what’s no and how they’re going to look at it. We do a lot of offer and compromise payment plans, amended returns, and obviously filing tax returns with offering a compromise. I just want to basically put out there I know there are a lot of companies that do offer and compromise many of them are some of them actually advertise on this station as well.
Dr. Friday 25:56 But any company that the first thing out of their mouth is yes, we can help you but please pay us $5,000 or anything like that. Make sure that you have an idea of what they’re really going to do for you. Because normally, you know, oh, we’ll get the IRS to stop bugging you. Well, you know, all you have to do is file a power of attorney at that point, they’re going to pretty much put a hold and then see what the next step is they have to then contact us to talk to you. So we’re a wall or shield between the IRS and you.
Dr. Friday 26:24 But other than that, are they going to be able to do an offer and compromise? Do you even qualify for an offer and compromise? Do you have the ability to do a payment plan? You know, what are the options that you really have? And what are they going to do for $5,000? Again, you owe 30, 40, and 50 $60,000 doesn’t seem so bad. So it’s not it’s not even the value of the money. It’s the value of the service.
Dr. Friday 26:48 So make sure you have a human being that you can go and meet and talk to, and find out what can be done. And if you need help with that. Again, it’s what we do, we’ve done it for 25 years, the new one will give you our phone number and email and a little bit here. So you can contact the office and set up a free consult to see if we can help you. Again, I want to address the taxpayer statement regarding refunds.
Dr. Friday 27:14 That’s the 3911. We have had a lot of calls, emails texts about how you get your stimulus money if you have if you’ve never received it. And of course, we kept telling you guys put them on your tax returns, and then people would get the love letter back from the tax returns, and we’ve changed the tax return, you don’t qualify for it. And then at that point, we kind of let sleeping dogs lie because we didn’t have any real approach. How do we go back and try to obtain the money that didn’t post?
Dr. Friday 27:46 So two things, the IRS basically came back and said, one, you need to go ahead and ID. I believe it is, but you need to get online or you need to have a power of attorney with someone like myself CPA EA, that can get your transcripts because we need to figure out when they issue the check and where the check was issued. So we can put tracking and find where the money wins. And then once you know where the money went, then it’s the question is did it go back to the IRS, or is it you know, whatever happened to it.
Dr. Friday 28:19 And then from there, you can apply for a second check or another direct deposit. Because in some cases, I know the bank accounts were closed, the people had relocated, so the mailing address of the IRS was not good. And then you know, the cheque went out to that address, it probably got returned to the IRS. But at that point, the IRS hadn’t really posted all that money back into the people’s accounts.
Dr. Friday 28:45 So and the same thing with banks, you know, the money went in, and then the bank money came back out. So it’s just a matter of tracking it making sure that you have it and then getting the resolution that you’re looking for. And if you need help, I would suggest filing the 3911 but if you need help doing that you can certainly call our office we will help you in helping you with any kind of tax resolution offering compromises. Just getting power of attorney and talking to the IRS is what we do.
Dr. Friday 29:13 So what we’re good at Alright, so if you do want to join the show, you can 615-737-9986 taking your calls talking about all my favorite subjects, which of course really are fairly limited, right? taxes, taxes, and taxes. There you go. There are my favorite subjects, all three of them. So if you want to join us you can but other questions and things you need to be considering again, we are halfway or not quite halfway, but we’re in May of 2022.
Dr. Friday 29:48 So if anything has happened, any sale that you have been that a piece of real estate, inheritance, or anything that may have a taxable situation, you theoretically have two options, you need to make an estimated payment on that in the 90-day cycle or on the estimated tax cycles that you have, if you owe. But the tax law basically says as long as you pay 110% of the prior year’s tax, you are basically in compliance. So you have to make sure that you understand the difference between those two situations.
Dr. Friday 30:21 But if you do, making sure I’m not going to tell you, I’m a huge fan of putting money out into the IRS and then waiting for them to give it back. Right? Not something that’s going to be very exciting. So I am a firm believer that you want to basically be able to do what you know, go out, do what you need to do, and then take pay them what they’re entitled to when the time comes.
Dr. Friday 30:48 So making sure on May 20th, which was just a couple of days ago, the IRS did revise the 2021 tax credit and advanced child credit frequently asked questions. Again, we get all these nice little updates in here. And one of the important changes to the tax credit is that will help many families receive advanced payments, the rescue plan act, of course, we know that rescue and the tax credit of 2021 came through and they helped do that. One of the answers or questions you have is they will not be given as of right now advanced child tax credits out in 2022. I just wanted to let you know that. All right, let’s see what Bill has. Donations to college. Hey, Bill, what’s happening.
Caller 31:36 So when my wife passed away, I gave the insurance I got I went ahead and donated that to my grandkids for their scholarship program. I don’t remember what that program is called. But I wrote the check to my daughter to deposit rather than to the fund. Is there any way to and I understand now that I can take that off taxes? Right? But will it work in that situation I have done?
Dr. Friday 32:01 No. I mean, neither of them is tax-free, because I think you’re talking about a 529 plan. And so the money goes in after-tax but grows tax-free. It’s similar to a Roth. But you don’t actually but so giving it to her would be the same as the other. But as long as it got donated into the 529, then you can I don’t know how much the I think it’s 150 to 100,000 or something you could put in in a year. But there would be no difference in tax.
Dr. Friday 32:32 The difference is if we give it to your daughter, and it’s showing as your daughter, theoretically, if it was over $15,000, then there should have been a gift tax return filed on that year, whatever your that is to show that she received the money, right? Because that’s who the check was made out to. If you intended to go to the 529 plan, theoretically, I know what you’re thinking, “Hey, I’m giving it to her,” she can make sure it goes into the right account and have it go that direction.
Dr. Friday 32:59 But in essence, the IRS would say that she was the end-user of receiving that money. So, you’re showing that you gifted the money to her now there are no taxes in any sense of this conversation unless it was over $11 million.
Dr. Friday 33:13 It was 30,000.
Dr. Friday 33:15 Yeah. Okay. And it’s is your daughter married? You probably made the check just out to her for 30,000.
Caller 33:23 I put on the fourth thing was for the Children’s Education Fund.
Dr. Friday 33:28 Okay. If it was for the 529 plan, there’s nothing needing to be filed. So again, I mean, our scenario is if you want to be on the safe side, you do a 709 and you put her in and show 15 of it would be disallowed. Another 15 comes out of your 11 million lifetimes, right? I mean, it’s really going to have no effect on anything. Or since you put 529 plan, I don’t think the IRS is really going to it’s not a taxable situation either way. So I don’t think they’re going to really be chasing it down thinking, “Okay, he’s trying to avoid something.” Because it would be a zero effect. Really.
Caller 34:03 Okay. And no deductions either?
Dr. Friday 34:06 No deductions. That’s the downside to that conversation.
Caller 34:08 Yeah. Okay. Well, thanks for your help. I appreciate it.
Dr. Friday 34:11 No problem. Thanks, Bill. I appreciate you. All right, what do you think I think we can get is a Dee. Dee. Hi, I love the name.
Caller 34:22 Hi. Thank you. I had a question about the tax waiver in buying an existing business I’ve never heard that before and I’m really interested in it is that through the TN Department of Revenue,
Dr. Friday 34:37 it is through the Tennessee Department of Revenue.
Caller 34:46 Like the opportunity to buy a building that had a business in it they had closed and the options by the business belong you know, I will sell the business to and I guess it’s like a two in one deal if we want to do that, and but I wanted to know about that. I wanted some information on that kind of sale and also, particularly tax waiver, because I can see where that can be very haunting.
Dr. Friday 35:19 Exactly. And, you know, doing business for quite a long time here 20 plus years, and I had never had a client run into it until this one, and then the state coming back and saying, oh, yeah, it’s on our books. Here’s the revenue code and all this and we’re like, oh, wow, this is a learning curve. Because I didn’t think you could hold someone else responsible for your taxes, you know.
Caller 35:44 Yeah. Is that on collecting the sales tax or is that the business tax?
Dr. Friday 35:51 It actually covers all three. So sales tax, business tax, franchise excise tax, if they have any opening balance on any of those, so you need to get a good standing from the state. And it’s pretty easy. You can go on to TNTAP and download a good standing report so that you have proof that they were in good standing according to you know, the state at the time that you purchased.
Caller 36:15 So you’d say that they have to get on there and do that.
Dr. Friday 36:19 Right, that will be part of the closing, in my opinion, it’s a lot easier for them to do that than it would be for you. I mean, you could probably order it but it’d be just easier for them because most of us have access to that every month or whenever you’re filing things so it’s pretty easy.
Caller 36:36 When you said the franchise excise. Is that just if you’re operating in a franchise or is that just generally in the state
Dr. Friday 36:50 Franchise excise would cover any type of basic entity be it an LLC, a corporation, not a sole proprietor so if they’re operating as a sole proprietor they would not have the franchise excise or if they are operating as a general partnership, they would not have franchise excise but nowadays, a lot of people are like LLC be single or multi membered or corporation, so they should all have the waiver.
Caller 37:22 You said the LLC would not be subject to the franchise excise.
Dr. Friday 37:29 LLCs are subject to franchise excise. Anything that has a charter is subjected to franchise excise.
Caller 37:36 Oh, okay. Gotcha. All right. Well, that’s a big help. Thank you so much.
Dr. Friday 37:41 No problem. Thank you for calling. Appreciate it. All right, boss. Let’s go ahead and take a break. And then we’ll come back to Michael. And we’ll be at our last time. All right. Dr. Friday show. Goodness, gracious. This is the Dr. Friday show. We’ll be right back.
Dr. Friday 38:06 Righty, we are back here live in the studio. This is the last part of the show. So we have about seven minutes left. And we’ve got Michael on the line who held through the break, which I totally appreciate. Hello, Michael.
Caller 38:19 Hello, how are you?
Dr. Friday 38:20 Hi, I’m good. What can I do for you?
Caller 38:22 Filed a paper tax return on March 7th. And I’ve called the IRS hotline, refunds hotline, but no information available. And I’ve been unable to reach a person. What should I do?
Dr. Friday 38:35 Did you certify it?
Caller 38:37 I just sent it regularly like I always do.
Dr. Friday 38:41 Yeah, I would suggest refiling it and sending it Priority Mail, it will cost you like seven bucks, something like that. That way, then you have a date that it was received. So you have a period of time to know because any paper return, I will tell you if you sent it on March 7, that’d be April, May. It’s only been it’s been a little over about 10 weeks, I guess if I’m doing my math, maybe 11 weeks, something like that. It will take usually about three months for it to post. But I would think it’d be close to posting in all fairness. So if they’re not showing it now, I would actually if you hopefully have a copy of everything you sent because I would suggest sending it again.
Caller 39:23 Okay, appreciate your help. Thank you. Do I send it certified or just tracking?
Dr. Friday 39:29 Just track. That’s all you need to do. You just need to track so that way you know that they received it then you can start counting the weeks and know that when you call them you say, “Wait, I have proof you received it on this day. Where is my return?” You know, kind of thing. All right.
Caller 39:42 I appreciate your help. Thank you.
Dr. Friday 39:43 No worries. Thanks, man. All right, and that is always what I know for some people, hey, you’ve guys filed your taxes this way for like ever. And it’s one of those deals where you know, every year I do my paper return I fill in the few blocks So I put it together, I usually have a refund, so I’m not overly worried about it.
Dr. Friday 40:04 And I get that. But, you know, it’s like anything else, like having a rotary phone, which some of you guys are probably way too young for, but it’d be like having one of those and then trying to call people in your car with it or something, I mean, you need to be e-filing returns is all I guess I’m trying to say, it’s a lot faster. Usually, within 21 days, usually, I have several cases where we show proof of e-file and they’re not showing up and we have to put a track on it, sometimes they get bounced back, and we don’t hear about it because of a name or social security number.
Dr. Friday 40:35 But most of the time, maybe oddly enough, when we put tracking on it, the government then finds it, and then the ball starts going for that. But I mean, I will say there’s probably no perfect situation where you can absolutely every time guarantee that it’s always going to be you know, there so, but it’s at least trackable. And if you don’t have something a few days, at least with, uh, with one of those situations, you can actually, you know, come back and say, “Wait for a second, I know that you received it, here’s my proof. Here’s my filing number, find this return or tell me why it’s not going in the right place” or whatever.
Dr. Friday 41:13 So that is my suggestion. But I do know there’s a lot of people there, it’s easy, you guys just fill out the paperwork, you put it in the mail. And again, up until before COVID When the post office in the IRS or the postal receiving area and the IRS wasn’t, you know, so far behind you guys, actually, we’re able to get your refunds probably in a fairly timely manner. Not so anymore. I haven’t heard anything from the IRS member I was telling you guys, they were like 6 million behind and in posting or receiving or opening letters. I haven’t heard anything lately on any of that.
Dr. Friday 41:48 So I don’t know if they’re any closer or any further away from that situation. But I will keep you posted. If there is a question you want to ask and you’re not, you know, one that wants to hop on a radio totally can relate to that you can email Friday, like the day of the week, friday@drfriday.com, you can email a question. Or if you want to set up an appointment, that’s the easiest way to probably do that email it. Another thing you can do is give us a call at 615-367-0819. Crazy enough, you can also text to that number 615-367-0819.
Dr. Friday 42:33 And we can also answer questions or text you back at that number, if you would like to, you know the best thing if you have a friend you know somebody that is behind on taxes or they owe a lot of money to the IRS. We just had a situation with somebody up in Indiana who had for years had some issues with the government, the revenue department up there. Finally, I would like to say it was on my behalf. But I will say we opened the door but the owner of the home really did do the harder push on that one.
Dr. Friday 43:05 But we showed her how And the bottom line is the levy was released, she’s selling the home, and she’s not going to have to have $28,000 held back for something that she didn’t owe. But getting that off and making sure that your records are in good shape. That’s really important. So again, if you need help, you’re not too sure where to start, you have moved around, or you don’t have records.
Dr. Friday 43:25 Trust me, we know how to help you get your tax returns caught up to date. And you might be actually relatively surprised on how long or how many years we have to do. So if you need help doing that easiest way to reach us is 615-367-0819. You can also email friday@drfriday.com.
Dr. Friday 43:48 And then if you don’t have any idea who this crazy person is that you’ve been listening to for the last 40 minutes on the radio, you might want to check out drfriday.com. That’s drfriday.com And you can find out who I am where my offices are our office, not multiple only singular offices in Brentwood.
Dr. Friday 44:15 Or if you just want to have some questions or situations you can also email us right through the website directly to us so that we can try to help you figure out what the next step is because so often people will make decisions and then II once you’ve made that decision, especially when it’s coming to selling investment property, maybe you should have done a 1031 but it’s a little hard to say that to someone after they’ve already sold it because once you’ve touched the money, you can’t do a 1031 exchange.
Dr. Friday 44:42 You can’t do a 1031 exchange on your primary home. So these are the kinds of questions you need to talk to someone before you make those decisions. That way then when you get ready to go do something you’re not sitting there going oh my gosh, I could have saved what you know. What good does that do looking backward is not going to know the answer, you need to look forward to figuring out what’s gonna be the next way to do it.
Dr. Friday 45:03 So again, if you have tax issues, you haven’t filed taxes in a number of years, you have someone that you know is getting a ton of love letters, or maybe you just received your very first love letter from the IRS and you have no idea how to communicate about it. Well, guess what I am more as you can see, I know how to talk, I can certainly fill in the blank for all that I can certainly help you fill in the blank and figure out what you need to do. If it’s a state issue. If it’s a federal issue, we’re licensed in all the states so we can help you in either situation. It’s just a matter of getting things done the right way.
Dr. Friday 45:34 So you don’t have to worry about you know, making a decision and then that decision costing you possibly 1000s of dollars, if not 10s of 1000s, and making the wrong choice as far as how and what you need to do. So, one more time, just so you know, I’m Dr. Friday, my firm is Dr. Friday Tax and Financial Firm 615-367-0819 or you can email friday@drfriday.com. Again, friday@drfriday.com. And you can also do the internet. Just drfriday.com again, drfriday.com I hope you guys are having an awesome Saturday. We’re having a great time here. And as we always like to say in Australia, call you later.