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:
- How Do You Calculate Taxable Gains in Real Estate?
- Will My Social Security be Taxed If I Continue to Work?
- Can You Use Your Social Security Benefits While You’re Still Working?
- How Old Do You Have to be to File a Tax Return?
- What Is the Best Filing Status for Married People?
- Can You Gift Money to People Without Paying Taxes?
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How Do I Avoid Paying Taxes on Prize Winnings?
- How Do You Know if You’re Using Your Car for Business or Personal Use?
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What Happens If I Can’t Pay My Taxes on Time?
- How To Get an Extension to Pay Your Taxes
- How To Do Tax Preparation and Financial Planning The Right Way
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 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
Dr. Friday and the doctor is in the house. We are here live in studio. So if you’ve got a question, are you working on maybe preparing for your 2023? Maybe you’re selling some real estate you’re trying to figure out? What’s the best way to do whatever it is you’re trying to accomplish? This may be the show to offer that information, at least on the tech side 615-737-9986, we are taking your calls talking about my favorite subject, which is taxes, how is it going to affect if you decide to sell your your product or you sell a home? What is the situation? And how are you going to deal with that and making sure you have enough tax?
Dr. Friday 1:17
I was talking to a client earlier today. And he had been selling off some of his rental real estate. And he was wanting to know what percentage of taxation should he be looking at when it comes to resale of that real estate? And it’s a great question because especially if you’re selling multiple properties, we do have the 0% capital gains. But even if he even if he didn’t make capital gains, he would have recaptured depreciation required on those properties because he’s owned a burned number of years. So it’s very important that if you have something like that, that you preempt just like him, he’s selling them now he wants to know what portion of those monies need to go to Uncle Sam. So if he reinvest, he’s not reinvesting with Uncle Sam’s money so that way you can actually deal with your situation.
Dr. Friday 2:09
All right, let’s go the phone lines hit John. Hey, John, what can I do for you, sweetie?
Caller 2:14
Oh, hi. I’ve been retired for a couple of years now. And I’m planning to go back into the workforce. Now I’m collecting Social Security, I did not start taking Social Security to my full age, which was four months I was I was born in 1956. Okay, so so so you know, I’m getting full Social Security retirement benefits.
Dr. Friday 2:39
So no penalty for taking the Social Security, but it will be taxable. But go ahead.
Caller 2:44
Well, that’s my question. Because I want to go back to work part time, I was I was in sales as a commissioned salesman. And quite frankly, at this point in my life, I don’t want to be working 6070 hours a week, and I don’t want to stress of a commissioned salesman. So I also have aviation experience from the Navy. So I’m thinking about possibly part time at the airport. Or there’s a friend of mine in the construction business that needs help with customer service and estimates in that part time. So both of those are in my wheelhouse. So what I’m wondering is, at what point because I’m looking at the way I understand it, it looks like I am either in my first 20 benefits I get I get $2,731 A month is what I get. It looks like to me that I am either better off making under $12.4 thousand or less, going all out and earning as much money as I can. I don’t know which one makes more sense. Now, if I earn over that amount, I believe, because I’m earning money that I could really contribute to a 401 K to reduce the tax burden. So that’s what I’m basically looking at is that I’m looking at, like three months down the road. So I’m trying to plan this out ahead of time versus having a surprise next April.
Dr. Friday 4:18
And you’re doing a great job. Yes. Because so for some people, they’re listening, what he’s basically saying, Okay, I’m gonna go back to work, but his social security once he makes more than 24,000 this provisional tax code, they take half of your Social Security, plus what you earn to get to that $24,000 So in his case, really, he’s already making I think you said 22 a month, so that’s easily
Caller 4:44
I’m making 27 about 32,000 a year. All right, so 100 securities 2700.
Dr. Friday 4:52
So that’s already 16,200 or there abouts, of the 24. So you would really only be able to Make like eight grand, before you would fall into the world of taxes. So the question is, I mean, is it even worth going out to work? If you’re I mean, I’m not saying it isn’t worth it. But I mean, you know, and you could you could contribute to your retirement, like you said, as long as you’re still working, you can contribute to retirement plan, which may help defer some of that, at least up until well, as long as you’re still working for the same company, you can contribute as long as you want, pretty much. So that means you can make another What 7000, maybe 7500 and contribute that or if it’s a 401k, theoretically, a little bit more, maybe. So I mean, in my opinion, it’s hard to stop and say, “Okay, I’m only going to work and make this much at the type of jobs you’re listing,” because, obviously, you’re a good salesman, or I mean, you’ve had a lot of experience. So once you’re out there doing is like, “Oh, I can’t sign this job, because that’s gonna kick me over, you know, I mean, that would just be an impossibility.”
Dr. Friday 6:01
It’s not like you’re clocking in and saying, “Okay, I’m gonna work 10 hours a week, and that will keep me relatively in this dollar amount.” Since you’re doing it based on commission, I think it’s going to be harder to control that, especially if you get a rhythm going, and you’re able to start selling whatever the product might be. So I think you just have to sit back and say, “Well, what’s worse scenario is the IRS can tax up to 85% of your Social Security.” And depending on your tax bracket, that would be let’s just say 20%, if you’re outside the 12 already. So you know, that’s still keeping most of it in your pocket.
Caller 6:39
Okay, but they can’t, they can’t read, they won’t reduce my benefits, they’re just going to tax the benefits is what it will come out.
Dr. Friday 6:46
100% Yes. And, and in theory, they will, I mean, depending on, I’m assuming you probably earned a lot more knowing that you’re making 27 than you will now. But for some people, theoretically, they could earn more, and they will reevaluate every year if your social security because you’ll be paying in to Social Security, which is the bad side of this conversation. There’s no way of excluding yourself from Social Security now that you’re already on it. But yes, I mean, there’s no way of them taking money out. Now I’m gonna put a provisional in there. Medicare is means tested is what I call it, they basically will look and say, if you make less than 94, and again, I think at this point, this won’t be a problem. But you need to make less than 94,000. Or they can take more out of Medicare for single person.
Caller 7:32
Okay, one other question, because, because I understood it differently. So I’m glad I call because I thought it was I thought, I thought that they didn’t count my Social Security as income and you know, that they kind of the income I made, and then they started taxing the Social Security. So I thought it’d be tax, I thought it’d be taxing like, 10%. So the other question would be, okay, if I went the other way, and went for a job, earning their money, let’s say, let’s say I went in, I wanted to, because I’m, you know, I’m single. So if I said, Well, you know, at this point in life, you know, I can get by on say, $60,000 a year, could I just sit simply suspend my Social Security benefits while I’m working and then reapply for them when I needed them?
Dr. Friday 8:20
I don’t think you can, once you’re on full Social Security, I’m not going to claim I’m an expert. Put that little caveat out there. Because there might be someone that knows the answer to this. I know if you take an early social security, you can do that. But I don’t think if you do it at your actual Social Security age, you can suspend it, but it’s a great question. And I I’m not sure if I know the exact answer on that one.
Caller 8:43
Okay. So I need to talk to a security expert, because actually, technically what happened is that is that about five years ago, I had a stroke, I recovered extremely well. But that’s what forced that’s the first my early retirement. I’ve recovered extremely well. And then once I hit full service attorney agent changed from SSD, to SS. Yes. So,
Dr. Friday 9:05
SSA regular. Yeah. Well, I will say this, I’m not a financial planner. But what’s the harm in taking your Social Security and earning more money? I mean, again, you’re going to be paying tax but sooner or later unless you can live off. So security, we’re all going to pay tax on Social Security, either through retirement funds or otherwise. I mean, now that you’re back on your feet, I mean, there was a reason why you were on disability Social Security at the time, but now it sounds like you’ve you’ve done an amazing job and you’ve recovered you want to get back out there and at least you know, try to do what you want to do. So I don’t know if I would let the mean personally and again, I’m not a financial I’m a tax person, but I don’t think I would let Social Security stop me I think I just go out there and make as much money as I can. Well, worse scenarios. I pay a few dollars in tax on Social Security, but you’re still keeping 80% in your pocket and you can reinvest that to grow or to use in your lifestyle.
Caller 9:59
Right, right. That makes sense. Yeah. It makes it work because that was that was my that was like Plan B, Plan B was well, you know, just go ahead and make some more. Whatever I can handle because I don’t want to over I don’t want to over stress myself. That’s why I don’t want to go back into sales, because…
Dr. Friday 10:16
That would be possibly a little bit more stressful, especially
Caller 10:19
Stressful. It is everybody thinks the salesman sits on their button doesn’t do anything.
Dr. Friday 10:25
That’s not the case. Yeah. All right, buddy. Thanks for calling over.
Caller 10:30
I used to have over 100,000 but okay, well, thank you so much. No problem.
Dr. Friday 10:35
Well, thanks for listening. Appreciate it. Okay, let’s go to melody real quick. Hello, sweetheart. Can I help you? It was a melody. Yes.
Caller 10:47
Yes, it is Melody. Hello. So the only question I have is, how old do you have to be or minus a cut off for filing a tax return?
Dr. Friday 10:59
You know, that is a great question. And I’m asked that a lot. And there is none. You can be and I have people in their mid 90s that still have to file tax returns, I have a 98 year old that their son who’s not necessarily very young, but they both come in. And we have to file taxes because they have enough Retirement and Social Security and investments that require filing. So it’s really based on income. If your only Social Security, then you don’t have to.
Caller 11:28
And that’s what I’m saying, “Oh, I’ll collect your Social Security.”
Dr. Friday 11:33
If that’s all you have, and even if you had a few dollars in pensions, or something else, you would no be required to file if you’re only on Social Security, you are not required to file a tax return.
Caller 11:45
Thank you, because I don’t have anything about that at all.
Dr. Friday 11:49
Then you you are in perfect position not to file taxes.
Caller 11:54
Thank you so much.
Dr. Friday 11:55
No problem. Thank you for the phone call. I appreciate it. You too, bye bye. We’re gonna take a quick break here in a minute. And then if you want to join the show, you can at 615-737-9986 Again, 615-737-9986. We talk about taxes, or money issues, maybe you’re in the process of handling an estate someone, or maybe you’re in a position where you want to make sure your estate is in good shape. And you’ve got a question about that. You can certainly give us a call. We’ll be right back with the Dr. Friday show.
Dr. Friday 12:39
By the studio. We’ve got a caller on the phone. Let’s get Phil’s see if I can help him figure out what’s going on. Hey, Phil, what’s happening?
Caller 12:52
Yeah, thanks for taking my call. I’m curious about the non filing if all you’re making is Social Security. I’m 51 wife is 57. And the only income she has is her Social Security Disability. Are you saying that she doesn’t have to file?
Dr. Friday 13:11
Well, in theory, she does not have to file but then you would have to file married filing separately. And you can’t claim her as your spouse. So you may be in a higher tax bracket, even though she’s not going to have taxable income. I have found in many cases, it’s cheaper to pay tax on the social security than it is to lose the marriage status.
Caller 13:32
Okay.
Dr. Friday 13:34
Does that make sense? I mean, you know, it’s theoretically No, she, I mean, answer your question. No, she does not have to file but I’m assuming you’re the breadwinner. And when you file you file you guys jointly and pick up her income or her disability on the tax return. You could try calculating what it is married filing separately, but like I said, there are certain penalties, and I find that sometimes it’s not beneficial to do that.
Caller 13:58
Okay, thank you so much.
Dr. Friday 14:01
Thanks. That’s someone that was actually listening, because I have had more than one person call her or come in and ask about that. And there are times when married filing separately makes sense. One of the biggest times that I lot of times we’ll we’ll look at it at least is when one spouse is self employed. Because keep in mind when both names are on a tax return, both people are completely 100% liable for any tax information put on that return as well as any tax dollars due on that return. And so if you are married to somebody that’s self employed, that doesn’t make their quarterlies or you find that they you know, maybe their bookkeeping isn’t great because you’re not necessarily looking at every single thing they do. When you file a joint tax return and they put on their business information on their tax return. You now are taking a portion of that information for yourself.
Dr. Friday 15:00
You’re signing off saying that is correct that we agree with this information. So I have some situations where that’s not the case where the both aren’t necessarily confident in each other. So it’s easier to file them separately. But there are times when that is also going to create a penalty of some sort when it comes to that situation. So just make sure when you’re doing it that if you have a penalty, or are you you’re not sure, especially when it comes down to when people are not tracking their sales or their information. I mean, I know a lot of people feel like, well, all I have to report to the government is what they know about, which is usually like the 1099 that they have 1099, 1099 K’s. But let’s be honest, in most businesses, there is a cash side to it or checks. And just because it’s not in the business doesn’t mean that you do or do not have a responsibility to making sure that is on the on the books.
Dr. Friday 16:05
So again, just make sure whatever information is being put on, I have a couple of cases where people you know, get behind on taxes, and the person getting behind on those taxes is usually the entrepreneur or the self employed, the person usually not behind on taxes or individuals that have had W-2’s now, I say usually because I have people that claim married and two, but it’s really married and zero or married. You know, questionnaire, the only reason because if you have two working people making more than about $80,000 250 each, you now are basically hitting that different tax code. When we check the box married on our W-4, it basically means that you are supporting someone else, a spouse of some sort. And if your spouse is making as much or more than you, then there may be an adjustment required for you to actually not do that.
Dr. Friday 17:03
And there is nothing wrong. I’ve had people come in and say, Well, you said that she claimed single, but I’m not single. So I don’t want to claim that, well, you only have two options, you either claim single, which is an option. And it doesn’t mean you are single, it’s just the status so that they take out more taxes, or you have to go and put in the information. With additional withholdings, right, that’s perfect too many times, instead of making any adjustment, we just calculate, okay, we owed, you know, $5,000 at the end of the year. So guess what we decided that it was better to have an extra $500 A month come out of the paychecks instead of trying to come up with penalties interest and always having to come up with $5,000 It’s not an easy thing to do.
Dr. Friday 17:48
So if you have a situation where you’re every year having to pay money having to deal with tax issues, then you need to give us a call. I mean, if nothing else, let us help try to get that balanced out. So that you then can continue to do your own taxes. It’s not like you’re doing anything wrong with your taxes, but you’re not making the adjustments that are required. So we need to be able to figure out whatever adjustments, make sure those adjustments are going into play. And then making sure that that information is out there so that you’re able to really take advantage. Because what fun is it to think that you you know, you take your paycheck every week, you think taxes have already come out. And then at the end of the year, you have to pay 567 $1,000.
Dr. Friday 18:32
And then you’re trying to figure out oh my gosh, where is it, it’s not like you have it sitting in the bank many times. But if there’s children and sports and all the things that happen in life, sometimes people aren’t sitting on all that or puts a financial or worse even, you have to take money out of retirement account, which then means you have a 10% penalty plus, you know, the taxes or whatever else that’s going to be due on it. So you kind of putting yourself in the cycle of always being able to be behind. So it’s not easy, but it’s fixable. It’s a controllable situation is a way that you can then get back on track, because the only way and that happens for and I have entrepreneurs are self employed individuals.
Dr. Friday 19:13
And sometimes they’ll come in and say no, I don’t like to pay estimated taxes, one. It’s not really a choice. It’s not like well, I don’t like to pay them. Well, that’s fine. But realize there’s a penalty for any entrepreneur or a self employed individual that owes money at the end of every year that there is a penalty for not making quarterly fees. Now if you are married to someone that is paying in more than enough taxes for both your entrepreneurship and them, then no you don’t have to make quarterly so as long as the government’s getting their money, they don’t care who’s paying it. But otherwise, for a business to be successful.
Dr. Friday 19:47
You have to take into account the partners you have and one of the partners we all have in business as entrepreneurs is plain and simple the IRS now depending on how much ownership they have depends on the profitability of your company. But that doesn’t change the fact that we all have them as partners in the business, and that we have to make sure that that partner has been paid before we distribute or do anything else. Because it’s just the way it is. I mean, it’s not like there’s a question about it. Sure, there may be some great ways to reduce taxes. But one of those ways is buying a big car. Oh, my gosh, I can’t tell you last week, I had three new people come in. And every single one of them said, Well, what if I buy a car? One was a consultant that never left the house did all the consulting online, but they were going to buy a 6000 pound car or bigger, because they were told they could take a section 179.
Dr. Friday 20:45
Another was a person that ran a like a jewelry or some a discount store of some sort. And they were basically told that they could buy a vehicle for over 6000. I said, Well, do you do you actually? I mean, because driving from home to the store is not a tax deduction. So do you drive? Are you going to wrap this vehicle to promote your jewelry store? Is it going to be used solely for the purpose of a business, because believe it or not people, when you buy those vehicles, they have to be used 100% for business. Now, if you’re a contractor or construction, and you have to drive your truck every single day, because you’re picking up and delivering and, and everything is required that truck hauls things, you need a truck, that’s fine.
Dr. Friday 21:33
But if you don’t have a business that requires a 24 hour car, and you don’t want to wrap it now, I do believe if a vehicle is wrapped, you still can’t take a section 179 If it’s not used 100% for business, but you can at least get the deduction of using it and taking some miles used to promote the business. But that’s even got to be tracked properly. So just keep in mind, I know every new business owner comes in and first thing they say, Well, I’m gonna buy a vehicle. And then that way I can write that vehicle off in my business. I’m sorry, guys, that is not that simple. And there are ways of doing some of that in the right types of businesses. But not every single business qualifies for a 6000 ton car or more and 6000 pound car or more to itemize, so just keep that in mind. All right. Let’s see if we can hit Randy before the break. Hey, Randy, what can I do for you, sweetie?
Caller 22:31
Yes, ma’am. I got a question. My dad passed away. And I’m trying to liquidate in the state. He didn’t have a will. But he instructed me to give money to people. And I spent a large sums of money, one of the 100,000 and a couple of 30,000. My understanding is I can’t do that as an inheritance because he didn’t have a wheel. Now that’s a bit of a gift. Is there any way I can give that money to these people without having to pay taxes on it a gift tax?
Dr. Friday 22:58
Well, I mean, you the person handling the estate, in essence, your father would have to pay the taxes first or the state has to pay all taxes, then you can gift them by filing, giving them as much as he wishes, tax free through the gift taxing, but there’s no tax can remember, we have like $11 million for actually gift tax. But so the person giving the gift is the person that pays the tax. So your father’s estate would have to pay any tax. So if this isn’t an IRA, and I don’t know where the money, I’m just saying, you’d have to make sure the taxes were already paid on the money, then you can gift it to anybody that your father wished it to be gifted to tax free.
Caller 23:40
So like he has, he has several $100,000 I want to give somebody $100,000 in cash and taxes all been paid on it. I can just give somebody 200.
Dr. Friday 23:49
Now you can but there is a gift tax return we have to file it’s not going to be any tax dollars do but the government does want to know that. You gave Jimmy Bob $100,000. And they want his name, address and social security number, if nothing else, just to track where that money came from, but it is not going to be taxable to Jimmy Bob in my example. It is it’s going to be tax free to that person. There’s just a paper trail that’s going to be required no tax do.
Caller 24:19
No. Okay. Let’s do it sounds like that’s pre tax. Tax.
Dr. Friday 24:24
No, no, that’s the beautiful thing of gifting it just you know tracking it and making sure you have the information when you do it. But other than that you can follow up with whatever dad wanted.
Caller 24:34
Okay, I appreciate your answer.
Dr. Friday 24:36
Thank you very well worries. Thanks. All right, we’re gonna take another break here. When we get back we’ll get to more of your phone calls. The number here in the studio is 615-737-9986 and we’ll be right back with the Dr. Friday show.
Dr. Friday 25:01
All righty, we are back here, Dr. Friday tax and financial firm on an enrolled agent licensed by the Internal Revenue Service the taxes and representation. So that’s why we talked so much about taxes, people. That’s the only thing I’m really really good at. All right, we’ve got Wednesday on the line. Let’s see what Wednesday needs. Hello, Wednesday. Yes. Hello, sweetie, what can I do for you?
Caller 25:28
Hi, I have got a question. And my, my mother who lives with us, and we have Hey. Are you there? Yeah, I’m here. My phone is going crazy. My mother who lives with us, we filed our taxes this year and claimed her, I guess as a dependent because she gets the majority. She does have the security, which is like $1,800. And then she gets a 560 something dollar pension. So does she need to file taxes for herself with that income? Or she?
Dr. Friday 26:10
She’s not making enough with 560 That would be what $6,000 A little over 6000 plus what she’s getting and so security of nine that Wink kicker into a taxable situation. And so that would get you know.
Caller 26:25
Right at 1829 and some change. Yeah. So she’s okay not to fall in.
Dr. Friday 26:34
That is about the 11,000. And then the other six that puts her below the situation. So she would not be in a taxable situation.
Caller 26:41
Okay. Okay. So she keeps stressing over.
Dr. Friday 26:45
Well, yeah, they were raised to always file their taxes. So they like to make sure that they’ve always filed so I have to give him credit for that. But she tell her she’s fine.
Caller 26:55
Okay. I appreciate it. You have a good week.
Dr. Friday 26:58
Hey, you too. Thank you. Bye, bye. Bye. All right, let’s see if we can hit the line Ricky’s on the line. Let’s see if I can help Ricky. Hey, Ricky.
Caller 27:08
How you doing?
Dr. Friday 27:09
I am doing awesome. What can I do for you, bud?
Caller 27:13
I have a question. On withholding tax. Okay, if I want 15 or $20,000, on scratch off ticket or salt lochia. What is the maximum I could win and not let them withhold anything?
Dr. Friday 27:30
Well, I would say that would be, that would depend on your actual other income. I mean, if that is all you, you know, you have one scratch off and you receive $15,000, you wouldn’t have to have Omri hold anything, you may owe a few pennies in taxes, but not a whole bunch. But if you have other income, let’s say you’re making 50,000 at your job, and you win another 15, that’s gonna be at the 22. Assuming you’re single, that’s going to be at the 22% tax bracket. So you’re gonna at least have them take out 20% You know, to cover the tax on that particular situation. So very few people probably could scratch off even if you’re just living off Social Security. If you you know, if you received a 15 or $20,000 scratch off, you probably now make your Social Security taxable. So you would have some taxes do in most cases.
Caller 28:21
I was wondering I’d rather not pay to withhold and take that money that I would have to pay and put it in a CD or something. Let it grow what moodily for grown till tax filing date?
Dr. Friday 28:34
I don’t know. I really don’t know how it works. But I’ve been told at least I did have a client this year when the million dollars. And my understanding was basically the IRS is standing there at that time. You know, or not physically, but you know, the information, they are not letting the money go until the taxes have come out. So they you know, they automatically took out $300,000 from from that to give Uncle Sam their share, and then he could wait for the refund or whatever. But in his case, that’s what works. I’m assuming it works on everybody. I don’t know, if you make only like four or 5000 if it would actually go without tax, but I think anything in the 10s 50s or 20s, they’re going to want their share.
Caller 29:19
Thank you.
Dr. Friday 29:20
All right. Thanks, Ricky. Good question. All right, we are on the Dr. Friday show and if you want to join the show, you can at 615-737-9986. During the last break, I did get someone that came in and said that you know, could a dentist office have a vehicle that’s a tax deduction. So again, if you are running four or five locations and you are the manager of all four or five locations and and you own the business, then I would say you have the ability to take off a vehicle now do you need a 6000 pound vehicle or do you want a smart car, that would really be more of your own personal situation. But you know, you have to figure out what’s going to be best for your business.
Dr. Friday 30:09
But keep in mind for a car that you’re taking as depreciation of a section 179, the accelerated depreciation on a bigger vehicle, that vehicle has to be 100%. If you’re going to just buy a car that you use for a portion of business, and you write off a portion of its expenses and a portion of its maintenance and everything, you can do that. But that’s not the question most people are coming in and asking, they want to go by f 150, and uses part of it for work and part of it for personal, and then they want to write it all off for business. So I mean, this is an area where the IRS has not necessarily dropped the ball they have when you know one of the largest areas of audit that I have seen in the last number of years is completely auto expense.
Dr. Friday 30:56
Either people taking high business, depreciation on automobiles, you know, keep in mind that, you know, big construction companies, you know, most cases, they have to depreciate the vehicles because they have more than three vehicles. So they have to depreciate, and then take actual expenses, and not documenting that correctly, in an audit can come back because one of the first questions they always ask, we turn in all the gas receipts and we turn in all the things.
Dr. Friday 31:24
And the first thing, how do we know this gas receipt was used for this vehicle, you know, and because we wrote the number on it, but that’s, you know, that’s one of those situations where you do need to make sure you’re doing very excellent documentation, if you’re tracking multiple vehicles in miles, because the government has found statistically that a large number of people exaggerate their miles. So just putting that out there is very important, because again, it is a 62 points 62.5 per mile. So 62 cents point five per mile is what we’re getting in miles right now.
Dr. Friday 32:02
And that is a nice, very nice tax deduction. If you’re tracking it properly and doing it right, then you are in a good situation to be able to write off a lot of miles. I mean, let’s be honest, real estate people and other individuals are all doing that kind of situation. But it’s not one of those situations where you can just turn things around. So you need to make sure you’re tracking it, you’re not just looking up and saying well, I must put about 20,000 miles on my car, not really going to fly guys, you really need to make because again, this is one of those areas that does wave a flag. When it comes to the Internal Revenue Service. Good documentation always wins out. If you’re ever audited. I mean, it’s easier with supplies and maintenance. And some guys because you have the invoices, you have the receipts. But when it comes to miles, you have to have a mileage log and a mileage log can’t just be first the year I had this many miles in the year, this many miles and everything was work, I only work I never go to the grocery store, I never go to the doctor, I never go out to dinner, I only work so 100% of this was all business even though we all know that’s not the facts come on.
Dr. Friday 33:15
So using a vehicle and saying it’s 100% Unless it is a vehicle that you have, that’s a secondary or third vehicle and you do drive that vehicle only when you leave the office to go to work. And then you come back when you’re done doing it. And then you switch vehicles to take care of personal items. That’s great. But statistically, that’s not the situation. So if you have questions, or if you’re not sure, or if you’ve been filing your own taxes, and you’re trying to figure out how to do a better job of that, all you have to do is give us a call at 615-367-0819 That’s the direct office number 615-367-0819 and we can help you you know least start with mileage IQ get all that straightened out and show you what the IRS expectation is. So that way you’re never, you know, kind of flying blind and just using educated guesses or expectation of well, my friend said this is how many miles they wrote off.
Dr. Friday 34:10
So I figured I can use the same. That’s not going to really fly either. Guys, I’m pretty sure the revenue officer sitting across from you is going to say that that’s not the way we track miles, people. So if you want to join the show you can at 615-737-9986 is the number here in the studio. We are live today. So if you have a question, or if you want to understand more about how you might be able to save some tax dollars, or just to make yourself more audit proof because sometimes people work so hard to save every single dollar in taxes.
Dr. Friday 34:48
Maybe not necessarily understanding how the tax law exactly works. So maybe they’re stretching certain things that they should not stretch, then that would be a question that you have to figure out everything on that Tax Returns should be justified that way you can put it to bed, never have to really think twice. And then you know what you have going on, right? Because that’s the easiest way to do taxes, get the documentation, put it together, scan it all in, it does not have to stay as paper, you don’t need to have 15 filing cabinets of every tax year, you’ve had since the beginning of time, the government only requires seven years of taxes to be saved. And really to be quite honest, unless something major happens, they’re only gonna go back three years for an audit.
Dr. Friday 35:30
So you need to make sure your information stays current and that you can still read it three years later in case the IRS comes back and says, Oh, wait, we want to review this information. Guess what, they can do that. But you want to make sure that you have the information for them. All right. So we’re I’ll take our last break for the show. And then we can come back to your phone calls. If you’ve got a question for the show. 615-737-9986. We’ll be right back with the Dr. Friday show.
Dr. Friday 36:09
We are back here live in studio. And if you want to join the show, you can at 615-737-9986. Now let’s go live to the phone to Diana and see if I can help her out. Hey, Donna, what’s happening?
Caller 36:27
Hello, I just have one question. We have a loved one family member that receives royalty checks each month, maybe two a month. And last year was you know, close to 50,000. There’s not any taxes taken out during the year. So we fall at the end of the year and pay the taxes? Would it be less if we paid anything quarterly or had them take out the taxes monthly? Whenever they open the checks?
Dr. Friday 36:58
Yeah, most likely they I mean, obviously the world tea companies won’t deduct the money because it’s not the way they usually handle it. And you have to pay at least 110% of the year before so not to have penalty. So depending on you know, like next year. So in this year, let’s say this person paid $5,000 in tax just throwing a number out there.
Dr. Friday 37:19
If for some reason they do owe any money in 2023. If they don’t pay 110% of what they owed the year before they’re going to get hit with a penalty for not paying quarterly fees. So the answer is they should at least try to pay quarterly. And I’m not sure if there’s any way of knowing what their royalties will be because that’s one of those fairly unpredictable situations. But you know, I would definitely suggest setting aside the money and at least sending in what you find is taxable. I mean, so let’s say this year, they only owe $2,000. But at least if that was pre paid, the penalty will be minimal, if nothing versus waiting until April 15, or whatever the due date is there radically next year to pay it. So there is a penalty for waiting.
Caller 38:05
Okay, I think what we pay them was around $4,400. That’s how it was calculated when I did the taxes for them. But I just wanted to make sure that we were doing it correctly, because this is the third year that we’ve done this this year, everything’s down. I mean, the checks are even down. I don’t know, it probably has to do with the drilling and all this.
Dr. Friday 38:29
I might know the tax rate that this person’s in, though, you can probably hold back the tax rate, knowing that this person is, you know, estimating between their social security and assuming their social security. I don’t know that but and the royalty or just the royalty. You know, it does go up as you go. But at least the first 50,000 is going to be at 12% per se you know, so at least setting aside that money and sending in and quarterly or at least a portion of it quarterly is going to save you tax dollars because the there’s got to be some penalties. In some of these years. Some years you may be overpaying but since you’re waiting to the last to file it there would be some penalty every year.
Caller 39:11
So how would I would I contact the IRS and ask for a quarterly tax form? Or would I just…
Dr. Friday 39:19
It should come out of your tax software? It’s called a 1040 e s, whoever’s filing the taxes should should give those to you. Or you could Google 1040 es and go right on to the irs.gov and you can print them out.
Caller 39:34
Yes, I print those for my brother because he has his own There you go see? Yeah, this person’s well, this person is only 40 years old, and is single and and so that gets the world but I want to make sure we were doing this correctly, but we may start trying to pay those quarterly because we do hell back some of the money.
Dr. Friday 39:53
Good. I mean it just why not pay some of them. I’m not saying we don’t want big refunds either. I don’t want the government hold Holding on to a ton of the money, but at least sending in some would eliminate some or portion or all depending on. I mean, royalties aren’t as easy with the then a self employed person that you know, is probably earning so much every month. This one’s a little bit different because it’s based on whatever the royalty is based on a book or song or whatever. So, but I would be paying something an answer.
Caller 40:23
Okay. Well, this was an inheritance that from from Pennsylvania and West Virginia, and so, okay, well, this has been very helpful. Thank you so much.
Dr. Friday 40:31
Thank you. Appreciate it.
Caller 40:32
Okay, bye.
Dr. Friday 40:33
Bye. Bye. All right. So we were talking about taxes, I do want to bring up a fact that for many of you, or some of you, I should say people that live in Hardin, McNary, Cannon, Hardman, Haywood, Lewis, Makai, Macon Rutherford, which is the big one, Tipton and Wayne, all of you guys do have an extension till July 31, due to the storm. So if you did not file your taxes, you did not pay your taxes, you have until 731, to still be current, even if you if you didn’t file an extension, you are still good, because the IRS automatically gave you guys an extension.
Dr. Friday 41:17
So again, if you are in one of those counties, big one that I deal with is Rutherford, if you’re in Cannon, or Rutherford and a couple of the others, or if you’re not sure, you can contact us. But if you’re in one of those counties, you didn’t file your taxes, you didn’t file an extension or you filed and you need to pay the taxes, you do have an extra extension till July 31. To deal with that. So in some cases, you may not be late, even though at this moment, you’re thinking, “Oh, my gosh, I didn’t file my taxes. I forgot to file an extension.” I had someone call me yesterday or Friday yesterday, and say, “Can you make sure you file me an extension?”
Dr. Friday 41:55
And it was a bit funny on my side, because you’re thinking the extensions had to be filed by April 18. And we’re in May. So it seemed a little bit late to ask your tax person if they filed the extension or not good news is we had filed the extension. The bad news was my Plex client did not realize the taxes apparently were due on or before April 18, in most cases, but if you are in one of those counties, again, the big ones that I know of is canon, Macon, and Rutherford, those will be counties that do have an automatic extension into giving you guys until July 31, to file your 2022 taxes. So some of you might have just got a little bit lucky on at least hopefully, you didn’t end up with any storm damage, but got lucky because you’re in one of those counties. And you’re able to take advantage of the extension provided by the Internal Revenue Service.
Dr. Friday 42:50
If you’ve got questions on that, or just questions on doing taxes, you know, it’s time to get yourself on track, it’s time to just say, hey, you know what, I’m gonna stop playing that ketchup game or worse, where you’re putting the love letters from the IRS in a drawer or something and you’re just ignoring them. It’s time to get straight, why not? Let’s find out what the IRS wants. Let’s figure out how we can do it. Because I keep telling everybody, just you don’t want to wait till you’re back on your feet, and you’ve got all the situation and you’re finally ready. Because then they’re likely to get more money. If you’re renting a place and your your income is low, and you have IRS issues and you’re ready to deal with them.
Dr. Friday 43:30
Because making a deal with the IRS doesn’t mean Oh, it’s a it’s all disappeared, you have to stay current, you have to be kind of what I say a good little taxpayer for the next five years. But if you’re ready to do that, when you’re actually in this kind of situation, now’s the time to have that conversation as an enrolled agent licensed by the Internal Revenue Service. That’s what I do. I do taxes, I’m kind of like Superwoman between you and the IRS, I can protect and make sure that we get the best situation in your case. But if you don’t want to come in and deal with it, then there’s nothing we can do to protect you. The IRS does have its own unique courts and their own way of doing things.
Dr. Friday 44:08
So if you want to make sure that you’re going to get the best deal that you can have, and you want to first we got to get you in compliance, which means filing tax returns means making sure that we understand what the IRS is actually trying to collect on moving forward on any of those kinds of situations. Once we know what we’re going to have to do. We’re not one of those companies is going to call us up and say, “Oh, we can deal with everything start paying this. Can you give us $1,500 out and pay us $500 a month without even knowing what you can do for me?” No, let’s not do that.
Dr. Friday 44:39
Let’s make sure you have someone that’s going to be in your corner someone you could come in and talk to mostly someone that’s going to help you deal with it. It’s not something that’s going to happen fast. It takes almost a year from the moment that you start working to actually get through what we call an offer and compromise or a payment plan. So again, making sure that your information is going through making sure we Have everything in play making sure that you’re getting the best that you can get, and most importantly, that you’re going to be able to continue doing that year after year after year. So you don’t have to go backwards and try to save a house or save.
Dr. Friday 45:14
You know, I mean, I even had one where their name was on their child’s bank, state bank account, and the IRS took that money because any bank account that your name is on and you don’t have a payment plan or an offer and compromise on the table or anything, they have the ability to take money from any account that has your name on it if you owe the IRS so they can go to your employer, which can be a bit embarrassing, right? We don’t really want them coming to our employer taking a look and saying, Oh, yes, we have some back debt issues. Now. We have to start loving your paycheck. That is not going to be a good situation. So if you need help, you can call my office Monday morning. 615-367-0819. You can email Friday, just like the day of the week. friday@drfriday.com. Again, friday@drfriday.com. Or check us out on the web. Maybe you’ve never even the first time you turned on the show and you’re like oh my gosh, who is this crazy person? This is you’re gonna do a drfriday.com. drfriday.com is the website and we’re here to help represent and to teach you about what you can and can’t do in taxes, but more importantly to be in your corner if you’re dealing with the IRS or other tax issues. I’m really hoping that you guys are enjoying the tax this Saturday, and we’re gonna see you next Saturday.