Welcome to the Dr. Friday Radio Show! In this episode, Dr. Friday takes on the latest tax updates, answers the caller’s questions, and talks over the following topics:
- Counties That Have a Tax Extension Until May 16
- What is Deferred Action for Childhood Arrivals (DACA)?
- Seminar on July 14 and 15th in Mount Juliet for Association of Enrolled Agents
- What is ITIN and Who is Required to Get It?
- Personal Tax Extensions Due October 15
- Business Tax Extension Due September 15
- Can I Receive the Child Tax Credit?
- How To Get Back On Track With the IRS
- Why You Shouldn’t Sell Anything Before Accounting the Taxes
- What If I Sell My Primary Property?
and much more!
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. And we are here live in studio to enjoy this kind of overcast Saturday, it’s not the most crazy, but tomorrow is Mother’s Day. So for all of you that are mother’s or step mom’s and all the other kinds of scenes that go along with that people that have helped raise wonderful kids. Well, hopefully tomorrow, you’ll have a wonderful day.
Dr. Friday 0:54
So I know I have one of the best moms in the world and I miss her everyday. So hopefully you guys will enjoy, weather is going to be beautiful tomorrow, according to my chart. So that will be a great thing to do. All right, today, we’re gonna talk a little bit about taxes, maybe prepping for the 2022 tax year, we’ve already been taking several meetings. Because with all the real estate sales and inheritance and people retiring, it just seems like there’s quite a few choices and decisions people need to make.
Dr. Friday 1:25
And sometimes if you don’t make those decisions in advance, they will be made for you. I mean, it’s really what it comes down to. So what I’m saying is, if you haven’t sat down and kind of plan, “Okay, I’m gonna sell this house. So I have a $250,000, I’ve lived in a two out of the last five years. So I’m going to move into a new house.” And if you’re single or married, and in that case, you would basically have zero tax, if it was your primary home, if you’re married, you can have up to $500,000 exclusion.
Dr. Friday 1:54
But keep in mind, in some cases, people were maybe self employed, and you use your home and maybe you depreciated your house, during the time that you had a home office, then you might have some recaptured depreciation, I have probably just in the last month talked to four or five people that are selling their rental real estate, in which of course, we have the recapture of depreciation.
Dr. Friday 2:17
And you know, and of course, the capital gains on that one, depending on how much you make, it’s going to be anywhere between 15% and 23.8%, there is a 0% capital gains rate. So just letting you know, but it’s not as easy to do I mean, you’d have to be making 50,000, including the capital gains for a single person total income under 50,000. And a married couple under 100,000, basically, and that, again, would include the capital gains.
Dr. Friday 2:45
But if you do have that and get remember, capital gains is something that is a year and a day, right? Anything that’s called long term capital gains, really only capital gains is when we actually have it for more than a year in one day. Otherwise, it’s taxed at ordinary income rates. So just you know, in that, obviously can fluctuate all the way up to what 37%.
Dr. Friday 3:07
So just making the right decisions, understanding what those decisions. I was talking to a couple yesterday and they had sold their their primary home they lived in for over 15 years. And they sold it in their take the exclusion and then they moved into a home in a subdivision. These are people that lived out in the country and and really want to return to that.
Dr. Friday 3:30
And so they’re trying to make a decision. Do they want to live in the new home almost three years or to get the exclusion again. Or do they want to just sell the house and move out? And I thought it was an interesting conversation. Because so often everyone looks at everything on tax dollars. Everything about okay, well, if you sell the house and you make $100,000 profit, in their case, they could be there, they’ll own it for over a year.
Dr. Friday 3:57
So they would be in there for long term capital gains, but they would be looking at probably 18.8% with their income bracket of tax, and you’re sitting there going, you know, is it worth staying someplace for another two years where you’re not happy? You can’t take money with you. I mean, I’m not saying you need to be ridiculous, but sometimes I think we get so hooked on trying to save the dollar that we forget to live. So maybe I’m an odd tax person, but I think you have to weigh the option.
Dr. Friday 4:30
So in this case, will they pay $30,000 in taxes and move out and move into the area and go back to living the life they live? They want to live? Or will they wait the two years not to pay the $30,000 and that’s also making a wild assumption that the stock market that the housing market doesn’t reduce so they could lose money because it may not sell as much in two years as what it’s going to sell for today.
Dr. Friday 4:56
No one has a crystal ball at least I don’t to be able to tell people But you know what you do and what you do not have. So it really just comes down to is what is what is going to be best for each individual. Sometimes, it’s not a big deal because you relocated to someplace that you love, and you have no problem in saying another 2, 3, 4 years. And other cases, you know, it’s not a priority.
Dr. Friday 5:20
So again, you don’t care if you’re living. But if you’re not living the life you want to live, I think you have to put that into the scenario of tax dollars as well. So, I can tell you 25 years of doing this, and I’ve seen and talked to a lot of individuals, but when you’re making your decision solely on the idea that you’re going to save money. I mean, if you can save money and do what you want, awesome. But if it’s a matter that you’re going to save money, but not live the life you want to live, since we’re not guaranteed tomorrow, it just seems like a crazy concept.
Dr. Friday 5:54
So anyways, I just think when you’re looking at your future, looking at your tax picture, or your financial situation, take into account what’s really most important to you. Because without that importance, then you know, sure you may have enough money in the bank, and you may be very well off. But if you’re not happy, what good is any of that going to make a difference of so you know, make sure you add that back into your mathematics. I want to be happy, put that on there. And so you got it.
Dr. Friday 6:21
All right. So if you want to join the show, you have something you want to share 615-737-9986 take your calls, talking about all my favorite subjects, even though let’s be honest, tax season has pretty much ended, even though we do have until May 16 I believe it is May 16, to file some of the individuals that live in Davidson County and some of the other counties around here.
Dr. Friday 6:51
And so we are still working taxes, day take a few days off to regroup. And it was hilarious because I physically turned off my phone and after tax season in one day, the voicemail was fully full. And by the time I got to it, I think there was well at that point, no one was able to leave any extra messages. But you could see where people like called so. So if you needed to reach me or you need to, if we haven’t returned your call yet, we will be doing that in the next few days. I did get back on Thursday.
Dr. Friday 7:21
So if you have questions for us, you can call us at the office. But you can also join us here on the radio 615-737-9986 talking about taxes and things that we were dealing with. And so another thing we’re going to look at or talk about a little bit is dealing with the problems that maybe people had in filing your 2021 tax return. One of the big things was, of course, children, the child tax credit. Some people said they didn’t get all of the payments. You know, there was letters that were sent out saying how much money they receive.
Dr. Friday 8:03
People didn’t agree with some of those letters. And this is this is going right along with the same concept we had with stimulus for 2020. And of course in 2021, as well, the final stimulus was filed and some people said they never received it, the IRS is basically saying that you did. So we are looking at the resolution that we’re going to be trying to deal with that most of that’s going to come back to waiting for the IRS to receive back in some cases, maybe they had a wrong bank account, or they mailed it to a bad address.
Dr. Friday 8:38
And so the IRS will have to get those back into their system. And at that time, they will, my understanding is they will reissue those back to the individuals that the money was supposed to go to now, that’s not going to happen very fast. So don’t think it’s going to be something that’s going to be a quick turnaround. But they are not at the moment doing advanced child tax credits, which I will tell you I’m an advocate for I do not think we need to have the advanced child tax credit out there.
Dr. Friday 9:06
I think it just creates more conflict and more problems during tax season. So most people have all lived without it. And right now, before my show was listening to the little news thing, and they’re saying that there’s two jobs for every one person looking for a job. So I’m pretty sure that most people that want to work have the ability to go out and get work. And if you’ve decided that, you know you don’t have to work because you have downsized or whatever the situation is.
Dr. Friday 9:35
Then we’ll be you know good to be able to go through and do that kind of situation as well got it. But, you know, I mean either way you look at it, you just want to basically be able to win filing taxes. We want to be able to do that without having to worry about trying to wait for the IRS to give us notifications. It’s difficult enough for the employers to give us the W2’s the spell Actually, the investment companies giving us our 1099 B’s. That works out really well for us. Oh, look at that. I didn’t see anyone on the list. There’s my boys. All right, so let’s go ahead and start with Jay in Hendersonville. Sorry, guys, I couldn’t see the screen for a moment. Hey, Jay, what’s happening?
You’re good. I’ve got a question. It’s just part of it is a text question. I’ve got two rental properties that are paid off. And I’ve got a primary that has about $110,000 mortgage and worth about 500,000. I’m trying to think is being tax wise, or would it be a good investment to pay off? I mean, to get a homeowners equity line of credit for the rental property, and pay off my primary?
Dr. Friday 10:49
Well, there’s nothing wrong with that. But the current tax law is the mortgage. I mean, as long as the mortgage is tied to the the investment property, that is not a problem. So you can write off the interest where theoretically you are writing off the interest on the primary, but as you and I know, we’re not itemizing, especially not on $110,000 probably. So you will have a better ride off against the rentals than you will have with the primary no question. The answer is, yes, I would take it against my rentals and pay off my primary.
Okay. For not just for tax purposes, just more so forth. If something happens, and I lose the rental property, so be it for my primary safe.
Dr. Friday 11:42
Well, that’s it in the likeliness is the real estate is going to be worth more than the mortgage anyway. So worst scenarios, you have to sell one of the rental properties to pay off the mortgage. You know, I mean, since we’re talking 110, that’s my assumption anyways, but that would be my I’m never big on paying off rental real estate anyways. Let someone else pay your bill.
Yeah. Okay. Well, I’m just having then I’m having a little trouble finding a vendor who wants to take the risk with me.
Dr. Friday 12:18
Yeah, that mean, they’re likely to only want to give you like a 60% or 70% against the rental. But assuming that the rental has paid off, so soon, it appraises for more than the 170 or whatever required. And again, I don’t know your rentals, but that would be the the secret. Or putting both rentals up for the 110 You know, I mean, I don’t know your situation.
Dr. Friday 12:45
No problem. Thanks, Jay. Appreciate you for calling. Thank you so much. All right. Let’s go to Ricky in Watertown. Hey, Ricky, what’s happening?
Not much what’s going on?
Dr. Friday 12:58
Oh, you know. little this little of that. What can I do for you?
I’ve got a question. I had a traditional IRA, and I rolled 130,000 into a Roth IRA. I withheld 25% by 20. Forward better nerf, you may have to correct me whether it was not I rolled 100 over last year and did not withhold or nerf. How much would I?
Dr. Friday 13:34
So 2020 or 2021? You rolled over? 100,000 And you didn’t withhold enough. So now you’re you’re asking it. Can you hear me?
I just withheld 20% and it should withheld 22%.
Dr. Friday 13:51
Oh, 22. Okay, so on. 130 you went ahead and just done 25%?
Dr. Friday 13:56
Dr. Friday 13:57
Okay. Do I do your taxes, Ricky? Who does your tax returns?
A gentleman in Lebanon.
Dr. Friday 14:10
Okay. Okay. The reason I’m asking because it would depend on your income bracket, right? So 130 in itself 25% would be great. But if you’ve got 30 or 40 or $50,000 above that.
I am disabled.
Dr. Friday 14:27
Okay, so you just have security disability?
Dr. Friday 14:31
Okay, so you would have social security, which are you single or married?
Dr. Friday 14:41
That could be almost 150 and that will put you at 22% up to. I’d say 25% should hit you right. We’re very close. I mean, it may not be spot on because, again, I am doing simple math on my side, but basically you have the first 50,000 then dollars after you take your standard deduction, and that’s going to be at 12%. The next 75,000 is going to be at 22%. And then you’ll be jumping up into 24 %.You said you withheld 25% I think you should be safe at 25% assuming that you only have Social Security tax or Social Security that will be taxed, or disability, whichever.
Okay, I thought 24 would do it, but I wanted to make sure I had to pay in 1100 this last time and normally I’d get back 1000 and advise me to mumble some jokes syllables.
Dr. Friday 15:37
I hear you. I hear you. All right. So well, hopefully yeah, I think you should be safe with the 25 based on what you’re telling me. All right. Thanks for calling in. Appreciate you, Ricky. All right, we’re gonna take a quick break. And when we get back, I’m gonna go to Tom, Rosie and Jim. We’ll be right back with the Dr. Friday show.
Dr. Friday 16:02
All righty, we are back here live in studio. I’m Dr. Friday. This is the Dr. Friday show and my three colors are been holding for quite a while. So let’s go to Rosie. She’s been on for a while. Hey, Rosie, Thanks for holding.
Hey Dr. Friday, I hope you had a wonderful vacation and and welcome back. Real quickly what you were talking about being happy earlier. My I have droopy eyelids that might I inherited from my dad bless his soul. And so I was gonna wait until Medicare covered it. You know, because it, they will eventually affect my eyesight if I don’t get them fixed. But I thought, Oh, screw it, you know, just spend the money and be happy. Because by the time they get that droopy I won’t care. Right?
And so I made an appointment for a consultation. And one of my friends told me about to your show. And so we’ve talked before about her going in for a tax question. I was going to come in once my husband retires about taxes, tax planning. And um, so I texted her this morning and I said, “Hey, you know, guess what appointment I made? It’s with a doctor, but not up not for a medical reason.” And she was so proud of her. I said, “This is a major clue.” And so I gave her that clue when she was so proud of herself. And right away. She said, Dr. Friday.
Dr. Friday 17:29
I’m glad I’m part of the conversation, and I’m really happy that you did you know, again, I don’t know, I think it’s awesome. When people think of themselves a little bit. I’m not saying we have to be selfish or crazy or anything like that. I’m just saying that. You know, just like that. I mean, it affects your life all of your life. So why not enjoy it while you still can?
Exactly and that you haven’t set out for your doctor of accountancy. So you’re welcome. Take care.
Dr. Friday 17:59
I appreciate it. Thanks so much for like, that was nice. All right, so Tom in Nolensville. Hello, Tommy.
Hey, how are you doing?
Dr. Friday 18:09
I’m very good. What can I do for you?
So last year, I installed a high speed Evie charger in my garage. And I understand that I could have taken a tax deduction on my taxes. But I didn’t learn that until after I filed. One, is that right that I can take a tax deduction? And two, if I can, is it worth going back and amending my taxes? I ended up paying around like five to $7,000 in taxes was what I had to do this year.
Dr. Friday 18:38
Well, Evie, yes, there is a credit, possibly up to 7500. How much did you spend on your Evie charger?
Dr. Friday 18:50
So there’s a forum called an 8911. You’re gonna want to actually possibly a min I mean, depending on so here’s the deal. If your tax bracket is 12% You’re going to save a little over $120 on your taxes if your tax bracket is 22 or 24. You’re going to double almost that right? So higher your tax bracket more savings is going to give you but no sense in money on the table if you didn’t do it, why not go after it?
So the 8911. Okay. Thank you.
Dr. Friday 19:23
No problem. Thanks for calling. I appreciate you. Okay, and I lost my screen. There we go. We’ve got Jim in Lavon. Hey, Jim.
Hello. Oh, hello. Can you hear me?
Dr. Friday 19:35
Yes I can.
Okay, I’ve got a couple of questions that are related in on the internet that give me different answers. So I’m asking you. Okay, I’m contributing. I’m 70 years old, and I’m single, and I’m contributing a maximum amount to my Roth TSP plan. So what’s the most Income I can make and continue to do that without any without them starting to reduce the amount I can put in there?
Dr. Friday 20:09
So it’s $7,000. But they do back out if I remember my calculation properly.
I mean, my income. I’m putting in like 27,000 or something like that.
Dr. Friday 20:23
Did you say your Roth IRA?
Yeah, no no, Thrift Savings Plan.
Dr. Friday 20:28
Oh, okay, thrift savings. Sorry, I was on the wrong, wrong things. So let’s see what a thrift savings is.
So, I know how much to put in, but be what’s the most I can make before they start saying, well, you’re making too much you can’t put in that, you know, the max?
Dr. Friday 20:46
Well, are you an employee of someplace? Only reason I’m asking that. No, you’re self employed?
No, no, I work at a VA hospital.
Dr. Friday 20:56
Okay. Well, the only reason I’m saying that, because the way the Thrift Savings is the higher earners, sometimes what happens is, if enough of the lower earners don’t put enough in, the higher earners end up having to get kickbacks, because they have to balance it with all contributions right? Every year. So you’ve probably had it happen where you get back a 1099 R where they had to send back your part of your contributions in some years. It’s not based necessarily on your total income is all I’m saying. It’s about all of the people that contribute in the hospital, or wherever you work.
So, I don’t have to worry that I’m making too much money?
Dr. Friday 21:41
No. No, because you’re I mean, you’re on a W2, it’s going to actually as soon as you start hitting a certain earnings, it’s going to actually kick out anyway. So you know, personally speaking, I don’t think there’s anything you can really change on that. Let’s see here. If there’s something that tells me really quick, what the maximum earnings for Roth is usually higher than the other as long as you keep working, because as we all know, they changed the law, right, that you can actually still contribute as long as you’re still working.
Dr. Friday 22:14
It used to be that you had to stop it at 70 is the reason I’m asking and I’m not a financial planner. So those questions, I don’t know the exact answer, but I don’t think I would worry too much. It says 80% of the account and blah, blah, blah. Yeah, don’t there doesn’t seem to be anything that’s going to stop or worried that you’re making too much money, the payroll service is going to basically stop taking once you hit the maximum that you can contribute.
Okay, then my second question is, can I still put money in my Roth IRA?
Dr. Friday 22:47
No, not if you’re maximizing your thrift savings? You can’t put that in the Roth unless, well, I shouldn’t say no. But I’m assuming since part of the question you asked me is how much earnings you have, I think a Roth for an individual cuts off at like 140 or something under 70. So there is a maximum you can have for regular
Roth, right. But if I’m making less than that, can I contribute to my, my Roth as well as my, my Roth IRA, as well as my Roth TSP?
Dr. Friday 23:20
I am not a financial planner, but my answer to that question is going to be no, you can’t if you’ve got a tsp at the workplace, you’re not going to qualify for a Roth IRA outside of it. Now, I know that there are certain people that probably could answer that question a ton better than me. I’ll be honest with you. That’s not really a tax question. If you want to take money out of your IRA and know how much it’s going to cost you. That’s more my my expertise.
All right. Okay. Okay. Thanks very much.
Dr. Friday 23:54
I don’t want to lead him in the wrong direction. Let’s it Alan in Tennessee. Well, that’s good to know. Hey, Alan, what’s happening?
Yeah, thanks for taking my call. Yeah, I had a question. The person is on disability and they sell their home they’re living in. And they make more than what they paid for profit you might say, are they allowed to keep that or say you went into another home that was less than what you earned off your sale with the with the Social Security want to take your take what you’ve made off that because you’ve been on disability?
Dr. Friday 24:34
Well, ah, you guys are really good, but neither of these are tax questions. Um, honestly, I don’t know the answer. No, sorry. No, I don’t really know for sure. Because it probably depends on the type of disability that you’re on. Probably because something I know I’ve heard somewhere where you can have only have like, $3,500 in the bank limitation that they put you on to it. And if you exceed those, then they’re gonna back out how much they’re going to give you in disability until you’re back down to those numbers. So my answer would be, that would be a concern definitely. Now I will tell you that you could go ahead.
I was worried about the IRS, will they claim taxes on something you make off property?
Dr. Friday 25:28
You would actually have your primary home, if you lived in it two out of the last five years, if you’re single, you can sell it for 250,000 above what you paid for it, and not pay any taxes. So you might be okay on that element, you might want to talk to if you if you really did make quite a bit of money, you might want to consider talking to an attorney, because there are what’s called Disability Trust, the money could probably go in there and be used for your comfort for the rest of your life and not kick you out of disability.
I see. Well, thank you very much for your help,
Dr. Friday 26:02
No problem. Appreciate your show.
Enjoy your show. Thank you.
Dr. Friday 26:06
Thank you very much. All right, guys, we’ll take our second break here. If you want to join the show at 615-737-9986. We’ll be right back with the Dr. Friday show.
Dr. Friday 26:31
All righty, we are back here live in studio. And I am Dr. Friday and then enrolled agent licensed by the IRS to do taxes and representation. And so that’s what we’ve been doing for the last 25 years. And I can say it’s always a fun ride, you never know what’s going to come next year what the taxes are going to be or how it’s going to change. I will say for any of you that might be in the business of tax preparation.
Dr. Friday 26:59
And we’re all looking to obviously continuously learn more about what we need to know from cryptocurrency to the current tax changes. There will be some seminar July 14 and 15th in Mount Juliet that Tennessee association of enrolled agents will be putting on so keep your eyes open. Or if you want more information, you can certainly email me or call me. And we’re going to be getting some notices out to everybody.
Dr. Friday 27:25
But just a heads up, put that on the calendar, if you are someone that is looking to have some CPE credits, and also maybe do some face to face and talk to other people like myself, that does taxes and representation. I’ve always found it to be a worthwhile event to go to because you know it’s local, a lot of people know each other. And then if there’s a problem, you have someone you can actually share that with so or at least try to get some additional information.
Dr. Friday 27:51
So we were talking a lot about the different questions or different things happening here under the IRS and some of the biggest topics, of course, was I think the IRS puts out a topics that that I think is always interesting. And a couple of the number one questions was, again, IRS, I don’t have a social security number, but I have an identification number. Am I eligible for the child tax credit? was one of the questions that the IRS have? And the answer is yes, you and your spouse if married filing jointly must have a social security number or an IRS identification number.
Dr. Friday 28:30
ITIN is what we usually refer to him to be eligible for the child tax credit. It can be claimed for each child who is who has a social security number or a valid or valid employment, our ITIN number. So again, that’s really different than some of the stimulus monies where we didn’t have that, right. So I have one individual who had a baby, and we’re still waiting for getting the social security number, because that is a little bit slow on the uptake there.
Dr. Friday 28:59
So we’re hoping that’s going to come quickly, but you never know what’s going to happen when it comes to those. So again, you can’t claim a child unless you have a tax ID number or social security number on them. Is it as a recipient of a deferral action of Childhood Arrivals prevented from claiming a child tax credit?
Dr. Friday 29:24
And as it says, No, having a DACA does not affect your eligibility. So bottom line is almost anyone that with a child can get the child tax credits. And so that’s one of the big things and of course, one of the other major things the IRS has been doing a great job in is actually dealing with qualified children. So you know, you can be independent, which normally means that at this point you’re 18 and older, a parents or grandparents all those would be dependents. And then there’s the qualified child or tax credit.
Dr. Friday 30:00
And that’s someone that is under the age of 18. And they are usually your own children. Now, that doesn’t mean they have to be biological. They can also be a child that you’ve adopted. Some cases, I’ve got grandparents that are raising the children, all of those different situations, but keep in mind earned income credit, you’re not going to get that on your girlfriend’s kids that you’re living with, you shouldn’t, that doesn’t qualify you to be their guardian, therefore, you don’t qualify for tax credit.
Dr. Friday 30:32
Now the mother who is living in the household if she is working, and she is there a biologic, you know, the person has them, then she would qualify for it. This is a big question. And I think a lot of people are very confused on who can get it. Just because there’s a child and there’s a name doesn’t mean that you’re going to have the ability to be able to just claim them because they’re in your house. I’ve had more than one person though the Child Tax Credit, yes, you’ll qualify for that because the child is in the home.
Dr. Friday 31:02
Earned Income Credit is a different animal and the IRS the number one thing they have been audited in the last year, guess what? People making less than 40,000. Single people or head of household people making less than 28,000. Why? Because those people half the time are claiming children that are not entitled to claim and getting large chunks of money for those children. I know there’s quite an outrage on the internet. And I’m going to say I am not one of those. I personally think if they expect all of us to file our taxes to pay our taxes and, and with the idea that we could be audited, or anything else during those time periods, every taxpayer should have that same concern.
Dr. Friday 31:44
So if you live with an individual, and they have children, and you’ve been getting 7, 8, 9, I don’t do a lot of earned income, but I have one that they have six kids, and they are married in there, these are all their own children, and they get somewhere around $12,000 a year back. So you know, this is something you need to consider something to think about nothing, you know, this is what the IRS is providing. And I’m a full believer and taking full advantage of every dollar you’re entitled to.
Dr. Friday 32:16
There’s nothing in the tax law. In fact, it’s in the tax law that you’re entitled to every tax deduction that you are truly entitled to. So don’t leave something on the table, just because you’re not sure. But if long as you know that this is a deduction, you’re entitled to go for it and make sure it’s out there. But if you’re not sure, if you’re guessing, or you’re taking the advice of somebody else, you know, make sure you get somebody that does know the business knows what’s going on and gives you good advice on should you or should you not claim a Pacific tax deduction.
Dr. Friday 32:50
You know, in some cases, it makes very little difference if you do or don’t, because sometimes, you know, I have people that the 306 $100 for charity has to be cash, it cannot be goodwill, it cannot be money that or clothing or household goods that you gave to a charity. And a lot of times, you know, that’s people like well, I mean, I had to pay cash originally for them, I get that. But the tax law is pretty specific cash to a charity.
Dr. Friday 33:20
So you know, in a lot of these cases, we’re talking, you know, $30-$60, that they’re saving in taxes. And it’s not that that’s not a lot of money, but it’s not worth putting something on a tax return, and then worrying about it later. See, I like to sleep really well at night. So I really prefer to put in my tax return everything that I can everything I’m entitled to, but I don’t need to make it up or hope that the IRS doesn’t catch it.
Dr. Friday 33:50
You know, sooner or later your luck is going to most likely pass on. So you want to make sure that that’s not the case, at least not while we’re at the choices that we have. So and right now taxes are about as low as they’re going to be in our lifetime. Maybe not in your kid’s lifetime, but it definitely in my lifetime.
Dr. Friday 34:07
So I’m expecting we need to be preparing and looking at what other alternatives. I’m totally agreement in that and what we need to be doing as far as you know, preparing for 2025 when the taxes are most likely going to start going back to what they were pre Donald Trump and see what you know, they may they may put them back in and keep them low. But I’m not really depending on who’s in the in White House at that time. So we’ll have to wait and see what that’s going to be so very important to think about who you’re voting for. But that being said, right now, we’re talking about taxes.
Dr. Friday 34:46
So if you’ve got questions, you can join the show 615-737-9986. Like I said, I’m an enrolled agent licensed by the Internet federal revenue service to do taxes and representation. That’s what I do. So if you haven’t filed taxes in 10 years or two years, or you know, somebody that really is just pretty much off the radar, because they’re just afraid that if they open up a bank account, or they, you know, their house or anything else has liens, you know, there are deals, there are ways of doing offering compromises, payment plans, making yourself non collectible partial payment plans, you might have to bite the bullet in your head and do what you need to do.
Dr. Friday 35:30
So that way you can move forward, because that’s the only way it’s going to happen is for you to be able to get what you want and do what you need to do. Otherwise, you know, you can live off cash, I’m sure you can. But it’s very difficult to buy a house or very difficult to, to grow your money, put it into an investment account, or you know, buy stocks or anything else if you’re afraid that the IRS at any good point is going to come and take that money.
Dr. Friday 35:55
So you’re better off making the deal and making them the priority, get them off your back so that you can start building the life that you want. So we’re going to have one more break here. And we get back we’ll have another oh seven, eight minutes of the show. So if you’ve got questions, and you’re not too sure, now will be the time to pick up the phone 615-737-9986 We’re gonna be right back with the Dr. Friday show.
Dr. Friday 36:27
Friday, we are back here live in studio, you can join us by calling 615-737-9986. We are taking your calls and dealing with different questions. So I was talking about the earned income and Child Tax Credit, I got an email during the break. And one of them asked Well, how do you what kind of documentation is is the IRS request, if needing to prove that I can claim the relationship and residency. So that’s the two things first. So first, if you if you have a child that’s living in your house, you first have to be able to prove your relationship with that child and the residency.
Dr. Friday 37:11
So most the time if it’s a boyfriend or a girlfriend living in the house, and they’ve got a child, the residency is not the issue because that home address is probably since the the parent is living in the house, the child is living it, it’s the relationship that you’re going to have, which has to show that you are either related a paternal test a marriage certificate, or legal adoption, payments, paperwork, that’s what they want. So or it can also be if you are foster parents, but your name has to be on these documents.
Dr. Friday 37:44
So again, big mistake, and one of the largest audit areas is people claiming somebody else’s child on a tax return because again, was it $4,000, a child or something like up in Earned Income Credit Plus another two $3,000. In child credit, each child is worth quite a bit of money. And so you need to make sure though, again, the IRS is doing much better job. And that’s one of the reasons there’s been a delay. And some of you, you may have found out that there was a delay in your refunds, because the IRS is actually holding a delay on trying to match children that are being claimed on the tax return with the proper parents, that’s going with them.
Dr. Friday 38:29
And so that is one of the situations that we’re always dealing with. In fact, we usually every year have one or two cases where the person that legally should be claiming the child isn’t and the person that is not supposed to is beating that other person to the deadline which basically if if someone claims the child and they file a tax return the other person that may legally be able to file that child must mail in the return because at that point, the IRS is already has that child already in the system.
Dr. Friday 39:01
So then we have to then prove the residency and relationship, put a whole packet together, mail that to the IRS. And then usually that will come back and end up with a child coming back at you and having to pay back and the penalty for doing that being caught by filing someone else’s is that you’re never going to be able to claim the earned income credit or child credit again, even legitimately they kick you out of the program. So it’s a pretty high penalty to do that kind of thing.
Dr. Friday 39:34
So just think about it because it’s not something that you really want to do. It’s not something that we really want to to be dealing with and I get it it seems like fast and easy money sometimes and when life is not always simple. It can be pretty decent situation. But in all honesty, it’s not the way we want to go because the IRS is getting smart guys, sooner or later they’re going to follow up and say boom, this is what we’ve caught and this is how we’re doing it.
Dr. Friday 40:00
Like I said, there’s emails and blogs and different things out there that are talking about this right now. And, and that’s because they’re saying, well, they’re already in the lower income bracket. And you know, that, you know, this is a hardship for them. But when you’re talking about, some of these people are getting $12,000 or $14,000, at the end of the year, that can be a problem. So enough about that, let’s see what other tax issues we have. Again, if you live in some of the other counties and haven’t filed your taxes yet, and, again, we’re working to try to get all the tax returns that we have in house completed here, just to at least the ones that we have on our desks that are ready to be completed.
Dr. Friday 40:42
I mean, many of us will file extensions, and they are not due until October 15, as far as a personal. If it’s a business and you filed an extension, that will be due September 15. And keep in mind extensions are great in my world, because it just extends the paperwork, and it gives us time to make sure the paperwork is correct and done right. So we’re not filing amendments or corrections, but it does not extend the money.
Dr. Friday 41:10
So if you haven’t filed your taxes for 2021, and you haven’t paid in any taxes or not enough taxes, now’s the time to really think about it. I mean, at least with most of my clients that you know, we have that discussion, we say, “Well, let’s let’s make an estimate, let’s try to pay in enough.” So you don’t want to have to pay penalties and interest, we don’t want to do that. We want to avoid that as best we can.
Dr. Friday 41:34
So if you haven’t filed your taxes, and one of the reasons people don’t file taxes is because they don’t have the money. I totally relate to that. And sometimes it is a matter of just waiting and hoping that you can then when you do file the taxes in October, you they have enough money to pay the basics or get a payment plan going. But you know nothing stopping you from going ahead and starting a payment plan. Just because you know you don’t you know you owe $5,000 And you don’t have it.
Dr. Friday 42:02
So you don’t want to tell the IRS that you owe the $5,000. But nothing stopping you from making a monthly payment of so much money to help whittle down the amount you owe unless of course at this point, you’ve lost your job, you don’t have the ability to pay or or there’s other issues. I mean, life gets in the way sometimes. But my suggestion is always start whittling away as best you can.
Dr. Friday 42:25
And whenever you owe the IRS penalties and interest. And again, if the idea is you don’t have a job, and you don’t have the ability to pay, then as long as you’re current in your filings, go ahead and do an offer and compromise maybe that’s an availability, but I will pop a lot of bubbles out there because there are a lot of services on the on the radio and on the TV. And many of them you’re going to call and they’re gonna say, “Oh, yes, we can help you.”
Dr. Friday 42:51
But if you have a home a 401k, you have the ability to pay them, you just don’t want to take the equity out of your house, you don’t want to withdraw the money from your retirement account, then I’m going to tell you right now, the way that the offer and compromise system works is the IRS is saying, “Wait, you paid your mortgage every month, and you didn’t pay us. So therefore that equity is ours, you put money into a 401 k or IRA or any of them, but didn’t pay us. That means that money is ours,” they’re not making big deals.
Dr. Friday 43:26
Now there are certain circumstances, there’s nothing ever black and white when it comes to the IRS in some cases. But you know, 99% of the time, if those funds are there, when you go in for an offer and compromise, it’s going to come on the table, they’re going to have certain expectations.
Dr. Friday 43:43
And even if you get a rejection on a mortgage, because your credit score is 540 and likely not going to get a lot of mortgages for that, then that’s something to consider as well. But I’m just telling you right now, there’s a lot of companies out there and they’ll say, Oh, yes, pay us $1,500 and $500 a month, and we’re gonna help you. And they may be able to get some penalties waived, they may be able to file all your taxes to get you current. But keep in mind, the tax law is the tax law.
Dr. Friday 44:14
It’s not something that they’re writing or they have some secret backdoor to it is what it is. So make sure you have someone that’s actually going to tell you exactly how and plan out what you’re going to do before you separate yourself from 1000s and 1000s of dollars and then find out later, you didn’t get any kind of resolution. That’s not the way we want to work.
Dr. Friday 44:34
I mean, it’s not easy resolutions take a long time. It’s not a fast process. So it’s not something you’re gonna come in and then you know, a few days later or a week or even a month. I mean most of ours take seven months to probably a year and a half of one. It took us over two years to get an offer. So just want to make sure you understand that this isn’t a process that’s going to happen fast.
Dr. Friday 44:57
All right, so we’re winding down the show. If you have questions and you want to reach us Monday morning 615-367-0819. If you have no idea who I am, and you’re curious, easiest way to find out would be to go to drfriday.com. That is drfriday.com. And for many of you that may have not heard me on the radio for the last 13 years, maybe you just found me. My first name is actually Friday. So it’s Dr. Burke, I suppose. But Friday is such a unique first name.
Dr. Friday 45:32
My father had an ingenious concept there. So I go by Dr. Friday. And if you need an appointment, you need some help. You can give us again, the easiest way is either email or phone call. Again, you can email us at email@example.com. Again, firstname.lastname@example.org.
Dr. Friday 45:54
Or you can pick up the phone call us at 615-367-0819. I hope you guys actually have a really wonderful Saturday. And for all of you there’ll be celebrating Mother’s Day tomorrow. Hopefully you guys enjoy, see your kids, have a great time. And as we always say here, I mean, again, if you haven’t filed your taxes, or if you need help doing some back taxes, I’m the person you’re going to want to call and we can help you if you don’t even have the paperwork. Don’t worry, we have ways of helping you recreate your information. So hope you guys have a wonderful Saturday. Call you later.