Welcome to another episode of the Dr. Friday Radio Show! In this episode, Dr. Friday gives all the newest tax updates and answers the caller’s questions:
- How To Find Your Tax Refund and Your Stimulus
- Tax Filing Deadline Is May 17, 2021
- The PPP Applications Closed on May 4, 2021
- You Can E-File Tax Returns
- Who Qualifies For A PPP Loan?
- If You Haven’t Filed Your Taxes, File The 4868 Extension
- Unemployment Is Taxable Income
- Reasons Why You Haven’t Received Your Stimulus Check
and other caller’s questions!
Transcript
Announcer 0:00
No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or your financial woes. She’s the how-to girl. It’s the Dr. Friday show. If you have a question for Dr. Friday, call her now at 615-737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
Dr. Friday 0:29
Hey, this is Dr. Friday. I’m live here in the studio. So if you want to join us, call 615-737-9986. So, obviously, we’re working on the last few days, you have until May 17, which is Monday, about a week from this Monday, coming up. If you haven’t, you need to make sure you file your extension. If you haven’t received your refund, and I am getting a lot of emails and phone calls. The only answer I can tell you is to check the IRS website if you’ve checked it, and it’s been more than 21. I would even say like 30 days, and it’s been more than 30 days since it e- filed, I would then take the time on a day that you have the ability to do that, I would have them call and see if they can tell you the status update on that situation. That’s gonna be something you’re going to have to figure out.
Dr. Friday 1:28
Unfortunately, I have had quite a few people when they do call, they have found out that they have to prove their identity. So I think the IRS is working very hard to make sure that we don’t have as much identity theft as we’ve had in the past. So that may be a good thing, but a little time-consuming in the middle of everything else. All right. Let’s go right to the phones. We got Melissa on the line. What do we have for you, Melissa?
Caller 1:51
Hey, Dr. Friday, glad to get to talk to you finally. My father passed away about three and a half weeks ago, and he had left my sister and I both an annuity. That was wired into my account on Friday. It’s about $90,000 roughly. I am just needing some advice on where to place that?
Dr. Friday 2:21
Two things. An annuity is usually taxable. So some of that income that came in maybe taxable income to you. So you are going to within 90 days of receiving it make an estimated payment.
Caller 2:37
I had them withhold on it. I had them my whole 10%. I think that’s okay for our tax bracket. I’m not quite sure. I’m guessing I’ll figure that out next year.
Dr. Friday 2:48
The biggest thing is you don’t want to put the money into an investment that if you find out next year that it is short because the lowest tax bracket is 12%. Now we all know there are effective tax brackets was so it could be less. If you’re adding and I’m assuming all of it wasn’t taxable income, you only have to pay tax on the growth assuming that you’re following that into this with after. So it’s only a percentage of what went into your account, that would be taxable, but on top of your ordinary income. You know, if your family makes less than 100,000, I’d say you’re fine with that annuity added in with the taxable portion. If there’s more than 100,000 with that taxable portion of the annuity, it does go from 12 to 22 overnight, basically.
Dr. Friday 3:35
So 10 may be on the low sides only thing I’m thinking because I would have probably went with 15 just to be on the safe side. But you can always still set aside some, you know, in a money market or something that you use just you know, put it somewhere well earn interest. Then you know if you need it, you have it there. Other than that, you sound fairly young on the phone. So I’m going to guess that you need this to be working and growing for you for a number of years. So do you have any financial planners that you work with right now? Or is all your money in like IRAs and 401 K’s from work?
Caller 4:08
It’s all one retirement fund. I do not have anyone I work with. Is that something I can set up and come in and talk to you about?
Dr. Friday 4:21
Right. I do taxes so I would actually immediately pretty much send you to my guy because obviously we need somebody. We need someone that knows what they’re doing over there. His name is Hank Parrot, and I’m actually going to give you his cell phone so he’s totally going to appreciate this, I’m sure but that’s the only number I have memorized. It’s 615-226-1520. It’s so easy. His name is Hank Parrot and his company’s estate and financial strategies. He would be able to tell you based on your age and everything elsewhere that might be able to be put so it can grow and grow. Now it’s after-tax dollars. So this is a nice little pot your dad left you to be able to add to because we all know that our IRAs and 401 K’s most of those are with pre-tax dollars. So this will grow. So you’ll have two buckets growing versus just one growing with the IRS money in it. So it’s kind of a nice little family that keeps on giving.
Caller 5:22
Yes, he was a stellar retired military man at 90 years old with the good life. So would you just move this right over into a money market for now?
Dr. Friday 5:37
I would put it into a money market. Then depending on your schedule, or whatever and his advice or and he’ll always do a free evaluation. So no matter what you walk away with, you’ll have some idea of a little bit better what to do with it. But definitely tied someplace where there’s a little interest. Let’s be honest, no real matters happening out there at this moment. I think I heard that was giving more than like .01 was USA bank, but I don’t know what theirs is. I mean, I cheat off my tax clients when they come in. Oh, yeah, this one’s getting a little bit more interest. So we all are moving money from bank to bank hoping to make a percentage versus a percentage on that harder and money. I would say just tie it up in there. So you’re nice, safe, and sound. Then like I said, if you need me to crunch some numbers to make sure you’re not investing tax dollars, I’ll be more than glad to help you with that one. But I think the 10% is a good solid number that they held for the IRS. But I would just probably make sure I set aside a little bit extra just in case your tax person at the year says you owe another five grand at the end of the year,
Caller 6:40
I hope my sister isn’t listening because she held out 22 and told me to do the same.
Dr. Friday 6:46
Is she an older sister or a younger sister?
Caller 6:49
She’s an older sister.
Dr. Friday 6:50
Okay, I live with my older sister, I totally can relate to what you’re saying. It’s always the way it works. I mean, in those 10 years between us, and I will tell you she’s probably right, even though I hope she’s not listening either, because that will come back and bite me later. All right. Well, I appreciate the phone call. Thank you so much.
Caller 7:07
Thanks.
Dr. Friday 7:09
All right. So we’re talking on the Dr. Friday show if you’ve got questions about taxes, or money issues, or any of those. Mainly, obviously, if you’re getting love letters, you haven’t filed taxes for a number of years. Or maybe you file but you have an address, of course, we still have a lot of people looking for their stimulus money. I’ll give you a little bit of an update on that. The bottom line is the IRS is still submitting the first one on the MCs me the last one I am what we consider the $1400 one, the third actual stimulus check is now it’s still coming out according to the last thing I heard from the IRS. Some of those are going to be coming out of the situation. If you haven’t received it, it could still come to you. The first two, which they are considering those both 2020 distributions, even though I know many of you did not receive it until January of 2021, those two have to be recapped on your 2020 tax return, there will not be a second mailing, third, mailing, whatever.
Dr. Friday 8:14
So at this point, that’s kind of where you’re at. So if you have not received the first or second, you need to prepare a 2020 tax return. If you haven’t received the third one at this moment, you’re kind of in a holding cycle. Of course, a large number of people. The problem is if you’ve moved, you’ve changed your bank account. Even if you relocate, it seems like in 2019, like you changed your address on your 2019 return, it hasn’t fully been updated on some of my clients, it seems like. So when they’re going in and looking for their stimulus, the address they have is not showing up. I’m going to tell you, if you have moved in the last two to three years and you go on check your payments, and it comes up that the information you’re providing is not correct, I would change the address to your prior address. Even if it’s a couple years old, and just see if that’s the address the IRS has because, theoretically that’s where your check when and it bounced back. So you’ll have to do an address update so that they can re-mail out the third payment again, the first and second no matter what address or bank account, if it’s bounced back, you have to do a filing for us for your tax return.
Dr. Friday 9:26
So if you have a problem with that one, and you’re having to deal with something, then you can you know, obviously do that, but you’re going to want to check the IRS website to the best of your abilities and see where you’re at. So if you’re missing your refund, that’s where you’re going to want to check. If you haven’t received your stimulus, that’s where you’re going to want to check. Then when you file your 2020 and you’re looking to receive back your stimulus, I’m going to tell you already I’ve had people that are called and they’re being told it could be taking an additional six weeks for the IRS to release once they’ve even done an income verify or anything else. Another six weeks to actually get the money. So this isn’t going to be a fast process.
Dr. Friday 10:08
In some cases, I’ve had some people that have filed their taxes got their usual refund, and got that direct deposited and then mended the return and just waiting for the stimulus. At this point, you’re going to need to file or do something. If you can’t get anything filed, you know, and you don’t have the ability, whatever. My suggestion, of course, is to file an extension. At least that way, if we need to get together in May, June, July, we can help you get things filed and organized. Maybe by that time, the IRS will have some changes. This also goes for individuals that may have filed before March 11, or 12th, where they made some tax changes, and maybe you had unemployment, and you went ahead and paid the taxes, because that’s the way it was up until that date. In fact, if anyone is listening, I’d be really curious to find out if you don’t mind calling, or you can even just text me if you know that my office number. But I’d love to hear if you’ve received the additional money. So if you filed in February or early March, and you had unemployment and you pay taxes, and then the IRS supposed to amend and correct that and adjust your withholding, and give you the full amount back, I’d be curious to find out if anybody has actually received it. Because on our site survey and that kind of information that we have from our own tax clients, we’re not yet seeing anybody getting any additional or in some cases, they’ve held up the entire refund, it looks like because of this.
Dr. Friday 11:40
The phone number here in the studio is 615-737-9986. The phone number you can call or you can just email friday@drfriday.com. I’ve got my email up. So if you want to just email and say yes, you have or no, that’s actually happened to you. I think a lot of people are a little frustrated, and they’re trying to figure out what they can be doing to kind of speed up their refunds. I just really honestly think that the government is so overwhelmed at this time that they’ve been giving out three different stimulus, they’ve had to take two to three tax change laws. Two big ones, in just from March till now. And just all these other alterations and decisions that don’t affect everybody, but there has been out there.
Dr. Friday 12:32
Alright, so when we take a quick break, I see the phone lines lining up. So we’ll be able to get to your phone calls as soon as we come back. This is the Dr. Friday, show the number here is 615-737-9986. We’ll be right back.
Dr. Friday 12:55
If you want to join the show, it’s really easy. Remember, when you’re brave enough to ask questions, a lot of people are listening, and they would probably appreciate that as well. So cal 615-737-9986. Let’s go to Chris from Nashville. Hey, Chris.
Caller 13:15
Hey, how are you doing?
Dr. Friday 13:16
I am awesome. What’s happening?
Caller 13:19
I think I know this, but I just want to make sure I’m right. So every year, my company has open enrollment, and I sign up for an HSA account. My wife has her own insurance. And they’ve been telling me that I can pick up the 7000 max, and I’ve been normally taken half of that.
Dr. Friday 13:40
Right. That’s all you should because if it’s just for you, unless you have children, of course, then you can only do half of that.
Caller 13:48
I did half of it. We picked up our taxes today, and it says I overpaid. Because the company contributed money to the HSA. I thought I could put half and I guess it doesn’t count.
Dr. Friday 14:12
Well, the total has to behalf. Right? So I think it’s 7000 some dollars. So each of us can put up roughly 3600 lets’s say it is but it would have to include the company portion. So the total that can you can put in and I would think your company would have that maximum set up in there. If they’ve got you set up as a single you would think that they would already have you set up that way it looks like we might have lost Chris. That’s fine. So, Chris, you may need to talk to them and find out if they’re gonna always give you $500 or $600 I know some companies if you do something like you do so many visits, you do so many things they’ll contribute so much to the health savings account because it saves them on insurance money. But you do need to make sure that that’s paid in and maxed out. Otherwise, you are going to have a problem because there’s gonna be a penalty every year on that. And your HR department should probably make sure that doesn’t happen. So you might want to make sure they do have you listed as single not married, as far as the contributions to your HSA, but sorry about that one. I have done quite a few taxes that way and never surprises. I do it myself.
Dr. Friday 15:27
Alright, so let’s go ahead and head on over to Ted in Springhill, right. Hey, Ted, how’s it going?
Caller 15:34
Oh, good. Yeah, you just asked a question a couple of minutes ago about filing? I was unemployed, last year, I was downsized. When I filed in February, I owed and it was a small amount. I was rather surprised because of the amount of unemployment I had drawn without paying taxes on it during the previous year. Anyway, I got a nice little letter from the IRS this past week, saying that I had shorted them approximately $1200. Luckily, I had it.
Dr. Friday 16:13
So when you filed your taxes, you knew there was going to be a balance due but the letter that they sent you did it account for the first $10,200 that was not supposed to be taxed? Have they taken into account? Because when you file back in February, the law was different than it is today.
Caller 16:31
Right. It had something to do with COVID relief. Apparently, I had checked the box on there regarding COVID relief. Anyway, my AGI versus the amount of taxes that I had paid was off by exactly $1200.
Dr. Friday 16:56
Did you get all your stimulus? Just out of curiosity? Did you receive all your stimuli? Did you get the first one? Because it sounds like if the first one was 1200, I wonder if you thought you hadn’t received in there saying that you had and that’s a guess I have no idea. Otherwise, just weird.
Caller 17:10
Yeah that’s my guess on my part too. The paperwork is sitting in there on the desk.
Dr. Friday 17:17
I appreciate you making the effort to call me because I know it’s never fun to call a radio show. So I do totally appreciate you calling in. Hopefully we’ll get all this stuff straightened out. We’ll take it from there. But thanks for calling Ted.
Caller 17:29
Thank you.
Dr. Friday 17:31
All right, let’s see Billy is available before he hit the next line. Hey, Billy.
Caller 17:40
I’ve got a situation where I just started paying taxes. I’ve been retired for a while and haven’t had to pay taxes, you know. I sold a piece of property last year. Then I was receiving payments on it monthly and in the last year. And this year, wasn’t too bad but the guy sold that piece of property that I sold him and now I’m gonna get the remainder of the balance of it this year. I might sell another piece of the property too. I was just wondering to help him and plus my required minimum payments. Distributions are going to start this year also. I was wondering if a new tractor that I could use pretty bad, how to have one. If that would help me and how depreciation works? Does it come out with tax?
Dr. Friday 18:40
It would only work if you have an actual farm that you are reporting every year. So if you’re a farmer, and you’re growing something the tractors required, yes, or if you’re land maintenance, like say you have a lot of different pieces of land that you’re collecting rent on, because otherwise there’s no place to put it on the tax return unless it’s under a rental or farm. You know, by buying and selling properties. Unfortunately, the tractor isn’t going to be something that you can really depreciate in those kinds of situations.
Caller 19:13
Well, I got my farm tax number last year. The piece of property, I’m looking at, I was gonna do some fencing and out cows own. But I might go ahead and sell it to will the way properties doing right now. Still, I have about 20 acres that I’ve got some fruit trees own and stuff like that, that I could keep up.
Dr. Friday 19:41
The biggest thing is you have to report it as a farm and you have to be making the effort to make a profit. So that means you either have to be trying to sell the fruit or growing the fruit for a market of some sort, right? I mean, it can’t just be a hobby farm. Not going to be allowed to have a tax break on that one. But other than that my suggestion is that you basically want to be able to create a business out of your farming that then justifies the need for a tractor.
Caller 20:10
Gotcha. Can you tell me a little bit how depreciation works?
Dr. Friday 20:15
Tractors are considered essential equipment, therefore, you can do what’s called section 179. So if you pay, let’s just say 70,000 for a tractor, theoretically, you can write it off in the first year. Now, keep in mind, that’s not going to reduce your capital gains, because it’s going to be a negative income, but capital gains tax is different. So you’re not likely to zero yourself full out, which is where I think you’re trying to go with that. So ordinary income, but not long term. All right, Billy, thank you so much. I appreciate it.
Dr. Friday 20:55
Janet, what do you got for me, girl?
Caller 20:58
Hi, how are you?
Dr. Friday 21:00
I am awesome. How about you?
Caller 21:03
I’m doing great today. My question is, my husband is retired. But he went back to work. He worked for his bank companies out of Kentucky. He has worked in Puerto Rico, Kentucky, Indiana, different states. How does this state income tax? Or state tax? I’m sorry, as that as being citizens of Tennessee, especially the Puerto Rican tax, we’re having a lot of problems with that.
Dr. Friday 21:41
Puerto Rican taxes are really high, to be honest. A lot of times they take it out. I’m going to be quite honest with you. I know Puerto Rico. People are say it’s not a foreign tax, but it is to people that don’t file Puerto Rican taxes, okay? We do all the different states, but Puerto Rico, I mean, their sales tax is like 10.5. I have had a couple of other people that do work there from their main companies, to be honest, and you do get foreign tax credits, you’ll get some credit for the state income, but it maximizes, any state income tax, we have only maximized $10,000 on our schedule one of my people actually have 40,000 paid to Puerto Rico. So yeah, it really wasn’t a huge tax saving for them, because of the fact that it’s just a higher tax than what we can actually deduct, which is a lot like California and New York also have those same taxes. But you’re gonna pay a lot more out than what you’re going to get benefit in. I’m not too sure about your husband, one of my clients, he made very good money while he lived there or was working there. But by the time you take all the taxes out and pay the income taxes and everything else, it was not as good as he thought when I had to give him his tax bill, unfortunately.
Caller 23:03
Oh, no.
Dr. Friday 23:05
Unfortunately, you may be in the same kind of situation. But you can write off the state income tax will fall on a schedule under state income tax withheld. But again, they’ve locked that up to a maximum of $10,000. That would also include your property tax, and everything else. So not going to be a huge deduction on your personal tax return, unfortunately.
Caller 23:29
The other states, do we pay their state income tax?
Dr. Friday 23:35
All the states he may have worked in all that. I mean, the maximum he can write off in state income tax maximum along with property tax would be $10,000.
Caller 23:45
Because that Puerto Rican when what he had is hard, okay. Yeah, well, thank you so much, appreciate you.
Dr. Friday 23:54
No problem, sweetheart. Thanks for calling. I appreciate it. Alright, so we’re gonna take our second break. So if you want to join us call 615-737-9986. We are taking your calls, talking about taxes, obviously, as an enrolled agent licensed by the Internal Revenue Service through taxes and representation, so pretty much what I do. So for the next week or so, we will be doing taxes. We’ll get back to hopefully getting some back tax and representation done and maybe the IRS will start answering their phones. So we’ll find out if you want to join the show, call 615-737-9986. We’re gonna take a quick break and we’ll be right back.
Dr. Friday 24:43
All right, we are back here live in the studio. I’m Dr. Friday the Dr. Friday show. I’m an Enrolled Agent to Revenue Service new taxes and representation guys, so we’re talking taxes or money issues. Mainly right now during this time of the year, pretty much Dealing with taxes and issues like that. My poor guys got the phone lines going pretty good. They’re actually managing to get that moving on nicely. Can we hit Dan real quick? Hey, Dan, what’s happening?
Caller 25:14
Hi, Dr. Friday, thank you for taking my call. The circumstances are, my brother-in-law visited us. He’s 61 going on 62, and he’s had a troubled life in the past, financially and personally. But he said that he contacted Social Security, they said he will not give Social Security because he has not filed a tax return in decades. Now, I’m wondering if that is the case, and I’m wondering what it would take to fix that. Now he’s been hit like this, he had a troubled past difficult time, etc, etc. We haven’t seen him in a long time, we had a death in the family here locally. He showed up for that event. And he told us this. You know, I was just wondering how to approach this.
Dr. Friday 26:12
The easiest way to approach it would be first to sign on set up an account for him if possible onto Social Security online. Let’s find out how many quarters in the last 30 years they have him on. Because probably what’s happened is when he was doing things he may have been self-employed. Without filing a tax return, they have no information on if he was even working. In some cases, he may have been off the grid, that’s what I call I mean, where he’s working for cash or doing things under you know, just kind of surviving, right? So he needs to find out everybody has to have 40 quarters to get so security is my understanding. So you have to and basically it’s 10 years of the last 30 years. Like you said he’s had a rougher life, maybe then some so maybe his work ethics or his the car, I would guess he was probably more self-employed than anything else. So that can be fixed, if there’s a way of proving that he was actually self-employed during that time is going to be the hard part. Otherwise, he still has, I mean, theoretically, I’m not too sure when he was born that he’s a few years older me, but I’m assuming his Social Security age is 66. If he’s able to work, I don’t know if he is or isn’t. But if he is, he would still have time to go ahead and get another four or five years and then he could qualify for Social Security. Not early Social Security, but extra full Social Security. So that would be something to consider. But our first question then would be how much does he have showing? Because you do have to have the 40 quarters to qualify.
Caller 26:28
What about the instance where it was not, as you assumed, but that was intentional. To not file?
Dr. Friday 28:03
Well, if it was intentional. When you work your job, and I’m not mine if I get 1099. If I get W2’s that’s turned into the IRS period. So if I mean if he actually was working someplace where there was a W2 and/or 1099, that’s turned in, and therefore we’d have the ability to either create a tax return on 1099, the W2 would automatically go to Social Security Administration because the withholdings were already paid in on it. So that’s the reason I’m guessing he was working for cash because otherwise, he would probably have a lot of that information. If he’s in his 60s, in the last 30 years, he would have held down enough jobs 10 years worth of jobs in 30 years that would have basically showed Social Security coming out on a W2 unless he’s self-employed. What’s his first step? First step, I would sign on to Social Security Administration and pull his report, it will show you the last 30 years basically, of activity, and that will tell you how many quarters then the second step would be to find out what he’s doing today. Is he working? Is he unable to work? Is he you know, I mean, I don’t know his personality.
Caller 29:18
To be specific, he sold a house in Massachusetts and moved to Florida and is living off the proceeds of that sale.
Dr. Friday 29:26
So he may need to find a generic job where he’s doing a little time so he can pay in his quarters.
Caller 29:34
Okay. I think I think I understand it. Thank you very much. I appreciate your help. Dr. Friday. Thanks.
Dr. Friday 29:42
Alright, let’s go to Mark. Hey, Mark.
Caller 29:46
Hey, how are ya?
Dr. Friday 29:49
I am awesome. How are you doing buddy?
Caller 29:52
Doing good, doing good. I want some information on payroll protection. I had been working part-time as an Uber driver kind of supplement my regular income. And when the pandemic hit, obviously over pretty much went away and understand in a lot of small business people, grass cutters and stuff are filing for payroll protection. I was wondering if that might be something I could do due to lost income is over.
Dr. Friday 30:22
It would have been, but they closed it on the fourth of May. But PPP closed on the fourth, I believe, took the last applications on the fourth. So at this moment, we’re waiting to see. For a long time, they hadn’t given out enough money into the coffers. But at this moment, it is closed, no more PPP available until later notice, and I will let everyone know when that happens. But right now, personal payroll protection is not available. I’m so sorry.
Caller 30:58
Would I be an Uber driver qualify?
Dr. Friday 31:03
Yes, it would have been based on the Schedule C that you filed. So you would have had to show profit? I’m not saying that my Uber drivers don’t show a lot profit. But if you had shown some profit on your Schedule C not the gross but the net, the one that you actually paid tax on, if there was something on your Schedule C then you would have qualified for two and a half percent of whatever that is. So they would have said that’s for 12 months divided into that. You may not drove for all 12 months. So it might be a little different. All in all, it would have given you something? Yes. As of right now, both PPP one and PPP two are closed.
Caller 31:41
Okay, well, thank you very much. I’ll be keeping my ears and eyes open.
Dr. Friday 31:45
You got it. Thank you so much. That was a good one. Is it Herbert in Gallatin?
Caller 31:55
We got a quick question. I’m probably getting a federal tax refund. Is there a penalty for late filing?
Dr. Friday 32:06
So there is not if you have a refund, because the government owes you money. So as long as you paid your quarterlies on time. So the late filing fee? No, if I would suggest, if anyone listening, just file an extension, just so that way, you don’t have to worry about it, because that would eliminate any kind of late filing fees. But it would stop the late filing, you don’t owe anything late filing is based on the dollar amount due at the time that you file.
Caller 32:34
Oh, what’s the forum for the extension request?
Dr. Friday 32:38
It is 4686? What is the form for an extension? I am 99%? Sure. Let me double-check it real quick here. Let me pull it up. If you send it in, I don’t know if you’re doing an online or if you’re working on the tax software if you’re doing it by hand, but either way, if you can, I would send it electronically because it just has that instant gratification that we all like to have when it comes to that. Okay. 4868 I was backward. 4868 is the form number.
Caller 33:20
Oh, perfect. Okay, thank you very much.
Dr. Friday 33:22
No problem. Thank you. Herbert, that’s a good one. All right, David. David, my friend what’s happening?
Caller 33:32
I know you’ve had several questions about this. But tax returns. I filed in January, got accepted in February, and still haven’t seen anything. How long am I supposed to wait for this stuff? What can I do to get it?
Dr. Friday 33:46
I’m telling people now, if you’ve waited 30 days, so in your case, you’re way past the 30-day limit? You’re more like 60 or whatever, you’re gonna have to pick up the phone call the 1-800-829-1040. I do believe they’re open on Saturdays. David, it may be better or worse. I’m not too sure. But again, 1-800-829-1040 that’s the regular individual line to the IRS. I would call them I would find out if, at this point, you haven’t received a letter telling you why or if you’re going online, it still says it’s being processed. You know, because it’s either the refund was issued and it went to the wrong place. It was held up because they needed more information and they haven’t given you the address on the tech. There’s all kinds of different things but I would say if you’ve waited more than 30 days.
Caller 34:33
I waited 90 days.
Dr. Friday 34:35
Yes, exactly. At this point, you’re way past the time that they would have at least sent you a letter. Aas anything changed?
Caller 34:43
No, nothing has changed in several years.
Dr. Friday 34:47
Okay, awesome. I was just checking but I have a feeling you’d say that. So pick up the phone mean try now and just see if you can get through. I’m not positive, they’re open or not. But I would say give them a call right now. Be prepared to wait because your Patience is a virtue that we know.
Caller 35:02
Yes, ma’am.
Dr. Friday 35:03
But just have a copy of that return in front of you and then see what they say. Because I have a feeling something’s held it up. But I can’t tell you what, under these crazy times we’re having right now. But that’s way too long.
Dr. Friday 35:15
Well, I agree. I agree. 100%. Thank you very much.
Dr. Friday 35:18
Thanks, buddy. Appreciate you. Alright, guys, we’re going to take our last break. So if you’ve been holding your breath, well, first take a breath, because that’s kind of dangerous. But if you wanting to get through and ask a question, or you know, and there really are no silly questions, guys, if you don’t ask how are we ever going to learn from each other? So asking a question is, is awesome. Call 615-737-9986. This is the phone number here in the studio, we get back, we’ll get some more of your phone calls. And I’ve got a couple of emails that’s come through. So we’ll try to get answers to those as well. As soon as we get back from this break. So we’ll be right back with the Dr. Friday show.
Dr. Friday 36:13
You got questions, now’s the time to call 615-737-9986. We are taking your calls. And we’re gonna go right to the phone lines. Hey, Gary. Hello. What can I do for you, sir?
Caller 36:37
My wife is going to be a beneficiary to a third-generation trust. They’re going to sell the property and liquidate the trust among the four remaining siblings. My question is, I know there is no inheritance tax and no estate tax in in Missouri or Tennessee, the properties in Missouri. Do the word Capital Gains come into play in that situation?
Dr. Friday 37:07
That’s a great question. So the fact is, the property would have a step up in basis as of the last person that left it to your wife. So let’s assume anyways, for this conversation, we’ll say her mother passed away, she left the land. And so when she passed away, whatever the land was worth at that time would be the basis that they’re going to be using for the trust to spread to begin the beneficiaries. Unless there’s been and it’s been crazy lately. So depending on when that happened, it’s possible that someone passed away six months ago, and the property is already appreciated more than it is the time that they passed away. Anything between those dates, if when they passed away, just for sake of conversation, the land was worth 500,000, and they sell it for 600, and your wife is 1/4 of it or whatever she would have to pay tax on $25,000. And that’s just the basic, nothing to do with you personally. But just some numbers. Does that make sense?
Caller 38:06
That’s extremely helpful. My concern was that it would go to step up and go all the way back to the first generation as a trust.
Dr. Friday 38:14
It keeps getting stepped up with each generation that’s in there.
Caller 38:18
Wonderful. And I appreciate you very much.
Dr. Friday 38:20
No problem. Thank you for calling. I appreciate you. Alrighty, so as we know, we’re getting down to the end of the show here. So I just want to make sure again, guys next Saturday will be our last Saturday before the end of tax season. So you really do need to make sure if you haven’t got your tax papers together, file the 4868 extensions, you can get it online, you can go to irs.gov. You can even file it off irs.gov. But you need to file get that form. If you owe money or don’t owe money, it’s still going to be better because the penalty for not filing an extension and filing a tax return late is 25%, 5% every month up to 25%. Not paying is .5% a month. So there’s a huge difference of 5%, I’ll take the .5% every single day. So filing and then making sure you do file the tax return on it before October 15, which is the deadline for individuals. Once you file that extension is vitally important. All right, let’s see if we can get Doug in the show. Hey, Doug. Hey, how you doing?
Caller 39:28
I enjoy your show. I turned 66 in June and I’m gainfully employed, I plan on working for a long time. But as far Social Security goes and collecting is there kind of a rule of thumb?
Dr. Friday 39:55
Your financial planner may have a completely different rule of thumb because they’re always looking. So here’s what I have learned from enough financial planners. Bottom line is, we now know when the big guy upstairs is going to say our last day here is, so we have to play a little bit of a game, right? Depending on your history of your family, let’s say my family, my parents both passed away before they turn 80. So in that scenario, I’d be better taking Social Security early versus late, because it really the catchup is like 82. So then it doesn’t make a big difference, right? But before that, you basically are better to take it early, and then let it you know, take it versus waiting until you’re 70, letting it grow all that time, and then start taking it because the mathematics works out. But if you’ve got a long live family, I would say, let it ride. If you know mom and pops won’t pass away until they’re in their late 80s, early 90s, then 8% a year on your Social Security is good. If you’re making more than $40,000 a year, basically, almost 85% of your Social Security is going to become taxable.
Dr. Friday 40:59
So you may be getting money, but you might as well go ahead and figure that you’re adding to your income, you’re gonna have to pay tax and go ahead and have Social Security withholding, depending on your income bracket a percentage so that every year you’re not hating your tax person saying you owe money. Again, really the rule of thumb is kind of looking at the family tree and finding out if you think you’re going to be making it past 80 ish. Or if you think all in all, statistically, my family isn’t really going much past 80. Therefore, you know, this is why we’ll do this or that, again, I am sure there’s financial planners listening right this second, and they’re pulling their hair out because there’s that’s great advice. The bottom line is, this is Dr. Friday’s opinion on this, you probably should get a second opinion just to make sure it’s right. But that’s what I’ve always heard is that the break-even point is like, if you’re like 82. And I think women live longer than men. Ours is a little different than men. But it’s right around the mid-80s, that if you wait it out and you make it past the 80s, you’ll actually have a bigger Social Security because it’s better because you will let it grow longer, where if I make it to 85, I may have less Social Security because I’m not going to get that step up for every year that you would have waited.
Caller 42:14
Right. So it as far as income goes. So you’re saying that I can still work and draw Social Security, but I’m gonna owe taxes on that Social Security?
Dr. Friday 42:23
Right. The way I would look at Social Security, again, not your financial planner, I look at it as extra money that I’ve already paid into. I’m not really counting it as my retirement fund per se. Right? If the big guy has anything upstairs. I’m going to work until the last day I can work so right. You know, I’m just saying, “Okay, you know what, I’m gonna get 30 grand. So I’m going to take 25% set aside for taxes” or depending on if I’m a few years away from that. So maybe 30%. And then the rest of it is going to go into Friday’s Mad Money or retirement or whatever I want to do with it. But it’s basically just extra money coming in the household at that point.
Caller 43:01
Gotcha. Okay. Well, I appreciate the advice. That’s a good perspective. Thank you.
Dr. Friday 43:07
No worries. Thanks, mate. All right, we’ve got a few more minutes. Let’s see if we can get Steve from Franklin on real quick. Hey, Steve.
Caller 43:14
Hey, I’ve got a question. It’s kind of a big question. So I know you think in too much detail. But so my wife’s family, my wife inherited some commercial real estate she and her sisters did. It’s a commercial real estate in Florida that’s very active has tenants on that type of thing. extended family is kind of managing at all. So every year we get a K1 from a CPA firm down in Florida and we pay on Phantom income. We incorporate that into our final kind of tax bill if you will. My question is, that’s all we do. Every year we get a K1 and we pay on Phantom income, should we be expecting more from the family business in Florida during the year like p&l statements and updates and that type of thing? I just feel funny. I know, one day many, many years from now, I guess. We may be, you know, inheriting this commercial property. But in the meantime, for many years, we’ve just been paying on this K1. And it just feels kind of funny paying on Phantom income and just paying all the time and never really receiving anything?
Dr. Friday 44:19
Well, that’s what I would say. Normally, when we work on those kind of deals, what we usually work out is how people prepare their taxes with and without the K1’s. Whatever the cost, the tax bill is we try to usually send a reimbursement so that way, the fans because what they’re doing is they’re doing improvements, they’re doing things that are not 100% right off. So that may not be a lot of cash flow, even though you have an asset worth a lot of money, maybe right rich, but you’ve got an asset. So they may not always be able to distribute all of the profits that they’ve had that year because the profits are actually tied up in improvements and other things going on in the properties. So that part I understand but I would definitely have a sit down you know if it’s possible and Hey, here’s the difference. You know, every year we’ve been eating four or five, or I’ve got one that’s like 12 and 15,000 every year, I mean, it’s a pretty big number.
Dr. Friday 45:09
So, you know, at least if we can reimburse the tax bill, then it’s not really a hardship on the individuals that are owners of this business since you don’t really have any input, but you know, and you can just continue and say here’s the difference, they send you a check, you basically are being paid for the IRS, and then you’ve already paid tax on that money they give you anyways because it’s unboxed right to have the K1. So that would be my direction to go. It’s not so much. Obviously, I love numbers. So I would always love to see the numbers and everything but they don’t necessarily have. I mean, they have to disclose all of that to you no matter what. All right, right.
Caller 45:43
Okay. Thank you.
Dr. Friday 45:45
All right. Thanks, Mike. All right, we’re gonna have to move off. So if you want to reach me on Monday morning, you can reach my office at 615-367-0819. You can also email friday@drfriday.com. If you have no idea who this crazy lady on the radio is, also go check me out on the web. drfriday.com. Hope you guys are having an awesome Saturday. The weather hasn’t turned out too bad. Congratulations to my little niece, Violet who’s having her first communion hearing the same time I’m on the radio. Talk to you later.