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On this episode, Dr. Friday dives into critical year-end tax planning strategies and offers expert advice for listeners facing tough IRS issues. From the tax implications of an inheritance to navigating W-4 withholding for multiple jobs, Dr. Friday provides actionable steps to protect your finances. Learn the pitfalls of dealing with national tax resolution firms, the strict rules for vehicle deductions, and the importance of diligent record-keeping for your business. Plus, get crucial advice on coordinating with your financial planner and attorney to ensure your estate plan is sound and your assets are protected.
Summary Points:
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Inheritance & IRS Levies: If you owe back taxes, the IRS can place a levy on your inheritance. Dr. Friday stresses the importance of dealing with tax issues proactively before they become a family matter.
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Choosing a Tax Resolution Firm: Beware of companies promising settlements for “pennies on the dollar.” Dr. Friday explains how to identify legitimate help and avoid firms that delay and overcharge without delivering results.
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W-4 Withholding Issues: An employee questioning why federal taxes aren’t being withheld may not be earning enough to meet the threshold. For those with multiple jobs, it’s crucial to either have extra money withheld or make quarterly estimated payments to avoid a large tax bill.
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Quarterly Estimated Taxes are a Must: For the self-employed, paying quarterly taxes is not optional. Dr. Friday warns that failing to do so can result in penalties, which are calculated monthly.
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Vehicle Deductions (Section 179): Purchasing a large vehicle for your business doesn’t guarantee a 100% deduction. It must be a necessity for your industry, and you cannot claim 100% business use if it’s your only vehicle.
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Business vs. Hobby: If you consistently lose money in a side business while working a full-time job, the IRS may reclassify it as a hobby, disallowing your loss deductions.
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The Importance of Record-Keeping: Dr. Friday emphasizes the need for small businesses to maintain accurate profit & loss statements and mileage logs. For homeowners, keeping receipts for all improvements is vital to increase your cost basis and reduce capital gains tax when you sell.
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Year-End Financial Coordination: This is the time to speak with your financial planner, tax professional, and estate attorney. Discuss Roth conversions, portfolio adjustments, and review your will or trust to ensure it reflects your current life circumstances.
Episode FAQ
Q1: I’m inheriting some property, but I owe the IRS from previous years. What should I expect? A: You should expect the IRS to find out about the inheritance and place a levy against the estate for the amount you owe. This can delay the distribution of assets and make your financial issues known to your family. It is crucial to contact a tax professional to address the debt before this happens.
Q2: My employer isn’t taking out any federal income tax, even though I requested extra withholding. Why is this happening? A: Your income from that specific job may be below the federal threshold where withholding is required. The extra $20 you requested is being taken out, but there is no base withholding to add it to. If you have multiple jobs or other income sources, you are likely being under-withheld and should significantly increase your extra withholding or start making estimated tax payments to avoid a surprise tax bill.
Q3: Can I buy a G-Wagon for my real estate business and take a full Section 179 deduction? A: It’s risky and likely to be challenged by the IRS. To claim a vehicle as a 100% business expense, you must prove it is a necessity for your work and not used for personal activities. This typically requires you to have a separate vehicle for personal use. Unless you can prove that a luxury vehicle is an essential part of your business image for selling multi-million dollar homes, the deduction could be disallowed in an audit.
Q4: I run a small side business that loses money every year. Is that a problem? A: Yes, it can be. If you show losses for three or more years, especially while holding a full-time job, the IRS may classify your venture as a hobby rather than a business. If this happens, you can no longer deduct your business expenses and losses.
Q5: Why is it so important to save receipts for home improvements? A: Saving receipts for significant home improvements allows you to add those costs to your home’s original purchase price (its “cost basis”). When you sell the home, a higher basis reduces your taxable capital gain, potentially saving you a substantial amount in taxes.
Transcript
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 Doctor Friday Show.
If you have a question for Dr. Friday, call her now.
737-WWTN.
That’s 737-9986.
So here’s your host, financial counselor and tax consultant, Dr. Friday.
G’day, I’m Dr. Friday, and the doctor is in the house.
And if you would like to ask some questions concerning taxes, uh
As you know, that is what I do every day.
It seems like seven days a week.
But if you have questions, you can join us live here on the radio at 615-737-9986 615-737-9986.
number here in the studio.
As for some of you that may have never heard of me, then um my name is Dr. Friday and I’m an enrolled agent licensed by the Internal Revenue Service to do taxes and representation.
Been doing this for almost 30 years.
So if you have a question, maybe you’re dealing with a tax issue and you’ve been throwing the letters in a drawer, or maybe the love letters are are are basically really old and you’re like, oh wait, maybe the IRS will forget about me.
I had one that came in.
And um just to let you know, if you happen to be inheriting something, so up until this time you’ve been fine because your income’s been relatively low.
The IRS hasn’t been able to get any money from either a paycheck or
because you’re self-employed or a bank account uh because you don’t have anything in the bank but now you’re inheriting some property and guess what the IRS is going to want their share
Because at that time, that information is turned into the IRS.
That’s where we have a lot of information and they’re going to
to be levying that that estate for your share of what you owe.
So if you think that ah finally I’m gonna get out, I’m gonna inherit to
inherit some money, I’m gonna be able to go do something.
And then you turn around and you find out that the IRS has found out that you’re going to inherit and now they put a levy against the estate
Not only is that going to be a problem, now the whole family knows that you have an IRS issue because whoever’s handling the executorship of the estate will then know and
if it’s a family thing, let me just tell you, it can happen.
So maybe putting off not uh doing something and maybe dealing with the issue is the secret
to success because there are ways of making yourself non-collectible, making a payment plan, a portion, a partial payment plan, or an offering compromise
Now I’m looking, I mean, there’s a lot of organizations, you guys hear them on the radio all the time, and they’re always saying, hey, we can do this for 10 cents on the dollar.
I have people
People that come to my office all the time.
And many times they have already worked or talked to some of these other organizations and they’re finding out it’s not quite what they think.
One thing that makes me a bit different is when I bill you, I’m billing you for work that I’m actually doing.
doing not saying as soon as you get on the phone with me hey we’re gonna start a $500 a month payment you can put down five thousand dollars we’re gonna save you thousands part of it they’re saving you is
is the fact that they stall delay and they should be at least catching and getting you on a payment plan or get you at least up to date with the IRS, right?
To get you into compliance is the first step we all have to do
Um, had one that came in last week though, and they’ve been working with someone for almost a year and the tax returns haven’t been filed.
They’re not in compliance.
They’ve been paying five hundred dollars a month
They put down $2,000 when this thing started.
And when it’s all said and done, from what I’m seeing, I haven’t finished the case yet.
But what I’m seeing is they’ve almost paid thir a third to this company to do nothing that they could have paid to the government.
And be a third into the payments.
So it’s important to understand what they’re going to do.
Make sure you’re asking the questions
I know a lot of times they just make it sound like, hey, we’re all take care of everything.
You are great.
Don’t worry about it.
We’re going to do this.
But if you have a house with equity, you own more than one
car in your single person um that’s an asset if you have a gun collection or bitcoins one
All of those are investments.
And that is something the government is going to look back and say, hey, you may need to have $3,000 in the bank.
That may be considered monthly cash flow, but you don’t need two costs.
Unless you can prove to them there’s a reason for that, they’re going to say sell one or give us the value of that car because we need to be paid.
So make sure that the company you’re working with understands what you’re going through and that they’re giving you a true picture because I mean like I said I’ve been doing this a long time and a lot of times people start out with those
you know, owe 10 cents on the dollar, and they find out they’re not qualified for the 10 cents on the dollar.
They have $400,000 worth of equity in the home and they owe the IRS $50
Doesn’t seem like it takes a lot to figure that one out.
You’ve been paying your mortgage for all these years, but you didn’t pay the IRS.
Therefore that equity or their share of that equity is theirs
You need to get a loan.
If you can’t afford a loan, that’s a different conversation.
If you’re over the age of 70 and you still have something and maybe your home is your only asset, there may be something that
that you could do, which proving that that’s your only retirement that has been proven in tax court before.
But you need to understand what your options are, what you need
to do and how you’re going to make that work.
Otherwise what you’re really doing is paying somebody else to possibly hold off or delay the inevitable and maybe that’s not going to work very well
well so again make sure that you understand what your options are and how you’re going to do it because that is truly one of the biggest things we need to do
We need to make sure we have all of that going.
Again, if you want to join the show, maybe you have a something that’s either happening or something you want to share, 615-737-9986.
615-737-9986 is the number here in the studio.
I did get an email earlier today and I thought it might be interesting.
interesting especially for a lot of us that actually um have employees or you may handle the bookkeeping in your firm and the question basically came
as I have an employee that is questioning her federal withholding tax.
She is single, has no other adjustment.
She has chosen to have an added $20 per payroll extra withholding
For each job.
However, she claims that the only money coming out is this extra $20 per payroll, and there’s no other federal withholding.
Of course
you know, this person goes on to say, hey, you know, I I the system does it.
This is a federal tax system.
We don’t have it.
So this individual um is answering the question, right?
But the fact still comes is that as a uh prepare um
if you use ADP or anyone else, there is a payroll tax code.
And if you’re earning less than the minimum wage, so if you’re learning earning less than the standard deduction, so if this person may be working 40 hours, but maybe they’re only making
$30,000 a year for a single person.
They’re not going to have much federal withholding come out.
Now the the question I would have if this was my
person, I would have asked, did they check on the W4 that they have multiple jobs?
Because if she’s not having any withholding, that’s telling me that most likely she doesn’t need to have any if this is the only job she has.
So if she has multiple jobs and this is just one of them, that often gets my people in trouble because they don’t have enough coming out of the payroll.
So what she might need to do is actually double up on the extra withholding.
We can’t change what the federal law is going to tell us.
So if you’re making $20 an hour and the federal withholdings on that is $3 and it’s
and you need them to be taking fifty dollars, you’re going to have to do that with box four of the W four.
You cannot have um we’re not going to be able to change that in our code
And she’s already at the highest tax break of single and zero.
So that doesn’t mean there’s nothing else she can do.
In this case, this person can only add more withholding under the additional withholding box.
The tax code is saying she’s not qualified to have any federal withholding.
Keep in mind the IRS is not really wanting us to be overpaying our taxes.
Again, the only reason this
person is probably looking at this is because they probably filed their taxes and due to the fact that they have multiple jobs or maybe
she’s self-employed or an Uber driver or something on the side and there’s no taxes coming out of that job that then she now has a tax issue and she’s like, wait, my employer didn’t take any money out
Your employer doesn’t know that you have two jobs.
So she has two options, either increase the extra withholding or she can make estimated tax payments herself
That’s a choice any of us have.
And it’s really quite easy.
If you are a self-employed person, let me first take care of a myth that making quarterlies is a selective or an option.
It is not.
If you are self-employed and you owe money every year, you have an obligation to make quarterly estimates for equal payments based on the prior year.
And if you’re not doing that, there are penalties for not doing it.
It is 0.
6%, I believe, per a month that you don’t do it.
So it basically works out to be around six, six and a half.
percent for a year uh for not paying it quarterly properly.
Now some people will say, hey, I’m earning more than six percent of my money.
I’m not going to do it.
That is
A personal choice again doesn’t mean the IRS is not going to charge that person a penalty because of it, because that’s just gonna happen.
Um this year we won’t see very many penalties from 2020
Um, but if you didn’t make proper quarterlies, you still have a penalty in 2024.
The penalties only stop things that were happening for 25, right?
So your four quarters that you had to make in
Three of them were due on 11.
3.
The fourth one is due on 115 of 2026.
Normally we’d have to have maybe
One in April, one in June, one in September, and one in January.
But this year we got um a little bit of a waiver because of the federal extension.
We were under the federal disaster extension
That being said, that is not usually going to be happening.
So you need to be planning, especially if you’re self-employed and you’re just getting started.
Let’s be honest, you need to move forward the way you want to.
One of the biggest problems that most self-employed people.
people have is at the end of the year they hate filing their taxes because they always owe and they’re not paying proper quarterlies.
Now I have some people they go the opposite direction.
And they’re paying way too much in because they don’t want to be dealing with estimated or or any of that.
But most of us want to hold on to as much money as we
money as we can.
Most of us don’t want to have to pay any penalties and interest.
So the way to do that and a self-employed or retiree that may be getting money that is not already taxed
Right?
Because Social Security, most people don’t have taxes come out, but yet it’s taxable.
Up to 85%.
You have your retirement, your pension, your 401ks, whatever.
Um, those, unless you’ve told them to take taxes.
You may not have had enough combining.
So again, this can be for people that are full retirement or individuals that are self-employed.
Those are the main people.
that pay quarterlies.
There are individuals that work and still have to pay quarterlies because of their outside investments or rentals.
But in most cases, if you’re one of my clients, we adjust the W for to have that money
come out.
It just makes it makes sense, right?
Just a logical step.
Why should I have to be paying quarterlies if someone’s already taking taxes out of my paycheck anyways?
All right.
So we’re going to be ready for our first break.
If you want to join the show, you can.
615-737-9986.
615-737-9986.
is the number here in the studio.
Again, I’m an enrolled agent licensed by the Internal Revenue Service, Duty Taxes, and Representation.
That’s all I do.
So if you’ve gotten the love letters and you have no idea what to do, or you maybe you have a friend or someone you know that’s just
been really kind of down because they don’t know what to do.
They don’t have the money to pay them.
They’re afraid to open up any kinds of boxes because they’re afraid the IRS is going to start levying or leaning their paychecks or put a lien against their house and they’re trying to
trying to sell it, we can help.
We really can, but you can’t hide to do that.
So if you have some questions, join the show.
We’ll be right back with the Dr.
Friday show.
Alrighty, we are back here live in studio.
And if you want to join us, you can.
Six one five seven three seven nine nine eight six six one five seven three seven nine nine eight six taking your calls
And I realized it’s an awesome, beautiful day outside.
So most of you guys are probably out there enjoying that.
And if you’re like me, I’m actually starting to put my Christmas decoration
So I’m just saying, I know it’s not Thanksgiving yet.
So I know some of you, but I like to turn my Christmas on the day after Thanksgiving.
And I have hundreds of things to put out there.
Okay.
So I’m just saying.
So I understand the weather is perfect for that.
So
Yeah, hopefully you are enjoying your day outside.
But if you do have some questions, maybe something’s come in the mail.
We’ve seen a lot of love letters now that the IRS
uh should be back open.
I know they weren’t fully closed, but it did seem like when we were sending responses or offering compromises, things were taking a little longer.
And I’m I’m gonna guess
that maybe part of that was just because they didn’t have a full staff.
I don’t know.
I know that the IRS is way undermanned and that they need to do a huge hiring
I don’t know if they’re going to do that.
I know some of you would prefer them not to because you’re like, hey, we don’t need to have any more people working, but we really do.
How do you expect to take care of these issues and a lot of the, I mean, you hear about all of the um the millions and billions and trillions of dollars that the IRS needs to collect.
But I personally have cases that are probably easily a million dollars with all my clients, easily a million dollars.
Um, and most of them do not owe the money.
We’re waiting for resolution.
We’re waiting for them to get into compliance.
So the IRS has assessed.
They have done um some
filing of returns because the people didn’t file them in time and they treated the and you know when the IRS files your tax return you are single zero no deductions
No matter if you’re married with six kids, which is one of my people, it really changes a tax return when you file it with married and six versus single and zero.
So um it it’s out there, you know, but you have to have someone that can actually really help us to get the resolution.
And that’s not always the case.
So anyway, so if you’ve got questions or maybe you are in the midst of trying to deal with something or maybe even just thinking about we’re at almost at the end of 2025, guys, which means that if you’re thinking of a Roth conversion
Um particularly uh maybe it’s time for you to upgrade some equipment.
Should you do it?
Um we need to confirm on some of that when um you’re going to do and what kind.
I will tell you, I am not a huge fan of individuals that go and buy a big truck.
or a but they don’t have a need for it.
Okay, so you own a hotel, so you go and buy yourself a G-Wagon.
Um is that really a I mean, is it necessity?
Because it has to be a necessity for you to own that vehicle.
You’re a real estate agent and you buy a G-Wagon.
Now, if you can prove to the IRS, it’s been proven in court that you sell multi-million dollar homes and that’s as
part of the image that needs to be presented.
I I know one person that won that case, but in most cases
Um and keep in mind you cannot do a section 179 if it’s your only vehicle because you can’t yeah you can’t have a hundred percent.
of that vehicle only used for work if you only have one.
You have nothing to go pick up the kids, no one to go to the grocery store, nothing to go out to dinner.
You have to have more than one vehicle to consider
the second vehicle 100% business, and then you can’t use it for those other situations, right?
So the idea is that you go to work, you come home, you switch vehicles, you go take care of your private life.
You cannot just go and buy a nice, gorgeous vehicle and spend $100,000, $200,000.
Take that off your taxes as 100% section 179, which we have now on the books.
um and then turn around and claim that it was used solely for business if you don’t have any other.
I mean, it is going to wave a flag, especially in some industries.
So um, you know, construction, I will tell you, I’ve got guys every year almost that have to buy a truck, or they have three or four trucks in the name of the business because
They have ones that can haul smaller ones that they use for different jobs, some that, you know, they have trailers and all that, because it’s expected in the industry that you’re going to need that.
But, you know, myself included, an accountant doesn’t need to have a 7,000 or 6,000 pound vehicle vehicle.
Now a lot of you are laughing laughing because I have one
But that vehicle is used for marketing because it is fully wrapped.
So there are some loopholes in that conversation, but it is not used as a piece of equipment in my company.
So you have to figure out which way you’re going to use it, what you’re going to use it for, and the proper way of making that work.
If you don’t,
then you’re going to come back and get audited and then that $200,000 G-Wagon is now going to be fully taxable and now you’ve got a $2,000
$2,000 a month payment, a G-Wagon, and no tax deduction.
So again, just make sure that you understand how that works.
Make sure it fits into the right criteria and that you’re doing what needs to be done.
Otherwise, you’re just creating a later uh potentially anoint math.
Um, so just want to make sure that you have that and that you understand what you’re doing moving forward so you can make sure everything is staying perfect in the way you need to do it.
So if you’ve got a question again, 615-737-9986-615.
737986.
Preparing for 2025.
Taxes, again, you would probably
If especially if you’ve worked more than one job, start a manila envelope.
Go ahead and put on the outside.
I need W-2s from this job and this job.
I need my 1099K because I sold some stuff on the marketplace.
Um, I need my
1099 B from my financial investment accounts because I have stock portfolios that are after tax dollars and I need to pay interest, dividends, and capital gains on interest from your banks.
interest from credit card companies if you have some of those.
Um and then of course your business owner start thinking about getting a good financial situation going on, right?
I mean
Profit and loss and balance sheet.
One, anywhere you go, you’re going to need that to get money if you have banks or anything else.
And then even if you don’t need it for that, you need it for make good business decisions.
How do you know how much profit you’ve made if you don’t have anything in Roddy?
How do you know what your total income is?
So you’re looking at your bank every day and you know there’s money in the bank, so therefore you’ve made a profit?
I’ve had people walk in my office and tell me that, just to let you know.
That is not the way we usually like to track our profits.
We really prefer to have a financial statement, maybe a balance sheet, but at least a profit and loss that says income in, expenses out.
What if you used a personal credit card?
Did you reimburse yourself?
Is it a sole proprietorship in which you’re using and tracking that expense?
Most of the time, especially small business people, they have a tendency to not um track all of their expenses.
They sometimes miss the things that are on their little personal credit cards or debit cards.
when they’re doing it.
They forget to track their miles.
And yes, let me clarify, a mileage log is required.
You cannot just sit in the office or sit and do your own personal tax return, look around and say, yeah.
I think I did about 30,000 in miles.
Um, do you have any documentation?
Well, I mean I go back and forth to this.
I did that so you can recreate a mileage log.
In fact, I would definitely suggest doing that.
So that way at least you have some justification behind the numbers you’re using when you’re putting it on
It’s probably one of the largest audit areas on a tax return, especially for small business owners, especially for my real estate people.
Because some of these guys drive and drive, even when they think they’re just looking at a neighborhood, they consider that business.
They drive and make sure that they m they may stop and see if there’s anything for sale and they’ll go up and down a whole neighborhood to do that.
I will tell you
So far, no one in tax court has won that as a way of tracking your miles.
It doesn’t work.
You have to have a reason for doing it and the purpose behind it.
Now, if you had a showing in that area and you wanted to show some people some other homes, you might be able to document a few blocks, but not an entire subdivision.
of going back and forth and then coming back and doing some people will just drive to drive miles because they figure, hey, I’m gonna get 70 cents a mile.
This is gonna be perfect.
I can make this happen perfectly
doesn’t always happen.
So you need to be able to understand how that’s going to work and what you’re going to do around that.
So if you need help,
You can obviously give us a call at 615-737-9986 here.
You can also use an app.
I suggest an app, Mileage IQ.
It is a perfect app for what you want to be doing.
It tracks all of your miles so that way you can mark what is personal, what is business.
It makes the whole thing perfect.
You don’t have to worry about
explaining where you went and you’d be surprised how many people forgot when they’re doing their own little recreation, they forgot what they were gonna do as far as
Um they forgot when they went to the bank that that was a tax deduction.
They forgot when they come to visit their tax person and dropped off forms.
That was a tax deduction.
Anytime you’re working to build or do something
Those all tax deductions, right?
So missing tax deductions in most cases is like 25 cents to the dollar if you consider the self-employment tax as well as the ordinary income tax
So that’s a quite a bit.
You forget $1,000, $2,000.
That adds up.
$1, not such a big deal.
But you know, most people don’t miss a dollar.
They miss tens of thousands of dollars or at least hundreds of dollars.
Um
When they’re doing that.
So again, all you have to do is if you want to join us here, you can 615-737-9986.
615-737-9986.
Taking calls, talking about
Obviously my favorite subject about taxes and tax representation, making sure that you’re prepared for your your business to have an audit if it
has to have one.
You know what I found is that we’ve got, I think I should say we have had um three or four calls this last couple weeks about the state of Tennessee
uh franchise excise, business tax, um, sales tax, all being audited.
And um and that’s a big audit.
Because you’re talking basically three years of sales tax, franchise excise, and business tax.
And if you don’t have perfect records.
then that’s going to create quite a problem for for some people.
So making sure you have all that documentation is a good thing.
We need to make sure we have it there so that we can, you know, answer their questions as best of our ability and move forward and give them what they need.
So hopefully you’re using something like QuickBooks or a software like that that will give you all the answers because.
Recreating that information would be almost impossible.
All right, we’re going to get ready to take our second break.
If you want to join the show, you can.
615-737-9986.
615-737.
Nine nine eight six.
This is the Doctor Friday show, and we’re gonna be right back.
Alrighty, we are back here live in studio.
And if you want to join us, you can 615-737-9986-615-737.
9986 is the number here in studio.
We’re halfway through the show.
So if you have been sitting around waiting to ask the question, now is the time to jump online.
And share some of your thoughts as far as if you’re dealing with something that we need to um to deal with as far as with the IRS.
Because let’s be honest, there’s we right now we’ve been getting a whole lot of um letters from people.
Uh one of the big thing is having to prove your ID, right?
that you filed your taxes and then they sent back say, hey, we’ve received a tax return, but we need you to call us to prove that this return is yours.
And you’re like, is this a scam?
That’s what people
Always call me.
They always saying, hey, I got this letter.
Is it a scam?
Is it real?
And you know, so far.
I mean, I had to do it myself, but it it’s not a scam.
The IRS is trying to protect us.
They’re trying to make sure that we haven’t had somebody steal our ID and file a fake tax return.
So when you get those letters, in most cases, um, you’re gonna want to make sure that you have
All of uh your information in front of you, call them if the information that they’re reading off or dealing with is not
you then you need to bottom line you need to make sure that you have the right tax return.
So if you have the tax return you filed in front of you, it shouldn’t be a problem
And so far, I’ve never had anyone call me back and say, oh yeah, the IRS found that this is a fraudulent return.
I’ve never heard that yet.
Doesn’t mean it hasn’t happened.
Just means I’ve never heard of it.
But
You know, if you haven’t filed your taxes and they received a tax return in your name, that might be weird.
But if you need help or if you’ve got questions about that or other issues, you can reach us at
615-737-9986 is the number here in the studio.
615-737-9986, taking your calls, talking about, well, my favorite subject.
talking about what we need and do and we’ll be in good shape from there.
And if you, you know, if you if you’re in the past and you haven’t filed, I’ve had a number of people this week coming in and they haven’t had a lot
In fact, several of them have not filed their taxes.
They’re four or five years behind.
And they don’t even know where to start, to be honest.
They’re they’re they’re like, is there even a way that I can even get it filed?
And there is.
It’s not as simple as other ways, but you know what?
It’s it’s not hard.
I mean all we have to do is get pile of attorney, pull your transcripts.
The harder part is if you’re self-employed, because going back five years for a self-employed person can be a bit more challenging.
So we just need to make sure that whatever we’re doing, we have the ability to go out and justify and create uh new records, like if you have bank statements, pulling them up from those years so we can actually
use some sort of information to be able to get what we want to get.
You can’t just, you know, maybe you have a vendor like I had a guy that hadn’t filed for a number of years, but he was a painter and he brought 90% of his stuff from Porter Paint.
So in his case, that was easy, right?
Go back to Porter, they were great.
They were able to give us proof of pay, you know, at least whatever he spent in the store for those years.
So we had some documentation because that particular gentleman liked to do a lot of stuff in cash.
So cash is not something you can recreate easily because you don’t have it unless you have the receipts um which are
At this point, some of them could be faded to the point where you wouldn’t even be able to see them, anyways.
But if you have questions, you need help, um, you know, again, this is what we do.
We help
make sense of this craziness.
We help people get back on their feet.
We help people try to figure out how to not only because a lot of times people are so wound up in the past that every year they just keep going into that same cycle, right?
So they’re paying as much as they can to the past, but they’re ignoring the current year or the future.
And I will tell you, after all these years of experience, the first thing you really want to do is start paying those quarterlies.
You want to be current.
The past is the past.
We can’t change it.
Sometimes we wish, but we can’t change it.
But what we can do is change our behavior, which basically means if we turn around and say, okay, we’re going to pay our quarterly so that they
Maybe when you file your 2025s, you don’t owe any taxes.
Or when you, you know, maybe you’re starting now for 2026.
So every month a year I’ll start making some payments so that way by the end of 2026, you’ll have that tax year fight in full.
Guess what?
You just accomplished something that is huge.
Because now you’ve got the first year you’re not adding to an existing payment plan or fearfully not wanting to file because you haven’t paid enough taxes.
And then you continue that practice, and then we work with the past, right?
That don’t even make sense.
You don’t want to keep adding to a bill.
And also the IRS is going to say, hey, wait.
Look at this.
They finally got the hang of this quarterly thing and they’re actually paying their current taxes.
Doesn’t mean they’re not going to come at you and doesn’t mean they’re going to try to stop collection.
But it does give you a better situation than people that have set up payment plans and canceled, set up payment plans and canceled, or set them up and then do the fact that they haven’t made the proper estimates have canceled.
All of that happens.
We don’t want that to happen for you.
We want you to be able to set up a payment plan, but be able to afford that payment plan.
And again, being self-employed, guess what?
We don’t have always a guaranteed salary.
We have to sometimes plan for the rainy days to keep up with the what we have.
And I get that.
But the IRS is a partner in our business.
I don’t think anyone ever really talks about that when they tell take you into business school or anything like that.
They don’t basically say, no matter what, if you’re a sole proprietorship or you’re a corporation, you always have one partner that is
Felt but not seen, I guess is the easiest way.
You feel the pain when you have to give him a portion of your profits, but you don’t when you set it up, all you’re thinking about is okay, I’ve got to pay the vendors, I’ve got to pay my subs, and I’ve got to pay my suppliers, whatever.
You don’t think about I’ve got to pay the IRS.
You have to because they are a part of your business no matter what.
The only time they’re really not a part of your business is when you’re losing money.
And even then they’re going to sit back and say, wait.
Did they really lose this money or was it just did they take too much?
They accelerate?
Are they claiming losses for three or more years?
Therefore, it’s not really a business because they’re not working hard enough to make a profit.
That’s the kind of things that are coming on the other side.
So even if you’re not making money, even if you’ve lost money, if you’re doing it too many years in a row, they’re gonna turn around and say, well, you can you’re not entitled to those losses because you are actually got a hobby.
And one of the biggest ways they look at that, to be honest, I’ve again been at this for 30 years.
One of the business is when you work a full-time job.
And then you say you have a business on the side.
And that business every year happens to lose money because they’re going to say to you, they are not.
Or you are not really in a business.
You’re not putting 155, 150% into it, 500 hours or more.
You are doing it on the side.
That makes it a hobby.
We never like to hear the word hobby from the IRS.
Why?
Because hobbies are not tax deductible.
Hobbies are all basically all income, no deduction.
Hobbies are not a good situation, especially if you’re in business trying to make a living.
Yeah, sure.
If you have a hobby and you go to the
you make some really cool jewelry and you design it and you go to a fair a fair once or twice a year and you sell there.
You have a hobby.
You enjoy it.
You it’s a it’s a release for you to be able to make
your art and and possibly sell it, but that’s not something you’re doing for a living, nothing that you have an expectation of.
It is just
something you enjoy doing and sharing with other people.
I mean that’s how it’s it got started really it was artists that wanted to share their their talents.
And then, you know, they do one up here and one up there.
And then next thing you know, several people have really started whole businesses based on it.
But
The concept was it’s just individuals that enjoyed doing what they did and gone for it.
And that’s exactly what a hobby is.
A business is someone that gets out there every day, hustles, seven days a week sometimes
16 hours a day um and and tries to make a success where you’re making a profit because if you keep losing money on a business
The IRS is going to come back.
Now, I know some people are listening and they say, I’ve lost money for 10 years, never had a problem.
Well, good for you.
Statistically, that’s not going to be everybody.
And the IRS is going to eventually audit.
And when they do that, they’re going to go back a minimum of two years.
Can go up if they consider it fraud.
meaning more than twenty five percent of your income has been fraudulently reported, they could go back up to ten years.
So
I don’t think most people are going to have to worry about it, but that’s not the point.
The point is you’re really wanting to make sure when you file your taxes, you put them in bed and you don’t have to worry about someone coming back and looking at them
That’s the whole purpose.
We want to pay them.
We want to know we’ve paid what we’re supposed to pay.
We didn’t pay too much, but we didn’t underpay trying to take advantage of something that we weren’t entitled to.
That’s what it comes down to.
So if you are working on all of that or you’re thinking about your 2025 taxes and you need help, we’re going to be getting ready to go into our last part of the show.
So
We’ll put out our our direct phone number and all of that in that way.
Also want to put a shout out to anyone that is a returning tax client to Dr.
Friday and that you usually have an appointment.
Need to make sure you have that appointment now.
Those appointments are pretty much filled up.
Um we always have room for our returning clients, but I just want to make sure we have everybody in there so we don’t have to worry
about getting uh you squeezed in or or filing an extension because we don’t have the time to do you before the end of the year um or or before the end of the tax season, I should say
So if you if you are a returning client, just make sure you touch base with our office, either emailing or doing a phone call.
And that way we can make sure that you’re set up in our system and that we’ve got you all ready to do the next year’s tax return.
So again, if you are working or needing help with that, that’s what we’re here for.
We’ve uh been or I’ve been doing this for over 30 years here in the Brentwood, Nashville area.
and um have been fortunate enough to uh been dealing with the IRS for almost most of that same time.
So if you’ve got questions or you’re not too sure what you should be doing or maybe you’re not getting the responses you think
And I will say right now the IRS is moving slower, you’re not going to have fast responses, but if you need help, that’s what we’re here for.
So when we get back from this last break, we’ll go into giving you some information about how to contact us directly via email, text, or phone.
We’re going to be taking a quick break.
This is the Dr.
Friday show
You can join us here in the studio at 615-737-9986, and we’re going to be right back.
All righty, we are back.
Here live in studio.
And if you want to join us, you can 615-737-9986615.
737-9986 taking your calls talking about my favorite subject taxes and no matter what it’s always around.
I know a lot of people are preparing for the Thanksgiving holidays
Or maybe even heading towards the Christmas holidays, but gotta do Thanksgiving first, people.
And then um prepare to enjoy the holiday time.
But
That being said, as soon as we get through the Christmas, we’re through the end of the year.
So if you’re thinking of doing a Roth conversion, um, you’re thinking about
Um, maybe you’re selling something.
I’ve had a couple people.
Now I want to clarify really quick.
I am not a financial planner.
I do taxes.
That’s my expertise in life.
So if you decide you want to sell your portfolio and put it all into Bitcoin.
I’m the person that might tell you how much it’s going to cost you in taxes, but I’m not the person that’s going to tell you that’s a good or bad idea.
I’ve had people do that, and you know, that was a personal choice.
But
If you’re going to do some of this stuff that you’re doing, you want to make sure that you are not triggering a tax situation.
So
So that you can make sure that you have what you need when you need to do it.
And you know, when you’re dealing with Roth conversions, you have to do them before the end of the year.
If you’re thinking about maximizing your 401k, that needs to be done before the end of the year.
If you’re an employee that have an employer that handles the 401k, not a self-directed or an individual one, but um
And then then those payments have to be in before uh September, I’m sorry, April the 15th.
So when you’re working with retirement, when you’re thinking about doing a cleanup on your portfolio.
Maybe you’ve sold a house this year and you need to make sure you’ve covered that.
I’ve had a number of people that have sold homes.
Those are all the same.
situation where you’ve got capital gains, maybe this is the time to get rid of the deadbeats out of your portfolio so you have some loss carry forward that you can offset against the profits that you might have made
um by selling a piece of real estate that’s all capital gain so you can work together but I would definitely suggest talking to your financial planner when you’re doing these decisions
Not everybody should do Roth conversions.
Not everybody should take losses on a portfolio just because you have gains that you want to save tax dollars on.
Because sometimes you may be having a bigger effect than you think on your long-term goals in your finances.
So I am suggesting
This is the time you want to sit down with your financial planner, sit down with your tax person, sit down with even your attorney that may be handling your estate.
This year, uh, we’ve we’ve been last couple weeks.
A lot of people, because one of the questions I always ask, or usually at least most people, when they come in my office
I want to know, do you have an estate?
Do you have a will?
Do you have the ability?
Something happens when you walk out of this office, everything’s gonna run smoothly for the rest of the people you love
Right?
I mean we want to to make sure that happens.
And what people don’t realize is that after a couple years, things have changed, right?
You’ve relocated
You’re um you you’ve inherited something.
You’ve brought something, you’ve sold something, all these things change.
Children get over the age of
18 or 21 depending on your situation.
And you know, you divorced.
All of that is going to change or married.
um your your uh your finances in your estate, right?
So how you want things divided, how you want things to be moved around.
So when you’re talking to your financial planner and saying, hey, I need to do a Roth conversion or should I even consider this kind of thing?
You also might want to talk about estate planning because none of us are getting any younger.
And I don’t care if you’re an 18-year-old right now listening to this show.
At some point in the near future, you are probably going to get married.
And as soon as you get married, you have someone else you’re responsible for.
And then how about the children?
I had a case that we we were talking to someone, and you know.
The uh the sad thing was both of the parents passed away leaving two children under the age of six.
They did not have a will.
They just assumed that her parents
Or at least that’s, you know, assumed her parents were going to take them.
And it wasn’t that they didn’t want to, but his parents also wanted them.
And so now you’ve got a huge court case, no one really knowing, because nothing was left behind besides what people said was said.
took years to settle and they ended up basically both having to split, divide, share.
And it’s not that they wouldn’t have maybe come up with that, but if it had been done in the first
place saying, hey, we want the custodial parents or people to be these two people.
Then the the second set of parents could have or grandparents could have basically just said, hey, we want visitation, you know, blah, blah, blah.
No, because they, you know, when we’re young, we don’t think of any of this.
And so, you know, it all happens.
The same thing happens as we get older.
I mean, I’ve got people in their 60s and 70s that walk in my office and don’t even have a will.
You don’t have to have a trust.
I like trust.
The biggest reason I like a trust is because no one in the world needs to know what is in my estate other than the people that are inheriting.
If you have a will, it is going to be probated.
That becomes public information.
And therefore you have the world knowing what was in your estate.
And it’s not a big deal.
Maybe it’s only a house.
Maybe it’s this.
It’s a matter of what you have and how many people and then also and
With a will, a lot of times, you know, in probate, people come out of the woodwork claiming that this person, you know, it’s interesting when you study some of those cases and you’re like, well, this person
basically said that he would give me his car when he died.
And so they go to court saying that this is what he said.
And if there’s not something in the will that specifically says what the car is supposed to do, because you figure, well
Everything you put all my possessions will go to this person.
But this guy comes in and says, Oh, I thought, you know, and then he’s got a text or something that says this.
And even though it was
Ten years ago, um, you know, he could end up getting the car because the court’s gonna do their best.
to weed out the bad people, but there are a lot of, you know, good people or people that think they’re truly are entitled to something from somebody else.
And you know, it just gets more and more into that.
So when you’re sitting down with your financial planner, talk to them because most of them are also tied in with the state attorneys
When you sit down with your tax person, make sure you’ve also maybe cross-reference with your financial planner and maybe your estate planner mainly.
You know, tax people were more on the financial side.
So we just want to make sure that if you’re supposed to put money into an IRA, you did.
That you put it into the right kind of IRA because sometimes people put them into Roth IRAs and
They should have put it in a traditional because their income bracket was high enough where it may have been a big deal, or they’d end up doing the backdoor IRA, which is fine because you pay tax on it and it goes in the other direction.
Those get a little bit more confusing because a lot of times
People will do the backdoor IRA and they um take their own money from a bank account and put it into the traditional IRA and then do a conversion
Well, that’s an after-tax contribution to a traditional IRA in which you should not have to pay tax when you convert it.
So you have to have good documentation when that happens.
You need to make sure you understand how or what that’s
going to do.
But you know, again, making sure you understand where your money is, how the money is going to be taxed, and making sure you’ve got good pay per trail when you’re doing these things is what’s going to save you tax dollars, really.
You know, everyone knows that, you know, if I have a mortgage, I should qualify, or at least I can put that on my tax return.
Is it enough to itemize?
We don’t know.
Um, the salt tax is going to increase.
So if you’ve got property taxes and sales tax or a state income tax, you’re gonna have a better chance this year to meet those than you may have had in the past when it cut off at $10,000.
Things are always changing in the world of taxes, so you really do want to make sure that you have everything in your world moving forward the way you need and document what you have.
And same thing, you know, a lot of times people are doing a lot of home improvements and we do them because we’re living there and we’re just doing, but we don’t save the receipts like we should
And then we get ready to sell the house and we purchase the house at 200 and we’re selling it for a million and we only have a $250,000 exclusion.
And so even though you’ve redone the kitchen, you’ve redone the bathroom, you’ve put a new roof, you’ve got an extension of a sunroom in the back, you put a lot into this house, but without any kind of
actual documentation, we can’t account for it.
So we need to be able.
So as you’re doing it now, as you listen to me and you may be doing some improvements, the holidays are coming.
People do that all the time
then you want to make sure that it is going to go that direction.
Make sure you’re tracking and then saving those.
Put those in with your deed from your house or your titles or anything that you may have.
Put them all in the safe.
Save those receipts so that way you have something later when you do decide to downsize or relocate to move where the grandbabies are or whatever the reason is that you don’t have to pay tax
on money that you’ve reinvested into that house, but you didn’t have proof of when you did that.
All right, so if you want to join us or call us
at the office 615 367 0819.
My office number 615
367-0819.
You can also email Friday at drfriday.
com.
Again.
Friday at drfriday.
com.
You can also check us out on the web.
You can also send us a link through the web.
That’s just drfriday.
Again, drfriday.
com.
I hope you guys have an awesome Saturday.
And as we say in Australia, call you later.