Welcome to the Dr. Friday Radio Show! In this episode, we have tax expert Dr. Friday take on the latest tax updates, answer the caller’s questions, and talk over the following topics:
- Should We File for Married Filing Jointly or Separately?
- Penalties to Keep In Mind When Married Filing Separate
and much more!
Transcript
Announcer 0:00
No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or financial woes. She’s the how-to girl. It’s the Dr. Friday show. If you have a question for Dr. Friday, call her now. 615-737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
Dr. Friday 0:28
Good day, this is Dr. Friday, and you’re listening to the Dr. Friday show. And we are live here in studio having a little technical difficulty. Usually it’s mine, because let’s be honest, I’m not necessarily a technical person in this world people. So we can go ahead and see if you have questions, you can give us a call at 615-737-9986 going to be taking your calls in the video. So you may see if the Zoom is working just to see if we’re gonna be able to do it that way or not. We’re good. Either way, I know you’re working multitasking there. So let you do your thing. There’s not been a whole bunch of changes, a lot of conversation out there about things going on as far as the 2022 tax changes that could be coming down the line. But I think what most people need to be really thinking about at this point, we’ve got down to about 3035 days to the end of the year.
Dr. Friday 1:24
And what we need to be thinking about totally is Is it time for us to think about tax savings, right? If you’re on RMDs, have you done your qualified charitable deduction, or taking your RMD through that format? If you’ve purchased or sold homes, this is something we can do that direction as well. You know, do we need to not not RMBs? What can we do something as far as a 1031 exchange? Or do we need to think about taxes on our primary homes? We have all kinds of questions that’s gonna go that direction, along with if you had inheritance, how much taxes are you going to be looking at? or whose taxes are you looking at? You know, when and where is that going to come into play for you. And because you know, I have tax time is great, it’s a perfect time to really get with your tax person.
Dr. Friday 2:14
But if you have the ability to get with that person earlier, always a better thing to do. Because if we can do that, then we can deal with the situation of how to make things more user and let’s be honest, we’re very busy at tax time. If you can talk to someone before tax time starts, then you’ll be able to get somewhere and do some of the things you need to do. I’m not sure if I can take these kinds of videos only because I’m not sure if I can actually hear anything on here. So I just feel like I’m talking to myself. But if I can, that’s great.
Dr. Friday 2:46
So I guess we can check and see if the caller one which is going to be let’s see if I can hear anything. Hey, Roy, can you hear me?
Caller 2:55
Yes, ma’am. I hear you fine.
Dr. Friday 2:57
Oh, wonderful. Okay, great. What do you have for me? What can I do to help you?
Caller 3:02
First, thank you for your nice message to us veterans last Saturday. I have a letter from the IRS that they owe me money. I will be paid in September or October. I’ve been trying to call them and there’s no way in their phone system to talk to a human when they owe me money. Right?
Dr. Friday 3:28
Well, if they if you owe them money, it’s very difficult to actually talk to a human to be quite honest with you. But that being said, Is this for the year? 2021 or 2020? What year do they owe you money for?
Caller 3:43
2016
Dr. Friday 3:46
Oh, okay. And when did you file 2016? Taxes?
Caller 3:51
And 2017.
Dr. Friday 3:54
Okay, and so you follow them and 17 and they have not yet did you have any other balances do this a long time back. So did you owe the IRS for anything else ever?
Caller 4:06
I can’t answer that, honestly. Okay. I mean, we had disputes. I don’t have records. I’ve been looking for this a long time ago. I had several arguments with him. I’ve won more than I’ve lost. But anyway, I received a letter they said you’d receive payment. I have not had no correspondence from them since then, nor have any of my backs received a direct deposit from them.
Dr. Friday 4:38
Gotcha. Well, at this point, you might want to consider doing a 911 This would be going directly through the tax advocate office. Because now you’re looking at in all honesty, you know, I mean, it’s outside of the normal three year collection but you are still entitled if if you filed everything on time and the IRS assistance give you the refund. But that you know, so I would file a 911 go the tax advocate office, they can then pull up all the records and the communication and find out if there is a refund coming your direction.
Dr. Friday 5:12
Or if you should have received this refund and you did not receive it, it could have been returned through the mail last, who knows. But at this point, you kind of need to know where to start. And that would be first, where is where is the money? You know, I mean, is it supposed to be in my bank account, in essence in your own bank account? Or is it supposed to be in in a check form that you’ve received or whatever, they can help you with that along with? You might want to also order some transcripts, because it might be able to tell you some what, what day they issued the refund? Was it a check was it you know, I mean, some of that information is on those.
Dr. Friday 5:50
So, you know, just making sure that you have that information there. So you’re able to do what you need to do, you know, I mean, because going back to 2016, for all of us would be a little more challenging, you know, just to remember everything, every conversation, everything you’ve done at that point. So I would actually, if you Google 911, IRS, it will take you to the tax advocate, you know, website, and you can fill out the form and then that form is usually faxed in and with about 30 days, they’ve done an awesome job of communicating and they’ll tell you if they can help you. And if so you know what they can do to help you get the resolution you’re looking for.
Caller 6:29
Good. I’ll give it a try. I’m not online. But I’ve got friends get back. Can I use a friend’s computer to Google aureus?
Dr. Friday 6:36
Absolutely. I mean, as far as I know, they’re not tracking that. But just have your friend Google 911 IRS form, and then have them print out that whole packet. And that way you can, you know, get all the information. You can hand write it in and then just either fact it either go to FedEx, or you can mail it, but faxing usually gets done a little faster, in my opinion.
Caller 6:59
Sure. Thank you. You’ve been very helpful.
Dr. Friday 7:02
No problem, buddy. Thank you again, appreciate you. Okay, let’s hit Bryan and Franklin. Hey, Brian, what’s happening? All right, how are you today? I am awesome. How about yourself?
Caller 7:18
I’m doing really good. Thank you enjoying the sunshine? Myself. Got a question about survival on a small farm and about a tractor for about 50,000. How much of that can I take off on my taxes this year?
Dr. Friday 7:36
Well, when you say you have a small farm, is it actually? I mean, is it something you’ve been putting on your tax return? Are we actually raising something? Or growing something or?
Caller 7:46
Yes, I am. Yeah, i’m paying taxes on it.
Dr. Friday 7:49
Okay, then I mean, the tractor, I use it for anything other than what you’re doing on the farm.
Caller 7:55
So 100% for the phone.
Dr. Friday 7:57
Then it’s 100% tax deduction just like mine, a lot of us, you know, that have properties or whatever. Use solely for the purpose of maintaining properties that we use for income making or whatever. But while my firms don’t actually make a lot of profit sometimes, but that being said, you can deduct either all of it in one year called a section 179 accelerated or you could spread it over seven years, your tax or you whoever does taxes can make the determination with others better for you in the big picture. But either way, it would be a tax deduction to you.
Caller 8:31
So but it won’t knock off the whole 50,000. It would just be a percentage, right?
Dr. Friday 8:36
Well, now you would take 50,000 off of your income, not from your tax, because that’s the big question, but it would take it off of your income. Yes.
Caller 8:44
Awesome. Okay. All right. Well, thanks so much for your help.
Dr. Friday 8:47
Hey, no problem, buddy. Thanks. All righty. So we are talking today about my favorite subject.
Dr. Friday 8:54
And we all know next week, we’re going to have some fun over eating and hopefully seeing family and enjoying ourselves for Thanksgiving. But right now we’re talking about taxes. And if you’ve got something just like our fire listeners that have an issue happening, maybe you’ve gotten a love letter, or maybe you’re getting multiple love letters, and sometimes they’ll send one to you one to your spouse, and multiple years, then, you know, if you’ve got a question, I’d be more than glad to give you an idea of where to go, what kind of information what kind of help that might be available out there. And don’t fall too much into you know, as an EAA unlicensed by the Internal Revenue Service to do representation.
Dr. Friday 8:54
There are attorneys and there are EAS that basically handle this and CPAs that will do this kind of work, but make sure that you’re dealing with the same person you’re talking to. There’s a lot of people that advertise and market on the radio. But I’ve had more than one that their clients have ended up in my office partly because they called and they say, “Oh, you’re dealing you know this person,” but you’re not. They’ve actually got other people. They’re just the marketing. They basically didn’t say You know, when dealing with people a lot of times in the same state that you’re in, if we’re here in Tennessee or thinking one at least deal with someone that you can walk in the office and ask, “Why am I getting these letters? What should I be doing?”
Dr. Friday 10:10
It’s a slow process, guys, it’s not something that’s going to happen fast. And if you have multiple years that you haven’t filed taxes, or if you have the possibility of liens or levies already existing out there, this doesn’t happen. I mean, you heard the one call, it says, I’ve tried to call the IRS, it’s not something you can get done quickly. There are processes, they will get resolved. You can get your money back, you can get smaller claims, all these things exist. But anyone who tells you they can do something fast or did done overnight is is I think it’d be it’s lack of a better term to you. Because no matter what first thing you have to do is get the power of attorney, you got to find out what’s the resolution that needs to be done? How do we need to get it’s taking longer to get power of attorneys than normal we have when we started this back in 2020 years ago, whatever, it would take us five, seven days to get a power of attorney we’re up to 15 days to get power of attorney on and on clients.
Dr. Friday 11:03
After that, then we have to pull transcripts and find out what is the issue? Why are we having these problems, you know, is it just lack of filing turns, and then we need to file those returns anything that’s over three years, we have to mail in, which means they have to be hand process. So all I’m saying is that this system works, it works great, but anyone that’s going to tell you, it’s going to happen fast. And that you’re you know that that you’re going to get some sort of quick resolution, is it telling you the full truth, if you’re going to look for real resolution, you’re either looking for payment plan or offering compromise.
Dr. Friday 11:35
Those are the two main big ones, there’s also non collectible all of those exists. But if you’re looking for that kind of information, if you’re hoping to get that done, then the best way to do that is to hire someone local like me to help you with your tax issues. So we’re gonna take our first break, you can join the show here, if you’ve got questions on any of that or any tax questions, we’ll number here in the studio 615-737-9986. We’ll be right back.
Dr. Friday 12:07
Roughly, we are back here live in studio and we are ready to rock. So if you’ve got some tax questions, the tax doctor is here 615-737-9986. Again, talking about taxes. So if you’ve got someone I mean, it’s in the year, it’s time to start thinking about 2022 is just about over, we’re actually even thinking about moving to 2023. Because it’s about time to actually start thinking about that kind of situation. I mean, you know, if you’re gonna if you’re closely in the year, have you crunched your numbers? Are we really thinking we need to go towards 2023?
Dr. Friday 12:50
To make a sale of some sorts? Or do we want to do something different? These are the kinds of questions we’re always thinking in our mind. When should we buy? When should we sell? What’s the situation? And how are we going to make it happen? Because I’ll be honest with you if if we’re going to kick ourselves into an 18.8% tax bracket. And the possibility is, you might lose a few dollars on one side or the other is it smarter to wait until you basically make a few dollars less because you’re going to actually kick yourself into a higher bracket, which means you’re not putting more money in your pocket?
Dr. Friday 13:25
These are the kinds of questions you have to ask yourself, if you’re actually going to go do anything when it comes to actually really making the money people make in the money. And we want to keep all we can I mean that’s the game, we all play the same game, we all want to make as much money but also we all want to keep as much money as possible in our own pocket.
Dr. Friday 13:47
So if you’ve got questions about how you might want to do that, or maybe you’ve got friends or family or someone that is actually, you know, making some of these decisions right this second, then that’s what we want to be able to help them do is to make the right decisions, make sure you’re keeping more of the money in your pocket. Also conversions, Roth conversions. This is a big time when many people start thinking about, should we convert some of our IRA into a Roth conversion? Let me put a caveat out there. I am not a financial planner, I do taxes.
Dr. Friday 14:18
That’s all I do, just taxes. But you need to have a good tax person if you’re doing Roth conversions along with a great financial planner. Because if you just have one, you might find out that you’re paying more in taxes than you think or you might be missing out on some 1000s of dollars that could have been converted at the lower tax bracket. So you want to make sure that you’re looking and dealing with that kind of situation with all the players in the game not just thinking that this guy is going to tell you well 15% bracket is this or 12 or 22 Because sometimes people forget you know security a portion of its taxable if you sold some property A lot of times different things come into play and you want to make sure you have the whole picture to put all those numbers together. All right Let’s see we have Brandon in Nashville. Let’s see if I can help him out. Hey, Brandon, what’s happening? Can you hear mee now?
Caller 15:11
I can, yes.
Dr. Friday 15:12
Without a problem. What can I do for you, sweetie?
Caller 15:15
Thank you for taking my call. So I started a business in 2018, just online sales like eBay and Amazon. And I signed up for a retail certificate, I guess.
Dr. Friday 15:30
It’s tax free, but yes.
Caller 15:35
But I just got a letter in the mail a couple of months ago saying that I owe them some money. I did file my taxes that year. So I’m not sure what to do about it. It’s like $11,000, that they say that I owe them at this point.
Dr. Friday 15:55
Okay. I think the problem with that is, is that, you know, I’m not too sure if it was my headset or whatever. But in case you couldn’t hear he saying that he owes some money to or the state is saying he owes some money on a resale license, most likely, that’s an assessment, Brandon, what happened was you either close the business and didn’t close it down with the state, you might have thought you did, but maybe you didn’t.
Dr. Friday 16:18
And so what they’ve done is assessed you God knows it can be five years worth of assess, or whatever 18 through today, of different assessments that they’ve kept going, or you notify them, but they still had a couple open months. And they assessed you. I mean, that can be one or two months, it can be a lot of months. So what you need to go and do is go back on, if you don’t have it, you need to probably open a TNTAP account.
Dr. Friday 16:39
Or if you have an accountant or somebody, someone needs to go into 10, tap file zero returns for the months that may show open for assessment, you may get hit with a few dollars, but it won’t pay 11,000 If those are the months that they have open, because I think what they 99% of the time when we get those kinds of letters is when the state is basically saying, Hey, we haven’t heard from you. So we’re going to just make some ridiculous number up and throw it in there. And now you’re going to contact us because obviously you don’t want to pay us $11,000.
Caller 17:09
Okay, gotcha. All right. Well, I will I will do that. I think I do have a TN TAP ccount. So if they go in there and and look for that.
Dr. Friday 17:18
Right. Just take a look and see if if you can give us a call Monday or whatever, if you go in there and you’re not seeing but I would say that’s 99% of the time the problem is just not been closed properly. Because you did say the business is closed, right? Are you still using it?
Dr. Friday 17:23
I’m still using it. But I only only did the resale certificate for that one year. And I hardly ever used it. So I guess I didn’t close it, close it down in that regard.
Dr. Friday 17:23
Right. And it may just be that you didn’t file zero returns for the months that, you know, because unfortunately, if you still use it, you’re probably going to have to go back to whatever month and make sure there’s zero and then they’re going to hit you with a $15 late filing fee for all the months that didn’t have return. So you either need to get yourself put onto an annual if you’re still using the resale because you know, maybe that you’re a wholesaler and you’re you’re using it. Or if you need me make sure you turn it off whichever it might be.
Caller 18:17
Okay, perfect. Okay. All right. All right. Thank you so much.
Dr. Friday 18:20
No problem. Hey, you too. Bye. Bye. And that’s that’s a great question. I can’t tell you how many times people come in our office, and they’ve gotten those letters, franchise excise business tax sales tax, which is also your resale, all of them often come in. And the first thing is, of course, they’ve got this letter. I’ve got one that actually owes, I think, I think it was like 102,000 because they were it was like eight months worth of assessments between penalties and interest.
Dr. Friday 18:52
And it closed the business a year ago. But it was one of those deals where they decided you know, what his normal sales were or what they had predicted in his ink. I think they said something about the average in the industry that they had enlisted in. Anyway, you look at it, it is one of those deals, you’re sitting there going, oh my gosh, how in the heck you know, he’s he’s like totally freaking out because he’s like, “I don’t have this kind of money. Where am I going to get this?”
Dr. Friday 19:17
And of course, when we were when it was all said and done, the state does work with you on that. Now sometimes if you don’t close it properly, they will they will make you go and pay the $15 fee for every month that wasn’t But in his case, he was pretty happy to file that because he pretty much was saying I rather pay you know $150 then 102,000. So everyone makes the choice on that one, but that is one of the best ways you want to go for it. All right, let’s go ahead and hit Keith before the next break. Hey, Keith, what’s happening love.
Caller 19:50
Hi there. So a couple of days ago I heard on one of your commercials you talking about creating an exit plan for small business Then I just had hoped that this today’s topic would be, but
Dr. Friday 20:03
We could we could make it that way you can see how organized I just kind of go with the flow.
Caller 20:09
Right on. Yeah, I just had no idea what to do. And I’m not really not really put anything into play. And I’m not that far from that. So I’m just trying to figure out what, what I should be thinking about.
Dr. Friday 20:25
Well, that’s a great one. So I can put some thoughts in your head. And then obviously, you can always give us a call. And we can do more one on one because everyone’s life is a little different. But one of the biggest things, first thing most entrepreneurs, including myself, I’ll be honest, the small business owners is we always think our businesses have value. And not to say they don’t, I’ve got a lot of people who have sold their businesses for very nice checks in the mail.
Dr. Friday 20:47
But the fact is, most of us built our businesses, and then we ended up where we’re at with hopefully something we can sell. So that would be part of your exit plan is finding an evaluation. Is there a value to my business? Or is it my business, for example, my business doesn’t have a ton of value, because most of my clients are coming to see Friday, I mean, I’m sure that you could sell some of it.
Dr. Friday 21:06
But to be honest, the value isn’t what I’m making, because it’s been built around me. And we’re fairly small in all honesty, so my business may not have as much value if I were to exit that I do making it in a normal normal world and yours are like I have landscaping companies or tree companies that have sold their businesses very successfully. So really, Keith, one of the things or anyone listening that has a small business, one of the things you have to put in the right column would be how much a logically could I exit this business for? And is your dream to fully exit it?
Dr. Friday 21:38
Or is it to I’ve got some that sell the business, but they keep you on payroll, for example, for a year or two, giving you time to kind of get under your feet still help the business succeed. Because sometimes when an owner leaves a business, it is always harder for especially small businesses getting merged. Because your clients are used to the way you’ve done things.
Dr. Friday 22:01
So it may be something to consider in the time that you’re going to sell it the way you exit may be that I have one client that came in the office on Thursday or whatever he sold his business, basically, he’s selling so much over the next two years, they’re keeping him on a set salary. And that salary is really paying him through payroll, which I think is an unusual way of doing it.
Dr. Friday 22:21
But everyone’s got to figure out that exit plan, because normally we only pay capital gains tax, we don’t pay Social Security and Medicare on a sell of a business, then what are you going to do with the money if you do sell the money because a lot of small business owners, Keith do not have 401 K’s they don’t have pension plans, most of you, including, again, most of us until we hit a certain age, do we really start throwing money into retirement? So that would be a big picture? can you really afford if you sell your business for what’s the minimum, you can afford to sell your business to exit out to keep you in the lifestyle you want to continue living until the day you pass away? You have to have a budget for that case. So these kinds of questions, you know, do you have any of that employee my love?
Caller 23:08
Nothing so far. I was thinking about liability, because I actually you touched on I do have tree company and I’m thinking well, you know, what about I leave and then something that I did fails and may try to put blame on me kind of stuff. I don’t know how that stuff goes. But maybe it’s just when you
Dr. Friday 23:26
Well, to be honest. The papers, you know, that’s when the attorneys that closing docs, they would be the same way as if you sold the house and two weeks later, it burns down unless they can prove that you did something to totally encourage that. You know, I’m just saying it would have been the new owners problem, you know, in all honesty. So that would be one of those deals, though that you’d want to make sure that you know, as is all equipment, especially for tree companies, right?
Dr. Friday 23:53
I mean, there’s a lot of tools there that if mishandled or not used properly could hurt someone or kill someone. So you know, all of that would be signed off at the time that you sold this business to the new owners and I would tell anybody that’s thinking about selling a business to use an attorney you don’t sell your house without a closing agent in my opinion, or at least, you know, an escrow company that can you know make sure there’s all the liabilities are covered the same thing with a business. I’ve had a couple people that have met someone and they’ll gonna buy the business.
Dr. Friday 24:25
But those don’t always end up as pretty as we’d like I rather pay a Few Dollars More out and make sure that when I exit I don’t have to look over my shoulder for another three years to protect myself. Kind of like what you’re saying, Keith. So there are there are good a good attorneys and documents that can be signed notarized and everyone is on the same page.
Dr. Friday 24:44
So if something happens the moment your foot is no longer in there. You know that it’s not your problem either. But it is a good business because I have like I said I have a couple of clients that have sold landscaping and tree businesses. And there is a value to you Your business, maybe it’s the best way to put it not knowing. But that exit, would you be considered retiring? Or just going into another? Would there be the potential of you building a non compete would be required, as all I’m saying, if that makes sense.
Caller 25:15
Probably at this time retiring. I’m not ready to retire. But that’s what what I foresee. But I don’t know, you’re just putting another idea in my head. So?
Dr. Friday 25:27
Well, I mean, there’s, you know, there are, I mean, you’ve done this a long time, and is there’s always the possibility of still staying in the company, as an employee without liability. If you’re good at selling, or you can make your own time clock, right, no longer worried about what’s happening in the bank, or payroll is being made, or any of the things that you normally have to really worry about, more than anything else would be just making sure that you’ve got the liability and everything else taken care of there. But it’s a great conversation.
Dr. Friday 25:58
And if you’d like, I mean, we can always do more one on one to figure out business evaluations and a personal exit plan if you’d like. But all in all, you’re in an industry, which can and of course, it’s also hard industry, I mean, on the body. I mean, there’s if you’re doing the work yourself, at least it can be difficult. All right. Take a break here. And then get back. Thanks, Keith. I appreciate it. All right, we’re taking a quick break. We’ll be right back with the Dr. Friday show.
Dr. Friday 26:33
All righty, we are back here live in studio, you can join us if you want 615-737-9986, taking your calls, talking about my favorite subject, which is usually taxes. But as a small business owner, myself, dealing with, obviously small business tax issues, entrepreneurship, as well as exit plans. Because I think so often we all get so faced with day to day operations of our businesses, that we are not very good at doing the day to day operations.
Dr. Friday 27:16
You know, I mean, I mean, looking at the big picture, sometimes we just get so grounded, like, Okay, I’ve got to make payroll, I’ve got to do this, I’ve got to make this deadline, gotta get to the 15th. Or I get to the 20th, whatever that is that sometimes we forget, next thing, you know, we’re 25 years into our business. And there are things that we should be dealing with and making sure that we have in play. I mean, we talked about exit plans.
Dr. Friday 27:39
But another part of the exit plan would also be considering Do you have a will? Do you have a trust? Do you need a trust, I don’t know about the trust, you definitely need a will no matter what you need a will do you have power of attorney for for finance and power of attorney for medical, there’s like five essential documents. Again, I’m not an attorney, I’m just saying that if something happens, there’s really only one person that well under my core belief, the guy upstairs is going to be the only person that can tell me when and where I’m not going to be here.
Dr. Friday 27:39
So I have to be prepared for whatever. And that’s a part of your exit plan as well. Many of us myself, I don’t plan to ever retire, I enjoy doing what I want to do. And I don’t see any reason why I should retire. But there is a plan in place. Because if something happens to me, my clients are counting on me I’ve had so many times when a client will come in and say, My my, my tax person has passed away.
Dr. Friday 28:32
They have my tax documents, they didn’t finish my tax that their kids are trying to get things organized, but they don’t have they have no idea and they’re not too sure what their legal responsibilities and all this. And meanwhile, you’re sitting there going, oh my gosh, I don’t have my tax documents. I don’t have this. And so those are the kinds of things you do want to have in place. If your tax person, you’d want to make sure that everything that is in your office can be returned immediately to anyone that might need to have additional information that would be the world’s worst thing to happen in my world. All right, let’s get Greg in Franklin. First. We’ve got Greg and Franklin, what’s happening, buddy?
Caller 29:09
Yeah, hi. I’m a beneficiary on a IRA and also on a on some annuity accounts. And I cashed the annuities out straightforward, but I’m kind of in a dilemma of what to do with the IRA, because I guess there’s different tax ramifications involved. Possibly.
Dr. Friday 29:29
It could be because for anyone that’s listening, not so much you may know some of those, Greg but with an annuity most of the time it’s first out last in So bottom line is, you know, if you cash out an annuity, you’re probably not paying tax on 100% of whatever was in that account, depending on how long it was in and all that so you would have had it still ordinary income but you could have gotten 50,000 and only pay tax on five.
Dr. Friday 29:53
Now an IRA is different because 100% of it that’s in there if it’s a standard traditional Ira all of it in there is taxable at ordinary income rates. And you only have I think it’s 10 years now, Greg, to cash it out before. I mean, it used to be lifetime, but they’ve changed the law. And so I think it’s 10 years that you have to cash it out. So, you know, you got a time clock kind of ticking out, no one says you can’t take it all out at one time, you are required to do what’s called RMD. So if the person passed away in the year of 2021, in 2022, you would have to take a required minimum distribution from that account, you have to take that minimum amount no matter if you do anything else.
Caller 30:39
Okay, that’s good to know. I wasn’t aware that.
Dr. Friday 30:41
Yes, so you do have to do that. And then at the end of the 10 years, you have to have cleaned it or in I guess, this is an inherited IRA. So you can’t really do I don’t think you can do conversions on those, you have to cash them out. And then you have to either reinvest them into I don’t know, an annuity or something, you know, I’m not a financial.
Caller 31:01
But one of my questions was, yeah, can I just roll this over into my own IRA?
Dr. Friday 31:07
You can only if it’s a spousal. Yeah, spouses can, but if it’s inherited from like, my parents, whatever, or your parents or whatever, then no, you cannot do that, you’d have to cash it out. And then one of the games we play though, is if you’ve got a real job, and I mean that with the fact that you have a job with like a 401k, or anything, sometimes people aren’t maximizing them, and what you might be able to do, and again, we’d have to down crunch all the numbers, but one thing we do is okay, let’s say you can put 25, or $20,000, into your 401 K, you might want to convert 20,000, and then put 20.
Dr. Friday 31:43
And that way, you can still live off the same amount of money. And theoretically, you’re now converted into your own IRA at the same time. So there are some little games like that we can play. But it really depends on how much we’re looking at. You know, if we’re looking at, you know, maybe 100 grand, that in 10 years is something easily converted or done. But if we’re looking at more than that, sometimes, again, depending on income brackets, and all kinds of other things we have to look at, there may be some ways of kind of deferring it into your own retirement and not affect your day to day life.
Caller 32:16
Well, it would be a spousal situation with me. And the confusion part for me was when the funds sent me the paperwork, they send me a packet. And as I learned, it’s like a universal one that applies to all their different scenarios, then I have to figure out which one applies to me. And so that’s that I had to call them and go over that with them over the phone. And then they finally told me, Oh, I’m only required to file three of the forms of the 20 that I got in the packet. You know what I mean?
Dr. Friday 32:49
First, I want to say I’m sorry, I apologize for the loss of your spouse. Second, you do qualify for a rollover spousal rollovers are allowed. So you could roll that over into your own retirement. Third, if you want, I can give you I don’t know if you have pen and paper where you’re at or not, but I have a financial planner, and he does free console, just like I do to be quite honest. And he would be a person to consider calling. If you have your own financial call them because they’ll give you the best advice. But again, depending on your income, there might be some room for conversion of the money into like, roll it all over into your IRA and then maybe doing some sort of Roth conversions or something. It really depends on where you’re at in your life, Greg, at this point.
Caller 33:38
Yeah. And at my age is the Roth conversion. Anything Roth is very, very appealing to me at this point. Yeah. So that number real quick, that would be great. Yeah.
Dr. Friday 33:49
His name is hate parent. It’s estate and financial strategy. 615-376-5325. He’s here in Brentwood as well, Greg, you might want to give him a call just because I’d hate to give you any bad advice, because it’s not my expertise. And this is what he makes his living doing. So let him earn his key. All right, thank you. You’ve been very helpful. No problem. Hey, happy Thanksgiving. Alright, let’s hit mark and Franklin. See we get him in. Hey, Mark, what’s happening?
Caller 34:22
Hey, Dr. Friday, thanks for taking my call. This shows great. I always appreciate listening to you. I have a an easy one. But I don’t have all the details. I don’t think they’ll matter. My wife purchased the stock about 20 years ago. And it’s basically now worthless. And so we’re wondering what we need to do and how do we get a tax benefit? If we if we basically sell it off now and how does that work?
Dr. Friday 34:51
So 20 years ago, the biggest question would be is that she had the basis because sometimes that’s, you know, we know back when Obama was and their bases had to start getting reported. But earlier stocks didn’t have some of those. But assuming mark that you know how much he originally paid for it, and now we know, we’re throw some numbers out, let’s say she paid $5,000, it’s now worth nothing, or maybe it’s upside down even. But so she would lose that $5,000.
Dr. Friday 35:18
So you’d sell it, you have a loss of 5000, you can offset that to either short or long term gains, first, it would offset long term against long term first, and then if they didn’t have it would offset the offset to short term loss, the loss. So that’s great. And then you can take up to a negative 3000. So if you didn’t have any losses, you’d have 3000, it would roll to the next year and have another 2000. Either way, it would offset your ordinary or, since this is long term, it would basically offset your long term capital gains.
Caller 35:49
Okay, so we don’t have any capital gains. We don’t have any we’re not selling, buying and selling stocks outside of our retirement accounts.
Dr. Friday 35:58
You can still reduce your income $3,000.
Caller 36:03
Okay. Very good. That’s what I thought. I appreciate it.
Dr. Friday 36:07
No problem. Thank you very much. Appreciate the call. Let’s uh, Jack in Spring Hill really quick, so he doesn’t the way through the break. Hey, Jack.
Caller 36:16
Hey, Dr. Friday, how you doing?
Dr. Friday 36:19
I’m doing awesome. What do you got going?
Caller 36:21
Okay, I understand that eBay is gonna be sent sending out whatever forms they are?
Dr. Friday 36:28
1099 K. Yes.
Caller 36:30
1099 K. Okay. I have sold a few things on eBay this year. Like I was telling the man that took my question. I sold a pair of boots of the day for $100 on eBay, but I paid well over $300 for this pair of boots, but I have no idea for that. Nobody keeps a receipt. How to. Okay, what would I do in a case like that? Yeah.
Dr. Friday 36:56
There’s a lot of those kinds of things from my grandmother had an attic full and I took everything out of the attic, and I sold it. And obviously granny has no idea where all this stuff came from bad enough. Anything else? We are working on trying to come up with a good answer to this jack, to be honest with you, because the answer the IRS is going to be can you justify what you spent? Where did the $300 boots come from where they gifts to you? Did you inherit them? Did you actually pay for them 10 years ago, you know, whatever or two years ago, whatever. And you know, older they are harder it is because like you say most people do not save their personal receipts. It’s not a tax deduction for us.
Dr. Friday 37:35
So me going out buying a sweatshirt and then selling that’s what your three years later, I wouldn’t have it either. I would not have the receipt. You know, so we are trying to get something from the IRS. So you might want to keep listening, I’m not going to probably be able to give you a perfect answer on this. Because right now the answer the IRS is going to say is if you don’t have a receipt, you’re going to be responsible for being able to pay tax on the entire profit.
Dr. Friday 38:00
That’s what they’re going to tell us. But I think that’s going to have to change with these 1099 case coming out of a place where people are using their personal home assets and selling those, which now they’re trying to say normally you want to report them you had a garage sale and you put that stuff on, you paid more money for it as other there would be no paper trail, there would be nothing. You know, yeah.
Caller 38:22
Actually in our garage sales that we have, and we got to turn in that marketplace. That’s another place. You know, people say that.
Dr. Friday 38:31
I mean, that’s it, you know, there’s a lot of these different ones. But now that eBay, you know, in their game killed up to being doing this. And so as Venmo and Cash App and all these different things. It would normally not be a problem. But we’re going to take a quick break here and we get back. I will try to get you a better answer in the next couple of weeks. Jackson. Yeah, hopefully you can keep listening. And if not, you can always call me direct. All right.
Caller 38:53
I thought I thought oh, here, I’ll call back here towards the end of year two.
Dr. Friday 38:58
Thank you, Jack. I appreciate it. All right, we’re gonna take a quick break. When we get back. We’ll have a few more minutes. And then that will be the end of the Dr. Friday show. We’ll be right back.
Dr. Friday 39:11
All righty, we are back here live in studio, we have about five minutes left to the show. So if you have some questions, or if you’ve been holding your breath saying, “Oh, I really wish you would say something about this” and I haven’t. Now it’d be your opportunity to try to figure out where that’s going to come from. And if you would like to listen or do remember, we do have you can go to www.drfriday.com. And you can actually listen to our shows that we’ve had in the past. 615-367-0819 is the number here in our office.
Dr. Friday 39:48
So if you have questions, you can also call that number. The easiest way to get answers to most of your questions is going to be through email, which would be Friday at Dr. friday.com. So again, If you’re in the process of trying to figure out what you owe in taxes, how you’re going to get things done, making sure that you’re on the right page or you know, just trying to get organized, the best way to do all of that is first probably to give me a call just to make sure we’re all on the same page.
Dr. Friday 40:17
But second, would also be to be able to make sure that we’re doing what we need to do to move forward with tax preparation, as well as financial planning and everything else. Because people sometimes forget that estate planning, financial planning and taxes, we all kind of cross over into each other’s information. If you’re deciding that it’s time for you to to exit out of your work plan, then you’re going to need to know how’s that going to affect your future taxes, as well as where are you what you’re going to live off of what’s your financial planner, and for anyone, as far as I’m concerned, I don’t care what your age is.
Dr. Friday 40:53
I’ve seen too many people come in my office that have not had a will, or trust. I am a firm believer of trust. I do not like the idea that someone’s going to go into the court and have to pay lawyers to deal with my estate. Once I pass away. I like everything to be already pre done easier for the people that would be inheriting.
Dr. Friday 41:12
But that’s everyone’s choice, but not to have a will. And not to have power of attorneys, because something happens. And everyone always thinks well, I’ve passed away well, what if you don’t, what if you get hurt, what if you’re enabled, you’re incapacitated, you’re not able to pay your bills. And then guess what someone’s gonna come and say, “Hey, you didn’t pay for your house and you lose your mortgage.” Whatever it might be. If you have someone that can step up and help. Those are the kinds of times that you need those situations.
Dr. Friday 41:38
So again, if you, you need to talk to an attorney, we have attorneys, but that’s not the point, you can call your own attorney. And you can make sure that you’re getting those things done in a timely manner. That way, you’re not looking over your shoulder, that’s the most important part of life. As far as I’m concerned, I like to get my taxes done, I like to do things and then not have to go back and revisit those things.
Dr. Friday 42:00
Again, it’s done. Now I can move forward and take on the next batch. And the next thing, I don’t have to worry about what I did, did or didn’t do. And one of those things is definitely financial planner, you need to have a good financial planner, because when the decisions that you’re making, so often people are googling or they’re, they’re using the internet, and they’re like, “What should I do here?” Just like the gentleman had called and had lost his spouse. I mean, it’s already a difficult time, but then they they start sending you it sounds like a ridiculous number of documents, and one or two of those apply to your situation, you’re thinking, oh my gosh, I have to deal with 30 different, why not have someone just say these are the forms you need, because it’s already difficult last thing you want to have to deal with is or make the wrong choice and find out that, you know, “Hey, I could have rolled these over and not cashed something out and not had to pay the higher taxes.”
Dr. Friday 42:51
Or maybe at this time, it’s better to think about cashing or converting or whatever. That’s when the experts are coming into play. That’s all I’m saying you need somebody. And when it comes to IRS issues, tax issues, state tax issues, that’s when I come into play. That’s my strong suit. So if you have issues with dealing, if you’re a small business, and you’re dealing with the IRS, or if you’re or the Tennessee Department of Revenue, we are licensed in all 50 states.
Dr. Friday 43:18
But if you’re dealing with the IRS or the state, that’s when you need someone like myself, an enrolled agent licensed by the Internal Revenue Service to do taxes. We’ve been doing it for over 20 years, we’re here to help you understand where your taxes are, what your options are. And if you’re trying to deal with something with the IRS, you need someone else to do it. Because sometimes it’s kind of like having someone fix your car. Do you want a good mechanic? Or do you want someone that pulls up a YouTube video and tries to follow that video says, “Oh, yeah, I think I can do this. I can follow this screen.”
Dr. Friday 43:51
That’s not the way you really want your taxes, your financial situation taking care of, and you want to be able to get resolution. That’s the hardest part. Because so often again, doing this for the number of years I’ve done it, one of the hard parts is is really getting the resolution sometimes that resolution isn’t exactly what you’re wanting. Sometimes you want someone to say, “Oh, we’re gonna settle this thing 10 cents on the dollar.”
Dr. Friday 44:14
And the reality is, it’s not going to be 10 cents on the dollar. Maybe it’s going to be 100% you owe to be honest, you’ve got equity in your house, you got a 401k You’ve got cash in the bank. No reason it won’t be. So you need to be able to figure out what’s going to be the truth and how you’re going to deal with that resolution. And then we can help you take care of the situation. You want someone that’s going to tell you how it’s going to happen, what the best options are.
Dr. Friday 44:43
And then same thing if you haven’t filed taxes for a number of years, we have lots of cases where people haven’t filed seven 810 I mean, I’ve had people 20 years out. In some cases, you don’t have to file more than six years. So even if you haven’t filed taxes for 10 years, it doesn’t mean that You’re going to have to file all 10 of those in May, but in most cases it doesn’t. And in that case, you may just have to go file the last six years, then get resolution and then you’ll be able to move forward with the rest of your life.
Dr. Friday 45:13
So I just want you to make sure you’re going where you’re going to go and if you need to reach me 615-367-0819 email friday@drfriday.com or website, drfriday.com. I hope you guys have a wonderful Thanksgiving and enjoy this beautiful Saturday. Call you later.