Welcome to the Dr. Friday Radio Show, where Dr. Friday takes on the latest tax updates, answers callers questions, and talks over the following topics:
- Dr. Friday’s Tax Tips For the End of the Year
- Cryptocurrency and Taxes
- What Is the Build Back Better Act
- Why You Should Contact Dr. Friday Before Selling
- Apply for PPP Forgiveness
- RMD’s Are Back on the Table for 2021
- Should I File Married or Jointly?
- How To Know If You Are Paying Penalties and Interests
- The Capital Gaines Tax Changes
- How to Get Back on Track With the IRS
and much more!
Transcript
Announcer 0:00
No, no, no, she’s not a medical doctor, but she can share a cure for 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 0:27
Good day, I’m Dr. Friday and the doctor is in the house and we are live today on this beautiful Saturday after Thanksgiving. I know many of you guys have probably enjoyed Black Friday a bit differently than when I was a child.
Dr. Friday 0:40
But then again, everything seems to change as we keep going. So we had some good time shopping, as well as then obviously, now we’re going to be doing a lot more on the internet, right cyber. So making sure one of the big things I want to touch on a little bit is every one of my clients, I promise you are many of them almost are all great people they give, especially during the season, and many people are buying things for like Angel trees, buying food for families that maybe aren’t able to have the same kind of Christmas or Thanksgiving that you were able to have.
Dr. Friday 1:14
So they’re giving and sharing those things. Now keep in mind that under the new tax law that the $600 for married couples and $300 for single individuals that’s above the standard deduction has to be cash. And that doesn’t include if you go out and buy clothing, gifts, whatever for Angel Tree that is not going to be qualified for that type of charitable deduction. Just put it out there nothing wrong.
Dr. Friday 1:44
I know myself, my sister, and I, we’ve probably got four or five bins for the angel trees that we’re working with. But just putting that out there that that is still a charitable contribution, but it would be considered non-cash because you’re actually buying something for them not giving cash. Same way as if you go out and you buy a lot of food for a food bank helping to make Thanksgiving or Christmas baskets.
Dr. Friday 2:08
Again, you are using cash for but you are yourself you are not a nonprofit yourself. And so you’re buying the food with after-tax dollars. And then giving that to the charity, the charity is claiming the food or the clothing. So therefore the money did not go through a 501 C three.
Dr. Friday 2:25
So just as a point and go fund me accounts kind of want to touch on those a bit. Because I know I have many clients especially at this time of the year, a lot of times they will go in and do a GoFundMe for different families in the neighborhood ones that are having health or medical issues. I have a client a case right now where one of my client’s significant others, set up a GoFundMe account for someone in their church that was having a really hard time.
Dr. Friday 2:55
And they were trying to get money for treatments. Long story short, she raised, I don’t know somewhere, I think it was around $25,000 on her GoFundMe. She physically wrote a check to those people. But she did not set it up as a nonprofit or charity. GoFundMe account because she was just trying to raise money for this family, the IRS came back and said wait for a second, we’ve changed your tax return. And you’re going to pay tax now on that $25,000.
Dr. Friday 3:22
So there are ways in the GoFundMe situation to set it up as a legitimate nonprofit or not-for-profit situation, you may not be a 501 C3, but they do have those setups. And it does depend on how much money I think you earn, and how it’s transferred to that individual. Any money you give to a GoFundMe unless it is a legitimate 501 C three, which you can go to irs.gov/charity and look up any charity to find out if it is a legitimate 501 C3, then you have that ability.
Dr. Friday 3:54
But otherwise, it is not even a tax deduction for giving or helping or supporting another individual, you know, through a rough time or anything like that. Just want to be able to you know, make sure you have that and what’s going to go forward on that. So if you’ve got or you’re working with GoFundMe, they’re a wonderful organization, help people raise money and a lot of people give to those who just want to put that out their charitable deductions.
Dr. Friday 4:23
Again, for the above the standard deduction, which is 300 for an individual and 600 for a married couple that will only be allowed if it was cash like tithing at your church or any of those kinds of situations so that way you have enough to make sure that you’re dealing with what you have the child tax credit.
Dr. Friday 4:44
I know we probably have quite a few listeners right now that are talking or thinking, okay, you’ve been getting the child tax credit you haven’t been getting the child’s gasket and you shouldn’t be getting it or maybe you should. I don’t know. There’s a lot of every other year situation with divorce couples or co-parenting parents I should say. And there are situations where a child’s age may turn and the government didn’t catch it.
Dr. Friday 5:09
Just keep in mind, this is not like the money that we call a stimulus that we received in 2020. And in 2021, this is going to have to be paid back. So if the government sent you money for a child that will not be claimed on your current tax year, even if that child is living with you, whatever the situation may be, because I do know with some divorce situations, they’ll say, well, the child lived with me the whole year.
Dr. Friday 5:41
But the divorce decree says this, I mean, the IRS does not get in the middle. If you have a tax person. In all honesty, you’re supposed to have that child living with you for six months and one day to claim them as your dependent child, no matter, if you’re paying for their room and board at your exes or anything else, makes no difference. That is the way the rule runs. And nowadays, when there’s so much money seeming to be handed out there, for parents, the last, what, two years, basically, again for a night for 2020 and 2021.
Dr. Friday 6:12
It’s been interesting, because a lot of people are like, Well, yeah, he claims them every but they live with me. And they have this and I’m just saying the tax law itself says the child must live with you six months, one day, and your address should be the one that is showing on all tax documents.
Dr. Friday 6:31
As far as they go, the doctor whose addresses on if they’re in school whose address is on their paperwork. Now, in some cases, I have actually seen in both those cases where there is two addresses, but I’m just saying that is the way the tax law, they’re not going to get in the middle of a divorce. And there’s no need for the IRS to do that. But making sure that you’re claiming this properly, there are certain limitations, there are certain things.
Dr. Friday 6:57
And again, just to let you know, reiterate, because I had a case that came up recently where the ex-husband was allowing the wife to claim the children every year, but the children never lived with the wife, but his income was too high. Again, playing with the numbers at the IRS isn’t necessarily go guys. So if you are taking care and you have six months in one day, and the child is basically full-time at your place, you should be the person claiming them no matter what the income bracket or any of those other situations.
Dr. Friday 7:31
So make sure you have that information straight. If you’ve got questions on that you can certainly join the show 615-737-998 is the number here in the studio. Hopefully, you guys are actually having a great time out there on this Thanksgiving after the weekend, I guess you call it. To me, it’s all the pre-show.
Dr. Friday 7:53
My Christmas lights get to be turned on tonight. So I am really excited because I have put on like one of those crazy people, right, I put all my Christmas lights up starting in October. So that we’re ready for the big show. And so I love my Christmas lights.
Dr. Friday 8:09
So anyway, if you’ve got questions on that, or you know, keep in mind, we only have about what four weeks thereabouts to make any kind of changes if you have a tax question or a situation in which you might be thinking, okay, in 2021, I sold a piece of real estate I sold a rental I which could be a piece of real estate. I sold a lot of stock, I took money, additional money out of retirement account, what is this going to do to me in taxes?
Dr. Friday 8:37
That’s the kind of question that we can try to help you at least get to a basic number, or we can get you in the office and get you a more accurate number. Either way, if you’ve got a question about those kinds of situations, it may not even be taxable. But you need to ask the question because the last thing I want you to do is to throw your paperwork, get ready to do your taxes, throw the numbers in your tax return, and then turn around and say what?
Dr. Friday 8:59
I owe money and you’re not gonna pay me because I’ve been telling you guys throughout the last 10 years that if you have tax questions, you need to be calling me. All right. Well, we hit Michael, real quick, and we’ll see what we got. Hey, Michael, thanks for calling.
Caller 9:14
Hey, how are you?
Dr. Friday 9:16
I’m good. How about you?
Caller 9:18
Doing wonderful. Thank you. My question, I’ve got two jobs. One of them I work with on the weekends. And all throughout last year, they did not take any income tax out of my checks, right? I’m not really sure why I don’t know if I just don’t work enough. I don’t make enough bi-weekly paycheck or?
Dr. Friday 9:43
That’s part of the problem. The problem is the tax code and they’ve tried to change it with the new W4. Personally, I think they’ve made it more complicated but what happens is they’re looking at it as if that job is the only job you have. And if you think about trying to live off just that job, you probably are in poverty, you know, I’m saying if you’re just looking at that line, so your second job, which is the weekend job in my mind, you need to go in there are you married or single?
Dr. Friday 10:11
Married, okay, you need to go into that job, change your W4, and go to a minimum of single and zero, which would get you at the highest available for that income without having additional, because my concern is, and it happens every year, is when you get ready to do your taxes. Now, again, you may have a number of children, and you may have enough other deductions that offset it, but it could actually end up where you owe money because they didn’t take out any taxes on that money. At the end of the day.
Caller 10:42
That’s what happened this last year, when I filed they took out a lot. And I only got back, you know, a third of what I was supposed to. I was like, wow, that’s, that’s crazy. I went in this year, I put zero on everything take the most out, I didn’t put filing single, so I might have to change that. But I put in to contribute $60 each paycheck.
Dr. Friday 11:04
Right. So okay, well, if you did that, I mean, I don’t know when you made that particular change. Obviously, that should have helped, but it’s only going to be probably after you did your taxes in 2021. And you found out that hey, 2020, I ended up losing a big chunk.
Dr. Friday 11:19
Now we’ll say on the positive of that. And I know it’s never great because a lot of times people look forward to those refunds. But the fact is, you had enough refund to cover it. So you get your money every paycheck in your pocket, and you weren’t loaning the money to the government? I know, that’s not always an easy answer.
Dr. Friday 11:36
When you’re saying hey, I usually get six grand back and I only got two because the other four, you know, went back to the government. But either way, you’re going to pay that four, right, it’s either gonna come out of your paycheck, or it’s going to come out at the end of the year.
Dr. Friday 11:52
But you know, and that way, the government’s not holding 6000 of your dollars until the end of the year is the only thing I’m thinking I would, I am one of those people that prefer a smaller refund, and have more money every month in my pocket or week or whatever your paper is. But I do know with children, sometimes it is nice to have one big cheque to take care of holidays and things like that.
Dr. Friday 12:13
So either way, Michael, but my suggestion is if whatever the dollar amount, it sounds like you did do that, when let’s say you owe $3,000 on that money, based on the year before. Divide that by 26 weeks or, you know, you said you’re paid bi-weekly 26 pays, excuse me, and that will give you how much money you should have come out every single time.
Dr. Friday 12:34
And if you just tell them you know what just take out $60 every paycheck that should accomplish, which is what you’ve done that should accomplish what you’re looking for. But I don’t know, how recently you went back and did that.
Caller 12:47
I did that right at the beginning of the year, just in case they didn’t take income tax out again. I gotcha. I brought it up to my GM. She was like I don’t know.
Dr. Friday 12:57
Yeah, well again, I mean, we by putting in the extra 60 It should have been a no-brainer. And that one normally people go in and say I went through and I put zero and everything and I’m like well did you check single and zero versus married because, you know, if you’re making $15,000 to $20,000 a year in this side job and you’re married even with zero, you’re still way below poverty and there’s not going to be any federal withholdings.
Dr. Friday 13:20
In fact, if you make less than $35,000 There’d be no withholdings on a married zero situation you know, so yeah, so that’s what I would double-check but yeah, I would definitely talk to the payroll department my friend, or change your other paycheck your big your main company has them take out extra and just leave the other the smaller company alone is a suggestion.
Caller 13:41
We ended up given enough for my combined income, though.
Dr. Friday 13:47
Makes no difference who pays it. Yes, sir. Yep.
Caller 13:52
All right. Thank you so much.
Dr. Friday 13:53
Hey, thank you for calling. Appreciate it. Okay, we’re gonna take a quick break and you can join the show if you want 615-737-9986. And we’ll be right back.
Dr. Friday 14:15
We are back here live in the studio. So if you’ve got a question, all you have to do is pick up the phone at 615-737-9986 taking your calls, trying to figure out what we can do. Obviously, the build-back better plan is out there. We are watching it to see what exactly is going to be coming as part of a tax change or not. Inflation obviously has affected a lot of our decisions possibly in this last holiday season. We’ll see how that really comes out in the wash.
Dr. Friday 14:55
Depending on who you’re listening to inflation is good inflation is bad. Look We’ll work our way through that one as we keep going. But if you’ve got questions on taxes, which is what I like to talk about, you can join the show at 615-737-9986 got an email over the weekend, and one of the questions someone asked me is, how much can they contribute to a health savings account?
Dr. Friday 15:23
You guys all know, especially for entrepreneurs or small business owners, I am a huge fan of the Health Savings Account. Because for many of us that are blessed, I should say, we don’t have a lot of health issues. Therefore we don’t go to the doctor a lot. And paying for health insurance can become very expensive. And what do you have when it’s all said and done, so you’re paying four or $500 a month for insurance, and you don’t see a doctor, but once a year, in my case, usually for poison ivy or something.
Dr. Friday 15:51
So with a health savings account, I’ve been able to put in in this year for a single individual. For 2021, it was 3600. And for a married couple 72. And then if you’re 55 or older, you can do what’s called a catch-up. So it’d be 46 for so a single person, and 82. If you’re a family, both of those would be an awesome situation.
Dr. Friday 16:15
Because think about if you’re not using that money, you can do that year after year after year. And then maybe you do want some sort of procedure, Lasix, for example, I got some of those last year, and it was basically money I’d already saved up. So it was something I could use. It was valuable. And it was a great thing to be able to move forward with. So just want to say if you have that question, is anyone else listening? Definitely take the advantage.
Dr. Friday 16:39
All right. Let’s see Gary in Mount Juliet. Hello, Gary.
Caller 16:45
Hello, Dr. Friday.
Dr. Friday 16:47
What’s happening, buddy?
Caller 16:51
This is a standard question. I used to itemize, but in 2020, the deductible I couldn’t meet it. So the comparison between 2020 and 2021 is going to be about the same as major that would affect that.
Dr. Friday 17:15
No. The standard deduction did go up just a smidge. So you’ll have a little bit more. For standard deduction for 2021, a single person under the age of 65 will be 12,550. Married 25,100 head of household 188,000. And then if you are over the age of 65, you can add another 1350. To that either double it if you’re married with two or if you’re single $1,700. Sorry. So are you married or single?
Caller 17:46
Married over 65?.
Dr. Friday 17:49
Both of you?
Caller 17:51
Yes.
Dr. Friday 17:53
So your guys’ standard deduction is going to be if I can figure out how to use a calculator. Sorry, 278. So you guys’ standard deduction will automatically be $27,800.
Caller 18:08
All right. Appreciate
Dr. Friday 18:10
No problem. Thank you very much. That’s a good question. Because a lot of us are planning our taxes making things work, you know, we need to know how much is our deductible because before the Trump changes, a lot of us did what I always referred to as even an odd so every even year, I would pay my property taxes twice, do all my charitable contributions a lot of times the first year and then spread the rest of it out.
Dr. Friday 18:37
So that way, you have the ability to you know, spread the money and do what you need to do. Where on the other hand, if you Nowadays though, with the higher standard deductions, it’s almost impossible, especially for married couples, unless you have a high charity or a very large mortgage to itemize.
Dr. Friday 18:59
So, it’s going to change and make things a little bit simpler in that aspect. I know that they said they are simplifying the tax code, and in some ways they did. But it’s also made it a little bit more complicated because they maximize home purchases up to 750,000.
Dr. Friday 19:16
And the housing market has gone kind of crazy, as we all know. And that means that a lot more people have mortgages that might be more than that dollar amount. And then we have to amortize the difference so we can come to what was the actual interest of that home if it was purchased and I have a lot of people that have sold their primary homes and purchased new homes. And in doing so they have started that clock all over again.
Dr. Friday 19:42
And you know, just saying it is something that is going to make for you know if you’re doing your own taxes and you have a mortgage statement and you have a house with a mortgage of $775,000 You’re not going to write off 100% of that interest. Interest is very low right now anyway, but that is something You have to look at most before this, it was over a million dollars. And to be honest, in Tennessee, we didn’t have to worry about California, New York, New Jersey, where I have other clients that were more homes in that dollar amount.
Dr. Friday 20:11
Nowadays in Tennessee, I have quite a few people that have sold homes for that and then repurchased homes in those higher dollar amounts, even though their mortgages may be less than the total value of the home, it’s still out there, and still dealing with that issue. So if you’ve got a question on that, you can give me a call at 615-737-9986, we still have up through 2021. Until we know what the build-back better plan is going to do.
Dr. Friday 20:43
We still have the lifetime gifting exclusion of $11 million 11,000,007, to be precise. And then obviously, you still have the $15,000 per person, per individual. So anyone can give anyone $15,000 and not really have to report that in any direction. Sometimes that’s a nice thing to be able to, to do when we’re funding different gifts or helping to gift overstocks or homes.
Dr. Friday 21:11
Those are ways we can do that and preserve the value of the thing we’re gifting. Because sometimes people are like, Well, I’m just going to give my house to my kids. The problem with that is an I don’t think it’s a great to plan. But let’s just say your look, you’re worried about the look back for Medicare, and you want to do this early. So you have that.
Dr. Friday 21:31
And that way, you know, your children will always have this home. And, you know, the theory is wonderful the concept is not because your home has been appreciated since the moment you purchase the home. And unless your children are going to buy the home from you for fair market value, you’re not going to be preserved that so you paid 50,000 or $150,000 for the home.
Dr. Friday 21:52
And then you have to give it to the children at that dollar amount gifting. I’ve even seen people quit claiming it for $1 to their children, which means there is no basis, you’ve just eliminated what you paid for the home. So not a good plan. But let’s just assume that you got to get a tax person, they realize that when you’re gifting something, you can preserve the original investment of the person that they paid for it.
Dr. Friday 22:16
And now the kids, you know, sell it 15 years later, they only have the original appreciated value of 150. And now they’re selling for 850. Now the child has that and you’ve passed along, and they would have normally inherited at the 850, not your original investment. So there are ways of preserving there are grantor trust and different things like that.
Dr. Friday 22:38
But in all honesty, I think I know, the look back in the Medicare, that’s not my expertise to be quite honest, I’m always looking at how we can save tax dollars, and what’s the best way to pass this information or our assets to our children without having to pay taxes, in some cases twice.
Dr. Friday 22:57
And that’s what we’re trying to preserve when we’re looking at taxes and making sure we’re not just making decisions because we’re a fear, you know, I mean, you see a lot of people, they’ll sell out all their stock, or they’ll put all their money, they’ll cash out, I have people that took all the money out of their IRAs, and left it in the IRA, but they moved it over to like a bond account during the whole beginning of 2021.
Dr. Friday 23:20
Because they were fearful that the market was going to crash and they missed out on one of the biggest bull markets we had because of that kind of situation. I’m not going to say that I’m a market person, I’m not a stock, but you’ve got to not allow fear to make decisions. You need experts.
Dr. Friday 23:35
If you’re thinking about doing something like that you should go at least talk to three experts in that profession. And almost all of them will offer a free consultation so that you can take care of doing that kind of situation. Don’t just make a decision because you think something’s going to happen or you’ve got a fear lease, let the experts help you out on that.
Dr. Friday 23:52
And if you got questions on taxes, after this next break, I can take the call at 615-737-9986 and we’re gonna be right back with the Dr. Friday show.
Dr. Friday 24:16
All right, we are back here live in the studio. And we’re taking your calls talking about taxes. And I realized today of all days, probably a lot more people are thinking about what they’re going to be getting raised by for Christmas, or any other the being your holidays coming up and probably not thinking about taxes.
Dr. Friday 24:36
But now’s the time you need to be thinking about taxes. We only have about 30 days left. Come on people we need to make sure we’re organizing we’re not missing out on some sort of tax deduction. Just because you are busy trying to make sure everyone is staying happy.
Dr. Friday 24:51
I’m just saying guys, we need to make sure that we have everything going and we’re doing really, really good. So if you’ve got a question You can reach us here in studio 615-737-9986, taking your calls, making sure we have everything nice and organized. And some of you guys may have heard my last show, but I do want to say that we are looking for some staff members.
Dr. Friday 25:22
So if you’re in counting that business, and you are more like an accounting assistant, right now we’re looking and we will train, we are taking on some new employees. So just a heads up, if you are someone in the accounting industry, and you want you can give us a call in our office or email friday@drfriday.com. And we will be looking at applications trying to fill a couple of positions that we have coming up. If you do have questions, obviously, about taxes.
Dr. Friday 25:54
Many of you may not know but I’m an enrolled agent licensed by the Internal Revenue Service to do taxes and representation, which just basically means guys, that’s all I do is taxes and representation. So if you’re looking to get out of IRS debt, you’re looking to figure out okay, now’s the time to start doing what I wanted to do get back on track, get ready, you know, stop looking over my shoulders, are they gonna take my house, they will take my call, I can help you get all of that straight and let you figure out exactly how we can do it.
Dr. Friday 26:24
And maybe in a way that you might be surprised there are some really good I want to say deals because they can the IRS is one big deal, but they have some really good programs that we can use to maybe help you get back on track.
Dr. Friday 26:37
All right, let’s hit Tony first. I’m sorry, Tom. My fault. Tom Hendersonville. Hey, Tom,
Caller 26:45
Hey, listen, I just want to know, I draw Social Security. And I’ve always heard like, two or three different answers from everyone. But I was just going to start back to work just part-time a few hours a week and just want to know, how much can I earn per month before they go ahead and they had to get your Social Security?
Dr. Friday 27:09
Are you under the age of full retirement?
Caller 27:13
I’m 62.
Dr. Friday 27:15
Okay, so you’re on early social security. So in the year 2021, the maximum you can take is $18,960. That’s the max you make for the year.
Caller 27:27
Okay, so it’s not like per month, I think just made like 2000.
Dr. Friday 27:34
You could work six months and make that money. And as long as you don’t make any more the last six months, you would be fine. It’s not based on a month, it’s basically is the maximum earning by the job a 60 to normal security, if at above that, you’re going to get reduced $1 for every $2 over.
Caller 27:52
Okay. All right. That’s all you need to know that.
Dr. Friday 27:55
That’s wonderful. Thank you for listening. I appreciate it.
Caller 27:58
Thank you. Bye, bye.
Dr. Friday 27:59
All right, let’s get James in Hendersonville. Hey, James.
Caller 28:03
How are you doing?
Dr. Friday 28:05
I am doing very well. Thanks for calling. What can I do for you?
Caller 28:10
I’m retired, don’t file an income tax on my Social Security. I’m going to open up a small business and I’ve been buying stock to stock the business with Okay, me declaring that tax that I’m paying on the stock that I’m buying.
Dr. Friday 28:27
So do you mean like inventory, you’re purchasing inventory that you’re eventually going to resell? Yes. Okay. The answer is no. There’s nothing you have to claim at this point. It’s really all investment. Right?
Dr. Friday 28:40
You’re investing make sure you save all the receipts, everything. So when you do start selling, we’ll be reducing that inventory by whatever the cost was. So let’s say cost me $5. You sold it for Tim, we only want to pay tax on the $5 profit, not the money you put into it originally.
Caller 28:58
Okay. It makes sense. Yeah.
Dr. Friday 29:01
So just keep really good receipts, especially if you’re doing this over a couple of years because your inventory is slowly growing, right? But you know, make sure that you’re using some sort of trail mix.
Dr. Friday 29:12
If it’s cash, make sure you have a cash receipt book, where you got it, how much you paid, or if you’re using credit cards or checks, again, document on those receipts if you can, so that way, if we ever have to go back and justify it, we have the documentation. It’s always harder to recreate than what you have.
Caller 29:30
Okay, sounds good. You’re doing a good job. Thank you.
Dr. Friday 29:32
Thank you so much. I appreciate you guys. Thanks. All right guys. For Thanksgiving weekend. I do appreciate my listeners because I do know again that many of us I will say I did my part for Thanksgiving on a Good Friday.
Dr. Friday 29:47
I actually just got back in town and had a wonderful time visiting family down in Florida so we got to enjoy ourselves. But it is always fun to get back on the radio get back into the office and just Get back to work because kind of thing I like to do. But if you have questions, or if you need to set up an appointment, if you are a returning client, first and foremost, guys, our calendar is open for all returning clients. If you’re a first-time client, you can certainly give us a call, we will get you on the schedule. As soon as we can.
Dr. Friday 30:17
We always make sure all of our returning clients have a time and a date. So that you know, obviously, you’re returning you get that so. But if you need help with taxes, as I was saying before, I’m an enrolled agent, and we help people get back on their feet. It’s what I’ve been doing for 20 plus years. And basically, it’s very straightforward. You haven’t filed taxes for a number of years.
Dr. Friday 30:40
In some cases, we only have to go back six years, you don’t have to go back 26 years, if you haven’t filed for all those years, we go back, we figure out what we need to do to get you into compliance. Some people, theoretically, I meant to go back 20 years if the IRS assessed you 10 years ago, on a piece of taxes that the time clock may not have started or might not have hit yet.
Dr. Friday 31:01
And they say you owe $100,000, but you had a loss that year, well, we do want to take a look and see what we need to do about getting that taken care of. On the other hand, if it’s already been 10 years and they assessed you may be falling off before you know it.
Dr. Friday 31:14
Now I will say if you go into non-collectible, a lot of times, in that case, you have the clock stopping often. And it does create a situation the IRS officially has 10 years to collect from the date that you filed the original return. If you never filed the original return, the clock doesn’t necessarily ever start.
Dr. Friday 31:36
Now they will at times do an IRS tax return. And they’ll do an assessment usually based on absolutely no paperwork, they just basically say this is how much money we know you’ve gotten based on 1099 and 1099 Ks and all these different things.
Dr. Friday 31:53
We don’t take any deduction, but the standard deduction. And that’s always as a single and zero individual, that if you’re married with five children, and they have seen that in the past, they’re not going to assume that and then they’ll send you a nice little love letter saying hey, guess what you now owe us this.
Dr. Friday 32:10
And so you have to address that, or you would have to file an original return to offset that. The same thing with sometimes the audit, I’ve had several cases where we had to open up or do a reconsideration of an audit because the person basically just let it go. Let it slide, thinking that if they didn’t have to say anything, didn’t look up anything, and kind of just let it everyone would just let it slide.
Dr. Friday 32:36
Now keep in mind in the build back better plan. They’re putting billions of dollars into the IRS thinking that that’s going to be a big way of how they’re going to pay for part of this bill is the collection of people that are either cheating fraud is way they put it basically people that may have understated income.
Dr. Friday 32:58
And so more audits more collections, trying to get more money put back into the bank, for the IRS. And that’s what they’re looking at is getting that is a way of them paying the bill. And of course, they say they’re only going to affect people over $400,000. But yet the highest audited, believe it or not, the highest audited people are people making less than 100,000, or people making more than a million dollars.
Dr. Friday 33:23
Those are the higher two areas of audits in the United States right now. So it will be interesting to see what comes of that. As I said, we’re watching to see what’s going to come back in that bill. But if you have a question, maybe you have, like I said, a lot of times people are buying or selling, especially selling real estate, either that being inherited or properties that they had as rentals.
Dr. Friday 33:47
And then they turn around and sell them, then, you know, you not only have the capital gains, but you will also have the recapture of depreciation that often throws people so when they do their taxes, you know, they get the tax person comes back and says Wait, you owe this money.
Dr. Friday 34:04
They’re like, wait, I took 15% I thought I’d only owe this and you would in capital gains, but they forget the ordinary income tax due on the recapture of depreciation. Very important to make sure when you’re dealing with this and making sure everything is on the same page that you’re making this work in the same direction.
Dr. Friday 34:25
You don’t want to just estimate these things because especially if you’re taking some of that money and reinvesting it, so that means you can end up paying the IRS your loan officer and that’s the biggest or the worst thing you can do as far as I’m concerned. So let’s not do that if we can help it.
Dr. Friday 34:41
So want to make sure that you’re you know, looking after your own tax situation, making sure you understand the difference of how you’re getting your money. Obviously, we have ordinary income like wages, certain retirement accounts, most of your 1099 ours right from IRAs, or from 401 K’s, Bank interests, your Social Security all of that are most the so security up to 85% can be taxed at ordinary income.
Dr. Friday 35:06
But if you’re selling stock, and let’s say you’re a single person, and maybe only, maybe you only get so security, and then you sold some stock, and next thing, you know, you can almost make what $30-40,000 Capital Gains easily, and still have zero tax due on that because of the social security being kicked in, or the tax on the Social Security, and you’re under $50,000.
Dr. Friday 35:27
So you may end up with a zero tax on that. So there are ways to make sure that you keep more money in your pocket, but it’s truly understanding your tax bracket your situation, maybe you shouldn’t be selling your stock and your home and taking money out of a 401k all in the same year.
Dr. Friday 35:46
If it’s something that we can control. Very, very important to do. Alright, guys, we’re going to be taking our last break here. Your you want to join the show, if you’ve been hanging out and you’re like, oh, yeah, I’ve got one question I need to ask or you think other people might need to hear the answer. Because I know some people love to get on the radio. And I mean, I should say a lot of people don’t love to get on the radio and ask questions because it can be a bit nerve-racking. I understand that.
Dr. Friday 36:12
But if you want you can join the show here. Call 615-737-9986. We’ll be right back with the Dr. Friday show.
Dr. Friday 36:30
Friday, we are back here live in the studio if you want to join the show you can 615-737-9986 All right. We got Ricky in Watertown. What’s happening, buddy?
Caller 36:48
Oh, not watching the world go around.
Dr. Friday 36:52
Does that no matter what happens in life. Right?
Caller 36:54
Yep.
Dr. Friday 36:56
What can I do for you?
Caller 36:58
Got a question. I’m retired on disability retirement, I had a fairly large sum of money and my Roth IRA in our tradition, and I rolled 100 miles and over into a Roth IRA from a traditional would have held 20% for taxes, but I’ve got a good feeling that should have withheld 22 or 23.
Dr. Friday 37:28
Are you single or married?
Caller 37:31
Single.
Dr. Friday 37:32
Okay. So you’re absolutely correct. You should have probably, I mean, the effective rate will probably come out to let’s see, you got 100 how much you’re on disability, but how much for the year do you estimate just give me a ballpark on what that’s going to be?
Caller 37:47
Usually, when I file taxes, it’s a rough 35,000. Usually, I get 1000 back at any.
Dr. Friday 37:56
Okay, so 35,000 is what you usually I and you’re on social security disability, not VA, right?
Caller 38:03
Social security and I’ve got a disability policy through my former employer. Okay,
Dr. Friday 38:10
So both of those. So, social security disability, you don’t have to pay tax on 85% of whatever works out, too. And then the other one, you’ll pay tax on 100% of whatever they’re paying you unless you paid into that originally, but I’m assuming that’s probably taxable income to you.
Dr. Friday 38:29
So, let’s say 35, the first 50 the next 110 Yeah, you’re gonna be close, I would say you might want to, I don’t know if you have the ability because you’re on a fixed income at this point. And I wouldn’t do anything until the first of the year. If for some reason you need a little bit more and you want to do it, but the bottom line is I would not be surprised you’re $2,000 to $4,000 short.
Caller 38:54
Okay, that’s what I figured.
Dr. Friday 38:56
Thank you, sir.
Caller 38:58
I have another question. I’ve still got about 150,000 In a traditional and I love to roll it over into the Roth. Okay, what percent should I hold down on it?
Dr. Friday 39:14
I would actually do 28. Because you’re already kicking into the other bracket so I would actually go there and then we’re scenario is you may have a few pennies over but I would go to the higher Yes.
Caller 39:29
Okay. Very good.
Dr. Friday 39:31
Thank you. All right. I appreciate it very much. Thank you.
Dr. Friday 39:36
Alright guys, so if you have a question we’re getting to the end of the show here but you can also always email me friday@drfriday.com pretty easy to remember. Remember as an enrolled agent guys, I am here yes to educate to help to make sure you guys but the real purpose I love about this show and it seems to usually help and work out well is plain and simple to make you think about your taxes to make sure that you, you know, ask the right questions.
Dr. Friday 40:06
If you’re 70 or older and you’re taking RMDs, you know, and you give money to charity, why are you not taking it out of the RMD? Because that way it’s dollar for dollar tax deduction versus trying to meet a standard deduction and, or any charitable deduction that you might get.
Dr. Friday 40:24
I mean, either way, you’re going to get the money, but why not take advantage of the qualified charitable deduction in those situations? There are all kinds of things like that, that may apply to you, not everything’s going to be across the board apply to any one person. But if you understand what the different types of taxes we have, and then how you’re going to do those taxes, then boom, you can find a way that might give you.
Dr. Friday 40:47
If nothing else, just like the gentleman that called a minute ago, let’s make sure that we’re taking out enough taxes, so you don’t have to worry about coming up with more money if you’re in a fixed income situation, right? It doesn’t make any sense people, we don’t want to have that happen.
Dr. Friday 41:02
So what I want you to be able to do is enjoy your retirement or prepare for retirement or just not dread taxes. And if you’re somebody that hasn’t filed taxes in the next, or the last four or five years, give me a call, we can get you back on track, there are offering compromises out there that can help you do things, or at least find out do you qualify for an offer and compromise, a payment plan a partial payment plan non-collectible, these are the options you might have.
Dr. Friday 41:30
And that way, then you don’t have to sit there and say, “Well, I can never buy a house, I can never buy a new car, my kids can’t go to college,” because you’re not filing tax returns normally makes it difficult for those situations.
Dr. Friday 41:42
Again, I have had people that seem to be able to live without filing tax returns, but very rarely are they able to get what they want, which is usually money for their kids to go to college to even, you know, buy a house, you have to have the last couple years unless you’re paying cash.
Dr. Friday 41:58
And that would be a question of where that cash came from if you’re not filing tax returns. So you do want to make sure that you have that information, do what you need to do, and make sure it’s done right. So if you’ve got a friend or you know, someone that has maybe got some of those love letters from the IRS, and they don’t know where to start, my initial consultations are always free. And we need to be able to make sure we can help you.
Dr. Friday 42:21
If we can’t help you, then you know what you need to find someone that can it’s that simple. But if we can, that we need to go ahead and get you on the right track and moving forwards that we have the ability to do what we need to do and how we’re going to do it. And sometimes people think, “Oh, I’ll just transfer this over here, I’ll just do this over there.”
Dr. Friday 42:39
And you’re creating more tax problems than you might even realize. If it’s not for yourself, you may be creating it for the people that you’re really trying to take care of. So I just want to make sure that we’re all on the same page, we understand how this is working.
Dr. Friday 42:52
I realize you’re all full from Thanksgiving, it’s a few days after now. But I think we’re still all feel that we actually probably had a little too much Turkey. But if not you probably eating turkey sandwiches. So you’re enjoying it. And hope you guys do have a wonderful holiday this weekend and stay safe and not do anything too crazy. But if you do need help with taxes, bookkeeping, if you’re a small business, we also do bookkeeping and payroll and help you with the EIDL.
Dr. Friday 43:21
If you’re doing the SBA is trying to get the employee retention, these are things we can help with, or I can send you in the right direction or someplace to get that information. If you need help I have to do first and foremost, check me out on the web at drfriday.com. It will show you what we have what we’ve got going, where we’re going to be able to help, and if you need help with taxes.
Dr. Friday 43:43
Obviously, you can also call us at 615-367-0819 Now’s the time for you guys to be sitting back thinking about a little bit. I mean, again, I realize it’s Thanksgiving, and that you probably need a few days off from doing this. But once you’re back on track, get that manila envelope off, stop putting tax forms and things in there.
Dr. Friday 44:04
On the front make a list of the things that you are expecting to have, right because many times people have worked more than one job, especially in the last couple of years. Sometimes people weren’t working in the same profession. Some people took on driving or doing different things. If you are doing Uber or Amazon or any of those other types of transportation or delivery services.
Dr. Friday 44:26
Remember, miles are our friends and we need to make sure we have a good record of those miles traveled. You don’t want to just be educated guessing those Oh, I think I put about 50,000 on my car isn’t a good answer we need to know. And the good news is in most of these agencies, are actually tracking some of that information. So again, making sure we have the documentation tracking that information and then doing what we need to do is the secret to having an easy simple tax season. So if you need help with any of that, or if you’re looking to, you know find someone that maybe you need to consult on tax issues.
Dr. Friday 45:01
Either way, the easiest way to do that is to pick up the phone and call my office at 615-737-9986. If you need to email, maybe you need to kind of outline what you’re looking for. If you’ve got a question and you’re a bit shy or you missed the show, and you weren’t able to actually get on the phone, it’s not a hard thing to do.
Dr. Friday 45:27
Again, my first name is Friday, just like the day of the week so friday@drfriday.com. And if this is the first time you’re in the car out driving around trying to figure out what’s going on in the world and you being listened to the station the first time I am Dr. Friday, an enrolled agent licensed with the Internal Revenue Service to do taxes and representation.
Dr. Friday 45:53
So if you’ve got IRS issues, if you haven’t filed taxes, if you just need someone that knows the tax law and how and what you’re going to do with the taxes, then that way we have the ability to be able to help you get on track and do what you need to do. Otherwise. Hey, just listen and have fun on the radio as I do. And if you need help 615-737-9986 or email friday@drfriday.com. I hope you guys have a wonderful day. Call you later.