Welcome to another episode of the Dr. Friday Radio Show! In this episode, tax expert Dr. Friday delves deep into the complex world of taxation, offering clarity, guidance, and solutions for listeners. Here are some of the topics she addresses:
- Year-End Tax Strategies: Dive into the intricacies of 2023 finances, the nuances of business purchases for tax savings, and the critical decisions surrounding major expenses. Discover the world of depreciation, the significance of timely equipment updates, and individual tax pointers, from medical expenses to maximizing deductions.
- Decoding Inheritance Tax: Uncover the potential tax impacts of inheritance, the capital gains maze when selling inherited property, and the latest limitations on retirement accounts like 401ks and IRAs.
- Medicare Insights: Clarify the myths and confusions around Medicare payments and get the lowdown on a recent payment discrepancy.
- Guidance on Tax Payments: If you’re bracing for a higher tax bill this year, learn why it’s pivotal to pay at least 110% of the previous year’s tax.
- Engaging with the IRS: Good news! IRS response times have improved post-COVID. Learn about the positive shifts and how the landscape has evolved in recent years.
- Tax Advocate Office Explained: An ally in the complex tax world, this office not only collaborates with the IRS but champions taxpayers. From resolving IRS-related challenges to the specifics of the ‘nine one one’ form, get acquainted with how they can be your tax savior.
- Dr. Friday’s Expertise: As an IRS-licensed representative, Dr. Friday underscores the value of professional advocacy, emphasizing her role in standing up for taxpayers.
- Navigating Tax Filing & Refunds: The clock is ticking! Understand the importance of prompt tax filing, the three-year refund window, and the need to claim stimulus funds.
- Inheritance & Disability Dynamics: Explore the tax implications when inheriting revenue-generating assets on disability. Emphasize the need for specialized counsel, especially during major life transitions, and the strategies to shield assets and revenue.
- Book Your Tax Session: A gentle reminder to secure your tax appointments for the upcoming 2023 tax season.
- Golden Tax Nuggets: As always, Dr. Friday stresses the significance of seeking advice from seasoned experts, be it lawyers, financial advisors, or tax pros. After all, in the realm of taxation, forethought and proactive measures reign supreme.
… And so much more!
Part 1 – 00:00
Announcer: No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or your financial woes. She’s the how-to girl. It’s the Dr. Friday Show. If you have a question for Dr. Friday, call her now, 737-WWTN. That’s 737-9986. So here’s your host, financial counselor and tax consultant, Dr. Friday.
Dr. Friday: G’day, I’m Dr. Friday and the doctor is in the house on this absolutely beautiful Saturday. It is perfect weather outside to be working outside for some of us crazy people. I was just mentioning to my engineer that I have started to put my Christmas decorations up and I know that’s a little early for some people, but you know, it takes me a little while to get all my outdoor decorations up, so it’s time to start getting them down and getting them prepared.
So it’s getting close to the end of the year and what do we have to do by the time the end of the year? We need to be making sure that we have looked at our 2023, evaluated, do we need to buy something if that would help save tax dollars if you’re a business owner? Keep in mind, I am a firm believer that we don’t just go spend $50,000 on a truck so that I can save 20% of that in tax dollars. That doesn’t really make sense, people. You know, you go spend $50,000, 20% of that is what? 10,000 dollars, something like that in cash.
So you know, I’m still out $40,000. Now if I need that truck, if my truck is breaking down and you need a vehicle to use for work, and that vehicle is essential and you know, if you’re breaking down, you’re losing money, then yes, absolutely go spend the money. We can do an accelerated depreciation if it’s a larger truck over 6,000 pound tow rate or if it’s a smaller one, we can do spread depreciation or actual depreciation. Either way, that is a good investment. Same thing with equipment. If you’re looking and you’re saying, hey, you know what, I really need to upgrade the computer system. You know, it’s slowing down.
We need a new server. We need some new things. And if it’s something that’s going to benefit the company, then yes, absolutely do that. Save the tax dollars because you need to do it anyways. And if you can do it before the end of the year and keep in mind, the equipment has to be in use. So you can’t just go on the last day of the year, go buy a bunch of stuff and have the boxes still sitting in the office. Tax law says it has to be in operations to deduct it. So if you have something like that, that you need to do, then that’s great. Individuals, I know a lot of times people are often asking, well, if I have a lot of medical, you know, is this the year I can itemize? You know, it’s tricky nowadays to itemize because of the higher standard deduction. But again, if your medical bills and have been outrageous, it might be time to pay off a lot more of them to get you over that threshold.
Especially if you have mortgage interest and property taxes and sales tax, then you might be able to kick over that threshold to do it. But it may be also the same year that you pay your property taxes twice to get you even higher. Now, keep in mind, we refer to it as the SALT tax, the state income property tax and personality tax section of the Schedule A. That one, you can only have $10,000. So there used to be, for a long time, guys, we used to do every other year, I would pay my property taxes twice. I would maximize all of my charity every other year so that one year I would not itemize, the next year I would, and I’d be able to really maximize that. It really doesn’t work as well because my property taxes, I lose money if I pay them twice in one year. I don’t get to deduct 100% of them.
And so it’s just harder to do the itemizing the way we have in the past. But there are times when you have a large amount of purchases because you’ve refurnished the house and you paid sales tax on a lot of things. Maybe that year is, again, the year that you actually double pay your property taxes if they’re only three or 4,000. And then that way you maximize that area of the code up to 10,000. Then you have your mortgage interest. Usually that’s high enough where between that and your charity. And again, no one says that you have to pay all your charity in one year or not. So if you’re going to be maximizing, let’s say you don’t normally itemize, but if you had another $5,000, you could itemize, then maybe maximizing your property taxes twice and paying your charitable deductions in advance, some people would call it, but paying it in more, then that way you can actually really maximize because the standard deduction is that just that. If you can’t itemize, then let’s take the standard deduction. It’s higher than what you’ve paid out of pocket.
Therefore it’s a good thing. But you really need to evaluate what your taxes look like. And now’s a great time. It’s quieter. So if you’ve got questions, maybe you’ve had a situation where you’ve inherited, that’s usually a big area where people aren’t actually positive. Did they, or do they have to pay taxes? If I inherit, will it make my social security taxable? You know, if I inherit, but I inherited a few years ago and now I’m selling the property, what kind of capital gains would I be looking at? Of course we now have the 401ks or the IRAs. If someone passed away, we have basically 10 years to take out that money, which used to just be an R and D for the rest of your life. It now has limitations. When should you do that? Should you wait until the end and take out a huge lump or should you be taking out larger amounts and it’s different for everyone, but that’s the plan that needs to be put together. Right?
You need to have that plan. So if you don’t know, if you’ve got some questions, you can join the show today. 615-737-9986. 615-737-9986 is the phone number. Also want to remind anyone that is in Medicare that we’re still in that time where you can turn around. I know you probably couldn’t forget it because of the fact that you have so many people advertising out there and it’s almost overwhelming. It’s almost like tax time when people are telling you so many different things. I had someone, they called me the other day because they saw something on Medicare and they thought that people were going to get an extra payment. And so they were so confused about what, you know, is there an extra payment and all that. And just so you know, any of you that may have seen or got that advertisement that there was an extra payment in September and then no one got their social security in October.
It’s because of the dates when they change something. So September people got two payments, October they didn’t get any. And then back in November, they’ll be at their usual. And I believe this was for disability, not normal social security. So there was a lot of chit chat and many, many field phone calls that came through our office because people were thinking they were there were entitled to an extra payment or that they didn’t get it. And therefore they wanted to make sure that they were going to get it.
There was no extra payment. I just want to put that out there. There was no extra payment. It really was just the matter that, you know, everything was, you know, just the timing where September ended up with two payments, October, nothing back on track in November. If you’re not sure if you receive those payments, you’ll need to check in and contact social security. It’s not really a tax issue, but brought it up because we ended up with a lot of phone calls the last couple of weeks on that one. And I just wanted to make sure everybody was back on track because you’ll be getting your normal check this week for disability. So if you want to join the show, you can 615-737-9986.
I will also say that if you’ve had something unusual happen this year, and maybe you’re going to owe more in taxes, tax law says we have to pay 110% of the year before. So if you look in your tax return, it says you owe, I don’t know, let’s just say $20,000. That was your total taxes. And this year you think you’re going to owe more than you want to make sure you have at least paid in that 110%. I’m not a huge fan of telling people just because we know you’re going to owe 50,000 more that you need to rush and pay that out. But we don’t want to have the penalty for failure to pay proper estimates or failure to pay estimated payments at all.
You know, they love to do those. And so I would suggest, especially by January 15th, even if you’re going to file before the April 15th deadline to make an estimated payment, make sure that you have at least 110 in by that time. So that way it will, if nothing else, slow down or even stop any penalties that might have existed at that time. All right, let’s hit Rich in Brentwood real quick. We got Rich in Brentwood. Maybe yes, we do. There we go. Hey, Rich.
Caller: Hey, Dr. Friday. How you doing?
Dr. Friday: I am doing great. Thanks for calling. What can I do for you?
Caller: Yeah, I just received two BDAs this year. One is a regular, I guess, IRA rollover. And the other one is a Roth. And the Roth BDA was not held for five years. So I wondered if that has anything to do with my withdrawal rate. And I just want to know, when do I have to withdraw from the BDAs?
Dr. Friday: So the BDA is inherited?
Dr. Friday: When you refer to them as a… Okay, that’s what I was into. Okay, so the Roth, obviously, it won’t make a difference if it was held for five years or not, because you inherited that Roth. So you inherited it as a tax-free fund.
Caller: Okay, great.
Dr. Friday: So you can take that out anytime you want. The IRA 401k situation, or was this an IRA?
Caller: It was a standard account IRA, correct.
Dr. Friday: So that one, you’ll have to take out the requirement of distribution minimum. But obviously, you have 10 years, Rich, to empty it. I don’t know how much is in it. And it may be beneficial to convert so much of it and take some of the money out of the Roth to pay the tax. So it doesn’t necessarily affect you, but that way it’s rolling over, because taxes could go up in 2025, and therefore, you could end up paying more. So you want to probably sit down with a financial person or a tax person and figure out how much is in there and what’s the best way to get it out at the lowest tax rate available.
Caller: Okay. Getting back to the Roth BDA, at the end of the 10 years, do I have to clear that account out or can I just leave that in there?
Dr. Friday: No, they’re making you clear out all of them is my understanding. So you will have to take it out. And then, unfortunately, because it stops it from growing tax free, right? So that one, I would personally probably wait till the last day to take it out if I don’t have to. So that way, I’m not sure. I don’t believe an RMD is required as long as it’s all out by the end of the 10 years. So I would just wait till that last few days and then take it out. There’s nothing, let it grow tax free as long as you can.
Caller: That was my plan, but I just wanted to check with you to make sure. And that’s great. You helped me out a lot and I appreciate it.
Dr. Friday: Cool. Thanks. Appreciate you, Rich. Thanks for calling. All right, really quick. Let’s go on to Ron in Manchester before we take our break. Hey, Ron, what can I do for you?
Caller: I see a train wreck coming with this $7,500 clean car credit. I don’t know whether the dealer does that or whether there’s a voucher that the taxpayer gets it on his return or what. Can you comment on that please? And I’ll hang up.
Dr. Friday: Yes. Okay, no problem. It is a clean car credit. It’s a lot like the energy efficient credit that we get for electric cars. And it’s a credit, it’s non-refundable. So you’re not going to get it as a refund, but it will offset your income tax. So it will apply to open taxes, but it is going to be one of those situations where you’re going to file, you’ll have to have the fin number of the vehicle, make and model, and then you’ll be able to put that on your tax return.
All right, well, we’re going to take a quick break here. When we get back, we’ll take two more of your phone calls. You can reach us here in the studio at 615-737-9986. We’ll be right back with the Dr. Friday Show.
Part 2 – 13:18
Dr. Friday: All righty, we are back here live in studio. And if you want to join the show, you can at 615-737-9986, 615-737-9986, taking your calls. I want to cover a little bit about communication with the IRS, what we’re experiencing and the pros and cons. Obviously there’s good and bad, but we have found that we are getting a faster response than what we had two, three years ago, especially over the COVID period where IRS was practically shut down. Nowadays, I mean, I do want to give a big hands up to the tax advocate office. They seriously have helped our office at least many, many times. And I’ve referred a number of people to them to get their resolution and they’ve always done a great job.
So it is for you that don’t know what I’m talking about, tax resolution, the tax advocate office is a office that works with the IRS, but they actually work for the taxpayer. So if you’re looking to get some sort of resolution, let’s say you’ve been working on something. I’ve got a case here from 2019. We’ve been doing some, you know, we drove back and forth to the IRS, keep saying, keep sending nothing’s happened. We’ve sent amended, we’ve sent correct and no responses. We don’t know why they’re not responding. It just seems like we keep falling through, but yet the love letters or the collection letters are coming nicely every year telling them there’s still a balance due, et cetera, et cetera.
So what you do is you file what’s called a nine one one with the tax advocate office. And then you tell them what you’ve done, all the process and everything, you copy them on all your communication. And then you, and then in the same form, you actually tell them what would you like the the resolution person to do for you? What do you expect their help to do? And then give them the outline of what you’re trying to achieve. Maybe it’s them to correct or to accept or to make some sort of adjustment or even just get basic communication that everything’s been resolved, whatever it might be. We have that kind of situation. And then, and then you can fax this to them. And usually within about 30 days, you’ll hear from them and then they’ll assign you a human that are great. I mean, they, they are commutative.
They’ll tell you, Hey, I’m going to get back with you in 20 days. I’m going to do this, this and this, and I’ll get back with you in 35 days, whatever. And they’ve got this process. So if you’re looking to do something and you’ve been dealing with the IRS and you don’t want to hand, I mean, obviously that’s what we do, but there’s also times, you know, where you’ve been doing it yourself. You’ve been trying to figure it out. You’ve been handling the situation, but you’re just not getting any kind of serious resolution. Now, this isn’t for one where the IRS has wrote back and said, they do not accept your amended return because that’s, that’s a whole different conversation.
This is for one of those that, you know, you keep sending in communication, you’re asking for this or that, maybe it’s a penalty waiver. And you’ve been asking for it three times and you’re not receiving anything saying that they’ve rejected it, but you know, you, you, they’re still trying to collect on it. Those are the kinds of things that the tax advocate office are really good at. So you know, if there’s lack of communication, there is a, another case, but I will also say that the phone number, if you call nowadays, you’re not waiting four or five hours. I will say it’s not, it’s not back like it was in 2018, where probably an hour or two on the phone, you actually had resolution, but we are getting humans on the phone in an hour or two of waiting. So it’s, it’s definitely improved. So anyway, so if you’re having a tax issue, maybe you’re getting love letters as an enrolled agent.
That’s what I deal with guys. I’m licensed by the internal revenue service. Now let me clarify, licensed by the internal revenue service to do representation. I do not work for the internal revenue service. I never have, don’t ever expect to, but but I am licensed by them to help individuals to get representation because just like if you’re going to go to court or if you’re going to get your car fixed, you want someone that knows what they’re doing because it’s impossible for us to know everything. I mean, you could do the research and you can probably represent yourself, but never, never would suggest that if it’s a big enough case where it could cost you a lot of money, better to have somebody that has the education.
But if you’re dealing with love letters or maybe you just haven’t filed, you know, I mean life happens, especially the last four or five years, it’s been pretty unique. So if you haven’t filed those last couple of years, two things are going to happen. At least one very important thing. If you didn’t file 16 or 17, 18, and then they started giving out stimulus money in 20 and 21, 20 will be coming off. So you will not be able to get your refund from 2020 after April of this next year, unless you filed an extension, but let’s just call it simple.
So if you haven’t filed your 2020 return, then you, even if you’re entitled to a refund after April of 2024, you will not be able to get that refund. The law says that you can only get refunds for three years. So if you didn’t get the stimulus money, if you didn’t get anything, cause you didn’t file the IRS is kind of saying, Hey, you had three years to file. If you didn’t do it well, tough luck. So that is very important. And the same thing for 2021, 20 and 21 had free money out there where people were getting, at least if your income was low enough where you qualify for those, or if you had children or whatever, you may want to find out if you’re leaving anything on the table.
It’s very important. All right. So if you want to join the show, if you’ve got questions of possibly, you know, again, inheritance is probably one of the big ones, but maybe you’ve sold a piece of real estate, you know, and, and in some cases I’ve had many situations this last week where somebody was on disability and then they ended up inheriting something that is income producing, which can really mess up your disability situation. So you need to consider talking to an attorney or someone because there are disability trust and things that can be put aside to help that kind of individual. But again, for tax code, if you, if you have earnings, if my understanding is if you’re on disability, it’s a lot like early social security, there’s a limit. I don’t know what the limit is, but there’s a limit to how much you can really earn or you end up losing some of your disability payments. So again, you might want to talk to a disability specialist, especially if you’ve inherited. I had a situation where her husband passed away.
She inherited a business and now that business is generating income that she, she never filed. The husband filed under his own name, never came out. Now this is going to have a big effect on her personal life because of the disability and all that. So you need to seriously, if something like that, or even if you’re a person that, you know, if something happens to you, what you could do to probably preempt some of this problem instead of letting it slide. And then, you know, in this case, this could have been put in trust. It could have been put in a corporation. There was ways of possibly protecting his wife better so that there wasn’t such an income situation that now is going to possibly have her losing her disability and having to rely solely on the business to do, to do what she needs.
So again, there are, you need to sit down with experts, be that an attorney, financial planner, a tax person, and make sure all of your little ducks are in a row. And if you’ve got questions, you can certainly join us here in the studio right now at 615-737-9986. We’re taking your calls live, or you can call our office. I’ll give that number out a little bit, and then you can set up an appointment and see what you want to do. For many of my current tax clients, the calendar is on the website. So if you’d like to set up a tax appointment for 2023 tax preparation for 2024, it is there. So go ahead and get yourself an appointment booked. So you know how fast those things fell up. So I want to make sure all you guys are taking care of. Other things you want to think about, again, we’re getting towards the end of the year. So putting together your little checkoff list, right? I mean, where did you work?
A lot of times if you have multiple jobs, don’t forget to make sure you get all your W-2s, especially if you’ve relocated. You might want to contact your old employer and ask them to update your address or your email address if you’ve changed it, because most people nowadays are downloading their W-2s via internet. But it’s your responsibility. Employer does not have to change or do anything unless you’ve contacted them. And then they theoretically could send you a bill because you didn’t update that and then bill you for getting a W-2. So that’s kind of silly. So if you’ve relocated, contact your old employers, making sure they have the information or at least a good email address so that they can forward you your W-2s. Same thing with 1099Rs, 1099s. If you worked for somebody and you were a subcontractor, they could 1099. If you don’t have it, it’s not their fault because you did not update your W-9 with them. So now’s the time guys, right now, because come late December, a lot of people are putting together that information so they can kick them out come the first week of January.
So you need to contact them now. Put a little thought to who did I see? Who did I work with? Did I do some subcontract work? You know, W-9s, W-4s, update them with old employers or even current employers. If you’ve relocated and you haven’t let anyone know, now’s the time to update that because you really do not want to have to go chasing, waiting to file. I have one person, we still are missing something and we’re late. So we filed the return. We know it’s probably going to get bounced back because of the fact that we filed it to the best of our ability by the October 15th deadline, still haven’t gotten that W-2 and we’re just waiting for that to update the system. All right, we’re going to take our second break. If you want to join the show, you can at 615-737-9986.
I’m Dr. Friday, an enrolled agent licensed by the Internal Revenue Service to do taxes and representation. That’s what I pretty much do all the time. So if you have tax issues, tax questions, maybe you’re trying to figure out as an offer and compromise. I’ve been making a payment plan for 10 years. I’m not getting ahead. What options do I have? Can the IRS keep collecting? You can join the show and ask that question, 615-737-9986. We’ll be right back with the Dr. Friday Show.
Part 3 – 24:13
Dr. Friday: All righty, we are back here live in studio, taking your calls at 615-737-9986. And we’re going to go to Steve in Hendersonville, who is nice enough to wait through the break. Hey Steve.
Caller: Hey Dr. Friday, I just had a question on inheritance.
Dr. Friday: Yes sir.
Caller: I was wondering how inheritance affects your either gross income or just the gross and taxes there and how it may affect your Medicare payment because that goes up if you make, you know, so much money every year or something.
Dr. Friday: Yeah, that’s a great question.
Caller: How does that affect any of that?
Dr. Friday: Well, some can when we are talking about like inherited IRAs, like the first caller called in, when he takes money out, it’s going to change his adjusted gross income, which then could theoretically affect Medicare if he was in retirement because Medicare, I believe it’s 90,000, roughly 90,000 for a single person, 180 for a married couple. Anybody above that starts going up pretty drastically as far as I’m concerned. So it could. So it’s one of those things you do want to make sure if an inheritance is going to come in that’s taxable. Now sometimes you inherit someone’s house, you inherit stocks. A lot of those are step up in basis. So therefore there’s really no taxable gains, but retirement accounts, annuities, many times, those can affect your AGI, which then could affect your income bracket as well as your Medicare.
Caller: Okay. Yeah, there is a house and there is a house and only one part of it has any taxable amounts left on a gain for that account. So there’s very little bit that’s not, that has taxes left owed on it. But I didn’t know what amount inheritance went up to before it was taxed and how it affected your Medicare payments because I am paying Medicare.
Dr. Friday: Right. And so the answer is, I mean, any of it could, but it’s basically as long as your AGI, if you’re single, it stays under 90 or you’re married, stays under 180, then you won’t be affected really. But if it’s, and if it’s a house you inherited and within the last year, it’s probably not went up much, so you would sell it for pretty much what you inherited that. So it’d be a zero tax and the same thing with stocks. If anything, they’ve went down if you’ve inherited them in the last year, possibly. So those may not have, even if you sell them and make money, it may not actually be a taxable event.
Caller: Okay. All right. Well, thank you. We’ll go above the 190. So yeah.
Dr. Friday: So, and then for a year, your Medicare will be, will be higher based on whatever that new number is. And then they’ll drop it back down the next year when you file.
Caller: Okay. Yeah. I’ll note it. Alrighty. Thank you.
Dr. Friday: Hey, appreciate the phone call. Thanks. Let’s go to David in Brentwood. Hey, David.
Caller: Yes, ma’am. My question deals with, do you do? Gift tax returns or for a generation skipping issue? I’m 77 and I wanted to give some money to somebody who’s more than 37 years younger than me. And I haven’t done anything yet, but I wanted to have my ducks in a row before I did anything. And that includes having a tax person lined up.
Dr. Friday: Sure. And yeah, yes, we do quite a bit of that. So she right now where the gift lifetime gift is $11 million or thereabouts might be a little over that, but so you can give 17,000 without filing any kind of gift tax return, anything above 17. I mean, theoretically you can give them $200,000. There’ll be no tax to the person receiving the person giving, if that money comes from an IRA or something, you know, it’s not just sitting in the bank and you’ve already paid tax on it. And you will be taxed. But most of the time, most of the gift tax returns I do is people have already got the money sitting in the bank and now they’re wanting to gift it to a child, a grandchild, a friend. And so in those cases you can do that.
Caller: Well, mine’s, it would be in a taxable account in a brokerage account. It wouldn’t be in the low seven figures, but I just didn’t want to get stuck with having to pay a 40% penalty on that. Right.
Dr. Friday: You’re good on that, but you will want to make sure when you, when you, if it’s in a brokerage account, obviously are you gifting the stock or are you going to gift the, are you going to cash it out and get cash?
Caller: I realize they’re missing out on the line up when I die, but maybe they won’t be so keen to sell it if I’m going to get whacked with a nice big tax bill.
Dr. Friday: You know, I mean, that’s a unique approach, but I will say that it’s not something I haven’t heard before, David. So I would say, you know, obviously from the tax standpoint, it’s always better to inherit it because that way they get the step up in basis. But I totally hear what you’re saying that you’ll give it gifted to them now at your basis. And they may think twice about selling because then they will have to pay the capital gains later and maybe they’ll, they’ll sit and let it ride for a while instead of just immediately spending it.
Caller: You know, it’s a soft way of, of a, shall we say, keeping them from being total spendthrifts.
Dr. Friday: Yeah. Well, I will be curious to see how that works out for us, David. I can’t say I haven’t heard it. I just don’t know. I have seen people do some pretty silly things with inheritance and I’ve seen people be extremely responsible. So hopefully this person will do what you need.
Caller: Should I make an appointment and, and, and cause I want to know exactly what pieces of paper you folks need.
Dr. Friday: Absolutely. You can give my office a call. If you’ve got a pin there, David, I can give you a direct line to our office. It is a 615-367-0819. 615-367-0819. And we’ll say it again if you keep listening. But David, you can give us a call on Monday and we can set up a free appointment for you to come in and we can go over that.
Caller: Thank you. You have a good day.
Dr. Friday: No problem. You too. All right. We’re going to keep taking phone calls here and we’re getting down to the last, Oh, 10, 15 minutes. So if you have been waiting and you’re like, Oh, I’ve got a question and I just don’t know, there are no silly or stupid questions. I’ll be honest with you. Come on. We, we all have things that we do and don’t know. If you don’t ask the question, how’s anyone going to know what the answer is? So asking questions is the best way to do it. The phone number here in the studio is 615-737-9986. 615-737-9986.
That way we’ll take your calls. Hopefully at least lead you in the right direction. If I don’t know the answer, well, you go, what? We always know ways of getting those answers. If we have to go to attorneys or other individuals, we can do that as well, but at least we’ll get you started in the right direction to make sure you, the choices you make. Because sometimes, I mean, I have many people that have come through and tried to make certain choices and I’m like, why would you do that? And they’re like,
Oh, I didn’t, didn’t think to ask that or didn’t think to do that. Can we hit Tanya real quick? Oops, we lost Tanya.
All right. So you know, we can just making, making sure that you really understand just like David and I called in, I’d much rather take appointment and make sure that at least from the tax standpoint, these are the things you want, right? This is how you’re going to do it. This is what you’re going to do with it. Or it’s going to be that you, you make this choice cause you Googled it and you’re like, Oh, I think I understand it. And then you find out that maybe something’s a little different from what you really understood it to be. And so that’s really important to make sure that you understand how the taxes are going to work, at least from my, my standpoint, and that you have those things ready. I mean, sometimes it’s better to be able to do the, um, to, to, to let people inherit, for example, because of the inheritance tax right now, it’s much better.
All right, let’s hit Kevin really quick and, uh, may I can hit him before the break and then we can go to the next ones if that’s possible.
Caller: So leave the radio off.
Dr. Friday: Okay. Yes. Leave the radio off cause otherwise you’ll hear me echoing in your head and that’s more than one voice that you need to hear. So what do you have, Kevin? What’s happening?
Caller: Um, I’ve had a couple of Roth IRA’s in the past and they were, um, they were both through Edward Jones and.
Dr. Friday: Kevin, you still there? Levidius, I think I’ve lost, uh, I lost Kevin. Tanya, Tanya, you on the line?
Caller: Yes, I am.
Dr. Friday: Hey Tanya. Okay. Well, Kevin, if you can call back Tanya, how you doing?
Caller: I’m good. I have a question for you about a personal loan to a family members.
Dr. Friday: Okay.
Caller: So this loan occurred about four years ago and there’s really no indication it’s ever going to be paid back. Um, or is there anything I can do from my point of view from a tax purposes? Can I write that off as a bad debt or something or, or is that even possible?
Dr. Friday: It isn’t, is not possible under the current loads that, uh, they, they don’t have casualty loss on our, um, code any longer. So that was one of them. They kind of gotten rid of unless it’s a federal disaster. Um, so this would not fit under that. So there’s really not a whole bunch that you, you can do as far as taking that loss off since it wasn’t tied directly to a business unless it was. Um, but if it’s just a family loan, Hey, I gave a, I gave him this money to go by. Then it’s just a loss within the pocketbook. No tax advantage or disadvantage.
Caller: Sorry. All right. Well, all right.
Dr. Friday: Thank you. No problem. Great question though. All right. Uh, Oh, Kevin’s back. Let’s see if I can get Kevin back on the line. Hey Kev.
Dr. Friday: Okay. Got you back. Sorry about that. Somehow I lost you. So you were saying before we got cut off that you have purchased several Roth IRAs. Is that correct?
Dr. Friday: Okay. Go ahead.
Caller: I mean, you know, when I got my statement at the end of the year, they were saying that, you know, I was getting 9%, nine and a half percent. But when I actually did the math, you know, all of that was eat up and feed and then buying and selling and moving them from that mutual fund to that mutual fund. And I really want to start saving up again, but I really don’t know a good reputable company to go with.
Dr. Friday: You know, that’s a great question. Okay. Let me get that really quick. Cause that’s more of a, I’m going to cut you off a little bit, Kev, cause that’s really more of a financial planner. And if you want to call my office on Monday, I can give you a couple of different financial planners we work with. Uh, but, uh, that’s one of those. And I know I was the same way for a long time back in the eighties, I put $500 a month into one and then I lost it all. I mean, it all went upside down, have none of it.
Caller: So, um, we’re going to, uh, go ahead and realize what they were doing and I just need to start putting something else aside, but I really don’t know. I mean, I’ve heard good and bad about Bob and Edward Jones and you know, some other ones, but I mean, I worked very hard for my mom.
Dr. Friday: Yeah, I understand. Um, but again, call my office on Monday. I’ll be more than glad Kevin to share a couple of different financial planners. I would suggest going with one of them that are fee-based, um, you know, just because they don’t make money off trades and that does help us. All right, we’re going to have to take a quick break. If Dan can hold through that break, that would be awesome. And then when we get back with the Dr. Friday show, we’ll go right to Dan and then, uh, we’ll be at the end of the show. So we’ll be right back with the Dr. Friday show.
Part 4 – 37:18
Dr. Friday: All righty, we are back here live in studio. This would be the last part of the show. We’re going to go right to Dan because he’s been cool enough to wait all the way through that break. Hey Dan, what can I do for you?
Caller: Hey Friday, thanks for taking the call. Love the show. Got a quick question for you. Uh, in the process of inheriting a thrift savings plan, TSP, that is according to the wiki, a federal equivalent of a 401k. I want to know if that is the case. It also says I need to take action by January 24th, which would be exactly four months a day after my brother’s passing. And do I need to put this into an exist or can I put it into an existing 401k or separate or do I need to set up a separate one?
Dr. Friday: It would have to be separate cause it’s an inherited. So it’d have to go into an inherited IRA. I mean, thrift savings from everything I’ve ever heard when I’m in the meetings with a lot of financial planners, they do very well in comparison to some of the 401k. So it may be a determination. Can you leave it in the thrift savings even in have the same, I believe you still have the meet the same 10 year situation, but would it be better managed possibly than what you can get in a regular IRA? That would be a financial planner question.
But yeah, um, probably because he has, he passed away in 2023 it sounds like. Um, and so he, you know, you, any RMDs, anything that would have been required would fall on him in 23. And then theoretically you’ll be the next person in 24. That’s probably why they have that. I don’t know about the four month thing, but that may be a financial planner. But I would say, Dan, the biggest thing is first to find out, do you have to move it by so many months out of a thrift savings since you’re not, um, you know, the government employee. And then the second is if so, I know you’d have to move it into an inherited IRA.
Caller: That’s a, that’s a formal term and inherited IRA quote unquote.
Dr. Friday: Correct. Yes. And so when you talk to your financial or chase or whoever you want to move it to, I don’t know, you know, it’s all kinds of different. That’s what you’ll tell them because obviously it’s going to meet the criteria of an inherited one versus your own IRA, which will go on for your entire life and only RMDs required.
Caller: Right. So I’m under the age of 73, so I’m not required to take RMDs yet. Would I be required to do that with this under the 10 year rule?
Dr. Friday: Yes. You will. You would have to start the RMDs. Yes. After the date of death. And then you will have 10 years to take it out, but you will are required to start RMDs the year after.
Caller: The year after the year, after the year of death.
Dr. Friday: So yeah. So the year of death is 2023 I’m assuming. So 2024 you will have to take an RMD.
Caller: Wow. Okay. Good to know. Thank you very much.
Dr. Friday: No problem. Thanks, Dan. I appreciate you. All right. So if you’ve got questions or if you need help with doing taxes or you know what, maybe you’re just tired of dealing with IRS issues or maybe you’ve kind of been dealing with them, but just enough to keep them out of your bank accounts, but you’ve been making payments and you’re just not sure how much longer do you have to do this? And really the biggest thing I find when I’m dealing with most clients is it’s always just trying to keep ahead in a sense.
There’s never a break. And one of the things that I think we work really hard with our clients is let’s concentrate, for example, on 2024. Let’s make 2024 the year that we don’t owe any money to the IRS. Let’s break that down so we can afford, figure out how we can get that to the best of our ability and then deal with the past. Because what happens is people just get our payment plan and there’s continuously making payments, but they’re always adding to that payment plan because by making payments, they’re not able to pay their current bills. So you really need to sit down with someone that is an enrolled agent that deals with the IRS and you need to have a plan. You need to sit down and figure out not only, okay, you owe $40,000 to the IRS, but you’re going to owe money because you’re self-employed.
Every year we owe money. Fact of life. You’re going to owe money. You’re paying it monthly, quarterly, annually. If you have a paycheck, can you double up on federal withholding so that with your self-employed job you don’t have to worry about paying the estimates, but there is going to be money due. We all have partners in our business and it’s called the Internal Revenue Service. And in most of us, it’s 25% partners. So you need to be figuring out on every dollar you take out of that company, or I should clarify every dollar of profits, because some people don’t take it out of their companies, is Uncle Sam’s. Now sometimes we can accelerate depreciation. We can do certain things, do an adjustment to inventory if there’s been a lot of theft or giveaways, but those will be an effect that will reduce possibly the profit.
Therefore 25% of said profit will still be 25% of said profit. What you don’t really want to do a lot of is put yourself in debt to get yourself a bunch of equipment so you don’t owe Uncle Sam because sooner or later you got to pay the debt. So the game is to figure out how can I pay the least amount to Uncle Sam. In that same scenario though, I don’t want to be taking on a bunch of car notes or different equipment notes just to try to have a bunch of equipment that I didn’t accelerate depreciation on so I don’t owe taxes, but now I owe the note. So you can get yourself upside down in those kinds of scenarios and you really do, especially a small business owners, you really need to consider what is the best way for you to do what you want. But also remember, IRS is always going to be our partner in business and the best way to think about that is 25% of all profits need to go to a separate bank account because that’s taxes that you’re going to owe. If there’s a way to save money, great. You’ll have over saved money in the tax account. What you don’t want to do is spend every single dollar and then come tax time, Uncle Sam’s got his handout and where’s their 25% or whatever.
You know, I mean, percentages are different, but the likeliness is you’re always going to owe almost 15 because self-employment tax is 7.65% for the employer. We get credit back. It’s still 15% tax guys. So if you don’t owe ordinary income tax, you’re going to owe self-employment tax. So again, have a plan, figure out how you’re going to deal with the IRS. Because if your plan is just to keep filing and keep adding to the existing payment plan, sooner or later, the payment plan is going to get too high. Gosh forbid you want to retire or you have, I mean, I have people that their social security is being hit because of that same reason, right?
Because they continuously. So even though they don’t even have to pay taxes right now, they’re on a theoretically a payment plan for the past. It’s like a really bad credit card. So there are ways of getting some of those, a lifestyle and situations where you may not have to make those payments. Again, you need a plan. So if you need help with that, I’m Dr. Friday, enrolled agent licensed by the Internal Revenue Service to do taxes and representation. So if you need help with representation, or if you need help with just tax preparation, doing your taxes, getting a plan together, figuring out how that’s going to work, I’m your girl. So all you have to do is you can call my office at 615-367-0819. Again 615-367-0819.
You can also go to drfriday.com and our calendar there. So you can set up an appointment for taxes. That’s going to be coming up in January. If you need an appointment prior to that, you need to just call the office again at the 615-367-0819 number, and then we’ll be able to help you with whatever those, you know, whatever situation, if it’s a tax situation, at least we’ll be able to help you with that. You can also email your situation to us at friday at drfriday.com. That’s friday at drfriday.com.
Again, if you have IRS issues, or you’re just looking for someone that can help you out with taxes, maybe you’re looking to see have you gotten the best tax, not so much prices guys, but you know, are you getting a good, good tax person? Are they maximizing your taxes? Have they explained everything to you? If so, you’ve got a perfect person, stick with it. Maybe your person’s retiring, so you need someone else to step up. If you need help with any of that, again, you can call the office Monday morning 615-367-0819. Or you can just email friday at drfriday.com. That’s friday at drfriday.com. And we’ll be there to help you understand your taxes, run through them, make sure that you’re getting the best that you can as far as a tax savings. I truly hope you guys are enjoying this Saturday.
And I hope that you spend a little time doing the things you enjoy doing. If you need me, 615-367-0819.