Welcome to yet another episode of the Dr. Friday Show. Guest host John Haggard takes on the show while Dr. Friday is on the phone answering queries from listeners with tax questions. In this episode, the two personalities tackle different tax topics, including:
- Tax Legislation Updates Under Trump – Are There Any?
- Tax on Rental Businesses
- 2018 Tax Deadline – No More Extensions
- How Dr. Friday Helps Her Clients
- The IRS’s “Fresh Start” Program
- Payroll Taxes And Why You Should Hire Payroll Services For Your Business
- Tax Preparation Software – Are These Accurate?
- Estimated Tax Withholdings for Side Businesses
- Taxing Business Trips
- Getting Notifications from IRS for Social Security Discrepancies
- Are People with Disabilities Not Taxed?
- IRS Statute of Limitations for Installment Payments
- Getting a Notice for Your Audit – What You Should Do?
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 737 9986. So here’s your host, financial counselor, and tax consultant Dr. Friday.
John Haggard 0:29
Live from America’s Music City. It may be Saturday where you are but it’s Friday, all day, every day all the time with the tax doctor, the tax lady, the doctor of accounting. Known in these parts of America as the Dr. Friday and right there she is. Hello, Dr. Friday!
Dr. Friday 0:47
Hey John! What an intro, what an intro. I love it.
John Haggard 0:51
I tell you what, when you’re as a big of a star as you are you got to really build it up. You know, just trying to match.
Dr. Friday 0:55
Yeah. John, no one’s asking me for autographs. Apparently, Dr. Electric has got a whole fan club going, you know?
John Haggard 1:03
I think he does, I think he does. That’s a pretty big deal. You’re start getting asked… You know after 10 years he ought to be able to get an autograph after 10 years, don’t you think on the year? I think he’s been on the air for 10 years.
Dr. Friday 1:15
Who would think so? But he’s like a rock star, baby. I mean, my goodness! I love it.
John Haggard 1:19
He is a rock star and you’re the tax star. A lot of people may be tuning in for the very first time to the Dr. Friday show. And if you are, here’s what’s going on, because you might say, well, what is this all about. Dr. Friday, we call her the tax lady because she is an enrolled agent with the Internal Revenue Service. Now what that means is she does not work for the Internal Revenue Service But much like an attorney who can represent you in a court of law if you’ve got some problems. She can do the same thing as an enrolled agent with the IRS and you never have to speak to them again. As Dr. Friday affectionately always says, if you are tired of those love letters from the IRS call Dr. Friday, she will become the enrolled agent for you. And you won’t have to talk to them anymore. So I always like to ask Dr. Friday. Is there been any big news? You know, Trump’s on TV every day and we’re talking about tax legislation, tax things that may happen won’t happen should happen could happen, whatever. But is there been any breaking news in the last maybe, you know, couple of weeks or so that would impact current year taxes just so that we could plan a little bit better?
Dr. Friday 2:25
Well, nothing has been passed… Nothing has been totally passed. There is a lot of things that the conversation candidates are running on, you know, how can we tax the wealthier more, you know, what is there is… the everyday tax-paying person, I don’t believe is going to be affected by a few of the things that have gone the index capital gains for inflation did not pass. So for some of those that may want to Donald Trump was really pushing that at one point. It was a way of helping capital gains inflation because stocks can be inflated and then they have losses and trying to use a way of leveling that off.
Dr. Friday 3:16
Another big thing that did not pass and most likely will not change is the $10,000 cap for state and local tax. Again, Tennessee isn’t severely tested by that. But my clients in New Jersey, New York, California, where there’s a high state income tax along with a decent sized property tax, $10,000 is an extremely low number for many of them. So they are getting an additional penalty, I guess you would say under the current tax law, and it doesn’t look like that is going to be changing anytime soon. And there are many other additional things that they’re really pushing to try to get some changes on. But to be honest, not a lot has had really passed at the moment. A lot of talk more than action.
John Haggard 4:02
All right, I think probably, you know, the Democrats are doing a great job of distraction. They call them the, you know, do nothing Democrats, and all this, you know, the next scandal up here, you know, the impeachment thing and all this jazz.
Dr. Friday 4:14
It’s always a scandal. Something other than the really important issues, right? There’s always some distraction going on out there talking about what he said she said they did. And I think for the everyday American, and I try not to get too political because I don’t think it probably serves much when it comes to taxes. But to be honest, I think if we could just get a party that wanted to get something done, Donald, like him or don’t like him, that’s a choice, but he has done a lot of the things he’s promised. You know, and I do appreciate the fact… I do like the new tax law, for example, it affects my day, every day, and I think a lot of the changes… Now, did it help every single person myself included? It wasn’t a big help for me, but the reduction in tax overall has helped everybody. So I think there are some really good steps there. But you know, some people are paying a little bit more because of the tax law. So it doesn’t help everybody.
John Haggard 5:05
Now, would you say that with the revisions that came through and have been approved current tax law? I think one time you said if you were to stack up all of the tax codebooks, it would reach how high I mean, it was a it was way up there. We’ll way way way up there.
Dr. Friday 5:22
It’s 10 times, and that doesn’t include the current changes, which is probably been another thousand pages, but it was 10 times the King James Bible. So everyone knows how thick that is. Just imagine 10 of those stacked up. And, you know, when you go into the Library of Congress, they have all of the tax law books in there and it’s for someone like myself. It’s a kind of fascinating place to go see and read all the hierarchies in the Tax Court and all the different information that’s in there. But it’s amazing when you see, you know, 15 rows of books and this is a small type, you know thin paper. We’re not talking any, you know, anything special here. In fact, the magnifying glass abides now.
John Haggard 6:08
So really the new tax law as it currently is did not reduce the number of pages. Just added another thousand you say?
Dr. Friday 6:17
Yes well it didn’t reduce because, keep in mind, the tax, the actual tax law books always keep all the laws. For example, the current tax law we have in effect today will expire in 2025, it then reverts back. So they can get rid of any of the documents from the prior tax law because we’re reverting back to those tax laws. So we added on top what’s the current tax law and then they have to see, you know, look back to 2015, or whatever the tax law was originally written. So yeah, we’re adding on top of existing tax law, additional tax law that had a limited cycle or time period to it’s got a stamp of expiration on it.
John Haggard 6:58
Right. So that’s how that works, then? In other words, whatever the new law is and no matter what president or what party, it always has an expiration and we’ll go back to the previous tax code unless amended and changed. Is that how that works?
Dr. Friday 7:10
Right. I mean, there are some. Like the federal tax law that went across for corporations that were put in for a permanent change. So everything that went effective as of December 20.. 20th or something, 20 2017, when that law went into effect, it was a permanent law change for tax rates on corporations, for example. So that will keep the old law for anyone filing taxes for 2017 or earlier. But in 2018, the new law would have been moving forward. So obviously, again, I file sometimes for a lot of my clients, I file 810 12 years of taxes. So I have to deal with tax law in those different periods. What was an effect at the time of filing those current tax years? I can’t say okay, now I’m filing this year, but I’m finally 2015 or 2014. Now I have to file based on those tax years that we’re filing in. So when it’s not as straightforward as saying, well, this is the current tax law, so the current to the tax year you’re in and how long it actually is going to last, whatever the cycle is for those laws.
John Haggard 7:10
Alright folks, now, I didn’t know that but now you know that. And so if you are one of those who maybe has not filed in five or 10 years 1520 whatever, it might be pretty complicated. So here’s the place you can get some answers right now. If you’re out there we are live from Nashville. And we say live that means you can call in right now and get advice. Free advice right here on the telephone, Dr. Friday with it. And here’s the number to call 737 WWTN, 737 9986. Tax law is complicated, I think everybody would agree with that. So don’t sit around, say well, I’ll call on a few minutes because we’re only here for another 47 minutes. So you need to get on the phone now. Get the answers to what you need now. And if you got a real kind of private and personal confidential situation you don’t want to talk about on the radio I’m going to give you phone numbers to reach Dr. Friday personally as well. And you can always find out more about her if you go to her website DR friday.com. www.drfriday.com.
John Haggard 8:14
You know, a lot of listeners, Dr. Friday to this radio station own rental property. And is there anything that’s going on in the rental business that’s different or something that somebody can take advantage of this year or anything kicking in there at all?
Dr. Friday 9:27
So I think the biggest change is qualified business income and how that’s affecting rentals. It can be a little bit more challenging. We have a new tax law that went into effect as part of the Trump tax laws of 2017. Or we come sec to basically 2018 tax. That’s the 20% qualified business income deduction. And that applies to the self-employed. So that’s corporations, partnership, LLC, and account it’s kind of a combination of wages, dividends, capital gains, incomes, earnings, if you purchase equipment, etc, etc. But on rental activity and must generally reraise at a level of trader business. So the question is, do you have a rental management that’s handling your rental company? Meaning you are not actually doing anything but collecting money after they’ve handled all of the crisis? That would definitely not meet the QBI or this qualified business income. If you basically only have one rental maybe and it’s the, to your neighbor’s house or whatever, it really depends.
Dr. Friday 10:34
Are you really having to put time and effort into managing it possibly spending more than 250 hours on rentals? Now I have people that have 40, 60, 80 rental properties. And they do most of them maybe 80%. They handle themselves and they have a management that handles a percentage. In that case, it is a legitimate business, right? It’s actually generating there, they’re spending most of their time… It’s very hard if you’re working a full-time job to consider your rental business a business unless you have multiple units that you can show that you’re spending more than 250 hours a year in my opinion. So something that was one of the biggest tax changes that came along. I think a lot of people click Yes to that box, and maybe not everybody’s entitled to it.
John Haggard 11:17
All right. 737 WWTN, 737-9986. Call now, we are live. Get the answers to your tax questions, because I guess it’s really only goes here 30, 60 what, 75 77 days or so to go before the year closes again, right?
Dr. Friday 11:34
Well, don’t forget October 15, which is one of the reasons you’re sitting in there is for all this procrastinators. That is the end of the 2018 tax deadline. So everybody that hasn’t filed taxes for 18 months have them in by Tuesday,
John Haggard 11:47
Must! Right, are there no extensions?
Dr. Friday 11:49
No more extensions.
John Haggard 11:50
Zero. So that’s, you timed out. That’s it if you don’t get in. So if you’re one of those and you’re still in trouble, Dr. Friday (615) 367 0819. You better better better hurry up there because that sounds bad. Okay, no more excuses. It’s over. Right okay. Yeah. All right when we come back folks will be taking your phone calls and I’m going to tell you something that you may not know about Dr. Friday. Pretty interesting. If you haven’t heard before you’re going to hear it next on Super talk 99.7 WTN.
John Haggard 12:27
Part Two of the Dr. Friday show live from America’s Music City. John Haggard in the studio, the Dr. Friday, the tax lady right here. She’s on the telephone with all the answers to your tax questions. There are no dumb tax questions. Why give away money when you don’t need to? You need to call Dr. Friday or better yet call into the show here because here she is. And she will answer those questions for you. What’s the one thing that you might not know if you are a new listener? I bet you don’t know this about Dr. Friday. Here it is.
John Haggard 12:56
She had a client that,t see I’m going to brag because she won’t. But I will. So she had a client who owed over $1 million, not a typo, I mean $1 million to the Internal Revenue Service. And she got that settled for about $100,000 and doesn’t stop there because there are a lot of cases sort of like this. She’s had others where someone owed $100,000 and she settled for 9 or 10. Some have owed $20,000 and she’s gotten settled for you know, $1800 or whatever it is. Now, you know, a lot of things it sounded too good to be true oftentimes and usually are too good to be true. And you know these claims are going to start advertising on this radio station and on TV stations and all over the nation here pretty quick. Because tax season is upon us, “hey, you owe IRS all this money. You call in here we’re going to take care of you…” and you know, all this kind of stuff. But Dr. Friday’s actually legitimate in this and so I want her to explain Dr. Friday, I mean, how did you do that with a client? I mean to all a million dollars to get it settled for about $100,000. How do you actually do that?
Dr. Friday 14:10
Well, it’s a great question. And I mean… and the problem is it takes two things. One, in his case, and in many of the clients cases, the IRS has already assessed taxes because they did not file tax returns. So for the self employed who only get 1099, and imagine having no deductions, your tax bills going to add really, really quick, because none of us do, or I don’t know, any business that has zero tax deductions to it or, you know, very few. So that was his case, he had plenty of deductions that would help to reduce it down. So we got it down to the point where we can negotiate and that’s the first step. First getting into compliance. Second is once all of those have been posted, which could take if we’re doing 8, 9, 10 years of taxes, it could take six months for the IRS To get all of them actually in the system. Then we have to go through, in many cases, what’s called an offer and compromise.
Dr. Friday 15:06
You’ll hear a lot of companies advertising like John said about “Fresh Start”, which is a program that the IRS gives us. It’s a wonderful tool, it works for many of my clients. But it doesn’t work for every client. But if you do qualify for it, you can get pretty close to, you know, 10 cents on the dollar, because most people qualified really don’t have a lot of assets. And then, you know, then they can settle for a million-dollar case for $100,000 or one it just closed last week, which was an $85,000 case for 1800 dollars. You know, again, it doesn’t work for all. I’ve got several cases that come in and we end up doing payment plans because the individuals have too much in home equity and they can’t get rejections and things that required to make it so. But it does take that particular case took me over two years to get to the point where he was able to get a deal with the IRS. It is not a fast process. So I think one of the biggest things people have to understand is that, you know, by the time it takes a while for the IRS to get through the process.
John Haggard 16:09
Two years. Yeah, that’s, that’s substantial. I’m reading in the show notes. And if you out there are responsible for paying payroll taxes, or someone in your office pays payroll taxes. Well, this is interesting. Dr. Friday, I know you’ll set us straight on this. But if someone felt like they need to sue the IRS for a refund, because they’ve paid too much. And they say, you know, I owe some payroll taxes, so I’ll just give them a couple hundred bucks. But I mean, I’m going to get a big refund. Here’s a Why should I let the IRS use my money? Well, there’s a case here apparently, where someone did that and then was not entitled to the refund even though they were owed it. Am I reading that right? Or how does that work?
Dr. Friday 16:56
Trying to find the notes that I sent you which one it was, I sent you a couple, good pages there.
John Haggard 17:01
Yeah, it was actually on the… let’s see that was on page two of October 4th. it was right there at the top. Yeah.
Dr. Friday 17:12
Okay, so the the state local challenges the president minimum wage service so he choose… I will tell you this I don’t see the case right in front of me and unfortunately, I’m on page two of that one and at first mind says the house looks at impeachment on that.
John Haggard 17:29
Look at number three down there. It says payroll…
Dr. Friday 17:30
I’ll tell you to pay a minimum amount of due, okay, get a refund to dismissal as a former business owner learning while disputing payroll bills. Normally taxpayers must pay the full bill of taxes due, IRS sues for refund. In this case, payroll taxes a refund suit can be brought to pay the amount of taxes withheld from one employee in case of the quarter. Okay, so let me explain a little bit how that works. We have what’s called fiduciary tax. Basically, when an employer has payroll, there are taxes that we have to pay as matching. Social Security, Medicare, federal unemployment, state unemployment in the state of Tennessee. There’s also the taxes that we withhold from our employees. So you get a net check, usually. You have a gross check, they take out those Social Security, Medicare and federal withholdings here. And then you get the net effect. The money that we take as an employer from our employees, we basically have a fiduciary responsibility and make sure that money is paid directly to the IRS in a certain amount of time or period.
Dr. Friday 18:34
And so what it comes down to is, if you don’t, there are probably the highest amount of penalties, the highest in the shortest amount of time to negotiate anything with the IRS. The IRS will usually give you 90 days to get caught up. They will lein, levy, and seize on a dime if you are not responsible for payroll. so it’s also why I tell a lot of clients, if and when you start payroll, use an outside service. I’m sure that there are revenue officers or possibly Federal Department of Labor people listening because I was at a meeting and apparently they do listen to my show. But they will, I will say, that I still think, even though they have issues with a couple of them, 99% of the time using an outside service is going to give you the ability to file things on time. And that’s where these kinds of problems come is when you take that money out of someone’s check it is your job is your responsibility to make sure at least the amount that came out of the person’s check is paid. The employer portion, there is a little bit more wiggle room and you’re able to negotiate sometimes fines and penalties can be done. But payroll can be a serious thing. So before you start payroll, be sure you understand the tax laws and the responsibility. It can be a bookkeeper that can be sued for not filing payroll taxes, not even the owner of the business. So make sure that you have the responsibilities and understanding of who’s doing what.
John Haggard 20:02
Wow. Okay, so if you are a business owner, but have a payroll clerk who’s responsible for that, I would think the IRS would say, “Well, you know what, you are the owner of the business. I don’t care what your employee did. I’m going to come after you.” But you’re saying that the IRS could actually go after that bookkeeper?
Dr. Friday 20:20
Yeah, so I had several cases that come up this way. And a lot of times the employee of the boat owner of the business maybe isn’t not hands-on or only does the sales and so they don’t even deal with the what bills are being paid and what’s not being paid. And in two cases, I represented the bookkeeper never informed the employer they thought they were helping out so I’m just going to make it work. I’ll set up this I’ll do this and you know, the business wasn’t going well. The the owner did not know about it until the time the IRS basically walked in the door. So they couldn’t have been responsible for paying it because the bookkeeper is making a choice. I’m paying the employees today. I’m paying rent today, but I’m not paying the IRS.
Dr. Friday 21:02
When you make a choice between paying the IRS and some other vendor, the IRS says at that time you made an eligible choice not to pay us. So you are now responsible. That’s pretty much the way they look at it. So when you are making a choice for your employer thinking that you might be helping them out or stretching it a little bit, be very careful that you don’t get something in writing as the bookkeeper saying, “Hey, I was told to pay the rent and not pay the 941 taxes or payroll taxes.” It can be a very important thing because, sometimes the person that gets first representation can be the one that’s weighed that penalty and the poor bookkeeper standing there without representation and ends up with fines and penalties. Wow.
John Haggard 21:45
Now that folks is worth the price of admission alone to this show. I’m telling you right now, because there are some bookkeepers out there, potentially where the bosses said, “Hey, things are a little tight here, you know, we’ll try to accrue the payroll taxes will catch them up next quarter, but go ahead and pay the rent and the employees.” And that bookkeeper could be or would be in that particular case unless she or he got a waiver from the, you know, the owner. Wow. I mean, that’s pretty serious. Here’s another question that is of concern to people about this time of the year they see the advertisements for. Tax software, $59.95. And we will guarantee that if you are audited, we will pay your tax due or whatever the situation is. What is your general advice on tax preparation, software and the liability of it? And are there any horror stories where somebody used it and think calculated totally wrong and somebody gets like a, you know, $10,000 IRS bill?
Dr. Friday 22:45
Absolutely. I can share more than one of those. I’m not saying – the problem is this: What I have found out from the different companies, I mean, obviously, I think every tech company as well as individual uses tax software. In fact, there was a big huge writeup where one of the big branch stores use the software at the beginning of tax season. It wasn’t updated properly, and there was a large number of people’s taxes done incorrectly. So it’s not just the individual, I don’t want to push that. But a lot of individuals click that box and pay a little extra money for what’s called audit proofing or audit insurance. My problem with this is, and you’ll have to find out different policies with different but there is at least one or two companies out there that have that box, but when it comes time to actually deal with an audit, they send you a packet and how to deal with your auditor.
Dr. Friday 23:42
Well, that doesn’t help people. Who wants to be in front of an auditor? I mean, you know, I’m just saying representation should be somebody like myself or CPA or somebody that’s going to represent you. And then the second thing is, you know if they can find as far as I can see, you know, you said this on you’re filling it out – you make a mistake typing anything in. You click a box that’s incorrect. It makes it invalid. So if you thought you were answering a question correctly on the tax form and you get the refund, the IRS comes back and corrects it. And now you owe money, the audit insurance doesn’t protect you. So, you know, you got to be very careful. I mean, the whole purpose of having your taxes prepared by someone usually, so you know, you’re not making those mistakes. So, if at all times you’re preparing your taxes and there’s a question that you really do not know for sure the answer 100%, you know, find out the answer before you send it in. These companies, most of them, do have online services, or you know, pay the difference and have someone prepare your taxes. You may not be individuals with W-2s, I don’t think there should have any problem filing their own taxes.
John Haggard 24:50
All right, folks, did you get that? Another great piece of advice worth the price of admission listening to the show today? HT minus 29 minutes to go, if you’ve got a tax question, now is the time to call. 737 WWTN, 737-9986. When we come back we’ll talk to Jonathan in Lebanon. He’s got a question about withholding and we’ll take your phone calls. John haggard in the studio, the Dr. Friday, an enrolled agent with the Internal Revenue Service and when I say that no, she does not work for the Internal Revenue Service. An enrolled agent works for you much like an attorney would represent you in a court of law. So you never have to talk to the IRS again if you don’t want to. Your phone calls are all next year on Supertalk 99.7 WTN.
John Haggard 25:45
And now ladies and gentlemen, Part Three! Live from Nashville the Dr. Friday Show! All the tax advice you can possibly want now’s the time to call 737 WWTN, 737-9986. Call now. As promised right before we go to Cindy, we’ve got Jonathan on the phone from Lebanon. Jonathan, welcome to the Dr. Friday Show.
Oh, thank you, John. I made… Hey Dr. Friday, I enjoy your show. I’m a novice and I don’t understand some of it but always welcome to listen in. I am a full time professional. And I have W-2 withholding. But I also have a side business of a farm. And in the past, I have always just increased my withholding from my regular job so that I could cover the income from my farm. However, I’ve realized that this year now, I’m going to have some little extra income from my farm. And it’s going to end up being a few thousand dollars short of my total withholding. So my question is, should I attempt, now I have not done quarterly estimated tax withholdings, should I do some estimated tax withholding late in the year now? Or should I just wait and see what the implications are on my 1040?
Dr. Friday 27:18
You have a couple of options. Since you have a real job, you could… you say it’s a couple hundred dollars, you think, you’re going to owe in taxes?
Probably $2,000 to $3000 or $2,000 to $4000.
Dr. Friday 27:35
Just out of curiosity, and I don’t know your cash flow, but do you have the ability to add any money to your retirement account like a 401-K or anything?
I already maxed out all of that.
Dr. Friday 27:48
Ok. So the incident, I was just trying to find a way we could sacrifice a nap to get more money the government you could save all of it. So that being said, if you’ve maxed out the 401k then at this point yes, you can print out just print out a one voucher, the next one will be due January 15. I would definitely suggest sending you in a minute an estimate of it. So that way then you don’t get hit with potentially a penalty by not paying it by January 15.
Okay, so I have not made estimated quarterly installments, it’s not a big issue if I just kind of loaded up at the end.
Dr. Friday 28:29
Not really, because you’ve already paid most likely 100% of 2018 tax bill already, because you stayed with the same consistency, so it shouldn’t be a penalty on you anyways. I’m really just having me sitting in the money. So the rule basically is you have to pay in at least 100% of what the year before was. And you’ve already done that because you stay consistent. You just got a bonus somehow made a little extra money, whatever. So I’m just saying just send them a one time voucher to offset that difference. You may find that going into 2020 Maybe we’ll go back to the other way. You know, this was just a unique situation.
Very good. I’ll take that. I appreciate your advice, Dr. Friday.
Dr. Friday 29:08
No worries. Thanks.
John Haggard 29:10
Folks, you’re listening to the Dr. Friday Show. All the tax advice is right here. T-21 minutes to go jump on the phones get the answers. 737 WWTN, 737-9986. Now, as promised, let’s bring Cindy on to the Dr. Friday show. Hi, Cindy.
Hello, actually, it’s Gary. Cindy is my wife. She dialed for me. I was driving at the time.
Dr. Friday 29:31
No worries. I love it.
Thank you for taking my call. I just had a question. I do, I’m a home improvement contractor. I’m getting older and mostly I just do handyman type things now. And we go to Florida every year for a month and we’re hoping to maybe someday be able to go for two or three months. And I was wondering if there’s always some work to do down there, but I don’t take my work truck. And I was wondering how much of my experiences could I deduct if I, if I went down there and you know, even made $1,000. Could I deduct my rent and mileage to go down and that kind of thing?
Dr. Friday 30:22
It would actually be more time if you can show that you are developing at least, you know, four to six hours a day, which I know this isn’t gonna be likely, but four to six hours a day to the business either generating sales, working, generating income. Then the reason for you to be there would be for business, not pleasure. Otherwise, you know, they’re going to say the thousand dollars was a one day and you spent 30. So take one 30th of everything off, maybe, you know, I mean? But it’s not likely going to be enough unless you can show you how to a bigger project than that.
Yes. Okay, well I appreciate it. I was just kind of was figuring out…
Dr. Friday 31:06
Yeah, no. Hey, I love my entrepreneurs. We’re always looking for ways that we can have our business keep us going no matter where we’re at. So it’s nothing wrong with asking that question. It’s a great question.
Thank you so much.
Dr. Friday 31:19
No problem. Thanks, sir!
John Haggard 31:20
Back to the phone lines, we go. Let’s bring Darrell from Columbia onto the Dr. Friday Show. Darryl, you are on the air.
Hello, Dr. Friday!
Dr. Friday 31:29
So I am a minister, have been for about 30 years. I opted out on Social Security years ago and should have not taken and not had to pay Social Security or minister of monies as you would know. So about 2014, I guess it was we have to pay in taxes and everything. We were notified A year later, that we owed $5,000 that was not paid. So going back to my comment, he said, “Yes, that’s your social security for whatever the reason they charge you. They damaged you for Social Security, which they weren’t supposed to do.” And he said, “I’ll take care of it.” Well, it’s now 2019. He’s still not taking care of it. And I have been to his office multiple times. He says he calls and they said they’re going to assign somebody to us. And then that didn’t happen. yada, yada, yada, yada. So they’ve already taken out. They’ve already signed us, taken about $2,000, toward little less than $5,000 debt. Plus, this includes interest and we’re up to somewhere around $8000 and they’ve already taken too. So I don’t know what to do about this situation.
Dr. Friday 32:47
Yeah, it’s a great question. And I, you know, he really does need to see if he can get it assigned to a local agent. This isn’t an everyday situation and he doesn’t have a ton of… I mean he needs to do it probably a 911. That’s the tax advocate’s office and you can put a form you can do it yourself. It’s called a 911. And go on the IRS, go on Google whatever googled 911 IRS Form, it’s for the tax advocates. It’s going to ask you what the problem is, and what are you looking for for a solution. And just tell them what it is and then that within 30 days, even less than that allotted times, a tax advocate office will contact you and talk to you about your case. They have a way of getting into the cases that regular phone numbers… I hate, I’ll be honest, I totally and I do it all the time, I hate calling the IRS okay? Because you don’t really feel you’ve achieved anything 90% of the time.
Dr. Friday 33:40
And even when I talked to an agent that my client will still get a letter as if nothing was ever resolved. So I find I use a lot more of them. So you might want to talk to him or just bypass him whatever. Do the 911 get a tax advocate involved. And then that way the all the interest penalties that they’ve charged is no bearing. That doesn’t exist, it’s a figment of their imagination. If this is a legitimate thing, then they’re going to zero out the $5000. And then that will zero out all penalty and interest, and then they will refund any money that you’ve already paid them or they’ve taken. So it really is going to come back on you. But and they’ll let you pay you interest on the money that they had and interest is better than the bank. So it can get resolved but I would definitely start that direction because he’s probably done everything he could through mail and phone calls. And it’s probably just not getting anywhere because as much as I don’t like to bug the IRS, they can move things.
Well, about two years ago, we did do that process. And I’ve talked to them on the phone and they told me they said, Well, this is not something that has anything to do with us. They said we can’t advocate you on this issue.
Dr. Friday 34:51
That’s the tax advocate office that they can’t advocate you? It’s an IRS issue, that doesn’t make any sense at all.
Yeah, she said this is out of our hands. We can help you with this. That’s what I was told. And so that’s why I just keep sitting around going back to him because I didn’t know what to do, you know
Dr. Friday 35:07
Well, yeah, I mean I don’t blame you. I would try that again. If they say that then ask them who is what department handling this. The IRS is collecting your money. I mean, the only other direction he could go would be to the tax practitioners hotline and see if there’s an advocate there that he could go through on that side. It wouldn’t be something you could do but we do have a tax practitioner situation that, you know, the quality the EA or CPA that he can represent. That would be the only I mean, you know, that would be the directions I’d head. I mean, if I were to be taking the case, that’s the only two directions because we need an actual revenue officer in the state of Tennessee.
Dr. Friday 35:47
And at this point, until somebody gives you that case. And the problem is it’s such a small dollar amount and I don’t mean to you but to the IRS. It’s not something that’s big enough that’s generating any interest for revenue officer to come in and do anything, right? So, yeah, so if they, I mean, I would do another one and if nothing else, you know, you know, have him join you on the phone at that point. That’s just, you know my opinion because someone’s got to have an answer on where am I supposed to be getting this information we submitted everything. And when you submit the 911 I would actually submit all the documentation with it. You may have done that but to me a copy of the return, copy of the letter the IRS said that you don’t have to pay social security, etc, etc, etc. Put the case right there. Okay?
Thank you so much. Appreciate it.
Dr. Friday 36:38
No worries, thanks!
John Haggard 36:39
Folks, you’re listening to the Dr. Friday Show. T-14 minutes to go. When we come back we’ll talk to Allan and also to Scott and your phone calls. Now’s the best time to get free tax advice. Here’s the number call now. 737 WWTN, 737-9986. John Haggard in the studio, the Dr. Friday an enrolled agent with the Internal Revenue Service. No, she does not work for the IRS. She works for you just like an attorney would in a court of law. Your phone calls are all next on Supertalk. 99.7 WTN.
John Haggard 37:19
And now, part four of the Dr. Friday Show. Live from Nashville, John Haggard in the studio. The Dr. Friday, the tax lady, she’s on the telephone with all the answers. And to Nashville, we go bringing Alan on to the Dr. Friday show. Alan, you’re on the air.
Yeah, thanks for taking my call. The reason why I was calling them I’m on disability and I heard that, she said something about the… that I didn’t even have to pay taxes on that if I’m on disability. Is that so?
Dr. Friday 37:48
That’s right. Is that all you have, is disability in social security?
If you’re, if you’re married and filing jointly now, does that make a difference?
Dr. Friday 37:59
One more time.
If you’re married and filing jointly. I have been paying, taking the amount that I have, and they have this thing that they send in the middle of the year where you break it down or something. It’s like a paper they get to the IRS that you have… not the IRS with Social Security, you have to break it down and pay half of it. Is that true?
Dr. Friday 38:23
Okay, so if you’re married and you don’t work another job, is that correct?
Dr. Friday 38:30
Okay. You might want to see if married filing separately would be a better way for you guys to file…
Okay if you file jointly, you have to pay half some of that taxes and that…?
Dr. Friday 38:44
Okay, so I’ve been doing it right then. I’ve been paying some of it.
Dr. Friday 38:50
I mean, there’s nothing wrong with that. There’s absolutely nothing wrong, but I’m just saying if you’re looking, it may be in some cases, sometimes it doesn’t work, but sometimes in some cases, it’s better to file married filing separately. Your wife would actually file and you wouldn’t have to file any taxes because then her income is making yours is what it comes down to taxable. But yes, it is taxable if you’re married and the other person is working.
Dr. Friday 39:13
A portion up to 85% can be taxable. Yes, sir.
Right. Okay, that’s what I was trying to find out. The person that you must talk to you must have been just single then that says [inaudible] I got it. Okay. Well, thanks for your help. I appreciate it. Thanks.
John Haggard 39:29
Back to the phone lines, we go. Scott, you are on the air with Dr. Friday.
Hello, Dr. Friday. Hi. Hello. Can you hear me?
Dr. Friday 39:43
Okay, I’ve got a question. Is there a statute of limitations that the IRS can collect on an installment agreement on how many years that I would be paying it back?
Dr. Friday 40:02
Most installment agreements will only go for seven years. But theoretically, the IRS has 10 years from the date that you filed unless you waived your agreement to collect that money.
Okay, the reason I asked is I’ve been on an installment agreement for at least 10 years. And the last check that I go when I go on my account and look it’s got lockbox scan phone to check on the face of the check. It’s got a lockbox and none of the other chicks that have ever had that. I didn’t know what that meant exactly.
Dr. Friday 40:46
It doesn’t mean anything to me either. I mean, I guess do you get your statements every year. I mean, there’s usually a statement either every year every quarter depending that they mail to you showing your payments applied to you may have multiple years of taxes have been paying?
Yes, I get a statement. Maybe not every month, but every so often I get a statement. And it goes back to my 08-09 years, tax years.
Dr. Friday 41:16
08, just so you know if it was filed on time would have been April or October 29th of 2009. So they would have had until October of 2019 to collect that, assuming that the time clock never stopped and you know, whatever. So, hopefully, you’re 08. I mean, I would take a look and see 2008 may fall off 2009 they still have one more year to collect.
I see. I see. So it could possibly… I could possibly have to continue to pay this debt for another year or so…
Dr. Friday 41:50
That’s what it sounds like, yes, sir.
Okay, all right. Well, thank you for the information.
Dr. Friday 41:56
John Haggard 41:57
To Murfreesboro, we go. Jake, you are now on the air with Dr. Friday.
Hi, doc! Just getting audited. I got a notice. The first time I have ever had an audit and it’s a single line out almost. It’s like one line and my Schedule C, they’re saying they want to check it out, come on in. The lady even said that she’s like in training so that they wanted me to come into their office to take a look at it. I don’t know that sounds kind of says tax money, but is that a typical thing that they think that basically is it like maybe a red flag that might be whatever my expense was for that line item is unnaturally large compared to the benchmark that they typically look at? Or one do they typically do that?
Dr. Friday 42:42
Yes, I mean, you either got randomly pulled and they love to use the word random even though I’m not too sure I agree with the word. But you get randomly selected to have that item. I will tell you, I would be very very careful in going in, I think. I mean they’re not going to do anything, but the fact is if they find anything as far as the discretion in that item, that likely is going to open up the entire Schedule C. Just be prepared. They can go in there and then the next thing there will be asking you to bring in as all the tax… all your bank statements, etc, etc. So, you know, it could lead to they see something else it may be that they solely Is this, can I ask, is it miles?
No, it’s office expense.
Dr. Friday 43:29
Okay. So, you know, as long as you can justify that line, and it’s, you know, here’s all my receipts, here’s how I came to this number. You know, maybe under office expense, you put a computer, whatever, you know, that’s why it’s larger than normal, then it shouldn’t be an issue but I’m just telling you a lot of time. I have a case right now gentleman came to me as for 2013. Actually, they’ve opened up the file that late but they open it up for two items. So he said I can do this. They sent it in, they completely disallowed those two items. And then they disallowed everything else on a Schedule C, sent a statement back saying please submit to file and basically it was a full-fledged audit that point.
Dr. Friday 44:11
So just point of interest, go in there prepared, making sure you have the numbers exactly to what they’re looking for and have copies of receipts, credit card statements, whatever you use to generate it. Hopefully it will go smoothly for you. But if it doesn’t let me know and I’ll be more than glad to, we can walk you through.
Another question for… follow up question is what if, what if I had the receipts and for whatever reason, I just disallowed, saying I don’t like and they’d say that’s not a covered expense. So they just disallowed, you pay your fine and a fee and move on or is that…?
Dr. Friday 44:43
It can. It could. But if they find that they don’t like the receipt that you have there, they like I said, in this particular case, at least and again, this has nothing to do with you, but I’m using you as an example. They could basically say okay, we don’t like that. Now, you know, since we found this error, we want to see the receipts for this, this and this.
But then we’ll give you time to go back if you would like me to bring…
Dr. Friday 45:06
Oh absolutely. Not yet, you would not have to do it in that meeting. But what they may say, since you didn’t bring on what we’re going to do is we’re just going to disallow him right now. And then soon as you bring them back, we’re going to put whatever we agree to on the books. So in essence, they’ve completely wiped out all your expenses. And now your tax bill went from $1,000 to $10,000. And you know, and that’s within their computer, and they give you 30 days to come up with a receipt. So just saying be prepared for that to be a possibility. It seems to be a new approach. I’ve only had two cases in the last year but it’s not the normal way that they usually do it. Normally they would audit the Schedule C, right? Not a line item on the Schedule C in the past. So it is something new that they’re doing but…
No why would they claim that she’s in training and is that a…?
Dr. Friday 46:00
You know what? I’d like to say those words and there’s a lot of training. I won’t disagree. Most likely she is in training because we’ve got so many of them that are retired…
John Haggard 46:08
All right, Jake, we got to take off because the show is just about a couple of seconds here to go. Just do for Dr. Friday. Yeah, absolutely. You can reach her at (615) 367-0819. Go on the website, www.drfriday.com. And you can always email Dr. Friday. Here’s that email address firstname.lastname@example.org. Have a great week, everybody. Dr. Friday will be back next Saturday at 2 pm right here on Supertalk. 99.7 WTN