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On this episode of the Dr. Friday Radio Show, Dr. Friday dives into key tax changes impacting small business owners, real estate transactions, disaster tax relief, and IRS updates. She also answers listener questions about capital gains, 1099 filings, and how to avoid tax penalties. Tune in to get practical tips for managing your taxes and staying compliant with the IRS.
Key Topics Covered:
- PayPal and Third-Party Payment Changes: Starting in 2024, businesses receiving over $5,000 via PayPal and similar platforms will receive a 1099-K.
- Capital Gains on Second Homes: How selling a second home differs from selling a primary residence, including tax implications and capital gain rates.
- Disaster Relief and Taxes: Tax relief for those affected by storms and terrorist attacks, including deadline extensions and loss claims.
- Inheritance Tax Update: What to expect in 2026 when the estate tax threshold is projected to lower.
- Tax Deadlines and Penalties: Importance of filing by October 15th for those with an extension, and understanding IRS penalties for late filing and payment.
- 1099 Requirements for Small Businesses: Clarification on when to issue 1099s and how to stay compliant with IRS rules.
Transcript
No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or your financial woes.
She’s the how-to girl.
It’s the 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.
G’day, I’m Dr. Friday and the doctor is in the house.
You can join us live here in studio at 615-737-9986.
Phone lines will be open.
And then we’ll be able to get your calls.
We want to talk a little bit about a few things that have come down for all of you that may have those small businesses that you have been taking PayPal or some portion of merchant fees.
And I know that 2024 will be the first year that they will be sending those to you based on $5,000 instead of the, I think it was 200 transactions or 15 or 20,000.
So it was a big difference.
So that’s going to make a huge difference to have what you have going there.
So just make sure that you have that information because if you are running a business right now and you have the ability to do what you’re doing and before you really weren’t concerned.
So in 2023, the third party payment system was hired this year.
It’s going to be $5,000 in the phase out to implement the Washington follows feedback from taxpayers and tax professionals.
They’re basically claiming or saying that they won’t have quite so much.
They’re claiming that they’re not going to tie this directly into taxes.
They are saying that it is going to be, it was 20,200 now it’s $600 threshold enacted by the American act.
And that anything above that, theoretically you should be filing taxes, a 1099 K for any sale more than $600 of goods will be following on a 1099 K.
They’re saying the max, basically you have to be doing up to $5,000 threshold before the form will be coming out and that they will be working with taxpayers and other people to try to manage this carefully to help that the 1099 Ks are issued only to taxpayers who should be receiving them.
Well, we all know how well that works for the government.
So all I’m going to suggest is if you are a person that maybe has their own little shopping or maybe they even just do things on your you know, you have some things in the attic and you decided to sell them, anything like that.
And it’s been over $5,000 in the year of 2024 do not be surprised that you may get one of these.
And if you’re not tracking your expenses, this is probably one of the biggest questions or concepts or series because a lot of times people are like, well, this is stuff I’ve had in the attic.
It’s not something I’ve actually been tracking.
And you may end up with a situation where you, you need to pay taxes or you’re going to have to prove that the information you have is, is not taxable income.
Now again, if you have a little garage sale in the front of your house and you’re taking your eye, your stuff out of your home, you’ve already paid for it.
A t-shirt was $15 and you’re selling it for five, you know, there really is no taxable income.
And a lot of times most people are not holding on to their, their personal information that way.
They’re not holding on to every receipt that they have coming through that is just not happening.
So if you have that kind of situation and you’re making that kind of a zero to area, you’re going to run into a particular tax problem and we need to deal with it.
All right, let’s see if we can get Mark on the line.
Hey Mark, what’s happening?
Hey, how are you doing today?
I’m doing awesome and yourself?
I am fine.
Hey, my question is my wife and I purchased a home last year up, uh, it’s in East Tennessee and we live in middle Tennessee and, uh, we bought it because we have children and grandchildren up there and we bought it for a second home.
If we, if we sell that home, say next year, uh, will we have paid capital gains or how long can we have it before we don’t have to pay capital gains?
Second home doesn’t fall into the tax situation that you have for a primary home.
So you will always have capital gains on a secondary home.
Um, the only home that you have any kind of exclusion on or, you know, tax step is your primary home.
Okay.
So keep you up for more than a year is good because now you have longterm or you have actual capital gain tax rates, which is most likely going to be around the 15 to 18% depending on your income bracket.
Uh, so that would be better than if you sell it before a year in one day.
Cause that’s now we did a total, we completely gutted the house and I mean almost built from the ground back.
So can I deduct all of those calls?
Absolutely.
That was an improvement to the property.
So you would have the original purchase price, all the improvements that you’ve done to the home and then whatever you sell it for closing cost fees, et cetera, et cetera.
Then you get to your actual taxable, uh, or capital gains.
Okay.
Sounds good.
I appreciate you.
No problem.
Thanks for calling.
A great question.
And a lot of us have that kind of situation too, where we have multiple homes maybe.
And um, I have had people that have moved into their second home for over two years.
And they sell it and then it’s really their primary home.
And then they move back to their primary home.
And during that time you could be renting out one home versus the other, but it really depends on what you’re actually saving.
I mean, if, if the logic is, okay, I like both homes and I’m going to move here, I’ll live in it for two and a half years or two years and then I’ll sell it.
And then my other home, I’ll just either have it rented out or I’ll go back and forth.
Um, so that way I, you know, I don’t miss out anything.
So that’s a possibility, but to be quite honest, you have to prove that the home you’re living in is your primary home.
So if you’re not really living it, but you’re not renting it, so you’re claiming you’re living in it.
Uh, if audited the IRA, I mean, they could go back, look at utility bills.
Um, they could check and see where you’re receiving your mail.
Um, you know, all that kind of stuff.
And so it, I mean, you may be able to do it, but I’m just saying, is it really worth saving a few thousand dollars to actually have to deal with?
So I don’t know.
It depends on the amount of capital gains and where you’re actually choosing to live and do.
So, um, in his case, it sounds like he’s put a lot of money into that property.
So he may not have a lot of capital gains actually when he gets himself paid back for all of that work.
I will say that the IRS has announced a tax relief affecting terrorist attacks in Israel for 23 and 24.
So anyone that may have families, um, that have payments due, um, usually, uh, by September 30th, 2025.
And so they’re extending all of 23 and 24 out further for those individuals that may be living or be, um, affected directly with.
And of course we also have the, um, the storm that came through and we have all the people in Tennessee and in North Carolina, South Carolina, all of them that have been affected.
There are of course, um, tax relief, uh, for those individuals.
Um, right now I have a client just spoke to today and, uh, he had a second home in Florida.
It was flooded.
And so he’s dealing with, uh, the insurance.
He was blessed to have insurance for flooding.
I just heard on the news, several people in Asheville, they were never expecting to be flooded.
It’s not an area.
It’s not near a major body of water necessarily.
It’s never had a flood.
You know, the 500 year flood we had here in, uh, in Tennessee, um, I guess it’s been probably close to 15, 20 years ago.
I don’t know when it’s 2010 or something like that.
Um, but, uh, we were not, none of us expected that either.
We had never had any kind of major flooding.
So things are changing.
And a lot of those people, we are, uh, you know, hoping they can rebuild and do what they need to do, because again, they’re being turned down by the, uh, the insurance companies because none of their insurance covered something like this.
So they’re, you know, I always love that.
I’m not an insurance person.
I’m not insured.
I always, you know, it seems like whenever you need insurance, it never covers, you know, I had a warranty on my truck, but apparently I didn’t change an air filter.
Therefore, and you take it to the same shop.
So you think, okay, they know what’s required when it’s required and they should basically be able to tell you this, but you know, it wasn’t changed.
So then the whole warranties, Nolan Boyd.
So then, you know, you’re stuck.
So it just, you know, I’m not a big fan of, of insurance.
I have all of it just like everyone else, because if we don’t have insurance, we can’t do what we want.
But on the other hand, it does lead to the fact that we’re all sitting there going, this is crazy.
I mean, every time you, you know, when you hear that and they’re like, well, we never expected, well, you’re the insurance company.
You should be preempting what your clients need.
It’s not the client’s fault.
If you told them they needed something, they would have gotten it, but you didn’t tell them and now they’re not going to pay out any policies.
And the person now has, you know, no, no help and rebuilding.
And that’s just crazy.
Anyways, I know it’s more than nothing to do with taxes necessary.
The only advantage is that they will be able to report these huge losses on their tax returns because it was a federal disaster.
Therefore they’ll be able to claim losses.
So for any of you that may have family or anyone that’s in those areas, I know as hard as this is, but have them put together just like they would put together anything for an insurance company.
If they’re giving it to FEMA, it would be a whole packet of what they actually owned, what was lost in the flood, the damages and everything else, the cost of the original home when they had purchased it, and then what it’s valued at today, because obviously it’s been flooded and it’s going to have to be fully gutted or whatever to be rebuilt.
And then the difference between all that, whatever they don’t get in insurance or in some sort of non-payment, like a grant that they don’t have to pay back, they will at least be able to report on a tax return, be able to save some tax dollars.
Maybe those dollars can go back to helping them rebuild their life.
It is certainly not a great fix for the situation, but you know, there’s got to be a, somehow you got to find something good in the situation because obviously we can’t change that information.
So if you’ve got questions, you can join the show, 615-737-9986, 615-737-9986.
For all of you that may not know who I am, I am Dr. Friday.
I’m an enrolled agent licensed by the Internal Revenue Service.
I have never worked for the Internal Revenue Service.
I am licensed by them to do taxes and representation.
As an enrolled agent, that’s what we do.
We’re not CPAs, we’re not tax preparers.
All we deal with is the IRS or state offices, but we deal with taxes, right?
You know, CPAs, a lot of them can handle audits, they do certified financials, and some of them do great tax returns, but you know, they have different specialties.
As an EA, we are only licensed to do taxes and representation.
So you know, if you’re looking for someone that’s going to help you, if you’re getting love letters, you’re having to deal with the IRS, you might want to call someone that has actually been doing it for 25 plus years and that actually can help you actually understand.
Because sometimes I’ll have people come in my office, guys, and I’ll be explaining exactly what the situation is, and they’ll tell me what they’ve done.
And then I’m like, “Well, you can’t do this.” And they’re being, “Well, people say I should be…” There are strict rules that we have to follow.
I mean, there’s no making it up as we go.
The IRS isn’t just going to say, “Well, I’m going to offer you $30,000, even if I owe you $50,000, because that’s what I want to offer you.” It doesn’t work that way, people.
And we’re all talk more about how you can do that and what we can do for you after this first break.
This is the Dr. Friday Show.
We’ll be right back.
All righty, we are back here live in studio.
And if you’ve got questions, you can join us live at 615-737-9986.
615-737-9986, taking your calls, talking about my favorite subject, taxes.
And keep in mind, October 15th is the deadline for filing your tax return for 2023, if you filed an extension.
If you did not file an extension, then you’re late anyway.
So probably good to get it filed so that you don’t have to keep waiting and waiting and waiting.
Failure to file penalties and interest, failure to file penalties, failure to pay proper estimates, failure to make payments.
They have all kinds of fun failures that you can get, and every one of them can add up to quite a bit of money.
So you don’t want that to happen if you don’t have to.
So let’s try to get you back on track, figure out where you’re at, make sure we have everything we know going forward and doing all the good things.
So if you have questions, you can certainly join the show, 615-737-9986, 615-737-9986, talking about my favorite subject, taxes.
So we’ve talked a little bit about, we still have that BOI, the business owners information under FUBAR, and you just want to make sure that that’s being filed for anybody that starts a new company.
Best to use somebody that could actually help you with that.
I’m just saying whoever’s setting up the company, because sometimes people will just go to Tennessee Secretary of State, they’ll sign up for a charter, and then they’ll go to irs.gov and they’ll get a federal ID number.
But there’s a little bit more, you need to register that, and then you need to also make sure that you’re doing what you need to be doing to make it proper.
Part of that is filing for the BOI.
Now like I said, there’s not a proper, I mean, there’s a website, it doesn’t take much.
Basically you’re uploading your driver’s license and telling them about the business, and then all the owners of the business is a way for them to help track.
You just need to make sure you have everything you need for that in there, so that they’re not charging, because I haven’t yet seen any penalties, because it’s not really going to happen until the first of the year if there’s people that are late, but we don’t want to be playing that game if we don’t have to.
So avoid penalties, best thing to do is to avoid penalties.
So all small businesses, LLCs, corporations, partnerships, all of you have pretty much, most of you, 90% of you have an obligation to file the BOI.
There are a few things, if you go to that website, all you have to do is Google business owners information filings and report, and you can go right in there, and you know, it’ll walk you right through it.
It doesn’t require a lot, I just want to make sure that we’re not missing out on anything important that we have, so that way we can keep everybody out of trouble, and make sure that we are keeping the, well mainly the penalties, right?
The penalties away.
I don’t like penalties, no one likes penalties, you guys all hear my little girl in the background, I know.
She always has to give her opinion during the radio show, most of the time she’s not talking at all, and then she’ll turn around to give that so you have more time for that.
If you guys are anybody that is in the hurricane for Halina, the Tennessee Department of Revenue announced that any payment deadlines for taxpayers have been extended until May 1st of 2025.
In the wake of this storm, the IRS is also giving out some extensions that run out on October 15th, quarterly estimates that ran out for January and April, they’re giving you until May 1st, 2025.
So again, if you have family, they may not be able to hear or know, but you might be able to put them, because I know many people, they get pretty worked up if they can’t file their taxes on time, they’re used to getting it done, and now they’ve lost, some people have lost all that paperwork.
We can help them recreate, we can help them put that information together, but most importantly, we can make sure that they’re doing what they need to do to deal with, you know, their IRS issue, but take the stress off, right?
We don’t need to be stressing over something we can’t control, you know, and there are ways of avoiding penalties and everything else.
So just putting that out there that if you know someone, or hopefully not here this close, but there are some people that did get tree damage, and this is all a big federal situation, so if even in this area, if a tree came down and it was due to the storms, and you’re in the right areas and the right counties, then again, just making sure that that is something that we can give you good news on, that they do have some tax relief, you have until May 1st, 2025 to deal with 2023.
You don’t have to worry about the fourth quarter estimate or the first quarter estimate.
Right now, there’s no penalty for that, so, you know, concentrate on the important things and let the IRS or the state deal with that after the fact.
So if you need any help just dealing with that, you know who I am, but most importantly, just, you know, do what you have to do.
So let’s see, it’s October 15th, we’re getting ready.
Fourth quarter estimates, of course, are not due until October, I mean, January 15th, 2025.
That’s our last payment for the year.
If you have not made any, because some people are like, “I just got my taxes done.
I didn’t make any quarterly estimates.” First, you probably should be doing something based on even 2022, even if you haven’t gotten 23, something should be getting paid.
Because you can tell the IRS all you want, “I didn’t know how much, so I didn’t make anything,” but that doesn’t really make sense.
Every year you’ve had to pay 5,000 a quarter or some dollar amount.
Making an effort is going to give you a much better situation than just basically waiting.
Now you’ve gotten them because we finished your taxes.
Okay, well, it’s after October.
So now you have three quarters you did not make.
So your best bet is if nothing else, pay them faster as soon as possible.
Don’t wait till the January 15th, unless it’s under $500, then you don’t have to worry about it, right?
If it’s under $500, then we don’t care because there’s no penalty.
If your balance due at the end of the year is under 500, not if each quarter was under five.
So you want to make sure that you have that situation where you’re at.
And then you can deal with the penalties because the failure to … I have two people that came in last week and we finished their taxes and they turned around and said, “Hey, why … ” Actually, one, I didn’t do their tax at all, but they came in and they’re like, “Well, why is there a penalty on here?” Guys, filing … If the IRS wasn’t charging a penalty and they said you could wait till October 15th, don’t you think every single person in the world would wait till October 15th to file their taxes and then pay them?
Yes, there is a penalty.
Taxes are due and payment is due basically by April 15th, the latest.
But if you’re a self-employed like myself, you should have made four equal payments, last payment due on January 15th, and then sometimes due to other situation.
Yes, we may have, but there is a penalty between January and April if we did not pay enough in based on 20, the prior year.
So in this case, based on 2022 for 2023, or 2023 based on ’24, or if I made my payment late because I was out of town, whatever.
So if you’re filing your taxes in October, you know, you should know, and you have to write a check, there is going to be penalties.
Penalties could be if you did not make a proper extension, you would have failure to file on time, failure to make proper estimates if you’re self-employed, failure to pay.
I mean, you’re at 25% almost right there by this point.
So it’s going to add up quickly and you’re going to have that situation.
So even though we all talk about extensions, and I do an extension on myself almost every year, because I mean, my tax person, to be quite honest, isn’t going to be doing mine in the rush hours.
I mean, that’d be silly because I know how busy they are.
So I need to make sure though, I need to make sure I have paid in enough by the April 15th deadline to count for this period of delay.
I have it, everyone has a rough idea of what their income is.
And in most cases, it doesn’t change too much.
You might go up a little, go down a little.
Anything I’ve overpaid, well, at this point, if I filed yesterday, I think I did, the overpayment is just basically rolling into 2024.
I mean, it’s only three or four more months and we’re done with this year.
So I can apply that into this year.
And in my case, I actually won’t have to make my fourth quarter estimate because I way over estimated this time, but I’ve had years where that’s not the case.
So you need to make sure you understand what you have going, make sure your numbers, but you are the person responsible.
If you’ve got a good tax person, sure, you can pick up the phone, call them, say, Hey, this is my situation.
What’s my estimate like?
But that needs to be being done basically to be quite honest in November and December, because come January halfway, well, January 15th, you’re going to be late if you don’t know that number.
And if you don’t know your rough income by November and December, which most of us do, you know, unless there’s some big sale that you’re going to sell a piece of real estate, even that can be estimated.
So if it does close by December 31st, you already know how much you need to take out of that sale to put in.
And if it doesn’t close until after January, well, that’s a different year.
And therefore you have more time to make that estimate.
But it’s important for you to understand where and how, because I can’t believe two different people and one was my tax client.
One was not, but one was, and I’m like, you didn’t think about the fact that you would have had to already have made this payment.
Um, uh, you know, or, or you’ll basically be at a point where you’re like, why didn’t I make the payment?
What, you know, what was the theory behind it?
It just did not make a lot of sense to me.
Um, because you know, think about it.
Why would the government give you until October to make a payment when it was due?
They’re not going to give you a penny longer than you need or a moment longer than you need.
They’re certainly not going to give you a break.
Now you can, if it’s a one-time situation and you’ve made a mistake and you didn’t pay enough or you paid it late or whatever, you may have a situation where you can request a waiver for that, but you know, you don’t want to count on that.
You don’t always want to count because sometimes, you know, the IRS could come back.
I had a gentleman come in, he filed his own taxes and he, uh, he, you know, he didn’t understand why he was being charged a penalty, but he had just filed his taxes in August and he hadn’t paid them.
So he had a balance due, but they charged him a penalty, uh, two different penalties, failure to pay proper estimates and failure to pay on time.
And um, it was a little less than a thousand dollars.
And he’s like, well, this is crazy.
Why am I paying a penalty?
But he still hasn’t paid the dollar amount.
So he needs a payment plan.
And he, he requested a waiver, um, for this, which is a great idea.
I didn’t think that’s a bad idea.
It’s a good idea, but I probably would have waited until I had actually got the payment plan and most of the penalties have been imposed because they’re only going to waive one penalty.
Why not wait till the penalty is at its max versus he, you know, at the very beginning.
Uh, so you, you don’t always want to just jump and request for that waiver.
You might want to wait and see what the total penalties, cause it’s 5% per a month up to, you know, 25% on some of these.
So you might as well wait.
So the full 25% has posted before you go and do, uh, the, the situation.
So, um, you’ll just have to figure that one out, but, um, you know, that’s the way it works.
So anyways, we’re going to take a quick break.
If you need to join the show or if you have a question, you’re waiting 615-737-9986.
We’ll be right back with the Dr. Friday show.
I’m Dr. Friday, an enrolled agent licensed by the Internal Revenue Service to do taxes and representation.
And if you have a question, you can join the show at 615-737-9986.
We’ve got a caller on the line, Jim from Nashville.
Hey, Jim, what can I do for you?
Thank you for taking my call.
I’m, I am curious if, do you know what is going to happen with the inheritance tax in 2025 or 26, whenever it comes up again for reconsideration and what percentage, uh, one might have to pay?
I think it’s 40% now or something.
Right.
But right now we have what, 11 million, $12 million, 13, $13 million that, uh, goes through per person.
So it’s, it doesn’t hit a lot of people.
I’m not going to say there isn’t people with much better estates, uh, but, um, the, you know, due to inflation, that’s what they’re going with.
The exemption is, uh, 2026 is when the new one and they’re projecting it to go down to 7 million according to the last, um, I follow a couple of newsletters on it.
So these are estimates, right, Jim?
But I had heard 5 million, so that’s a little better.
But even nowadays, $7 million per person, it sounds great.
But with inflation and things, I mean, I have number of people, their homes are worth a couple of million dollars here in Nashville and we’re talking Nashville, imagine California in places where their real estate is, you know, a lot higher than ours.
Um, so the tax at that point, when you get a bit, it is a 26% is what you’re going to pay right now.
And then it goes to, yeah, 40%, you’re absolutely correct.
Um, and that’s when it starts exceeding.
So anything over 7 million under, they’re saying the projection here, again, this is a newsletter I follow, but they’re saying 7 million in 2026 at 40% tax.
And how long will that stay in place?
Is there another time period when it will be?
It depends.
I mean, right now, all we know truly is that it’s going to expire.
And I believe if it expires under the current, it will revert back to the, um, uh, Obama period, which was 5 million.
So these people are already assuming that this is going to change.
And I think no matter who goes in, um, personally, I think if it’s a Republican, you’re more apt to have the higher deductible, you know, higher amount than if it’s a Democrat, but you know, they haven’t had to really do anything with it in this particular term.
So, you know, they, they didn’t extend anything and they, everyone knows it’s going to expire.
All these expire at the end of 2025.
So whoever we bring in right now, that’s a great question because I don’t know.
I mean, I know everyone’s looking at the economy, but we also need to look at what’s going to happen if it goes back down to 5 million and then 40%, it’d be good for the IRS, right?
Because they’re looking for ways to pay for our budget.
Um, but it’s a little scary for you and I, because you know, that’s going to be a big tax bill for most of us, actually.
And you said it will begin the beginning of 2026, January of 2025.
Correct.
Yeah.
Expires December 31st, 25.
Okay.
Hey, thanks a lot.
I appreciate your help.
No problem, Jim.
Thanks.
That was a good question.
Um, so that’s when we’re all thinking, I try not to get too much into the whole politics thing because taxes are, let’s be honest, we’ve all lived long enough to know that taxes are going to go up.
Taxes go down based on whoever’s in the, the white house and they all have their own causes, uh, and, and that, but for me personally, I often look at the economy because that affects me the most.
Um, many of us it affects, but, um, you know, we all know inflation has hit huge, huge.
You know, we’re, we’re talking double digit inflation and, uh, the cost of everything has went up to go with it.
We went to five guys the other day, got a tiny burger, a fry and a soft drink and paid $18 for, for that.
So, um, obviously I knew, but I’m just saying, you know, it gets a little ridiculous to eat out because you’re like, well, what’s the purpose?
I mean, you know, um, so it’s just, everything’s just costing so much more.
You don’t think about eating out, filling up your Petro or your, your fuel tank, um, you know, is three, four bucks an hour a gallon.
So you know, how’s that going to affect the big picture when it comes time as, as Jim was bringing up or just asking, but you know, what happens when we start looking at a state tax right now, when most people pass away, we have a step up in basis on homes and on stock if there’s annuities or 401ks or IRAs traditional, we have, um, we have to take them out now in 10 years.
We used to be able to take them over our lifetime.
Um, but you still have at least some control over that.
Uh, but they are taxable, right?
So if you inherit someone else’s IRA, you will pay tax on it and it’s got a 10 year climb clock, so you have to take everything out within that 10 years.
Um, but there, you know, what’s going to happen when you start saying right now, $13 million for an individual, a married couple, 26 million, you know, at least in the Tennessee area, that is a healthy estate.
Again, not saying there aren’t people out there that have those, but if they’ve got that kind of estate, then they’re smart enough to do grant or trust to be gifting out $13 million.
They’ve got all kinds of different things that they could use to help reduce the estate, um, while they’re alive so that they have some advantage to doing that.
But if most of your income is tied up in either stocks or real estate and things like that, where you really can’t just easily gift something to somebody, then you’re tied into what’s going to be the inheritance tax.
40%.
I mean, that’s crazy.
That’s 400,000 on every million dollars.
That’s going to really affect, and, uh, you know, they, they talk about generational wealth, um, many times.
And I find that to be interesting that they’re thinking about bringing something back like that because I know there’s people that sit there and say, I’ll never have a million.
I get it.
But if you’re talking middle-class America, which is what everyone wants to be protecting, I guess you would say, um, which is probably many of my listeners.
I mean, we’re, we’re basically middle-class.
My, you know, we all work every day.
We, we may have been fortunate to make good investments, but it was from work that we made these investments.
It was from doing the things we were good at and building on that.
So if you have that kind of situation and you built up that wealth, and now you’re talking about generational, and my parents passed away with, you know, $10,000 in the bank, no life insurance, nothing else because they had raised eight children and they’ve given us great lives.
That’s nothing to be said about, but the fact is they didn’t have a lot of wealth.
Our first generation of wealth will actually come from this generation.
My family, my brothers have done great.
My sister, you know, there’s eight of us and all of us have done what our parents had expected and given us the foundation for.
So we’re very blessed.
So now that next generation, if they’re going to have to pay a 40% tax on most everything they inherit, now you’re talking about a limited amount of wealth running to that next generation.
And the worst is it’s going to the government, which we know does not manage money well anyways.
So it’s just frustrating.
Okay.
I’m getting off track a little bit, but you know, we are getting close.
I think it’s November 7th that we’ll be looking at elections.
That is less than, almost less than two months away, I guess, or just a little over two months away.
So, you know, you, you need to be making, I know that if you listen to News Nation and some of the, the, I can try to say more middle of the road versus Fox or CNN, which are both one way or the other.
I think you’ll find that, I mean, it’s going to be a close race.
It’s just a matter of, they say there’s a lot of undecided, which I find that hard to believe most of us in this world, let’s be honest, we have our core beliefs, we have our core choices, and you’re going to go with those core choices, you know, no matter which way that might be.
So hopefully everyone will vote.
That’s the only way we get a fair election.
That’s all I’m going to say.
Now let’s move on to taxes.
As an enrolled agent, one of the things we really do great is trying to help the IRS and you basically not go to war, right?
We’re like a shield between you and the IRS.
We’re able to help you negotiate, pull off some extra time, figure out how we’re going to make a plan to be able to pay back or to get back some of the money.
We’re here to help get the documentation together so you can actually do your taxes.
That’s what our job is, is to help you get back on track because if your taxes are on track, you can apply for loans, your kids can go to college under the FAFSA.
You have obviously several options of what you can do to make it happen.
So that’s what you’re going to want to have.
And then of course I have a case right now where a gentleman hadn’t filed taxes in 20 years.
Hey, these are all people’s personal choices, but now he found out he doesn’t actually qualify for social security and he’s getting to an age where he’s thinking he might want social security.
So some of the choices you make as you go through, especially self-employed individuals, you don’t have W-2s, you don’t have anything.
And if you choose not to file taxes, and in many industries, especially construction, people are not 1099.
So the government has no idea how much money you’re making and what it’s going for.
So you are now at a place where you’re sitting there going, okay, I’m 58 years old.
I want to think about Medicare and social security.
Yet you haven’t filed taxes in 20 years.
There’s no record of you actually qualifying.
You have to have worked in the last 30 years, 10 years or 40 quarters, you have to have worked to qualify for social security.
Thinking Medicare too, I’m more on the social security side.
So that’s important, right?
So now you’re getting older and you’re sitting here thinking, I don’t have any insurance.
I’m not going to have any retirement.
I haven’t put any money aside.
Yet taxes become important.
So in this case, we’re having to go back.
We’re going to need to file.
I usually don’t have to go back that far, but he’s going to have to, between now and his 62nd birthday, if he’s trying to hit early, he’s got a few years, plus he’s got to go back.
He needs to have 10 years of taxes, which also means he owes taxes, penalties, interest, all of that, that he’s going to have to try to figure out how to pay.
So these are important things.
He may be able to do an offer and compromise.
He’s not doing very well at this point.
So that may be a blessing for the tax side, but we need to have everything filed and up to date.
So just saying, if this is something you know, or you’ve heard, or you’re in, we can help you get that done.
And maybe you too can file for an offer and compromise.
We can also walk our way through that.
If you want help on understanding that, you can certainly give us a call.
Number in the studio right now, in case you have some questions, this will be our last break.
We’ll be right back with The Dr. Friday Show.
I am Dr. Friday, an enrolled agent.
If you’ve got questions on taxes, you can join us the next few minutes at 615-737-9986.
During the break, I did receive an email that was someone asking about 1099s.
So let me go over that real quick, just to make sure everyone understands.
So if you have someone that does work for you, especially if it’s a rental property, or for your business, where you’re deducting that cost, you need to be issuing a 1099.
One of the things I can think of is your lawn person.
But if you have someone that does the lawn, or if you’ve got a repair person, or handyman, or whatever, those people need to be able to receive 1099s for anything over $599, or $600 or more.
So if you pay somebody throughout the year, not just one transaction, but even throughout the year, so maybe it’s $100 a week, but you do 12 weeks, that’s $1,200.
That person should receive a 1099 if it has to do especially with anything to deal with business as far as I’m concerned.
Now sometimes, obviously, some people will actually do it to people that do repairs on their home and things.
And it’s correct, you should do anybody you pay more.
But for the most important part is rental properties.
I find that so often people do not do it.
But that is a tax deduction.
You are deducting the lawn service.
That person needs to be picking up the income because someone’s got to pay tax on it.
Since you’re reducing it, you need to have somebody that’s paying the other side of it.
Same thing for anything like tree removals, anything it takes to maintain our rental properties.
Also in your business.
So maybe you have day labor.
Just because it is day labor doesn’t mean you cannot obtain that person’s legal name, address, and social security number.
If you’re paying them more than $600, that person needs to be dealing with that situation.
Right?
I mean, that’s the way the rules make.
If you have to pay taxes, then everyone else in the world should have to pay their share, as far as I’m concerned.
So making sure that you’re 1099-ing those individuals.
Now the only people you don’t have to 1099 are people that have a corporation.
So if their name is Dr. Friday Tax and Financial Firm, Inc., which is what it is, that person doesn’t have to receive.
Tax law’s a little different for a corporation because of the way we have to treat everything.
But if it’s an LLC, you do have to 1099 that person.
If it is a, well, I mean, I can put a small caveat out there.
LLCs can be treated as a corporation and/or as a partnership.
If they are being treated as a corporation, you don’t have to 1099.
But the only way you’re going to know that is to have them fill out a form called a W-9.
If you are a contractor or you are an individual that does a lot of work, then you need to keep those in your car or have an electronic one that people can fill out.
But somewhere where you have that being done so at the end of the year, when you’ve tracked all your payments to all of your subcontractors and individuals that work for you, then you can prepare.
Remember, those are basically due January 31st.
There’s not a lot of time from the end of the year to now.
So if your business has a slower period during the year, you know, theoretically mine will slow down in November and December a lot of times.
That’s the time to get your records in order, get everything organized.
So you’re ready to hit January and go ahead and get everything filed.
Your tax person or your bookkeeper may handle that.
I mean, obviously our bookkeeping firm handles that for our monthly tax clients.
If you do it yourself, a company, I don’t get any money, but the company I love using is e-file for biz.
It’s e-file and then the number four and then the word biz.com.
They do a great job.
They handle all the filings with the government.
All you have to do is type it in.
They’ll do everything and then you can print out.
You can even have them emailed to your individuals or you can print out, hand them out or whichever way you want to do it.
But it’s a great organization because a lot of times I have people that will get the forms and they’ll fill everything out, but I find out they never mailed in what we call the pink copy to social security administration or to the internal revenue service.
So even though they may have handed out 1099s, they didn’t do the process properly and therefore they ended up with not getting the, the IRS is still looking at them for penalties.
And I believe the penalty now is $500 for each 1099 you do not complete.
So if you’ve got, you know, a hundred of them, that can be a lot of money.
But if you’ve got 10, that’s still a healthy $5,000, not petty cash.
So you know, it’s time to start thinking about who you need to do.
And then if you still have, you know, if they’re still then and you haven’t gotten a W nine, now’s the time to go ahead and say, Hey, I’m going to be preparing the form soon.
So I need you to confirm this information and you know, and you can basically say if they don’t want to give you that information, you know, that’s fine.
But then you have to withhold 25% of what you’re paying them and send that to the IRS.
Because therefore they’re basically saying they’re not going to report it because they’re not going to give you the information.
Therefore, you know, they’re, they’re trying to avoid taxes.
Well, the government says as employers or subcontractors, we have to do something.
We have to then withhold 25% of what we pay to these individuals and send that as if it’s like a payroll tax to the IRS because then the people are more up to file because now they’ve got taxes in there.
And two, if they don’t want to, the government’s been paid what they consider at least, I guess, a fair transition.
And in many cases people would actually, Oh, probably less than that than what they have right there.
But you know, again, people will do what they can to avoid sometimes taxes.
So whatever, whatever that is, is important that we actually have the situation, you know, in line and you’re able to get done what you need to do.
So again, as someone that hires somebody else, it is your responsibility to make sure that you have filed the 1099.
You can’t make anyone file taxes.
It’s not your job, but your job is to make sure.
And if they will not give you that information, it is your job to withhold 25% because they’re, they’re not following the rules and therefore you could be held.
You could get a letter.
Some of you may have actually done that.
You may have done that.
And if that’s the case, then you want to make sure that you’re covering yourself because the IRS will come back to the employer, the individual that they work for first, and they could cause the fines or they can hit you with penalties.
So, and then misclassification is a big one right now.
They’ve got a whole division handling misclassification.
And that is people that you have working for you today that are truly employees.
So let’s say you have a guy that comes into work every day and you tell him where to go, what to do.
You know, you may even provide him a truck and all of that.
And then your 1099, that is not a subcontractor.
Subcontractor is someone that chooses to say, Hey, I’m going to come over to this house.
Okay.
I’ll repair this one.
No, I don’t want to drive that far.
I’m not going to repair that one.
He has his own tools, his own truck, and you’re just giving him work as he goes.
That’s a subcontractor and somebody that comes in your office all day and works, that is not a subcontractor.
You know, it’s just, you know, makes sense.
If you tell someone, well, from eight to five, you need to come in here and do the mail and answer the phones.
And, you know, I have some people that, you know, have jobs like that.
And I’m like, this is a W2 job, but of course people are afraid to say something to their employers because of it.
So that’s a choice, but keep in mind that employer is also saving a minimum of 10% when they do that, because they put the social security benefit onto you, which they would normally have to match, which is 7.65 plus unemployment and all that, which they’re not paying.
All right.
So this is a widening down to the end of the show.
If you want to contact my office on Monday, you can at 615-367-0819.
Again, 615-367-0819.
You can also check us out on the web, drfriday.com.
Our calendar is out there now for the 2024 tax season.
So time to start looking.
There is two EAs in our office, myself and Chris.
So if you don’t see my calendar open, look at Chris, he’s probably available and we’ll be able to do something on that.
Also we have Lolita coffees.
You guys have heard me talk about them in the past.
If you’re looking for a unique gift, you need to go to lolitaroasters.com.
Lolitaroasters.com.
They’ll make a custom coffee just for you or your company and bag it and package it for what you would normally play for cookies or something like that, that didn’t even have an originality.
This would be your brand.
So it’s something you really, lolitacoffee.com.
I’m sorry, lolitaroasters.com is the website.
Hope you guys are going to have a wonderful Saturday.
It’s a great day outside.
Again, if you want to reach us in our office, 615-367-0819.