Welcome to another episode of the Dr. Friday Radio Show! In this episode, Dr. Friday takes on the latest tax updates, answers callers questions, and talks over the following topics:
- Tax Extension deadline Oct. 15 to file your tax return
- Tax Tips For the End of the Year From Dr. Friday
- FBAR Extention Until Oct. 15, 2021
- How To Be Prepared for the Advanced Child Credit
- Certain Limitations Contributing to A Roth IRA
- Standard Deduction Changes for 2020 Tax
- Does the IRS Know How Much Money I’ve Gifted Someone?
- How To Know If You Are Paying Penalties and Interests
- Tax Changes Done to the Capital Gains
- The New Charitable Contribution Deduction
- How to Get In Touch with the IRS
- Get Back on Track With the IRS
and much more!
No, no, no, she’s not a medical doctor, but she can share a cure for your tax problems or financial woes. She’s the How-To Girl. It’s the Dr. Friday show. If you have a question for Dr. Friday, call her now. 615-737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday.
Dr. Friday 0:21
Good day. I’m Dr. Friday and the doctor is in the house. We are all working on our last big weekend for the final numbers for the individual and corporate.
Dr. Friday 0:38
If you’re level 20, your due date is 10/15 which is next Friday. So now’s the time to hopefully sit in front of that computer when it’s a little bit quiet, I hope and make those numbers sing for you so that way. And I have quite a few people to be quite honest with you I am in the process of working with many people or you know, my clients at least will email me things that are coming up things that have changed.
Dr. Friday 1:05
And there, you know, we have quite a few people that sold real estate. It’s that simple. So quite a bit of real estate. And in doing so you may have created some tax situation, especially if it was rental real estate because rental real estate can usually have recaptured capital gains along with recapture of depreciation sorry, which is ordinary income plus the capital gains.
Dr. Friday 1:30
So we might need to make sure that you’re covering both of those. So that you are ready, when comes few more months and we get ready to start looking at doing taxes, that we’re not telling you that you owe another, you know, $50,000 in taxes. I know in the last just today alone, I’ve had three people I’ve been working with clients that have sold real estate that has been rental real estate, and all of them have had some pretty good tax bills, one of them only paid like 40,000 and sold it for like 410,000. So obviously in those situations, you’re looking at some pretty big capital gains.
Dr. Friday 2:06
So if you’ve got questions because it’s not just straight across the board 15% if you’ve got questions, give me a call, you can do it here in the studio at 615-737-9986, taking your calls, talking about pretty much all things when it comes to taxes.
Dr. Friday 2:25
So if you’re in the process of finishing your 2020s, or prepping for your 2021, you know that there’s going to be certain things like some changes, the standard deduction in 2021 is going to be 25,100 for married filing jointly, 12,550single and 18,800 for the head of household. This is including inflation. So every year, well go up a little bit.
Dr. Friday 2:51
I do want to make sure individuals that are receiving the advanced child tax credit that you have prepared that information. Especially, it’s just going to be a little confusing in my mind, because maybe I deal with a lot of people that go two different directions. But income has gone up. A prime example is if you sell a piece of real estate and you’re getting the advanced child credit, it may come down to a situation where you might need to give this money back.
Dr. Friday 3:24
I mean, it’s possible that you’re getting money right this second, that isn’t going to be money that you’re entitled to. Now the likeliness of that happening is pretty rare, married filing jointly will basically start cutting out at 400,000 single individuals 200,000.
Dr. Friday 3:38
But those individuals that I was talking about, you know, are obviously individuals that their normal, ordinary income will actually go up those same numbers for 2021. Adoption credits will start phasing out for single people between 214 fully phased out at 254.
Dr. Friday 3:58
And that’s the same for married as well one of those married penalty ones that you have interests on educational loans. You know, again, if you have student loans, if you have an income of more than 70 maxes out at 85 for a single individual, you will not be able to claim the interest on your student loan.
Dr. Friday 4:17
The same thing for married filing jointly, it’s 140 and it will max out at 170. If you make more than 170, you’re not going to get $1 of your student loan interest. If you have children in college American Opportunity or lifetime. For individuals that are single, those individuals will start phasing out at 80,000, for the American Opportunity, credit and 59,000, for the Lifetime Learning credits, that one’s always a problem because let’s be honest, hopefully, if you’ve got a college education, then you might be making more than 59,000.
Dr. Friday 4:51
Those numbers will go up and they’ll start at that number and they can kind of phases out by about 65 for single people on the lifetime and about 8590 American Opportunity doubles. First joint married filing jointly 160,000 for American Opportunity you can make before you start losing that credit, and 118,000, you can make on lifetime credit. Same situation on those basic active retirements. If you have the money you put it into an IRA, as long as you make less than $75,000.
Dr. Friday 5:24
For active participant plans for nonactive meaning, if you’re in a business and they’re participating in there, you may have some limitations. If you are just an individual putting money into your own IRA, there are very few limitations on how much money you can earn for those issue situations.
Dr. Friday 5:42
So again, there are certain limitations contributing to a Roth IRA, everyone always tells me “Oh, I can always contribute to a Roth IRA.” That’s not true. If you make more than 139,000 as a single person, or 206,000, as a married couple, Roth IRAs are not on the table. So there are certain limitations. And if you’re planning and trying to work your way through the best situations, you want to sit down and figure out how that’s going to work both for you and for those individuals.
Dr. Friday 6:10
I’m trying to deal with all kinds of things. I had a person that we talked a little bit about divorce, they’re in the process of getting divorced and, you know, they were they will be divorced before the 15th of December. And I’m telling them at that point, that means you’ve been single for the whole year of 2021. And the gentleman’s like, “Well, wait, I’ve supported the family, I’ve done this, I’ve done that.” It doesn’t make a difference.
Dr. Friday 6:33
If you divorce before, my suggestion was a push it off till the first week of January. But you know, but you know, either way, it’s kind of sometimes difficult because getting a husband and wife, this particular couple is actually on the same page. But very often, they don’t want to file together, they don’t want to claim things together.
Dr. Friday 6:51
They don’t want to do anything together. So they don’t want to make that work for him. But if you are in the midst of doing a divorce, taxes are a big part of that. And you do want to make sure that you’re taking the time, you know.
Dr. Friday 7:03
It’s better to give each other the money than to give Uncle Sam the money. And that’s really the option in many cases, because sometimes you just leaving money on the table that, you know, just because you don’t want to really talk to each other. So not good advice.
Dr. Friday 7:14
All right, let’s hit Jim in Nashville. Appreciate the phone call. Hey, Jim.
Yes, Dr. Friday, my question is about the gift tax. And I made a fairly large gift grandson this year, in 2021. And, you know, it’s my understanding that you can do excess amount above what it allows, you can put that against your estate limit. When do you file the tax when you file the paperwork for all that?
Dr. Friday 7:51
That would be filed in the year it happens. So in the case that we are talking 2021, you will file a 706 Gift Tax Return for that. You’ll list the dollar amount, you’ll back out the 15,000 that you were allowed to give him. So let’s just say it was 50,015 would come out you would report 35 coming from your lifetime. And you have to give them their name, address, and federal or social security number.
Okay, so you would do it in the year that you did it.
Dr. Friday 8:21
Okay, exactly, yeah, in the year that you do it, which is not I mean, it’s a really easy form. And it’s basically just the paper trail, really. But we do have quite a few of those. But right now the lifetime limit is 11 million right now. I’m not sure exactly what’s going to happen if they change that which is on the table. But at the moment, you’ll just need to file that form along with it. It’s a separate form, but you know, at the same time you file your personal tax returns.
Okay, thank you very much.
Dr. Friday 8:53
No worries. Thanks, man. Great question.
Dr. Friday 8:55
Because again, seems like we’ve had quite a few people, parents are pretty awesome. You know, I mean, I’ve, I’m one of those aunts, so I don’t get to necessarily claim to be a parent. But I have a lot of great clients and parents seem to be, especially when inheritance comes in, or something large, like they sell a piece of real estate or whatever.
Dr. Friday 9:15
So often a parent gives or pays off something or gives kids a gift to be able to buy a house, those kinds of things. And anytime it’s over the $15,000 and there are certain ways like if the gentleman, his grandson is married, theoretically he could have given his wife 15 and his grandson 15 if it was only 30,000 but sometimes that also keeps the money coming outside of the family tree or descendants.
Dr. Friday 9:47
So there are certain loopholes you don’t want to possibly do that with but all that being said, it’s one of those things that you do really want to be able to track and make sure you put it down. I know I have People come up to me all the time and say, “Well, how is the IRS know I gave someone so much money?”
Dr. Friday 10:05
Well, like everything in taxes, really, there are certain documents that are filed. If the money is used for a piece of real estate, for example, a gift letter has is attached to that particular purchase. And therefore, there is a paper trail that gifting was involved. If you just gave someone $25,000 out of your bank account, there’s probably not an easy way of tracking if you’re ever audited, it’s right there in their face, and they will find it but you would have to be audited to find that. So, you know, I guess I like to sleep at night.
Dr. Friday 10:37
So I kind of just like to make sure that whatever I do every year, I do to the best of my ability track or whatever, if I’m supposed to 1099 or if I’m supposed to get a gift tax return, or whatever it might be, it doesn’t make a difference, just want to make sure that everything’s done.
Dr. Friday 10:52
So that way I can check off that year and move forward. Because it’s already become play complicated enough when we’re actually doing what we can. I know I had an email today from one of my clients that I’m not too sure about, but somehow their 2019 is showing he filed on our side and obviously not showing filed at all on the IRS website, yet they received the money.
Dr. Friday 11:13
So it’s one of those wonderful things and you can’t reach anyone at the Internal Revenue Service. If there is anyone that works for the Internal Revenue Service listening, it would be totally awesome. If we were able to actually reach somebody, I have been keeping track of a log and actually send it to our tax advocate that we representative we talked to.
Dr. Friday 11:36
And to be quite honest, you know, three out of the five phone calls I make are usually hung up on disconnected after waiting 45 minutes, hour and a half. The other day, I actually did it five times. And I did finally the fifth time get somebody. And the fourth time was the hardest because I waited an hour and 40 minutes and the person who got on the phone said hello, etc, etc. And then we lost the call. I don’t know if she hung up on me or somehow the phone call got lost. But I had to start over and another.
Dr. Friday 12:09
So I was on the phone pretty much eight hours that day waiting for the IRS to get on the phone to help with resolution. And the person I actually got was absolutely no help. She was pretty much saying, “Well, if we can’t see it in the computer, even though you’ve got proof of filing proof of paying,” whatever, they weren’t going to do something. So it wasn’t I wasn’t in the right place. But that being said, it is very frustrating.
Dr. Friday 12:35
So if you’re trying to reach someone on the IRS, all I can tell you is patience. And just keep calling it does happen. But plan on an entire day now just plan the entire day to basically try to reach somebody and if anyone has a phone number that actually is a worthwhile calling. You know, if someone has found for collections, usually who I’m dealing with, please feel free to share it with everyone else.
Dr. Friday 12:58
Or maybe you shouldn’t because then everyone will call it alright so if you want to join the show, you can very easily 615-737-9986. If you have a story to share about calling the IRS or just basically giving people inspiration to say, “Hey, I did finally get through and they helped resolve something.” It’s always nice to hear. Because you know usually I’m only hearing when there’s a problem. 615-737-9986 is the number here in the studio, we’re gonna take our first break and we come back we’ll get to some more your emails and phone calls. We’ll be right back with the Dr. Friday show.
Dr. Friday 13:47
All right, we are back here live in the studio, taking your calls live. So if you want 615-737-9986. We are taking your calls, doing all things exciting. So we are talking about different strategies or different things that are coming up for 2021.
Dr. Friday 14:12
I do want to make sure that I hit a couple of people that just because there are so many changes we’ve had as far as we know guys, 2021 is going to be April the 15th deadline, which means you do need to pay it in your IRA on or before April the 15th for the year of 2021 April 15 to 2022 right? Not trying to confuse you. So we do want to make sure that you’re taking advantage of that
Dr. Friday 14:38
I mean, the markets have been doing pretty good, I’m far from being an expert, and make sure you talk to a financial planner if you’re looking for tax advice on that. But just want to make sure that everything is showing up and that you’re doing what you need to do. And then we’ll talk a little bit about some capital gains and maybe some steps of what we need to do for some tax planning.
Dr. Friday 14:57
I think it’s Dolores in Gallatin?
Yes, good afternoon.
Dr. Friday 15:03
Good afternoon, sweetheart. What can I do for you?
Well, I’m on social security and I earn less than $21,000 a year, do I have to file a return?
Dr. Friday 15:17
Well, how do you earn the $21,000? Is it by working through self-employment or?
Social security for under 12, and I take some money out of my supersaver, which I’m allowed to do, I think only 4,000 a year. And then if I add that, it’ll be less than $20,000.
Dr. Friday 15:43
Gotcha. All right. Yes, you are correct. You don’t have to worry about filing a tax return at all if part of the money you’re talking about is your Social Security. So you would be, you know, in a tax-free, just make sure they don’t withhold any taxes when they take the money out of any kind of retirement.
Yeah. I told them that. Thank you very much.
Dr. Friday 16:05
Thank you, sweetie. Bye. All right, that was a great question, because that’s the kind of thing you want to think of.
Dr. Friday 16:11
If you could live in a world where you don’t have to file taxes. Now the only time I would actually have anything for Dolores, or anyone like Dolores is if you actually are sitting on an IRA, there is potentially some wiggle room where you might want to convert 5000 a year just converted to a Roth if you don’t plan to need the money if you’re going to use the money that I went through the conversion anyway because you’re already at a lower tax bracket.
Dr. Friday 16:35
But if your goal is, “You know what, I’ve got everything paid off, I live fine off my social security and my small pension and I’ve got this IRA sitting out there, your children or grandchildren or whatever could inherit that money tax-free, and they’ve changed some of those rules as far as how long you can keep them in a regular IRA. So it’s a good plan.
Dr. Friday 16:54
Alright, let’s hit Lisa, in Nashville. One of my people, self-employed. Hey, Lis.
Hey, Dr. Friday, I’ve got a question for many, several years now. I’ve been 1099 employees. And my husband and I always file jointly. And he always has paid in enough taxes to where we always got a refund.
And due to COVID, and different things, his position is changed. And I’m afraid he hasn’t paid in enough this year to where we may end up owing. So, do I still have time to pay in? or what should I do to make sure that I don’t run into a penalty situation with self-employment taxes?
Dr. Friday 17:37
Great question. And, yes, you still have time because well, you can always make a payment anytime. But usually, January 15, would be our last quarterly for the year 2021. So you have time to sit down and try to do a quick calculation.
Dr. Friday 17:52
I mean, if his income has dropped, you know, the biggest thing is you have is the self-employment side, the Social Security, Medicare, you know, that’s always the higher tax, it seems like in some cases than the withholding itself. But you might want to just compare your numbers roughly from 2020 to 2021. And see because if his job has reduced he maybe hasn’t gotten the bonuses or whatever, which usually take out large chunks of taxes, which help offset your income.
Dr. Friday 18:19
You might want to start squirreling away a little extra money because the worst thing is to have to pay taxes or get behind on the IRS on top of possibly lower income as it is. But yes, and if you need help, I can certainly do that off the radio, whatever.
Dr. Friday 18:32
But we would need to, you know, just do a simple comparison night 20 to 21 at this point, and just make sure that the income and the withholdings are close enough that you’re, you know, able to do and then if it’s only a few dollars, it’s not a big deal because you had a refund in 2020.
Dr. Friday 18:47
You wouldn’t be qualified or have to make quarterly estimates in 2021. But I’d hate to see you have to say, “Oh, you know what, Lisa, you owe $4,000.” And Lisa’s sitting there going, “Holy moly,” you know? It’d be better to start pre-empting it now. So you have time before the April 15 deadline to get that money together if possible.
Okay, could I make an appointment off-air or whatever, with your office and come in and kind of go over our whole situation? As I said, we’ve moved into a whole new realm with he’s growing his retirement now. And like I said, there’s just a whole different situation tax-wise, from what I’m used to always do our own taxes. And I’m afraid at this point, I may be not doing something correctly.
Dr. Friday 19:31
Not a problem. My direct line, you can call Monday, Lisa is 615-367-0819. And you’ll hear it on the radio a couple more times. But 615-367-0819 just call the office Monday, we’ll get you on the schedule.
Great. Thank you so much. I enjoy your show.
Dr. Friday 19:51
Thank you for calling. I appreciate it.
Dr. Friday 19:53
Alrighty, so again, if you’re in the process, you’re working and you’re trying to figure out and there’s a lot of changes that have happened. For many people in the last couple of years, between COVID, some people went ahead and went into retirements because of kind of the COVID.
Dr. Friday 20:08
And the cutbacks at work and the way things have changed. I have quite a few clients that have gone into, I don’t know if you want to call it full retirement, partial retirement, and still working, but working in a different situation. So it really does lead to a different like, like Lisa was saying, what was working perfectly because everybody had it, you guys kind of have a doubt.
Dr. Friday 20:30
Now it changes because of your retirement, maybe you’re not having enough withholding, maybe Lisa needs to turn into start making quarterly is on her own, so we don’t have to worry about and this is all doable, but it is different. So What you don’t want is that huge change.
Dr. Friday 20:43
That’s what is always the hardest. Even sitting on my side of the desk to be quite honest, I really dislike telling someone Oh, you owe 25,000 unless they’re prepared for it. Because sometimes my clients, they’re used to hearing those numbers, and they’re already prepared. They’ve got the money, and it’s no big deal. But other times it is.
Dr. Friday 21:01
Alright, let’s hit Robin before the break. Robin in the Boro. Hey, Robin.
Hey, I wanted to ask. I am 65 in 2021. And I have heard that when you turn 66, and you want to go back to work, that there’s no limit on the income that you can make as far as the penalty against your social security. Is that true? And if so, is that the complete year that you turn 66? Or do you have to wait until after your 66th birthday?
Dr. Friday 21:33
Well, I think it’ll be a little bit higher because most of my sister who turned 65 in January, her full retirement is 66 and a half or 66 in like July or August, something like that is her full retirement age.
Dr. Friday 21:47
So Medicare starts at 65. Theoretically, if she was to retire, and but until she hits 66, and three quarters, and then it’s what you’ve earned after that, they take it after. So you could work up to that and make it what you normally would make and not affect your Social Security.
Dr. Friday 22:03
But once you get on Social Security, you are going to be limited to the amount of money you can earn. But if you wait for your full retirement, the bottom line is no penalties.
I’m sorry. I’m actually on survivor benefits. My husband passed away several years ago. So I have been on that since he passed away in the month actually that I turned 60 years old. Because I have not worked all five years now.
Dr. Friday 22:34
Right. Well, you work and makeup to like 17,000 or 18,000, right without penalty, just so you know. But if you wait till you hit full retirement age, and you might need to go on to social security because it is based on it. But it sounds like your birthday and my sisters are relatively soon.
Dr. Friday 22:49
So it’s either 66 and a half or 66 and three quarters. But when that date comes you can go out and get a full-time job and they won’t take they’ll tax your Social Security. Nothing’s free in life, Robin, but they won’t take any of your money. I mean, you know, I’m saying okay, and right now you can work and make up to 18,800 I think.
Okay, all right. Sounds great. Thank you.
Dr. Friday 23:10
Thanks, Robin. Appreciate it. All right.
Dr. Friday 23:12
Well, we were gonna take another break here in just a minute. If you want to join the show. It’s really easy. And these are great questions, guys. And I’m not an expert on social security and I’ll look up but I know you can go to SSA.gov and you can look on there. That’s the website for Social Security Administration. They just sent out a new email saying that they’ve upgraded the page and you can get a better look at what your Social Security might be.
Dr. Friday 23:38
But anyway, that being said, you can look there and make sure your retirement dates and exactly how much money you can earn while you’re on early retirement for Social Security. So if you have other questions, join the show, please. 615-737-9866 is the number here in the studio. We’re going to take more of your phone calls more of your emails.
Dr. Friday 24:03
So if you’ve got questions and you’re a little shy totally relate to that. Don’t hesitate to go ahead and feel free to email email@example.com or call 615-737-9986 We’ll be right back with the Dr. Friday show.
Dr. Friday 24:27
Alrighty we are back here live in-studio so if you’ve got a question or you have a situation where you’re like, “I’m not sure where to go,” this is where you want to start to want to make a phone call want to make the first conversation then this is it 615-737-9986 is the number here live in the studio.
Dr. Friday 24:52
I know it’s a beautiful weekend out there. It’s awesome to be really this sunny and nice. You have to go move some rocks when I’m done with the show. It’s a big day for me, a big day well, actually, I’ve got to finish two tax returns, but it’s all gonna come out in the wash.
Dr. Friday 25:06
So if you need some help doing something, when it comes to your taxes, not rock movie, give us a call at 615-737-9986. All right, well, we’ll talk a little bit about capital gains.
Dr. Friday 25:20
Because so often people will come in and say, “Hey, I calculated my capital gains, it’s 15%. Boom.” Not always guys. So let’s talk first there is a 0% capital gains rate, but you have to kind of be on the verge of like, have no other income if you got a decent capital gain.
Dr. Friday 25:39
But if you’re single, and your overall income is 40,000, and that 40,420 21, and that includes your capital gains, then you could have zero tax on that. So if all you had was $40,400 in capital gains, and no other income, you would pay zero tax on that, which goes up to 80,000 for a joint and 50 for 100.
Dr. Friday 26:02
For a single person, then we get into the 15%. This is where it gets a bit tricky, okay? Because 15% for a single person is $40,401 through$445,850, pretty big right? 880 up to 501, basically, and 54,000 up to 473. So you say, “Okay, well, that’s 15%.”
Dr. Friday 26:26
But if a single filer exceeds 200,000, or a joint filer exceeds 250, and yes, another marriage penalty is involved here, then you have to add another 3.8. Well, if the top two records of these higher-income taxpayers are 23 for long-term capital gains, and it can be up to 40,800. But there’s a 3.8.
Dr. Friday 26:53
So for anybody that is making over $200,000, including your capital gains a single person, so your income and all of your investments plus your gain is over 200, everything above that is going to be at 18.8%. The same thing for anybody that is married, and your total income, including your capital gains is over 250,000, everything above that is going to be at 18.8%, then anything that goes over 445, including your income and everything else you’ll be at 23.8%.
Dr. Friday 27:33
For this is all for long-term capital gains. So the reason I always try to get my clients to call me when it comes time to working on taxes, and, and all these different things is because these numbers come in and we’re in a progressive, so everything up to this number is going to be there and then everything over this and that way you have some rough numbers.
Dr. Friday 27:53
I don’t want you to come into this whole thing and you turn around and say, “Oh, wait for a second, guess what? I thought I was only taking 15% on 200,000.” And yet your incomes 200,000. Now you’re at 400,000. And really most of that income will be almost at 20. So you’ve underestimated you may have reinvested the money. And now you all know Sam, we’d never want to owe Uncle Sam.
Dr. Friday 28:15
They are the world’s worst loan officers seriously world worst. Alright, so here are a couple of tips I wanted to give you guys for year-end. Again, we are looking at April 15 is going to be our filing date or extension date. I’m going to suggest people should be doing trial tax returns projecting any kind of income and deductions. So that way you can also adjust your W 4.
Dr. Friday 28:40
So if you have had some different changes, maybe somebody has changed jobs, maybe you’ve had multiple jobs in one year that is often what throws in my so my clients. I had a gentleman the other day come in and he owed $19 now to me that was a perfect situation. But he’s been normally getting a refund. And the reason he didn’t get the refund was that he had had two jobs that year instead of just his usual one job and they didn’t take out as much tax. And that kind of thing can throw you in a bit of a tailspin.
Dr. Friday 29:14
If you expect to have income that is not subjected to withholding, for example to 99 R, self-employment tax, capital gains any of those then you may or may not if it’s a continuous thing. So let’s say that you are getting social security but you’re still working. We know that up to 85% of your Social Security is going to be taxed so if you’re in the higher you know if you’re making any basic income.
Dr. Friday 29:40
So do you want to go ahead and account for that on your paycheck withholding so that at the end of the year you’re not getting hit with either that are paying quarterly taxes? Quarterly’s are always a pain, but those are the kinds of things we also want to look at. Is there a place where we can just have a little bit more come out on one side so that the money coming in is all tax when it acts Hit your bank account? It’s so much easier to live when you have that.
Dr. Friday 30:04
I will tell people to keep an eye on Congress and some of the tax reforms, we’ve got quite a few things going on up there. Good, bad, ugly, we don’t really know right now. But it’s very important that we keep an eye on that, because things can change by December 31, they can have some serious effects that may go into effect going forward.
Dr. Friday 30:22
Theoretically, some of my tax experts, attorneys that work in the tech side of making laws say that they can theoretically, backdate some of that, not sure how that would happen. But either way, just keep your eyes on them make sure and if you can control when you’re going to receive certain incomes, or take certain deductions, that’s also a time to think about it.
Dr. Friday 30:44
Let’s say you came into a large dollar amount. And maybe you also want to give so much money to charity, that your children charity and actual 501 C3, then you might want to consider that to be the same year because maybe giving the money to a charity would actually turn around and give you some tax advantage and may not be dollar for dollar, but it would be something and if it’s already basically something you want to do, then make sure that you’re watching out for that make sure you got the right direction, right?
Dr. Friday 31:13
I will bring it out when we’re talking about charity. Again, anybody that is 70 and above that is taking required minimum distributions from your IRA, or 401k, or any of those. Keep in mind that you can give money directly to the charity called a qualified charitable deduction, you can give money directly from up to 100,000, from your IRA directly to the charity, and it becomes 100% deductible. So you don’t have to worry about itemizing. You don’t have to worry about exceeding the standard deduction at this moment.
Dr. Friday 31:51
And right now, we do have a new one where last year married or single It was $300. Above the standard deduction. We are getting charitable deductions this year. It’s 300 for singles 600 for married. So again, add to your checkoff list. And this is solely for cash. This is not for people that are giving to Goodwill, clothing, shoes, household goods, this is cash going to your church or other organizations.
Dr. Friday 32:18
And again, also I know a lot of people, myself included Angel Trees, giving to, you know going shopping and buying that is considered clothing or gifts. So it is not going to qualify as a cash contribution unless you write a check directly to that charity, and give money to them, which is also a great way to give money but keep track of the cash up to 600.
Dr. Friday 32:42
But again, if you’re 70 and older, and you’re taking required minimum distributions from RMDs. And remember, they did change the law, some people could be 70, up to the age of 72. Now you have you don’t have to, but the law says you don’t have to take RMDs until the age of 72. But that was just changed a year or two ago. So we have people that are 70 up to 72, taking RMDs and talk to your financial planner or your tax person or whoever and talk a little bit about the qualified charitable deduction.
Dr. Friday 33:15
I fell in love with those. A lot of my clients are using them because I have probably some of the most giving clients in the world. But let’s be honest, if we can give and save tax dollars, I think that’s my job to make sure they’re going to give no matter what. But if they can do it that way, that would be the way to go and keep more money in the pocket or give more money to your church. Because you’re not having to pay as much in taxes, then make a difference, however, you want to do it.
Dr. Friday 33:39
But definitely talk to whoever’s handling or helping you with your finances, because that’s a very, very good tax deduction that you can use. So we’re going to get ready here in a minute. And we’re going to take our last break. And then so if you are waiting to try to come on in and have some conversation or if you’re thinking about, well, I’m getting ready to do this, or I’m going to do that maybe you inherited something and you’re wanting to know, do you need to set aside any money to cover taxes on that inheritance because some things can be taxable, and many things will be tax-free under this current tax law.
Dr. Friday 34:15
It is something that they are talking about in Congress trying to change. But as of right now, it is what we have going on. So if you have some questions on that, or maybe you haven’t filed taxes in a number of years, I am an enrolled agent licensed with the Internal Revenue Service to do taxes and representation.
Dr. Friday 34:32
It’s really all I do is tax and represent people in front of the IRS of the state of mostly state of Tennessee. I have a couple of cases in California. But we basically help you get whatever the resolution is that we can get. Sometimes it’s great sometimes for most people, it’s better than what they have and resolution is what you’re actually shooting for.
Dr. Friday 34:54
So if you need help you file taxes for a number of years. You’re trying to figure out where do you get started, you’ve got a friend or a child that has maybe not been doing everything the perfect way, all you have to do is give our office a call. And that way, then we can set up a free consult, oh, he’s my first meetings are always free guys, because I need to make sure that we’re all on the same page, and that I can help you do something and make it work versus, you know, it’s great to charge people. But the fact is, if it doesn’t work, I want everyone to have the same experience.
Dr. Friday 35:23
So if you need a free consult, all you have to do is call my office Monday morning, and we’ll get you on the calendar. And we can show you how we can help you either get yourself straightened out with the IRS, or just help you figure out are you doing the best you can with what you have doing your taxes and things like that.
Dr. Friday 35:39
So if you need help, you can join us in our office. And also, you can also email firstname.lastname@example.org or check us out on the web at drfriday.com. And there’s also a place where you can email right from the website.
Dr. Friday 35:57
So we’re gonna take our last break. And if you want to join the show, you can at 615-737-9986 and we’ll be right back.
Dr. Friday 36:15
All righty, we are back here live in-studio and we’re waiting for your phone calls at 615-737-9986. And we’ve got Gary on the line. Hey, Gary, what can I do for you?
Yes, I had a question about, you’d mentioned earlier in the show about earning money after you turn 65 and drawing Social Security. And the question I had, the same limits apply to money you’re taking out of a traditional IRA?
Dr. Friday 36:51
That is an awesome question. And the answer is no. It only applies to earnings. So W2, 1099, that kind of stuff. You can make money from an IRA to receive a rental income. No problem.
That’s good news. Thank you.
Dr. Friday 37:11
Yeah, no problem. Thank you. Great question. Thank you, Gary.
Dr. Friday 37:15
Because I forget sometimes when I’m talking that sometimes the individuals will have other income sources like if you’re actually in retirement, you may be taking money from IRA or 401k or Roth IRAs. And you know, making that work.
Dr. Friday 37:32
But that is not a part of what the Social Security Administration is talking about, they’re really looking at things that you actually would pay social security on, in essence. So you can manage your life that way, any way you like, making sure you do what you need to do.
Dr. Friday 37:50
Heads up to some of you, I know I keep talking about real estate, I guess it’s on my mind because I have so many clients that are in the process of selling, rental real estate. And I want to make sure that we are all on the same page, because the other option of not paying tax, and I know some people just want to sell so they can put the money in the bank.
Dr. Friday 38:10
And they can have that security or pay off another house mortgage, or maybe be completely mortgage-free by paying off selling one of their properties. And that’s all great as long as you paid Uncle Sam, but if you’re really just looking, because right now you could get a piece of real estate or you can sell the real estate really high and you’ve got a great deal.
Dr. Friday 38:28
Look at the possibility of a like-kind exchange. So those are fairly flexible, meaning investment property for investment property. So land building, you know, rental properties, commercial, you can usually go between those things, and I’m not an expert, I’m just gonna tell you on the tax side. But 1031 is an option that you might want to consider using versus paying the taxes.
Dr. Friday 38:57
So basically, what happens is you just roll over your basis into the next property. And then when you sell that property, you pay tax on both properties, or no matter how many 1031 exchanges you’ve done. So at the moment that is still on the table, I do know that that’s one of the categories that they were talking about eliminating.
Dr. Friday 39:15
But it is something that you do want to consider if you are an investor and you’re just saying hey, I can get a million dollars from this property and I rather go and put this in some more properties you can put it into I believe up to three properties from one sale. So you could actually diversify out a little bit if necessary when it comes to doing what you have or how you’re doing it.
Dr. Friday 39:39
So Alright, let’s get Ben on the line. Only a few more minutes. Let’s see what we have from Ben. Hey, Ben.
Hey, my wife and I make about 150,000. We live in Smyrna, Tennessee, and for some reason, the Roth IRA, I’m sorry, the Alliance tools that are. Does that sound correct?
Dr. Friday 40:05
So you said you and your wife make how much? Sorry.
Dr. Friday 40:10
Okay, and the Roth IRA?
The online tools, won’t let us get a deduction for a standard IRA.
Dr. Friday 40:22
Oh, a standard. So it depends if you’re an active participant in another plan, meaning do you have a 401k or anything at work?
I do what I put 17% to it.
Dr. Friday 40:34
Okay, so 124,000 is the max you can earn and be part of an active plant. So you are making too much, Ben.
Okay, well thank you, Dr. Friday. It’s good to know.
Dr. Friday 40:45
You can go into a Roth, though, if you wanted to. I mean, I know it’s not helping tax-wise, but it would grow, but you can’t do the IRA. Okay?
Dr. Friday 40:53
Thanks, boss. Great question, though.
Dr. Friday 40:56
Because that’s the kind of thing that happens a lot of times with my clients and, and the sad, I shouldn’t say sad, it’s a good thing. But what happens is, sometimes people will go ahead and put the money into the IRA, or into the Roth or whatever, and they can’t qualify, then we have to get the money back out or roll it into the next year.
Dr. Friday 41:15
Like right now, if Ben is doing his taxes for 2020, and he put money already in the IRA for the, well, at this point, he can’t qualify for it. But if he already did it, he’s gonna either have to roll it over to 2021 and see if his income is going to drop, or he needs to go ahead and take the money out and pay the penalty.
Dr. Friday 41:36
That’s what you have or pay the penalty. And that’s pretty much your two options, you’re gonna get hit with a penalty otherwise, so. But that’s what happens. I’ve more cases where people think I put $7,000 every year into my IRA, or into my Roth or for my wife, or whatever.
Dr. Friday 41:53
And it doesn’t quite work that way, especially when you start getting again above 124, for a married couple, jointly, and are over 75, for a single person, it will max you out, and you won’t be able to do that.
Dr. Friday 42:08
Now, I will tell you, if you’re a person that maybe makes $25,000-$35,000, and you can contribute, I would probably suggest the Roth but you still get it, there is a saver credit up to $2,000 credit that you would get the benefit for so sometimes putting money in at a lower income bracket, nothing to do with my poor boy, Ben. But at a lower income bracket, those individuals can actually reap the reward of getting some of that money back actually just for putting money aside into a retirement account.
Dr. Friday 42:38
So if you happen to be an individual, I keep trying to talk to my nieces, and all of them that are now in the workplace, many of them like you got to get used to not living off 100% of your paycheck, you need to start putting money aside into 401k is especially if your employer’s matching up to 3% or something, learn to do that early because then it’ll be a lot better than waiting and then trying to figure out when you’re 45, or 50, how you’re going to retire in 15 years, because you didn’t have enough money set aside.
Dr. Friday 43:09
So those are the kinds of things you do want to make sure that you’re visiting, and also crunch those numbers before you go and put money into an IRA. Unless you know that you’ve you know, some people they’ve worked and they’ve only made $7,000, and they want to put $7,000 into their IRA, and they’re on retirement or something. There are some benefits to doing that.
Dr. Friday 43:32
But I think they’ve known homie, this guy’s I’m no financial planner, but there may be some age, at one point there was some age limits, but they may have removed that with the tax cut, or the consolidated Tax Act, one of those may have actually changed that information. But there used to be some limitations to what you could actually put in at a certain age.
Dr. Friday 43:54
Once you hit like 70 or something, you weren’t allowed to put money back into an IRA. But I think they’ve changed that as long as you’re working. So double-check all of that with your financial planner, because you don’t want to make a make of something go ahead and put the money and then get hit with a penalty for not doing it properly. That is never a good idea, guys.
Dr. Friday 44:13
So let’s also make sure that if you’re a small business owner, again, you need to make sure that your personal tax returns which also means if you’re a single-member LLC that you have filed them by October 15 and C corporations are also due on October 15. If you have any other type of business 1065 1120 s all of those were due on 915. And you’re now late and it’s very important that you either file extensions or file on time because those penalties can add up quite a bit by just making a late filing.
Dr. Friday 44:51
If you are a C Corp we all know that the flat tax went to 21% at least for the next year or until the end of this year. And then it can go down from there and see what we actually have. So that is one of the areas that we are watching very strongly, the Congress and all of them just to make sure that we are not going to lose out on the information we have.
Dr. Friday 45:14
All right. So we’ve come to the end of the show. If you’ve got questions you can easily call my office on Monday morning, the phone number there is 615-367-0819. If you need help with doing taxes or back taxes, or just have some tax questions, feel free.
Dr. Friday 45:37
You can also email my office, which is email@example.com. Keep in mind that when you’re you know, if you haven’t filed taxes for a number of years, it’s very hard to get back on track. But if you don’t get back on track, you’re going to end up for the rest of your life. I know some people that when it comes to getting close to social security and they don’t have all the quarters in there because they haven’t filed the taxes.
Dr. Friday 46:00
So you need to make sure you stay on top of all that so you don’t have your whole life messed up for something as simple as just getting some tax returns. Even if you owe money, file the freaking tax returns we can deal with what you owe or don’t owe. But if you don’t find them, we’ll never deal with them.
Dr. Friday 46:16
So again, if you want to reach the office 615-367-0819 check me out on the web, drfriday.com. I hope you guys are having a wonderful Saturday. I will be here again next Saturday. Call you later.