Dr. Friday is back with another incredible Radio Show! In this episode, Dr. Friday talks all you need to know about taxes, including the following topics:
- The IRS Is Hiring
- PPP Money: Forgiveness
- What Do I Do If I Haven’t Received My Stimulus Check Yet?
- How Much Money Can I Gift My Child Per Year?
- Selling Your Home & Capital Gains
- Why You Need Help With Tax Representation
- Will There Be A Second Stimulus Check?
- Is The Stimulus Money Taxable?
and so much more!
No, no, no, she’s not a medical doctor, but she can sure cure your 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 at 615-737-9986. So here’s your host financial counselor and tax consultant, Dr. Friday.
Dr. Friday 0:30
Good day. I’m Dr. Friday and this is the Dr. Friday show. We are here to talk about my favorite subject, taxes. If you want to join the show, you can 615-737-9986. We’re taking your calls talking about again, my favorite subject taxes. Maybe you haven’t filed taxes in a number of years. Now maybe the time to think about making a deal with the IRS getting caught up getting everything filed. Very difficult to move forward with purchasing houses going to college. A lot of times college kids need to have parents tax returns. If you haven’t filed those, it’s very difficult to get funding. Or you’re wanting to start over and you’ve got a lot of things in the past that just happen. We can’t change the past. But what we can do is get it taken care of. So it’s not continuously coming back. So if you’ve got questions on that, or remember, coming Tuesday, if you have a business that would be people that are operating as a corporation, a partnership, a trust, in most cases, unless you’re on a fiscal year, all of those are due September 15. So that is next Tuesday. So if you haven’t filed, I would suggest that at this point, you probably better figure out something to get into a tax program because I doubt you’re going to find a tax person Monday to do your taxes. Otherwise, you’re going to have some serious late fees. Now that’s assuming that you actually filed an extension. If you didn’t file an extension, you are already late as individuals You have until October 15. And those deadlines are coming very quickly. If you don’t have someone to do your taxes and you’re still looking for help, you can go to my website, Drfriday.com. Click on appointments and set up an appointment, I’d be more than glad to still help you. I believe there are still some appointments open for us to help you get filed. Again, this is for individuals that filed an extension. If you haven’t filed an extension, then you’re late already on your individual tax returns.
Dr. Friday 2:30
Here is some good news for individuals who haven’t received their stimulus checks or were paid too little. The IRS will be able to correct amounts in certain cases in creating processes that help some people who are due to an economic impact payment but never got it or received at the correct amount. But you know, for people like identity theft, innocent spouses, or just people that made a mathematical error on their tax returns, they’re hiring about 5000 new employees. So again, if you don’t have work, might well look on the irs.gov website then look and see if there’s a job opportunity. They are looking for people to help them with the backlog of emails, calls, and obviously stimulus checks. So it’s not over if you haven’t received your stimulus check, to be quite honest, if you haven’t received it, and we’re by the end of the year, you will be able to get that Credit on your 2020 tax return that you’ll be filing come February or March or April of next year. But in some cases, they’re saying that you’re not qualified for it but you really were those the ones we just need to make sure that that the information the IRS has does make you qualified for it and that you are going to be more of a receptive audience. One group that needs to act soon are recipients of federal benefits such as social security veterans pension supplemental security income, who didn’t file a tax return for 18 or 19, who have minor children. They can use the nonfiler on the IRS. website until September 30. Let me repeat that if you are a nonfiler because of the reasons that you live off of Social Security, VA pension, supplemental Social Security, and you are raising a child that is 16 or under, they are considered a minor child. At that point, you can go to the IRS website, but only until September 22 into the information about your dependent child, it says age 17 or under but if they turned 17 in the year of 2019, they will not qualify for the 1200 dollars, you’ll still get the 500. Let’s see for those who haven’t got the extra 500 the agency announces it will be sending out $500 per eligible child in October.
Dr. Friday 4:44
So it’s not over yet guys. If you have questions and you need help, or you need more information on where to call, you can call the show at 615-737-9986. You can call our office I’ll get that number out in a little later. But stimulus checks, they are trying very hard to make sure they’re getting these things correct. In all honesty, there are just so many moving parts and the IRS is just way underhanded and they don’t have enough employees to cover all of the information that’s needed for this particular situation. So just making sure you’re dealing with that. Again, file taxes. If you have the opportunity, make sure that you do file them. If you did suffer, some people moved up here from Florida and places like that were hurricane Laura and other places have been affected. There are tax credits for you. Make sure that you’re not just rushing through and trying to figure out what you need to do. There are certain things that you can qualify for. Again, solar panels, if you’re looking at those for 2020 they are at 26% credit, you’ll get a 26% credit based on whatever you spend, so if you spent $10,000, you would get a credit of $2,600 towards your solar panels, that’s going to drop down to 21% in 2021. And probably fall off pretty soon. They haven’t actually said that. But it really depends on who you’re going to vote for and you know which way that’s going to go. So we’ll have to see what comes with that.
Dr. Friday 6:23
If you need help with filing back taxes, and you’re like, “I don’t even know where to start.” The good news is I do, and I can help you get yourself organized. I can help you figure out where to start, what years you need to file, are we going to be doing just a payment plan? Do we need a file because you just need to have taxes filed and you probably don’t owe money? Or do you have a big balance possibly due and we’re going to be looking at offering compromise a lot of times that makes a difference on how many years we have to file? Has the IRS already filed some taxes for you? So always nice when they’re able to do that for you, and that’s sarcasm. I’m especially for the self-employed because I all they do is take 100% of whatever’s been turned down, claim you single and zero, and no expenses, and then voila, now they’ve got a tax bill that they can start charging you penalties interest and failure to file and failure to pay and etc, etc. That becomes quite a situation for everyday individuals. So making sure that you know what you’re doing and how you’re going to do it is very important. Again, if you owe the IRS I know the simplest thing so often is to think, “You know what they don’t know I owe them so I’m just going to kind of keep my head down my mouth shut. I’m just going to try to I’ll get to them later.” Not always the best plan because keep in mind the IRS has 10 years to collect from the date they either file a tax return for you or the date that we file the tax returns.
Dr. Friday 7:47
So if you’re really looking to eventually get out of issues with the IRS, there are some steps you need to take. Especially for entrepreneurs guys I have had so many people come into my office and they turn around and they say, “Hey you know what? I don’t have any estimates. I don’t need to pay him I can’t pay them, etc.” But you do need to pay quarterly estimates. If you haven’t paid quarterly estimates then you know that’s going to be a problem because we kind of need to make sure that everything is working. So you need as a self-employed person, black and white. If you have been self-employed for more than one year you need to be paying quarterly. Those quarters are what’s going to keep you from getting in trouble with the IRS. Making the quarterlies is going to help you keep up with your taxes. You are not an employee, you do not have the taxes coming out. You can’t extend them sooner or later. You’re going to end up with problems from the IRS. It’s really that simple. Sooner or later. You’re going to end up with issues and then the IRS is going to be coming and knocking on your door or trying to close down your business or you’re going to have more penalties than what you would have owed originally in tax liability. If you’re going to be an entrepreneur, let’s do it correctly, you can’t change the past again. So looking at the past and thinking, “Oh, yeah, I should have done that.” You know what, that doesn’t change anything. So you need to move forward and figure out what do you need to do now to you know, get yourself back on.
Dr. Friday 9:31
We just passed September 15, not quite a few more days is our third quarter estimated payment for all of us that are self-employed, we have to pay third-quarter estimated payments. The first two were made on July 15. The third one is being paid in September. The last one is being made on January 15. If you’re not making those payments, and you’re wondering why you’re getting hit with more penalties and everything like that, it is because of the fact that you are not complying. Then you can’t make a payment plan, it’s hard to do. They won’t even accept an offer and compromise unless you’re doing quarterlies because they don’t want to make a deal with you, and then next year, you’re at the same place, you have to stay in good standing for five years. So, what’s the deal of getting everything resolved, and then you not learning. So, entrepreneurs, this is kind of my little neck on you is just that we need to make sure that we are staying up to date. We’re paying our quarterlies, we’re doing everything we need to do, and we’re making sure that you know, you are here when we have the different things on those different things.
Dr. Friday 10:38
Do I have Dan on the line? Is Dan there?
Yes. Can you hear me?
Dr. Friday 10:46
I can. I’m sorry. We are working off Skype and I am working a different way. I’m sorry. Hello. What can I do for you, Dan?
Oh, yes, ma’am. For last year for my wife’s IRA, we put in too much money. We went over her limit. When it came time to do the paperwork, I had it corrected. But the credit union still accepted it as a payment for last year.
Dr. Friday 11:18
Do you know when you made it? When did you make the payment?
Well, I write small checks and I go kind of all the way up to the 15th because I’m trying to juggle a lot of things. The check was written before the 15th for sure, but it didn’t get cleared. And when it got cleared past the 15th the amount of money that I contributed on her behalf, both of us ended up being two months.
Dr. Friday 11:50
So the beautiful thing about that is, is that you paid it in the year 2020 or some of the money was paid in 2020. If the excess amount was paid in 2020 you can apply that to 2020 instead of 2019, even though you told them that you wanted it on 19.
Oh, okay, thank you. That’s a big relief.
Dr. Friday 12:08
You know, so don’t forget that you have that credit in there. So when you get ready to make whatever contributions for 2020, you want to make it, you know, so at least if you make the additional in 2021, the same thing can always happen, you can move it from one year to the other, they actually post it as the date they receive it. They don’t actually post it to the years that we actually put them on our tax returns. But if we had to prove it, you would have checked dates that would prove it was done in 2020 and not 2019. So you should be fine without any issues.
Okay, ma’am. Thank you very much. I appreciate it.
Dr. Friday 12:39
No problem. Thank you. All right. And then I think I have Alan on the line?
Yep, you do. How are you?
Dr. Friday 12:48
There you are. Hello. What can I do for you, love?
My wife and I have two adult children. Both are married and one of them has a child. How much money can we give them each year?
Dr. Friday 13:01
So each of you, the husband and wife can give each child each husband, and each grandchild $15,000.
Okay. What happens if we give more than that?
Dr. Friday 13:14
Well, if you give more than you just need to file a gift tax return because it would come out of your lifetime credit which is $11 million? Because you’re an honest taxpaying American.
[Laighter] That’s not really making it for me. So, with the couple that’s got a child, can I just write them a check with $45,000? Yes.
Dr. Friday 13:42
So you can actually give them because it’s a couple. So it’s three people, times 15 times two, so $90,000 because you can give 15, your wife can give 15, each of you can get 45 to that family.
I see. Okay, that’s an acceptable outcome, just out of curiosity, how would the IRS or find out?
Dr. Friday 14:10
Audits. If your child gets audited, because if they go buy a house that has a gift letter, you know, they’re things like that’s kind of turned in from either mortgage companies or from one of you or your child getting audited. That’s really the only way and the odds are typically low.
So if my wife and I gave the married couple or grandchild, we gave $90,000. And they went to put that as a down payment on a home. Then obviously, whoever’s looking over the financials would say, “Well, you don’t have a whole lot of money here. Where did you find this $90,000” Is that how the IRS will finance?
Dr. Friday 14:47
Exactly because what’s going to happen is the mortgage company is physically going to have you write a gift letter to your children because they need that in their file because their files are audited every two years. So in theory, if you gave them$ 180,00, and you’re only allowed to give them $90,000, that would wait for the flag, right? If you get a 90,000, then you’re within code, and they went even, there’d be no question because it’s a husband, wife, and child, and that’s what you’re entitled to. But yes, I mean, so that would be the flag that might weigh someone to contact you. I mean, it’s rare, and it’s not very often, but that’s the kind of thing that can happen.
And so we could, it’s just in a calendar year, we could write them a $90,000 check on December 31, and another one in January.
Dr. Friday 15:30
Got it. We’ve done that more than once. Yes.
I appreciate your time. Thanks very much.
Dr. Friday 15:35
No problem. Thanks. All right. We’re gonna take a quick break. If anyone has any questions, you can join the show at 615-737-9986. We’ll be right back.
Dr. Friday 15:48
All righty, we are back here live in the studio. If you want to join the show, all you have to do is pick up the phone at 615-737-9986. Okay, so have some changes in 2020, we’re going to have a little different tax form, least based on a first draft that the IRS has put out. One nice thing or a good thing will be for people that are not itemizing. There is going to be above the line contribution for the charity of $300 or less, and this is for non itemizes. So if you give a charity $259 or $300, you’ll be able to take that plus your standard deduction. That’s going to be something new and then also, there’s going to be a line in there for people who need to reconcile their stimulus payments. Obviously, many people, there’s still some confusion who should have gotten how much or whatever. Then obviously, they’re still asking people about the virtual currency that has now moved over to Schedule 1. So so far for simplifying the tax code. I am not sure if we have accomplished that. But it has made for an interesting conversation on the tax side.
Dr. Friday 17:18
Another thing is that the IRS has hit a pause on sending out balance due notices. I know many of you have just stopped, hit the brakes jumped up, enjoy yelling, “Yay.” In response to criticism for lawmakers, IRS will stop mailing out second notices to taxpayers without sending text debt, it is taking this step to avoid confusion for taxpayers who responded to the first balance due. I have had many people that have called me and the IRS has sent them a notice including penalties and interest but yet the people mailed a check with either their return or right after the return may have been e-filed. But the problem is the IRS hasn’t gone through all of their mail yet. So they are like way behind on opening up the mail, but yet they’re sending out notices because a computer can send it out and saying, “Hey, you owe us money. We haven’t received payment. Here are additional penalties and interest.” So the IRS is postponing any new tax lien notices or anything else till September 30. Hopefully, they’ll hire those new 5,000 employees and somebody is going to get down to that mailroom because I know for a fact I have two 1040X’s but before for earlier years, not for 2019. We now can do amended returns for 2019 electronically, but for earlier years, we’re still sending some of those in and these were actually sent prior to that ability to do and they need to open up those so we can get these tax issues resolved because it slows down. So the bottom line is the IRS is trying to collect money that they may already have. Then they’re going to have to go back repost and they never send back a letter saying oh yes, thank you for your payments. We appreciate it and you don’t always any money. That would always be a nice little change for things but You know, we have hope for the future, none of that actually comes about. So either way, you look at it, it can be a good thing.
Dr. Friday 19:08
So we’re talking about taxes and resolutions and the IRS does have the Fresh Start Program. Many of you guys are some of you may hear about it, sometimes we talked about on the radio. The biggest thing I want people to know is I’ve been doing this for 20 plus years, 10 years, we’ve been on the radio here, but make sure that you understand. There’s a lot of people that advertise they talk about how they can save you 10 cents on the dollar. All of that and in all honesty, nobody can do that overnight. I mean, we have had some wonderful cases, we’ve closed some great cases where the last one just closed recently owed over 100 thousand or over 100,000 they settled it for like $7,000. Keep in mind these are individuals that their assets are either maxed out, or they have no assets that the IRS can have. So, therefore, it leads them to the ability to the IRS is basically saying, “We’re not gonna collect anything anyways.” And the time clock is almost out. So we’re willing to make these deals. For someone to say, “You know what we can help you, you know, and we can make this deal for you, then start paying us $500 or $1,000 or give us 1500 dollars down.” I mean, I’ve heard all kinds of different stories. It’s usually like $500 a month that they want you to pay them and it goes on for like two years up to some of these cases. It can take almost a year to do an offer and compromise. But keep in mind that that is just one situation and it doesn’t work for everyone. Sometimes bankruptcy spots. If you’ve had more than 36 months of collection and you’re able to go bankrupt and other issues are part of it. I wouldn’t just go bankrupt for the IRS. But sometimes bankruptcy debt is something that is brought into play. You want to make sure that you’re doing what you need to do. But the IRS has a lot of tools out there to help individuals. It’s just sometimes people you know, just want to find a fast, easy fix, and I will tell you that offer and compromise will never be a fast, easy fix. The only good thing that happens is once we have a case number, they can stop collections, which gives my individuals time to breathe, to not worry about bank accounts being levied or seized or emptied out, as well as the ability to do what we need to do to move forward.
Dr. Friday 21:33
So if you need help with back taxes, you need help negotiating. As an enrolled agent licensed by the Internal Revenue Service. Basically, what I do is like a shield, I represent you in front of the IRS. So when you need to deal with issues we need to sit down and handle it audit or whatever it might be, you need to talk to an enrolled agent. If you have someone helping you with your taxes sometimes they’re tax preparers. But they really don’t know how to do representation. That is something they haven’t taken courses or even have any idea and there’s nothing wrong, they may be awesome tax people. Some of my best friends are tax-preparers. But you want to make sure when it comes time to dealing with the IRS that you have someone that knows what the game is and how to play it. You don’t just want to jump in there and say, “Oh, well, we can handle this.” And then you might give them information that they didn’t even need or know about and open up a larger tax situation than what you might have already started with. So if you need help or you need an explanation or situation, you can always call my office and we will help you deal with the IRS or get the power of attorney so that we can represent you in front of the IRS.
Dr. Friday 22:44
If you have not filed your 2019 or maybe you did file your 2019 and you have a child that is 17, 18, 19, 20 and etc. And they worked and you always claim them as a dependent. Keep in mind 2019, maybe a year that you want to re-think that. In 2019, a 17-year-old or anyone older than that, that worked and were able to file their own taxes could have qualified for an additional $1,200, whereas a tax dependent of yours you would have only got $500. So, in many cases, it is a smarter concept not to have them on your tax return. Again, this is something that’s really only so far happening for 2019. We do not know what’s happening as far as 2020 as far as any kind of additional stimulus at this moment, all of that has frozen. I haven’t seen the Heroes Act, there’s not a lot of conversation coming about that if you have PPP money, most of us have to file something by October or mid-October. So just keep in mind that we were talking about the forgiveness and the heroes act. Most of our clients especially if you had like a less than 100,000 that you receive, we were trying to wait it out even while banks were saying to wait till the last update to do the Forgiveness application. But I am going to tell you right now that I think that we are needing to start thinking about filling those applications out. We’re in the middle of September that gives people 30 days. The US Small Business Administration which administrated the PPP began accepting the loan forgiveness August 10. Just two weeks later, the agency in conjunction with the Treasury Department released additional guidelines for small businesses. If you’re an owner and you thought you’re clear on how to apply for the PPP forgiveness, I guess it’s very confusing. You need to make sure you have all the proper documentation, no forgiveness for home office or tenant expenses, mortgage payments, it’s complicated. It has to be only from the bottom line. The new set of rules outlines employees may not be eligible for much forgiveness of their PPP loan as they originally thought because some of the rules have changed from what we originally signed on. These apply to any of them that was released after February 15, 2020, which is a large number of clients who didn’t get their money until after that. So you do want to make sure that you are looking at the US SBA website and make sure that you understand what we have going on. All right, so we’re gonna take a quick break. If you want to join the show. You can 615-737-9986. We’re gonna be right back.
Dr. Friday 25:50
We are back here in the studio. We’ve got some questions from the mailbag here, but you know what, first, let’s go to the phones. Looks like we have Pete on the line. Hey, Pete.
Dr. Friday 26:11
Can you hear me? Okay. Pete, if you’re on the line there, you can try to give me a callback. Apparently we couldn’t hear each other. So let’s go for that and see what we have going on. I have a question that came in this week and just says, I have a client that lives with her significant other and see another entertainer-month-old daughter, the babies, which is the baby’s father, she would like for him to claim the child tax credit on his return. Can she use the release of the daughter’s credit to her boyfriend and keep the other tax benefits earned income credit, etc? Or can they just agree between themselves to split the benefit? The 8332 release just so anyone wants to know that is to release the claim of an exempt child to custodial parents can potentially be used by couples who are not married. But there are additional requirements for couples who may not live together during the second half of the year. So the release form is actually designed for people that are not living together. Otherwise, theoretically, you are living together and there’s no release form for that specific situation. Then this particular couple under these special rules of separate or divorced parents, both of them may have to prove that they are supporting 50% of the child that they’re either legally living apart. Otherwise, they are actually living as a joint couple and don’t qualify for earned income credit. So be careful if you’re living with the father of your child and your filing head of household and then they’re, you know, they’re trying to claim the child as well. This could be quite a flag that would wave and you may lose a lot of benefits if you’re trying to claim benefits on both sides. So just make sure you understand how that works. Let’s see here. Looks like Pete is on the phone again. So let’s give Pete another shot. Hey, Pete. Can you hear us?
Yeah, can you hear me?
Dr. Friday 28:30
Okay? I can, sir. What can I do for you?
Well, I’m selling my home and I want to find out about capital gains.
Dr. Friday 28:42
How long have you lived in the home, Pete?
Oh, gosh. 26 years?
Dr. Friday 28:48
Okay. So here, are you married or single?
Dr. Friday 28:53
Okay, so, here’s the rule, you will pay no capital gains on the first $250,000 above what you originally paid for it. So just as an example, let’s say you paid $100,000 and you sell it for $300,000, there would be zero capital gains in that situation.
Okay, what about an income basis of under $40,000? My income is under 40,000.
Dr. Friday 29:19
Doesn’t make a difference. This tax rule applies to everyone.
Okay, well, I was told by a tax guru that if I make less than $40,000, we get a cut, but it’s 250,000 plus the cost basis?
Dr. Friday 29:34
Right. So if you sell it for above that, what he’s talking about is there is a 0% capital gains for the next 10 or $15,000 that you would have because you’re in a lower income bracket for Capital Gains purposes. But, most people unless you paid $10,000, and you sell it for 300 then you would have a Capital Gains situation.
Okay, so basically, if I’ve got a $400,000, and I’m selling it for a million. I’d have 650,000 off? [Inaudible]
Dr. Friday 30:06
Yes, 650 off, but you’re gonna pay tax on the remaining 350 because they’re going to add that to your 40. Now you’re making $390,000 for that year and you’re not going to have any break on capital gains. In fact, you’re going to end up paying about 24% on most of that. 23.9% to be precise.
Yeah. How nice the government is.
Dr. Friday 30:31
That’s what happens to rich people. Okay, rich people have to pay the tax.
I’m not rich.
Dr. Friday 30:38
Doesn’t feel like it, but they consider any individual making more than 125,000 theoretically, rich. So yeah, it’s not the greatest, of course, if you had done it to earned income, you’d be at the 36% so it’s a little better but it’s still painful, sir. Let me tell you it’s still painful.
So basically for 350,000, I’ll be paying tax of 27% on it.
Dr. Friday 31:04
Yeah. 24%, but ye.,
24%. Wow, it’s a big number.
Dr. Friday 31:11
Yeah. Make it simple math. You have a profit of you know, 25% off of that. So that’s a quarter of whatever you’re making above that 351 quarter of it is going to Uncle Sam. Yes, sir. It’s painful.
Well, it’s not that painful. I guess I can live with it.
Dr. Friday 31:30
Well, it is what it is, but a good attitude behind it. But yes, at least you’re smart enough to ask the question first, instead of me doing taxes and saying, “Oh, yeah, you know what you owe $100,000 to Uncle Sam.”
When is that due? Is that due at the end of the year?
Dr. Friday 31:47
Theoretically, 90 days after closing, you’re supposed to make an estimate.
Okay. Thank you very much.
Dr. Friday 31:55
No problem, sir. Thanks.
Dr. Friday 32:00
Okay, again, if you want to join the show you can at 615-737-9986. We’re taking calls talking about taxes, figuring out what we need to do, how we need to do it, and what is happening. The IRS is taking some enforcement employment tax laws. They’re trying to come up with better ways of making sure they’re going to get their money. I think this is interesting for the employment tax, which all employers are responsible for. In 2017, they, they had investigator-initiated 162 cases in 218, 207, and 219, 250. That’s quite a jump from 2017 to 2019. They sentenced 50 people, they indicted 73 and prosecuted 104. They incarcerated 84% of the people that basically, they did and that was up from 78. So I know we always say that the percentages are low, and they are when you consider that there are 2 million people that usually have been audited or have certain, you know, situations going and I don’t know how many I think there’s, I don’t know. Something like 200,000 people that filed 200 million people that file taxes and out of that 250 people were basically audited for some of that. So it isn’t huge numbers, but when it comes it is big. So you know, you really want to make sure if you have a love letter from the IRS and you’re trying to deal with situations, you want to make sure you have representation, do not try to handle it yourself.
Dr. Friday 33:49
Another big thing that’s waving and we had articles from the IRS is cash incentive businesses, one that receives a significant amount of cash they’re looking at which would be, laundromats, restaurants, pizza parlors, hair salons, car washes. These are ones that the IRS is looking for because you know what? Such a large number of them are not showing deposits for cash. So they’re using what comes in through credit cards or what’s being deposited into the bank through electronic transfers. And the government’s in there going, “Wait for a second, we know that there is you know, that there’s an underreporting.” And all there has to be as 25% of income under-reporting, and then you’re kind of getting yourself into actually criminal cases at that point. And there are some serious tax laws. So if you’re running a business, as I’ve always said, the best thing is you want to be able to do what you need to do. You want to be able to move forward and deal with things. You don’t want to be sleeping like this going, “Oh my gosh, am I worried about this? Lifestyle leads them to this as well as keep it on the IRS. They understand that if you’ve got a mortgage that is turned into the IRS they know you own a house with a mortgage for $200,000. Or Guess what? They even know what the appraisal value of that house is. When you buy a house, guess who gets notified? When you sell a house? Guess who gets notified? So you’re not necessarily hiding things, especially with individuals that I mean, sometimes they’ll own two or three homes, yet their tax return show they may 40 or $50,000 a year. It doesn’t always make sense. So just try to be a little bit logical before you file your taxes. I know it’s difficult to part, I finished my taxes just this other day two days ago. It’s never pretty to have to write a bigger check, but it is what has to be done. Because we want to be able to sleep at night and justify our income.
Dr. Friday 35:45
All right, we’re gonna take our last break here in a minute. If you want to join the show. You’ll have a few minutes after this next break at 615-737-9866. Remember, you can also go to drfriday.com, and click on an appointment if you’re looking to have a free consultation or taxes prepared. We’re going to be right back after this break.
Dr. Friday 36:28
Back here live in the studio. I think we still have Lee on hold. If we do, let’s get him on the phone. I’m sorry. I think the system is not working as well. Lee, you still there?
Dr. Friday 36:41
Oh, awesome. Thank you for holding through. What can I do for you?
Well, I might have more than one question since I’ve listened to a little while. Alright, the first one is probably talked to the enrolled agent that said they did an offering compromise one time for a person and they thought everything was all fine and good, and maybe the next year, they sold some timber. And the IRS came back on them. Is that a possibility?
Dr. Friday 37:14
It is, I mean, the bottom line is if there’s an asset that they have if they disclose they had the ability to sell the timber, and they didn’t, or the value of that wasn’t added into the offer and compromise, the IRS could come back and say, “You did not disclose it, therefore, we’re still entitled to that money.” Yes. So making sure that the offer and compromise have all disclosures on it is really important. Because I’ve had a couple of cases where in the middle of them, were being notified by the person or I get told something about, “Well we have this rental property that we have over here or this.” That’s all got to be told because the IRS is going to do a review of this, you know, I mean, and it can take a year and a half or two, but I’ve never had one yet. Not make it through an audit. So far, but I do know what they’re talking about. If it wasn’t on the paperwork Originally, it can come back. So it’s important. If you win the lottery, for example, they can come back because you had a lottery ticket that had a value.
Okay, let me ask you this. The situation I’m in, my health is failing. In course, I’ve got RIS just got blanes against everything, and I really need to sell everything and quit work. My health has gotten to the point where I can hardly make it through the week.
Dr. Friday 38:42
Sure. Without disclosing, we can do a free consult. But let’s just use these scenarios. Let’s say you owe the IRS $100,000. Just as a number doesn’t make a difference with the numbers anyways. Do you have assets equaling that number? Whatever the number is? If you sell it, that would be something that would be enough to pay the IRS off? or are you looking at, “Well, I only got $50,000 with the assets, I couldn’t pay them even if I owed them $100,000.” Does that make sense when masking?
Yeah, it would be close. I probably could, but then I wouldn’t have a place to live.
Dr. Friday 39:22
Right. The nice thing about some of that is, is well, depending on the situation, but some assets can be taken off the books, we have had some success. It takes a while, but you know, proving that you don’t have the ability to get the money out of the assets. They can’t force you to sell your primary home, for example, right? I mean, you have a place to live no matter what, but they can hold the asset. Now, it may be that you know what, who cares if they have a lien against the house? If it’s your primary home, you’re not moving anyways. There’s not much they can do. They can keep a lien against it, but there’s really nothing that’s gonna happen until you either have to sell it or whatever, but I’m assuming. And again, this is difficult on this side of the thing. But let’s make the assumption that you have multiple assets, and some of them could be sold that the IRS could put a lien against. If you have two homes, one of them, they could see saying you don’t need two homes, we’re going to take this property and sell it at auction and take whatever we have to pay your debt. And that could happen.
Well, the situation I mean, the house I’ve lived in for 20 years was occupied by my mother. She’s passed away. The reverse mortgage company wants their money. If I could sell my assets, I could keep the house and I wouldn’t have to move. I’m not physically able to move. But if I tried to sell my assets with these liens on it, I’m afraid that wouldn’t end well.
Dr. Friday 40:55
and you’re 100% correct. It is not. So the alternative would be giving the IRS to remove the liens on your properties possibly and part of it would be for medical purposes, right? I mean, if you no longer have the ability to work, there’s no way they can collect money.
Well, I’m still hanging on and work and work in some. The only thing that is saved me I guess from not being able to work anymore at all is this COVID-19, this has given me a vacation that my body needed desperately.
Dr. Friday 41:36
Well, that’s a blessing. It means nice to have some. But in the long run, I guess you know what you need to do is see an if there’s a way of working something else out with the IRS, possibly dealing with your health issues being unable to pay. It also depends on how old some of this debt is. Keep in mind the IRS still only has 10 years to collect So I don’t know how old the debt is that they have.
Probably three or four years.
Dr. Friday 42:08
Okay, so there’s still a good window. What if you were on a payment plan is that something at all feasible to get into? They may not mean accepted payment plan the man-made basically say, you’ve got the asset they need, they want the asset and the payment. So, the IRS may or may not know, you have your mother’s house at this moment, but it will get disclosed at some point.
Oh, they know it. They’ve put a lien on it too.
Dr. Friday 42:37
Okay. So, you’re gonna have some challenges. I mean, and this isn’t a phone call, at this point. You have the ability to pay them and they’re going to say that they are entitled to the money gets the money you paid on these houses was the money that you could have paid them if you had paid your taxes. That’s their put. So the argument would be your health would be one of the things that would be able to help but no one needs two houses, according to the government.
One of them was a rental. It’s got issues, it had a leaky roof, and the ceilings fell in a place or two. Of course, the roofs have been replaced, but the inside damage has not been repaired.
Dr. Friday 43:28
Yeah, so the value, I mean, maybe you could sell it for less than it’s worth. But I mean, it doesn’t make a difference. You know, at this point, you need that money to pay off the reverse mortgage. So you have a house to live in?
I do. I’m not for sure. But I don’t think I’ll be working by the end of the year.
Dr. Friday 43:48
Yeah. So I think that what the biggest thing is we need to look at all options and see how much money you have and how long are they going to make collections and see if there’s any way of getting them to remove and put the lien against the current home if you pay off the reverse mortgage with the money, they then would have a lien against the asset that they would have they may make consider that. But it’s a little bit trickier than just that because they’ve got a viable property and they’re going to want their share of that. That’s going to be a tricky part to prove that there’s no reason that you’re not entitled to it. I’m gonna get down to the last minute here the show, but let me give you my phone number it’s 615-367-0819. You can call me and we can set up a free consult and see if there’s anything I can do to help or if there’s any I mean bankruptcy is on the table, possibly. It’s something to think about.
All right, well, I want to get everybody pay that has a lien. I don’t want to see any of my banks. [Inauduble]
Dr. Friday 45:03
Well, there are ways of controlling that too. I’m just saying maybe something to have a conversation on at least look at all your options before you make a final one. But give me a call if there’s anything I can do to help you move forward. Okay?
When do I need to go?
Dr. Friday 45:16
Okay. Thank you.
Dr. Friday 45:19
Okay. Thanks, buddy.
Dr. Friday 45:23
Alright. So we’re getting down. So if you do want to have a tax appointment, or you want to talk and see if there’s an option for you, the easiest way is the phone 615-367-8819. You can also just set up a free consult right there on my website at drfriday.com. That way then you can get the consultation and you know, come in. You can also email firstname.lastname@example.org. Hope you guys have a wonderful Saturday. Time is flying by and we’ll be able to look and see what we have going but if you need help again, call me at 615-367-0819.