Welcome to the Dr. Friday Radio Show! In this episode, we have tax expert Dr. Friday take on the latest tax updates, answer the caller’s questions, and talk over the following topics:
- Sub S Corporation, LLC Partnership, or 1065, due September 15, 2022
- Can I File Another Tax Extension?
- October 15, 2022 Is the Tax Deadline for Individuals for 2021
- Is There Any Advantage to Paying Cash Versus Getting Student Loans
- What Is The Corporate Tax Rate in 2022
- Dr. Friday’s Tips on Contacting the IRS
- The Biden-Harris Administration’s Student Debt Relief Plan
- How To Find Out How Much You Owe To the IRS
and much more!
Transcript
Announcer 0:00 No, no, no, she’s not a medical doctor, but she can sure cure 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 0:27 Good day, I’m Dr. Friday, and I’m here live. So if you’ve got questions, I know there’s a lot of things happening. The biggest thing is if you have a Sub S Corporation or a LLC partnership or a 1065, then you know that tax day is 9/15, assuming you filed an extension, which is why it’s really crazy around here at my office at the moment, only have about five days left to finish up a number of tax returns.
Dr. Friday 0:32 So if you have not filed your taxes for those types of entities, remember they are due on the 15th of September, there are no more extensions. Often though, other questions I’ve been getting this week, “Can I file another extension?” Nope, no more extensions out there for you guys, you have to file those tax returns, or you will be filing for late fees.
Dr. Friday 1:16 And those can be pretty hefty $300 per month for each shareholder up to I think it’s like $1,000 or something per shareholder. So you can end up with multiple 1000s of dollars very quickly. I had a guy that had 60 shareholders and they had not filed on time. And you can imagine it was a very hefty building. Goodness, it was a first time offense, and we were able to get it waived.
Dr. Friday 1:38 But my point being you rather do it on the right time at the right place versus waiting for something like that to happen. So if you want to join the show, if you’ve got a question about filing your taxes, because we all know October 15 is the deadline for individuals. This is for the tax year of 2021.
Dr. Friday 1:56 And if you haven’t filed like myself, and you’ve got PTO taxes that are due, then you need to go ahead and start making sure you’ve got that information. If you want to join the show, you’ve got a question maybe one of the reasons you haven’t filed this because some things come up like sale of real estate and inheritance.
Dr. Friday 2:10 Those are often some of the big ones this last year, or maybe change of jobs or something along that line and you’re not sure how to handle it, I can at least head you in the right direction. You can reach us here in the studio at 615-737-9986. The number here in the studio for the show. And you can you don’t have to leave your name or number anything special you can call yourself Joe Schmo as far as I’m concerned, just ask your question.
Dr. Friday 2:39 And hopefully, the whole purpose of doing the show for the last 13 plus years is really just to get people on the right track to realize there are other ways sometimes in doing things. And I guess today’s show I want to bring in I had a really unusual situation where, you know, the fact is, I’ve been doing taxes for 25 years, some of you guys have been with me just as long and totally appreciate that.
Dr. Friday 3:04 But we do taxes with the idea that those tax returns would be like my own, I need to be able to justify the entries and do things on them. And most of my clients in all honesty, I believe, you know, trust me to do the right thing, because that’s what they’re paying me to do.
Dr. Friday 3:20 Well, I had a situation where this is bad for tax preparers, in my opinion. But a gentleman was basically preparing taxes for people of his own culture. And based on what he was charging, I honestly don’t know what his thought was. But the bottom line is he was putting entries to reduce their taxes. So they got refunds. Well, here’s a surprise. They were done incorrectly and now the IRS is auditing these individuals, and they had no idea. I mean, they really did not have any idea of how to read tax returns.
Dr. Friday 3:53 They just assumed that the information at least that’s what I’m being told was on the tax returns correctly. And here’s the downside to this anyone. You pay a professional and you hope that they will be there when a love letter comes or if a situation comes up that they’ll be able to help you deal with that situation and to resolve any tax issues.
Dr. Friday 4:13 But if you’re dealing with somebody that doesn’t put their name, or maybe they do but then they’re not available to answer questions when it comes time to doing the taxes or the love letters arrive, then you need to find out more about that person. You need before you sit down have someone do your taxes.
Dr. Friday 4:29 Ask them will they be available? If a letter comes in? What will be the process? How will it be handled is not always the fact that the preparer did anything wrong at all. IRS comes back and changes your tax return because they say you didn’t report something that wasn’t on the tax return. How do we fix it? How do we deal with the issue? These are the kinds of things you need to be asking because in this case, these people are going to owe several $1,000. We’re going to have to go through an audit and we’re going to have to deal with this issue and the sad thing is one day had one person he talked to some friends and there was a another person.
Dr. Friday 5:03 And my concern is there can be a large number of people that have had this happen. And the IRS once they find a trend are very likely to pull those returns prepared by that individual. So just a point of interest. If you’re looking at a tax person or you’re talking or you have someone, ask them those questions, find out what exactly is their plan, because in the perfect world, you never receive a love letter from the IRS we none.
Dr. Friday 5:27 I mean, the perfect world, the IRS doesn’t even know we exist. But statistically, or even just you live long enough likeliness is you’re going to end up receiving a letter or you’re also going to have if you’re an entrepreneur, a business owner, you’re likely to receive them for some issue. Even if it’s not an audit, it may just be simply underpayment of taxes, overpayment of taxes, tax document missing, those are often the majority of letters we get. So anyways, you got a question, let us know.
Dr. Friday 5:57 So let’s go to Wednesday. Okay, Wednesday is on the phone. I love it. Hello, this is Friday.
Caller 6:05 Yeah, I thought about that when I called in. Like my question, and my mother may have been with us, it’d be two years is coming up on two years. And she does get like a pension and Social Security. But she doesn’t have to file taxes anymore. She has no property. No nothing. But we were told because she lives with us and is considered basically a dependent because we pay for a majority of everything for her monitor care, well, her caregiver we pay for but minus like her prescriptions and stuff she still pays for. But with that being said, how do we file that with our taxes? Because usually my husband used to do our taxes. And sure we’ve never had any problem that now we’ve got. I mean, with kids, it was one thing, but now with an adult, we were like, what? How do we what do we do?
Dr. Friday 6:55 It’s a great question. And it’s a fairly easy answer, what the biggest thing is, depending on the amount of her pension, that you make sure Social Security is not concerned earnings or income. But if she has a pension, and she’s contributing that to the household, or even her own care, you need to make sure you’re covering 50% of her care, which I don’t think is a problem, because you’re giving her room board, utilities.
Caller 7:18 Her pension is like $560 a month.
Dr. Friday 7:22 Okay. And that’s probably barely covering her prescriptions. Yeah, I mean, I’m just saying, I mean, we all hope to have it. But so the differences, what you’re going to do is just the same place you used to list your children, you’re going to list mom, and you’re going to list her as other dependents, and she would qualify as a $500 credit on your tax return.
Dr. Friday 7:43 And I mean, every dollar counts of this, especially with the cost of medical and everything going, and especially if she’s not filing now, you know, that did mess a few people up back in 2020, and 2021, because they were claiming their parents, and then the parents didn’t qualify for all of the stimulus. But I don’t see the stimulus coming down the pike again for a bit of time. So I don’t think that should be a problem. And that and that she would definitely it sounds like from the conversation, she would definitely be your dependent.
Caller 8:13 Yeah, that’s what we were wondering because she uses her like I said, her pension that she does get, she uses it, she’s got two dogs. And we basically make $300 on that at the vet just a few minutes ago for their shots.
Dr. Friday 8:28 Where those parents would do for our dogs, right? I mean, seriously, my sister, I bet I almost hate what she makes the food run. Because I mean, next thing you know, she has bags of dog food and bags of treats. I mean, oh my gosh, we have one dog and there’s more treats in this house than there’s food in this house.
Caller 8:46 Well, thank you for that. And thank you. Thank you have a good day.
Dr. Friday 8:51 You too. Hey, all right. Let’s go ahead and hit Daniel in Nashville. Daniel, what’s happening?
Caller 9:02 I got a question in reference to this thing to do with eBay went before the January this year it was 20,000 in sales for you had to do anything now it’s down to 600 are supposed to be getting a 10 99k. Can you bring people up to speed as to? I mean, I don’t have receipts from stuff that I’ve owned and sold or I’m not sure what to expect.
Dr. Friday 9:29 Okay, so bottom line is what we’re understanding now from them is that of course let me update people are listening. Daniel, just so Silva may not know what we’re talking about. But if you happen to have an account with Amazon, eBay, any of those and you use their merchant services like Pay Pal or any of that, at the end of the year, if you’ve sold like he was saying up until recent until the last tax change.
Dr. Friday 9:56 They basically said hey 20,000 or more or less you weren’t going to have to report it, it was basically going to be considered personal. I mean, a lot of us use eBay and different sites like that to sell old furniture, different things. So anyway, so then, you know, now they changed the rules.
Dr. Friday 10:16 And like Daniel freeing up, it’s now $600, which is the same as any of us that may work in a job where if I do a tax return, that’s $700, theoretically, a 1099 can be issued, this is a 10 99k from merchant, here’s what they’re telling us, Daniel, they’re saying two things, one, and I’ve been meaning to do this, and I haven’t, and maybe you can actually do this.
Dr. Friday 10:38 If you can look in there and see if there is anything, they’re telling us, there’s going to be an option that says that it’s personal versus business, that we can choose an option saying it’s personal versus business. Same thing with Venmo, and a couple of the other apps where money can be exchanged, that were saying that it’s a personal and they’re not going to turn it on or count that towards the $600.
Dr. Friday 11:02 I did, I haven’t looked and I’ve been meaning to, but I need to go on because my in our family, sometimes someone will go out to dinner, and we’ll give all the money. And then they’ll you know, they’ll pay the bill or something. Right. So it’s, it’s nothing to do a tax bill that could look taxable, if they’re gonna say $600, we do that two or three times a year.
Dr. Friday 11:22 Next thing, you know, the person paying the bill could end up with a 1099 from demo for personal dinners, you know, I mean, I do have quite a few people that clean up grandma’s house, I have gotten a number of people that have older relatives, and they the kids or the parents, they’ll go in there and they’ll list all kinds of things, and you know, sell it now, you know, in theory, grandma doesn’t have a receipt, the person isn’t passed away. So there’s no step up and basis in inheritance.
Dr. Friday 11:51 So if the IRS ever audited you or me, when we do something like that, we have no paper trail, like you were saying, it’s not like you saved your receipts from when you went and bought your T shirt. That turned into being a good cool, someone wants to buy it for, you know, $10. And you’ve already wore, you know, whatever I mean, you know, secondhand and you sell it or even some people that go through their closets once a year and sell a bunch of their clothes, they don’t have the tags, or the receipts or any way of proving.
Dr. Friday 12:18 So I will say if you are a person in the future moving forward, we can’t change the past. But if you’re a person that does a lot of eBay, or any of those types of sites, where you’re reselling your clothes, or you are doing trying to think of the one posh or whatever it is, all of them are required to do the exact same thing that Daniel brought up, which is there going to be 1099 s for over $600 sent to us.
Dr. Friday 12:45 If you don’t have your receipts, in theory, if ever audited, you may have to pay tax on that money. My suggestion is also according to tax law, we’re able to recreate some information if you can possibly recreate any of it. I’m not sure I don’t think I could go back and find it. I mean, I’m an accountant. I don’t think I could go back, I might be able to go back and show where I went shopping at a certain place.
Dr. Friday 13:11 But would I be able to find the receipt or only a receipt that says my charge card had $200 on it, I wouldn’t be able to tell you what I purchased that day. So again, you want to be able to in this would be a great my understanding according to the IRS. And what they’re telling us is that we have the ability to check that it’s personal and they will not 1099 us.
Dr. Friday 13:32 That’s what I’m being told, I have not yet went on. So Daniel, that would be a task I am putting on to you my friends, since you brought it up. It’s all your fault. No. If you go into your eBay account, if you could go into your eBay and I’m trying to get on my Venmo now but if you can go in and just look and see if there’s anything in there that tells them that this is a personal account, you know that you’re selling something that’s personal versus business.
Dr. Friday 13:57 I’d be interested in eBay if that’s even an option on Venmo I don’t see anything on my Venmo account. It’s set up as a personal account, but I’m not seeing anything in there that’s telling me or telling them that this transaction that I just did is business or personal.
Caller 14:16 I haven’t I haven’t seen it either and I understand there’s a few senators is trying to get this change back to what it was but once again.
Dr. Friday 14:27 Even if it happens unfortunately for you and me we’re looking at it happening for 2022 Unless they can backdate it I don’t see anything in here that tells them that we have the ability to, you know, to change it because it just basically says in here profile it doesn’t have anything but your name and then under your types of accounts. It says personal but I don’t attacks.
Caller 14:57 There’s gonna be a lot of people out there it’s gonna be the 1099 K And then some sales less than 20,000. But still say five 6000 They’re gonna get a bill, it’s gonna catch them off guard, and it’s gonna kill eBay next year.
Dr. Friday 15:13 Oh, there’s no question. And then here it basically says Venmo is required by the Internal Revenue Service to provide information to the IRS certain customers who receive payments from the sale of goods of service and crypto transactions through bimbo. If you exceed the IRS threshold, $600, then we will be sending you a form, I’m going to exceed it because I already know that I mean, I already know that.
Caller 15:37 You can start items and that’s why they are hiring the 85,000 IRS agents to go after little things like this.
Dr. Friday 15:53 Yeah, I won’t disagree. I think they’re gonna have some fun trying to get at 5000 people, but I will say they did pass under the US Department of Education. I just read today, where they passed. And they’ve already sent out like a million dollars worth of student loan forgiveness for people in public service. So that would be teachers, people working. So if you go to work for the IRS $10 billion of forgiveness 175,000 public service people. So that may be a great incentive to work for the IRS, because you may actually qualify for, you know, for forgiveness on your student loan that you agreed to pay for in the first place.
Caller 16:33 Oh, yeah. And if you I enjoy your show, and if you’ll stay on top of this, and just keep us informed that there’s a ton of eBay sellers out there. That, you know, just $100 a month is helpful.
Dr. Friday 16:46 Yes, you’re absolutely correct. And again, and I know I have clients that every year asked me and up until now I have not had to deal with because it wasn’t, it wasn’t a business. It was taking personal items, family items and selling them. And I think that’s what the IRS is trying to define. But I don’t know if they’ve, if they’ve done it the right way.
Dr. Friday 17:06 Because unfortunately, you know, let’s be honest, there’s a lot of people that use eBay and Facebook and all them to sell personal items. But we’ll find out more Daniel, let’s be I will keep you up and formed. And I’ll see if I can find any more information of what kind of documentation that can help make us audit proof. Okay?
Caller 17:25 Thanks so much.
Dr. Friday 17:27 Thanks, Daniel. All right, well, I’ll take a quick break, we get back, we can go to your phone calls. 615-737-9986. We’ll be right back.
Dr. Friday 17:45 All righty, we are back here live in studio, you can join the show easily 615-737-9986, taking your phone calls, talking about all my favorite subjects taxes. And I will tell you, in all the research that I’ve done so far, what Daniel was talking about the 1099 K, and that’s gonna be a huge one this year, I agree with him, I think there’s gonna be people going back to the old garage sale, because it’s not going to give them as much but they don’t get to 99 case.
Dr. Friday 18:22 But I will tell you, you do have an option either doing I think it’s like 21 unless they change the tax code for 2022. Or, which is just other income. Or you can do a schedule, see if it’s a legitimate business. Let me tell you this, though, first and foremost, if you get a 1099 K. Do not ignore it, that’s the most important thing.
Dr. Friday 18:46 Because it is without a chance or question that the IRS will come and change your tax return. And they’re going you know, there’s not going to be any deductions, there’s nothing else you can do. It has been done and taken care of. And you know, you’re going into paying a penalty or not, that’s, you know, and then penalties on top of it. So you either need to track it.
Dr. Friday 19:12 And you know, you’ll have your eBay expenses, and you’ll have your shipping expenses and things like that. And then I will say, you know, we’ve known this since I don’t know, February, March that this was happening, and love most my clients and you know, all I can tell you is if you’re an individual that does go out, I have a couple people that actually go out to other garage sales locally and they pick up things or they go to Walmart in places and they buy certain things and then they put them back out there a that is a business.
Dr. Friday 19:42 And if you’re a person that just cleans out your attic, the IRS will say, well, at some point that addicts got to be empty, right I mean, so unfortunately, if you are cleaning out your attic, you’re gonna want to document that at least to the best of your abilities. That’s all I can say.
Dr. Friday 19:57 And I will keep everyone in the loop I have looked a little bit on eBay and then Mo, and I’m not showing anything where they’re allowing us to change or do anything to, you know, to make any alterations or anything else, it’s going to come in as a 10 99k.
Dr. Friday 20:14 All right, so if you have questions, if you haven’t filed your taxes for 2021, again, I’m pushing it because it’s less than almost 30 days for your personal tax returns, and only about five days for your business tax returns, if you’re on a 1065, or 1120 s at least. So you do need to make sure these tax returns are filed.
Dr. Friday 20:35 Otherwise, penalties and things can come back in there. As we all know, there, there has been some changes. And one of the big questions I have on a lot of people is the student loan, you know, how can I apply everything I see right this second. And if someone knows better, it’s not my expertise, because it’s not necessarily a tax thing. But I’m looking and most of them, I’m not showing where you can apply yet.
Dr. Friday 21:01 There’s a lot of organizations out there, when you Google that says, hey, it’s going to open up soon, you can go ahead and start the process. But I don’t know what that process is going to be the DEP borrowers in the state across the country benefiting from temporary changes. Because of this, more than a billion borrowers have already received additional credits towards forgiveness, you might want to go to US Department of Education website, that’s where I’m at.
Dr. Friday 21:27 So just get some details, there seems to be a couple of different policies most of them having to do as far as I can see teachers, nurses, veterans, government employees, and countless other dedicated service to your country type of public public services. Maybe if you work for a nonprofit, federal or state organization, many of those deal now because of the inflation Reduction Act or something along those lines, because some sounds like they had some other that’s going to come into play and and go and see what we can do.
Dr. Friday 22:00 But that did come into play. And that will you know, we’ll all we can do is follow it and see it we have we do have the inflation Reduction Act that happened in 2022. We know that happened back on August 16. Probably not a lot of actual tax changes to be honest in there, there is solar and other types of systems that you can now invest in that will last longer evey cars, there is some credits out there be really careful, because the kind that a lot of my clients at least talk about Tesla’s Hummers a lot of them, they are not qualifying for the Eevee credit.
Dr. Friday 22:39 So if you’re looking to buy something with Eevee credit, you might want to double check with the person selling the cars, who’s available, what’s available, I mean, it does come up to $7,500. And it’s not expected to expire till with the new bill inflation react, they extended that out to 2032. But I will tell you, you must be careful, because there are several different ones that do not qualify.
Dr. Friday 23:11 And some of the ones they brought back in, I’m not too sure. If if it’s going to you know, I just don’t want you to buy a car and then think you’re getting $7,500. And then someone like me does your taxes and boom, we tell you sorry, that car is not on the qualified list. You just need to make sure that whatever it is that you’re buying, and hopefully you’ll can get that information directly from the buyer or the seller, right?
Dr. Friday 23:34 Because they should know what cars because you do have to make VIN number data purchase, etc, etc. The phase out percentage if there is one, some cars may not get 100% some may get less or more. All right, we’re gonna go ahead and kick into our second break of the time.
Dr. Friday 23:51 So if you’re holding your breath, and you’re like, I have a question I need to understand this particular thing, or this is what happened to me. I’d be more than glad to either help you or lead you in the right direction. All you have to do is pick up the phone 615-737-9986. And we’re going to be right back with the Dr. Friday show.
Dr. Friday 24:22 All righty, we are back here live in studio taking your phone call. So if you’ve got a question now, you can certainly call us back at 615-737-9986 is the number here in the studio. And, you know, again, we’re talking about very simple things. Basically, you know, what can you do to save taxes? What do you need to make yourself? Audit proof? I received an email just this morning.
Dr. Friday 24:53 One of them was asking, is there any advantage to paying cash versus getting student loans? See, in my mind, the only advantage to one versus the other would be you don’t have to pay the interest, but I do know is some loans. It’s, it isn’t always about that. I mean, you’ll still qualify for all of the educational credits, depending on your income, things like that.
Dr. Friday 25:18 But otherwise you, you will have no need to worry about the interest, right? Maybe that’s what we keep seeing now. In some cases, they’re getting loan forgiveness. Now. I mean, that’s a great question. Because somebody pays for everything in cash, there’s no loan, are they forgiving the interest and not the principal?
Dr. Friday 25:39 Are they actually forgiving the entire loan, I mean, that means that they never paid for that education up to 10,000, or 20,000, depending on what you’re reading here in the net. I mean, that doesn’t make a lot of sense to me. I mean, I can understand forgiving the interest that you might have had to pay. I know I had someone come in the office the other day, and she’s, she graduated 20 plus years ago, but still had a student loan. And she’s been paying every year and thought she eventually would pay it off. And when we did the calculation, she is paid this much in interest, then she borrowed 20 plus years ago. And again, that that is a little crazy, I guess.
Dr. Friday 26:15 But you know, many of us that purchase homes. Now, if you don’t make those extra payments, the principal, you can easily add 100 or 100, you know, depending on how big the home is, and your mortgage. But you can add a lot of money. When you look at how much the actual amount when you pay it in full compared to 30 years later, or 15 years, depending on what you do.
Dr. Friday 26:36 So all I’m really saying is interest is accumulative, and it will add up quickly. And so in her case, obviously, if she’s sitting on the money, my idea would be is to pay it in cash, because otherwise you have to get into the situation. And right now we’re not seeing a lot of interest being paid for money sitting in the bank compared to the amount of money it costs for us to borrow.
Dr. Friday 26:59 Sometimes it used to be where you’re making a percent and interest. And you could borrow it for 5%. Well, that was sweet, because then I would have said, No, invest the money in something paying you eight go ahead and borrow and you get 2% free money. But again, that that is not a game we have right now on the table. And I will say that in this situation. Again, I don’t know what’s happening with loan forgiveness, my understanding, it’s not going to apply to kids in school right now only people that have already graduated.
Dr. Friday 27:29 But since I can’t seem to find the black and white of the exact tax law that says exactly who’s going to qualify what’s going to qualify, and when all we can do is just keep moving forward with the best of the abilities that we have, and how it’s going to be possible for us to maximize. Again, if you’re a person that wants to have certain types of energy, that being solar or other things like that there are some tax provisions in the inflation Reduction Act, that may be something you’d be interested in.
Dr. Friday 28:03 There’s quite a bit of environmental protection. things in there. Of course, we all know about hiring revenue officers in that being said, they are I mean, they’ve already came out and said a large number of them are going to be used for audits. I mean, if you talk to anyone, the other part is supposedly going to be used for customer service. Here’s my biggest fear on revenue officers being hired today is they don’t require them to have any education.
Dr. Friday 28:32 So how are you going to have someone learn? You know, I mean, I’ve been doing this 25 years, and I still learn things all the time? How are you going to have someone that can audit efficiently without having them being educated, at least in accounting or taxation. So we’re going to find out how that works.
Dr. Friday 28:49 They’re going to maybe get some crash courses, and then, you know, carry the IRC with them. And that way, when they audit, they can just open up the book that’s I have had that happen. Always impressive when the revenue officer is looking up the IRC code that you’ve quoted to them, so that they can find out if it applies or not, not really the best plan.
Dr. Friday 29:07 So it is a matter that you know, there will probably be I mean, we can’t keep spending money without auditing and one of the best places to audit and I will tell you the income bracket they’re looking at you may be surprised it is not the middle class. It certainly isn’t the upper class because the upper class already have a 15% people making over a million dollars. People making less than a million dollars have a point one to 3% chance of audit people over a million dollars have a 15 plus percent to be audited.
Dr. Friday 29:36 So they’re more apt to be audit already they prepare for that. So it really is the low lower income people making less than 50 or $60,000 that are qualifying for child and earned income credit. They have already done some studies and found there’s a lot fraud. There’s people claiming other people’s children. There are people claiming children that are not that are not their true dependents and getting earned income credit and if they You can put a fraud, it’s a multi billion dollar fraud business.
Dr. Friday 30:02 So if they could stop that, that would put a little money in the pocket. I don’t know if they’ll ever be able to collect the back numbers, but they stop it moving forward, I believe is what their plan is. So that is the individuals that are number one to be audited. And then of course, you’re going to have Schedule C individuals, small business owners, those are usually top of the pecking order, because in most cases, they will find a problem and many small sub single, sole proprietorships.
Dr. Friday 30:29 Because people will write off their cell phone for their kids, they just write off their cell phone bills, which happens to have two or three children on it, or they’ll write off, you know, utilities, but it’s the cable system for their home, which again, you have two or three kids living in that home.
Dr. Friday 30:46 So even though you need cable to do it, you can’t write off 100% of it and just assume that the cable being used for the rest of the family is free. IRS doesn’t really see it that direction. So there are rules and regulations. But I do know that there are many times when I reviewed for people, their you know, cell phone bill, you know, they have them in their spouse and one or two children and they write off 100% of the cell phone.
Dr. Friday 31:08 And it really should be closer to a quarter to 1/5 of the bill. And like I said same thing with cable and different things like that. So if those are the individuals, they’ll have the highest also miles. I can’t tell you how many times I’ve asked to talk to people about their miles and they still don’t have miles logs, they don’t have any outline to their miles, they just basically estimate those numbers.
Dr. Friday 31:31 And those will be the numbers that will most likely be triggered for an audit. miles are almost always on the table if there’s miles on it, because they have found that very few people have done anything as far as tracking those miles. So if you’re a small business owner, especially a Schedule C, that can be single member LLC is or their sole proprietorships. You know, make sure you’re using a system you’re tracking, you’re using mileage IQ or even a paper log. It doesn’t have to be technology guys, it just needs to be you know, I’ve got plumbers and people that put in tons of miles.
Dr. Friday 32:05 And in some cases, they’re not tracking enough of the miles. Because sometimes what they’ll they do an estimate, I guess or something, but you know, you change vehicles, you do different things, and you’re not sure what you need to do? Well, that’s what you need to do. You need to make sure you’re tracking your true legitimate expenses.
Dr. Friday 32:23 So that way, you know, if for some reason your number gets called and you’re doing deal with the IRS, it’s not such a hassle. If you know you’ve got the basic information in there, then it’s great if you think that the numbers on your tax return, like I said earlier in the show with the people that had had other people prepare their tax returns, and they really don’t know or even understand what the numbers are.
Dr. Friday 32:43 They just assume that the numbers are right, then that person could be in trouble. Because again, tax law pacifically says the person signing your name on that tax return Friday birth, if I signed my tax return, I am the person responsible for those taxes, no matter if they’re done correctly or incorrectly.
Dr. Friday 33:01 I am going to deal with the IRS directly. Would there be recourse if I hired an EA or a CPA? I would say yes, if they were done incorrectly by that individual, most of us will have insurance or the ability to make it right. If it’s done by someone that’s just a tax preparer. Maybe not they may not carry no insurance, they may not have the ability to negotiate or deal with the IRS directly.
Dr. Friday 33:26 Because if you don’t have an EA or a CPA or an attorney, then you don’t have someone that can actually represent you in front of the IRS, which is very important when it comes to representation of your taxes. Right? I mean, do you want to have to sit and talk to the IRS personally? I mean, I’ll be honest, if I was if I personally was being audited, I would not represent myself personally, most likely, because it’s personal people. And then the IRS revenue officer starts doing this and doing that.
Dr. Friday 33:53 And you’re sitting there going, “Oh my gosh, did I do this? Did I do that?” You want somebody that looks at it as a business and knows how to handle it and knows how to come back with the proper answers in and I mean, it’d be like me fixing my own car seriously. And that’s something you don’t want to happen, because trust me, I’ve had some car issues lately. And I’m not going to fix them no matter how much I want to try because it’d be worse, not better.
Dr. Friday 34:18 So if you’ve got questions, or you’re dealing with IRS issues, or maybe you have a friend or a family member that has some issues and you’d love to see them get it taken care of because I can’t tell you how often people wait until they’re back on their feet till they recuperated or they have more and then you don’t have negotiating power. If you’ve got assets if you have a home or 401 K’s or anything like that that has a equivalent to money cash in the bank because you sold your primary home and now you know you need to deal with something then you need to think about when you’re going to deal with the IRS. It is always better when you don’t have those things when you hear all those ads on the radio and people talking and they say, “Oh, we negotiate with the IRS for 10 cents on the dollar.”
Dr. Friday 35:04 Those are people that do not own a home. Those are individuals who do not have $100,000 or $25,000 sitting in the bank account. Those are people that don’t have assets, ability for the IRS to collect against. So in a real world, most of us have some. So the question really comes down to is what can we afford? What can we do to negotiate? You have usually payment plans, partial payment plans, offering compromises and non collectible, those are the top four basic ways to deal with the IRS.
Dr. Friday 35:37 Some are going to be better than others. But not dealing with the IRS is absolutely not an option in the big picture. If you want to be able to put your kids through school and do FASFA, if you want to purchase a house. You know, even you know, the fact is, if you owe the IRS and you’re putting money in a 401k, think about it.
Dr. Friday 35:56 The IRS is going to say that 401k is ours, you’re taking our money and saving for your future, but you didn’t pay us first. I mean, you know, so you need to make sure you understand how the system works. And which way it’s gonna go live it is let’s go ahead and take a quick break. And then we can come back to the phone lines. This is the doctor Friday show you can join us at 615-737-9986. We’ll be right back.
Dr. Friday 36:21 All righty, we are back here live on the radio. All right. Let’s see Gary. Hey, Gary, what’s happening?
Caller 36:44 My wife’s mother passed away. And she’s in her property. And she got a little money out of it. And I just wonder, of course, she git retirement from the government, you know, saying that no big mouth, you know, but I just want to have she’s supposed to make sure that we do it so regular, like, when we have our taxes fill out or what?
Dr. Friday 37:13 Right, it will go on and it will go on your tax return on a Schedule D. And if it’s inherited property basically. Did she sell it as soon as I mean, within months of when mom passed away? Or did they hold it for years or anything?
Caller 37:28 I think a couple of years.
Dr. Friday 37:30 Okay. So what’s going to be needed is that we’re going to need to know how much the property is worth at the time of mom’s passing. And then depending on percentage, your wife had what we sold it for we can get because she should have that. So the difference would be the gain. So if it was worth 200,000. And we sold it for 250. We have a $50,000 gain we pay tax on.
Caller 37:59 It was worth more than that for it. They had to come down a little bit.
Dr. Friday 38:03 a bit of a loss theoretically, and that happens sometimes they didn’t sell to a family member, did they Gary?
Caller 38:14 Yeah, it was sold to my wife. Then we sold a family member it was sold to another individual.
Dr. Friday 38:23 Okay, so bottom line mom passed away a couple years later, they sold was it your wife and some other family members that she just have a percentage of the property?
Caller 38:32 Yes, there’s a percentage, right? She only pays her percentage, right?
Dr. Friday 38:36 Right. She only has to worry about her percentage. But again, whatever it was worth when mom passed away, and then whatever they sold it for the difference would be a gain or loss. And no matter what she put in the pocket, does it make a difference? It’s really just the difference between the value at the time of mom’s passing and the value of the time that was sold.
Caller 38:56 Right. Now she filed it wasn’t in my name. So she decided her her right.
Dr. Friday 39:03 That’s correct. But I mean, do you guys file jointly?
Caller 39:06 Well, we used to but we haven’t filed. We’re both retired you know, I’m 72 and and she’s well up there, I won’t tell her age.
Dr. Friday 39:15 That’s alright. That’s alright.
Caller 39:17 Just couldn’t wait. We made enough. You know,
Dr. Friday 39:20 well, might be better. I mean, depending again, what can I ask if it was over? 50? I mean, again, doesn’t sound like there was a game.
Caller 39:30 Yeah, it was all were you talking about her age or the what we got for.
Dr. Friday 39:33 No, let’s keep her age because we don’t want her upset with us. We want to know how much the difference that she actually profited from this. So the difference between when when mom had it, when mom passed away what the value was and when we sold it what the value was due we had no those numbers at all, Gary.
Caller 39:53 Not really, and I think it’s probably worth less when she was living it was when she you know three years later
Dr. Friday 39:59 Right, it should have been I mean, it should normally would happen is two years ago, the property would have been worth, let’s just say 200,000. But now if we sell it, it would be worth 300,000. You know, I mean, property usually appreciates, usually. But I don’t know, I mean, not all property. I mean, that’d be perfect if everything we did did that. But you know, so that’s what she needs.
Dr. Friday 40:21 And then you need to look at her percentage. And then if it if her profit after the difference of those numbers, and her share is under 50,000, or under 100, you could have a 0% Capital Gains pretty close, depending on your guyses other incomes. But you know, you need to get those numbers. And I’d be more than glad to let you know, but you may file together because it’s one of the few areas we don’t have a penalty for marriage. So you know, if she makes if she has a healthy capital gains, it may be better for you guys to be married this year on a tax return is all I’m saying.
Caller 40:55 Okay, thank you very much. Thanks, boss.
Dr. Friday 40:57 Thanks, boss. All righty. So if you have questions, again, not too hard, you can reach us we only have a minute or two left on the radio 615-737-9986 is the number here in the studio. What I do want to make sure is again, I’m gonna reiterate it tax season for 2021 is almost over. And I know that’s crazy, because a lot of you guys think of April as the big deadline. But for many of us, October 15 is the major deadline.
Dr. Friday 41:29 And I also want to reiterate that that does not extend to the amount of money you owe. I have people that you know, file their taxes in May, June and July. And then they get this sweet little love letter. It says we’ve added money to you. Because you filed them late. You did? It’s not so much the paperwork was filed late. But you did end up paying late because you sent the check at that time. All right. Let’s get Robert really quick. Because when how much time Hey, Robert, hey, what can I do for you?
Caller 41:59 When I when you go to file for a business license, it always usually asks you what type is it? Are you factoring items and selling that? If I’m doing both? Do I have to have a license to do both or just one?
Dr. Friday 42:14 Just one.
Caller 42:15 Okay. And the second question. I have a 1099 contract employee, but I’m also self employed as a licensed home inspector, can I write off my mileage on both of those? For traveling for work on my vehicle?
Dr. Friday 42:30 Well, yeah, because once it’s over, both of them are sole proprietorships, just different ones, you know what one being, and you would want to track them. I mean, since they’re both sole proprietors, the IRS wouldn’t really care if you put them both on the same schedule.
Dr. Friday 42:42 See, but for your purposes, you might want to track them separately, just for the record keeping to know which ones making money, but especially if it’s the same vehicle, it probably doesn’t make a big difference. So it makes sense. Oops, I lost them. All right, well, we’re getting down to the nitty gritty.
Dr. Friday 42:58 So let’s talk about how and what you need to do. If you need help with taxes, you’re getting love letters, you’re not too sure which way to go. And you’ve probably heard a ton of ads on radio and TV. One thing that makes my firm different is you’re going to deal with me, you’re going to deal with my firm, you’re going to have a face a name, a phone number, you’re not going to be put through all those big companies.
Dr. Friday 43:19 And what’s going to shock you most of all is we’re not going to bill you just to do something that we can’t do, we’re going to make sure that whatever we’re doing is going to be in compliance with how we’re handling it. So meaning if you don’t, you don’t need an offer and compromise. Why am I doing an offer and compromise for you, if you need to be doing a payment plan, or you need to be making changes to your current year so that you have the ability to do something and move forward and get out of tax problems.
Dr. Friday 43:46 We’re going to work with you under that situation, we are not going to turn around and say Oh, this is what’s next or or let’s start out with $5,000 now and in $500 a month, and we’re going to get you squared away not knowing what it would take to square you away. Also not going to just because you owe two and a half million dollars or in some cases, a million dollars, I’m not going to charge you on how much money I save some of these companies actually work on a percentage basis to a point.
Dr. Friday 44:15 Again, my work is based on how much time I’m putting into it. And that’s what you’re going to pay for one way or the other. But it’s not going to be based on if you owe a million dollars or you owe $250,000. So you want to deal with someone that you can actually talk to and have face to face, then you need to call our firm. That’s what makes us different. We’re here in the Bretton Woods area.
Dr. Friday 44:35 And we will be more than glad to talk to you about how to get the IRS back on track with you maybe filing back tax returns, you may find out you don’t actually have to file as many returns as you think. And then you’re going to have to you’re going to have to actually make sure that you have all the proper information and documentation and then we can find out do you actually meet an OYC should you be doing a partial payment plan should you be looking at making adjustments so that you can deal with the IRS.
Dr. Friday 45:05 And in some cases, I’ve had people that have just decided to get a line of credit against their house and pay off the IRS. Because sometimes you have more equity in your home and the ability to borrow sometimes you don’t have the ability to borrow. So these are the kinds of things we have to look at and understand if you need help. My phone number directly is 615-367-0819. You can also check me on the web because you have absolutely no idea who this crazy person is. Even though I’ve been here about 13 years on the radio 25 years doing business in the Brentwood area, you can go to drfriday.com.
Dr. Friday 45:48 You can also email me because sometimes I get it radios are always difficult to deal with. If you want to email you can email friday@drfriday.com. Again, one more number at the office 615-367-0819. Don’t forget to file your taxes. That’s the message for today’s show. Don’t forget to file your taxes very important. penalties can be eased if you file your taxes on time. Hope you guys are enjoying this rady rainy Saturday, and we’ll check you next Saturday. Call you later.