Dr. Friday Radio Show – September 23, 2023

The Dr. Friday Radio Show
The Dr. Friday Radio Show
Dr. Friday Radio Show - September 23, 2023
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Welcome to another episode of the Dr. Friday Radio Show! In this episode, tax expert Dr. Friday answers callers’ tax questions and covers various topics, including:

  • Warning about scams involving fake IRS calls and fraudulent emails.
  • The importance of being cautious with personal information and verifying the validity of payment requests.
  • Retirement planning, including when to start collecting Social Security and the tax implications of different sources of income.
  • Clarifying the tax bracket based on pension, Social Security, and 401k withdrawals.
  • Inherited funds, taxation of life insurance proceeds, and financial management for seniors.
  • An anecdote about a scam involving fake IRS calls and the significance of verifying emails and bills to prevent fraud.
  • The necessity of being in compliance with the IRS before entering into any deals or payment plans.
  • The challenges of dealing with the IRS and the value of having representation.
  • The limitations and qualifications for offer in compromises and payment plans.
  • The importance of cautious spending when dealing with the IRS.
  • A caller’s inquiry regarding tax implications when selling a house in a different state for a family member in a nursing home.
  • The tax-free limits and potential Medicaid look-back period for the sale of the house.

And much more!

Transcript

Part 1 – 00:00

Announcer: No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or your financial woes. She’s the how-to girl. It’s the Dr. Friday Show. If you have a question for Dr. Friday, call her now, 737-WWTN. That’s 737-9986. So here’s your host, financial counselor and tax consultant, Dr. Friday.

Dr. Friday: G’day, I’m Dr. Friday and the doctor is in the house. So what a beautiful Saturday, the first day of fall, but it is gorgeous out there. A little warm when you’re working outside, but I’ll take it compared to rain or any of the other things we could be having. So appreciate the weather. Hopefully you guys are enjoying it.

If you wanna join the show today, where I’ll be talking about my favorite subject, taxes. I’m an enrolled agent, licensed by the Internal Revenue Service to do taxes and representation. So that means if you haven’t filed taxes, if you’re getting love letters and you’re like, I don’t know what the IRS really wants, or you’re trying to make a deal with the IRS and they just don’t seem like it’s making sense to you why they want something, or you don’t know if you can make a deal with the IRS, you don’t understand how that works, that’s where I come in. That’s my expertise, that and just basic tax preparation.

And again, I’m an enrolled agent, been there for almost 25 years doing taxes and representation. So if you have questions, or maybe you’re pying something, you’re like, I don’t know if I sell my home, am I gonna owe taxes? If I inherit something, is it taxable income? Is it not taxable income? What’s the difference between the two? Big difference, obviously, all of us know, no taxes, taxes, never a good thing when you have to pay taxes.

You can join the show at 615-737-9986, 615-737-9986 is the number here in the studio. You can also email friday@drfriday.com. If you’re a little bit shy, totally relate. Calling a radio wasn’t something I ever really was doing until I started this 15 plus years ago. Now, of course, it feels like a second job. So if you’ve got a question or you just, maybe you have a friend or someone that you’re not sure of, you know, they’re behind, they’ve gotten divorced, that’s always a big reason, or like many of my clients, it’s one of the big reasons why people end up with tax issues.

What can you do? What’s your options? How are you gonna make it work? That’s what we do. We can help you get back on track because I don’t care what anyone, if you call, there’s national phone numbers you can call and many of them will immediately sell you something, but you’ll find out a bit different. It’s not that, you know, not that anyone works for free, but our initial consultation is always free. And we’re gonna find out, is there actually an offer in compromise, a payment plan, a partial payment plan? What can we do for you? And our billing is based on that, not just start paying us money.

I always share this story. It’s been a number of years now, probably 10 plus years. But back in a while, there was a scam that people were doing where they would call and say they were the IRS and that you owed them money. Well, I got a gentleman that got this phone call and then he immediately called one of the national numbers that were out there and they said, “Oh yeah, we can help you. It’s what you need to do. You need to start paying us $500 a month and then we’re gonna get this all straightened out for you. Turned out, I started that conversation with scam, right? This gentleman did not owe the IRS anything. He just got scammed. And when people say the IRS is going to collect, I mean, it is one of those people that we are not too happy to hear from. He did not owe any money, but they still collected for three months until he called and said something. And then he asked me and I said, “Well, who is this?” And they said, “Well, I think he said something like the county Mounties were gonna come to his house.” I said, do you even owe the IRS? Cause that was one of the things they always called our police, something other than the police. They always call them, you know, the Bobby’s are coming or the, the troopers are going to get troopers to come out to your house. We don’t use that terminology. And you ever look at the emails that come in and they’re frauds. One of the first things you want to do is really read the email. Did they, did they have something? I had one that said I needed to pay something through PayPal, but instead of a decimal point, it had a comma. And to be quite honest, I never heard of the company anyways, but it was a dead giveaway. It wasn’t in our normal way of doing. So anytime you’re thinking or you’re not sure, obviously, first thing you do is you want to call whoever it is, if it’s a bill for somebody or a product, and find out if they’ve even sent it.

Because if later, if you look at the email addresses, sometimes there’ll be like a Gmail account. I would Comcast or any collection from a major company would be coming from an email from Comcast from Google or some other email. I think that’s personally a dead giveaway, but you want to be careful. So anyways, anytime you’re not sure, definitely, because we do have cases come in all the time about, you know, someone’s identity has been taken or someone’s tried to get into someone’s bank account or, um, had an unusual one with my nephew. lives in South Carolina. And he basically had a situation where we have a rental there and a package was delivered.

And next thing you know, a police officer comes and picks up the package. And he’s like, “Oh my gosh, it wasn’t for us.” He said, “It wasn’t.” He goes, “No, no, we know that somebody had stole someone’s credit card and the credit card had contacted the individual saying that this was being delivered to this address.” They called the police and this person.

The next day our videos picked up someone knocking on the door and window trying to get someone’s attention in the house. Nobody was home. Thank goodness, but I’m just saying these things happen. They’re scary There’s not like you have any control over it so your best bet is be careful when you’re giving out that information and Always double check if someone’s asking you to pay something make sure you really owe it That’s my two cents and my bit of warning on that since it hit home very close with my nephew

So if you want to join the show, talk about taxes or financials situations, you can 615-737-9986. 615-737-9986.

This week I was in a class for the last three days taking about taxes and representation. It was really quite fascinating to be honest. And I know not everyone’s going to get excited when I use the word taxes or representation, but anytime I can find something out, I always say, anytime I take a class and I can walk away with just one thing out of three days, then it’s great, because that’s one more thing I can have in my toolbox to help the next person that comes into my office. And there was actually two or three things that came. Part of it was automation. You know, when you’ve been doing something for a number of years, sometimes you get stuck on how to do something because you know how to do it that way. And then change, obviously, sometimes seems like it’s harder but I think the IRS is coming along with being able to do more things as far as faxing and emailing people’s power of attorneys.

Sooner I get power of attorney, sooner I can start representation, sooner I can help get my client back on track. Because anytime you’re dealing with the IRS, before you do anything else, you have to be up to date. That’s plain and simple. That means you have to be in compliance. So if you haven’t filed your 2022 taxes, which are due 10/15, right around the corner, and you owe back taxes and you have back issues, well, you need to have that one completed just as well as anything else. So if you don’t have it, you need to go ahead and consider, what can I do to get myself into compliance? Because if you make a deal, in most cases, they won’t make a deal with you if you’re not in compliance. But sometimes I’ve had stories where people say, well, I was able to call up and get a payment plan, but then we go and file and get them into compliance, they get kicked out of the payment plan, now the payment plan’s higher. and it makes it harder or people get themselves in a high payment plan ’cause they’re just so afraid. And then you turn around and find out that the government’s saying, “Well, they were paying $500 a month. What do you mean you wanna take it down to 280?”

Which is all they really had to be filing or paying, but they were just wanting to make sure that they paid and it’s so much more difficult to go backwards with the IRS than it is to go forward. So if you’ve got a question, you wanna join the show, you can. 615-737-9986, 615-737-9986, taking your calls, talking about taxes. We had several people that came in the office last week. Of course, last week was also the final, the 15th was the end of business return. So if you haven’t filed your 1065 or your 1120-S, unless you’re elective to be on a fiscal year-end, then you are in trouble. Otherwise you are spot on and you will be great because you filed them. If you haven’t, you’re late. And if you didn’t file an extension, you’re already late anyways. I had a gentleman call me yesterday and said he got a $5,600 bill because he hadn’t filed his taxes. And then he turned around and filed them. But he was a year late in filing his taxes. And of course didn’t really have a extension at that point. Remember extensions do only extend a period of time, normally six months past the due date. And so there isn’t a second one just for any of you that want to call and say, is there a second one? Because it doesn’t always happen, but there is not a second one. It used to be three and three, but they just went directly to a six month extension.

And that makes things, it actually does make things a bit easier when it comes to that kind of situation. But anyways, so you want to make sure that you are in compliance, that you’re getting ready. And if you’re going to be in compliance, that means filing now for your 2022. Don’t get everything organized and done up through 2021. Hit the, you know, hit the finish button and then you’re already behind again on 2022 in less than three weeks. Not the best plan.

All right. Let’s see what Lewis in Mount Juliet has to say. Hello, Lewis.

Caller: Hey, uh, my question was, I’m fixing to be 62 and a lot of people I’ll hear them say, Hey, go ahead and collect your social security at 62 versus 65 or 67 because you’re going to really get more on the front end than you would get if you weighed it later, of course, because you’re collecting for more money. But as you get older, if you make it to 80 or whatever, you’d collect more on the back end. But my question is along with that, though, I’m going to get a pension. I’m going to get about $2,500 a month in Social Security, according to my paperwork that I’ve I’ve got and I’m going to get about a $2,500 a month pension and then I have a I have a 401k and an IRA that I can pull some money from but now my wife’s not old enough to collect Social Security yet because she’s younger than me. How much money, my first question would be if I’m collecting 25 Social Security and 25 from a pension that I haven’t paid taxes on yet and then I’ve got a 401k and I collect let’s say a thousand dollars a month from that that I haven’t paid taxes on obviously right is it am I am I gonna be down in that 12% tax bracket or is that going to put me up in the 20% bracket well I have to ask first how much does your wife make my wife doesn’t make anything right now oh okay so she’s not okay that’s good well I’m not good but it’s good for my side you won’t make anything.

Okay.

Dr. Friday: Well, I mean, one of the things that I want to put a caveat, Lewis, this isn’t going to affect you. But if somebody had a real job and then wanted to go on early social security, you could only make like 19,000 earned income, nothing to do with pensions or, or, or retirements. But if they had a W two job, there is limitations if you take social security early, putting that out there, because that is not what you’re asking me. And you don’t sound like that’s your situation.

The biggest thing you should be in the 12% because you’re less than $100,000. But just keep in mind that you’re going to have 60, well, 12,000 plus 25, 30, and 12, which is, sorry, having to do this on the fly here, around $67,000 taxable because Social Security, they can only tax 85% of that. And then everything else you’re bringing in is taxable. So you’re going to have, you know, 67,000 times 12% roughly worst scenario. That’s about $8,000. Roughly, you’re going to have it taxes due every year and you’re going to either need to make quarterly’s or you’re going to want one of your retirements to have that come out of. Right. Okay. So you’re just saying, because I’m going to make $2,500 a month on just my pension right and then you got $25,000 so but on my social security I’m not gonna have to pay tax yes sir yes sir you have more than you have more than $25,000 coming in you’re gonna hit at least 50% tax depending on how much you take out of that 401k it’s gonna be up to 85 so but you’re already at the 50% but you’re saying that’s only because I’m pulling out of my 401 right well I I mean, theoretically, you, sorry, you, have $30,000 coming in from your pension.

Caller: Right.

Dr. Friday: So you’re at the very edge of when social security, ’cause they take half of your social security and that dollar amount. That means that you’re at roughly 45,000. You’re already at the 50%. They’re already taking taxes out of your social security. No matter what you do before, you take the $1,000 from your 401k. So you might as well figure 85%.

Caller: Yep. Okay. Okay, that’s kind of what I wanted to know.

Dr. Friday: So you might as well look at it about eight grand a year going out in taxes, my love.

Caller: Okay, well, I guess it’s less than what I pay now.

Dr. Friday: I’m sure it is.

Caller: Okay, thank you so much.

Dr. Friday: Thank you for calling, sweetheart. I appreciate you.

Caller: Okay, bye-bye.

Dr. Friday: All right, we’re gonna take our first break. If you wanna join the show, you can at 615-737-9986. 615-737-9986. We’ll be right back.

Part 2 – 14:38

(upbeat music)

Alrighty, we are back here live in studio. And if you want to join the show, you can at 615-737-9986, 615-737-9986. And we’re going to go right to Jamie in Nashville. Thank you so much for calling. What can I do for you, Jamie?

Caller: The question is about inherited funds, whether the funds are inherited through a will, through probate, or because someone is listed as the beneficiary of a bank account that was owned by the deceased or life insurance proceeds. How are those taxed, if at all?

Dr. Friday: So usually, usually, I have only had one situation where life insurance was held in a unique annuity situation that did come back as a portion of it being taxable. But 90% of the time I would give life insurance if you’re the beneficiary is gonna be completely tax-free. That’s the purpose really of life insurance is to go to the next generation tax-free ’cause we usually pay with after-tax dollars.

Bank accounts, as long as the person closing the estate has filed the final tax return for that person ’cause sometimes interest and dividends can be in a bank account, all the rest of the funds are usually completely tax-free because they’re usually after-tax dollars that’s sitting in the bank or the taxes were paid at the time of the final filing for the estate under the individual.

And then what was the third one? If you have an IRA, biggest ones you have to be careful of, inherited IRA, which sometimes you can be paid on death, you can be a beneficiary of, everything in there is gonna be taxable, unless it’s a Roth, let me clarify that. Many annuities, if you’re on the name of, if it’s just annuity, many times an annuity will have some taxable dollars. One of the good things that many of annuities do, they actually take out first the taxable amount. So by the time someone passes away, much of the money left in there is actually after tax dollars but like anything else, it’s never black and white.

But so you usually can be pretty good on bank accounts. You’re usually fairly safe on life insurance or real estate, like a primary home. If you sell it within a few months after the person passes away, usually the basis that you have will be the same as what you sold it for anyways. Does that help at all, Jamie?

Caller: It does, very much, thank you.

Dr. Friday: Cool, thank you for asking, I really appreciate it.

Alrighty, so if we’re gonna continue on here, that’s a great question. Many people listening are often wondering if I’ve inherited this, is it taxable? Again, depending on in a will or if it’s in a trust, doesn’t necessarily change the taxability. Sometimes in a trust, when we handle them, we will pay the taxes before distributing. Probably one of the largest or biggest mistakes I see that executors do of estates. And we do handle that in our office for some of our clients, not very many, but every once in a while, we’ll have to do it because they don’t have a immediate family and that kind of thing.

But in all honesty, the biggest mistake is they distribute too early. So I had a situation just recently where a big piece of farmland was inherited, but it was one of those things where it was generationally inherited. So the step up in basis was somewhat difficult to track. And then the children that actually are now growing, older individuals were the ones that were on the paperwork for 30 years. Now it’s been sold and of course the profits were millions of dollars and distributions were made before this was held in a partnership, actually an LLC and the state franchise tax, which was several hundred thousand dollars, had to be paid and then people had to give money back, which makes things very uncomfortable, very difficult for them to understand, But it is what it is. And that’s the executor’s job is to make sure that you’re not distributing or doing anything that would create, that’s why I’ll be honest, I’m the opposite. I’m very hard to let go of the money until everything is done. Taxes have been, tax letters have been accepted. Clearance has been received. Because once you close an estate, once you’ve given the money to the individuals that are the beneficiaries, most of the time it’s best if we can do it as a tax-free situation, even though I will tell you that trusts often pay higher taxes than individuals, but it does come down to where the individuals do want to inherit tax-free, right? They don’t really most of the time, they don’t care as much, even though my clients are probably a little bit more on top of it than some people, I’m not saying all, but they often question that. And we usually work with the beneficiaries if possible, because if you’re in the 12% tax bracket and the trust is in a 25% tax bracket, that’s kind of a no brainer to say, it’d be better to give that person and let them pay the taxes than the other way. But anyways, those are the kinds of decisions. It’s not as easy for people to understand unless you’ve ever had to be an executor of an estate to understand how hard it is. There’s always one person that needs the money today, always needs the money before everyone is ready to really distribute. They needed it yesterday, but they’re waiting until today, you know? And it could be months, even in some cases, I have one that the state, the person wanted them to wait until certain ages. And so they’re being distributed.

And with the market being as crazy as it is, it’s definitely a unique situation. But all of that being said, it really comes down to is just make sure if you’re an executor or a beneficiary, make sure you understand, will I be inheriting this after tax or before tax? If you got paid on death, then it’s gonna be your responsibility because if you received stock paid on death, they’re gonna roll it over or they’re gonna cash it out. Personally, I would roll it over ’cause you get a step up in basis. And then you could hold that until you’re ready and you could sell it at a loss later, or you can, hopefully if it was a good stock, you can then keep it growing until you hit retirement or whatever you need to do. But again, I’m not a financial planner. That was just my opinion on how to do it. There are probably people out there that would be much more qualified to really tell you how to manage your retirement other than a person that specializes in taxes. I can tell you how to keep taxes out of your retirement. And we work very hard to pay the littlest amount that we can. And sometimes that really means paying more now because we know taxes are going up and then having to pay more later on if we wait until we’re in our, you know, wait till 26 or 27 or 20, 27, 28. Because we all know that depending on who’s, when’s the political side of things, we will see. But the way the spending has happened, people, we all know there is no money in the coffer. So therefore they’re going to have to come back to us to get money to pay for these things. And the only way to do that, the easiest way for them to do that is to allow inflation to go crazy and to taxes higher. Well, inflation has already went crazy. So now we’re going to go with the taxes to increase taxes, because that’s just the way they pay for all the bills. And, you know, be careful who you vote for. That’s about all I can say, ’cause there’s really no perfect answer on, if it’s a political one, I would lose that one because we both know both sides of the parties have done poorly, to be quite honest. Even a lot of people, which I liked Reagan, and some of his was good, but you know, There’s always good and bad to every person that was a politician as far as I’m concerned.

Alright, let’s hit Jeff real quick before we take our next break. Hey, Jeff from the borough, what can I do for you, sweetie?

Caller: Yeah, the question is, what are the services that we hear about on the radio do you provide? Like, can you work for companies for like oversight of accounting firm or management or for people who are older and take care of their bills? Do you have those kinds of services available?

Dr. Friday: We don’t. At one point we were talking about taking on for the seniors, helping them with that kind of service. But we found out by trying it to be quite honest, it’s not as simple as you like. People really don’t like to be managed. And it’s a difficult thing. We have had a couple of situations where we helped manage doctor’s offices on their spending. And I will tell you that is a very difficult job, Jeff, to tell people they can’t.

Caller: Herding cats, I bet you.

Dr. Friday: Yeah, because really the job is for us is really just keeping Uncle Sam. And normally we’re called in these situations a lot of times ’cause they have a large debt to the IRS. So we’re like, okay, let’s reevaluate. Where’s the money going? How can we set it aside? And like I just said, it sounds good. And then somebody opens up a new credit card that you didn’t know about because we were tying their hands. They just go open another credit card and that kind of defeated the entire purpose. I realized I was not good at that. So yes, that is a service that I think there’s probably people out there that are better than me.

Caller: Well, you’re an expert at what you do. Really appreciate it. Thank you.

Dr. Friday: No problem. That’s a great question. Thank you. Appreciate it. Alright. So we’re going to take our next break here. We get back, we can go back to the phone calls if you want, or we can go to your emails. The phone number here is 615-737-9986. 615-737-9986. So you can hit the email Friday at drfriday.com. We’ll be right back with the Dr. Friday show.

Part 3 – 23:59

(upbeat music)

Dr. Friday: Alrighty, we are back here live in studio. It’s the one thing about the Zoom, you never know when I’m supposed to jump back in. You can reach us here in the studio at 615-737-9986, 615-737-9986, taking your calls, talking about my favorite subject, taxes, or just dealing with tax issues, like I said before, it’s not always as simple as people like to think.

And, you know, every day, I love to say, it’s not that, you know, often, but pretty much daily, we have someone that comes in that has had either back payroll, where it’s called fiduciary, you know, situations or businesses that have gotten out of control with payroll taxes, or just not filing taxes at all. Then we have individuals that haven’t filed taxes or they have filed them and they’re either completely wrong or they are under audit and et cetera, et cetera. There’s all kinds of reasons, all kinds of situations that you’ll get into. And that’s just the way life happens.

None of us have a perfect situation, but once that happens, then you’re in good shape to be able to make your decisions and do things the way you want to, to be able to get yourself back on track, doing exactly what you want done and how you want it done. So that’s the important thing is that we wanna keep sure, make sure that we’re keeping you out of trouble and making sure that the government is not calling and making your life miserable when it comes to doing that kind of thing. So I just wanna make sure that’s what we do. When it comes to really our expertise, it’s really is the tax side of things. That’s what I’ve done for so long is dealing with the IRS, dealing with the state, dealing with tax issues that do or do not make sense to the individuals and how they’re going to do things, making sure that you have the representation.

Because sometimes it can be so confusing. I mean, one minute someone’s telling you, “Oh, you should be able to make a deal with the IRS and you should be able to put 10 cents on the dollar.” But then there’s other ones that turn around and say, “Well, you can’t make a deal. You don’t have this.” And you know, the problem is it is a bit of a system where you want to be able to make a good firm decision. I will tell you, not everybody qualifies for offer and compromises. Not everybody’s gonna get a partial payment plan.

Just because money is tight doesn’t mean you don’t have access. Kind of like the gentleman that had called me and asked about the money management side, because the problem is sometimes people just aren’t good with money. You know, I mean, it’s just, it is a fact. And so if you’re not great with money and then you turn around and then you have the IRS knocking on your door and you’re saying, well, I’ve got two car payments. I’ve got a mortgage. I have, you know, I have kids in college. I got kids in private school. I have, you know, and there are some things the IRS looks at you and says, wait a second, you owe us money, but you have your child, for example, in private school. They’re like, that’s not allowed. I mean, from their standpoint‚Ķ

I’m not saying you can’t do it. I am saying that when they’re looking at your tax finances and they’re saying, where’s all the money going? And they see, you know, $500 a month going to a private school, unless you can show that that is a special needs school, then there’s no problem at all. But if you just have a child going to, you know, good Catholic school or whatever you might choose to send them and you owe the IRS debt, keep in mind that that is going to be a problem if you’re trying to make a payment plan as far as a partial payment plan.

If you can pay them on a monthly basis in full and do what you want, they don’t really care as long as they get what they’re supposed to get on a timely manner and take it from there. But that’s all I can tell you on that aspect. So if you do wanna join the show, again, you can join the show at 615-737-9986, 615-737-9986, taking your calls, talking about taxes, representation, because, you know, again, we all are going to have life happening to us. There’s going to be times when making a choice between paying Uncle Sam and keeping the roof over your head or fixing your car or whatever it might be that comes up, you’re just going to have to make those decisions. And then, hey, if it gets to a point, you’re going to give my office a call or you’re going to give someone like an EA or a CPA that does representation.

And they’re going to hopefully help you do what it takes to get yourself back on track. Because if at any point you think that, you know, everything’s just going to be all just going to go. I can’t tell you again, how many times someone comes in and says, well, I’ve got the money to pay the IRS. I’m thinking, great, this is awesome. This will be the simplest deal I’ve ever had. And then there’s always that, but, well, I have the amount, but this is a six-year-old debt. And what you have is the original amount due and no penalties and no interest calculated in their calculation. So you don’t have the money to pay back the IRS. You have enough money to pay back your original amount due. The government is no different than anyone else in the world.

They are not going to let you borrow at least without interest. Interest is not a negotiation. I’m gonna let you know that. I don’t care what anyone tells you. Interest is not a negotiation. Anytime we negotiate that is with an offer in compromise. But in a payment plan or a payoff, you’re not going to get it. The only thing we may have the ability to have a discussion on is penalties. If there was extenuating circumstances, if there was a hardship during that time, you might have a very good chance of getting that off the books, but not the interest. Anyone that tells you they can do that, I’m going to tell you right now, they’re fibbing to you.

Alright, let’s talk to Kelly in Ashland City. That’s a little bit of way. Hey Kelly, thanks for listening.

Caller: So I, my wife and I have a unique situation. My mother-in-law has been moved to a nursing home and just got approved for Medicaid. So they’re eating her social security income pretty much the entire month all but like $30.

Right.

Caller: So she’s not able to pay her mortgage, and she’s going to be falling behind. So we are in the process of trying to sell her home.

good

Caller: and my wife has power of attorney uh in order to make financial decisions and medical decisions so um i’m trying to understand the the tax purposes now this is even in uh this is not in Tennessee we live in Tennessee in the Nashville area but this is in a different state so i’m trying to understand what what the best play is for tax purposes and everything

Dr. Friday: so there’s two things if she’s going to be dealing with she’s on Medicare, right?

Caller: Yeah.

Dr. Friday: I mean, Medicare housing where she’s living there taking care of her housing bill with her Medicare and Social Security.

Caller: She’s actually in the nursing home.

Dr. Friday: A nursing home. Okay. Well, Medicare is going to do a five-year look back. So whatever you give for that house, first thing you can’t spend unless you spend it directly on her personal care. Then it’s spendable just to let you know. Second thing, um, how much did your mom buy the house for or inherited or wherever she, however she got the house in the first place?

Caller: Yeah, she bought it outright. I don’t know how much she bought it for. She’s been there probably 10, 15 years.

Dr. Friday: Okay. So if she, whatever she purchased it for plus $250,000, it is tax-free money.

Caller: Okay.

Dr. Friday: Okay. So hopefully the whole house isn’t worth more than 250 plus what she paid for it. So hopefully that will be so whatever she gets for the house will be tax-free most likely. I mean there’s always the possibility it’s in the right neighborhood at the right place and the land’s worth more you know whatever but so the first 250,000 above what she paid for it originally will be tax-free and if the above that would be taxable. But then she does need to talk to because that now that money will go to bank to help mom take care of whatever she needs to until she passes away. And then theoretically since she’s in a nursing home, depending on how much Medicare has paid for that nursing home and you know I don’t know the situation, but there is a five-year look back so that money could end up going to the government.

Caller: Okay, is there now I know my wife and I have paid for some of her expenses, we can get reimbursed for that I’m assuming for whatever we’ve paid for her.

Dr. Friday: I would say you might be able to. I’m not an expert, I mean everything I’ve ever heard about those, you know, I mean anything you’ve done to help keep the house you can have a time of closing paid back to you, no question. You know, if you’ve had to help make some of the payments or fix it up or whatever that may be, you will get that money at time of closing because that was your money invested into the home to keep it from foreclosing or whatever. If you’ve paid anything to help her outright, I’m assuming she could write a check to you for that. That is an assumption. You probably need to get again, double check. They are extremely, I mean, I’ve got two people I know that got sued by them because they didn’t realize that some of the things that they were doing. They thought they were helping. But anyways, long story short, you just want to be careful. That’s the only reason I’m bringing that up. You want to be careful on how that money is spent. And since your wife has power of attorney over it, she’ll be the authority that they would come back to.

Caller: So you don’t think there’ll be any tax implications? How does at all, because we’re doing this in a different state. So if in the other state does have personal income, you don’t think they would tax that income even though

Dr. Friday: No most of the states follow the same uh federal tax code i mean at least the ones around us what state is she in

Caller: Uh louisiana

Dr. Friday: okay yeah she’ll be fine um so again do you know how much the house is worth total

Caller: i would probably less than i would say less than 250,000

Dr. Friday: Okay wonderful great so we’re that was my biggest thing so that’s perfect So yes, she should be fine on both sides. Louisiana’s actually got some pretty decent laws for the older, the seniors, you know what I mean? They treat them pretty good on their tax code. So I think you’ll find that both Louisiana and the Fed won’t have a problem with that. It’s going to be, as far as any tax issue, it will not come from that issue.

Caller: Alright, well I appreciate your time. Thank you so much.

Dr. Friday: No problem. Appreciate you listening.

Alright. We’re going to get ready to take one more break here before the end of the show. And so if you’ve been holding your breath and you’re like, Oh my gosh, I have a question. I have a question. And you want to ask that question. The best thing to do will be to pick up the phone because that’s really the only way, cause I can’t not read your brain from over the radio. So you just basically want to pick up the phone 615-737-9986 or you can email friday at drfriday.com i know sometimes that is easier than calling so she had a beautiful saturday like today it is absolutely gorgeous outside so all you have to do is give me a holler here and send me an email we’ll be right back with the dr friday show.

Part 4 – 35:54

All righty we are back with the last bit of our show so if you If you want to join the radio show, you can right now. It’s 615-737-9986, 615-737-9986. Taking your calls, talking about all kinds of exciting subjects here, at least things that excite me.

What can I say? I’m excited fairly easily when it comes to tax issues. But I do want to put out there guys, one more time, tax day 10-15, if you haven’t already filed. And if you do not have an extension, your tax day has come and gone people. This is only people that filed an extension, individuals, their taxes are due on 10/15. So if you haven’t, and this did not extend the money due. So, you know, when you prepare your taxes and you have a balance due, don’t be shocked that there’s going to be a little bit of penalties and interest on that. Because when we file an extension, we are only filing extension for the time that your tax return needs to be filed, we are not filing a tax return for any of the other situations.

So just put it out there that if you owe money, this extension does not extend any of your services. If you have a situation, your best bet is to make a deal, talk to the IRS, figure out what needs to be done and take it from there, because that is going to be the most pain-free way of handling them. If you’re already in a payment plan and then you file in October for your 2022s, keep in mind, guess what? They’re going to probably kick you out and make you put up another payment plan. So just putting out there, that is kind of the way it works. It’s not quite so simple. You can only have one payment plan with the IRS. So if you have multiple years, it will be all combined into one payment plan.

You can, by people for years, just add to it. And they pay off the oldest you know, the IRS is fairly flexible that way. But again, just making sure that when you file your taxes, that you know, kind of how it works, what you’re going to do, where it’s going to be. So that way you can make sure that you have what you need and how it needs to go through.

So if you have questions, all you have to do, if, and again, if you’ve got questions and you want, myself to take a look at your situation, maybe you’ve, haven’t filed taxes in a number of years, and you’re just not sure what the situation or how it’s going to go. Our initial consultations are always free to see if we can actually help you do something and if that’s the case then we’ll be more than glad to give you a plan and show you how that’s going to work. You can give us a call at our main office Monday through Friday and that is at 615-367-0819. 615-367-0819 is the number there at the main office. And then basically, if you want, you can always email your questions.

Sometimes it’s just a matter that you’re trying to figure out what’s the best way to go. So we can usually do an initial consultation, at least get an idea of where we’re at, how we’re doing it, where we’re moving, all that kind of good stuff. Because let’s be honest people, we have to have a plan on how to deal with the IRS, just like you would have a plan dealing with any other financial decision that you’re going to make.

And if you’re getting close to retirement and you’re thinking, I need to do Roth conversions, those kinds of things, as long as you have, in my opinion, you’d wanna first run that through a financial planner, because when you talk to your tax person, my goal is to keep your taxes as low as possible in the year I’m working on usually. I don’t have, unless we already have a five-year plan.

And the only time I usually have those set up are individuals that have actually sat down normally with a financial planner and said, okay, this is what our plan is. we’re gonna do so much of conversion, or you’ve made your own plan where you decide, I’m gonna convert this much to keep myself in the 22% tax bracket or whatever bracket it is. And I wanna convert as much as it is that it’s gonna keep me in that tax bracket every year for the next number of years. ‘Cause when I retire, I really want all of my, or a big chunk of mine, it really depends on how much you have, of your retirement in a Roth instead of in a traditional, or maybe all of yours is in a traditional and by the time you hit retirement, you like to have a little bit of an other off ’cause you know, Roths are tax-free people and traditionals are not.

And again, this also comes to what will your tax bracket be when you hit retirement versus it is right now and how much of that will be offset possibly? ‘Cause normally, I mean, I don’t know about anyone else but sometimes when we hit retirement, the goal is not to have to have as much. I’m not too sure if that’s actually the case with many of my clients.

Many of them have done a very good job, and their financial planner. So they have as much now as they did in retirement as they did when they were working almost. So it is a good plan to have, but you do need to be a plan. That’s the secret to the Antofagasta. You need to have a plan on how you’re going to do that. Same thing with that exit plan in business. I mean, many times we sit down with business owners because obviously entrepreneurs, I love my entrepreneurs, um, happen to be one, but also, you know, love the minds and in the way, but most of us work, work, work, work, work. We build, we work, hopefully we become somewhat successful. We keep working and we don’t really have an exit plan. What’s the plan for us to stop working? Because right now our mindset is go, go, go, go. And we know how to solve our problems. We know how to do things. We know how to keep moving, but is there really an exit plan? Is there a plan that says, Hey, when I hit 75, am I going to be able to slow down and do this? Or should I sell the business? Should I do this or that.

My exit plan is not to exit. That’s my exit plan. Not so much just I love doing what I do. So I’m really, really lucky. Most people don’t have that. So I mean, especially if your job is very, I’m not moving my fingers. All I have to do people, I don’t really have to be physically fit. Some jobs do require if you’re a plumber and stuff, some of my guys, their knees go out, their backs go out. And it becomes an extremely painful situation to actually do the job that that they usually did before. So having that exit plan so that when a time comes or the age comes, whichever comes first, you exactly know what your plan is instead of wait, one day I’m here and next minute, oh wait, I can’t do it anymore. I have no idea how I’m gonna survive. I have no idea. That’s not what we wanna do. That isn’t the direction we want to head.

What we wanna do is actually start talking about it now. So that way, if it’s a five, 10 year plan, you actually have the ability to have a second option, a second plan on how you’re going to do something. Because if you’re just sitting around thinking about, you know, I mean, that’s the same way people, Oh, I’m not going to fire my taxes this year. Okay. Gets a little away from you. Life happens, whatever. And then boom, second one, you know, second year, and then something happens and you don’t get the third and first year you filed an extension. At least you tried the second year, you know, just so now you’re three years into it and life has happened. Same thing happens there. Next thing you know, you’re three years, you haven’t filed taxes. Now you’ve got what might’ve been a small bill in one year, a large bill for three years, especially if you’re an entrepreneur, because we don’t pay taxes until we, um, either make quarterlies or file our tax return.

So these are the plans we need to be thinking of. It’s the time of the year where we all need to stop and think a little bit about how or what is our next year plan. I mean, before you know it, we’ll have our new year’s resolution. So now’s a good time to start thinking about how are we going to make that part of our lifestyle. Again, it’s not something I’m going to tell you is a perfect science. Life happens. We none know what’s going to happen.

Only the big guy upstairs really knows when, what, and where, but we can plan for what we can plan for. And those are the things I think so often, especially my entrepreneurs, We have a tendency to put everything into our businesses, but we don’t really think about ourselves as much We don’t pay ourselves first in many cases. We don’t have the retirement plans we’re hoping in some cases to sell the business as our retirement and That’s leaving a lot to chance, you know, I mean because you’re assuming someone’s gonna find your business valuable Some businesses are some businesses are not you know, I mean I mean, if you have an electrical business, some, I mean, I had a gentleman that could sell his business for quite a bit of money, over a million dollars. And then you’ve got some guy that, you know, can’t even sell it for $50,000.

So, you know, it’s a little risky to assume that our businesses are going to be what we need to have for our final retirement. We need to think a little bit further than that. So now we’re getting ready, starting the end of this year, we got one quarter left. Maybe we start thinking about, do we need a SEP? Do we need an IRA? Do we need to talk to a financial planner? And my answer would be yes to all those things and figure out where we need to go. All right, well, I have managed to get this radio show almost off the air here. So let me give you some information.

Again, Dr. Friday, you can Google it, you find me, but my phone number is 615-367-0819, 615-367-0819. You can email friday@drfriday.com. again Friday at drFriday.com. If you have no idea who I am, you just turn on the radio and you heard this crazy person talking, you can check me out on the web, been doing this for quite a while. Just go to drFriday.com, again, d-r-f-r-i-d-a-y.com. Friday is my first name for many of you that are listening. It’s just a unique first name thanks to the parents. So that’s what I go by, Dr. Friday. Again, if you wanna call us at the office Monday morning 615-367-0819 or email Friday@DRFriday.com. I hope you guys have a wonderful Saturday. Enjoy yourself. Cop you later.