Welcome to another episode of the Dr. Friday Radio Show! In this episode, Dr. Friday takes on the latest tax updates, answers callers questions, and talks over the following topics:
- Tax Extension deadline Oct. 15 to file your tax return
- The Infrastructure Bill being debated in Congress and the IRS monitoring bank accounts
- Letter 6470 from the IRS about the Recovery Rebate Credit
- The New Charitable Contribution Deduction
- The IRS Using Collection Agencies
- How to ensure your Stimulus Status
- Tax advantages and disadvantages of inheriting a home vs buying a home from an elderly parent
- Changes in the tax law for Real Estate Professionals
- Donating a commercial property and how to appraise
- Cryptocurrencies and how to track for tax purposes
- Cryptocurrencies and wash sales
- Veterans and Taxes
- Capital Gaines in the sale of Motorcycle, Airplane or Boats
- Earned Income Credit for taxpayers with non-qualifying children
- Using the taxpayer’s prior year income for the purposes of EIC
- Catching up if you’ve fallen behind in your taxes
and much more!
Transcript
Announcer 0:00
No, no, no, she’s not a medical doctor, but she can share 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 0:29
Good day, I’m Dr. Friday and the doctor is in the house. So if you’re working on your tax return, remember October 15 is our deadline. So many of us are working through the weekends, trying to make sure everybody’s taxes are done and completed. So if you haven’t done your taxes yet, probably now would be the time to start thinking about them. You don’t want to wait to the very, very last minute, you know. You can always wait until the last second to hit the send button. But you do want to get them prepared. So you can at least see what you have or what’s going on.
Dr. Friday 0:56
So there you go. So you want to make sure so if you’ve got questions, you haven’t filed your 2020 taxes yet… this is the show you want to call 615-737-9986.
Dr. Friday 1:10
I thought I’d start off the show a little bit with some new information about what’s coming down the line from Congress. The infrastructure bill, excuse me, is being debated. Obviously, we all keep hearing about it. 3.5 trillion something along that line. Interestingly enough, I got this from my bank. And they’re basically saying that part of this bill will be that the United States Congress contains a proposal that would require financial institutions to report to the Internal Revenue Service, the IRS, the amount that flows through account holders that have more than $600. So now we’re going to start reporting… this kind of reminds you of Greece when they started charging the tax on people that held money in the bank. They’re now going to have the IRS be notified if anyone has more than $600 in their bank at any given time. Now, I mean, let’s be honest, that’s would be a very large number of people in society. So it says money that flows through an account for more than $600. Paychecks. You know, a lot of things would be over $600. So this is part of that infrastructure bill that they keep trying to say isn’t going to do anything but give us a better type of roads, better internet. You know, they keep trying to sell us, but what kind of personal information are we losing, by having this personal privacy situation that we are not getting. This is an extraordinary regulation, Burnie created, I can only imagine what’s going to happen to companies like, you know, small banks, people like that, that have to be able to give this information out.
Dr. Friday 2:48
So just keeping our ear to the ground trying to figure out what’s coming down. When it comes to this one. We all know that there’s a lot of other tax issues involved in that particular bill that they’re talking about. Because let’s be honest, they will have to pay for it. But you’re wondering, why do they need to know if I have more than $600 flowing through my bank account at any time? I mean, what purpose would the IRS need to know that obviously, I have a paycheck or something else going through there. But there’s got to be more to it than that. And you gotta always wonder what they’re trying to find, what they’re looking for, you know, they’re trying to find, either, you know, your unreported income, that’s where I’m thinking, but what about gifts or you know, I went on eBay and I sold some Halloween decorations or whatever that are going to flow through your bank. And that’s not going to be something that’s reported on your tax return. Is that going to become you know, something that we have to be concerned with as a tax person as well as an individual who lives life.
Dr. Friday 3:42
So if you’ve got questions, you can join the show. 615-737-9986 is my number here in the studio. Another thing that’s been happening this week is a lot of people have finally started to receive the Internal Revenue… It says Department of Treasury IRS from Austin, Texas… this letter, it’s called letter 6470. And it’s coming in Spanish and English. Obviously, I cannot read the Spanish one. But my clients are great to share all of this. And what it basically is for any of you that filed tax returns and ended up with a recovery rebate credit that you claimed on the tax return you never received. Yet the IRS made a change to your tax return. They’re saying yes, our records show you either were not entitled to it, or you received it. And then there’s a phone number on here 1-800-829-0922 and they say press one for English, press two for Spanish. If you need to get more information about your Recovery Rebate Credit. So the good news about this will be for some of you that have been calling for the last, you know on the show and things just saying hey, I’ve never gotten my credit. You filed your tax returns and maybe they came back and said nope, you’re not entitled to them. Well, here’s a phone number, at least that might take you to it. You do have the right to appeal the decision that they say that you received it. But I will tell you the first thing that anyone needs to do. And we’ve had several clients, I’ve had him go back from March of 2020, all the way through to August of 2021. And you need to pull out every single deposit that came in electronic and or matches the dollar amounts that were coming in. So the first one was 12, the second one was six, the third one 14.
Dr. Friday 5:33
And you need to find out if a check was deposited in that dollar amount and or if it was an electronic deposit into your account. And you need to do this for every single bank account you have with your name on it, or your spouse’s name because it could have come to either one of you. And if you were divorced, then that bank account that the IRS may have had may have been your spouse’s, and you claimed you never received it. Well, the spouse may have received it. So we’re going to have to find out, still a little bit more about what happens when you divorced in the year in which they gave the money to the other person if that’s going to just be considered tax fraud, possibly to the person that accepted it without sharing the money. Or if it’s going to be something you could take up with the IRS, and then they’ll go out and collect it from your ex. I don’t know. But there is a phone number 800-829-0922. If you’ve had a problem, or if you’ve got this letter, you probably already have the phone number on it. But I just wanted to share that with everyone. Because I know we’ve had for a while, I know at least five, six, maybe even 10 returns we’ve had where people had told us that they did not receive the stimulus money, the government has come back and said no, no, no, you did receive it. I know probably half of those, at least when we went back through and did a full audit on their bank statement, we did find the money had come in. In one case, it had come in just after we filed the tax return. So in their case, they didn’t receive it, but they had received it after the fact.
Dr. Friday 7:03
But you just need to make sure, if you haven’t received it. Again, I’m not saying for anyone that has not received that money, then you want to make sure that you’re able to go and get your get the money that you’re entitled to. And so you just want to take care of that.
Dr. Friday 7:18
Next, we want to just touch again, we’re getting close to the end of 2021. And that means we’re getting ready to go into a new tax year. And in 2020, they added that new Charitable Contribution Deduction straight off the front 1040. Many people did not save receipts or even track their cash contributions, because for the year, two years before that they weren’t able to itemize, therefore, they didn’t have any reason to track it. And now we do. So remember single individuals $300, married couples this year in 2021 will be $600.
Dr. Friday 7:52
So if you’ve done only cash, it does not qualify. If you’re giving food, clothes, anything else, but just cash. But if you did give cash of that dollar amount, get the receipts together so that you can give that or when you prepare your taxes, you can let that happen and move on from there. But that is, again another great tax deduction that I find a lot of people did not have the information about because they just weren’t prepared for that to happen in 2021. As far as how it’s going to come back through.
Dr. Friday 8:23
So if you’ve got a question again, join the show at 615-737-9986. For any of you that have not heard this show before, my name is Dr. Friday, I’m an enrolled agent licensed with the Internal Revenue Service to do taxes and representation. It means I am not an employee or have I ever worked for the IRS. No, I have never worked for the Internal Revenue Service. But what I do is represent you as a taxpayer, every taxpayer has the right to representation.
Dr. Friday 8:55
And that’s what we do. We offer that representation in ways of helping you to either settle IRS debts, to get payment plans to become non-collectible to get you caught up because you can’t even make a deal with the IRS if you’re not in compliance. And that sometimes also means making sure that your business… if you’ve had payroll issues, or if you have any kind of W2’s payroll 941,940 you know 1040, 1120 you know, whatever your tax return might have been… all of them have to be in compliance before you can make any kind of deal with the IRS. And for a while, to be quite honest, it’s been rather quiet. The IRS was shut down for a long time, and then they are playing catch up for a long time, but I will tell you based on my phone calls and a number of love letters that we received… because whenever we have representation we also get copies of the love letters from the Internal Revenue Service. We are getting a lot of them.
Dr. Friday 9:50
And also, of course, the IRS has started with the collection agencies. So you not only have the IRS that’s trying to collect the debt but you also have collection agencies that are a bit more tenacious in trying to track you down. And I think the reason they hire him, it’s not so much that you’re going to do anything with the collection agency, as much as in my personal opinion, collection agencies have the ability to track people down better than the IRS, believe it or not. The IRS is just so busy. I mean, I think the information is there, they just don’t actually do as much. So this would be something that they would actually want to have them basically get new addresses, new phone numbers, new employers, and that way they can do that by, you know, without violating.
Dr. Friday 10:32
So it’s very important that you basically start learning to deal with the IRS. If you’ve got years of back taxes, it may be that you won’t ever be able to pay them off. And that’s what an offer and compromise are there for. But keep in mind, I know many of you are avid listeners of this station, and you will hear a lot of people that come out and they’ll promise you 10 cents on the dollar. We make deals all the time. I’ve done the same as far as I’ve got people that owed hundreds of thousands of dollars, and have been able to settle for very little.
Dr. Friday 11:02
But I’ve also had people that have owed hundreds of thousands of dollars that have not been able to settle at all because of the fact of equity in a home… that they have the ability to make payments over a longer period of time. Remember, the IRS does have 10 years to collect. And that 10-year clock starts from either when they have filed a return for you or you have filed your own tax returns. If you haven’t filed tax returns, keep in mind that the time clock has not started. And therefore, if you owe $100,000, theoretically, you could be paying them $1,000 a month if they think that the budget in your household allows for that. You’re not going to get the deal no matter what you think, because they have the ability to make the payment especially with the equity in people’s homes right now. Right now home values have shot up and guess what. The IRS does use things like Zillow and other websites to get the basis of what your home is worth. And if they see that your house is worth $400,000, and you’ve got a mortgage of $200,000, they’re saying that you’ve got the ability to borrow or pay off the $100,000, you owe them. So you either borrow and or you make payments, they’re not going to make a deal with you. It’s that simple. So you need to have someone in your corner that understands how the IRS works, and what you need to do to make it work. Because sometimes there are other solutions. And we can cover all of those in our meeting.
Dr. Friday 12:24
So if you’ve got a question right now you can join the show 615-737-9986 we’re gonna take a quick break here. But when we get back, we’ll get to some more of your questions as well as if you want to join the show by telephone at 615-737-9986. We’ll be right back.
Dr. Friday 12:49
All righty, we are back here live in the studio if you want to join the show, pick up the phone 615-737-9986. And we have someone that just did that. And that’s Jerry from the Buro. Hey, Jerry, what’s happening?
Caller 13:05
Hey, how are you doing today?
Dr. Friday 13:06
I am doing awesome.
Caller 13:09
I got a question. The people that were on disability, should they have received a stimulus check?
Dr. Friday 13:19
They should have received three stimulus checks. So you would have received one back last year, one theoretically in December or January, and one this year.
Caller 13:29
All right. So if we do not see that come in, is there a way we can find out if that’s been paid out?
Dr. Friday 13:38
Well, you can go online to irs.gov and see your stimulus status, you know that you can go on there and check with the status of your stimulus. If you, and I’ll make a guess here, do you normally have to file a tax return?
Caller 13:52
No.
Dr. Friday 13:53
Okay. So you may have to because, I mean, normally you would have gotten it because of the fact that you were either on veterans or social security, whichever disability you might be on. Both of them should have been registered in there for you should have automatically received as a direct deposit or on whatever type of device you receive your money. And, that being said, if you did not get it, and just double check that and you can go online like I said to the irs.gov and then right there on the front page, it says the status of stimulus or stimulus status, something like that. And go through that. But if you can’t, you may have to file a tax return for last year. It would be zeros but you get that $1,800 as a refund.
Caller 14:37
Okay. All right. Thank you very much.
Dr. Friday 14:39
No problems but thanks. Appreciate the call. All right, let’s hit James in Nashville. Hello, James.
Caller 14:47
Good afternoon. Love your program. Got a question for you. I have an elderly parent close to 90 years old, and he has a home that I eventually will inherit probably in five to 10 years. Is there any advantage to go ahead and buy the home from him now? And then having him rent it back while he lives there? Are there advantages and disadvantages?
Dr. Friday 15:17
Okay, so. My opinion is the disadvantage is, when he passes away, whatever the home is valued at that time is what you inherit it at. So right now you can buy it, but theoretically, he probably would have a disclaimer meaning he we have up to $250,000 from what you pay from what he originally paid. But theoretically, it could become a capital gains issue for him… possibly, I mean, houses right now, they’re worth a lot more money. I don’t know if that’s the case in this one. But in your case, you’re buying something that you would inherit, and, at no value, you know, I mean, at zero, I mean, you would inherit it at whatever value it is, and then you can take the mortgage out or whatever you need to do to reinvest.
Caller 15:59
Yeah, capital gains are about 400k. Right now, I’m a numbers guy. So.
Dr. Friday 16:04
So if it’s worth $400,000, what did dad pay for it back in the day or when he moved in?
Caller 16:10
Well, capital is $500,000. He paid $450,000.
Dr. Friday 16:14
Okay, so, yeah, I mean, so whatever the home is worth right now, if he paid 450, and what’s it worth now?
Caller 16:23
He paid, he paid 450. It’s worth, he paid $50. It’s worth $450. Now. Oh,
Dr. Friday 16:28
Okay. So he would be looking at because he gets to 250. So he still is looking at $100,000 or $150,000 of capital gains? Where you wouldn’t have that if you wait till you inherit.
Caller 16:40
But that’d be prorated. If it’s owner finance, correct?
Dr. Friday 16:45
Theoretically correct. Because he would be able to spread it out. Yes. You could also gift it to you over the next 10 years if you want to go in that direction, but I don’t think I would, but, um, I mean, unless there’s a need to protect the asset. With the five-year look back for Medicare and all that. I don’t see any reason from the tax standpoint, I’m not an attorney. But from the tax standpoint, James, I don’t really see an advantage to parents giving homes to their children, a lot of times they’ll quick claim them over and there’s not a lot of tax advantage to that my opinion.
Caller 17:16
The only other qualifier would be that if he’s having trouble making the property taxes or maintaining the upkeep of the property, which is unfortunately true, and I wouldn’t have an incentive to do it more and more than if it wasn’t
Dr. Friday 17:31
True, but you will eventually be the owner. So you might want to look at it as an investment into the future.
Caller 17:37
You are a bright lady, I appreciate it.
Dr. Friday 17:38
Ha, talk to you later, James. I appreciate the questions. Yes, thank you very much. All right. So we are going to continue with that. I mean, that’s a tough question, in all honesty, because the person in me says, you know, if he needs to step up because then dad’s living on his own, then maybe it’d be good to be able to take over the house or whatever. But the accountant in me says, Wait till something happens. So that way you can avoid capital gains tax in any sense of the word if you have to. Alright, so I want to talk a little bit about a credit case that come to my office, and I was doing some research.
Dr. Friday 18:15
Anyways, real estate professionals, Listen up here, okay? Because we all know that there are two types. There are people that can claim it as passive income or non-passive. Some people will say they’re a real estate professional, because they have a real estate license. Yet they work a full-time job somewhere else. And keep in mind, you have to have more than I think it’s 850 hours and maybe 650 hours, somewhere between there to prove, per year, that makes you a professional. So you have to be working this pretty much as a full-time job to claim rental losses. Otherwise, if you make more than $150,000, as a married couple, any losses you have on your rental properties just roll forward. You don’t get to claim it on your tax return. Right? So people want to be rental professionals because then it’s it will come off no matter how much you earn. And then you have it but they’re using the excuse that I have a real estate license, or I collect rent on my 12 rentals or something like that. And guess what the courts are saying? Real estate professionals must meet to test to beat the passive loss rule and deduct their rental loss of full. They must spend over their working hours of more than 750 hours a year materially in an activity of doing real estate and collecting rents or taking courses… they’re saying is not going to qualify. So you must make sure that you are actively involved over 750 hours per year. And right now there are several cases at Tax Court I was looking at up because I was working on representing someone that had claimed some big losses like that, and found that the courts are favoring the side of the IRS, there’s a shocker. Most of the time, the IRS often has a very successful, you know, it’s very hard to beat the courts in the IRS. Especially real estate pro status, a couple of deductions in big real estate losses. Several times, the biggest people I noticed that try to push that bucket a little bit are individuals that usually don’t qualify for the usual they make more than $150,000 as a married couple, for example. So they’re looking for a way to get some of those losses on their tax return because rolling it over, doesn’t give you instant gratification. Now I will tell you as a tax professional, and not able to usually take a lot of losses. I like the idea because, when I sell the real estate, I have all of these losses I can deduct at that time. And normally when you’re selling real estate, in most people’s cases, we’re looking at gains anyway. So this helps with those gains because I can actually wipe out a big chunk of the gains because I never took the losses. So that way it helps out. But it is more of a long-term tax situation than getting that instant gratification of instant money coming back on your tax return. And so it becomes a unique situation on making sure you understand that.
Dr. Friday 21:15
All right, so if you have a question you can certainly join the show, 615-737-9986. I’m taking your calls, talking about all my favorite subjects, you know, taxes, money, all those good things, and we want to make sure that we’re actually taking care of what we need to deal with… and don’t forget October 15 is the big deadline guys and we are working very crazily around here… so I’m assuming there are just as many crazy people out there making sure that you guys have all of your taxes finished and you have everything in order as far as what you need or where you’re going to go with it. If you don’t have anyone to do your taxes, you might be fortunate enough, I don’t mean that but, our office is getting pretty booked itself, but we have some openings here if you need to try to squeeze in a simple tax return. You can reach us at 615-367-0819 is my direct office.
Dr. Friday 22:14
But I want to go to basically keep it in here in the studio if you have a question 615-737-9986. I’m taking your calls here in the studio. If you’ve got any questions, now’s the time to be able to make sure you have them. Alright, let’s hit Less before the break. Hey, Less, what do you got?
Caller 22:37
How are you doing? Well, I’ve got a commercial property that I bought and I am wanting to donate it, and I was wondering when I take the deduction off my taxes for the loss do I use a tax card appraisal would that be good enough?
Dr. Friday 22:54
So if you donating, if you’re just gonna donate it at the full value of what the property value is today from the appraisal or are you going to use is that what you’re asking?
Caller 23:07
Yes
Dr. Friday 23:07
They will accept the county taxes or city tax whichever one you want to use.
Caller 23:13
Okay, well thank you!
Dr. Friday 23:15
Okay, that was an easy one, Less, thanks!
Caller 23:19
Alright, bye.
Dr. Friday 23:19
That was a good one. All right. So we’re I get ready to take another break here. So if you’ve been waiting to call now be a good time to get yourself all worked up here. So my guy Loveidius would love to answer your phone calls and put you on the radio at 615-737-9986. I am an enrolled agent licensed with the Internal Revenue Service to do taxes and representation guys, that’s what I do. So if you’ve been waiting, trying to figure out how to get back on track with the IRS, this is the place you want to start. You want to basically be able to go out there, maybe you’ve got a friend or someone you know that can’t go and buy a house, they can’t really start moving forward in life because they’re constantly getting hit back or having to hide or hold back on everything that’s going on in their life with taxes.
Dr. Friday 24:07
Taxes can make a huge difference even from marriage or anything else so we’re going to take a quick break when we get back we’ll get some more your phone calls here on the Dr. Friday show.
Dr. Friday 24:24
All righty we are back here live in-studio and as I always love it, my listeners are starting to call in. Because you know sometimes I feel like I’m talking to myself. So this is so awesome. Lovidius loves it when I just talked to him, it feels like. Anyways, we’ve got, I think Mark, is he the first one. Let’s go with Mark. Hey Mark,
Caller 24:44
Hey. We have invested in crypto digital currencies this year, and I’m just wanting to know your feedback or the process of how I go about paying taxes on the gains?
Dr. Friday 25:04
Well, first I’m excited that you’re even considering it because a lot of people weren’t doing that for a number of years… even though right now on the tax return last couple of years they’ve asked the people have been involved. As far as I’m concerned and my clients, and we have a large number now or many of my clients, are involved in cryptocurrency in some fashion. Many have just held on some have gotten into buying and selling. So, Mark, it’s a stock, and they are now, there’s several software’s out there, where you’re able to go in, it is not as clean as maybe you would have if you had a Vanguard or you know, a TD Ameritrade account. But you do need to be tracking every time you buy and sell different currencies because every one of those are different transactions. So you know, you convert US dollars into crypto, and from that point on you need to be whatever you’re doing with it. If it’s mining, if it’s… God knows there’s a whole different… there’s gaming that you can get cryptocurrency through, there’s all kinds of different ways. But hopefully that’s answering your question. We just need to have the ability to get original purchase and sell price just like any other stock.
Caller 26:11
Okay, yes, that does help and I definitely appreciate your insight. Thank you
Dr. Friday 26:17
Thank you, Mark. I really appreciate it. Thank you very much. All right, let’s get Mike in Clarksville. Hello, Mike.
Caller 26:23
How are you? I’ve been listening to you for years. I have a question. Veteran, 100% so my income is not taxable. But my question is, recently I did a refinance on my home because they kept calling me. Anyway, I did a refinance to cash out and I wanted to pay off two loans. I have a bank. One was a $30,000 at 17% another was $10,000 at 9%. It makes sense to me because I refinanced for 2.8% in a way. I was able to get the money paid off both loans at the bank. So I don’t have to worry about those payments. How does that affect me tax-wise?
Dr. Friday 27:16
Zero. So what you basically did was just took your biggest asset, your house, and you took some money out of it and increased that loan and decrease the other loans which is totally smart Mike, I mean to be honest with you, I mean, who wants to pay nine or 17% when you can be paying less than three. And if it spreads out over time, you’re gonna be paying a lot less on that same money so it really was just moving those two loans into your other loan. So really, it’s just increasing one decreasing the others but saving a ton of money in interest.
Caller 27:48
Cool
Dr. Friday 27:49
That was a great move. Wonderful move.
Caller 27:52
It does not affect me, does not affect my taxes, right?
Dr. Friday 27:55
No, sir. Not gonna affect it now. Depending on if those were deductible interest or not, but you weren’t filing anyway because you’re full, you know, I mean, you’re full disabled veteran. So not required, therefore not going to still be required, you’ll be in perfect shape, but just saving a lot of money.
Caller 28:12
Well, nice to hear some great news!
Dr. Friday 28:14
That’s it. Thanks for listening. I appreciate you. Alright, we’re gonna head-on, let’s hit Mike in Lebanon. Hello, don’t know. Sorry, David. I just had Mike David in Lebanon. Hey, David.
Caller 28:27
Hey, good, good, happy, and good. It’s a beautiful afternoon from Lebanon, I have a capital gains question. If I, if I sell my car, or my motorcycle, or my airplane, or my boat, for $100,000 more than I bought it? Do I owe capital gains on the difference?
Dr. Friday 28:48
Absolutely. Most of those things are our depreciable assets. So the likeliness unless they become collectibles, you know, which is actually a completely different tax credit. They usually are the opposite, right? You drive off a lot, your car’s worth $5,000 less than we just signed up to pay for it. Don’t know a lot about planes have only had one client that actually dealt with airplanes. So I’m assuming they don’t have a ton unless you can fix them up and sell them and then you’re more of a used car salesman because you’re buying something low and increasing it. But that would create capital gains if you do have earnings. And the funny thing is if you have losses, you cannot deduct them.
Caller 29:30
Okay, so that answers my question. Thanks for the bad news.
Dr. Friday 29:32
I’m always there for you, David. No problem. All righty. That was a great question, guys. And I do appreciate you guys listening as well as participating because I think a lot of people that listen to a radio show, you know, I’m giving the information to the best of my ability of what I think would be interesting or what’s happened this week or last week, that might come in affect all of us when it comes to taxes, but sometimes you guys bring in some great questions that I think other listeners learn a lot from. So I totally appreciate the fact that you guys have taken the time out of your day, not only to listen but to participate. Because that is huge when it comes to some of the things happening.
Dr. Friday 30:12
I was gonna bring this up, I had so many callers there, the gentleman that called on the cryptocurrency. When I was reading Biden’s concept of what he wants to put out there for a new tax, individual tax situation. One of them did come in with cryptocurrency. One of his things was, anyone that does a lot of selling, day traders especially, when you’re buying and selling the same stock. We call them wash sales, and you have to leave a stock for more than 31 days, and then you can claim losses or gains… and losses especially. They’ve never done this on cryptocurrency because lets be honest, they’ve never really had any way of tracking it. Well, guess what? He has put in his… the House Ways and Means Committee released the first draft of the proposal that Biden has for tax legislation, and in it is wash sales rules would now affect cryptocurrency and any other digital assets.
Dr. Friday 30:12
So I just thought I’d bring that out there for all my crypto people that you know, again they’re trying their very best to regulate something that was designed not to be regulated. So that would be an important thing to know because some might people… well it’s just like my stock guys. Some of you guys are so on top of… I know I’ve come to this table very slowly. Cryptocurrency, I’ve had a handful of clients that have done an awesome job of helping me understand and learn about cryptocurrency, and so I have some knowledge and I’m always learning because my people send me emails and videos and stuff that will help me learn more and more, saying that there’s still a large window of information that is not out there and how we can obtain it if it’s not there.
Dr. Friday 32:00
Where when you buy and sell IBM stock it is kind of everywhere and you can track that. If you’re buying and selling something that is virtual, it’s a lot harder. The IRS has not yet figured out how to totally get it. But we all know that some of these larger cryptocurrency companies, Bitcoin, they are now getting into the market, there’s more tracking, and they have opened up the door for that information to be available to the IRS. So just putting that out there that, I know a lot of people when I asked them… what was funny is in 2019 was the first year they asked, “did you have cryptocurrency or not or digital currency”? And I would say, 95% or more percent of my clients all said, no don’t know anything about it. No, no, no. And this year in 2020 I would say it was closer to maybe 25% of my clients all said yes to that same question that may be only 5% the year before. So there are either a lot more people being more honest, or they have really gotten more into it.
Dr. Friday 33:09
Now I know when you use things like Venmo and PayPal and all them… you can actually now convert your money to crypto if you want to in some of those devices so it is becoming more mainstream as we’re going. I have not yet, just for any of you guys that keep asking, no my firm has not yet gotten into accepting cryptocurrency. Doesn’t mean it won’t happen in the future people, it just doesn’t mean that we are quite there yet. But I do know there’s a lot of services out there that you can use to do it. So, I mean it’s becoming, probably back in the day when people used to say you’re going to use a credit card and buy something… why? Why would they… you know, when everything was cash, and then when it’s kind of like something new we all have to get used to it.
Dr. Friday 33:54
Okay, so we are taking your calls here in the studio if you’ve got questions 615-737-9986. It is an absolutely gorgeous Saturday out there. I got a break halfway through the day and I went outside with my puppy dogs, you guys all know I have Great Danes, and they are just sunbathing out there as we speak. So they’re not behind me crying or barking like sometimes because they are enjoying this wonderful Saturday while I’m on the radio.
Dr. Friday 34:25
So, if you’ve got questions, and don’t forget I keep pushing it but I want you guys to remember October 15. Because if you have an extension, this is an important day. If you have no extension, you did not file on the due date and you did not file the extension… at this point, you are late no matter what.
Dr. Friday 34:44
But you know, the sooner you get yourself back on track, it’s so much easier. I mean, everyone makes mistakes. You can’t go backwards. We can’t change what we could have, should have been, would have done. So here’s what we need to do kind of thing, right? Well, that’s what we can help you do. We can help you figure out where you are today. We’ve got two months, three months left, whatever we have left here in, in 2021. So the likeliness of you being able to pay your 2021 in full is probably no.
Dr. Friday 35:14
But the IRS is looking for someone to stop the bleeding. Meaning you owe money every year, you’re self-employed like most of us. And so instead of paying that quarterly, like you’re supposed to be doing, you just kind of go through and at the end, the year you sign a tax return, some people file it and then the government tries to collect and, and you just get into this cycle. And you always think… the next time I’m going to do better, or I’m going to sell something, I’m going to get caught up, or whatever happens. It doesn’t happen, right?
Dr. Friday 35:43
So what we have to do as entrepreneurs, we have to pay our taxes, guys, sooner or later, they’re going to shut down our business, take our assets, or just make life so miserable, that we’re not enjoying what we’re working hard for. And we can help you do that. There is some pretty straightforward plans to get your life back on track. But you have to be willing to do it. First thing you have to do is call our office. So we’re going to take a quick break, and when we get back we’ll take a few more of your phone calls if you want 615-737-9986. We’ll also talk about how we can get you guys back on track making 2022 an awesome year. We’ll be right back with the Dr Friday show.
Dr. Friday 36:31
All righty, we are back here live in-studio, the number is 615-737-9986. Okay, we want to talk a little bit about what happened under the Families Act. Because in 2022, and 2021, some of you guys may have gotten it. But when we get ready to file a 2021’s, there’s going to be some interesting things for people that may have had a tough year, even kids.
Dr. Friday 37:00
So basically, they made permanent the temporary expansion of the eligibility and the amount of earned income credit for taxpayers with non-qualifying children. Now, this was usually people that were 25 or older, making less than, I don’t know, maybe nine or $10,000 a year. And they made some huge changes for individuals. For one childless people that are used to be 25, it dropped down to 19. Now it does exclude full-time students in most cases, but it eliminated the upper limits which used to be when you hit 65, you couldn’t get an earned income credit because your income was… well because you didn’t qualify for whatever reason. I guess because of Social Security, whatever it is, there is no upper limit. So they’ve eliminated that and now instead of being 25, you can be 19 and possibly qualify for earned income. The big thing is, they have increased the percentage which used to be 7.65% to 15.3%. And the maximum credit amount is reached at $9,820 and increases the income which now you’ll phase out by $11,610 for non-joint filers. So that means for single people. Under these parameters the maximum credit increase from $543 now you can get $1,502 that’s almost triple people. So that’s kind of cool.
Dr. Friday 38:26
The other part of it is, they also made permanent the temporary provision allowing taxpayers to use the taxpayer’s prior year income for the purposes of EIC. So if you have in 2021 let’s say your income might be a little high but your income in 2020 qualifies you for earned income credit, you could theoretically still get earned income credit because you qualified in 2020 on your 2021 tax return. This is kind of important information, and I think you have to be very very careful when you’re looking at what you’re going to get under that situation. So, I’m just saying, this is something different. For individuals that maybe are in the lower-income, maybe you’re just starting out, maybe had a really bad year. You might want to look and see what does that mean when it comes to filing taxes and if you would still qualify even if 2022, like I said or 2021’s income is too high for the earned income, you might have qualified because 2020 was really bad for a lot of people. Some people are really really good, but you know, if this is the first time we’ve been able to do a lot of looks back. Not normally the way that we would do that in a tax situation right? So just thought I put that out there to make sure you have what you need to know. Get the information you need so that way you can always get your tax questions taken care of, making sure that you have what you need. You know what you need to know because… again, there is so much in the tax law, I think they say it’s 10 times the size of the King James Bible. Maybe I’ll say 11 times because we’ve added a lot of tax law in the last three or four years. And so it is making it a little bit more complex than it used to be.
Dr. Friday 40:17
I do want to talk a little bit again, I always get emails almost every week about individuals that, should I file with my husband or my wife, they have tax issues and I don’t? And again, you do want to look into the ability, do you qualify for possibly either an injured spouse or innocent spouse relief? That is a very important question. And the reason we want to look at that is if you married someone that had tax problems, you could still get your portion of the refund, even if that person, their portion has to go back for back taxes. There are ways to preserve that information and get it. So you don’t lose the tax dollars that you want to leave. I mean, you don’t wanna put it on the table unless you’re trying to help them pay it off faster, and therefore deal but when you marry someone, you don’t take on their tax problems. That being said, in offering compromises, and often in payment plans, the problem is, if I marry someone that has a tax problem, my income is going to come into play for their ability to pay the IRS, right. Because if I’m already making the maximum, let’s say that a married couple can make $75,000. And that’s the most well if I’m making 75, or $60,000, and my husband’s making, or spouse, or whatever, 65 or $70,000, then they’re gonna say pretty much his entire paycheck can go back to them to pay off all the debts. Because they’re saying that’s all we need to live off of is that dollar amount, anything above that should be considered extra, or gravy. And that’s the problem with the IRS. As far as their calculation, I don’t have a problem with them, basically saying, now, if you can prove that you’re paying the mortgage, or you’re paying these things, and the other person isn’t participating, there is some wiggle room. And depending on if it’s a payment plan, or an offer and compromise, it’s not as straightforward as you like to think even though like I say, the IRS says, you cannot, no way are you going to be, you know, responsible for this person’s taxes yet, and they kind of make you responsible, because they’re saying my income can offset the problems that they’re having. So I don’t agree with the way they do that. But on the other hand, I don’t have a better solution. So if you are in the middle of trying to deal with that kind of situation, or you know what, I mean, I love it, when couples come in before they decide to get married, right still living on their own, still getting ready to have that situation. And we’re able to make a deal, settle, settle the IRS debt based on a single person and their tax situation. So when you get married, you’re not bringing that extra burden to a relationship. Since the number one reason for divorce is cash or money issues, I would say probably having IRS issues would be right on top of that. So maybe not bringing that to the party would be a good idea.
Dr. Friday 43:13
And so if you need help, give us a call at our office at 615-367-0819 on Monday. Also, if you’re looking for someone to help you get your taxes, review your taxes or get tax completed. Again, if you haven’t filed your 2020 you would need to be calling us Monday or Tuesday if you want us to help you out because our calendar is getting pretty full on this point. But, we always want to try to make time and help as many people obviously as we can. That’s what I love doing. But, so if you haven’t got anyone to do your taxes for the 2020 tax year, and you haven’t filed them yet, then you better, you know, get on the calendar or go online and get them filed because your time clock is running out very quickly.
Dr. Friday 43:55
Again, if you want to set up an appointment, you’ll need to call our office at 615-367-0819. You can also email me directly Friday, just like the day of the week. friday@drfriday.com. That is my name. And for any of you that have no idea who I am, you might want to check us out on the web. It’s drfriday.com, it’ll give you who I am, what we do, you can listen to other radio shows that we’ve done, you can, you know, check out what we might have as far as tax planners, and different things like that. Also, I think we’ve got a couple of speaking engagements possibly coming up, and different things like that, that we might be able to, you know, get out there so you guys can get the information that you need to be able to complete your taxes and make good tax decisions.
Dr. Friday 44:41
I mean, that’s what I… that’s the whole point of this radio show is really just to make you guys think, right? What if I do this? What if I do that? What would be the tax consequence on this? How would I be able to calculate the taxes on that? That’s what I want you to be able to do or at least have someone that you can bounce the idea for tax purposes. I’m not an attorney. I’m not a financial planner. All this stuff, you know, I don’t give advice on those… unless it’s my personal advice… but most of the time, all we’re going to be talking about here is taxes because taxes are such a vast part of our lives, and sometimes people need to be doing… right now I have a lot of clients that we’re evaluating their paycheck stubs. Are you having enough money come out so when we do your taxes, that we don’t have to come back and make another two or $3,000 payments every year because there’s not enough withholding coming out of the paychecks? I know people like to have more money coming in. But in the end, if you’re having to come up with a big chunk at the other end, what logic is there in that? I’d rather come up with a few dollars one way or the other verses you know, I don’t want big refunds. I don’t want the IRS holding on to large chunks of my money. But on the other hand, I do not want to have to be bringing two or $3,000 to the table so couples with their children and all the other things and expenses that come along.
Dr. Friday 45:57
Alright, so we’re gonna wind up the show here. You need to give us a call if you want at 615-367-0819. You can call that number they should answer it on Monday 615-367-0819. You can also email friday@drfriday.com, or check us out on the web at drfriday.com. This has been an awesome show. I hope you guys are actually really enjoying this holiday season getting ready for the holidays. Halloween, then Thanksgiving, and then obviously Christmas… my favorite holiday. So hope you guys have a wonderful Saturday and we’ll call you later.