Welcome to another episode of the Dr. Friday Radio Show! In this episode, tax expert Dr. Friday answers callers’ tax questions and covers the following topics:
- Discussion about upcoming business tax deadlines on September 15th
- Explanation of estimated tax payments and their requirements
- Advice on making proper estimated tax payments
- Discussion about penalties for late filing of business tax returns
- Reminder of the October 15th deadline for individual tax returns
- Importance of tax planning for the current and upcoming tax years
- Advice on converting or taking money out of an IRA for various purposes
- Introduction of the Sweet Addiction, a job readiness program for women in recovery
- Announcement of the Tip the Waitress breakfast fundraiser event
- Explanation of the difference between non-profit and not-for-profit organizations
- Answering questions about IRA distributions and tax rates
- Advice on gifting property or money to family members
And much more!
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 if you are working on your business tax returns because if you filed an extension for your partnership LLC’s your sub S corporations and even for C corporations those will be due on September 15th again September 15th which is this coming Friday.
So if you haven’t, and if you did not file an extension, you’re just late, period. But that’s also the same day that we have to make our third estimated payment. Kind of want to touch base a little bit on the requirements for estimated tax payments. The tax law says we have to make four equal payments based on the year before. Now that doesn’t mean that if you want, some clients say, well, do I have to make four?
Can I not just on the first payment in April, can I just send all of the money or on the second payment?
Can I make a first payment and then the second?
As long as those payments are paid before the due date, those are considered for equal payments.
So if you wanna make all of your payments at one time and the original due date for every year is the first estimate is April the 15th or the filing date, whichever it might be, you may make all of them.
If you had an unusual situation, So let’s say you sold a piece of real estate that is taxable, not your primary, possibly it could be your primary, but in most cases with the exclusions, people don’t have a lot of taxes due, but let’s say it’s a rental property or a piece of investment land property, whichever that might be, then let’s take that and say that you owe taxes, maybe 50, $60,000.
So you are required within 90 days to make an estimated payment.
Again, estimated payments are based on the prior year.
So as long as you have made all the proper estimates for the year before, so you need to make sure you make 110% for this kind of situation.
So you might want to pay in a little extra.
It doesn’t mean you need to pay all $40,000 in taxes that may be due, but you do need to make an estimate, especially if you normally don’t owe taxes.
Two reasons I usually suggest this.
One of the big reasons is if the money is sitting in the bank and you are not a good person as far as being able to hold that money until tax time, you don’t want the IRS to ever be a loan officer.
It’s never a good experience.
Their interest rates are high, their penalties are high.
And if the money’s sitting in the bank, you’re less likely making money on it anyways, or maybe you’re making 4% or 5% versus paying out 25% for not paying proper quarterly, not paying on time and not making proper estimates.
Again, some of that can vary, but those numbers need to vary as well.
So if you have something like that and you’re not too sure, you can certainly call the show.
We’re live 615-737-9986, 615-737-9986.
But you do want to make sure, ’cause the last thing you really wanna deal with is having to pay a penalty on top of all the other taxes that are already coming out.
No one likes to pay extra money to the IRS.
And that also goes, if you did not file an extension and you haven’t filed your business tax returns, $300 per shareholder per a month that it’s late, up to the 12 months.
So that can add up to quite a bit of money.
Well, a group of four, it’s like $5,600 of a penalty if you don’t file it on time and you wait till the last date.
So you do wanna make sure that these are the situations.
Yes, there is sometimes a penalty waiver that you may be able to apply for.
It doesn’t mean you’re gonna get it if we can do it before and not have to worry about asking for forgiveness.
Sometimes it’s nice to do it right.
And then if you filed an extension as an individual, just a reminder, 10/15 is our due date.
So you do wanna make sure if you haven’t already filed, you wanna get those taxes ready, make sure you’re on the calendar, whoever your tax person is to make sure they haven’t, you know, got sidetracked or something’s happened so that you make sure you can file your taxes.
So that was one of the first things we wanted to touch on since that deadline is less than a week away for the business returns, you do wanna make sure those are filed and then go back and then you can file your personal.
So because again, if you have a sub S or a 1065, the other side of that is if you haven’t filed that, you can’t file your personal tax returns if you’re one of the shareholders because how do you file your personals if you haven’t already filed that?
So again, making sure that that information is correct and that you have filed it is essential.
Time clock is ticking.
Again, we’re also what, almost three quarters through the 2023 tax year.
So now is the time to probably sit down, especially with your tax person sometime after the 10/15 date and just say, “Hey, what do we need to look at?
Are we going to be doing a conversion?
If so, how much is that going to cause in taxes?
Did you sell or rebalance your stock portfolio?
Should I be worried or thinking about making a payment on that as well?
You know, because any change or major situation you’ve had will have a tax effect on you.
And that tax effect is going to be huge.
So, or it can be huge, it may be minor, but I’d rather prep before tax season when as a tax person, we are always so busy, right?
During tax, during the February through April deadline, It’s very hard to sit down and actually do tax planning.
Now’s the time to talk about tax planning.
Now’s the time to think about if I sell my real estate, should I sell it this year?
Should I sell it next year?
These are the kinds of decisions you don’t just jump into and start making unless you have little to no input on it.
Sometimes we don’t always have the ability.
Sometimes if it’s an inherited property, you may only be one of the people.
So it may not be something that you can turn around and say, well, it would really be better for my taxes If we don’t do this, but it’s always good to be prepared.
So that way, when the money comes in, you can take Uncle Sam out of your money.
And then if you’re reinvesting or doing something, you’re not investing the money that could come back and bite you.
So again, it’s really important to understand that right now is a good time to think about 2023.
It is also the, almost the only time that we can finish 2022 on time.
And so you wanna make sure all of that is happening.
If you’ve got a question, you can join the show.
Had a client that came in this last week and he was totally shocked.
He hadn’t filed taxes for a number of years, but he wasn’t worried about it because he had basically always worked as a W-2, always had enough money coming out, usually end up with a small refund.
So he was gonna, as long as he hit the three year, he’ll get his refund back for each of those years and it’s not a problem.
But then he realized he had a situation where one of his parents had passed away and they had settled the estate.
And he said, well, it was all life insurance.
And there was a little bit of an IRA, but none of it should have been taxable.
And this is when you really, really guys need to talk to whoever is your tax person when these situations come about, because sometimes the money that comes out is taxable, especially any money that comes from most annuities and from IRAs, obviously traditional IRAs, are going to come to you as a beneficiary, but as taxable income in which then normally, the custodial will say, “Do you wanna have withholding come out?”
And at that point, you can have enough money come out of it before you cash it out.
Nowadays with IRAs and only having 10 years to completely deplete them, there are some planning that sometimes needs to be done to make sure that we’re taking advantage of that time period because maybe that’s the time that you haven’t really been maximizing your 401k.
So maybe you maximize your 401k and then you take out so much money for the IRA so your lifestyle doesn’t change, but theoretically you’re converting that money into a retirement account again, into yours, because you can’t take an inherited IRA and convert into your own numbers.
It doesn’t work that way.
So what you really wanna do is make sure that you have all the right information, see what’s gonna happen, see how you can make it work for you.
And then you’d be able to maximize your taxes and also possibly increase your retirement with someone else’s retirement.
And again, wanna put a little caveat out there.
I’m not a financial planner, I’m a tax expert.
I’m an enrolled agent licensed by the Internal Revenue Service to do taxes and representation.
I don’t do financial planning.
I can help you with the tax aspect of financial planning, but I can’t help you as far as where should your money be?
Is this a good portfolio?
Not my expertise.
You wanna call a state financial strategy, Hank Parrott or whoever is handling your accounts now because those are the experts that’s gonna do that.
Now, if you wanna convert or do a conversion or take money out of an IRA to pay off your home mortgage or any of those kinds of things, then I might be your girl because those all lead to taxable situations and then I can help you figure out what’s maybe a better way of doing it, usually working in conjunction with your financial planner.
So that way you’re not, you know, ’cause sometimes as a tax person, we’re looking at the given year, right?
I mean, we can do five, six years tax planning out depending on current tax laws.
But normally when people come in, they just wanna know, well, if I do this this year, how much is that going to affect me in taxes?
Where a financial planner may say, yeah, we’re gonna pay taxes right now, but that means five years from now, you’re gonna pay zero tax ’cause the way we’ve got you set up, we’re gonna get all the tax dollars out of your thing and you’ll be living off a Roth and therefore your social security or have minimum IRA distributions and therefore have you in a zero capital gains or any of that kind of situation.
That’s their expertise, how that’s going to work and what’s gonna work for you.
But from the tax point, if you decide you’re gonna take money out today or you wanna pay off something or you wanna gift money to your children, and that’s, I mean, I have a lot of clients that do do that, but keep in mind, if you take money out of your IRA to gift to your children, that will not be a good plan, personally speaking, because now you’ve got to pay taxes, your children will not, you will be paying the tax.
Now, if that’s your plan, maybe it’s a perfect plan, who knows?
But that’s the kind of the planning you wanna do.
And now’s a good time, because if you have something you don’t wanna leave on the table, I always work a lot with Hank Parrott, he’s a financial planner here in Nashville Brentwood area.
And he, and we’ve been doing this for 25 plus years.
And in some cases, you know, I’ve seen him do conversions that are zero.
I’ve seen him maximize for several years where people pay zero tax because it’s more beneficial to do that.
But understanding how the taxes affect your retirement makes it easier for you to understand how do I change or what is my best option?
And so sometimes people get so hung up on the taxes that they don’t understand the big picture of how am I going to make something work?
So again, you wanna make sure you’re maximizing your tax deduction, but on the other hand, you also wanna make sure that you are taking care of your big picture, right?
She is the one that you wanna be able to make sure in the big picture that you’re not paying a dollar more than you need to in taxes.
And sometimes with tax law going up in 2025, right?
We know that the current taxes are going to have to either be extended or we’re going to be looking at higher taxes.
How do we make that happen?
And where does that go?
So that being said, we’ll be able to take that.
And we’re going to go ahead and take our first break.
When we get back, I have a special guest that we’re going to be talking about some event that is happening here in town that a lot of you may be interested in.
It might be something you want to participate in either as a sponsor or is just someone coming to breakfast.
So you can do that.
You can reach us.
We’ll take a quick break and we’ll be right back with the Dr. Friday Show.
Dr. Friday: All righty, we are back here live in studio and I’m gonna go ahead and take Adam real quick and then we’ll get to Robin and talk about some important things.
Hey, Adam, what can I do for you?
Hey, thanks for taking my call.
I just had a question about a bonus that’s coming up that I’m receiving and wanting to figure out the best way to maybe minimize the taxes on it.
I’m looking at potentially just fully funding an HSA and then taking the balance and throwing in a 401(k), but I was wondering if there’s anything more advantageous than that.
Now that would be your best because the HSA, obviously, depending if you’re married or single, you could put, you know, $7,300 if you’re married in, and I think it’s half of that for a single person.
And then what’s nice about that is you can also maximize your 401k which for an employee is the highest I mean otherwise an IRA you can’t do both so you’d be better off to maximize everything through the 401k and then the HSA.
I mean if you never use the HSA it turns into an IRA theoretically at the time of RMDs anyway so it’s a good investment.
Okay appreciate the Thank you.
Hey, thank you so much All right, we’re gonna go to get Robin on the line.
Thanks for calling Hey Friday.
Thanks for having us No problem at all.
So for all those that have never heard of the sweet addiction Can you tell them a little bit about what our nonprofit does?
Our nonprofit is a job readiness program for women in recovery So we are the second step when people go through a halfway house, they’re in any halfway house, we bring them into our program and we partner with the halfway house and we teach these ladies who have barriers to employment, most of them have come out of incarceration, they’ve been institutionalized, we take them and teach them the basics of how to be a good employee.
Teach them when to go to break, conflict resolution, communication, all the things they need to be successful when they get on site at a full-time employer.
Now we have a special event coming up in October on the 25th, limited seating of course, but if we can get a few more people, tip the waitress, tell them a little bit about what that is.
Tip the waitress.
This is where the ladies are gonna be able to show off their talent in their cooking, ’cause we use catering and food as our venue teach these ladies in the job arena and Tip the Waitress is going to be a VIP event for people to come.
$15 a ticket, they get to enjoy a wonderful breakfast and I mean a wonderful breakfast.
I have a young lady who’s from the midnight community and she makes a killer biscuits and gravy, that’s all I can say.
So they can come, enjoy a wonderful breakfast, we’re going to have a magician there, silent auction and yeah Yeah, just a great event.
It’s gonna be from 7:30 to 9:00 on the 25th at the Warehouse in Murfreesboro, Tennessee.
And all proceeds 100% go to support the Sweet Addiction of these ladies.
And the website is thesweetaddiction.com, correct?
It is, thesweetaddiction.com.
All right, so, ’cause I always have a tendency, Robin, to call it sweet addiction without the the, and therefore I wanted to make sure I put that out there.
So if you’re looking on the internet, make sure, If you actually Google Sweet Addiction TN, they’re the number one name, but thesweetaddiction.com and right on the front, you can actually buy either sponsors.
So if you’re a small business and you would like to have some promotion going on, and this is in the Murfreesboro, Rutherford, but they cover all of the Southern Tennessee, Eastern, whatever section we are in, Tennessee area.
‘Cause I obviously I’m in the Brentwood area and I’m a big avid supporter of this.
And I think if you just wanna know how to help do more.
This is a wonderful organization.
Now we also have a food truck, right?
Or if somebody has an event coming or something like that, this is something they could also book?
They can book food trucks.
We can do private events.
We’ll also be at Uncle Dave’s making days at the end of the month.
We’ll be at Depot Days in September.
But yes, they can book for private events.
And it’s a sweets truck.
And we offer sweets, two or three different sweets you you can pick to be able to talk Italian cream sodas and everything not for private events is by donation.
Right now, again, if you’re interested at all in having them come out or even just talk more about that, you can go to that website, the sweet addiction dot com and you can actually book a catering event.
They do birthdays, they do it all.
And the food is just I mean, I’ve been fortunate enough to get some free samples.
So I can honestly attest to how good it’s it’s good southern cooking good sweets, but they have some amazing catering.
So what else can, I mean, obviously they can, can they also donate?
I mean, would there be things that you may need from, if someone’s listening, do we have, you know, some other programs that people can help donate?
How is there anything else that people can do if they can’t make it to this event?
Yeah, if they can’t make it to event, they can go on the sweetaddiction.com.
We also have an Amazon wish list and because we have a kitchen that we’re running right now we have an Amazon wish list or they can call me directly if they want donate time or help with an event or maybe they want a mentor and they’re willing to bring with the ladies on site at their job for a couple days just to get to give them a feel for different opportunities they can call me at 615-580-8001.
All right, just making sure because you know, since you ever learned wrong, we have to say that three times for it to sink in.
Okay, just saying.
I’m just teasing you.
Okay, totally teasing.
But no, and again, if you’re interested, this was on October the 25th, Wednesday, it’s a breakfast.
So you don’t even have to take the whole day off, take the morning off at 730 to 930.
Is that correct, Robin?
Yeah, 7:30 to 9:30.
7:30 at the warehouse in Murfreesboro, Tennessee.
And what is the cost per seat?
It’s $50 a seat, but you can also sponsor if you want to sponsor a table.
And if you’re interested in a sponsorship packet, we can provide that.
And we probably We need to put that up on the website, but they can get a table.
I think it’s for like $300 and then they get some, you know, or $500 and each level they’ve got all kinds of advertisement.
You’ve one level of advertisement that you get your stuff plastered on our truck, you know, everywhere.
And then just, just to recap what she’s talking about, cause I get to cheat Robin is not there.
Uh, the platinum is a $5,000 sponsorship, which includes just about anything, anyone up to 12 people to the event.
Um, you helped to stage a logo displayed on the event, video announcements at any of the media situations, company banners on the website, logo on the truck, and a dozen treats every month for one year.
Right there is worth the freaking $5,000.
2,500 is the gold, 1,000 is the silver, and then 500, almost all of those, the first couple of them allow you to be on the truck.
And keep in mind, if you are in the, again, Murfreesboro, Rutherford County, These guys are out and about all the time at all kinds of events.
So if you’ve got something just like my business, any business that needs branding, this is a great way to connect yourself to a wonderful organization that is constantly branding.
And if you have something, you’re not seeing it on the website and you just wanna talk to the person that started all this is Robin.
And that’s how I got into knowing her and everything.
Well, kind of 615-580-8001, 615-580-8001 is the direct number to her.
So if you have something you wanna go, and again, even if you’re just interested in helping out the Amazon wishlist is at the top of the website, thesweetaddiction.com.
This makes such a huge difference in women’s lives that have maybe never had a hand up, Maybe I always consider myself extremely blessed because I’ve never had to, this kind of thing has never directly touched me.
Doesn’t mean that most of us sometimes are only a step away from some of these things that could or would have happened.
So I think we help each other.
It can make a huge difference in just one person’s life.
You know what I mean?
Robin, anything you wanna add?
‘Cause you know, I never shut up.
I just have a great way of always talking.
Well, no, but I wanna tell everybody out there that Friday’s been doing my taxes for years and she’s a girl to go to.
(laughing) – There you go, cross promotion, there you go.
Well, I have been and it’s always been a pleasure to, I’ve been excited about this nonprofit when she had it in a notebook and said, “Oh, I wanna do this.”
Never thinking that she would take it and now she has a ton of people backing it.
A lot of organizations impressed, including myself.
Totally anyone that’s ever worked with a non-profit knows how hard it is to get to that level.
So to get it truly helping every day, she’s helping women that otherwise would never have a job.
I mean, they would go back to what they knew because no one would take this risk to help change these lives.
So again, thesweetaddiction.com.
Robin, appreciate you jumping in.
I’ll push a little bit more on that.
And if anyone has a question directly for Robin, one more time, 615-580-8001, we’ll get you directly to her and she can help you with any questions that we might not have covered or that may not be on that website.
Thank you so much, Friday, I appreciate it.
No problem, we’ll talk soon.
We’re in our second break.
So again, I am Dr.
Friday, an enrolled agent licensed by the Internal Revenue Service due to taxes and representation.
That’s what I do.
So if you haven’t filed taxes for a number of years, if you’re not too sure how to do your taxes, because either something’s happened, some changes, and you’re just at a point where you’re a little lost on it, then I’ll be more than glad to jump in and help you figure that out.
That’s what we do.
We can help you find where your paperwork, maybe you’ve had situations where you don’t even have the last few years of paperwork.
That’s something we can help you with.
We’re gonna take a break and we’ll get back to your phone call.
We’ll be right back with the Dr. Friday Show.
Alrighty, we are back here live in studio.
And let’s see if we can get Jim back on the line.
Hey Jim, thanks for calling back.
Yeah, I had a question about converting some 401k money to a health savings account.
Is there a way to do that and save any taxes?
I don’t think you can do that without taking it out first, even though they’re both, that may be a financial.
I’ve never had anyone ever ask that.
It’s actually a really good question.
I mean, both of them are tax deferred.
(indistinct) So in my mind, a 401k and an HSA are basically both tax deferred.
But the problem is HSA stays tax deferred as long as we use it for medical reasons.
So I’m thinking that they’re not going to allow a conversion from a already deferred account into an HSA, I don’t think.
Again, if anyone knows this for a fact, I may need an expert on this one or I’ll have to send Jim to Hank Parrott, which will be able to answer it probably.
But I don’t, my guess would be if I were to take you in a guest, Jim, I would say you couldn’t do that.
I would think they probably would not allow the conversion because I like your attitude though, because then it would stay tax deferred And then, you know, obviously then you spend it for medical until the day you pass away, pretty much you can, you know, take that advantage where we don’t have that in a 401k, they make us take it out first.
That’s why I think a lot of people don’t maximize it.
I could do.
I wish, but I’m pretty sure the government would say that’s a loophole they don’t like.
So I’m gonna guess that they’ve already put a stop to that somehow, but I’m gonna find out.
I don’t think there’s anything else you can move it to that would keep it like a health savings account.
Now you can choose instead of maximizing your 401k to contribute to your HSA, but I’m assuming you’re probably doing that anyways.
And you can only put in the maximum each year into a health savings account.
You can’t over contribute or they penalize you.
I don’t even contribute to one now.
So I thought this would be a great time to start one.
Look at you.
Yes, well, I am a huge advocate, don’t sell the products or anything, but I am a huge advocate for a health savings account because the nice thing about that is even when we get older and we’re on Medicare and we’re not working, the health savings can still be used as tax deferred money to take care of our medical until we die where anything else we have to take the money out and spend it, which let’s be honest, we’re gonna have medical sooner or later, even if we’re fortunate right now.
So anyone that can maximize it every year, I would say go for it, Jim, but I’m not helping you with your question ’cause I don’t know the answer.
All right, so I’ll have to check on that tomorrow.
On another thing, if I’ve got a small pension going and I’ve got Social Security going and I want to take the max out of my 401k, what’s the equation?
Well, Social Security, you’re gonna take 85% of, you’re gonna take whatever the pension is total, and then you’re gonna subtract the standard deduction.
And then whatever that difference is, is gonna tell you how much you can either take out tax free, or if you’re married or whatever, if you’re.
Keep it at the 10%.
Keep you at the 22% or are you thinking the 12?
I’m thinking 12.
Okay, so you’d have to keep it all under 55.
All right, well, I appreciate my talking to you.
You too, thanks Jim, appreciate you.
Alrighty, that was interesting.
I do love questions.
I’m not always saying I’d always know all the answers because that would be impossible in the world that I live in, but it is always challenging.
And he’s gonna make me think and I’m gonna have to go see if I can figure out if there’s a way of doing what he suggested.
I’m gonna guess I can’t, but I like his concept of doing that.
But I will say again, especially for the self-employed, not always, but many of them have to pay for their own health insurance.
Anyways, employers sometimes control if you have the ability to have a health savings account or not, but as a self-employed, if physical reasons allow and I don’t, you know, changing is not always good because sometimes you can’t, but if you’re a self-employed individual and you have the ability to go on to a health savings account, personally, I say, maximize it.
It’s like having a second IRA.
I mean, in fact, when you hit 72, it will be part of your RMD.
You will be mandated to start taking money out of your health savings account.
So there will be that particular penalty that will happen.
But other than that, if you use the money on medical, it will stay as a protected medical situation.
So I would say, and I think all of us will have some medical if you can make it till you pass away, would never have a medical bill, then that would be awesome.
I guess it would turn into an IRA and it’ll be left to the people as your beneficiaries.
But if you have a health savings account, My suggestion is maximize it every year.
It may not have the same growth.
So again, this is a financial planner thing.
If you have to make a choice, do I maximize my 401k or up to the match that my employer or my HSA, they would have to answer that question.
I don’t know the answer.
Anytime someone’s matching, I’m thinking that’s free money, but there are little loopholes here and there.
And that’s what Jim’s looking at.
And I liked the way he was thinking, even if I didn’t actually have the proper answer for him.
So if you’ve got a question, you can join the show today.
615-737-9986, 615-737-9986, taking your calls, talking about my favorite subject, which is taxes.
And today we had our little extra bonus, trying to sell out Tip the Waitress, a breakfast fundraiser for the Sweet Addiction.
It’s a really great organization.
If you have never heard of it, you need to go on the web and at least check it out.
Even if you can’t attend, maybe you can sponsor a table or you can even just go to the Amazon wishlist and see if you can’t help them.
It’s time or money spent that’s well worth it.
I will tell you that.
And if you get the opportunity to go to the breakfast, you’re going to find that the girls or the women, I should say, really do have an amazing amount of talent in the kitchen for someone that doesn’t have an amazing amount of ability.
I like to obviously go and eat.
I don’t have the ability to cook very well or bake.
So just something to put out there.
It’s a wonderful, and you can get all your information right off the front page.
well-designed little website there to help you do what you need to do.
And if you want to join the radio today, and if you’ve got a question or you have a statement or something I can help you with, it’s not too hard.
615-737-9986, 615-737-9986, taking your calls, talking about my favorite subject, which is money.
So we’ve already covered today, the 9th, September 15th and we’ve reminded all of you guys about the October 15th.
Very big deadlines.
Our office is obviously working straight through to try to make sure we’ve got all of them.
And don’t forget that if you are a company, when someone sent in and said, don’t forget to remember that you also have your franchise excise.
If you are a single member or multi-member LLC, if you did not file an extension, you’ve probably already gotten love letters on it.
But if you have filed the extension then you have the ability to move on from there.
All right can we go ahead and get Stephen on the phone real quick?
I knew you could do that.
Hey Stephen what’s happening?
Well I’m just out here living the dream.
I love it.
This specifically pertains to a 501c8 fraternal organization.
And we get into these arguments about whether or not we are a non-profit or a not for profit.
I know that our gains are not taxed.
Not for profit.
You’re not for profit.
When most of us think of, and I’ll cut you off right there, most of us think of a non-profit, we think about if people give money to it, it is tax deductible.
When we think not for profit, it’s still, meaning that whatever you do, you’re not going to pay tax on it.
It still falls under the 501(c) or 501(a), I mean, there’s several 501s.
But if people contribute in most cases to these organizations, they’re not going to deduct it.
It’s tax-free money for the organization.
They’re going to grow it.
It’s a good nonprofit.
But in most cases, the 501(c)s are not.
You you should have a letter that will say if you can actually deduct, if you’re allowed to take contributions that are deductible or not.
But, um, from my experience, most 501 C sixes are, uh, more of a association kind of situation.
501 C eight.
Oh, C eight.
I don’t know if I even know that one is.
All right, let’s see what that one actually comes up as.
’cause now you’re throwing in a whole nother alphabet.
Oh, I know, I know.
But to clarify what you said, the C8 is gonna be a not-for-profit.
So the C8 organization is a fraternal society that provides benefits to its members.
So it is a lot like the C6, where it’s more of an organization in my mind.
You have a set number of members who share the vocation, blah, blah, blah, blah.
But it is a not for profit, not a nonprofit.
I mean, again, all 501Cs fall under the IRS code, not nonprofit organizations.
Let me clarify that.
But when most people ask, most people think of a nonprofit is, if I give money to Goodwill, I can deduct that on my tax return.
People that are in the fraternal society, Usually, and I haven’t seen your bylaws or I haven’t seen, so I want to put a little caveat there.
Normally those are not deductible dues because it caters to a very specific type of organization.
Now you may have a letter that tells me differently, but either way you need to by filing definitely at 990, which is a nonprofit corporation.
It falls on the 990 period.
That I know.
you so much.
No problem buddy.
Hopefully I didn’t completely blow Steven away there because I’m not too sure if I answered his question.
Let’s go to Jim in Lawrenceburg.
Jim, you there?
There’s my boy.
What can I do for you?
Yes, I was wondering what about an IRA.
If you get it out or leave it in and what the tax rate is on it or what the bank failed.
So did you say a bank failed?
Well no, I was wondering what would go on if you know if the bank failed or whatever, what they’re talking.
Well I hear you.
Well most IRAs are invested unless it’s self-directed, usually in annuities and they’re diversified.
So you would have some protection, even if the organization that is managing the IRA, it would be protected by the Fed.
So you would have some protection there.
So far as I know, I mean, I’m not a financial planner and I’m pretty sure mine’s protected, at least I would hope so.
As far as the tax rate, that’s unfortunately a tricky question.
Jim, can I ask, are you married or single?
You’ll be married.
So the easiest way would be kind of like the gentleman that asked me about the other tax rate, but if you and your wife were to add up everything you get, social security, pensions, W-2s, whatever you have, and you add it all up in anything that is under $108,000, you’re in the 12%.
So you would basically say if you were to take some money out of your IRA and it would keep you under that $108,000, sorry, the $108,000, then you would then be at 12%.
So if you took $10,000 out, you would pay 12% on that.
If that money you took out of your IRA was above $108,000 up to 250-ish, you’re at 22 for the money that’s above the 108 to the 250.
So it’s not a simple mathematical unfortunately Jim and we have progressive tax code.
So my suggestion if you are really thinking about taking some money out of your IRA would be to talk to a tax person so they could give you you know like okay here’s the real numbers and I want to take this much out how much would I have to pay in taxes that way they can give you an exact number or at least a very close estimate so you don’t you don’t really want to go over that at 108,000 if you don’t have to, if you could take it out over the next few years versus just cleaning it out because you’re afraid.
I would not be, just to put out there, I wouldn’t be afraid of an organization going under.
I think if you’re not comfortable with where the money’s at, you can always move it to a larger custodial, TD Ameritrade, any of those that have been in business now and have a very large portfolio.
so you wouldn’t have to worry about losing it if you’re having a small bank.
Does that help Jim?
I feel a little better about it.
All right, buddy.
I appreciate you calling.
We’re gonna take a quick break here and we get back.
We’ll go to the phone lines again.
615-737-9986 is the number here in the studio.
We’ll be right back with the Dr.
♪ Live, live, live ♪ – All right, we are back here live in studio and we’re gonna go right to the phone lines.
We’ve got Billy from Lawrenceburg.
Hey Billy, what can I do to help you?
Hey, I’ve got a question on a piece of property.
It was my old home place where I was raised and when my mom passed away, there’s four siblings, me and a brother and two sisters and she left it to all of us.
And over the years it was this, they decided that they were going to give it to me, uh, to do.
And I told them, you know, well, if they was going to give it to me, but I’d make sure it stayed in the family.
And, uh, I was looking to, and plus I came, I sold another piece of property at one time and I told him, no, I was going to go ahead and pay them for it.
So at that time I figured maybe today it’s a half acre, but I’m going to make it into an acre of land for her to put this house on.
And she was wanting to do the old home place, redo it, but termites had got into it and it was going to cost more, so it’s going to have to be tore down and she’s putting up a modular home there.
And I was just wondering what the best way to give that to her right now before I pass or because she’s needing a place to move to and settle up here, you know.
So I thought she was the one I decided I was going to give it to anyhow, you know.
So that’s what I was looking at, the best way to do that.
Well, I mean, the best way is not to do it during your lifetime only because what you’re going to gift her which is what you’re basically talking about by switching the title you would be gifting her at your value.
So this would have been back when your mother passed away and then whatever the other half acre you’re talking but it would be whatever you paid for it would be the value that you can gift it to this person.
They have to inherit it at your value where if you pass away they would inherit it at the current value.
Now I don’t know what the difference of the values are, you know, but if you were to give it to her, Billy, um, you would have to give it to her at the value that you inherited or took it over at.
I mean, otherwise you could sell it to her, but then you’d have to pay taxes.
So say that again, that last part.
Otherwise you would have to sell.
I mean, you could basically show it as a sale, um, in theory for the current value, but then you would have to pay tax on the difference.
Okay, yeah, I got you, I got you.
Okay, sorry, not a lot of help.
But you could do a life estate, you could do a trust, so if you pass away, it automatically goes to this person.
That way it stays within your bloodline, nothing happens to it.
Those would be legal things.
I’m not a lawyer, but that would be another direction to go.
And the only reason I speeded it up was because she was gonna hunt a place to buy up here.
You know she lives about 40 or 50 miles away, or she worked but retiring and She just needed a place, and I thought I’d go ahead and do it now So she wouldn’t have to buy another place.
You know or whatever right I hear you all right Well, we’re gonna have to take a quick jump.
Let’s see if we can get David really quick on the line.
Thanks, Billy I appreciate it.
Hey David Yes one reason, skipping tax issue.
Uh, I want to give some money away before, uh, 2025 and we might change the credit.
And, uh, uh, if I’m just making a, a transfer out of my brokering account, uh, that is a heavily, uh, an account open in the name of the, uh, beneficiary and, and, and, And then, and then this time I’m basically dragging the stocks that I picked over into that account.
Paperwork wise, what’s the best way for me to be documenting that to fill out the tax return?
You would have to do a gift tax return.
Yeah, you would need to be doing a gift tax return because on there it will show if you’re gifting stock, gifting a home, gifting cash, gifting whatever it is, art, whatever the value is.
So you would need to be doing and tracking that through the 70706 or 709706.
Could I just, you know, use them, have a printout at the end of the day and put them both in the house?
Value is a value.
No, at the time at the time of the transfer, what the value was at that point.
So that would be the value that you’re transferring it to.
Okay, thank you very much.
No problem, appreciate it.
All right, we’re gonna take, this is actually, no, we’re not gonna take, we’re gonna be ending the show here in just a second.
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Another easy way to reach me is email, Friday at drfriday.com.
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And the biggest one is this Friday, September 15th for all business owners that have LLCs that are partnerships, corporations, 1120s, 1120s.
Very important to get all of those filed on time.
That’s assuming you filed an extension.
I hope you guys have an awesome Saturday enjoy this weather it feels like the fall weather has come out again and maybe you’ll have a little time to enjoy this Saturday keep listening to 99.7