Could your paycheck withholding leave you with a surprise tax bill?
In this episode of the Dr. Friday Radio Show, Dr. Friday delves into crucial tax updates and financial strategies. From the essentials of tax preparation to navigating new IRS regulations, this episode offers valuable advice for both individuals and businesses. Key highlights include:
This episode is packed with expert advice to help listeners efficiently navigate their tax responsibilities and optimize financial planning for the year ahead.
In this episode
- Wait until all your W-2s, 1099s, and other tax documents arrive before filing to avoid IRS adjustments caused by missing information.
- Keep purchase records for personal items sold online so you can establish their original cost instead of treating all proceeds as taxable income.
- File a return to recover federal income tax withheld from pensions or Social Security when your income leaves you owing no tax.
- Review paycheck withholding early in the year using the IRS paycheck checkup, especially when both spouses work or you earn side income.
- A 1031 exchange can defer gains when moving between qualifying investment properties, but a vacation home used solely by your family does not qualify.
Transcript
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.
G’day, I’m Dr. Friday and the doctor is in the house today.
We’re going to be talking about my favorite subject, which of course is taxes.
There has been a few minor upchanges on a few things that might be on the other, ununique
side of things, but we’re going to cover that.
And of course, many of you are probably getting all of your tax records together, so it’s
time for you to probably start thinking about, I wouldn’t rush still because I know many
people are still waiting.
W-2s do not have to be out quite yet.
1099s are still being processed, at least in our office.
So many of those will be something that may hold you up in processing that information
and don’t rush to file something until you have all of your documentation.
It’s not worth the IRS turning around and changing your tax return, which is something
that can happen anytime they don’t have the right information on the right lines that
matches what they think you should have.
All right, we’re going to go right to the phone lines.
We’ve got Ryan.
I love it when my phone lines start lighting up early.
Hey Ryan, what’s happening?
I hope it’s Brian because that’s me.
Oh, okay.
Brian, I am so sorry.
My typo on that one.
Let me give you my total and see if I need to say federal.
29,865.
Social Security of that is 27,816.
And the other is PBC and just a little bit of bank interest.
Is that all you have total?
Unfortunately, that’s it.
Okay, then you don’t need to file taxes.
Oh, I’ll take that as the gospel.
Thank you so much.
No worries.
Thanks, babe.
All right.
And that’s always a good question because sometimes life changes every year, right?
I mean, sometimes you get a little more interest.
Interest rates have come up.
So people might actually get a little interest for the money that they have in the bank.
It’s also one of those situations where you just want to make sure that, you know, the
biggest thing is most of his income was coming through Social Security.
Social Security in itself is not taxable unless you have other income, then it can be made
taxable up to 85% of what you receive.
So it’s just important to make sure you understand how that works and what you have going on.
So the IRS has released just recently the 1099K.
I think I’ve brought that up in the past.
That’s the one that started out back in 2021.
If you guys remember, they were going to basically do $600 or 20 transactions, whichever you
had and they pushed it out.
And now it’s going to be $5,000 or 20 transactions.
So if you’re using eBay, PayPal, some sort of cash app to receive money through doing
different things, the max is if you have overall, not just one transaction, but if you have
more than $5,000 in a 12 month cycle of January through December or 20 transactions, they
will be issuing you a 1099K.
Now I’m going to tell you that I’ve already had one person receive one that was based
on the $600.
So one of the companies, I guess had already set up and started to try to do the loss and
they had issued one to her and she had had more than $600, but she did not yet have 5,000
last year, but yet she did receive the 1099K from one of the cash app organizations.
So that’s going to be an interesting situation that you want to make sure that, again, this
is really for individuals that maybe are big on garage selling through the internet.
I call it garage selling, taking things from your own house and selling it, or people that
like to go out shop and then put them on the internet to sell, which is truly a legitimate
business.
And if you’re selling 20 or 30 things a year, I would say the IRS would probably consider
that a business, even if it was your own, because most people have a very difficult
time finding the proof that that was something you purchased 10 years ago, not something
you may have put up at a garage sale or something you got some other way.
So it’s really important if you’re an individual that really likes the idea of, you know, buying
something, living with it for a while, and then instead of just storing it or whatever
you put it on the internet, you need to start tracking your personal expenses.
So that way, because that’s what the IRS, otherwise they’ll say your basis is zero and
you sell it for $500.
Now you’re paying tax on $500, which would be normally zero because you probably paid
a thousand for that item.
All right, let’s hit Laura in Gallatin.
Hey Laura, what can I do for you, sweetheart?
Hey, I would like to know, I have a 21 year old daughter who was in full time college
last year.
She had, she made $5,000 on her W-2 and I am just wondering, can I still claim her as
a dependent or is she past that age?
Yeah, age, I know one.
Yes.
I mean, here’s the true test.
Did you provide more than 50% of her care?
And if she lived at home, that means room and board.
If she’s still on your health insurance, then you’ve covered that.
If she has a car and she’s on your car, all of those things would add up.
And if she only earned $5,000, I’m going to guess that you did actually, even if she didn’t
live in the house, but she lived on campus cause she was away, they still consider that
at home for the purpose of the test.
So she would still qualify as your dependent for that year.
And you might want to make sure she may have some college credits that you could qualify
for as well.
All right.
So yeah, that was another question that I had.
What kind of credits?
I saw something last year for you could get credit for books.
We bought her a new laptop.
So she would get a form.
She will get a form from the college called the 1098-T. It’s going to show how much her
tuition and then if she had any grants, scholarships, whatever, you know, that may have been paid
back on her behalf.
And if there is a difference and then you can add in some college, if you do lifetime,
you could add in the books, tutors, things like that, that may have also come into play.
And it doesn’t make a difference if there was college loans or if you paid for it one
way or the other, it will be paid with after tax dollars, assuming they don’t give everyone
a free ride then, you know, so she would still be a dependent and you can use that 1098-T
to see up to $2,500 depending on income and situations.
All right, great.
Thank you so much.
I appreciate that.
Thanks for listening.
I appreciate you.
All right.
If you want to join the show, you can.
615-737-9986.
This next section we’ll talk about is for qualified business, mostly tax exempt organizations
or entities such as state or tribal, which doesn’t really apply in most of ours.
There’s the new elective payment and transfer credit.
This is really dealing with, they’re starting to really get into the clean energy accounts.
If you are a business that deals with the clean energy, you do want to go on to the
IRS.
There’s a website and you want to go ahead and get registered under the IRS, the Inflation
Reduction Act, as well as the CHIPS Act of 2022.
You can pre-file registration right there on the website.
The publication is 5884.
Reason I’m bringing it up, it’s just opening.
There are more people than you think that are really working, trying to get qualified
and get the credits because those are credits that you can use.
Even in a nonprofit that doesn’t pay tax, you may still want to register if you’re dealing
with the clean energy.
That way you can start applying those credits.
That way you also get certain qualifications that come along with that as well.
That may be useful if you’re in that particular type of business.
We all know that there’s a lot more going towards clean energy and battery operated
vehicles and all that good stuff.
All right, real quick, let’s hit Chase in the borough and then we’ll come to Mary.
Hey, Chase.
Hey.
My question is, me and my wife got a divorce three years ago.
Our four-year-old goes to daycare.
The tax credit that you get for paying daycare or whatever, the credit, do we both get to
file that?
Every other year we file.
One of us filed last year.
This year I get to do it.
Right.
Every other year you may qualify as head of household, but you both won’t be able to take
that credit.
If it’s a 50/50 deal, someone theoretically, according to the IRS, has one day longer than
the other because of the way the calendar is.
You guys already decided that.
Even years is yours, odds hers, whatever.
You guys get the child every other year.
That’s the year you’re ending up with the child credit.
Too bad.
If you’re in a great relationship with a spouse, it would be great if you could do the same
year you pay it and then she gets 100% and you get 100% in the years that you claim the
child because I don’t know how much you pay.
Okay.
The half of daycare that she pays for, do I get to file for her half that she pays?
No.
You don’t get that credit?
No.
Now do I get to file the full amount of $7,000 or?
No.
You get to claim what you paid.
You don’t get to claim the part that she paid.
That’s what I said.
Unfortunately, if you’re in a team effort trying to outdo the IRS, which I have some
clients that are really good at doing that, the years that you claim the child are the
years that you pay 100% and the years she claims and she pays 100% and then that way.
To be honest with you, it cuts off at $2,500.
The maximum credit is like $500 you get.
You don’t get all of the money you pay.
You may already be maximizing Chase the amount anyways.
It may not be something you have to worry about chasing because $7,000 is above the
number.
Okay.
Well, thank you so much.
No worries.
Thanks.
Let’s hit Mary really quick so she doesn’t have to go through the break.
Hey, Mary.
Hi.
I have a question.
Yes.
From the first caller.
The first caller asked about the need to file taxes and he only made so much so did he have
to file?
Right.
So my question is, doesn’t social security make and if shouldn’t he file to get that
back?
No, because social security, I mean, right now we don’t have any refundable credits.
We don’t have any, he doesn’t pay in any federal withholdings with his social security because
he’s in a zero tax bracket.
Now I will have say some clients of mine have federal withholding come out because they
know they’re in a tax bracket that they’re going to pay tax on their social security.
This gentleman from my experience does not have anything coming out.
So Mary, you’re correct.
If someone’s listening and you had any kind of federal withholdings come out of either
the small pension that he may have been getting or your social security, you always want to
file to get your own money back.
But I would also say change your withholdings.
Okay.
All right.
Thank you.
No problem.
Thank you so much.
Great question.
All right guys, I’m going to get back here, but reiterate what Mary was saying just so
I make sure I’m straight.
She’s correct.
If you’re having any type of withholdings, even if you’re at that lower income bracket.
So Brian who had called in, if you have a small amount of money or small pension or
something and they’re withholding or on your social security, any federal withholdings,
you always want to file to get that money back.
You don’t want to leave money on the table.
But I would also say in Brian’s case, at least don’t have any withholding.
You don’t owe any taxes.
Therefore don’t give them any money and therefore you don’t have to file.
So just make sure that you understand if you do or don’t have to file.
I’m not saying there’s not a lot of people that don’t get to file, but just putting that
out there.
All right.
We’re going to take a quick break.
We’ll be right back in studio 615-737-9986.
We’ll be right back with the Dr. Friday show.
All righty.
We are back here live in studio.
You can join us live if you want it.
615-737-9986.
Do you want to make an announcement?
Monday is the day that the IRS is opening up for e-file.
That’s the 29th.
Then we can start actually sending out tax returns.
That would actually be for 21, 22, and 23.
E-file officially reopens for the years in that situation that are allowed to be e-filed,
which is three years at this point.
So just putting that out there.
And the IRS does have free filing.
You can go to irs.gov, available for, they say millions of taxpayers can get free filing.
Just be careful.
Make sure.
I’ve had people say that they went on thinking they were going to get free filing and it
turned out that they tried to have to pay.
I don’t know what the qualification for free filing is.
It used to be $65,000 or less.
No schedule C’s, no earned income credit.
Here we go.
It’s $79,000 or less for individuals on most of them.
And that would double, I would think if it was a married couple, but it’s really only
for W-2s.
If you have rental properties or you have children and you qualify for earned income
credit, my understanding, all of those would come back into play where you would actually
possibly have to have to pay something.
Also on the IRS website, I want to lead you guys to that site, especially now when you’re
getting ready to file your taxes and you see that you owe money and you’re a W-2.
So in most cases you shouldn’t owe money because you’re basically taking out every paycheck
enough to cover your taxes.
Unless you of course have a side kick or a side business where you do some Uber or you
do something and you make a little money on the side, then sure, you’re going to owe money
on the profit of that business.
But normal W-2 individuals should not owe.
And if you don’t, or you do owe money, excuse me, you can go to irs.gov, click under individuals,
and then you can actually do a paycheck checkup.
So you can recalculate maybe what you’re doing.
The biggest reason I find that people have a situation where they do two things.
One, sometimes they work off a lot of bonuses and sometimes people will play with it a little
bit because if you get a $40,000 bonus on one check, they’re going to take 28%.
And maybe you only made a total for the year of 80,000 and therefore it would have taken
way too much tax out at the time.
But it’s also a game that’s very difficult to play, especially with the new W-4.
The other side of it is, is one of you make more than, for a married couple, let’s say
a married couple, one of you make more than 150 or your combined income is over the 150,
then you’re actually in another tax bracket.
So if you’re claiming married in two and your husband’s playing married in two and you’re
married with two children, you’re not going to have enough taxes coming out if you’re
in the higher tax brackets because both of you are claiming children.
Well, only one person can claim the children and actually get the right amount of tax to
come out, right?
Because it makes sense.
And you’re both claiming married, which means in essence, according to tax code, married
means you’re supporting a spouse and two children with married in two.
Well, if you’re married and the other person’s making as much or more than you, then you
really don’t want to always be claiming married.
I’ve had people walk in my office more than once because I’ll say, you know what?
You should be claiming single in zero and you should be claiming single in two because
single means one person and then the dependents being whatever they are.
And again, this really affects more people that are making more than 150 combined because
now you get into the other taxations.
Once you’re over 250, then there’s the penalty for making more than 250,000 as a married
couple and there’s additional tax.
So as you go up, it is definitely going to be more of a game of understanding.
If you’re in the lower tax brackets and you’re both making 20 or 30,000 and you’re both claiming
married and two kids, it’s probably not having a huge effect because by the time you get
your standard deduction out, you’re probably having enough.
But I have people that will somehow they’ll make 30 or $40,000 and they’ll pay three or
a hundred dollars, but yet they say they’re claiming married in one or married in two
and that’s where it gets distorted.
So very important to check your paychecks and now’s the perfect time.
It’s January.
Any changes you make now will pretty much affect you all the way through to the end
of the year.
If you wait till April or May when you actually finish your filing, some people will file
in April, then you’ve already missed the first quarter.
So now you’re, you know, you may have to accelerate a little extra withholding just to compensate
for the first four months that you had going there.
So very important to basically look at your income information now and say, okay, if I
file my taxes and I’m owing more than $500, more than a thousand, whatever that comfort
zone is, cause you anything over 500 you can get hit with a penalty depending on prior
year amounts.
So we don’t want penalties, right?
I mean, that’s just silly.
Give the government more money just because you had it sitting in the bank or something.
I know it’s nice to have your own money in your bank, but theoretically it’s the IRS
money.
So why not give them the money?
And then that way you don’t have to worry about it.
So it’s kind of important to make sure that you’re not just sending out money to have
it in the bank just in case.
And then you turn around and you’re like, oh wait, now I have to pay them plus a penalty
and interest.
And that is never a good thing for any of us.
So just making sure that you have that information and how that’s going to work.
And for the individual that likes to go and buy a big truck every year, every few years,
you need to understand, you know, the rule allowing 100% deductible capital expenditures,
how that’s going to work.
Cause right now you’re going to get 80% under bonus depreciation.
And bonus depreciation in 2024 is going to drop to 60%.
And by the, you know, they’re trying by year 2027 to bring that down to 20%.
So the person that basically runs out and says, you know what, I’m going to go and buy
my 40,000, 60, $80,000 truck.
And I’m going to put it on cause I need a truck for my business and I use it all only
for my business, a legitimate true tax deduction.
And you’re, you’re used to writing that off.
That is not going to happen this year.
You are not going to hit that 100% of that tax deduction.
You’re going to get 80% this year.
So again, in your mathematics, when you’re doing this and can’t go backwards.
So if you thought you were going to get a full deduction of your section 179 situation,
you’re going to find out that those rules allow 100%, but they’re going to change bonus
depreciation, clarified bonus depreciation phases out.
That was based on the 2017.
And right now bonus depreciation is at 80%.
So kind of important to know, you know, section 179 is allowed for certain things placed in
business, but that’s going to start kicking out because if you purchase 130, assuming
35% tax bracket, you’re going to free up about $70,000.
Section 179 will have some limitations based on income.
So they’re trying to move that down.
So again, section 179 allows business to deduct 100% of the product, but that’s not bonus
bonus depreciation is only going to allow 80%.
Section 179 will allow a hundred percent, but that has to be qualified equipment and
software placed in during the year.
And that’s going to change.
And again, it may test you as far as if your income is higher.
It may bring it out where we’re not going to get a hundred percent on those.
So just putting that out there.
So start looking at not only 2023, but you’re in 2024 and you may need to start evaluating
if you’re going to be qualifying for 100%, 80%, 60%, depending on the year we’re talking.
So it’s very important that, you know, the wonderful thing about tax law changes all
the time.
Your SUV does have to be over 6,000 pounds is $28,900 for section one.
Okay.
So let me clarify.
Section 179 had someone just send me saying, well, can I deduct my a hundred thousand maximum
depreciation you can take is $28,900 for the tax year of 2024, $30,500 on a section 179
for a heavy SUV.
So there is some changes on here.
So just make sure you’re doing your taxes.
If you do them yourself, or I’m sure your tax person should know this.
But just, you know, make sure that you understand that you may not be qualifying for as much
as you had in the past on some of the depreciation that was on the books prior to this time period.
So again, tax law changes.
If you want to join the show, you can 615-737-9986, 615-737-9986, taking your calls, talking about
all kinds of different types of limitations.
I had someone send an email earlier this week that also asked about a like kind exchange.
And she was trying to do it on her primary home.
And just so you know, like kind is a business, not an individual.
So it is a, it’s part of real personal tangible property.
It is investment property.
So and you do want to make sure that you are handling that completely right.
Most likely you want to hire an attorney that does 1031 exchanges, and then they can handle
putting the money in escrow, transferring it to the new property.
Everything is kosher.
So that way you don’t have to get in the middle of did you ever touch the money?
Was the money ever a part of your situation?
Very important to see how all that’s going to work and what that’s going to be.
Because 1031s, I’m totally an advocate for.
But if it’s handled wrong, then it’s not going to be a good day for us.
So just making sure that you have some of those, we’re going to come back and talk about
some of the changes to fringe benefits and a couple new credits that’s available for
businesses with employees.
And you can also join the show at 615-737-9986.
615-737-9986.
I’m Dr. Friday, an enrolled agent licensed by the Internal Revenue Service to do taxes
and representation.
I’ve been doing this for 20 plus years.
So if you have questions and you’re not too sure, even if I don’t know the exact answer,
I guarantee you I can find someone that’s an expert most likely, or at least someone
that handles that part of tax law or business law that can help you get your situation straightened
out.
So we’re going to take a break.
We get back, we’ll take to your call 615-737-9986.
Alrighty, we are back here live in studio.
And if you’ve got questions, you can join the show 615-737-9986.
615-737-9986.
As I said before, Monday will be the beginning of actually filing taxes from that point on.
Most people should be able to see their refunds within 21 days from the date of filing.
Some people get it faster.
Some people get slower.
They have told that people with earned income or child credits may be out till mid February.
That being the fact because they’re trying to verify the children and just making sure
that they are giving the credit to the right information for all of that.
There is actually a big movement on that.
Another important thing is the IRS is also saying, reminding taxpayers that they must
again, answer the digital asset question and report it on your 2023.
That would mean cryptocurrency or other digital assets that you might have.
You have to ask.
Now they’re asking, have you ever purchased it?
Have you ever sold it?
It’s quite the question that we have to deal with on that one.
So it’s a little bit more than last time.
I think it started out basically 2021 was pretty simple.
Did you sell any virtual currency?
Now they’re moving into, and also more questions on that.
Also for business owners, they are double checking your NIC number to make sure they’ve
changed some of those regulations as far as what fits into what.
So when you file the return, you’ll need to double check the code.
It’s a six digit code that they have out there that you’ll have on your tax return.
So if you have any questions, again, you can join the show, 615-737-9986.
Let’s go to Pat in Cookville.
Hey Pat, what can I do for you?
Yeah, I’m just wondering, I heard on your show that when you gift your required minimum
distribution to a charity, it’s non-taxable to you.
So I’m wondering how that would work.
Is it a separate form to fill out on tax return?
It falls under the 8606.
So basically you’re going to have, it is, it’s a continuation.
So if you’re filling out the 1099-R, where you put that in the tax software, there is
a section that will ask what your qualified charitable deduction is.
And then if you’re multiple, I usually list the charities that it went to and how much.
Some of my people do multiple if it’s only one.
And then that information then will immediately reduce it from the 1040 on the front page.
So it’s a hundred percent tax deduction.
So the form is 8606 that I would need to fill out?
Right, right.
You’re going to complete the 1099-R, but it will bounce over to the 8606, which is where
all the information for retirement end up working its way through.
Yeah, I don’t, I don’t complete the 1099-R.
You receive it and then you have to put it into your tax software.
I’m assuming you use a tax software.
I don’t know if you use paper or do you do tax software?
No, I do it on paper.
Okay.
So then you’re going right onto the 1040.
So in your case, you’re just going to, let’s see here.
You’re going to complete, you’re going to, since you don’t, you know, this is what happens
when you put that on.
Because on ours, basically all you’re going to do is you’re just going to put it in under
gross distribution on the 1040.
You know, on the first side, there’s usually two boxes for the 10 on the 1040, what’s gross
and what’s taxable.
You’re going to put the total amount of your gross under the gross one and then taxable
will be zero or the remaining amount be that if you didn’t give a hundred percent of your
1099.
Okay.
That makes sense.
So box, I think it’s 5A would be the gross amount.
5B would be less the charity.
Yeah.
Okay.
Thank you very much.
No problem.
All right.
Let’s go to Lisa in Nashville and see if I can help.
Hey, Lisa.
Hi, Dr. Friday.
You’re awesome.
I just absolutely love you.
I had a quick question.
My mom’s 84.
She collects social security for, you know, for years she’s retired, but she works about
35 hours at Sam’s club just to keep busy and they take social security, you know, out of
her paycheck.
Are they supposed to be?
Yes.
Unfortunately, there is nothing in tax law that says just because you’re a worker and
you don’t want to sit at home and watch the grass grow that you don’t have to pay into
social security.
Theoretically every year they reevaluate, but the fact is, let’s be honest, she made
more money or her husband probably made higher income back in the day than it did, you know,
than she is now.
So she probably, but yes, there’s no time that you don’t pay social security no matter
how old you are.
It’s just a shame.
So it’s, so it’s, so it’s correct coming out of her paycheck even though she’s like social
security.
Okay.
That’s it.
Okay.
Love your show.
Great question.
Thank you so much.
All right.
Bye.
Again, I was talking about the digital assets says at this time during 2023, did you receive
as a reward award or payment of property or service, sell, exchange, otherwise dispose
of digital assets or financial interest in digital assets?
So pretty much if you have any digital assets, even if you’re just sitting on it, you pretty
much need to say yes to that question as far as I’m concerned, because most people have
either purchased it, you know, um, and what they’re, they’re really looking for, not the
person that went out and brought Bitcoin because that’s an exchange.
What they’re looking for is somebody receiving it in a form of a tax or award that normally
would come through the tax return on a 1099 MIS or some other format.
And so they’re trying to make sure that people are not, not reporting income, right?
I mean, that’s what it comes down to, right guys.
They’re just looking to make sure that people aren’t working on the world of digital and
ignoring it.
I will say that more and more of the digital wallets are now reporting to the IRS.
So just keep that again out there.
If you know, if you are a person that does things in digital currency, you know, you’re
not really hiding, it’s up to you.
But as far as your tax person, if I’m your tax person, I’m going to ask that question
and you’re going to answer it.
And that will be the answer I go with, because I will have no way of knowing, um, if you
have virtual currency or not, but I do believe the IRS is getting more and more access to
more and more of that information.
So I don’t think you’re really hiding.
And you know, I’m just, I’ll be honest.
I’ve always been one of those people.
I like to sleep at night and I, I just never been one of those people that I’m going to
turn around and you know, I’ll be the one call that, uh, just say no to something and
then find out that you didn’t have it.
Um, and if you do have cryptocurrency and maybe some of it has went, um, completely
down to zero, keep in mind that converting, um, and changing, um, to, to some of that
digital currency, you may not be able to deduct it because it wasn’t possibly reported properly.
Or if you’re holding digital in your wallet.
Um, so the IRS says if you’re holding digital currency in a wallet or an account, you can
say no to that question.
Transfer digital assets from one wallet to another account.
You can say no.
Purchase the digital assets using a US or other currency, including through electronic
platforms.
You can say no, but if you receive digital as a payment of property, yes.
If you received assets resulting from award or reward, yes.
Digital currency asset resulting from mining, which means if you’re creating digital currency
stakes or similar activities, you have to say yes.
Digital assets resulting from hard fork, a branch of the crypto black chain that is a
split, probably a little more than most of them.
I know a few of you guys are hardcore, so I shouldn’t say that.
Sold any digital currency or disposed of any financial digital currency.
The answer to that question would be yes.
So if you’ve got questions, you can always call the show or you can email me at Friday
at drfriday.com.
I will be more than glad to do my best to answer those questions and do the best that
we can to get you on the right track because that’s the important part of everything, right?
Just making sure that we’re all reporting our things.
We don’t want to be looking over our shoulder dealing with the IRS two or three years later
had a situation where normally six years is the window.
As long as you stay in compliance, most things are good.
But I’ve had a gentleman come in and he was self-employed for a number of years and we’re
having to go back to 2012, 2013 dealing with some of those issues because they weren’t
dealt with.
And so making sure that you have all of your taxes and you know, even if you can’t pay
them, filing them are kind of important.
If you file, then the time clock starts and then you know, they only have 10 years to
collect unless we stop the time clock doing something like an offer and compromise or
something like that.
It’s just really important that you understand how the time for collection works in 10 years
is a long time.
You know, right now you’d be having a really, really hard time, which might be a perfect
time to have the conversation with the IRS because when you’re not at your best is when
you kind of want to have the call.
If you wait till you’re back on your feet and you’ve got equity in a home and your jobs
are back up, then you can end up having to pay more or not even be able to really make
a deal.
Just pay off the total amount.
All right.
Let’s go really quick to Jerry in McMinnville and see if I could answer his question before
the break.
Hey, Jerry, what’s happening?
Not much.
I was wondering if I sold some land and made a profit off of it and I reinvest the money
in some property in Florida, let’s say in Tennessee, can I count the profit off of the
purchase price of the other place?
No, we don’t have that on the tax code.
In fact, I had a young lady come in that had thought that that was the case and she’d sold
and brought and sold and bought.
Right now it would be straight capital gains.
Now you might be an individual that might want to talk to someone about a 1031 exchange
if this isn’t your primary home.
Is it your primary or is this just some dirt, some land that you own?
Well, the land was just the investment and the home is like a vacation home that I bought
in Florida.
So if the land can turn into a vacation home, as long as it’s a vacation home in which you’re
Airbnb or renting out.
If it’s just a vacation home for you and your family, then a 1031 would not be allowed.
But if you go from investment property to investment property, you could do a 1031,
not pay tax on the land sale, change the basis on the new house based on that, and then you
can keep that.
And then when that one sells, you basically pay capital gains on the whole thing or continue
doing 1031 exchanges.
But that would be something to think about, Jerry.
If it’s a decent amount of capital gains, if we’re only looking at 20 or 30,000, it’s
probably not worth the headache.
But if you’re looking at $100,000 or more, it may be worth the conversation of having
a 1031 exchange, taking your investment land and investing it into an investment property
in Florida.
I’ve got a number of people that have done it very successfully.
Well, I didn’t say in the forties, what would you do?
If the profit was 40?
Yeah, I mean, the capital gain would have been 40, what I’ve made out of the land.
Well, I’m just saying, if the capital gains like $40,000 and you’ve got 15%, that’s like
$6,000, $7,000 in taxes.
So personally, I probably would just pay it and not have the government in any of my investment.
You know, that would be-
Okay, thank you.
No problem, buddy.
Thanks.
All right, we’re going to take another break here.
We get back, we can take more of your calls.
615-737-9986.
We’ll be right back.
All righty, we are back.
This is the last part of the show.
So if you’ve been holding your breath and you’re like, “Oh my gosh, I’ve got a question
and I’m not sure if I want to ask,” go ahead and pick up the phone.
615-737-9986.
It’s going to start getting busier and busier.
You should have most of your returns.
So employers, make sure you’ve got your W-2s.
Now keep in mind, many employers are sending out links.
They’re not actually having to print them and send them in the mail.
It’s very expensive.
They’re actually going to just basically be sending you a link to download your W-2.
And so just keep looking for that if you haven’t received it yet.
Know organizations like ADP, which is who we use, or Paycheck or any of the other ones,
most of them have links for the employees to download their pay stubs along with their
W-2s and those were available weeks ago.
So you’re able to get your W-2s.
If you have 1099s, 1099 miscellaneous or 1099 NECs, that as an employer, any service that
someone provides to you that they are not a corporation, then you need to be 1099ing
them.
So that means if you’re a person that has rentals, I use this a lot, but I know many
people forget, rental properties and you had a new repair on your AC unit, or you have
a lawn person that cuts the grass, or whatever you may have had done, windows replaced, then
those people should be receiving 1099s.
So that way they have the information for what you have.
Now, if they’re a corporation, you do not need to 1099 them.
Also for all of those that might’ve applied for the ERTC credits or the ERC credits, you
need to make sure there’s, for one, there’s huge a number of audits going on.
So you may get a love letter that says they’re auditing your employee retention.
And if you didn’t use a CPA firm, maybe you just use one of those that advertised.
I don’t know if they’re going to stand behind the work that they did.
I know that we actually contracted out to a CPA firm for this reason, to make sure things
were filed properly, that the information was submitted properly, and that that way
they also someone that would stand behind the work if something were to happen.
Because this is a very specific part of the code and it’s very important to make sure
that you had 941Xs that got filed, all kinds of different things that had to go.
And so it’s really important that if you file for it, and April is basically the end of
when they’re going to be giving those credits.
And I know they’re way behind on some of the processing, but they’ve also opened up a ton
of audits in this category.
So again, if you receive the ERC credit, remember first, that’s taxable income.
So theoretically the years that they refunded it, you need to go back to those years and
file those returns and you need to make sure you picked up all the money on your tax return,
because that is not like PPP money.
This was completely taxable.
Second part of that conversation is if you are still interested in getting ERC, this
is your employee retention credit.
There’s probably every week, five or six people calling your phones if you’re a business owner,
saying that they can process it.
But it’s very important to make sure you do have someone that really understands the system
because last thing you really want to do is get yourself in trouble because of that.
And 1099s, 1099-MIS again are due the last day of January.
So next Wednesday or thereabouts, we’re going to have to make sure all of those have been
put out.
They can be sent electronically or you mail them to the individuals.
But again, it is your responsibility.
Keep in mind, as far as 1099 individuals, if you don’t receive a 1099, that doesn’t
mean you don’t report the income.
If you were paid by anybody, it doesn’t make a difference who, you pick up all of the income,
even if it came in through cash, no matter what, it went towards your lifestyle, which
means that you want to make sure you can justify how did you pay for your car payments, your
car repairs, your mortgage, your property tax, your food bill, your clothing bill, all
of that went towards that.
And if you’re showing that you didn’t make all that money, then likeliness is it’s going
to eventually, eventually, I’m not going to say I’m, I don’t know if you’ll ever be audited
at all, but I think it’s important to make sure tax law says you need to file all of
it when it comes time.
If you never get 1099, it’s not there.
They’re just recapping how much they sent to you.
Your job is to track all of the income that comes to you no matter what.
So very important to check that you can also, once you start e-filing again, e-file opens
on Monday, the 29th.
That means once the returns are being accepted, you can then go to irs.gov, click on refund,
track your refunds from there.
Also a major policy change will end unannounced visits to taxpayers.
This is something that was going on.
The IRS announced a major policy change that will end unannounced visits to taxpayers by
agent revenue officers to reduce public confusion and increase safety.
That’s great news because I tell people all the time, the IRS isn’t going to just show
up.
They’re not going to call.
They’re going to send you a bunch of letters.
You’re going to have time.
This is a huge change though, because for a long time, revenue officers would come knock
on doors just to try to get information because people are avoiding them.
But that has come down the line.
So that’s something that’s kind of new, a really unique circumstance.
But I think part of that is for safety.
I think a lot of people, for one, think that every revenue officer that comes in or comes
around carries a gun and that they’re going to be threatening.
Not the case.
Many, many good friends that are working for the IRS, they’re a collection agency, guys.
But I do think it’s probably for their safety that we don’t have them knocking on doors
and just showing up unannounced.
Doesn’t mean they’re not going to drive by your house and see how you live.
I have had a lot of audits.
And one of the first things a revenue officer will say to me is that, “Hey, we drove by
the house.
We saw where they live.
We saw the cars.
We saw the toys, the boat, all these different things.
And if you have those kinds of circumstances, again, just remember that these are the kinds
of things that you don’t want to come back and bite you later.
Better to show it on your return, show the information, and then that way you can sleep
well at night.”
All right, guys.
So that will be pretty much all we have for the show today.
We’re going to be wrapping up here in just a few minutes.
So if you want to ask a question during the week, I will do my best to respond to emails.
I can’t say it’s going to happen as fast as it was prior to now because we’re kind of
working seven-day weeks now, working on taxes.
But you can email Friday@DRFriday.com.
Again, Friday, F-R-I-D-A-Y @DRFriday.com.
Also if you want to set up a time to talk, if you’ve got tax issues or maybe you haven’t
filed taxes in a long time and you’re like, “Oh my gosh, I’ve got to get myself back together.
I’m tired of waiting to see if the next ball is going to drop,” or maybe they’re sending
letters to your employer, which can be very embarrassing, you can also call my office
Monday morning, 615-367-0819.
615-367-0819.
615-367-0819.
If you are an existing client of mine and you haven’t yet set up your tax appointment,
please call our office again at 615-367-0819 or text that number so we can get you on the
calendars.
We are pretty much filled up for new clients, but returning clients always, always will
have time for you guys.
So I need to get you on the calendar so we can make sure we’ve got your taxes ready for
you in time to prepare those.
If you, again, if you haven’t filed taxes, maybe you have a certain or unique situation
or you’ve received some love letters and you’re really not sure how to respond.
I mean, we’ve had some unique love letters in the last couple of weeks.
I’ll be honest, things that are coming back from 17, 18, 19, normally they’re only going
back a couple of years, but I’ve had a couple that have just come back, 941 taxes, different
things like that where it looks like maybe the IRS is just preparing forms because they
didn’t receive them in the proper time.
But just because you’ve got a letter that says you owe money doesn’t always mean you
truly owe that money.
But if you don’t respond and get to the bottom of it, you may owe it because after a while
the IRS is going to take their numbers and not pay attention to what you’re saying because
they’ve already sent out the information.
You had time to review and change this information and it wasn’t done.
So again, not everything’s going to stay as it is.
If you just ignore the IRS, it’s not always going to be a good thing.
All right, so one more time, phone number to the office, 615-367-0819, 615-367-0819,
Friday at drfriday.com.
Probably one of the easiest ways to get ahold of me.
Email Friday at drfriday.com or check us out on the web, drfriday.com.
You can find out who I am, what I do.
I am an enrolled agent licensed by the Internal Revenue Service to do taxes and representation,
which basically all I do.
So it means I’m kind of like the shield between you and the IRS, but we’re also here to help
you get into compliance and understand what is your taxes that needs to be filed, where
are you at and what you need to do.
I hope you guys enjoyed this Saturday.