Could working while collecting Social Security leave you owing thousands?
In this episode of the Dr. Friday Radio Show, financial counselor and tax consultant Dr. Friday , from capital gains to inheritance issues, and provides valuable information about the current tax-free weekend in Tennessee.
Topics Covered:
In this episode
- For 2024, single filers qualify for zero percent capital gains tax when total taxable income, including gains, does not exceed $47,025.
- Document inherited property values with appraisals, because inheriting can provide a step-up in basis that receiving property as a gift does not.
- In 2024, gifts of $18,000 or less per recipient generally do not require a gift tax return.
- Tennessee’s tax-free weekend covers eligible clothing and school supplies costing $100 or less per item, plus personal computers costing $1,500 or less.
- Pension income does not count toward the earnings limit for early Social Security benefits, while wages and self-employment earnings do.
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 this beautiful Saturday afternoon
And we’re gonna cover a couple things that we need to prepare for I’ve gotten quite a few phone calls with
individuals either selling real estate or
inheriting real estate and selling that real estate and wanting to know a little bit more about what the
exclusion or thresholds for capital gains had someone call me and thought that if their income was below a certain dollar amount which it’s
47,025 or less for individuals
And then if if they would be at the zero percent capital gains
But the one thing that you have to remember in that conversation that would have to include your capital gains
So if your total income including your capital gains is under
47,025 for an individual then you will not pay any tax on that capital gains
But if that is just your normal income and then you have fifty thousand dollars or whatever of capital gains now
You’re in a different situation. You’re looking at 15%
roughly and the and again when people are quoting capital gains rates whenever I’m looking at the the ones on the
Internet or whatever. They always seem to miss that
3.8 of
investment tax that we have anyone that makes a
Mer any individual over 200 any married couple over 250?
so what you’ll see is 15% from the 47,000 up to
518 and then above that 518 it goes to 20%
And if you’re looking totally at the fact that capital gains tax the term capital gains tax that is true
But we have an investment tax and that kicks in for anyone that has investments that exceed 200 or 250
depending if you’re married or single
And that kicks in again
So even though it you don’t pay the 20% until after 518 for an individual you do pay
18.8 anything above
250 for a married couple or 200 for a single individual
So that is one of those areas where yes
I mean technically you can say capital gains tax or rates are these but there is that other one and it can make a big
Difference it’s almost 4% especially if you’re on the higher end of those numbers and you’re calculating that you’re only gonna pay 15
And then your tax person comes up with
18.8 you didn’t set enough taxes aside to offset it now. You’re not going to be happy
So I’m just making sure you understand how that works. And then of course with the inherited side of things
We also have what’s called a step-up in basis
You want to make sure that you have proper?
Proper appraisals basically is obviously the best way to go but at least cops comps or something like that that will help you
understand how much the value of that piece of real estate you either inherited and there’s a huge difference everyone between
inherited and
gifted if your parents just signed over their house to you while they were still alive because
Normally, the biggest fear is they don’t want to lose it into
Healthcare, right if we get as we get older, we’re worried that we’re end up in the Medicare situation maybe and they just don’t want
To lose the house. It’s their biggest asset. They’re always afraid so they add their children and
Basically quick claim it to them. That is not the world’s greatest idea
Just sharing with you from sure from the attorney side. I’m and I’m not an attorney
I’m only talking from the tax side
But even from the tax side Medicare has a five-year look-back and they also have the ability of asking. Have you ever transferred?
Assets over during this time period and I’ve been told that they actually ask that for bigger periods not just the five years
But I’m again, I’m not an expert on this but from the tax standpoint
You know if you do it now and 20 years later your parents end up in a situation where they are
not having to worry about
You know if they went to housing or Medicare, that’s that’s fine
But you’ve also missed out on the step-up in basis
So if it’s 20 years later or 10 years later, and and now the house is available to sell
Then you know you would have to pay the capital gains
Other than what the basis and the basis is what your parents paid for that house
And that’s a very hard thing to prove in some ways too because a lot of times people are sitting there going well
I don’t know what my parents paid for the house
All you can do is go back and in many cases
Property taxes are the only thing we have to rule them because the parents or the grandparents actually built the house
So there wasn’t like a closing or something that we might be able to track down in most cases
They purchased the dirt and then they built the houses on it
So you’re gonna end up with the lowest dollar amount and if you can’t justify anything
Then you’re gonna end up with the zero base and I’ve seen that happen
So you pay capital gains on all the money that you might get from that property
so very
Important to establish that basis not to just quick claim and there are ways of shielding property to a point
Again, I would definitely suggest in the state attorney
Russ cook Jack McCann any of those guys that really do do a great job in helping us shield
What we can and what you know, and sometimes you think you’re shielding something and you find out it doesn’t happen
If you want to join the show you can at six one five
seven three seven nine nine eight seven
six six one five seven three seven nine nine eight six taking your calls talking about taxes
We have two things going obviously, we still have the 2023 tax returns being completed
individuals have until October 15th
businesses partnerships
corporations they have until
September 15th so sooner versus later you want to get those numbers done
You can’t really do your personal unless you’ve done the business returns
Because we have to have those k1s to process the personal tax return
So again capital gains is something a lot of people you still have the health savings accounts. Those are still wonderful
the annual contribution is somewhere between for individuals about
4,150 with the maximum out-of-pocket
About 550 and then for families you can put in eight thousand three hundred and fifty
And and that’s pretty good
Think about it
Many of us are blessed to the point that you know
You want to be using your health savings account when you don’t need to be using it?
So every year just like adding to your retirement you would add
The four thousand or the eight thousand if you’re married or single to that account and you may not use it
So that’s the whole point. You don’t use your IRAs
You don’t use and then that number can accumulate and then when you really do have some need or when you get over the age
Of 65 you can no longer contribute once you’re on Medicare
but you can spend those funds to help you make it through those times when
Medicare or the secondary insurance or whatever may not cover the procedures it we have a tax-free account
Basically that you can spend for medical and then when you pass away it basically turns into an IRA
In fact at 73 you have to start taking RMDs from your HSA because it is considered basically a deferred account
So when you’re looking at all your deferred earnings and all that that’s kind of important to understand
Right now the family member dies in 2024. The basic exclusion is 13.6 million. That means that most of us
Won’t have to worry about a state tax or inheritance tax
And you can actually gift family members
18,000 this year 2024 went from 17 to 18
So that is a very nice
Increase and that you don’t if it’s 18 or less you do not have to file any kind of gift tax returns
Now it doesn’t mean that you cannot
Gift somebody more money. It happens all the time
A lot of people help their children with down payments on their homes do estate planning with different situations
But then you do need to file a gift tax return just documenting the importance of that money and where it’s going and
You know taking it from your lifetime
contribution so that is
kind of an important situation if you are buying or looking at the electric cars and they
Qualify because it has to be an EV. There still is the
$7,500
Exclusion had a case last year in 2023 where one of mine did go and buy but they claimed
It’s one of those situations where I guess it was more. It wasn’t a full EV
Even though that wasn’t what they thought they were buying
IRS required you to come back in certain situations. So
Make sure you get the proper documents
That’s what I’m gonna say
the documents have to show
What kind of vehicle has to have the fin number on it has all the details and if that boxes are checked as used?
or something else and
It isn’t that was the car we have with this one
Then you know again it comes back down to if it’s not a used vehicle
It shouldn’t say used that therefore you get the full credit in this case
That did say used and it wasn’t but we’re still having to get the car lot to make the proper
adjustments to that situation
So you have all the important things you want on that in
2024 taxpayers can increase their contributions take advantage of tax savings the contributions for employees for
401k or 403 be increased to
$23,000 up from 22 to 5 and over the age of 50 you can add an additional
7,500 so that would be
30,500 can be deferred into
your
IRA I mean sorry in year 401k an IRA in 2024 is
7,000 and if you’re over the age of 50, it’s
8,000 and then it that’s an increase from 65 to 7,500. So those are important numbers
Certain standard deductions obviously have changed
Those are always fluctuating but basically for example the maximum credit for an adoption this year is up to
710 that’s up from 15 9
And keep in mind if you if you do adopt and you don’t use all that money in the first year
Because some of it does doesn’t always require full return full
Credit, it’s some of it’s a deduction. It will roll over to the next year. I’ve had a number of people who will be able to
Take advantage of that
earned income credits have increased so if you are a
Single person and you have one dependent
You can collect up to the limit for that married filing jointly is
56,000 a head of household or single person
49,000 and you still qualify maximum credit is
4213 for two kids. It’s 69 60 maximum credit
The income is 55 7 and married couple 62 688 3 or more
They do go up to three or more still seventy eight thousand seventy eight hundred and thirty dollars
So again, the but those are all based totally on basic income
That you’re earning head of household or single obviously have a lot more than a married couple
Able to basically earn. All right, so we’re getting ready to take our first break
If you want to join the show, you can six one five seven three seven nine nine eight six six one five seven three seven
Nine nine eight six, we’ll take a quick break when we get back
We’ll get some of your questions and phone calls. We’ll be right back
With dr. Friday will return in a moment on super talk 99 7 WTF
Right we are back here live in studio
And if you want to join the show you can six one five seven three seven nine nine eight six six one five
Seven three seven nine nine eight six. We’re still running through some of the changes. We’re halfway through 24
So some of these in for this information is going to be vital for you
Especially if you’re trying to calculate your tax brackets or your standard deductions
So again, everything usually increases from one year to the next so 23 standard deduction was 13 850 for a single now
It’s gonna be 14 6 married couples
Where’s 27 7 now, we’re at 29 to head of household
20,800 up from 20. I’m sorry going up to 21 9
So that is basically if you make as a single person if you make
$14,600 and a w-2 or or anything basically for ordinary income tax
You will pay zero
Ordinary income now if you’re self-employed, we’ll still pay our self-employment tax
But that is kind of the important part of that question
And also when I was giving those numbers for capital gains, it was actually subtracting
so when I said
47,000 and some change that you could actually have 47 25 you would add if you were
Married or single or whatever you would add your standard deduction to those numbers. So that way it’s almost
50,000 55,000 you can have tax-free before you actually end up with any capital gains
In those and the same thing almost double that first for a married couple
So again, there is always these little twists and turns that you want to make sure you add if you’re actually over the age of 65
You’re gonna add another
$1,500 so here’s a question that had come in and I thought was an interesting one because a lot of times there many times
I have clients that are grandparents that are actually raising their grandchildren
due to other reasons and things that have happened in life and one of the things that you find out very quickly and
Unfortunately, this is kind of the bad news, but from age 25 to 65 you can qualify for earned income credits
repeat 25 to 65
After that you do or before that so if you’re a 21 year old out on your own with a child you can I mean in
Most cases it’s difficult to qualify for the earned income credit now
There are some ways around that as a younger person, but over the age of 65
I have not yet found a way to justify the fact that you are earning income reporting a child
That’s under the age and you’re supporting that person
They don’t allow us to claim that earned income credit. So that’s kind of important to know, especially if you’re a senior thinking
Hey, I’ll get the the credit, you know that I can take this deduction and I’ll get that
$4,000 earned income credit
For that dependent you might not qualify
So again making sure you understand how the tax law works is always the best way before you go and then you file something you’re thinking
Oh, wow, I’ve got this. I got this covered and next thing you find out
It’s not what you thought it was and now in some cases people have kind of counted their chickens before they hatch as my grandmother
used to say and
You know, they’ve already spent the money thinking
Oh, we’re gonna get four or six or eight thousand dollars because we have children in the house and they don’t qualify for them
So very important to make sure that you understand how the tax law is going to work
So that way you can make sure you’re in the right position to do what you need to do
So that was one of those questions where?
This grandparent is over the age of 65 and wondered why they didn’t qualify and that is why right now
Tax law doesn’t allow that. So if you are a senior and you’re raising your grandchildren
Well first congratulations second
That’s a difficult position
But you’re not going to have a lot of tax help other than the regular child credit that you would qualify for
Tax brackets kind of important to understand your tax bracket
But when I say tax bracket, there is the actual tax bracket and there’s the marginal tax rate
Marginals more the important number because you could be in the 32% tax bracket, but maybe only paying
26% tax
Because we don’t have we have a progressive tax code, right?
So we go from 0 1 2 3 4 percent our percentages work their way up
We start at basically once you get through the 0 we jump to 10%
But again, I have people that pay maybe 6% or 4% tax
Overall with all the the way it works. So the top tax bracket we have right now is 37%
A single person would have to be making more than six hundred and nine thousand dollars to be paying it
And here’s where the marriage penalty. I mean you guys have heard capital gains what I say about that one
Thousand for an individual 250 for a married couple. Here you go again tax brackets
six hundred and nine thousand for a single at the top bracket
731 for a married couple
The tax really gets hit right there. You start feeling it a little bit more
it’s pretty even pretty much the up to 24 and then
32 but after that you basically are start getting into a little bit the 35 basically but 37 definitely a marriage
Penalty on those kind of situations no easy way around that. Sorry to say if you have two very successful individuals
Marriage is not always the best thing in those
conversations but
But you can maximize some of your tax deductions by you know, making certain investments
Deferring certain incomes that that’s the game we all want to play so that way we make sure we have enough
When we get ready to retire. All right, so if you want to join the show you can six one five seven three seven nine nine
eight six six one five
seven three seven nine nine eight six, so I’m working on a case right now where a gentleman is
his grandfather
Passed away and his father so he now inherited the house that it was full of all kinds of things right all kinds of
clothing
Furniture and so he was detailed he went through and put everything listed it put the product and all the things
but one of the things that they’ve come back and it added up to
$84,000 that he gave to Goodwill and
And the IRS has disallowed it right because they’re saying well you first you should have had appraisals
You need to have the date that you received it the purchase price all this. Well, he didn’t purchase it
He inherited it
So at that point the value would have been what the value was at the time that he contributed
Because that was pretty much the same value that we’re arguing because obviously he didn’t buy it from new and so there’s no loss
It wasn’t a business asset. So it wasn’t listed on some sort of business tax return or anything
It’s really just the matter that it was
On there and since it was every little individual we’re talking
Thousands of things he gave away loads and loads and he was very documented when he did it
And so they’re basically saying well without an appraisal
We can’t give you any of it and it you know, so we’re obviously there is ways around this and we’re still having
very strong discussions, but
we have to learn from what he did to make sure that if you have inherited and you’re
Donating and you’re wanting to deduct those donations your best bet in doing that would be
Actually having an appraisal or something come through it
I know there’s a cost to that but when you consider tax bracket, you know
If he’s even in the 10% tax bracket, he saved roughly
$8,000 in taxes if he was able to itemize
it would have been worth having this appraisal now in his
Defense I wouldn’t have even known that myself
I mean, I know when it’s a piece of art or it’s a car or something big sure
We always get appraisals for those. I would have never thought about all the little
pieces of furniture and clothing and all that that was in a house and a barn that would have needed to be
appraised so
Just putting that out there if you’re an individual that may be going through that right now and you’re thinking oh my gosh
I you know, there’s just a ton of stuff here and
Common-sense would be is hey, I’m gonna give it to good
Well part you want to read, you know have someone actually repurpose it but to
Why not deduct it from your taxes?
And that’s why if you do it, there’s no reason you can’t the problem is you need to do it in a right way
And you know what one person learns we pass to the other
so the important part of that conversation really is if you’re in that kind of situation where you’ve got a
Household of furniture and different things maybe you can call in an appraisal
Praiser that will come in and you know, either document it for you
Maybe even have like an auction versus doing the donations, but it’s more like a large garage sale kind of situation
He wasn’t looking to have any money come back from it
He really was just looking to repurpose it into a some place that could do something with it. So
You know that that’s the the situation but just putting that out there that it’s a little bit unique
Sometimes you don’t have and I want to also bring up that the IRS has pretty much come down and you know for all of
You that have short-term rentals. Those are going to be switching to schedule C’s if you haven’t already done that
It’s already been proven in court and everything else. The IRS is looking at all short-term rentals as schedule C’s
We some of us have done them on schedule ease in all honesty
Because people weren’t managing themselves. They were having managers and everything else being done, but they are moving those to a schedule C
So again, if you’re in a short-term rental
Those need to be moved to schedule C’s
Which is a pro and con. I mean if you’re losing money on it
It’s a good thing because theoretically you don’t have the same limitations as a schedule II does
But if you’re making money on it, you will pay additional tax because you’ll pay self-employment tax
If you’re not already maxed out on Social Security and Medicaid, well, you can’t max out on Medicare but Social Security, so
It’s one of those conversations. You do need to have with your tax person and
Make sure you’re moving in that right direction. That’s definitely something we’re seeing coming down through the audits
where people
Win or lose sometimes it’s actually a good audit because we actually were able to take losses that they weren’t able to but
most cases that’s not the case so
We’re gonna take our second break here in just a second. The phone lines are open six one five seven three seven nine nine eight six
I’m sure many of you guys are out there right now. This is a sales tax-free weekend
I would be out there if I wasn’t on the radio
You need to you know
Make sure you bulk up on all the things that you can qualify for and we’ll cover that and just come back
I’ll go over what some of the things you can be buying making sure cuz here in Tennessee, that’s nine point two five to nine
point seven five free
Money, you know almost 10% That’s a pretty healthy
Rebate let’s put it that way or deduction. So if we’re not paying sales tax, it’s a good time kids are getting ready to start school
So we’re gonna come back the phone number here in the studio is six one five seven three seven nine nine eight six six one five
Seven three seven nine nine eight six will be right back with the doctor Friday show
With dr. Friday will return in a moment on super talk 997 WTM
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I’m gonna go ahead and get the phone call. I’m gonna go ahead and get the phone call. I’m gonna go ahead and get the phone call
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and we can request — we have to go back in, amend the returns,
making sure that we have a Schedule G, and then you have
to attach a balance sheet to justify your net worth,
and then they have to approve the refund and then you have
to go through a refund process once those have been done.
It’s not quite as simple as they like to make it sound
when it was coming through, but it is working.
And I will tell you, now bigger companies,
obviously they were paying a lot more money.
Many of them were reporting net worth
and still paying more tax on Schedule G,
so they are getting decent refunds.
But most of my smaller companies, many of them,
because they were Schedule Cs on their, you know,
like a single member LLC,
net worth wasn’t really being reported.
Therefore, the Schedule G, and so when we reverse it,
it’s not finding a huge refund, but they sent a letter out,
Ron, to everyone, like you may be entitled to a refund,
and you know, obviously not everyone’s going
to get a refund, and not everyone actually has working
balance sheets, so it’s requiring them
to get some accounting work done to accomplish it.
– Thank you so much.
– No problem, that’s a great question.
Thanks for calling, I appreciate you.
And so yeah, I will just put out there
for all business owners, Ron, being on there,
but basically, if you haven’t, we only have
to the end of the year to basically apply for this,
so it can’t hurt to go in, amend,
I have some that come back as zero,
but you know, every dollar counts in this world,
so it’s always a good thing to do it,
and if you need help, our firm can help you
get to that point and get that squared away.
Okay, now, back to an exciting weekend for all of us,
Friday, Saturday, Sunday, if I’m correct, yes,
Friday, it basically started at 12.01 a.m. Friday,
and it will end at midnight on Sunday.
We have a tax-free weekend.
Here’s what applies.
General apparel for $100 or less per an item,
so shirts, pants, socks, shoes, dresses, et cetera.
Any piece of item that is more than $100 is not exempt.
You will pay sales tax.
Items sold together, such as shoes,
you can’t say, well, each shoe is $50 or 75,
so therefore, they’re under, it’s a pair.
You can’t change that.
You can’t split up anything.
If it’s $100, it’s either 100 or it’s over 100.
Same thing for items such as jewelry, handbags,
sporting, and recreational equipment.
They do not apply in this situation.
This is basically true back-to-school.
Things that you need, not to say that I’m sure new bats
and some of that may come into play.
Art supplies purchased for $100 or less per an item,
such as binders, backpacks, crayons, pins,
pencils, rulers, et cetera, et cetera, drawing pads,
all of that is exempt,
as long as each item is less than $100.
School and art supplies individually priced
at more than $100 per an item is not exempt.
Items that are normally sold together cannot be split.
Again, if you’re buying a package of something
that is usually all sold together,
but now it’s being, it cannot be split up.
It has to be per an item that is packaged that way.
Computers for personal use, $1,500 or less,
qualify for no sales tax.
Come on, that’s almost $150
we would have paid in sales tax.
That is where you need to be looking.
Laptop computers, if priced at 15 or less,
qualify as well as tablet computers.
That’s wonderful.
Storage, media fields, flash drives,
compact disc do not qualify.
Individual purchased software do not qualify.
Printer supplies do not qualify.
Does it say that you can actually, I’m not sure.
I mean, it doesn’t say printers qualify.
Household appliances do not qualify.
It specifically says computer for personal use
or laptop computers or tablets.
So those are definitely things that would be,
things you wouldn’t wanna look at.
This is a perfect, come on,
we live in one of the highest states for sales tax.
So this is, I mean, if you’re spending $1,000
in school clothes, you just saved $100, that simple.
Some of the things that may not qualify, just be smart.
I mean, jewelry, things that are accessories,
you know, ski clothes.
I don’t know, that’s what they have on this list.
Not too sure.
We don’t have a lot of skiing here in Tennessee.
But obviously all the other things,
even a wedding gown, if it’s $100 or less,
that’s interesting.
I would have thought that was not a school thing.
But there’s a whole list if you have questions.
Most of the places you shop are going to have it
already marked and set up for you.
So it’s not gonna be something you have to walk in with.
But all the essentials, definitely a good time to go online.
And there’s no reason you couldn’t go online
and do your shopping as well as going out.
I mean, again, if you have a bunch of office supplies
that you wanna buy or school supplies,
binders, pencils, pens, markers, crayons, whatever,
just order them online and get them shipped.
As long as you do it before tomorrow at midnight,
you qualify for the sales tax-free weekend.
And I would definitely put some serious thought
into whatever it is that you basically are gonna want
because that way then you don’t have to play
too much with it.
All right, let’s get John before the next break if we can.
John from Cookville, that way he doesn’t have to wait
through, hey John.
– Hey, Dr. Friday, enjoy your show.
Good job, girl.
Thank you so much for your time.
– Thanks for calling.
What can I do for you?
– Okay, got a friend of mine asked this question to me
and I could not answer it.
I’m in the insurance financial planning business
and do some trust work and he asked this question.
I thought, oh, that’s a good one.
He is 64, he draws Social Security.
Him and his wife earned about,
I think he said he earned 94,000 himself last year,
unusual year.
His wife owns, earns about 40,000 with Social Security
and so forth.
So they went over the 100,000 mark.
He started drawing Social Security and he’s not 65 yet.
Does he have to, if he goes drawing Social Security,
does he have to pay any of that Social Security back?
– Yes, but it depends on how he earned the money.
So you can’t earn more than like $20,000
if you’re on what we call early Social Security,
which he is until he hits his actual 66 and a half, 67,
whatever his full retirement is.
So, but what you were talking about doesn’t sound like he,
he wasn’t working a job.
He was drawing Social Security
and maybe taking money from his retirement?
– No, it was income money.
– Oh, I mean, he did go out and work?
– It was the 1099, yeah, the work he did,
he gets the 1099 at the end of the year, yes.
– So yeah, so if his profit on that 1099
is over the $20,000, he will have to pay back $1
for every $2 over that 20.
And there’s, I don’t know the exact number.
Let’s just call it 21,000 to be safe.
So if he made $40,000,
theoretically he’ll be paying back $1 of every $2 over.
So he’ll be paying a big chunk of money back.
– Okay.
– That’s what I don’t like about early Social Security.
– So they would stop his Social Security then, right?
That’s what he’s worried about.
– Pretty much they will.
I mean, he’ll have to pay it back,
which means they’re gonna keep his Social Security
for the next year,
’cause he’s gonna be paying back the year before
where he took it.
And so until he hits full retirement, it’s almost,
I mean, if he’s gonna continue working anyways,
I mean, this may have been unusual year, but you know.
– It was, yeah, it was, yeah.
Okay, very good, that answers my question.
– Yeah, is him and his wife both worked the business
or it was just him?
Because obviously if they both worked,
it would be 20 on each of them roughly.
But yeah, I mean, if this was an unusual year,
unfortunately, it’s always easy, you see it all the time.
I’m sure John, same thing I do.
One of those questions would have been a good one
to ask his tax person while it was happening.
So you could have either stopped the Social Security,
just so you don’t have to pay it back.
But that’s hindsight.
And at this point, he’s gonna end up with a situation
where he’s gonna possibly owe some decent money
and they’ll either gonna take his Social Security
every month as the payback,
or I mean, they send you a bill basically.
And so you’ll have to pay it back
or pay it through your Social Security,
depending on his situation.
– Well, what he has his taxes done,
if I think this is correct, through a tax person,
it’s not a CPA and they say, “We’ll get back with you.”
And it’s when he called me about two weeks ago
and I said, “I’ve got to get back with him.”
But it was about two weeks ago.
And so, yeah, I don’t know if he’s a person that-
– Hopefully his tax person got back with him
and they made a plan to move forward
because it’s nothing worse than getting that.
I mean, again, he may have gotten lucky
and just had a really good year
and didn’t have any expectation of that happening, but-
– I think that’s what happened, yeah.
So does he need to call Social Security?
You think you’d advise him to do that?
– Well, I mean, if this was in 2024 that’s happened,
or do you think it was a ’23 issue?
– ’23.
– ’23, well, then they’re gonna be notified
’cause he’s filed his taxes.
So he’s gonna be getting a love letter relatively soon.
– Okay, and here’s some message then.
He filed, he told me he filed a…
He filed a…
– Wait, call it, you defer your taxes, he filed extension.
– Yeah, well, that means he hasn’t,
I mean, he needs to go ahead and file his taxes,
but his tax person also needs to help him
try to figure out roughly what the bill can be.
So he’s not gonna be given a huge surprise at that time.
Right?
I mean, I’m just saying he needs somebody
that’s gonna prepare him for it
because there’s nothing worse than getting a bill
from the government for five, $10,000.
I don’t, I mean, depending on his profit and what it is,
but he has until October 15th to file,
but I’m assuming he’s still drawing Social Security today.
– Well, I would think he probably is.
I don’t know, but I can ask him.
– Yeah, I mean, and the question will be is
if this year is going to be as good
or even close to as good as it was, then he may,
you know, I’m just saying he’s gonna end up
eventually having to pay it back.
So he needs to have a plan.
I always think a plan is a good plan.
– Yes, ma’am.
– All right, well. – Hey, let’s show
what’s up, dog.
– Thanks, I appreciate the phone call, John.
– Yes, ma’am, bye-bye.
– Thanks, bye.
All right, we’re gonna take our last break.
If you wanna join the show, you can.
615-737-9986.
615-737-9986.
We’ll be right back with the “Dr. Friday Show.”
– Your money coach with “Dr. Friday”
will return in a moment on Supertalk 99.7 WTM.
(upbeat music)
All righty, we are back live here on the radio
and it looks like we’ve got a few phone callers,
which I appreciate.
Let’s hit John first for the early retirement,
maybe my boy.
What can I do for you, John?
– Thanks for taking my call.
I do have, to follow up a little bit on your last caller.
I’m about to retire and I’m gonna have a little over 40 years
but I’m not reached 62 yet.
My thinking is, or what my question is,
if I take early retirement at 62, is my,
I mean, my social security at 62,
is my retirement pension, does it count towards income?
Am I?
– No. – Or can I?
– That’s what I was trying to make sure
with that last caller.
So it’s really truly earning.
So 1099W2, that’s the ones that affect
the payback of two to one.
So you’ll be fine if you have a pension
and your social security, they’re not gonna take any,
I mean, there’s no penalty for that.
– Great, great.
Well, thank you so much for your information.
I greatly appreciate it.
– Thanks for the phone call, I appreciate you.
All right, let’s hit Bobby in Fairview.
Bobby in Fairview, what you got going for me, buddy?
Oops, I’m a little faster than my radio guy here.
Bobby in Fairview?
Not too sure.
Okay, I’m not too sure.
Hold on, Bobby, don’t hang up.
I’m not too sure what we’re, oh, there we go.
Hey, Bobby, what’s happening?
– All right, ma’am.
My wife owned a wedding dress shop in Fairview
and, or is in Dixon, but anyway,
they closed up shop and tried to liquidate.
We got stuck with about 50,000 roughly in inventory.
I’m having trouble moving the inventory.
I’m having trouble moving that inventory
and just wonder if there’s like a good option
to claim that on taxes since we can’t
or haven’t been able to sell it to this point.
– Right, so you’ll have to be a little bit more tenacious
on that one because the 50,000 would be either your cost,
which is what we consider 50,000 in inventory,
but it may also be what the market price would have been.
So you’re only going to be able,
and then did they already deduct that from the business
as a loss ’cause if they’ve closed the doors,
they may have already just wrote it off
and therefore there’s no value to it
because the loss came through the business.
Or if the business is still basically holding on
trying to get rid of this last 50,000,
then the best bet is donate the dresses,
clean out the, I mean, obviously that’s a nice thing to say.
I don’t know financially how that will work for us,
but you could donate or give them and then that money,
then the cost of whatever those dresses cost,
you’d be able to deduct as a loss on the business.
– Okay, yeah, I don’t think that she claimed it yet.
– Right, she’s still trying to get a value out of them.
– Right, it’s her cost, it’s not the retail price.
– Okay, well, that’s a lot of money to take a loss on.
I mean, in all honesty.
Hopefully she can do something with them,
but if she can’t, then obviously close final tax return,
zero out inventory, donate to one of those places
or whatever and see if that will at least give you some,
it will give you some tax loss,
which will give you some tax dollars back.
– Okay.
– Okay, cool. – All right, well, thank you.
– Thanks, Bobby, thanks for holding.
All right, let’s hit Randy real quick in Alexandra.
1031 X transfer or exchange as I call it.
Hey, Randy, what’s happening?
– Hey, Dr. Friday, good to talk to you again.
The question is, my wife and I,
we have a little over a hundred acre piece of property
in an area that’s not near our house
and not necessarily wanting to sell it all,
but maybe some of it and buy another piece of property
closer to where we live and maybe in the area we wanna live,
let me just say that, which is near where we live.
And build maybe another house or something.
How could I make that work?
I mean, if I didn’t sell it all or do you have to sell it all
can you just kind of go over how 1031 transfer works?
– You got a couple of moving parts there, Randy.
First thing is, yes, you can sell one acre
to whatever number you want,
probably depending on the capital gains,
do we determine the 1031?
I mean, obviously you paid so much for them,
but let’s just assume that you’re gonna make a profit
of 50 to a hundred grand,
then a 1031 would be a good suggestion.
1031 cannot be used to buy your primary home.
So a 1031 would be dirt for dirt in this situation.
So you can sell 20 acres, go buy a hundred acres, whatever,
you don’t have to buy the same number,
but the idea would be is to sell the acreage on the side
that you may not want to be dealing with
and then to invest onto the land on the side of town
that you might actually be able to do what you wanna do,
either that being farming or whatever.
I mean, it’s dirt, doesn’t have to be doing anything.
And then that would be the main thing.
You cannot make your primary home though,
for a minimum of two years, 1031 exchanges have to be,
and then there’s some loops you have to jump through
and eventually you’d actually have to pay the capital gain.
So I guess my question would be on that one.
Normally a primary home is five acres and a house.
So if you’re getting a larger piece of land potentially,
maybe that can be farmland or whatever,
obviously 15 acres or more is always a good idea
for the greenbelt, but that’s again,
may or may not come into conversation,
but I’m just saying for tax purposes.
– Okay, so, but it does have to be acre for acre,
is that correct?
– No, it doesn’t.
No, you can sell one acre and buy a hundred.
No, does not have to be, it’s just basically dirt for dirt.
– Okay, so, okay, so does that transfer
as far as all of the, not transfer, but defer the taxes?
– Yes, if you do a 1031, yes.
But if you sell a piece of property for a hundred thousand,
you have to go spend a hundred thousand.
– Right, okay.
– No matter what your profit was,
for whatever it sells for, you have to spend.
– On another piece of property, either large–
– On another piece of property, yes.
– And there’s a two year hold back
on building a home on it, correct?
– Primary home, yes.
And then you still have to pay the capital gain.
So I think we, if you have a tax,
or we’d have to talk a little bit more
about what’s the advantage or disadvantage,
at least to the five acres there you’re gonna build the house
compared to a 1031 on the other dirt, right?
It’s not primary, it’s a dirt for dirt.
So just saying.
– Okay, okay, all right.
Well, that gives me some information about.
– Cool, great question.
Thanks for calling.
All right, guys, we’re winding down the show here.
We’re getting down to the last couple of minutes.
So let’s just go through all the important information,
like how can you reach my office on Monday morning,
if you’ve got a question or you weren’t able to get through
or you’re out shopping and you’re like,
“Oh, I wanted to go out, but I’m out shopping,” right?
615-367-0819 is my phone number, 615-367-0819.
You can also email friday@drfriday.com,
friday@drfriday.com.
You can also go onto the web, drfriday.com,
and just check out who I am.
You may not know, I am an enrolled agent
licensed by the Internal Revenue Service,
which means I do not work for the Internal Revenue Service.
I am licensed by them to do representation,
basically to help put a shield between you and the IRS
so you have someone there
that can actually kind of talk the same language,
making sure that we can do our very best to represent you,
making sure that things are going the way they should,
and also to explain why the IRS is doing what they’ve done.
‘Cause sometimes people are all like, “Why, why, why?”
Sometimes it’s simple errors,
and sometimes it’s because they’re interpreting something
differently than the way you interpreted it,
and maybe it’s even just a matter of getting them
on the same page.
Had some really unique situations
where someone may have sold a house
and they ended up reporting twice on their taxes,
and therefore the IRS was trying to collect it twice,
even though it was the same exact house.
These kinds of things happen.
The biggest thing is making sure you got the communication
or you have someone there that’s going to help represent you.
Had a situation yesterday where someone was telling me
we couldn’t e-file 2021, but yet we can e-file 2021.
So, you know, IRS is not always right,
but it is important that they’re on the same page
as where we are, because otherwise,
you’re gonna be spending a lot of time going in circles,
and sometimes it’s too late to make certain recommendations.
Sometimes we have to do reconsiderations,
hoping that we can get an audit reopened
because something didn’t get done the first time.
But there are ways of working with the IRS.
It is their job to help make this work,
not necessarily just be a collection firm.
But again, if you wanna call us Monday morning,
you can at 615-367-0819.
Email is friday, just like the day of the week,
at drfriday.com, friday@drfriday.com.
You can check out the web, drfriday.com.
And that way you make sure that you’ve got
all the information you need to make sure you know
what the next steps are,
that you’re not just spinning your wheels trying,
and hopefully those love letters
aren’t accumulating in the drawer.
As we always say, cop you later.