Missed retirement withdrawals, delayed refunds, and withholding mistakes can cost you.
In this episode of the Dr. Friday Show, Dr. Friday , from individual tax situations to business tax considerations. She provides valuable insights and advice for listeners looking to navigate the complex world of taxes.
Topics covered:
In this episode
- Before converting traditional IRA funds to a Roth, calculate the income taxes and potential increases in Medicare premiums.
- For married couples filing jointly, the $32,000 Social Security taxation threshold includes half their benefits plus other income.
- File partnership and S corporation tax returns, or request an extension, by March 15.
- Report all business income, including cash payments and earnings for which you never received a Form 1099.
- GoFundMe contributions benefiting individuals are personal gifts and do not qualify as tax-deductible charitable donations.
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.
All righty, I’m Dr. Friday.
We are live.
You can reach us here at 615-737-9986, 615-737-9986, taking your calls, talking about taxes.
Many of you may be working on your taxes this weekend.
I know I’m in the process of working on taxes.
You may actually be running into some things that you’re thinking about for 2024.
I mean, things are always changing.
A lot of people are thinking about Roth conversions.
I am not a financial advisor, so I do not get into that aspect, other than the fact
that if you do a conversion, you will end up paying taxes.
So you may want to talk to your tax person when you’re doing that.
We do a lot of planning when we’re usually doing tax prep because what you have happening,
you know, sometimes people are thinking, “Well, maybe I’ll sell a house or I’ll do this,”
and all those kinds of things not only affect your actual taxes that are due, but your IRMA,
if you’re in and receiving Medicare.
So it’s very important to take into account not only what you’re going to be paying in
actual ordinary or capital gains tax, but make sure that you talk about the IRMA as
well because we have found over the years, many times people take into account, you know,
how much am I going to pay in capital gains?
I already calculated that.
And then they get the love letter from Medicare that says, “Hey, we’ve changed the amount
we’re taking from you because this situation is happening,” right?
Whatever it might be, but maybe you sold something, your income went up.
Now, I do understand there is a one-time exclusion.
I’m not going to claim I’m an expert at it, but I’m sure you could talk to someone over
down at Medicare or Social Security that could help you with it.
But it’s very important that you consider how all that’s going to work because when
you decide to take large distributions, again, I have a number of clients that are really
trying to get more money into their Roth IRAs, reducing their traditional IRAs while taxes
are still low.
There is absolutely no guarantee that we know in two years that taxes will go up.
But we assume that is what the tax law says at this point.
Many of us never expected taxes to go down.
So, you know, no one has a magic ball.
But if you’re actually a person that is working towards that, then, you know, we have these
expectations to do that.
All right, let’s hit Alan in Spring Hill real quick.
I think you have multitask there.
Thanks, boss.
Hey, Alan, what can I do for you?
Hey, I have a question.
My wife and I are both retired now.
And I know that if you keep or you can confirm it, if you keep your income under 32,000,
your Social Security won’t be taxed if you’re filing, you know, married couple.
Is that true?
Right.
Well, the provisional tax code takes half of your Social Security as part of that.
So that is true, the 32K, but half of that is Social Security or half of your Social
so if you make $20,000 a year, 10 of that 32 would come from your Social Security.
Okay, so here’s the situation.
And I’m not sure I understand what you just said there.
Go ahead and give me your numbers maybe or roughly.
You don’t have to give me exact.
So I’m looking at possibly taking some funds from my wife’s IRA.
Okay, our only income is some interest income that will be about $11,000.
Okay, how much do you guys get in Social Security?
About 48,000 a year.
All right, so theoretically, you’re already over the zero percent capital gain.
I mean, the zero tax for Social Security because the provisional tax code says, take all of
your Social Security divided in half.
So that would be 48 divided in half is 24,000, right?
And then add all of your other income, in this case, 11,000.
So we would be at $35,000 income before you do anything else.
So you are most likely going to have at least some, not all, because they can only tax up
to 85% of your Social Security.
I know it sounds silly, but they can take 85% of it in tax.
At this point, you’d probably only be at like 20% or even less.
It’s progressive a little bit.
But you’re already going to be over that 32K before you take any other distributions.
So, okay, I understand that.
So if I take, say, another 12 from the IRA, then I’ll be at what, 47?
Yeah, well, yeah, you’d be at 47.
And then of course, as far as, I mean, not all 24.
So probably about, to be honest, probably about 15, 11, and 12, that’s seven, eight,
about 38.
And what is it about?
Almost, are you guys over 65 or under?
We are over 65.
Okay, so you almost have what, 31?
So you’d be maybe looking at about six or $7,000 at what, three or 4%.
So you’re looking at a very small tax bracket that we’d actually be hitting, because you
have the standard deduction, assuming you take the standard and that you don’t exceed
that.
So that’s taking off the top, and then whatever’s left of that is taxable is what you’re saying.
You got it.
110.
Okay, sounds perfect.
Thank you so much.
No problem.
Appreciate the phone call.
Thank you.
All right, let’s hit Bill in Tennessee.
Hey, Bill.
Yeah, hi, Dr. Favius.
Bill from Nolensville.
Hello.
I got a question for you, reference RMDs.
Okay.
I forgot.
Okay, you forgot to take it.
In other words, yeah, I mixed up between myself and the company I have them with.
I thought it was automatic.
It wasn’t, and I didn’t take them.
And I discovered it around the 15th of February.
So I called them, took it then.
So how do I get out of this mess, basically?
I have found, I’m not going to say it works for everyone, but I have found that by attaching,
we attach a PDF letter to the return explaining what happened and asking them to please waive
the penalty.
We have done this for a number of years, and knock on wood, right now we are batting 85%
of never having to deal with the penalties.
And the ones that didn’t, normally it was multiple years that we ran into it.
So someone forgot completely, right?
They didn’t know until something happened, normally a financial.
So in your case, I would just kind of just beg forgiveness.
Hey, you know what?
I got, they got, thought it was this misunderstanding.
Here’s the situation.
Boom.
You know, I did take, because the biggest thing is they want you to take it out immediately
as, as you know it, because obviously it has a few extra, in your case, barely two months
of growth, but there was a little extra growth in there on their time.
So I would, and then just wait and see what will come of it.
But like I said, I have found the IRS not to be, and to be quite honest with you, Bill,
I mean, if you haven’t really had any IRS issues in the last 31 months, we’ve asked
them for forgiveness.
There’s always the get out of jail card free, I call it, but there’s always that one, you
know, everyone’s entitled to one forgiveness, right?
Either way, you’ll probably get away with not worrying about it, but that’s the way
we’ve done it.
And like I said, we’ve been very, very fortunate with the IRS just coming back and waiving
that penalty.
But most of my people haven’t had a lot of issues.
So it’s, it’s kind of just forgiven because it was a once in a lifetime problem kind of
thing.
Okay.
Now, if I’m in this form 5329, am I supposed to fill that out as well?
No.
You don’t need to do that?
You don’t need to do that.
Okay.
And, you know, I usually file it, you know, just send it through the new e-file, just
a simple return.
Now, am I going to have to, you know, print it out and send it in this time with the letter?
You know, that’s a great question.
If you’re our system allows us to attach, if the system doesn’t allow it, then I would
probably wait, bill and see if they even send you anything.
It’s not going to change the fact.
And then if they do send you a letter, then you can always respond to that letter.
Cause e-file is definitely going to be still the most efficient way to file your taxes,
but see if they allow you to attach a PDF to it.
Some software.
Well, like I said, ours does, but it doesn’t mean all the software does.
Okay.
So I should go ahead and e-file my return and then only send the letter if they tell
me I need to send the letter.
Yeah.
Wait and see if they even assess you.
Just wait for it.
See if they even comes back.
Okay.
Now I guess I just put the taxes and the gains on this year’s form.
No, do not do that.
Do not report anything until next year as far as you’ll put a double RMD on your 24.
Okay.
Cause then if they match it up, they won’t know how to match it otherwise.
I got you.
I appreciate it, man.
Thank you very much.
Thanks boss.
Have a great weekend.
Alrighty.
Yeah.
You too.
Doug and Franklin.
Let’s get him before the break.
Hey Doug.
How are you?
I’m doing awesome.
And yourself?
Fine.
Thank you.
Thank you for taking my call.
Sure.
What I’ve got is this.
Yes.
My mother passed away in February of 2023 and that was in early February and we filed
her taxes March the 27th of last year.
And I’ve been going back.
I’ve been going back on the, thank you.
I’ve been going back and looking at your website every day or two and it’s still showing in
process and I was just curious why, how long will this take?
It’s not a substantial amount, but it’s, you know, two things.
One, did you file the 13,001 or whatever?
Was there a refund coming back on that return?
There was a small refund coming back of $1,131 and we filed the 1310 form.
So you have two things.
One, you filed her 2022 on March 27th of 2023.
Did you file her 23 return yet?
We’ve not filed that yet.
No, we’ve just now got all of her paperwork.
Right.
A small amount, but we’ve got that, but we’ve not, I’m not filing that for another couple
of weeks.
Yeah, that’s perfect.
I just want to make sure you were going to file it because sometimes people forget.
The second thing is normally when it’s a deceased, it’s hand processed because we have to mail
them in.
We can’t e-file them.
So they do take a long time, but you know, I would be curious.
It’s taken a year almost.
That’s a little over time, Doug.
This was e-filed.
They took it.
They accepted that that day that it was filed.
It shows accepted and in process.
I can honestly say my software does not allow us if the last person, if there’s married,
yes, but it’s one of the members still alive.
Or is your mom by herself?
She was 99 when she passed away and she was, her husband, my stepfather was deceased.
Okay.
So, well, your software is a little different than mine, but so I guess I would do this.
You have power of attorney, correct, Doug?
That’s correct.
Okay.
I do want to make one of those fun, long phone calls because I’d be curious to see, even
though it’s showing that it’s processing, I wonder if they could tell you if it’s in
their system.
It’s a long time.
So I’m wondering if we need to certify a copy to them.
I have tried to reach them by phone, which has not been successful.
Is there a number that you have that I could call?
Unfortunately, I don’t have any additional numbers.
We do have a representative number, but you wouldn’t be able to use that one.
So your only best bet is the, you know, the 1-800-829-1040.
That’s the typical number.
But it is, they should be open today.
I mean, just as a thought, maybe you could call them not during the weekday.
And can’t say one isn’t already on the phone with them, Doug.
I usually find doing it seven o’clock in the morning is my best bet because people haven’t
quite got functioning at that time.
But that’s the only way, because I’m just really curious after this long a time, and
we were nearly at a year marker and they haven’t really sent you anything saying they’re still
working on it.
You’re looking online saying they’ve received it.
The alternative would be, is just to certify a copy to them.
As a, you know, put on the top, second copy, put it in the mail, certify it to the IRS
so you have a second proof of them receiving it.
And then that way, I’m just wondering if it would get processed.
Because I have a feeling something’s held it up.
And since you haven’t gotten any love letters, I’m wondering if it’s actually just not processing.
I mean, like it’s fallen out of the loop.
Right.
She was in assisted living when she passed away and I put them on notice.
I did do a change of address and everything like that.
I will, I’m going to meet with my tax preparer in about two weeks.
I’ll discuss this with him if I don’t see anything from the IRS and have him do that
then.
Yeah, I think that, I mean, it can’t hurt at that point, but all right.
Thank you for the phone call, Doug.
I appreciate you.
Thank you for your help.
Bye bye.
Thanks.
Bye bye.
All right.
We’re going to take a quick break.
When we come back, you can join the show at 615-737-9986.
This is the Dr. Friday Show.
We’ll be right back.
G’day.
All right.
We are back here live in studio.
I’m Dr. Friday.
I’m an enrolled agent licensed with the Internal Revenue Service to do taxes and representation.
If you’re having someone help you with your taxes, make sure you have someone that’s up
to date on taxes.
I mean, I get it.
If you only have a W-2, you probably don’t need an expert to just do your taxes, but if
you have got rental properties or you have an Airbnb and you have a business or an LLC,
these kinds of things, you might need a second opinion on making sure you’re taking the right
expenses.
Another thing is if you’re running a business, but you’re not making a profit, you know,
that is one of those areas that is very, very complicated.
Yes, some businesses lose money and the IRS expects that, but they don’t expect you to
lose thousands and thousands of dollars year after year, unless the business is something
maybe like a farm that has nut trees that take five or 10 years to mature.
There are certain exceptions to every rule, but if you’re in a business and every year
you’re saying you’ve lost money, I will tell you, you might have gotten away with it, but
at some point the IRS is going to come back and probably audit to get the justification
behind that business.
And at that point you’ll be paying penalties, failure to report, failure to understate.
The penalties can add up to almost a hundred percent of what you owed in the first place.
So saving money today, it always sounds great.
I had a young person that came in the other day and they’ve been doing their own taxes
and they’ve been showing for years a loss.
And we’re not just talking a couple hundred dollars, we’re talking several thousand dollars,
but without the business loss, they are owing money every year.
So I mean, they think, okay, well we’re in business, but legitimately they weren’t in
business based on the IRS.
Just because you think you’re going out to an art show or you’re putting money into inventory.
And again, inventory is not a tax.
So if your garage is full of a product, that is not a tax deduction.
It is in the garage, therefore the ability to sell.
So it’s inventory, which means at some point later on you might end up selling it.
But keep, you know, again, keep in mind, I am not saying that losses are not a tax deduction.
I am saying that if you’re making it year after year, theoretically, they say three
out of five years, if you haven’t made a profit, then you’re not trying to be in business.
So just be aware, I guess is my best answer on that.
Just because you can put it on your tax return and you get away with it, doesn’t necessarily
mean it’s the right answer.
And at some point that could come back, invite you and create more headache than what you
might’ve had if you’d just been filing and paying your taxes.
So I’m just kind of putting that out there.
Business when we start them up, almost every business has a loss.
Sure, some people will open up a business and immediately start having sales, or even
if they have million dollars in sales, doesn’t mean they didn’t lose money in making the
business.
But you know, if you’ve done $50 in sales and you spent $12,000 to make it, doesn’t
necessarily use some common sense.
It doesn’t make sense unless that was all education and buying into a franchise.
And maybe you did it at the end of the year and it didn’t really get started, but then
that’s considered startup and you can’t take a hundred percent of that loss.
So again, just keep in mind how that’s all going to work.
Also understanding how tax law kind of comes through onto your own personal tax return,
because we all have different tax situations and some of it will comply to your income.
If you’re making $200,000 as a single person or $250,000, most of the time there’s some
tax deductions that you will not qualify for that if someone’s making $100,000 or $150,000
they might.
So understanding how taxes affect your individual tax.
A lot of times people will get into rentals and I’m talking long-term rentals.
And if you’re into those, a lot of times you don’t get to deduct the loss because of your
income.
It doesn’t mean it’s not a good thing.
I love my rentals.
But it is something that you have to consider as rolling forward.
So when you actually sell those rentals, that will become a loss for you.
It may not be instant gratification, more long-term gratification.
So if you’re working on your own taxes and you’ve got questions, you can certainly join
the show, 615-737-9986, 615-737-9986 is the number here in the studio.
And that will give you the information if you’ve inherited something this year and you’re
not too sure.
You may want to hold off on filing your taxes because you may be receiving a K-1 and that
may not have been issued yet.
I know we handle many estates and some of them are not ready yet to be submitted.
So the individuals that had received money from there are on hold until we get through
that.
And then, you know, just making sure that prepping for 2024.
We’re two months getting ready to start our third month here of 2024.
So if you filed your taxes for ’23, but you’re still prepping for ’24, as I was saying earlier,
if you’re over the, if you’re over age 65 and you’re on Medicare, whatever decisions
you make also add into those decisions when you’re talking to your financial planner or
if you’re doing your own, make sure you’re looking at the IRMA as well.
Because that can, it feels like to me, it’s almost a two-year penalty.
They do a two-year look back whenever they set you up on your fees.
And it just seems like it takes them, you know, 24 months to really make that alteration
in there.
So I just want to make sure that you are looking at not only what you have, but where you’re
at and how much money that can affect.
And if you actually have a situation where you could end up paying taxes on some of that,
right?
So just, just keeping all that because I mean, maybe Medicare is not a tax and many of us
can’t itemize it, but, and that’s also worse.
But it is out of your pocket.
It’s money out of your pocket.
All right, let’s hit Lisa in Nashville.
See if I can help her out.
Hey, Lisa, what can I do for you?
Hey, Dr. Friday.
My husband passed away this past month and we received some life insurance money from
him.
Will that be considered taxable?
The life insurance itself will not, but we have had, unfortunately some of my clients
have recently lost some of their, and so sometimes from the moment that the insurance company
actually kind of closes the account.
And then when they issue you a check, sometimes that sits in an interest bearing account.
And so we have gotten interest just for those 30 days or whatever.
So there is a possibility of getting a small interest, but the actual insurance is not
taxable.
Okay.
And I will be drawing my son and I both, he’s disabled, so he will be drawing survivor benefits
from my husband.
And since I care for him, I am also now going to be getting survivor benefits.
Right.
So will my son’s be taxable if that’s all that he has?
No, and he can still be your dependent because social security is not considered earnings.
So he can still be your dependent and no, he won’t have any need to file a tax return
or report that, or you wouldn’t report it on your tax return either.
Okay.
So I won’t have to include that as income?
Not his.
No, yours you will because it’s you and you may have other income, but from your son being
the fact that he’s disabled and that’s the only income he has, there is no taxability
on his.
Great.
But I will, I will have to include it on my return.
No, that’s what I’m saying.
No, you will not report his on your return.
You will claim him as a dependent, but you won’t pick his social security up at all.
Right.
But I’m talking about what I will be receiving as survivor benefit.
Yes, ma’am.
Yeah, you will.
You will put it on yours.
You’ll get a social security statement and you’ll report that along with any other incomes
that may be reportable.
It may be your income.
If that’s all you have, obviously you won’t have to report, but hopefully you have some
other sources of income as well.
Yeah.
A small amount, his pension and just a small income because I have to work from home.
So it won’t be much.
Yeah.
To take care of him.
Yeah.
And we, we lost our health insurance.
And so we signed, I signed up for that eHealth insurance.
Yes.
Yeah.
The marketplace.
And they gave us a subsidy.
Yeah.
So is that, does that create a taxable event when you are getting that subsidy for that?
It should, because I’m assuming your income is just going to be low enough where that’s
not going to be a problem.
If for some reason, um, that’s one of those situations.
If for some reason you took out, let’s just say your deceased husband had money in an
IRA and you said, you know what, I’m going to take 20 grand out.
They will consider that potentially a taxable income.
Therefore they may penalize you for making more money than you told them.
But all in all, as long as whatever you told them your income is, which is middle, low,
you know, then there should not be any penalty to you.
Um, unless again, you get a better job or something changes where that happens.
But right now I don’t think that’s a worry that you’ll have to take on.
Yeah.
Because I mean, it’ll all be that I’ll be dealing with this time next year for 2024,
not 2023.
Right, right.
All this is just started this, this year, obviously for you.
Correct.
But still, um, you know, I don’t think you’ll have whatever they, when you signed up for
e-services or whatever, they asked you a bunch of financial questions and then they gave
you what they could give you for a voucher or a dollar amount or whatever.
Um, and so, you know, at that point you were fine.
So you should be in good shape.
But if something changes financially, you get lucky and there’s a better job or whatever.
Um, you just want to notify them if that happens.
So that way it might, might have an effect at that time, Lisa.
Right.
Okay.
Thank you so much.
No problem, sweetheart.
All right.
We’re going to take another quick break here and we get back, we can go to our phone calls
again.
615-737-9986.
We’ll be right back.
We have the Dr. Friday Show.
All right.
We are back here live in studio.
If you want to join the show, you can.
615-737-9986.
I do want to put out there for people that do run partnerships or sub S corporations
that you know, it is going to be deadline very quick.
March 15th is the deadline for 1065s and 1120s.
Some C corporations.
But if you run those type of entities, you want to be able to make sure that you have
either an extension filed or that you have filed the taxes.
One or the other.
And then obviously you have your annual reports.
Many of you that have business entities, don’t forget to file the annual report.
Your gross business receipts, your franchise excise, all of those are going to be due here
in April.
So get them done early if you can.
So that way then you don’t get that love letter that says you didn’t file something.
Really important that we file it, just letting you know.
Because then the penalties and things come up.
And as individuals, obviously the beautiful thing of living in Tennessee, all we really
have to do is deal with the fed.
But many people work in different areas.
I have many clients that actually live here, but work theoretically in California, according
to California law, which basically means if you earn your income in California, even if
you don’t put a step into the state of California, that income is taxable to the state of California.
So don’t forget your state filings along with your federal filings.
Making sure you understand different states, different rules.
Most of them like to tax as much as they can.
So make sure that you have that situation going if possible.
If you’ve got questions, I’m an enrolled agent licensed by the Internal Revenue Service to
do taxes and representation, which just basically means, guys, I do taxes every day.
And it feels like at this time of the year, every day.
And all year round.
So if you haven’t filed taxes, or if you have a situation where you’re trying to figure
out when’s the last time the IRS received your taxes, or do you need to make a deal
with them?
They have many different ways.
You can do fresh start.
You can do an offer in compromise.
You can do a non-collectible.
You can make a payment plan, a partial payment plan.
There are options out there, and no one option is going to work for every single person.
So you need to make sure you understand what your options are, what is available to you
based on your income, your assets.
You might not make any money, but your assets may be high enough to justify certain things.
So you have to put all of it in perspective to make sure that you’re getting the best
situation that you can.
Because let’s be honest, it isn’t one of those situations where you can turn around and say,
“Oh, more than one person has walked in my office and said, ‘Well, I have $20,000.
Can I just pay that to the IRS and they owe $50,000?'”
Sure you can, but it’s not going to necessarily eliminate the other $30,000 you owe.
It may be good if you get below $25,000, then we can remove liens and things, but it isn’t
going to change the situation.
Just because all you want to give them is $20,000 doesn’t mean that’s all you really
have access to.
So the rules are pretty straightforward.
There are many ways of making deals with the IRS, but just because you don’t necessarily
want to pay them isn’t one of those situations.
So they will look at your assets.
They will look at your 401ks.
They will look at your bank accounts.
They’ll look at your expenditures.
And if you have a mortgage for $500,000 or $5,000, well, $500, that’d be a lot of mortgage,
but monthly $5,000, if you’re doing an offer and compromise, they will say that that’s
too high.
They will request you to try to get a different situation.
So you will have to add it back in because they consider that extravagant for Tennessee,
which is interesting if nothing else.
So know what the game is so you can better figure out how you’re going to play the game,
I guess is the best way to put that.
If you’ve got questions, again, if you’re helping someone else try to get straight with
the IRS, the best thing to do is the first get the opportunity to understand what those
things are, and then make sure that we have the ability to, I don’t know, just understand
how it’s going to affect you, I guess is the easiest way to put that.
So if you need help with that, again, obviously I’m an enrolled agent.
My firm is Dr. Friday Tax and Financial Firm, and we are here to help you understand not
only what you need to do now, but also for the future and for the past, because sometimes
things have happened.
How far back do you have to go to file taxes?
Can the IRS do assessments on you even if you never filed taxes?
What are your rights?
All of those things can be interesting, but very confusing for some people.
So you need to make sure you understand that and we can help you do that.
If you’re working on your 2024 taxes, again, make sure you’re not rushing through the process.
Make sure that you’ve double checked your numbers.
Make sure that you’ve reported all of your income, even if you didn’t receive something.
Probably one of the big things the IRS is always looking at is a lot of times, especially
like construction businesses and things, they’ll only report what they’ve received 1099s on.
The IRS has come out in many cases and showing statistically most people that work in construction
don’t get 1099 for all of their income.
If you run an electrical firm or you run a plumbing firm and you only report what came
through to you on 1099Ks or 1099NECs or MISs, then likely is at some point you could get
audited for potentially understatement of income.
If the money went through the bank, you should report it.
That’s simple.
If it’s cash, theoretically you should report it.
It was money paid to you for your service and then you’ve got the expenses that go out
against it.
But making sure you understand what the IRS is looking at, they do have the ability or
the request to pull your banking information.
Now, they can’t just go into your bank account, even for levying or anything else without
notification, but once they’ve notified you, they do have the ability to take a levy.
You want to always get ahead of that.
So if you’ve got a love letter from the IRS that says, “We intend to levy,” you haven’t
responded to our letters, then you want to respond.
You want to at least see if you can deal with something, make a payment plan.
Also though, you cannot make a payment plan if you haven’t filed all of your tax returns.
You have to be in compliance.
Otherwise, they won’t set up, say, “I’m going to start in 2023 and I’m just going to start
filing taxes and not worry about the past.”
Great idea.
That means you’re making the effort to start and do everything, but that doesn’t mean the
IRS is going to be able to set up a payment plan.
Same thing as if you actually do go through the Fresh Start program and we get the deal
and you make everything.
Once that deal is accepted, you have to stay current and not have a payment plan or anything
else for the next five years.
Otherwise, they can add it all back up, back onto you if you fail to follow those rules.
So again, there are rules, but you have to make sure you understand those rules and how
you’re going to make those rules work for you, but understanding what they have.
The IRS has also put out a list of things that I guess you would say is beware.
One thing is under charitable deductions, if you are giving to a GoFundMe account that
is not representing a nonprofit, so maybe you gave money to, well, there’s two sides
to this.
You gave money to maybe a neighbor or someone that’s trying to raise money for medical help
or maybe their house got destroyed and they went on there to start a GoFundMe account,
so you’re trying to help them out.
That is not a tax-deductible charitable deduction because they’re not a legitimate 501(c)(3).
They’re an individual.
You can certainly give it to them.
It’s more like gifting.
And as long as it’s under $17,000, there’s nothing really that has to be reported.
Second part of that is if you’re one of those individuals that hear about a neighbor or
a friend or a family member that needs that kind of help and you say, “I’m going to go
start a GoFundMe account,” let other people help because, I mean, America is probably
one of the most giving places in the world and a lot of people will usually help somebody
that they feel is in deserving of that.
So if that’s the case, then you have to turn around and say, “Make sure that that is not
set up under your social security number.
Make sure that it’s set up under either the person you’re doing it for or that you run
it through.”
GoFundMe does have nonprofit setups to do that.
Make sure it’s being set up as a giftable giving.
Even if it’s not tax-deductible, make sure it’s being set up as a gift giving because
otherwise I have two cases now that actually both of them set up GoFundMe accounts.
The IRS is coming back to them to pay taxes.
The people are saying, “Wait, we gave all of that money to these people for a reason,”
but the IRS is saying, “But nobody, you know, it’s taxable to my client because they didn’t
set it up correct and it’s gifting it back to that family, but no one’s paid the taxes
because of the way it was set up.”
So very, very important to make sure you understand setting up the GoFundMe accounts, awesome
idea, but do not put it under your own social security number.
Do not, make sure you go with the option.
Again, I know there are nonprofits that they will help set up the FundMe situation.
I don’t know what the fees and things are, but if you’re not careful, like I said, I
have two cases where people have gotten letters from the IRS because the GoFundMe has now
reported it under their social security number as income because it wasn’t set up properly.
Going backwards, you can only imagine how hard that is and hopefully anyone that’s giving
money to those funds are not trying to deduct them.
Again, they’re gifts, but they are not tax deductible gifts.
Kind of an important thing to understand.
So if you have questions, we’re all taking another quick break here, then that will be
it, guys.
We’ll be almost done with the show.
So if you have questions and you’re not too sure, now will be the time to jump on the
phone lines.
Phone number here is 615-737-9986.
615-737-9986 number here in the studio.
We are talking about taxes.
Again, I’m an enrolled agent licensed by the Internal Revenue Service to do taxes and representation.
That’s what we do all year round.
So if you have questions on that kind of element, I’m not a financial planner, but I can help
you with your taxes.
So after this break, we’ll take some more of your calls.
615-737-9986.
All right, we are back here live in studio.
So if you’ve got questions, you can help join the show.
615-737-9986.
And we’re going to go right to our phones.
It looks like we have Dan from Gallatin.
Let’s see if I can help him with his question.
Hey, Dan, what can I do for you?
I have a question.
I just turned the radio on and caught the end of your conversation about the GoFundMe.
And I wanted to know about the Venmo, people Venmoing you money.
How’s that looked at at this point?
Well, right now, the current tax law that will be in effect in 2024 is $5,000.
Now Venmo does have the ability to be friend transfer, which that doesn’t count.
But if you do it through business to business, they basically call it, it’s $5,000.
So if you’re transferring to your, like me transferring to my brother and my brother
transferring it back, then that will not show up as part of that $5,000.
As far as anything through Square or PayPal, I don’t know.
I don’t use them as much.
But the rule is $5,000 or 200 transactions, whichever come in under that situation.
As far as Venmo, it’s called a 1099K, I think is what you’re talking about.
So if you sell products or if you’ve done anything through, again, if you’re selling
something, I think it’s going to probably come back and get you, especially if you are
using something like Facebook or I don’t know if anyone used eBay or any of those.
I think that’s going to come back if you’ve got a little shop and people are sending you
money.
I believe those people are going to actually, so if you have more than 5,000 in a year of
selling household things, you might want to spread that out because otherwise it’s going
to get reported as a business.
Okay.
That answers my question.
Thank you.
Cool.
Thanks for listening.
All right, let’s go to Katie in Nashville.
I cashed in my life insurance plan and the cash I got was 4,500.
Do I need to count that as income?
So that’s a tricky one.
Since you cashed in your own, it depends on how much you paid originally for, because
we usually pay for our life insurance with after tax dollars.
So if all the money, if that’s all you paid in, then that’s fine.
But if there was growth, then that will be taxable.
So let’s say you only paid in $2,000 and they gave you 4,500, 2,500 of that could be taxable
income.
They should send you a form.
I’m pretty sure that’s going to fall on a 1099R, but they should be sending you a form
that will show it potentially.
I would personally set aside a little money of that money just to find out or get someone
on the phone and see if they can tell you how much of that distribution was taxable
so you can estimate it or report it if it was from last year.
Well, I paid in a whole lot more than even the $15,000 for the life insurance policy.
I mean, you don’t get what you paid.
You know what I mean?
You get very little back from what you paid in over all the years.
Does that make any sense?
It kind of does.
It seems to me we should at least get what we paid for, but I’ve not ever cashed in one
and most of my people, to be quite honest, Katie, get it only when someone’s passed away.
But again, I would say that the way things usually are in life, that part of that money
could be taxable.
You would definitely want to talk to, if nothing else, call back the insurance company and
say, “Hey, all this 4,500, is any of this taxable income or is it all my own money you’re
giving back to me?
Therefore, it’s zero tax.”
I just hate to see you spend it and then find out when you file your taxes that you owe
a couple hundred dollars because of it.
Well, I will call them, but I mean, every penny I got back, I paid into.
I’m not disagreeing, but they may say some of it was for growth and for services and
they only distributed growth.
And if that’s the case, then they could come back and bite you later possibly.
So just double check it.
I guess I should put it down.
I mean, I wouldn’t report it unless they give you something to report it with because I’m
assuming it’s not taxable.
Okay.
Thank you so much, Dr. Friarty.
Thank you.
No problem.
Thank you.
Sure.
Thanks, sweetie.
Bye.
All right.
We are winding down the show a little bit.
We’ve got about five minutes left.
So we want to make sure that again, just kind of covering a couple things.
One, I had a number of people that had been filling out W-4 forms.
And on those forms, they are so different that many of us, I mean, obviously if you
just started working, you wouldn’t know the difference, but we had, you know, prior to
the 2000 pretty, or 2020, then after 2020, the new ones, instead of saying married and
two, now, if you’re married, you click that and then you would put $4,000 under the number
of kids.
And if the child is over age 17, you put $500 for each child.
And then there’s a box on there that says, do you have a spouse that’s working or are
you working more than one job?
And that’s a tricky one guys, because what we have to be very careful of, especially
for all of you guys that do work multiple jobs, and I can’t tell you how many times
it’s hard when you switch jobs, the tax code doesn’t usually work.
So you want to make sure that you have enough money coming out.
When you switch jobs halfway through the year, you’re thinking, well, it’s just going to
keep taking out.
But look at that pay stub because you might find out that they’re taking very little out
of federal withholdings because they’re looking at it as if this is the first job for the
year and you’ve, you know, you’re just making 5,000, 10,000, $20,000, which basically it
almost be a zero tax.
So we, you want to first, you want to check that box.
So if you are working a second job or you are married, even though it says married at
the top, your spouse is working, it will help take out additional money for federal withholdings.
I am more of an advocate for the next box, box four, I believe it is, or line four that
says, do you want to have additional withholdings?
So I am a big advocate for saying, let’s figure out roughly how much do we think we’re going
to make and how much do we need to make sure has come out of these jobs?
Especially if you plan to be working two jobs almost the whole year, then you can actually
put in there, you know, maybe you got your first pay stub and you see that they only
withheld $30, but yet calculating it all the way through the year with both jobs, you need
that job to be taking $60 a paycheck out.
Then on that box four, you would fill it out and just put, you know, $30.
So that way $60 would be coming.
So an additional amount will come out every time.
Keep in mind you pay now or you pay later.
It’s not going to be, you never pay.
And then worst scenario, you overcompensate, you get a small amount back.
I’m not looking for large refunds.
That doesn’t help anyone as far as I’m concerned, but it’s never nice to have to write a check
for a thousand dollars when you’re on a tight budget.
If you can’t afford to pay it, you either putting it on your credit card or you’re paying
the IRS, which means penalties and interest.
Easier to have a little extra come out every single week.
It’s a lot smaller, take $30 out than to pay 3000, you know, in April when you file your
taxes again, just calculate the numbers.
And if you did your 2023 and pretty much the same thing’s going to happen in 24 year income
and you wrote a check in 23, then maybe again, go and refile your W-4, leave everything the
same, but go down the box four and say, you know what?
I wrote a check for, you know, a thousand dollars.
I’d rather have $35 a week coming out or whatever it works out to being so that that thousand
dollars is now coming out.
It’s out of your bank account.
You now have gotten the IRS out of your bank and whatever is in there theoretically is
yours and it’s just easier to live than having the IRS’s money in your bank account.
I know it’s hard to, you know, but it’s sooner or later the IRS is going to get their money.
And if you can’t pay it on time, then you’re going to be paying penalties and interest,
which is almost a minimum of 25%.
That’s pretty steep.
So she, if you’re already having financial or just living on that edge where we, most
of us started trying to make sure we have the money in the right place.
So again, always do your taxes, then double check your W-4.
If any reason you, I had a couple that got a huge refund this year because we overcompensated
and we didn’t make as much money this year as we did last year.
So what did we do?
We went back to the W-4 and reduced box four because I don’t want a big refund.
I want them to get enough money to break even, but I don’t want $4,000 coming back at the
end of the year.
I, they could have used that money every month and that would be silly.
All right guys.
So this is that we’re going to be winding down.
So if you want to reach us, you can reach my office Monday morning at 615-367-0819.
Again, 615-367-0819.
If you have absolutely no idea who I am, you can actually just go to the web to drfriday.com.
D-R-F-R-I-D-A-Y.com.
Check out the website.
And also if you want to just send us an email, you can do Friday@drfriday.com.
That way if you have a question, we’ll do our best to get to you as fast as possible.
It is kind of the busy season here, so it may not be as quick as we’d like, but make
sure that if you haven’t filed your tax, go ahead and file an extension.
If you don’t plan to file that way, maybe we can get to you and help you get all organized
with the IRS as an enrolled agent.
That’s what we want to do.
We want to help represent you in front of the IRS, giving you that shield, but also
to give you the power to get out of IRS problems so you can go buy a house, put your kid through
college, whatever it is you’re looking to do.
I hope you guys are enjoying this Saturday.
It’s actually turned out to be a pretty nice day.
It’s not too bad out there.
And I hope that you guys are going to enjoy the rest of the week.
As we always say here in Australia, “Cop you later.”