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August 31, 2021 46 min
This is the Dr. Friday Radio Show! In this episode, Dr. Friday takes on the latest tax updates, answers callers questions, and talks over the following topics:
  • Tax Extension Deadline Oct. 15 To File Your Tax Return
  • Operating Businesses Tax Extention Deadline September 15, 2021
  • Apply For Forgiveness For PPP Loan
  • How To Verify Your Identify With the IRS
  • Why You Need To Adjust To Your W4
  • What Are The Current Capital Gains Rates?
  • Is the $300 Charitable Deduction for 2021?
  • Do You Have An IRS Issue That You Need Help With?
  • Do You Need Help With Tax Representation?
  • Tips On How To Lower Your Taxes
  • and much more! Transcript Announcer 0:00 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 at 615-737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday. Dr. Friday 0:29 Good day. I'm Dr. Friday and the doctor is in the house and we are live here on Saturday, this wonderfully sunny, I guess is the proper term. It's a really nice Saturday outside, I've been working all day. But I did get a chance to go out earlier. And it's very nice. Dr. Friday 0:44 So hopefully you guys are enjoying your Saturday. And if you have any tax questions, we all know we're coming up on another deadline here. Now, most of us already hit the, I guess you would say, one deadline of August 2. Now the next one is going to be the true extension deadline date, which is October 15. For individuals, all operating businesses are going to be on September 15. So those are coming up. And you know, before you know it, you'll also have your third estimated payment, which is going to be due on September 15, unless something changes. So making plans. Dr. Friday 1:16 You know, there's a lot of changes every year. And I think this year, maybe more than some because of the real estate market here in Tennessee, I have had an out rageous number of individuals that have decided to sell either a rental property or second home, a primary home. And so you're going to be looking at some tax changes that you might not normally have in your situation. So that would be one of those times when it's between the crazy seasons, to talk to your tax person, and make sure that you've set enough money aside for the potential of capital gains. So that way we know. Dr. Friday 1:58 Right now capital gains rates are zero if you're in the 15% tax bracket, which is kind of now the 12th. Then it goes to 15%, then it'll go to 18.8%, and then it'll go to 23.8. And that pretty much when you hit over 400 and some up 460,000s when you're maximizing that for a married couple. Dr. Friday 2:21 So that will be something you need to be looking at making sure you understand. And if you have questions about that, or maybe you're just getting ready to start thinking about changes that might be happening, changing of jobs, many people are relocating to different areas, it seems like. These can also cause some tax changes if you get a job that makes more money. It's a good problem to have, but it can't happen. Dr. Friday 2:44 And you can reach us here, the radio phone number is 615-737-9986. And we can take your calls here live. Again, if you're dealing with any of those. I took a meeting earlier this week with someone that was– another thing. When you're selling real estate a lot of times in some cases, you might have a lot of leftover furniture goodwill, per se, items. And how do you track that? And is it even going to be a tax deduction in the year 2021? Dr. Friday 3:23 And so what we did do in this particular person's situation, they haven't been itemizing the last number of years because their mortgage is not, you know, $40,000, or even $20,000 and their property taxes. Even though we can double up and do it every other year, you still have a maximum on property taxes and sales tax for the state of $10,000 on the SALT tax. So we can maximize the SALT tax, we have the mortgage interest. Dr. Friday 3:49 So in this particular year, giving all the money to Goodwill, but also possibly maximizing at the same time, the standard charitable contributions that you would normally make. And if you do that on an every other year basis, sometimes the audience or even whatever you do, it can kick into itemizing. Now, this doesn't work for everyone, because again, going up to $24,000-$25,000 for itemizing is going to make it a bit difficult for some individuals, even if they're giving their maximum charity, especially if they don't have mortgages. Dr. Friday 4:25 I do have clients that every year itemize because of their charitable contributions. But in many cases, that's not the case. So you need to sit down and talk. Is there anywhere, any place in your taxes that you might be missing the potential of being able to put a few dollars in your pocket versus giving it to Uncle Sam? That's really the game we like to play. That's the understanding we'd like to go after I'm trying to figure out what we have and where we have that information so that we can, you know, kind of maximize it. So that was one side. Dr. Friday 4:59 Another question that came in was about adoption credit. One of my clients was in the process of adopting a child. And they wanted to make sure that they would be able to qualify for the adoption credit and their case, they actually weren't able to because their income was over the $255,000. There is a cap on adoption credit. And the funny thing is, haha, it's the same for single people as it is for married. Dr. Friday 5:22 So anyone that tells you that there is not a marriage penalty in taxes obviously does not file a lot of tax returns for individuals that may have some unique or different situation. So again, if anything like that comes up, and these are usually once in a lifetime situations that you might be looking at, in you might need to figure out "What is the best time for me to do something? How should I do it? Where's the breaking point? So I know, if I'm making over this, then you know, that's going to change or whatever else." Dr. Friday 5:52 So you want to make sure. And of course, I had a ton of people during tax season because they all worked from home, they wanted to be able to take that and deduct the home office. And that is not an opportunity for individuals to be able to do. You cannot write off a home office, while you're actually working there. If you're a W2 employee. Dr. Friday 6:17 Not something that can be done, not available on the tax code. That dropped off in 2018. And may become available again in 2026. We are all waiting to find out what changes may be coming down. And if any of the tax changes we have right this second are permanent, or if they are not. Dr. Friday 6:38 So again, if you've got questions, you can reach us here live in the studio at 615-737-9986. An email in right now just asked about alimony. I don't know if there's something that's been in the news or something because, obviously back the tax cuts and Jobs Act of 2017. Right? That one came in and eliminated alimony as income as of December 31, 2018. So if that's the case, then we need to be able to take care of what we have happening. Sorry about that. Dr. Friday 7:24 I don't have anyone in the office with me, but my puppies. So we have to make sure we have that moving forward. All right. And so what we need to do next is to be able to make sure if you have alimony and you are divorced after December 31, 2018, your alimony is not taxable income. If you were divorced prior to December 31, 2018, It is taxable, unless you made some sort of deal somewhere else. It was the way the law. Dr. Friday 7:52 So again, many people seem to be receiving information or thinking that now that somehow as of December 31, 2018, all alimony became nontaxable, that is not the situation. And so we have to be able to make it work and do what we need to do and how we're going to do it. So, you know, again, that is the way that works. If you're in the process of selling your primary home, sometimes people have that question. But the biggest thing is you have is you need to make sure that you have the exclusion, right? Dr. Friday 8:28 So if I purchased my home, and I've lived in it two out of the last five years, and I purchased it for 200,000, and I sell it for 450,000, I would pay zero tax on that because of the situation. But if I had bought the home at 200,000, and I sold it for 600,000, I then would have $150,000 tax due on that situation. So we'll be able to take. Dr. Friday 8:53 So you need to understand that's for a single individual, just in case I didn't. And the marriage exclusion or the credit for a married couple would be 500. So the same scenario, if you bought it for 200, and you sold it for 450, you would not. But if you bought for 200 and sold it for 800,000, in that case, then you would pay tax on the additional 100,000 above the five plus the two. Dr. Friday 9:16 So if you have questions on that or any other tax question that might be on your mind 615-737-9986. We are taking your calls, talking about all things taxes, making sure that we understand exactly how the tax is going to hurt or help us in these situations. Because, again, timing is everything when it comes to taxes. So really understanding where your taxes are and how you're going to be able to handle them is part of making sure the decisions you're making are good. I mean, it may sound awesome. Dr. Friday 9:52 I, unfortunately, had a tax client call and he had been living in his house for a year and a half and he had a great offer on the table and decided to sell. Did not ask me, because he might have been able to delay the owners of that house if they knew they could have it. Anyways, he ended up with long-term capital gains. And he could not take the exclusion because he had not lived in the house for two years out of five years. Dr. Friday 10:17 So he still made a nice profit. But unfortunately, the government was going to get a chunk of money that they wouldn't have had to get if he had just waited, it was like four months. I mean, it wasn't a huge wait. But it was like four months after the closing. Dr. Friday 10:30 So, talking about real estate and something I know that we talk about probably quite often on the radio, but the 1031 Exchange is a wonderful opportunity. But that is not for primary homes. So you can do what's called an exchange or a 1031 Exchange. If you're thinking about selling some of your real estate, rental real estate, and you basically get a great deal, then you can turn around without paying taxes and reinvest it back in investment real estate again. So that way, you basically keep growing the money. Dr. Friday 11:05 It's almost like being in an IRA, in essence, that the taxable dollars will grow with the money that you've invested in that way, then you'll be able to make it to that next level and take care of things. But very, very important that you basically understand how that works. And if it's going to be best for you. Dr. Friday 11:23 Because another conversation that many of my colleagues have been having on some of our internet sites is, is it better to go ahead and pay those taxes? Because under some of the new rules and regulations that the Biden is suggesting, is basically eliminating the 1031 making people go ahead and pay the tax before they basically reinvest it, you know? It's an opportunity, so it's something to consider, is it a good idea? Taxes are low right now. Dr. Friday 11:54 And then another thing they're talking about is bringing capital gains tax up to almost 30%. So these are things we have to keep our eyes on and make really good decisions now, that will hopefully help you in the future as well as what we know right this second. Dr. Friday 12:08 All right, so we're gonna get ready to take our first break. And you can join us live here in studio, if you've got questions, maybe you haven't files taxes for a number of years, maybe you're thinking about opening a small business. What type of entity should you be, at least based on the tax advantages? Those are the kinds of questions you can call the show with 615-737-9986. And we'll be right back. Dr. Friday 12:39 We are back here live in the studio, if you want to join the show, you can it's 615-737-9986. We are taking your calls to live here in the studio. So if you've got questions, we know that September 15 is right around the corner. So if you have not filed your business tax returns yet, that would be LLCscorporations, Trust, C Corpse, anything that is a standalone, those are due on September 15. Dr. Friday 13:11 Assuming that you filed for an extension in the first place. If not, you're late no matter what to do. But you need to try to file those because then come October 15, your personal taxes will be due. And so you need to try to get those also filed on time assuming again that you did file for the extension that you had out there. So if you need help, you know, you can call us right now at 615-737-9986. And we can help you with some of the questions you might have. Dr. Friday 13:43 Maybe you haven't filed taxes in a number of years. I am an enrolled agent licensed by the Internal Revenue Service to do taxes, and representation. Plain and simple, guys, if you're having problems with the government, especially the IRS or the state, then this is the person you might want to give a call to and see if we can help you. I'm not going to tell you that every single person that we help is going to be able to settle for what they think they can settle for. But we will be able to help you make a deal and do our best to try to keep everything in control. Dr. Friday 14:15 Because part of the reason people get out of control with the IRS is, you know it really, this basically comes down to is gotten because of divorce or you just kind of had a really bad couple of years. And so the last person you really thought about was the IRS. And now there may or may not even be thinking of you. Dr. Friday 14:34 I have many times people coming into my office because they're ready to get back on track and doing the things they need to do. But they don't have any idea really, "How do I find the paperwork? I've moved six times" "I've gotten divorced" "I don't even know if I can claim the children even though I was supposed to be able to claim the children" and all these kinds of things come up. Dr. Friday 14:54 So if you've got questions on that, or if you need help, you can call the show right now. Because that's what this show is all about: Helping people that are trying to figure out where the next step is or just to figure out what's going on in the current taxes. Because we have a lot of changes coming down the line. Dr. Friday 15:09 Some things we have absolute confirmation on, for example, the charitable contribution deduction, we do know for a fact in 2021, it will now be $300 for individuals and $600 for married couples. And I want to reiterate, it has to be cash deposits. If you're itemizing, you can take both, you know, cash and also items, like if you go to Goodwill, you can qualify, but if you don't have enough to qualify, then you're going to want to go ahead and just you know, if it's possible, give the cash to a charitable contribution, that you have the ability to do something with. Dr. Friday 15:47 Alright, so let's hit Jerry on line one. Caller 15:52 What are the rules on doing 1099? If you pay an individual or pay a contractor, do you have to do 1099 on a contractor? Dr. Friday 16:05 That's a great question. And the law says yes. We're supposed to, as an individual, actually issue 1099s to the people that do our yard service to contractors, to people that do improvements, anyone that's over $600. In theory, we're supposed to. Dr. Friday 16:22 I will tell you, most individuals do not because it doesn't come into a tax situation, for most of them. You know, I mean, it's not as simple. Now rental companies and people that have rentals or investment properties, we do it all the time. But theoretically, the IRS wants everyone to get 1099 in theory. Caller 16:46 Alright, Dr. Friday, you help me every time. Thank you. Dr. Friday 16:51 Thanks for calling, Jerry. I appreciate you. Alright, let's get David on line two. Hey, David. Caller 17:01 Hello. My question is, when you're approaching retirement and eventually collecting Social Security, are back taxes or school loans are something you might want to address first? Dr. Friday 17:17 Absolutely. I have cases right now on my desk where they're getting levies on their Social Security benefits. So yes, I mean, let's be honest, the IRS knows right where to collect. Social Security comes right from the other office, right? Dr. Friday 17:31 So definitely wants you to get your situation corrected, or get yourself put into a non-collectible. If that's all you have is Social Security, it's possible that you can be put in a non-collectible status. But you don't want to just let it ride because the IRS has a funny way of sneaking up on you. And taking when you, I mean associate living on such a fixed income with just so security. It's pretty easy for them to put a levy against that. Caller 17:59 So I should address that before I address back taxes? Dr. Friday 18:03 Yeah, I would address the back taxes before I started taking Social Security if it's something you can do. Caller 18:10 But what about getting on board with the school loan or the backtaxes. Which one of those that are addressed first? Dr. Friday 18:25 David, I would say taxes are the most. I don't know a lot about student loans. I know I have quite a few people that have been put into like a holding right now because COVID and all the different things. Dr. Friday 18:37 But if you've got student loans and IRS issues, obviously for my expertise, I must say deal with IRS. It's possible that before you go on to Social Security, depending on how old your IRS debt is, if it's over 31 months, there's a possibility of taking both of them into bankruptcy. I mean, that is on the table depending on how old your debt is. Caller 19:02 Okay, I guess I need to call the office and lay everything out there so we can start taking care of some of these problems. Dr. Friday 19:11 I totally agree. That would be a perfect way. It's a little hard on the radio, but I agree, David. Dr. Friday 19:17 Thanks for your time. Dr. Friday 19:19 Thanks, mate. I appreciate your calling. I truly do. Alright, let's hit Connie online one before the break. Hey, Connie. Caller 19:25 Hi, how are you? Dr. Friday 19:27 I am very good. What can I do for us today? Caller 19:30 Okay, I was calling my lost my parents in 12 and 14. And I inherited we had a farm and then my parents home. And I've kept it all of these years and I've not done anything really with it. And when I'm hearing about Biden's proposal for capital gains and the increase that might go up, I've heard a couple of things. Caller 19:55 One is that he wants to make it retroactive back to April of this year. And one that it could go up to 38% to 43%. And so my question would be if I wanted to sell either their home or some of the farm, should I try to make that happen before the end of this year? I hope to retire in two years. And so part of that sale would be some of my cushions, so to speak. And I just wasn't sure about the capital gains. Dr. Friday 20:28 Great questions. And let me kind of start from some of them. And I hope I'll hit them all. So what Biden is right now put on the table is if you make more than a million dollars, including the gain on your property, he wants to charge people over 1,000,039.5%, or there abouts capital gains basically put him at ordinary income rates for those individuals. So I don't know. Dr. Friday 20:53 My suggestion would be is obviously to don't sell in such large chunks that we kick over a million. So that way, you have more control. Because under it, my understanding is he's not changing those rates. So theoretically, if you sell if your income and everything is under 400,000, you'd be about 18%, anything under 250 would be 15%. Dr. Friday 21:19 You know, we have we already have a flexible kind of grid of what we have to pay in tax on capital gains. So we'd have to work together and just kind of figure it out. But if there's a way of filling it in more pieces and trying to sell it all at one time, and putting yourself into a potential, I call it the Biden capital gain tax, my suggestion is let's try to work with under those numbers. That would be the best way to do it. Dr. Friday 21:44 My understanding from attorneys that are out there talking to at least on a lot of these courses I'm taking about what Biden has suggested is he cannot backdate the capital gains tax. I have heard the same thing though, Connie. And I mean, I say that and we don't have any proof one way or the other at the moment. So my understanding is that they can't go retroactive on capital gains for something like that. Dr. Friday 22:09 We'll find out I guess, but right now, I would say if you're thinking about selling mom's home, or pieces of the land, try to work with the idea that we're not going to have a gain of, and the game would be the difference of whatever the house was worth either in 12 or 14, whenever you know, you had two different, but whatever they are worth plus what you sell them for. Dr. Friday 22:29 So let's just use an example that in 2014, mom's house was worth 100,000, and you can sell it for 300, then you would have a gain of $200,000. The difference between what it was worth at the time of passing and what we sell it for. Caller 22:44 Okay. And I understand that part, I think part of it was the farm. And if I were to sell quite a bit of it probably would get up and call. Dr. Friday 23:00 I would honestly say that you would need to sit down with possibly whoever, the buyer, and really work on those numbers. It may be that you'll have to do it in a number of sales to keep yourself under the– I mean, right this second, if you did before December 31, my understanding right now would be you'd still be at the 24% tax bracket if it's over, you know, a million or whatever. Caller 23:24 But if I can just sell a few tracks and stay under the million I should be okay. Okay. Dr. Friday 23:31 Yes, ma'am. That would be the ideal situation. Yes. Caller 23:34 Okay. Okay. Well, wonderful. That definitely gives me something to think about. Dr. Friday 23:39 Thanks. Appreciate your phone call. Thank you. Caller 23:41 All right. Thank you Have a blessed day. Dr. Friday 23:44 You too. Bye. Bye. All right, why don't we get ready to go ahead and take a break here? We're going to be getting back on the show. If you've got questions concerning either situations that you've got going with personal tax situations. Dr. Friday 23:56 Because with the real estate market going the way it is, if you have people that have been selling their primary homes for more than the 500,000, or the 250,000 exclusions that we have on the table, and they're reinvesting in real estate thinking that somehow that's going to save them tax dollars, that isn't going to just to. Dr. Friday 24:15 But if you've got questions on that, like Connie, where maybe you've inherited some property and/or you've brought the property and you're trying to sell it, we need to sit down and try to crunch the numbers to get the best that we can as far as paying the little amount of tax to the IRS but also preserving every dollar we can for you to either reinvest or to use for what you want to do. Dr. Friday 24:38 So we're gonna get right back with the Dr. Friday show. You can reach us here at 615-737-9986. We'll be right back. Dr. Friday 24:57 We're back here live in the studio And if you want to join us, all you have to do is pick up the phone 615-737-9986 taking your calls, and also emails and texts. Dr. Friday 25:14 We got an email that came in over the break. And it says, "I was hearing you on the radio and you were talking about tax brackets and the one about zero, could you please go through it? I have an option to go to get my income down very low for this year. And if that would work, capital gains would be around 160." Dr. Friday 25:30 Well, Darrel, my love, that is probably not going to happen. What you basically need to have if you're single, to keep the zero capital gains, you have to be 50,000 or less. And for married couples, 100,000 or less, that would include not just the capital gains, but all income. Dr. Friday 25:48 So all of your income, including any gains you have from real estate, or stock sales or any kind of capital gains, and it is 0%, if you are single all income, including gain, is 50 or less married 100,000 or less. And that's when you would fall into the zero. So possibly not going to be the best thing you have. But sometimes it does work out sometimes we're able to get people where we can sell things. And you know, they don't have any other income that they need to justify at that time. So we're able to take advantage of it. But it's not an easy one to do for any large capital gains situation. Dr. Friday 26:29 But if you want to join us again, you can at 615-737-9986, we are talking about many of the different things that we have going on, I do want to again, put out there PPP loan forgiveness, do not forget to do this, I have had quite a few clients that have come in, we've talked to them, and they're like, "Oh, yeah, I got the PPP, but I hadn't filed for forgiveness." Guys, file for forgiveness. Dr. Friday 26:30 As far as I know, unless you received it very late. Most people voted in January, February you are outside of the window, I mean, you're at the time now, you do not want to have to start paying back that money anytime soon. So hopefully never I mean, most people use that money legitimately for taking payroll and taking that consideration. So just make sure that you are not going to end up with a payroll situation that is not going to work well for you. Dr. Friday 27:29 So we're going to talk about few things that we might want to think about with tax planning. We are getting close to the end of the year. So I would actually suggest if you are having some big changes, or a lot of times, it also comes into play with maybe you got married this year, right? Or divorced this year. Hopefully married is always happier than divorce. Dr. Friday 27:52 But either way, you may have had changes on your W4. So maybe doing a premium column, estimating your taxes for 2021, so that you can find out Have you had enough money come out because if you're getting divorced at this time, then you're going to end up possibly claiming married on a W2 the whole year. But yet, you're not going to be claiming someone this year as a spouse. So that could kick you more than once. I've had individuals that has created a serious tax situation. Dr. Friday 28:24 Usually getting married a little better, because you've been claiming single the whole year. And you may have overpaid your taxes in those situations. But all I will say is I just want to make sure that, you know, you're you're looking at it now let's not wait till November December when you really can't make the change. You still have enough time here where you can maybe make an adjustment either have less come out and put more money in your pocket because you've overpaid or put more in. Dr. Friday 28:52 So when you get ready to do your taxes, you're not sitting there scratching your head going, "Oh my gosh, how am I ever going to figure out how to pay this?" So you want to try to adjust your W4 now. Not wait till later to deal with that situation. Dr. Friday 29:08 Okay, let's go with Lisa online one. How's that? Hey, Lisa, what can I do for you? Caller 29:13 Hi, Dr. Friday, I filed a simple return for my 17-year-old son where he'd been working and he had $39 coming back to him. Well, the IRS sent us a letter saying they've got to verify his identity before they will refund it and tried to call them and you can't do it online because he doesn't have a mortgage or credit card or anything they can verify and I held for over an hour and then they said I gotta have an in-person interview, but the office is closed in Nashville so what do I do? Dr. Friday 29:56 Yeah, Lisa, and absolutely great question because we are running into- about a year ago, I actually had to do the same thing. They had to verify me before they could give me my refund or whatever. And so it ended up you know, and it was during the COVID time, so it was stressful. But now the number they seem to be putting on there, because I'm sure there are quite a few people listening that said that. Dr. Friday 30:20 We've got tons of these letters, but the phone number they're getting hung up on at least on Friday, I get phone calls from clients, basically saying, "Hey, I've called and they're saying they're too busy. And they're just basically saying call back later." And these people are calling at all times, you know. And they're like, "Call at 7 am, call at 7 pm" And they're like, "We're trying everything and they're not getting through." Dr. Friday 30:41 You're the first that said anything about in-person interview, because To my knowledge, like you just said, I'm handling. I mean, we do audits all the time with the IRS. And these are still not in person. These are all still through faxing, and telephone. We have not yet done an in-person audit, since pretty much 2019. So I don't know that the IRS is actually even reopened the office in Nashville, to be honest. Dr. Friday 31:06 So I would say you're going to have to call back and see I mean, again, pre 19, that would have been an easy set up an online appointment, you and your son could have gone in there and dealt with it. The only positive I can give you on this is that he's making 8% interest on the hold up because they're holding. Caller 31:29 But is there a time limit for that? Dr. Friday 31:32 Well, theoretically, no, because it's filed on time, the government should get their act together, but they're holding these things up. And I'm assuming, because there are so many kids that have not filed, this is probably his first year of filing. Don't hold me to that, because I've had a couple of cases where these are people might or you know, they've been filing for years that they're now getting identity. Dr. Friday 31:53 I think they're trying to find a better way to protect us. I mean, that's my positive on that conversation. But I all I can tell you is I would try calling back again. And you know, say "Hey, Nashville's not open. There's no way of doing an in-person, how can I do this?" Dr. Friday 32:10 I mean, you're wasting more than $39 worth of your time to accomplish this for your kid. But it's going to hold him forever. I mean, I've got a guy that's got three years held up because of this, because he can't verify himself. So they haven't given him any. Dr. Friday 32:24 So you know, I don't have if anyone's listening that has a better suggestion for Lisa and or myself to be able to give other people. Please share that with us. Because at this moment, the phone number seems to be the only thing. And like you say a lot of people do not have a cell phone or credit card or student loan in their name. And they're not able to do the online verification. So that's pretty typical, but not a lot of help. Dr. Friday 32:50 But if you do find a way out, please share it with us because there's a lot of listeners that are in the same boat. Caller 32:55 Okay, well, I'll just keep trying. Dr. Friday 32:58 Thank you. I appreciate the phone call you. All right. Let's hot Connie on line three. Caller 33:09 Yes, I just had a question about when to file as a married couple separately? I retired and my husband is younger than I am. He's still making good income. I'm on Social Security and I have a small pension. And I just started thinking whether we should still file jointly or what the situation would be if I filed separately if that would be more advantageous. We don't have any minor children at home. And we don't have a dependents. Dr. Friday 33:46 What about itemizing, Connie? Don you guys still meet the itemization of the, well, at this point is like 24,000 and some change. Caller 33:55 Yes, we itemize because he's self-employed. So we itemize. Dr. Friday 34:01 Well, that's the schedule C he itemizes, but do you guys actually have a mortgage and property tax and all that, that you guys need to the itemization for a Schedule A? Caller 34:11 Yes. Dr. Friday 34:13 If you do, then I will say that you're probably going to be better to file married. If you look at your tax return and do not see a Schedule A on it, then I'm going to say that you're most likely going to be better filed married filing separately. Dr. Friday 34:27 The reason is, you're going to get taxed at 85% of your Social Security benefit because he makes good money, and it's going to kick you into a taxable situation there where if you're filing by yourself, you're not likely to kick into that self-employed. You may, depending on how much your pension is, you may not have all of your Social Security tax. So it might save you Caller 34:51 That's why I was thinking. That's why I was wondering if it would be better to do separately or not. And I guess it's running numbers to see. Dr. Friday 35:00 Yes, exactly. There's no perfect science. So I will say, a lot of my clients we do on both ways will throw you, in a sense, we would do the tax return, and then we take you on and off and just see what the difference is. Because that's the best way to know under each individual what the advantages and disadvantages are, in most cases, especially under these, so my guess would be it might be a good situation. But again, if you are truly itemizing, then your standard deduction would be better by having both of you versus only him, because you would not be able to take a standard deduction. Okay? Caller 35:32 Gotcha. Thank you very much. Dr. Friday 35:34 No problem. Thank you. All right. Let's hit Welsh on line four real quick before the break. Caller 35:42 Kathleen Welsh. And I wanted to ask you, I sold some property last year, several years before that, I bought it auction at $60,000. I sold it for $190,000. I guess all of that will be capital gain? Dr. Friday 36:00 So the 190, you sold it for you purchase it for 60, so we made 130. Does that sound right? Caller 36:08 Sounds right. Dr. Friday 36:10 Okay, so the 130 give or take if there were any repairs, closing costs, anything else that I might be missing, but that would be the taxable portion? Yes, ma'am. Caller 36:19 Okay, then, even though I only have an income of 32,000. Dr. Friday 36:28 Yes, well, unfortunately- Are you single or married? Caller 36:32 I'm widowed. Dr. Friday 36:35 Okay. So, yes, you make too much to qualify for zero capital gains with the capital gains that you have here. So right now, you're going to be at the 15% tax bracket, most likely for the 130,000. Caller 36:51 Okay, well, I appreciate your help so much. Have a good day. Dr. Friday 36:56 Thank you for calling, sweetheart, you too. All right, while we take another break, we'll come back, we get hit more questions you might have concerning taxes, or if you've got some questions about how to get started on maybe dealing with back taxes or tax issues, you can join the show at 615-737-9986. And we'll be right back. Dr. Friday 37:23 Alright, we are here live in studio. We've got a couple people on the line. So we're gonna go ahead and hit those. We have Chris on line one. So, Chris, on line one. Caller 37:37 Yes. I've prepaid, some quarterly taxes due to capital gains or estimated taxes rather, due to capital gains from last year. My capital gains will be substantially lower this year. Should I keep paying? Or if I think I've paid enough estimated taxes for this current year? Would it be okay to now stop? Or would they penalize me? Because I didn't or haven't paid enough based on last year's income? Dr. Friday 38:12 Well, I mean, it's 100% of last year or 110% for this year. So theoretically, it sounds like you have already paid in enough for this year. So there's absolutely no reason to continue to pay give extra month. Caller 38:30 I'm very, probably very close to it. I just didn't want to pay just to use round figures. Let's say it was 50,000 in estimated taxes. And I've paid 40,000. Should I continue to pay the extra 10 or stop, draw the line and just work out the math at the end of the year? And maybe I'll get a few dollars back? Dr. Friday 38:52 Yes, why did you feel like you're on the side, that is the 40,000 is going to be more than enough to cover the taxes. Because otherwise, if you're under my fear would be if you're $5,000 off the wrong way. So maybe we owe 45 instead of 50 this time and we only paid at 40 they can hit you for not paying the quarterly. snough, you don't need to make that fourth-quarter payment, or actually September 15 is the third quarter payment but down the hall you paid it. Dr. Friday 39:23 But if you're at all thinking that, "Hey, you know what, it's close." Then my suggestion would be go ahead and make the third quarter and not make the fourth. Again, I'm winging this conversation. But I'd always like to say on the side, I don't like to pay a $1 penalty, because I know I'll get it back or roll it into the next year versus then keeping some of it because they didn't like the way I made the payments. Caller 39:48 Terrific. That's great. And I've heard you say something I haven't heard the whole show about the $100,000 limit on capital gains or it almost sounded like a deduct. Can you explain that for us? Dr. Friday 40:02 Absolutely. So what I was talking about is the 0% capital gain rates. So if you're a single person, and you have total income, including your capital gains of 50,000 or less, you're going to be in the 0% tax bracket. So there's no capital gains rates for people that make 50,000 or less in the single bracket. Same thing for people that make 100,000 or left in the same bracket. There's a 0% capital gains rate for those individuals. Hopefully it comes up properly. Does that makes sense. Caller 40:39 I was not aware of that. Dr. Friday 40:41 Yeah, yeah. So we have 0%, 15%, and 20%. And then we have the 3.8%. That's the rates we have right now for capital gains rates. Most people don't get to zero. But if you happen to be able to work it out properly, you know, sell something small and your incomes fairly low, you can actually hit that zero capital gains rates, but doesn't happen too much. But it does happen sometimes. Caller 41:06 Yes, it's a situation where, right now we are both not working. But I am making income on capital gains, with trading investment and whatnot. So if make 95,000 in capital gains, I'm good to go. Dr. Friday 41:25 There you go. Yeah, I mean, that's a big savings, zero to 15%. You know? So if you can actually work it out where you're actually you said right now, you don't have other income coming in, and you're living off of your trading. Dr. Friday 41:38 Unless it is, and I am talking, let me clarify long-term capital gains, not short-term, because you may be day trading, and that's a whole different conversation. But if it's long-term capital gains, then you will be able to hit a zero bracket. Alright, Chris? Dr. Friday 41:53 Awesome. Thank you so much. Dr. Friday 41:55 Thank you. Alright, so we have got a few minutes here. So let's talk real quick. As an enrolled agent, I am licensed by the Internal Revenue Service to do taxes and representations. So that's what I've done for the last 20 plus years. Dr. Friday 42:09 So if you've got questions on how to deal with taxes, or maybe you ran into a tax issue, or maybe you just have a question concerning how this tax issue might happen, or affects you, that's the kind of thing we can help people with all the time. So you can actually reach us on Monday morning at the office at 615-367-0819. Dr. Friday 42:36 We also have the ability to help people with, I mean, like if you're setting up a new business, and you haven't done anything on that, then you know, you might want to make sure that you have all of your ducks in a row. And if you need help doing that, should you be an LLC, should you be a Sub S corporation? We are not attorneys, but we can give you the tax advice that we have for that situation, to hopefully get you to go in the right direction for what you need to do and how you're going to do it. Dr. Friday 43:04 You can also email your question. So if you've got a question, and you're just not sure who, or maybe I don't know the answer, but I can always refer you to an expert in that section. You can email friday@drfriday.com. Dr. Friday 43:24 And if you have no idea who I am, or you just want to find out more information about who or what my company is about, you can also check us out on the web at drfriday.com. That's the easiest way probably to please get the basic information our offices in the Brentwood areas. So if you'd like to set up a time or an appointment, easiest way, again, is to call me directly at the office at 615-367-0819. Dr. Friday 43:50 We're looking and keeping track. So hopefully every Saturday you can tune in. If not, the show does replay on the website. So if you've missed the show, or if there's something on a show that you might want to re-listen to, it should be airing on the website. But we are trying to take every time we hit something new that comes up or if there's a conversation about how AMT tax or capital gains tax, or any of the new tax laws that are coming into effect, and how it's going to affect you and I and our tax planning, then we will do our best to try to bring that to you as fast and as appropriately as possible. Dr. Friday 44:28 But if there's something that you hear about or you have questions about, again, the easiest way to reach my office is picking up the phone at 615-367-0819. You can also again email your questions friday@drfriday.com. Dr. Friday 44:49 This is an enrolled agent which is an individual that has been licensed and tested. I do not work for the IRS. Let me clarify that. I have never and don't plan to ever work for the IRS. But as someone that is licensed by the IRS, our job is to help people with representation and taxation. So to help you understand how and what your rights are, what you need to do in the situation if you're being audited. Dr. Friday 45:15 Nowadays most audits are paper audits. Because as we were talking earlier in the show today, there is not a lot of face-to-face appointments. But many people will receive letters in the mail. And if you receive one of those saying they've changed your tax return, or they're needing more tax documents to help understand what they had, do not ignore those letters. Dr. Friday 45:37 I will tell you more than once I have people come in and we have to go and get a reconsideration on an audit because they completely ignored the conversation. They did not understand that they were supposed to provide documentation. All they thought was the government was disallowing everything that they've had. These paper audits are not that situation. These are pretty straightforward, and they're easy to deal with. Dr. Friday 45:59 But you need to make sure you understand what the question is and how it's being dealt with and you understand what your options are. And that's why you need to go to an enrolled agent or CPA, someone that's going to be able to help and explain to you what your options are. Dr. Friday 46:14 Alright, one more time. If you want to reach us to 615-367-0819. Friday@drfriday.com, or check me out on the web at drfriday.com. Hope you guys are enjoying this extremely warm Saturday and I hope to hear from you guys next Saturday. Call you later.
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