Welcome to 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 ReturnOperating Businesses Tax Extention Deadline September 15, 2021Quarter Estimates due September 15, 2021Returns for C corporations That Are On a Calendar Year Have Now Been Extended to October 15, 2021Apply For Forgiveness For PPP LoanHow To Verify Your Identify With the IRSWhy You Need To Adjust To Your W4What 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!
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 0:30
Good day, I'm Dr. Friday and the doctor is in the house and we are here live. So if you do want to join the show, you can pick up the phone at 615-737-9986. That's a number here in the studio. Many of you are probably working this weekend possibly like I am because this is the last big weekend before tax season.
Dr. Friday 0:53
For businesses, it's going to be here on September 15, which is next Wednesday is the final day. If you filed an extension on a corporation and LLC, trust in some cases 1120, 1120 S, and 1065 are the main ones. And if you file any of those, and you follow the extension, this coming Wednesday, 9/15 will be the deadline and so many of us are working on tax returns this weekend to make sure that they get filed on time.
Dr. Friday 1:22
And if you've got a question or if you're in the process of filing one and you've come across something you need to ask feel free to give us a call again here in the studio at 615-737-9986.
Dr. Friday 1:35
I have been taking quite a few appointments this week, talking to people that are trying to figure out 2021, we're already three-quarters of the way through almost. And there's a lot of talk of what's happening back in the House and the Senate.
Dr. Friday 1:50
Just to bring up to date for some of the people that may not follow everything happening there is that you have the ability to Secure Act that passed in 2019. And then there, of course, they changed a few things for IRAs and workers. But now there are some more proposals in front of the House and the Senate that will even go further than what happened on the Secure Act.
Dr. Friday 2:13
Of course, one of the proposals is raising the age for taking minimum distributions from 72, which is what happened in the Secure Act up to the age of 75, which means you can leave your money longer in an IRA, let it grow. And then that way you would be able to sorry about that guys, let it grow longer. And that means your mandate to take it out of an IRA would be longer.
Dr. Friday 2:39
So it was 70, it went to 72. And now they're trying to approach the age of 75. Also allowing more part-time to participate in 401 K's enhancing tax credits for small business owners that had the workplace and letting people age 60 and older to contribute still to a 401k. And expanding the charitable contribution.
Dr. Friday 3:03
The qualified charitable deduction or distribution, I think is a pretty well unknown text to break for people that are taking RMDs. Most people, a large number of people that take requirement on distributions also attend church or give money to charities. And the easiest way to do that would be to do it directly through your RMD. Because if you do that it becomes tax-free.
Dr. Friday 3:30
Especially nowadays with itemizing being very hard to actually itemize, especially when you're at the age where required minimum distributions are happening. This is one of those where it's a qualified charitable distribution. And you're able to make money from your IRA, your requirement on whatever you have to take out and you can give that to a charity tax-free, so you won't pay taxes and we pay directly to the charity.
Dr. Friday 3:55
There are a lot of people that I know when I do consult and we look at different things that might help save tax dollars. That is one of the things that many people either never heard of or have not done. Even if you're not, you know one of those people that say "Oh, I always give this much money," most people do give some money. So you just want to make sure that you have talked to your financial planner or your tax person and bring that up qualified charitable distribution, and see if it would help you with your RMD.
Dr. Friday 4:23
All right, we've got Zach on the line. So let's just go ahead and head directly to Zach. Hey, Zach.
Hey, good afternoon. I love your show. Thanks for taking my call.
Dr. Friday 4:32
Thanks for calling. What can I do for you?
I have a question about federal student loans. I keep working on mine about it. I keep seeing things where it says the interest has tax deduction principles and things like that. But is there anything when it comes to tax deductibility for paying off the actual principle of the student loans?
Dr. Friday 4:51
There is not. There was at one point and I'm reviewing the current bill that's in the house really quick here because it was time they had talked about forgiving the first 10,000 there were other conversations up to like 100,000. But that is not in the current bill that I'm reviewing, at least that's in front of the house. Anything on there.
Dr. Friday 5:13
For some people, the interest is a tax deduction. But if you happen to be making as a single person, I believe over 75 or a married couple over 150, I think it starts means testing out where you don't actually qualify for it. And then the principle itself is kind of like an investment. But paying it off is not a tax deduction unless you got some college credits back in the day.
Dr. Friday 5:38
Otherwise, at the moment, No, there's nothing on this even talking about any kind of forgiveness, which was one of the things that they talked about when they were running, they're going to help people with their student loans, but nothing yet, Zach. Sorry.
No worries. Thank you very much.
Dr. Friday 5:52
Thanks. Great question. I appreciate it. All right. So one of the other things that we're going to look at. And we'll make a little note here to see if I come across anything that talks about it.
Dr. Friday 6:03
So we're talking about the RMDs and raising the age so that more people can either contribute, and also letting employers offer student debt relief, which that's a little bit Zach along your lines, but not quite through workplace retirement plans. So you know, automatically enrollments and helping them they're kind of figuring out how a way that employee can opt-out of a plan, and they'll pay the student loan versus putting it into retirement.
Dr. Friday 6:32
This, again, is just one of the bills that are in front of the house and senate. So don't count your chickens yet people because we don't know if this will pass and who knows. One of the bipartisan house bills will require the catch-up contribution to the workplace qualified retirement plans such as a 401k to be subjected to the Roth treatment.
Dr. Friday 6:54
This means that the extra 60 $500 contributed by workers who are age 50 and older would automatically go into a Roth and come from a post-tax salary. Right now, obviously, if you normally contribute to an IRA, it is tax-deferred, right? So if you make $50,000, and you put $5,000, into your company, 401k IRA, you would have a taxable income of 45. They're saying if you're going to be doing the ketchup, the amount above the standard IRA or 401k contribution, they're talking about making that $6500. Ketchup is only allowed through a Roth.
Dr. Friday 7:37
Pros and cons. The pros would be I mean, many of the people I talked to today are looking to get more money into Roth, especially young people. I mean, I have a lot of them, they're just like, "I don't care if I'm saving taxes today. I don't want to have government money, I want to have it all primary tax, I don't want to deal with all of that I rather pay the tax today and let it grow tax-free."
Dr. Friday 8:01
Let me put a caveat out there. I am not a financial planner, I am a tax person. So this is not something that's going to be my expertise. If you're looking to get some financial planning, you want to go directly to someone like that. But from the tax standpoint, yes, you're not going to get the instant gratification for contributing now, but it will grow tax-free. So I'm not too sure if I'm totally opposed to that, to be honest.
Dr. Friday 8:26
Because like I say, I do a lot of consulting for people that are getting ready to go into retirement and people in retirement. And one of the biggest things is, "How much can I convert? Can I do a Roth conversion? Can I convert money into a Roth?" Because people are trying to get the tax dollars out of their retirement now that they're at a certain age. So it is something to think about.
Dr. Friday 8:47
We'll have to see what comes of that and in this measure to help raise money with the contributions made, but also to the thought behind it is it'll help people save for retirement, but it'll also give the money to the IRS today, instead of them having to wait while you're growing your money and their money in IRAs. So we'll see what that is. Past ideas are limiting Roth IRA benefits to the higher incomes that are back on the table.
Dr. Friday 9:15
In 2016, a Democrat proposed prohibiting contributions to a Roth IRA with account balances over 5 million. He also called for limited Roth conversions for pre-tax funding to prevent high-earning individuals from taking after-tax deposits into traditionalized. And moving them into Roths. Those ideas were nowhere at the time.
Dr. Friday 9:37
Fast forward to 2021 now head of the senate finance committee, the same gentleman, and the tax-writing committee upper chambers hoping to revise his 2016 proposal. So that's going to be an interesting one. I have quite a few higher earners that put money into an IRA and then do the conversions as a way of funding IRAs through the backdoor, I guess you would say because they have so many limitations.
Dr. Friday 10:05
So that will be interesting to see what comes of that we'll have to follow that because like I said, I do know a couple of high earners that do play that game because it's the only way that they can actually get money put into retirement without getting penalized for trying to save money.
Dr. Friday 10:20
All right, we have Teresa on the phone. Let's get Teresa real quick before the break. Hey, Teresa.
Hi, there. Thank you for taking my call. I just had a question about the estimated quarterly tax payments. I believe is due on the 15th as well,
Dr. Friday 10:37
Yes, ma'am. You are 100% right. I should have put that in my notes for this morning. So thank you for reminding everyone on the radio. Yes. This is the third quarter estimated payment is due on the same day, 9/15.
Okay. All right. I've gone on the IRS website and I've noticed that you can pay with a credit card. And I'm assuming you have to set up an account, you know, get your credit card number and there and so on and so on.
Dr. Friday 11:02
Right, I use pay1040.com I think it is that does do that. And you can use all the different, now you will pay a fee, the government doesn't eat that fee. So you will pay two and a half 3% depending on what card and which one you choose to use. So let's say you need to pay $1,000 you'll pay a fee above that the IRS will get the full $1,000
Oh, okay. I didn't realize that. Okay. Well, I was wondering, in the future, should you get a refund from the IRS? Is that credit card going to pop up out of their system? And will they send the refund to that credit card?
Dr. Friday 11:41
No, because they use a third party to do the credit cards. So the answer to that would be at least as right now Teresa would say the answer is no. Because the only thing they have on the tax return is bank statements, you know, bank account numbers, you pay by credit card, you go through a third party. So I would answer that question as no.
Okay. All right. Well, that's it. Thank you for your help.
Dr. Friday 12:04
I appreciate it. All right, we're gonna get ready to take our first break, and we come back, we can get some more of your guys' phone calls, please feel free to ask questions. Because if you don't ask the questions, you're never gonna know. And sometimes just like Miss Teresa there, she'll remind all of us about things that are coming up. I'm so focused right now on corporate tax returns, almost forgot the fact that we also have third-quarter estimates due. So if you want to join the show, 615-737-9986. And we'll be right back.
Dr. Friday 12:42
All right, we are back here live in-studio, and looks like I've got a couple of callers. So why don't we hit John first, then we'll get to Dean. John, what's happening
If I transfer some property to my son on a quitclaim deed, will he have a tax liability for the value of the property?
Dr. Friday 13:05
Well, I mean, theoretically, you're transferring it over at the value that you paid for the land, so he won't have anything and you're going to have a gift, you know, you're basically gifting it to him, because you're not selling it. So there would be and if it's over $15,000, there would be a gift tax return required part of that's gonna come out of your lifetime estate. Is the land worth, I mean, are we talking hundreds of 1000s? Or are we talking 10s? of 1000s?
Dr. Friday 13:36
Okay, you know, so the answer to that would be a couple of things. I mean, personally, I don't know what the big picture is. But if it's at all possible, john to keep it in your name under the current tax law. Right now, he would get a step up in basis when he inherits. So he would have nothing.
Dr. Friday 13:51
So I'm assuming, John, that you paid. Let's just say maybe you paid 50,000 for something that's worth now 300,000. And maybe less. I mean, you may have inherited, I don't know. But he will end up paying capital gains on the difference if he sells that property.
But if he sells, yes. But if he doesn't sell, would he have to pay tax on it?
Dr. Friday 14:19
No, no one pays anything. Basically, your gift to him is at the value of the land that you own it at right now. So there are no taxes due at this point. But at some point, when he sells that property, he will have your basis instead of a step-up in basis. And who knows right now, that may just be a smart idea.
Dr. Friday 14:35
But John, so right now, there'll be no taxes, you would do a gift tax return, and you would report whatever the value that you paid for that land. That's the value your son would keep with that land. And when eventually at some point, he either sells or gifts that to his children, that's the value that they will be able to use.
Right. Okay, that sounds good. Thank you.
Dr. Friday 14:59
Thank you. Appreciate the call. Appreciate it. Alright, let's you Dean in Franklin.
Yes. Thanks for your program on Saturday. I was listening to it about the donation to my, I support a scholarship fund. And you said to take it out of your RMD directly. And I did that. And my question today is, is there a cap on the amount that I can donate out of my RMD to the scholarship fund?
Dr. Friday 15:36
You can give up to the value of your RMD or $100,000. So if your RMD is over $100,000, then you can't give more. But if your RMD is 100,000 or less, you can give 100% of your RMD.
Okay, that's what answers my question. Because you know, in 2020, they didn't have an RMD.
Dr. Friday 15:56
Yes, correct. You did not have to take an RMD they allowed you to return it or not to take it at all.
So this year, I want to almost double my donation to the scholarship. And I didn't know if there was a cap on that donation.
Dr. Friday 16:12
Yeah, as I said, I think it's $100,000 is the cap a very, not a lot of people have all required minimum distributions to be 100,000.
Okay, that answers my question. Thank you.
Dr. Friday 16:23
Thanks, Dean. I appreciate it.
Dr. Friday 16:25
Alrighty, and so we're going to be continuing here a little bit on what we have going on as far as reviewing what is in the government. House or Senate reviewing different situations. And right now, the congressional Democrats are kind of in charge. So I thought this was kind of funny.
Dr. Friday 16:44
Back in 2019, there were 28,000 people, individuals that had over $5 million in IRAs. So 28,000 individuals, back in 2011, there was only 8000. And somehow, this is an unfair situation, I just want to let you know that And out of that 497 individuals have more than 25 million in their IRAs. So they think that they need to be able to, they want more regulations done on those, they're not looking at the fact that stock markets and a lot of these people have self-directed IRAs, which means that they can invest in rental properties, commercial properties, there are all kinds of things they can grow that money with. I mean, if they're smart, they're doing better than probably the stock market.
Dr. Friday 17:27
That being said, in that same bill, they're saying it's an easy way, a tax break for lower-income people who want to put money into an IRA, we're looking for incentives. So they're basically saying the maximum saver's credit is $2,000. Well, if you guys have heard me talk about the saver's credit for joint filer 1000, for others, so individuals, and it will cap at 5020 or 10% of the amount you've paid in depending on your adjusted gross income.
Dr. Friday 17:52
So fully phased out of AGI over 33,000 per single. So if you make $33,000 or less, and you put money into a retirement account, you can get up to, for a single person up to $1,000 credit of what you've put in, which is up to 50% of your so if you put $2,000 in, they'll give you $1,000 back of that. Head of households 49,500 and a married couple of 66,000. So they are, and this has been around for a while, guys. But there are some incentives. A lot of times people don't do it.
Dr. Friday 18:25
But you know, it's not a bad idea. If you think about it if you can contribute a couple of $1,000. If it's possible, I mean, let's be honest, if this is your earning period, and this is how much money you're making, you need to start thinking about retirement. Because on the other side of those whopping 30,000 people or whatever less that has over 5 million, there are like one out of every five people have an actual retirement account.
Dr. Friday 18:49
And I think it's, I don't know, $500 is the average savings for more than 70% of the United States, $500 or less they have in savings. So we need to really start thinking about not living paycheck to paycheck. And I know it's easy to say, "Hey guys, I've been where you have. And I'm not saying it's easy." But you have to figure out how you can start saving and doing something.
Dr. Friday 19:14
So again, the lawmakers want to make a bigger incentive for those to need to save. So they're looking at doing $2,000 for individuals that are single and $4,000 for people that are filing joint and again at a 50% match. So come on people this is a no-brainer. If you're making $33,000 I get it, not easy.
Dr. Friday 19:38
But if you can find a way of not maybe having a Starbucks every day, because that's my weakness in life, or something like that and take that money and just start putting it into your company retirement account or an IRA or something, then that would be a great way for you to actually start growing because they're going to give you 50% of it. I mean, come on. That's, you know, that's great. So that is something to think about.
Dr. Friday 20:01
And again, guys, I'm talking about what the Senate and the House have on their table because there's a lot of tax things out there that people are talking about, and what they're going to do if there's some other way of trying. I mean, I just want you to be aware of what they're thinking. So that way we can all stay on top of it.
Dr. Friday 20:20
If you have a mount garnished from your monthly state pension payments, you're taxed on the gross distribution, not on the net amount. If that makes sense. Some gentleman went to court because he thought because he was being garnished, he did not have to pay the tax. Guys, anytime you're paying the IRS is with after-tax dollars, if you're paying a state, you're paying the feds, you're paying child support, almost anything like any of those things.
Dr. Friday 20:46
If they're in the rears, or you're making payments we do a lot as an enrolled agent, we deal a lot with the IRS and guaranteed every dollar you're saying to them is going to come after taxes, so they're not going to let you pay them with pre-tax dollars. So I thought that was an interesting understanding thinking that because they had a levy or a lien on their information that you were going to have to deal with that situation.
Dr. Friday 21:14
Okay, so again, I just want to reiterate that the calendar year for partnerships and S corporations are due 15th. Also, if you have a standard year in on a corporation C corporation, same thing. There's also a deadline for your estimates for 2021, which would be 9/15. And then returns for the calendar year, C Corporation has filing extensions that are now due October 15. So 1120 S and 1165 are 9/15, and 1120s are due October 15.
Dr. Friday 21:46
See, I did the show all the time, I'm always working and they're constantly making certain changes on me. So that is a new one, they've changed the rules, and just reading off of the IRS websites, returns for C corporations that are on a calendar year have now extended to October 15. So just want to put that out there so that you have the right dates. And then October 15 is also the due date for individual returns.
Dr. Friday 22:10
So if you haven't filed your 2020 tax return yet, you need to be looking at getting that filed sooner versus later. The form 1044 2021 will look very much like the form for 2020. There are only minor changes to two pages based on the draft that I've just seen. But schedules 1, 2, and 3 are much longer. So they're adding a lot more to your new schedules.
Dr. Friday 22:32
I mean, come on guys, they supposedly shorten the form and 2018 to extend it by six pages, then they reduce those pages down to two. And now they've extended those three pages twice as long. Simplifying the tax code is not something that actually falls very quickly into this conversation.
Dr. Friday 22:50
So if you've got a question if you're thinking about filing your taxes, or if you haven't, or you're pre-empting, your 2021 because you've sold a lot of real estates, I have many people again, doing a lot of consulting, which we do a lot of time at this time of the year. But during this time of the year, we don't have quite so many people that have sold multiple pieces of property, sometimes it's their primary home, sometimes some of their rental homes, which means you have recaptured depreciation along with the sale of the capital gains on those properties.
Dr. Friday 23:21
And making sure you're making proper estimated payments is very, very important because the last thing you want to do is owe 70,000, and oops, here's another 15,000 or whatever and penalties and interest from not paying it right or making sure that your quarters are done properly. So you do want to follow through with that to make sure because just because you either have to pay 110% in for equal quarters or through your paycheck or whatever or you have to go ahead and you have to pay the estimates when the time comes into this situation so that way you have the ability to make sure you have everything happening.
Dr. Friday 24:00
Can we take a break real quick and then you get that phone call. That way we can be ready to take them? We're gonna take a quick break. You can reach us here live-in-studio at 615-737-9986. We'll be right back.
Dr. Friday 24:24
All righty. We are back live here in the studio if you want to join the show you can at 615-737-9986 taking your calls.
Dr. Friday 24:38
There is a lot of breaks for businesses with vehicles under the tax laws right now then the annualized depreciation cap for passenger vehicles went up a bit in 2021. If bonus depreciation is claimed the first year ceiling is 182 and then it goes from there on to new vehicles. If it's a used vehicle, it will be reduced by that dollar amounts up to the maximum value. This is the one part that I think a lot of people, I can't tell you how many people say, "Can I buy a car from my business" Let's talk a little bit about what kind of business I mean.
Dr. Friday 25:12
So if you're a doctor, and you go from home to your place of work, is there a car required? I mean, you're not going out and seeing the patients you're not driving to, to do something. So the likeliness of you needing to own a car in the name of that business is going to be very difficult to justify. It's not that you can't have but you still get miles for the business miles that you use on your personal vehicle, if you're self-employed. But if you are looking just to get a new car and put it in the name of the business, I think you have to be a bit savvier.
Dr. Friday 25:48
Now if you're a construction worker, and you own a big 3500 Ram pickup truck. And you also have a second vehicle that you drive a sedan, a Jeep, whatever it is that you drive for the family. And that way, then you have another car available, or maybe your wife has a car and this is what you have, that truck could be considered a section 179 fully depreciated asset.
Dr. Friday 26:16
But again, keep in mind first you have to have an SUV and a must-have a gross weight over 6000 pounds. Now I know my Hummer and I know my 3500 bolts are over that I don't believe my suburban is. And I know that a standard F-150 I don't believe is so you need to make sure if you're looking to do what's called accelerated depreciation on a work truck. It needs to be a truck. Now, obviously semis and dump trucks and all of those would, without a question fall into those.
Dr. Friday 26:16
Also, 100% of the cost of a big pickup truck can be expensed. When expensing your business assets, you can also do an exceeded taxable amount for the business bonus depreciation does not have to have the same limit. What they're basically saying under that is that even if it's not a 6000 pound, if it is totally 100%, a workpiece of equipment, it can be accelerated in the first year that it was in operation.
Dr. Friday 27:10
So here's another catch. Let's say you go down and you buy a truck because a lot of people are thinking, "Oh, I'm gonna go buy a piece of equipment, and I do it on December 31." Tax Law says it has to be put into service. So the question is, did it really go into service on December 31? Or was it truly not in service until the first week in January? That's when you would have to be able to document if you were ever audited. These are the kinds of questions they're going to bring up because they know that you rushed out and brought that call at the last minute to do something with that call is nothing wrong.
Dr. Friday 27:45
But if you're pre-empting, the concept, maybe you should be getting it several months or at least weeks before the end of the year. So that you can say you did have an in-service prior to you know, New Year's Eve happenings. So that is something you want to take into account. But section 179 is still on the books a very nice one, I do like that one and have that.
Dr. Friday 28:05
Employers who claim the Work Opportunity Tax Credit. This is for people that maybe have employees that live in, I think they call them empowerment zones. If I that the right term, I think basically, in areas where maybe high poverty and maybe you employ individuals. There is a credit out there that you could qualify for. It's a form 8850 I think I have to say I've become more knowledgeable of the 7200, the 8850. And if you haven't gotten the employee retention credits, and you still need help with that, if you've had a number of employees, even if you've gotten PPP, you can contact our firm if we do have an associate that is handling that now.
Dr. Friday 28:49
So if you have a business, and maybe you haven't contacted or don't know exactly what that is, we'd be more than glad to review the 7200 or the employee retention credit. If you kept people working through the entire time of COVID. Even if you had to close down based on government mandates, that would be something that we need to look at. And there is some very good up to I think something like 15 or $30,000 per employee that you can get on this credit.
Dr. Friday 29:18
Now there is a really straightforward calculation, but it is not as simple as you like. So if you've tried to do it yourself, if you need some assistance, as I said, we have an associate that's working now in our office with us so that we can actually make sure that those are handled correctly. And they basically have to be filed, I believe by the end of our middle of November. So if you have something like that, and you think you haven't taken full credit if you work in the payroll department of a company. Now some major payroll companies may have already approached but if you know, most of us middle, lower, smaller companies don't have someone that does that.
Dr. Friday 29:53
And so if you need something, give us a holler at the office and we'll be more than glad to help you with that in the same thing with this Tax Credit with a Work Opportunity Tax Credit. Again, that is very straightforward in the high poverty and unemployment areas, I can honestly say I've never actually personally filed one of those. But if you happen to have a business that does work in that kind of area, or you employ individuals in that area, that would be definitely something you should be looking into. Because it's another way of helping your business grow and keep it that way.
Dr. Friday 30:24
If you want to join the show, you can at 615-737-9986, taking your calls talking about my favorite subject, guys, taxes. We already know the deadline for 1065 and 1120s and your estimated tax payments are next Wednesday on 9/15. So you want to make sure you've bought those planned. The last thing we want to do is be late.
Dr. Friday 30:53
Here's something that many of you or some of you, Tennessee didn't get hit as hard as some people that live in states with actual income tax. Because there's a big debate right now on raising the $10,000 cap for the salt deduction, that is where you have to state property taxes, state taxes, sales tax, and car taxes in some states all fall under this. And right now it's at $10,000. So that is difficult when you live in New Jersey or you live in some other states, even Kentucky, and you already paid, you know, $12,000 in state income, and then you have your property taxes, that's another 6000, you got 18.
Dr. Friday 31:37
And you're only allowed to take 10 of that right now in the current law. So they're trying to push to soften or repeal the limit taken on that big step moving forward. Many of them are wanting to appeal it and maybe go up to $15,000. And then only for people with an income of $400,000 or less, I'm going to tell you there is so much means-testing happening with the tax code. Nowadays, if you make 150,000, if you make as a married couple, or you make 250,000, then there's another penalty and you making now they're talking about if you make 400,000 or less, many people have heard about one of them, they're talking about which is moving the capital gains tax to 40%. That, again, is the individuals they're talking about.
Dr. Friday 32:22
Now, initially, I've heard it was supposed to be people making a million dollars or more, they're going to hit 40%. I did just hear something recently, on another show, I was listening, and they were talking about 400,000 or more. So wonder if that's something they knew or something they've heard coming through the grapevine. Again, these are all just conversations, most of the time, we're trying to figure out what somebody else is trying to say. But they are usually having more of an effect. There are certain numbers or earnings.
Dr. Friday 32:55
And I mean, to me, if you're telling someone, okay, you have to make less than this dollar amount, or you're going to lose certain benefits. It doesn't give the incentive for people to want to go and be the best they can be earned as much as they can. I mean, you know, so why are we penalizing higher-income earners, because somehow that is is a burden to other individuals, you know, the tax burden right now, on the super-rich, I know a lot of people will say that you know, it's lower than other people's, but that's not true.
Dr. Friday 33:24
Try to figure out, you know, you make a million dollars, and you're spending, you know, 38% of that to Uncle Sam, where you make $100,000, and you're sending 12% of that to Uncle Sam, I wouldn't say that that's a fair assessment. So anyway, if you are working on taxes, it is that time of the year, you only have about 30 days to finish up your personal 2020 tax return, and goodness gracious, then we'll be getting ready to look at 2021. And move on from there.
Dr. Friday 33:52
As far as any of the new tax rules and tax things that are coming about. We have had the American Rescue Plan, we've had the consolidated appropriation we've had the secured act, all of those have passed in the last year and a half. And so we need to, you know, really understand how is that going to affect us? What do we really need to know because each and every one of our taxes is slightly different? Some of us do different things with different ways of earning money being self-employed or being an employee.
Dr. Friday 34:20
Sometimes we have a wife or husband that's self-employed, and the other one is an employee. And you have children and you have children over the age of five, you have children over the age of 17. And you have everything between there you have kids in college, and all these have different effects on you. So the question is, how is it affecting you? What do you need to understand? And so that's what I'm trying to break down all of these different things and just trying to get you to think before you go and do something because sometimes if you can know what the tax situation is before you make decisions, we can save you tax dollars.
Dr. Friday 34:54
If you go out and do something and then come back and say "Hey, this is what I've done." Now, I'm just really telling knew what you owe in taxes, there is really no conversation about how can I defer it? How can I do this? I mean, sure, there may be a little wiggle room, maybe you've got a 401k or an IRA. But there could have been a way of saving a lot more.
Dr. Friday 35:12
So make sure if it's not whoever's your tax base it makes the time to have those conversations. And most of my tax people, we actually even when we get ready to do their taxes in February, March, and April, while they're in with their tax, we always try to have that conversation, "Hey, anything new this year? Anything you're planning to do? Do you want to do a conversion? Are you doing something? Are you going to sell something?"
Dr. Friday 35:36
Because then we can get a head start on what we think will happen. "Hey, maybe if I'll sell this for this dollar amount, how much am I looking at taxes?" And sometimes there's a window, right? So if you sell it for less than this, you're going to pay, you know, 15%, if you pay it over this, you're looking at 18.8, or even 24% or 23.8%. So capital gains rates, ordinary income tax rates, all of these things are out there, we just need to find out what's going to be the best way to make it work.
Dr. Friday 36:06
All right, we're gonna get ready to take our last break. So if you want to join the show, now will be the time to pick up that phone. Lavidious will love to answer your phone call and get you on the air. The phone number is 615-737-9986. And we'll be right back.
Dr. Friday 36:33
All right, we are back final segment. So if you've bought a call, now's the time to do it at 615-737-9986. And let's hit Susan is from Franklin. My old hometown. Hey, Susan. What can I do for you, sweetie?
Okay, so my husband has part ownership in an LLC with 30% ownership. The accounting firm is in another state with 70% owner. And they have not sent us the K1 I had to file an extension. We've been pleading and begging for it. And we still have not received it.
Dr. Friday 37:16
Well, they have to have it filed by 9/15, Susan, so by next Wednesday, they have to file that return. So my answer would be is probably over this next week, you should be getting a copy of it.
Okay, so there's no way they can do another extension.
Dr. Friday 37:35
No more extensions. That's what they have to do, or they're paying a late fee.
Perfect. Thank you so much.
Dr. Friday 37:41
No problem. Thank you, I appreciate the phone call. Yeah. All righty.
Dr. Friday 37:45
And so let's see here. So, I got an email. So it was asking me about the hall income tax, which many people did and did not know, Tennessee does have an income tax not based on income was based on interest in dividends. It came back it was enacted in 1929. And here's the wonderful news. As of December 31, 2020, we no longer have a hall income tax. So 2021 will be the first year during my lifetime that we will not have to file the hall income tax.
Dr. Friday 38:20
So for many of you that have been filing or having to pay, I know I covered this a lot with my clients. But 2020 was our last year. So 2021 taxes. This year, there will be no state hall income tax, which is actually wonderful, because I've had many clients and trust where we've been paying some pretty good dollar amounts on that. So there'll be a few more dollars in our pocket for that case, whichever makes it work best for us.
Dr. Friday 38:48
But that way we have the ability to put that money to better use. So hopefully you haven't been making any kind of quarterlies paying any kind of estimates. Because they're basically saying don't file anything after December 31, 2020. Unless you are filing for that tax year.
Dr. Friday 39:06
All right, let's hit Alan in the Boro. Alan in the Boro. Hello, Alan.
Hey Dr. Friday. Good afternoon. Nice sunny day out and not a drop or cloud at all. Well hey. Unfortunately, my grandmother passed away up in Indiana. She had 88 acres of property where her kids have split that up. And I was willed about five acres of that 88 acres. So it's around, I don't know $18,000-$20,000 I might be getting from that property. Would I owe any sort of tax being in Tennessee versus Indiana or would I owe Indiana tax?
Dr. Friday 39:52
Not likely. Funny, my family's from Indiana originally too, my parents. Anyways, no because you would qualify for the step. up in basis. So in theory, whatever the property was worth, and whatever you receive, assuming grandma passed away within, you know, the value is within few months of her passing.
Dr. Friday 40:09
So let's say it was worth 18,000 and you get 18,000, there are no capital gains, you would report it, just so they have that basis because it's not reported anywhere. But you would file an Indiana non-resident as well, just so they have you on the books and having it removed. But it should be no tax due on either those, that, or state.
Okay, now, would there be any sort of, I guess, maybe a gifting tax at all, because what happened before we actually not closed yet, but she was in a nursing home. So they put it in some sort of a protective thing as far as like a Medicare, like nursing.
Dr. Friday 40:49
So they will need to get I mean, I'm assuming whoever's handling the estate has gotten a Medicare waiver, that has to be obtained before they can do any kind of distribution. But once that was done, and they are able to sell the property, there would be nothing from your standpoint, that all has to be done before the property could even be sold.
Dr. Friday 41:10
Or there's a value that I mean, either way, the Medicare has come back and said, "Hey, the estate owes us $50,000. So everyone has to pitch in so much per acre to pay that off." But either way, it looks that would become a medical expense for the estate, theoretically.
Okay, perfect. Well, thank you very much. I love your show. I listen to it every week.
Dr. Friday 41:33
Well, thank you for listening. I truly appreciate it, guys. All of you guys. Thanks, Alan. Appreciate you.
Dr. Friday 41:39
All right, let's see here. So I covered the whole income tax. And I do appreciate all of you guys listening, we're going on a little over 11 years doing this radio show. And so that was, it's always been a pretty big shock to me that after all this time that you guys are all still listening to someone talking about taxes. But it is truly appreciated.
Dr. Friday 42:01
I also wanted to take just a couple of minutes in the end here and thank all of the people, we all know, this is the 20th anniversary of 9/11. I don't think you can go anywhere and not see. But living in the south, I have to say not being born and raised here. But living here for the last 20 years. The spirit of this country definitely comes through and we have so many people that have served this country. I mean, a lot of my clients have done their service to this country.
Dr. Friday 42:29
And I guess I just want to thank all of you. I was born American raised Australian, but you know, the rights that we all have the gift of being from America and living in this great country. It is something that you guys all did for us. All of you that have taken up arms and protected this country, it's been a big thank you.
Dr. Friday 42:52
And I know it's not always felt that way, living here, but definitely, from my heart to all of you guys at least appreciate all the police officers, you know, firemen, all them and especially the people that have served in the militaries, all branches. Totally appreciate you guys and what you sacrifice for all of us.
Dr. Friday 43:12
So that being said, because I get a little teary-eyed talking about it, I appreciate you. And so if you are working, or you need help doing something on taxes, as far as you know, getting them prepared, or maybe you're not too sure where to start, maybe you haven't filed taxes in a number of years, which under normal circumstance may not be such a big deal. But with the government giving out already three stimulus checks, you may have left money on the table, and the first one might have gone to back child support, maybe.
Dr. Friday 43:45
I've seen a lot of people that said they never even got that I mean, the back child support never even got the credit. So you know, it may be something you think about, "Hey, maybe I need to file the last six years because that's pretty much what the government looks at."
Dr. Friday 43:57
And then we will or may have to go back further to resolve other tax issues. But it's a place to start. And we usually can help people get that information. All we need is a power of attorney and the ability to pull transcripts for you and or your wife if you were married for some of those years. And you're now divorced. We don't have to file for that other person.
Dr. Friday 44:19
But we do need to make sure we have all the proper information so that we can get everything filed to the best of our ability. Get caught up and be so much nicer if you can live every day without having the government in your back pocket because they can be the most irritating individuals, I guess you would say or business or whatever you want to say that can do it.
Dr. Friday 44:39
So there are ways to become offering compromises. I know you guys have heard but one of the reasons I like my offer and compromise is because I'm local, which means that if you guys need someone you need to sit down you can talk to us you're not doing it over the phone, you're not mailing documents.
Dr. Friday 44:53
Sure there may be times your fax or email or send me something but you have someone here in town that you can talk to about your position. Is it an offer and compromise? Maybe you should be talking to a bankruptcy attorney, maybe you need to be doing non-collectible. Maybe it's a payment plan and sometimes you know what you think, "Oh I've only paid 10 cents on the dollar." It doesn't work for every single person. I'm just letting you know it doesn't happen.
Dr. Friday 45:17
So if you need help getting yourself back online or getting your taxes up to date so you know where you stand, give our office a call. That number would be 615-737-9986. My office is in Brentwood but you can find me online at drfriday.com.
Dr. Friday 45:45
And the easiest or probably the fastest way to get me a lot of times is either through calls or texting the same phone number 615-367-0819. You can also text that number so that way you can get it or email email@example.com. That way you can also get to me so whatever is going to make. And just think about what you can do to get yourself organized.
Dr. Friday 46:18
And if you need a tax appointment or just you know just someone to review your tax information and make sure that 2021 is going to be a better year. give our office a call again at 615-367-0819.
Dr. Friday 46:32
I hope you guys have an awesome Saturday. The weather is totally perfect. And as I always love to say, call you later.