A: Not automatically. Age alone does not remove capital gains, though primary-home exclusions and lower-income capital-gain rates may help.

A: No. It is a deduction that can reduce taxable income, not a dollar-for-dollar refundable payment.

A: The gain can be taxed as capital gains, and prior depreciation may be recaptured at ordinary tax rates.

Announcer

00:00

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-WW-FC. That’s 737-9986. So here’s your host, financial counselor and tax consultant, Dr. Friday.

Dr. Friday

00:29

It’s an absolutely gorgeous Saturday out there. My girl is outside making sure that no one sneaks up on the property. Apparently, you’ll hear in the background. If you want to join the show, you can at 615. 737-9986, 615-737-9986 is the number here in the studio. We talk about taxes. I am an enrolled agent licensed by the Internal Revenue Service to do taxes and representation. We have seen that a lot of the one big beautiful bill has helped out a lot of my tax people. Everyone will have their own. opinions on that, I suppose. Most people, if you’re in the the middle to low income, you will see benefits of the no tax on tips the uh tax uh extra tax or the refund on overtime as well as if you’re 65 and older getting that six thousand dollars And, you know, I mean again, some people will get more benefits. A lot of people still confused on how much of the overtime they’re able to take. Again, this is just the portion that is overtime. So if you make $10 an hour and overtime is $15, you’re only taking that $5 of overtime is the portion of overtime you’re able to deduct, but it’s still a good uh portion and it does work very well if you’re not sure uh how much you do need to either take a look at your final paycheck stub and or you need to contact your employer so they can make sure that whatever information you’re putting On your tax return is correct. I would not suggest I have um seeing a couple interesting things on the internet And I’m gonna be quite honest with you, I do not suggest guessing. I do not just say, oh, put whatever number you want, the IRS won’t know. You know Keep in mind the IRS has basically three years to go back and audit. They will be getting this information from employers. And if they do find it, guess what? You are responsible for all the information and even the information that a a tax preparer, let’s use that term instead of an enrolled agent because we don’t, but someone just throwing numbers on a return. So be careful. That will possibly or most likely come back and bite you. Okay. Looks like we’ve got Wayne in Jolton Um, this is Dr. Friday Show. Can I get you online?

Caller

02:46

I’m here.

Dr. Friday

02:48

Hello, sweetie.

Caller

02:50

Hello. Thank you for taking my call.

Dr. Friday

02:52

Sure.

Caller

02:53

I have a Sumner County property, maybe a capital gains question. My brother sold some property for $80,000. And will we have to pay capital gains on that?

Dr. Friday

03:10

Well is your does your brother pass away after he sold the property?

Caller

03:14

No, no, he’s he’s still very much alive. Okay, okay.

Dr. Friday

03:17

I didn’t mean to kill him off that fast. Um anyways, um it just depends on what his original basis is then so if he purchased the property for 80 and he sold it for 80 there’d be zero but if he purchased it for 40 000 let’s say held it for a number of years and now he got 80 000 he would pay tax on the difference or on 40 000 like that example Okay, this was inherited and given to the Okay, so does he when he inherited there would have been a basis or there should have been a basis established. So at the time of that person that passed away, within 30 days of their passing, when you to know what was that property worth if you don’t have any way of going back to appraisal you can usually look at property taxes that’s not always the best number but it is at least a viable number

Caller

04:04

So the property So would they have would he have paid taxes on that at the time he inherited it?

Dr. Friday

04:09

He wouldn’t have to. No. What he would have gotten is let’s say let’s just say um he passed the whoever died passed away a year ago. The property at the time of that passing was Worth $80,000. A year later, your brother sells it for $80,000. It would be zero tax. So what was the property? He needs to find out at the time of the property with whoever he received it from passed away. What was the value at that time? Oh okay. And then the difference between that and what he sold it for will be capital gains, if there is a difference.

Caller

04:39

And that’ll be paid to the IRS, right?

Dr. Friday

04:41

Yes, sir. And that will report on a schedule D on his personal return.

Caller

04:46

I’ve heard you plenty of times. Thank you for talking to me.

Dr. Friday

04:48

Hey, no problem. Thank you for calling. Okay, that was a good question. And um Go ahead, hang up. Um and I will say that is something that is sometimes confusing on when we inherit. And uh I I can’t put out enough. The best thing to do if if for some reason um it’s It’s a bad situation, but if some reason you have now inherited some property, or maybe you inherited it years ago, the best thing you could do is to get either a real estate agent, an appraisal company But you need to know what that basis is because otherwise the IRS is going to say your basis is zero. You didn’t purchase it, so you have no purchase documents. You inherited. What was the value of the property at the time? Time of inheritance. That’s what we need to know. Then it’s you know, many times I mean I have people claim losses because they’re not able to sell it for what it was worth with the time. Most of the time and tonight to see though we’re fortunate that our property doesn’t usually go down. It has a nice steady uphill um grade, at least at this point. But either way, you need to know and then if this property was not in the state of Tennessee, let’s say you sold you inherited a house in in Alabama, Kentucky, um they have state income tax. So you would also have to file a tax return there if there was a capital gains. So again in Tennessee, we do not, and just because you live in Tennessee, if you sell something in another state, there is normally a capital gains tax or a tax due at the time. of the sale. Inheritance-wise, most of the time we don’t pay anything, but at that time you will pay something and it will be time to have to do what you need to do, which is file taxes on it. So hopefully again, if you’re sitting on something You know, now before you decide to put it on the market would be a good time. So you’re not having to run around and try to figure it out after you’ve already sold it. And real estate agent um agents are really good. I have a number of them are friends, and especially if they’ve just sold the property, they can usually pull comps for when the person had passed away. So if you’ve just recently sold that property, you might be able to go back to the real estate agent, have them pull comps in that area. at the same time that the person passed away. So now you have something in writing that would say this is what it would have sold for back at the time that person would have sold at before they died. And then this is what you sold it for. You’ve got documentation to justify the numbers on your Tax return. All right. So let’s continue forward, making sure that we have everything we need to move forward on our life and trying to get to all of my emails. have been a busy day. But anyway, so if you um you’re working on your taxes, we are totally working on our taxes here. I will tell you uh at this point our calendar calendar is full to be honest, which is a blessing to have. Not always great when you’re always wanting to meet and help new people. If you’re a returning client, we usually have a space for you, but new clients, we won’t be able to do anything but file an extension and then help you out. But um either way, um if we can’t help you, we can try to refer somebody if we know of someone that um that’s available that hasn’t already has their calendar full. But if you have a tax question, maybe you’re doing your own taxes or maybe like the gentleman that just called, maybe someone you know has asked you a question and you’re like, I don’t really know how to handle this. Maybe I can help out. If nothing else, I can send you in the right direction. So you can find out what would be the best way. Because what you don’t want is the IRS changing your tax return. It does happen often actually. So you want to make sure that if there is a change, we got a letter from one of my clients. We amended a tax return. return in 2025 and the IRS sent back saying we need more documentation on that amendment, so give us more papers to justify why you’re changing the return this happens quite often and a lot of times people are like well i filed the tax return and they haven’t adjusted my things you need to make sure you’re not ignoring irs letters or if you’ve gotten a letter and you’re not sure how to respond so you don’t respond sometimes that can be a problem as well so just make sure that you’re dealing with your issues and moving forward with whatever you need need to move forward with. If you um do have a tax question, you can join us here, 615-737-9986-615-737 9986 taking your calls. As uh people that may not have heard this show before, my name is Dr. Friday. Friday being my first name not my last name um and i have a phd in economics there’s the doctor part but i do taxes i’m an enrolled agent that’s the important part of all of this because as an enrolled agent i can represent you in front of the Internal Revenue Service. I can help you file your taxes if you’ve received love letters, maybe you haven’t filed taxes in a number of years. Whatever might come with that, that’s where you you’re going to be able to help you make sure you can stay in compliance. Because remember, the IRS is a collection agency, a very powerful collection agency. But that is what their job is. So they basically are going to go out and try to collect what you owe them, be that through the the taking of your payroll, cleaning out your bank accounts, seizing properties. They have the authority to do all of that, but not just Today I’m going to seize your property. There has to be notification, communication. So keeping that communication open is the way you’re not going to have as much happen. But also staying in compliance Maybe you made a mistake back in 2015 or 2016, but you’ve always filed your taxes. You’re less likely to have as much really angry situation unless you basically have the ability to pay, but you’re not paying. And that’s sometimes an interpretation. Don’t get me wrong. I know that. I’ve gone through people’s paperwork and they’re like, I can’t afford to pay anything to the IRS, but yet They could because the IRSA doesn’t look at you paying off your credit cards every month being a way of taking care of credit card company isn’t something the IRS considers something you have to pay in full. Your child being in a private school. I had one that had three kids in private school owed the IRS, but the private school, the IRS doesn’t that’s a that’s a something, a luxury that you can put your child into. If you’re using IRS dollars to keep your child in private school, the IRS is going to look very badly on that Um, you know, if you have money stored in equity in your home, but yet you don’t want to take it out and you have the ability to do that, some people don’t. But these are the kinds of things you need to answer questions of you always hear these places say oh we can sell it for 10 cents on the dollar really not everyone can do that in fact a large number of my clients have to make make an actual deal. And we did one 320,000. We just closed. It was 116,000. He was very happy. We were able to resolve the issue, get it taken off. And that way he’s able to go back and move forward and rebuild his finances without the IRS being on his back. But it wasn’t going to be ten cents on the dollar. He had too much um invested in other ways. So you have to figure out what’s going to work, but you also have to deal with the IRS. You can’t just ignore them. They will find a way of being recognized in your life. All right, we’re going to take our first break. If you want to join the show afterwards, you can. 615-737-9986 615-737-9986. We’ll be right back with the Doctor Friday show. Alrighty, we are back here live in studio. You can join us if you want at 6 Six one five seven three seven nine nine eight six six one five seven three seven nine nine eight six taking names and uh taking numbers I don’t know what I’m taking. I’m obviously a little confused. Um, but if you want to join the show, you can. If you ask tax questions or if you’ve got something that you’ve been looking at, you’re trying to figure out which way you need to do it. Um, and deal with the situation. I had an email that came through during the break and it was from Kate and she was asking, she says she has three properties that she inherited and And she’s not had them yet transferred actually into her name because probate hasn’t happened. She wanted to know if she could claim the property taxes on them. And as for anyone that’s listening, if you have multiple properties You can’t always take the interest because if it’s not your primary home or secondary, you cannot take the interest. But property tax on any properties that you have can be added under the salt tax. So your home primary one plus any others And she’s just asking, can she deduct those since they’re not in her name? If she has proof that they are actually her properties just waiting for probate. and that they will be in her name and she paid from her own pocket, not from uh an estate bank account or something, I think there would be enough room to justify that those inherited properties would be able to be deducted from her her pocket because she paid them out of her pocket. Preferably you do not put any tax or property on your tax return that you do not own or or you’re not buying. I mean sometimes the bank helps own all those things as well but that’s that would be the the tricky part of that cost conversation. Either way, if you have a question, um again, 615-737-9986. Okay, so I was working on some taxes recently And I noticed something when I review. This is a first-time client to me. And so I want to make sure when you guys go and have your taxes prepared. It it’d be like me going to an auto shop and saying the car is not working, and then when I get there the car is working. I would not understand, to be quite honest, I wouldn’t know what they did to really make the call work. They might tell me, but I wouldn’t know. So that’s sometimes how taxes are for some people, right? So you go in, you hand them the the documents, the tax returns done, and you just assume That’s what you just paid for that this person knows their taxes. But I can say to you, take a quick look. Ask questions as Like, hey, did you get my rental property? Did you get my social security? And that they should be able to just say, yes, it’s on this line here. You can see the schedule. You know, did you deduct uh my property taxes? And then they’ll say, no, you know, you didn’t qualify, or yes, here it is on the Schedule A. Feel free if if you’re feeling that you can’t ask those questions, you’re at the wrong place. These are taxes that you’re signing off on saying they are done to the best of your ability or the best of the ability you you hired someone to do. Um and what I have found is that several of these uh people doing taxes um aren’t putting things on the right lines. I mean, I have one where this person had been going to this person for three years. They have a rental property and somehow the it the income from that rental property without reporting total income and all the expenses, just the net effect was ending up under other income Um, that means the depreciation wasn’t coming through. That means there just was no paper trail, you know. I mean, just said other income. It didn’t even say rental as other income, it just unidentified other income. You know, uh same thing when I had one company where they they did a lot of personal loans and they had actual mortgages, right? And they weren’t reporting this as interest On their tax return, even though they were providing the information to the preparer that they were dealing. So I just want to make sure when you go into these, I know that you’re going to say, hey, I’m paying this. person to do their job. And yes, you are. But keep in mind that the IRS is also looking at you as the final person. Your name’s on that, your social security number, you are the final person So and and mistakes might be made. I mean between any person. I’m not, you know, no one’s perfect. But you need to at least ask. Hey, did you pick up this? Did you didn’t really ask me, but I had this And they may turn around and just say, you know, that didn’t really apply this year. That’s not part of the current tax code. You can’t deduct this. Who cares? Those are questions. Questions should be answered. You should feel comfortable with the person that you’re dealing with to ask those questions, to review that information. That’s all I’m saying. If you’re not if you’re going in someplace or you know you know you’re dropping off your tax forms, again, nothing wrong, but how long does it take to have a basic conversation and say, hey, can you confirm these information is all on here Because I want to make sure when I’m signing that this information is there for me to sign off on, you know? Um, so you have to make sure you’re the person that is asking those questions and that you’re doing it. I have another one that just came in and she wanted to know if she could write off the miles to going to her doctor. And she had heard that there’s medical miles. And the answer is yes. There are what’s called medical miles. There’s also, if you work for a charity, there are charitable miles. But keep in mind you also have to deal with the fact that you have to itemize to take either of those so right now that’s a little hard to do it’s what almost 16 000 for a single person 31 for um person underage, a married couple underage 65, I think, and like 34 if you’re over 65. So it’s that’s a lot of debt. Single people probably have the easiest because if you have a decent sized mortgage, you might be able to itemize um some of the charitable miles Medical miles, you have to have more than 7. 5% of your income. So $7,500 if you make $100,000. Anything above that would be a tax deduction. So again, it really comes down to income and how hard or easy it will be for you to be able to meet those criteria when you’re doing it. But Always turn that information in because you never know if it’s something that’s going to happen. All right, let’s hit Steve. See what I can do with Steve. Hey Steve, what’s happening?

Caller

18:49

Yes ma’am, thank you for taking my call. I wanna ask the question about the big beautiful bill and the addition to the standard deduction

Dr. Friday

18:59

Yes sir.

Caller

19:00

Uh over sixty-five, right?

Dr. Friday

19:02

Yes, sir.

Caller

19:04

But it only adds to your standard deductions, correct?

Dr. Friday

19:08

No So if you itemize or take a standard deduction, you still qualify if your income limit is within it for the six thousand dollars per person and this is only for as Steve was saying for people that are age 65 and older this doesn’t have anything to do with itemization It’s actually two lines below that.

Caller

19:31

You’re not gonna I guess I’m trying to ask, you’re not gonna wind up with that money, right

Dr. Friday

19:36

You’re not gonna I mean it’s a deduction, so you’re not gonna get a refund of six thousand dollars. It will reduce your income by six thousand dollars.

Caller

19:44

Yes, ma’am, that’s exactly what I thought. I just want to make sure about that.

Dr. Friday

19:49

I like that, yes. I had two people call this week at the office and that’s the first thing. I don’t I don’t need to file, but I want to file so I can get the six thousand dollars. So there’s obviously a lot of misconception. So thank you, Steve, for calling

Caller

20:02

There is must dis uh uh must yeah. Yeah.

Dr. Friday

20:11

Hey thanks for calling. And uh it yeah. And to reiterate really quickly what Steve and I were talking about for people that might be listening is um simply you can hang up on Steve uh is that the one big beautiful bill one way for them to help people over sixty five pay tax on social security now some people at sixty five are not taking social Social Security yet. But the theory is, is that the majority will be on or soon to take Social Security is to be able to give them a deduction of $6,000. So if you’re in the 20% tax bracket, that could save you. about twelve hundred dollars in taxes. But this is only if you owe taxes. I had two people this last week week they called they’re very confused because they wanted to go ahead and file taxes even though they haven’t had to file for years because all they had was social security And so Social Security itself is not taxable, therefore they have a zero tax return, but they wanted to get the refund of that money. That money is not refundable. Zero percentage of it is refundable. It’s only good for individuals that actually have to pay taxes. And it would help reduce your tax bill. And it does work. I have a number of people that if their income, especially in retirement, are often the Really close, you know, 75,000 this year that’s 76. Maybe they made a little bit more in interest. So their tax bill is fairly consistent, and we’re seeing a thousand dollars, a two thousand dollar drop because of being well in the one with there’s two thousand there’s two of them so it was a twelve thousand dollar deduction but still that was helping did it cover all the tax that was on social security Security? No. But was it a nice, wonderful surprise? Absolutely. It is a wonderful thing. And most of my clients are just happy that they don’t have to pay as much as they usually do. So, you know, anytime you can save a few dollars, it is a win-win situation. But it’s not everybody’s not going to get it. If you’re a single person and you make $85,000, you’re not going to qualify for all six you might get $4,500, whatever. It’s going to means test out is what I call it. So $75,000 or less as a single person, you will get all $6,000. 150,000 or less, you will get 12 if you’re married, 12,000. And but if you make any more than that, they will slowly zero itself out. So just, you know, put that out there. But again, it is not a refundable, it is not going to be putting more money in your pocket. It is all going to be a way of reducing taxes. Period. Reducing taxes. Okay. Hopefully that helps. Uh, because it’s very frustrating when you think you’re not getting enough money, or if you think, oh my gosh, I’m gonna file because I want to get some more money, and then you find out it’s not refundable, then you get a bit upset So if you’ve got questions, you can join the show. We’re going to take our second break here, but he can at 615-737-9986 We’re taking your calls, talking about taxes, talking about IRS issues. Maybe you haven’t filed for a period of time. Maybe you’re looking at something on your tax return and you’re sitting there going oh my gosh why do I owe so much money usually I’ve had those calls and people are like you need to do my taxes because I did them myself and I owe all this money and I want you to file them keep in mind I’m not doing anything different than you would be doing unless you’re not sure how to do your taxes. If you’re not answering the questions properly, you’re not putting the forms in properly. Sure. Sometimes my number might be higher than what you have. Sometimes it’s lower. I had a nice one this other day. She was just doing an estimator that they have on the IRS website. and the said that she was going to owe like $8,000 and she only owed $800. So um it was a wonderful thing. But that was an estimator and probably didn’t have all the information that I did when I prepared the actual test tax return, but it made her happy anyways. All right, we’re gonna take a quick break. We’ll be right back with the Dr. Friday show. Alrighty, we are back here live in studio. I’m Dr. Friday, an enrolled agent licensed by the Internal Revenue Service to do taxes and representation. So if you have a question concerning taxation had someone that wanted to know his wife was uh working as a travel agent and wanted to know if he uh if if the trips they were taking would be able to be qualified as a tax deduction. And that’s an interesting question actually because I have a couple people that are part of a um travel club, I would like to refer to it. And the idea is you get people to help sell products and people to use it for their vacations and they do things on the side. Um but it’s not really any of them they don’t do as a full-time job. First, if you’re truly a travel agent, you need to be making sure that this is a full-time position, not just something you do on the side because you get some good discounts and you like to travel. And then I think you would have to be able to really document how many trips you have sold on those kinds of trips so that you can show that your experience of having this travel has made the trips a viable tax deduction. So let’s say you’re uh take a cruise on the Royal Caribbean and you you’re doing different ports of call, but you’ve never booked one of them of those you’ve never actually sold this package to somebody else um and you know and you’ve taken two or three or four different but yet you’ve never even booked booked a cruise or booked only one or two cruises yet you spent more in travel than you have in actually bookings. The IRS is not going to look at that as a necessary um tool. Now if you’re selling, you know, 50, 60, I don’t know what they call them, rooms on a cruise, every cruise, and you take a accrues. I’m assuming that would be necessary because you’re now selling something that you have a better uh knowledge on and that’s creating sales. Therefore it’s a necessary um part of your job. So again, it really does come down to um how much what how how necessary of that trip would be what did you walk away with what can that turn into dollars because the irs is not like your vacation has nothing to do with doing this kind of situation. It all has to do with how and what you’re going to generate in sales and how was that tied to whatever you did I know I had a client also walk in the office this the other day and said, well, you know, why can’t we, they have like four rental properties. Why can’t we buy ourselves a Mercedes and use that as a car for the rentals? Um and they they manage them themselves. So theoretically there is a management But how is the Mercedes a necessary expense to managing rental properties? It’s a lot like a guy that owns a hotel that goes buys a beautiful BMW um and they write the BMW off. How is how is that necessary to the hotel business? Now, if that person had to have a vehicle, and then keep in mind there are luxury deductions, so theoretically the IRS is saying A car maybe necessary because he owns five hotels and he has to drive it between them all. It’s a necessary expense. But is it a necessary expense to go and buy $175,000 Mercedes or whatever. There is rules. I know people will turn around all the time and they’ll say to me, Well, I brought over a six thousand pound car and I should be able to take a section 179, which right now, again, we were not at 100. But thank goodness for the one big beautiful bill, we’re back at 100%. So I want to take that $175,000 vehicle off as a necessary vehicle for my business. And again, what is your business? Why would you? I mean, it has been approved in court. Um, a couple of the real estate people have been able to prove because they have sold multi-million million dollar homes, their their relationship to that kind of um sale is vital for them to prove their success and people like to see that therefore they’ll use them that has been proven but it’s also been proven that somebody that owns as I used it earlier a hotel or a handful of rental properties. I don’t care if you own a hundred rental properties and you’re managing all of them, it would still be what’s the necessity of having a high-end vehicle? Especially if all of those rentals are in normal, ordinary neighborhoods. It’s not like you’re in the million-dollar club and you have to go in and out of um very nice subdivisions with multi-million dollars and your vehicle would be um something that might not uh sell something or be a part of but keep in mind What you drive, the IRS basically says it’s four tires, right? They don’t care that you have it. So you need to prove the necessity, especially if you’re not just using miles Miles you can justify, right? Because hey, if I have four rentals and I need to go to my rentals, I can go from my home. to the first rental and then f and I don’t have to show that as commuting in a rental situation because I drove out there specifically for a reason to go to that one and then if I had to go to Home Depot go back to that repair something and then come home. That is a legitimate tax deduction. I did something. Maybe I collected rent. Maybe I need to look at something to get a repair person out there. Those are, that’s my job as a manager of my own rental properties. That is allowed. And saving the receipt, making sure you document that receipt because the problem is Home Depot lowells. Um, if you order something online to replace something They need to know that that was for said rental, not for your personal home. And that’s not easy to prove unless you can show this is what the process was and and how you how you had to replace the light bulbs or the air filters or whatever it was. And and you know it’s it’s up to us as the taxpayer to document what we’re doing so we can do that. And while we’re on that subject and rentals, let’s also not forget that our lawn person our heating and air conditioning guys, our repair people, anything from roofing, unless they’re a corporation, which most businesses nowadays are LLCs, we need to 1099 them because rental properties are businesses. If someone does it at your own house, your own personal lawn guy. It’s not a business. Theoretically we’re not, I’m sure the IRS would love it, but theoretically we’re not responsible for 1099 them. But if we have a property that we’re renting out, that now makes it a business, that now makes it something that you have to 1099 those people. There are penalties up to $500 for each penal 1099 you do not issue. There is stuff that you need to to deal with is all I’m saying. So don’t just think that this is all easy. I know some of my people sometimes um I think get a little relaxed with it. And um You know, as long as the IRS isn’t looking, that sounds great. But if the IRS is looking, not so great, because then they disallow it. Now you’ve got profits that you didn’t have before, and that never makes anybody happy Let’s just be honest. It never does. It doesn’t make any of us happy. So if you want to join the show, you can. It’s 615-737-9986-615-737 9986 just saw an email about doing a 1031 exchange. I am an avid believer in 1031 exchanges as long as the profits on those justify the purpose. So meaning that if you have a property that you have $10,000 in because you’ve owned it for 40 years and now it’s worth um a hundred thousand dollars and that ninety thousand because of your income could be taxed at twenty-three percent, that might be a good time to consider what they call a ten thirty-one like kind exchange. Sometimes it’s It’s you know whatever the dollar, but if it’s only like a ten or fifteen thousand dollar difference, I’m not an avid believer, why not pay now and then not have to worry about it? But most people look at ten thirty-one exchanges, you’re talking at hundreds of thousands or even millions of dollars. And keep in mind, whatever you sell that property for, you now have to buy property for And so um it, you know, it is what it is. So you have to turn around and and make sure you do that. So if you have um you know, sold something for a million dollars and even though you may have had a mortgage for six hundred thousand on it, you still have to go buy another property for a million dollars to get it um out of you know to to qualify for a 1031 exchange it’s not based on your profit it’s based on the gross sale and you can always deal with someone on that question all right let’s hit Danny in Nashville see if I can help him out Hey Danny, thanks for calling.

Caller

33:15

Hi Doctor How are you? Thank you so much. Um the reason I w I have a capital gains question, I heard the first caller call about capital gains

Dr. Friday

33:24

Mm-hmm.

Caller

33:24

And uh we have a similar situation with my mother and father in law. They are elderly. Uh they bought a piece of property uh for Uh well I can give you the numbers for twenty thousand and they sold it for fifty thousand. Uh is but uh with them being seniors, does that matter? Uh do they get some kind of special consideration because of that

Dr. Friday

33:46

No, the only only kind of consideration anyone gets and age has no bearing would be if it was their primary home. But otherwise.

Caller

33:55

It was not their primary home. Yeah.

Dr. Friday

33:57

Yeah. Then they’re looking now again, there is a zero percent capital gains rate for long-term, I mean short term is ordinary income, but if it’s been held for over a year, and if their income is a married couple including the capital gains of in this scenario, let’s say thirty thousand dollars is all under a hundred thousand, they may still pay zero tax.

Caller

34:18

Okay.

Dr. Friday

34:18

Yeah, well so I don’t know their situation, but I’m just saying sometimes we get lucky on that element. But other than that, uh Um yeah, they’ll they’ll have to pay capital gains on the difference.

Caller

34:28

Yeah, well I don’t think they’ll even come close to that.

Dr. Friday

34:30

So that may be their saving grace. Exactly. I I’ve had it happen more than once, my friend. It’s always a nice little gift that keeps on giving.

Caller

34:38

Yeah, well I I certainly appreciate it. I listen to you often and I have met you a couple of times when you’ve helped me out with a couple of things. So I appreciate it. Thank you so much.

Dr. Friday

34:46

Thanks for calling Danny. I appreciate it very much. All right. You can uh Thanks, Danny. All right. If you want to join the show, we’re getting ready to take our last break, but you can join the show at 615-737-9986-615-737-9986. taking your call, talking about taxes, talking about maybe like this situation where you know somebody else that has maybe a tax question and not everyone’s um brave enough to call a radio show. So it takes a little bit of guts to do it. So if you have a question for someone else or a question you might think other people might be thinking about and you want to have An answer to it, feel free to give us a call again at 615-737-9986-615 737-9986. Again, I’m Dr. Friday. This is an I am an enrolled agent licensed by the Internal Revenue Service to do taxes. and representation. So if you’ve got questions dealing with that or maybe you just know someone that hasn’t filed taxes in a while and you need some help, we’ll be more than glad to help you out or leave lead you in the right direction to help you make sure that whatever you’re doing now, you can make sure it’s not going to cause problem later because the last thing you really want is Uncle Sam. to be a person that is going to be on your back all the time. All right, we’ll be right back with the Dr. Friday show. We are back here in studio. Let’s uh looks like we got a few people. Let’s go to Sue and Smyrna first.

Caller

36:13

Hello. Hi. I’m a senior citizen and um because of the Fairness Act I got a lump sum last year. Mm-hmm. And uh I had to pay eight hundred dollars taxes on it. But so I went in and I uh put down that I’d take out seven percent you know, for next year taxes or whatever. Are they gonna is has President Trump done the no tax on social security or should I just keep that seven percent or should I raise it

Dr. Friday

36:46

Well, I mean, at least keep the seven. The no tax on Social Security is is basically his way of the six thousand dollar that he gave you because you’re over the age of sixty-five, that’s how he’s helping with the tax You’re under sixty-five, then uh you won’t get it yet.

Caller

37:03

Yeah, I’m over sixty-five. Okay. Yeah, I got it this this year and that did help, but Yep

Dr. Friday

37:09

Sorry. Yep, but good question.

Caller

37:11

Oh yeah, I was thinking it wouldn’t tax it at all.

Dr. Friday

37:15

But we were all hoping, but that is not gonna probably pass uh to be quite honest. Just not gonna happen too many people of over sixty-five that help pay the tax bill.

Caller

37:26

Okay. Do you think seven percent will be good?

Dr. Friday

37:29

If that I mean if you again it really does depend on how much, but you sound like you were pretty close this year, so it sounds like the seven percent should be pretty close, but um you know it’s too hard to say on the radio unfortunately.

Caller

37:41

Right, right. Well yeah well I’ll just keep that I if I have to pay I have to pay. But yeah thank you for your help. I appreciate it.

Dr. Friday

37:48

Thank you Uh-huh. Let’s do Susan and Dixon. Goodbye. Susan? Uh how are you? I’m good

Caller

37:56

Quick question for you. Um I wasn’t I was wondering if someone’s lived in their primary residence for say twenty to thirty years and then they sell it, are there any tax benefit credits for I mean are Anything that saves you other than paying is a big difference?

Dr. Friday

38:10

Right. So the only advantage, I mean, anyone that lives in it five years or more has the two out of five year sale and it’s two hundred and fifty thousand per person, so A single person would get 250,000 exclusion and a married couple would get 500. Um that exclusion plus whatever you paid for it. So So let’s say you paid 200, you get 250, you could sell it for 450,000 and pay zero tax. Okay, good. Yeah, okay. Good. Thank you. Thanks very much. Uh-huh. How about Bob in Columbia?

Caller

38:45

Hi Dr. Freddie. My question is very quick. Uh Sure. Is that considered income to me as the homeowner?

Dr. Friday

38:56

No, thank goodness Yes. But no, that’s just all between family.

Caller

39:01

Okay. All right. That’s all an easy one.

Dr. Friday

39:03

That is an easy one. Thanks, Bob.

Caller

39:05

Yeah. Thank you.

Dr. Friday

39:06

All right. And that actually th that is a a good question. I have had that more than once. Because even when you have a rental and a lot of times people will let their children rent, there’s certain things like we can’t take losses on those kind of rent. rentals. It’s a little different when it’s family, family works together, achieves whatever they’re going to go after and do what they need to do. But other than that, you don’t have to worry. That’s just, you know You can give a gift to each person of eighteen thousand dollars or nineteen, I think it is now, uh, per a year. So all of that kind of washes out those kind of situations. It’s not a tax deduction for the child either. So um you know, that works out for for anyone. But those were great questions. I did want to say um if if you are a person sounds like um Uh Sue initially she was asking about um the tax on her social security. She’s actually thinking, because a lot of people do not take the choice to have taxes withheld on Social Security. But that can be a problem because I have people now that are getting, you know, $50, $50,000 a year in Social Security, up to 85% of that can be taxed. You’ve got $40,000 that doesn’t have any withholding. That’s going to eat up your entire pretty much 12% tax bracket if you’re single. So it is an important thing to think a little bit more about if you’re getting Social Security on top of a pension, on top of your RMD or your IR, um your IRA distributions, um, or maybe you still have a job and you you’re receiving your your social security, you know, you need to make sure you are thinking about the taxes that happen on social security because so often, you know, this the $6,000 per person um helps. It does save a few dollars, but it’s not going to pay your social security. Bill, most likely. At least we we did some uh calculating in our office this last week and did it with and without the six thousand and and how much the tax was on the Social Security based on their income brackets and it’s it’s not going to help that much but it does help it’s better than nothing so it’s better to put that 500 1000 1200 whatever it might have been that saved you versus what you would have had last year rolling into the this year. So um take the win for what it is, and most of us do, but it’s uh I I have not yet seen anything from Donald Trump other than what happened on the one big beautiful bill. He still talks about not wanting to pay tax on Social Security. I just not seeing anything that’s going through the Senate or the House that shows that that’s actually going to be be um a viable um concept but we can hope don’t think we should pay tax twice on anything and social security is definitely being double taxed when you are retired. So if you have a question or you need to have um you know some some sort of situation and uh you can always email us at friday at drfriday. com. I will tell you this time of the year Um our staff is doing their best to communicate, try to get back with you, try to update you on what you have. Um they will try to uh at least send you in the right direction if it’s a question that we can help you with but um this is our busiest season so a lot of times that’s also when you’re thinking about what’s going on in your taxes while I try to push throughout the year to be thinking about these things we do a lot of times in in um our tax meetings that we also prep for 2026. What what do we think is gonna happen? I might retire, I might sell a house, what would happen to my Irma if I sell a house? How long do I have to pay the higher uh Medicare tax? Cause a lot of people Um let’s say you you own a rental property and you sell it and you make a couple hundred thousand or you know whatever and now you’ve got the taxes, but you also will have if you’re receiving Medicare, you also have IRMA that’s going to be a problem. And how can you, if you can, avoid that kind of situation? And You know, to be quite honest, it’s not an easy thing to avoid. Yes, you can do 1031s, but then you really haven’t sold your real estate. You’ve really just changed one type of real estate for another um and that doesn’t make an easy transition so there are there are some reads and different things out there that is a possibility for you to be able to sell and do something with but um i’m not a financial planner let me put that out there i do taxes only taxes so if you’re looking for financial um advice financial planning advice you need to make Make sure you call someone that is an expert in that division. I am not that person. I am a tax person. So I can tell you what is going to be the best um option through the eyes of someone that’s looking to save taxes. But keep in mind, my my vision is usually one to five years. I’m not looking at retirement for you. I don’t know what you have coming down the line unless you’ve shared it. And then we might say, well, you know, hey, it’s a good time. Be honest with you, we have a number of people that are now over the age of 65 and we have that extra twelve hundred or twelve thousand dollar deduction And so we’re doing some small IRA conversions at zero or 12%, keeping them in that lower rate to make things happen. All right, we’ll see if we can get John on and off. Hey, John, what can I do for you?

Caller

44:23

Uh yes ma’am, I bought uh bought a property years uh years ago. It was a trailer in five acres.

Dr. Friday

44:28

Mm-hmm.

Caller

44:29

Lived in it, paid it off, sold it. So I rented it, decided to sell it and I just sold it th last year The bank said something by a gift equity tax because I’ve kinda sold it cheap ’cause it’s kinda rough shape. I made twenty five thousand off of it actually. Do I have to pay taxes?

Dr. Friday

44:47

Well I guess uh how long how long did you rent it?

Caller

44:54

Okay. Yeah.

Dr. Friday

44:55

So yes, so the difference between what you paid for it Um and what you sold it for, that would be taxed at capital gains. And then also since you had it as a rental property, you probably depreciated that trailer or you legally should have depreciated that trailer for those five years And so then you have to recapture depreciation, which is taxed at ordinary rates. Reason I don’t like depreciation. But we don’t have an option. That’s tax law. So just put it out there, but you would have both of those.

Caller

45:25

Well see the bank, of course the county appraised it for one fifteen. And that’s the reason that their gift equity tax was their down payment

Dr. Friday

45:34

Right. But you purchased it for how much?

Caller

45:36

Yeah.

Dr. Friday

45:37

Oh fifty. Okay. So the difference between the fifty and the one fifteen theoretically would be your capital gains Plus wouldn’t wouldn’t be much of a recapture. Now you may have done improvements on the trailer or something while you live there, so that’d be something you’ll have to look at. Unfortunately, we’re hitting the end of the clock here, John, but you might want to see if you did any major improvements that would have helped value the land for reason it’s sold for more. If you didn’t, then yeah, you’re just looking at some decent capital gains Sorry. Okay. Thank you, sir. All right. We’re at the end of the show here. If you want to join us or have a question or whatever, you can email Friday at Drfriday. com. Again, that’s Friday at drfriday. com. You can call us on Monday morning at 615 367-0819-615-367-0819. Hope you have an awesome Saturday. Love the show. Cop you later.

A: File an extension before the due date to avoid unnecessary penalties while you gather complete records.

A: The episode explains that employee wages are generally still taxable even when an organization receives grant funding.

A: Side income is typically reported on Schedule C, with income and eligible expenses documented carefully.

00:01

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 Doctor 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.

00:30

G’day, I’m Dr. Friday, and the doctor is in the house. We are talking today about my favorite subject, which of course is taxes, and it is tax season. It is the time that we’re all looking at our tax forms I know many of you are still waiting for your 1099 consolidated from places like Schwab or Edward Jones. We have many clients that are also on that same page, don’t sweat it, they will come out, all will be good.

00:57

Um but if you are a corporation or an LLC, a sub-s corporation I should say, or an LLC, remember your due date is around the corner, March 15th. And so we just want to make sure that you are not um, you know, waiting too long or if you if you’re waiting for something else to come in and you’re at the mercy of either another company that may be owned and you have to wait wait for their K1 to come into yours. Don’t forget to file your extension.

01:24

Better be safe than sorry. So if you’ve got questions though, you can join the show. 615-737-9986-615-737-9986. Taking your calls, talking about life. favorite subject and then we need to talk a little bit about a couple of the things I see happening in my firm and then if there’s other people that are uh tax experts that are listening, feel free to chime in.

01:52

But I’m seeing a large number of people that don’t have all of their overtime information. Many of them are requiring to have to go back and look at pay stubs. It’s kind of an interesting challenge for tax people like myself because I have found out at least if people work for like GM in some of them They don’t follow the federal overtime standards.

02:18

For example, if you work more than 30 hours in some cases, they get overtime. If they work more than 10 hours It’s overtime. They have the union that has negotiated their overtime schedule. And it isn’t exactly what the Fed. So therefore, it could look like they have more overtime hours than what we have um or what we’re actually allowed to show.

02:40

And then sometimes they have double time and and weekend times. So um you know, as a tax person, we have to go with what we can to the best of our ability uh understand. But it would be very helpful If the companies, now some like Kroger’s and them, even though the WTs don’t have on, they have sent separate letters with the amount for each each employee.

03:02

So that makes it so much easier, right? So again, if you’re just taking a number and you cannot take the total number off of a pay stub because again, that’s your overtime, including your prime rate So it would only be like a third of that or time and a half of uh of the number that you need to use. The IRS is going to get this information from the employer It’s going to happen. It may not be as fast as we’re providing taxes, but it is something that we’re being asked to provide.

03:30

And so the IRS is going to end up coming back and correcting your information if If you put it in incorrectly is my understanding. So make sure you understand exactly how that’s going to work. All right, let’s see if we got Val in Spring Hill, my town. Not the warmest Saturday in the world, but hey Val, what can I do for you? Hey Dr. Friday, I have a question.

03:51

I did my taxes recently and saw that twelve thousand dollar additional uh d standard deduction uh added to the standard deduction for those of us over sixty five. Yes. Is that just like a regular added to that? I mean is that worth Regardless of where the income comes from?

04:14

It is. It’s all based on um AGI. So if you had all 12,000, then I’m assuming your AGI was less than 150,000. for a married couple um or right around that number. And then if you make more than that, let’s say you make 200, then you would have seen possibly nine 9,500.

04:32

Well, they would have means tested, right? I call means tested. They would have adjusted it based on income. But everybody or anybody that’s 65 and older that meets the criteria will get that sweet little uh um a senior benefit, I guess you would call it. I think there’s a proper term senior something like that that they’re putting on my tax returns.

04:52

But yes, it it is an automatic And so so the reason I’m asking is because I’m trying to calculate how much to take from my wife’s IRA without us having to pay taxes on it Um we don’t make a lot of extra income, but we don’t need it. Our social security is good for us. Um so I How I did it was I took the table where you figure out your taxable social security based on you know there’s a number you plop in and it tells you how much is going to be taxed.

05:32

Right I mean I found the chart online which which gave me the number. So I took that and I took the amount I want to take out. And then what I think my income is going to be, and it comes out to less than the forty six seven, which was this the deduction that I you know, the whole twelve thousand plus thirty-four seven If I do that, I shouldn’t owe any taxes next year if I do that, right? 100%. That is the game we love playing, especially when people have retired.

06:00

They’ve they’ve Limit like yourself, you’ve limited all your debts so you can live off your social security. Theoretically you can have a decent, you know, but you have money let’s say in an IR uh a traditional IRA or four And theoretically, could you be converting money every year for nothing or pennies on the dollar? Um, and then that way, you know, when your family inherits or whoever inherits So why not money from the government for free?

06:31

That’s what I want to do because I don’t have to do it from my social security. I’m not required for another two years to take money out. first year that she’s required to so I want to take out as much as I can so that when the time comes, you know her R and D is going to be less. So no that’s that’s a smart idea. Seriously. Very smart Martin I I I I’m glad you brought that up to be honest, Val, because I think so often people just look at the idea I don’t have to pay taxes or or I’m paying the minimum or I don’t even need to file, right?

07:04

But then you you’re leaving money on the table if you don’t need to file it and you do have an IRA or a 401k, maybe you should file just to make that tax-free conversion. It’s just saying you know it’s it’s free money so good idea great planning very good thank you bye bye thank you appreciate it all right that was actually really good um what val was saying so if you are someone one and it doesn’t have to be anyone that’s 65 and older. I’ve got people that retire at at 58 and 60 um and they don’t need to take any money out but maybe they have um small pension or something they’re getting or maybe maybe they’re just living off of savings.

07:42

So the idea would be is to take that free money that the IRS is giving you And if you’re 65 and older, like he said, it’s basically forty-six thousand dollars. Now, again, you have to take into account your provisional income or your social security portion that will be taxed because for some of you you have a zero tax on your social security.

08:01

If you do a conversion, it could be a dollar for dollar. So if you convert 20,000, 20,000 of your social security could be taxed so there’s your 40 but that’s twenty thousand dollars that was converted for zero dollars i mean it’s kind of a no-brainer but you do need to just play the game hopefully you’ve got a good tax person or or if you do it yourself just as Val may be doing figuring it out now’s the time to kind of put it into the this year’s tax program and say hey if I do this and I calculate this and it it comes out with zero because sometimes you have interest and dividends and capital gains, a few moving parts that you don’t have absolute, but the tax code’s not planning to change a lot from 2025 to 2026.

08:43

So it’s time for you to play the game and see how much money you can do without paying. Or maybe you’re only paying six or seven percent And you know, if your children, and I know it’s kind of morbid, but all of us are gonna pass away at some point, and the game is to let your children have it for a lot less than what they would have to pay if you pass away. And if you have a healthy IRA, I mean I’ve got people that have several million, but let’s just say you have 500,000 or a million, you know, and you’ve got one or two children, they have to take all that money out in 10 years.

09:15

That’s the new law, right? So you right now have your entire lifetime to do conversions or do whatever, but when they inherit what’s left, and it’s a traditional IRA and or 401k, they now have a 10-year clock to take whatever you have in there. So if they’re at a decent income bracket, you know, they’re going to have to pay 24 Or some 32% tax on their inheritance. And you could have maybe paid 12 or less on some of it.

09:43

Maybe you’ll never get it all converted, but what you can convert will grow tax-free. So therefore they will have some money that is fully tax-free, if nothing else, to help pay for the taxes on the IRA that isn’t. So it’s just a gift that keeps on giving. So keep looking that direction. Again, I’m not a financial.

10:03

So I’m not saying this uh this approach is for everyone. It’s not. I’m sure there are people out there that if you’re gonna be living off of what you have in an IRA or in your retirement that’s in a tax account a taxable account, you know, maybe it’s it just let it ride and you use it every year during your lifetime and it’s not.

10:23

Another game to play and I haven’t I was talking to someone I guess they had heard the radio show or whatever and I gave them this idea and I I’m glad I said it, but I want to repeat myself because it saved them tens of thousands of dollars because the mother um who was very much a person to squirrel a lot of money aside, right? So she had a very healthy bank account. She ended up in a nursing home. Um it’s costing eleven thousand dollars a month and she also had several hundred thousand dollars in a IRA they were um going to take a lot of they were just going to spin down her cash and then go And start taking the money from the IRA.

11:00

And then they heard what I said, and then they checked with their financial planner to make sure this was a good plan for mom. Because again, we don’t want to, I’m I’m giving you good time tax advice. I’m not your financial planner. Sometimes we don’t work hand in hand. But if if it does work, it’s beautiful.

11:16

So anyways, in this case they were going to take a portion of her IRA, which could apply against, because again She had dementia. She was not going to be ever to live on her own again. It was in a um assisted living, full, full living facility. And so they were able to take part of that because that’s medical cost. And then that way they were taking tax dollars and being able to write it off against medical cost, and it was helping to reduce the cost and therefore she really wasn’t paying tax on it either.

11:44

It was going to put more money in everyone’s pockets. Cash is cash and we want to keep as much as we can. um and pay as little amount of taxes as possible, especially when you’ve worked out your whole life to accumulate this and you don’t want to just be giving it away. All right. So if you want to join the show you can 615 737 9986 615 737 9986 is the phone number here i’m an enrolled agent licensed with the internal revenue service to do taxes and revenue I do not work for the IRS.

12:17

I work for you, the people, and helpfully give you the guidance you need to represent You in front of the IRS. We’re gonna take our first break. We’ll be right back with the Dr. Friday show. Alrighty, we are back here live in studio working on on our taxes, trying to figure out what the best way to do things is going to be for all of us.

12:42

And remember some things that are best for one thing might not be very good for another person. And so make sure that you’re getting some good solid tax advice on your particular situation because penalties and interest can be a bit expensive and you don’t want to be paying them If you don’t have to. Let’s talk a little bit about the Trump uh bank accounts.

13:04

Because I can’t say uh yesterday was probably the first day where I had a number of people that were starting to um oh an I shouldn’t say bank account investment for the kids account um I think they’re just calling them the Trump investment account for kids is what I think they’re referring to about. But um it’s basically just the jump start for that generation. It’s really important. I think anyone that has, and keep in mind, you as a grandparent may want to consider um having the form filled out, you can also go right to the IRS.

13:40

I think it’s called Trump account and you can file the 4547. So again, the 4547 is gonna basically want the custodial parent or grandparent to complete this so you can set up an account where you can actually put and if the child was born in the year of 2025 There is some additional benefits for those children. You get up to another $1,000 in summer, if it depending, I know.

14:09

uh Microsoft and and a couple are actually adding to these funds. But if the child was born in 2025 or any child born from 25 to 28 will get an additional thousand. But after that you have um a $5,000 per year contribution. And so a lot of times, I’ll be honest, as an aunt to what, 18 or 16 um nieces and nephews and probably another six or seven great nieces and nephew.

14:37

We, you know, a lot of times we’ll either buy savings bonds, we’ll we’ll spoil them rotten. Maybe one of the better things because this whole pop idea is to give them this investment. Um, and there was usually nothing there. You had a 529 was the probably the closest to something like this, but um it’s an investment account for a child that’s not working, right?

14:57

So once you start working, you can do IRAs. Which is sort of like what this is. But the nice thing about this is, at least in the example I’m going to give you, is I know someone that’s divorced It’s been pretty bad the whole time. And so there’s no communication. And last thing they want from each other is for them to have any benefit from each other.

15:21

But The child is what we’re talking about. So this account is set up. You file a 4547, you put them in there, and then grandma or grandpa or aunts and uncles Um, or the children themselves, if they get money from other ways, can contribute up to $5,000 into this account and it will grow until the age of 18. At that time, this account goes into that child’s name.

15:44

They could use it for education, they can use it to buy their first home, they can buy it for trade, so they can use it for trade school because not everybody is designed to go to college. Um, you know, it’s just really easy. Qualified name, US citizen, social security number. That’s it. And you can set it up.

16:02

Um we were, I was talking to someone yesterday and they have six grandchildren, two in which they are raising. because unfortunately um one of their child children passed away so they’re raising the grandchildren and then they have four others and so they wanted to make sure these were established so grandma and grandpa can contribute money to these accounts And then that way when these kids get older, and maybe grandma and grandpa may not be here, some of them were two and three years old, who knows?

16:28

Then they have these accounts and they can Use them for their education, for their um for their first-time home buyers. You know, this is a way of giving that generation some amazing step-ups that some of us may not have been fortunate enough to have. That’s the purpose in it, right? Is to be able to give this next generation $5,000.

16:48

And if it’s got 10 years, this child will have $50,000 plus the growth in this account. Um and maybe more if they’re if it starts when they’re just born, right? Because you have 18 years and you, you know, and it doesn’t always have to be the same person, right? It can be I put in a thousand My brother puts in a thousand.

17:06

The grandparents from the other side put in a thousand. It’s not like everyone has to, but if you could do that, just a maze imagine what those children could do with that money. All right, we got Jeff from Manchester and see if I can help him. Hey, Jeff. Hey, how are you? I am awesome.

17:22

How about yourself? I’m doing all right today. Um, I have a question. Uh my father is ninety-two years old and just sold his house to move into an assisted living. And the sales price was approximately a million dollars. Okay. And we’re curious as to what we need to do to navigate capital gains taxes.

17:46

Great question. So what you and hopefully dad is still able to help a little bit, but we need to know how much did they buy that property for and then if they’ve owned it for the last forty years, let’s say, because that’s what I had one recently. They had basically built it and lived in there. But they had re they they had done some improvement. Improvements on it over the years, major improvements, adding things, things like that.

18:09

I don’t, I mean, again, at 92, I’m not too sure if Dad has all of that documentation, but to the best of our ability, we’ll need to know when he purchased it. We can use if we have to probably um tax assessments, but ideally if you could find the original form, did he build it or did he buy it? Do you know? Um he bought the piece of property and then he built a house on it in the fifties and then I believe he built an addition on to it in the seventies.

18:41

Okay. So and was he married or is he married? Uh he was married uh but she’s since passed away. Well, was she on the title at the time that they built? Was this his spouse and I mean his spouse he said he was married, but were they both in this house as joint tenants? Do you know?

19:04

‘Cause back in the fifties and forties things were a little wonky for what you know, I mean just how things were put in names. And they divorced and she’s passed away. Uh, he remarried and she is uh passed away. So he’s outlived them both, but Poor guy. Um so the reason I’m asking this is because if they were if they were I mean, unfortunately with divorce, there wouldn’t have been a step up in basis.

19:39

He basically either brought her out of the house or they she agreed uh they made their own arrangements, right? Whatever it didn’t affect the basis of the house If the second wife moved in and she lived there until sh and she became um and they and they jointly held the property and this is where it gets a little, I don’t know, and we may have to get a little deeper in than we can on the radio But um if she became part of the home as far as you know she was on the um title um and then she passed away, there would have been a step up in basis at the time of her passing, and that’s what I’m looking for.

20:12

because obviously if she passed away in the 80s versus the house in the 50s, we might have had a better basis for pat half of the home. But I don’t know if that’s gonna apply or not. I uh a question about that. Uh the house was on approximately an acre and sometime in the nineties, I believe. He bought an adjacent acre and a half or two acres to increase the size of the property.

20:42

Would purchasing and joining the two pieces of land would that cons would that make the step up in basis? Because it’s less than five eight well it won’t get a step up in basis, but it would add to his base Because he went and spent another twenty-five thousand, fifty thousand. I don’t know what whatever it costs for that acre and a half, two acres. Now that would be added to his homestead or his home property.

21:05

So it it it would increase the basis because when you when he sold them assuming it included all let’s just say three acres at the time of the sale Okay. So we need, you know, you’ve got a couple different moving parts. Because basically what you’re gonna have in it you know is whatever we can justify he put into the house plus at this moment $250,000 that he gets as an exclusion.

21:28

The rest of it, whatever that number plus 250,000, anything above that number is going to be capital gains. So it’s important to try to do our best to come up with all the legitimate basis we can. Or step up in basis if the wife passed away and you know she was part of the home. Okay. So my next question uh to that is Uh he lives in South Carolina, so I assume I need to find a CPA located in South Carolina.

21:59

Is the what is the I mean we yeah, I mean we can do we do all states, but I would say it may be beneficial. Um they may know Um as we know here in Tennessee, obviously living here thirty years, if you can find someone, they may know because there’s a state tax in South Carolina as well. So not only capital gains to the Fed, but also capital gains to the state.

22:19

So yes, we need to, we you probably need to have someone that has some um experience in dealing with real estate, if you can. Okay. Uh any suggestions on how to go about finding that person? Do you guys have an estate uh does di since he lives there, does he have any kind of attorney that he’s been dealing with for his trust or will Uh I don’t believe so. Which it’s probably something else that needs to be good put in place, huh?

22:48

Yeah. I’m thinking it a lot of times we work hand in hand Like here I often work with attorneys. So as I say, if you can find an attorney, often they’ll work in hand in hand because he’s gonna need um like well he should have a goodwill, obviously, if nothing else, or a trust, um, but something and And then he needs the power of attorneys for, you know, medical. He may have all those, but it might not hurt to have um an update done at this point since he’s changing ownership of the home, moving into a facility.

23:16

Um might not hurt to just get all of that, you know, make sure. And then, you know, at 92, you know, we hope and pray he has a nice long life, but the fact is he’s towards the end of it at this point.

23:38

everything is nice and organized because I’m sure he would like that. Um and then having that attorney in state because you’re talking to me here, so I’m assuming you’re a Tennessean And not that it’s a far drive, but we do have a state and uh federal situation there that we don’t have to deal with here. I understand. Yes, and I am a Tennessee resident, so Okay But yeah, so if you if you need help, you can always um text my office or call my office and I will give you if nothing else I can give you a few places to start and then they might be able to lead you to someone you feel comfortable with.

24:10

All right. Well thank you so much for your help. Yeah. Thank you. All right, guys, we’re going to take another break here. When we get back, you can join us 615-737-998. We’ll be right back with the Dr. Friday show. Alrighty, we are back here live in studio. And you can join us online or Live here in studio at 615-737-9986.

24:38

We’re gonna hit Nelson in Nashville. Hey Nelson, what can I do for you, sweetheart? Hey Dr. Friday, how you doing? I am doing good. Hopefully you are also. I wanted to know some standard deductions amounts. I just want to know, you know, h what the final status is.

24:55

How much is, you know, for each of each uh threshold uh for uh uh this is for people over sixty five years old. Uh what is the standard industry for a filing marriage So if you’re finally married, um you basically have the standard deduction is 31. 5 and then you get an additional um 1600.

25:17

I’m looking it up really quick. I’m cheating because I don’t have that memorized myself. And then on top of that, um you’re gonna get another 12 because I know it’s 43. 5 So it’s yeah, so it’s 435 is what you get if you’re over the age of 65, I believe. leave that’s what it comes out to here we go married 435 would be the total for both spouses basis 31 plus you get thirty two hundred dollars extra Um, so that makes it 34-7 plus the twelfth.

25:55

So your standard deduction is thirty-four-seven. What about filing single I mean separate in your married? Married filing separately, it uh it’s basically just taking that number in half. They give you sixteen hundred plus your standard deduction of what fifteen So it’s just basically taking that 34-7 and dividing in half. They don’t give you any additional benefit from married filing separately.

26:19

I think it’s about 17350. would be the standard plus if you’re over 65 you’ll get that additional 6,000 if the income now marry finally separately you cannot get the 6000 So that new one that came in, it only allows for married filing jointly, single or head of household. Married filing separately, it’s disallowed. So that’d be something like 19 something or what? Uh 17,350 is what you would get married filing separately.

26:46

Okay, and the last one is a single flower. If you’re just single and you’re filing separately, I mean just single without the other is um twenty-one seven fifty. It’s 21. Okay. Uh did they ever do they still do that uh deduction extra deduction if you’re legally blind? Um if you’re over 65, you don’t get the extra deduction for being legally blind.

27:12

I don’t believe leave but let me just double check that i don’t do a lot of um yeah i wanted it used to be a fifteen hundred dollar used to be um like an extra fifteen hundred dollars um in 2025 legally vacuum total standard okay so a single person over the age of 65 that is legally blind would get an additional two thousand dollars so that would be 19750 This is what happens when you keep your computers. So they do give me another two thousand dollars.

27:41

Yes, sir. You good question. Well, I really appreciate it. And I’ll and all you have to do is add the uh six thousand to that nineteen, right Right, if you’re single, legally single, yes, sir. Oh, okay. All right. Well I appreciate it. No problem. Thank you for asking Appreciate that.

27:59

Okay. All right, thanks. Bye-bye. All right, let’s hit Rebecca in Cottontown. Hey Rebecca. Hello. Thank you for taking my call. Mm-hmm. I have a job that’s funded by block grant funding. And the people that write the check said don’t claim it on my income tax ’cause it’s not taxable Well, I claimed it one year.

28:20

I don’t have to pay federal taxes on it, but I had to pay social security taxes on it Okay, that’s an unusual. So a block grant is basically a federally grant awarded to state or federal government broadly defined as functions, health care, so social services are Community, highly flexible, lacking of automatic funding. I can’t say I’ve ever really heard of a block grant, but what you’re saying is it’s not earned income, therefore they’re not taxing you as far as the ordinary income tax, but it still qualifies as earnings because Social Security and Medicare has to be paid.

28:59

Right. Huh. Reciprocant can tailor the program to look around the And you just work for them though. You’re an employee of this company that has the grant. Well, actually they write the checks, but it’s like I’m an individual and they fund the people that I work for. better light and but again you’re you’re actually work I mean I I’m a little just making sure I don’t want to lead you in the wrong but you’re actually working for a company that has received this grant Um, but you’re you’re not an owner of that company.

29:34

You are actually an employee or are they just giving you money every month? I mean are they 1099 in you? Is there any paper? 1099 at all. Nothing You don’t hit nothing except you check with a stub that says which client you work for. Okay. Well, I’m gonna be quite honest.

29:54

I have never heard and I’m gonna be researching that Because to me, even if um my company receives the grant, and from what I’m reading here, it’s basically designed for love uh smaller regional government bodies to help aid in social services of different types, right? It’s supposed to help with care, social health care, children care, et cetera. But if you’re the employee, so let’s say I have a daycare and I get the grant, my employees are still going to be required to have all the regular Because what if they fire you?

30:26

You should be qualified for unemployment. You know, I mean, I’m assuming this is a ordinary job. So I think they’re I think they’re misleading you. I will be honest with you. Now if somebody’s listening to this and is totally hooked into this, I don’t want to mislead this lady, but I’m I mean I can understand if a grant comes into my companies, I have people that have gotten grants to buy or to recycle something and that is not taxable because the money is used for for a specific purpose, but I’ve never heard of an employee that works for a company that receives a grant not to be treated just as any other employee.

31:01

I know if it’s a nonprofit, if they have less than five employees, they don’t have have to pay unemployments. There’s certain things that work for nonprofit. Are you working for a nonprofit? Yes, ma’am. Okay. It is a it is a legitimate 501c or version of a 501c? Yes, ma’am.

31:16

Okay. I still, I mean, we do a lot of nonprofits and I still think that you are not a uh officer of this nonprofit, you are an employee. I think they’re leading you down the wrong path. But you need to keep if you don’t mind, Rebecca, keep listening. I’m gonna put my number out in just a second, my regular number Um, and we can follow up on that and I can get a little bit more.

31:39

I don’t want to put any more on you because this is just the basic call-in show, but um If if you have to pay Social Security and Medicare, you have to pay ordinary income. That I know. But let me um let me see if I can jump to Pam that’s on the line and and I’m gonna get my phone number out and we can talk more off the air, okay?

31:58

Okay, thank you. Okay, thanks. Let’s hit Pam from Manchester real quick. Hi, Pam. Do you have any I have I have a really s maybe strange question. Uh in 2014 I got a reverse mortgage on my house. Uh I moved in uh 2011 and I just sold it in 2025.

32:20

And I have uh let’s see, mortgage insurance well anyway, I I paid off the the the uh reverse mortgage And I uh I I’m on Social Security, I’m seventy-three years old and I don’t know uh what are my options as far as filing income tax And um I know I I don’t have enough to do the uh capital gains because it’s under two fifty.

32:47

But uh uh I bought the house for seventy three thousand and I sold it for two ten. Okay, yeah. So even if I I mean so yeah, your your your math is correct, Pam. So obviously you sold it for less, but you do need to report that as a f they don’t always know it’s your home that you sold. They may get a ten ninety-nine S and they may not the government should get representation that the home was sold.

33:11

So there is a primary home form that you need to put on your tax return it will not be it’s all gonna be zeros I suggest you doing it you probably don’t have to um no capital gains and you’re living off social security no required filing uh for Social Security if that’s all you have. And you could you could probably wait and see if the government comes back and asks you or they send you one of those love letters says now we’re charging you capital gains because you didn’t report it.

33:40

But I don’t want to put that pressure. It may never happen, to be honest with you. But you’re under the requirements as far as you’ll pay zero capital gains on the house as well as you know, obviously with zero capital gains nothing else is going to be made taxable like your social security or anything. Right. But is any of the interest that I paid on the reverse mortgage uh recoupable?

34:01

Well since you don’t really have any income There’s no reason to worry about itemizing. I mean all you could do is itemize to reduce taxes due. You don’t have any taxes due, therefore the itemizing would be of no use. use. Okay, so just uh just do the standard uh ten forty or whatever and uh make sure that I fill out the sales sale of a house form.

34:24

else it’s going to be all zeros there’s no advantage to having an additional loss because there’s no there’s nothing taxable Right, because my re my retirement unfortunately was from uh Kmart and it’s less than two hundred dollars a year. Oh wow. Okay. Yeah, so again that keeps you and then after this you won’t be filing, at least for a very long time Well, you know, I I do that just to to because uh because we’ve brainwashed you for the last sixty years.

34:59

I’m sorry, what? I said it’s because we’ve taught you for the last fifty years of your life, when you were working and everything, you’ve always filed taxes. Oh yeah. Yeah. But we don’t have to be a little bit more than that. Yeah. It’s up to you. It’s always something you can fill out.

35:16

It’s not a problem with you doing. I’m just saying the the mandate is there that you are not required if you have less than 15,000 as a single person and you’re on Social Security, you’re not going to be filing a tax return. You certainly can. No one stops you, but I’m just saying that the pressure is off. You don’t have to Well uh with the social security I brought in like forty thousand, but I know I only have to pay taxes on half of that.

35:39

And then that makes sense. Right. Uh Social Security is is full tax free unless you earn another fifteen thousand above the social security. But what you’re telling me is you’re pretty much living off your social security with the little retirement you’re getting from when you worked, but it was only like two or three hundred dollars a year.

36:00

Right. Oh, it’s not even that much. Okay, so you are not required because the Social Security only becomes taxable when you You have other earnings of like fifteen thousand. Okay. So then no file no filing unless I really want to and to go ahead and and file the paperwork for that I sold the house.

36:20

You got it. Perfect. Perfect. Well, all right. Thank you so very much. I relinked my mind. Thanks. All right, we’re going to take our last break. We’ll be right back with the Dr. Friday show. Alrighty, we are back here live in studio. Again, you can join the show.

36:40

We got a few more minutes. 615-737 9986-615-737-9986, taking your calls, talking about my favorite subject at least, taxes. Um, I did want to bring back up on the block grant. I was texting with someone because again, I’m not gonna say I’m always an expert on certain nonprofits. I don’t get as much into nonprofits as businesses for profits.

37:06

But it was specifically told to me that if you must pay income tax on any wages you receive from any nonprofit, even if that nonprofit is funded by a block. grant while the nonprofit itself is tax-free, he says, but the employees are still subjected. And that employer that you’re working for, that is the nonprofit, should be providing you a usual form called a W-2.

37:31

Nonprofits are required to file them just as any other organization. The source of the funding does not exempt employees. from paying any kind of personal tax. So not only should you be paying Social Security and Medicare, you should also be paying ordinary income tax on that. But if you are listening, uh, I think it’s Rebecca, you can also call me at 615-367-0819.

37:55

For anyone listening, that’s my direct line, 615-08 367-0819. Um, and you can give me a call on Monday and if you need more information on what you should be doing, but they should be giving you a W-2 and or a 1099, not knowing your connection exactly, but either way, your income should not change from uh for-profit or not for profit. The block grant has no bearing on you as the employee or subcontractor.

38:25

All right, so that all being said, it’s getting down to the final part. So we just want to make sure that it is tax season. It’s time for you to think about preparing your taxes. But not only preparing this year, thinking about next year. This is the time. I mean, I know we often have a large number of people that are um, you know making changes in life, right?

38:48

We have things that we we want to do. Conversions one thing, but maybe you’re thinking about retiring. Maybe you’re thinking about selling your house and downsizing or moving to another state All these decisions are pretty big, and most of them, I hate to tell you, have a tax impact. And so making that impact is important to being able to understand how to um follow through with that to know am I gonna owe money?

39:15

Is it a good idea to owe money? Is it a good idea to do something with it? Or, you know Just so you’re prepared. No one likes to file their taxes and know they owe $83,000 like someone I just finished. All right, so let’s hit the phone line real quick.

39:28

Moose in uh Greensbrier Briar. Excuse me, Greensbrier. Hey Moose Yes ma’am, how do you file like if you’re doing side work, how do you uh how do you file that in other words if I wrote down five thousand dollars in income, am I am I gonna have to provide You know, or is that just gonna red flag a audit? Well no, it won’t I mean a lot of people do side work.

39:53

You’re gonna file that on a schedule C like cat Um, and it’s basically designed for self-employment. You’re gonna tell them, hey, I was doing landscape, I did handyman work, I whatever, I don’t know what you do. Um, and then you’re gonna fill in your income and or expenses um that you might have had to do whatever you’re doing for the side work and then pay taxes on it as you have.

40:16

Um whatever you know, whatever the profit is after your ex legitimate expenses you might have for that five thousand. But no, I mean We do a ton of Schedule C’s for people that do what I might say side work where they work a regular W-2 job, but yet on the weekends or things, they do a side electrical, they do a side, you know, handyman work, whatever.

40:38

Okay, schedule C is in CAT. Yep, you got it, sir. Thank you. Okay, thank you. All right, so again, that’s a great question. Because if you’re filing your taxes, you kind of want to make sure you are reporting all of your income. And I want to clarify one thing because a lot of times people will come in and they give you all their 1099s and they say, here’s all my income.

40:59

And I’m always asking them because the likeliness is that you don’t get all of your income on 1099. Some people are just not going to 1099. You maybe made less than $79 $600. Yes, you are required as the person receiving the money to report that’s uh $500 or $400. They may not be required to 1099 you because anything under $600, we don’t have to Same thing when I’ve had someone just recently, we did all their taxes, and then she came back and said, oh wait, I’ve got another 1099.

41:30

Well, you’re supposed to be giving your tax person every dollar you’ve earned If you get a 1099 or not. And it’s pretty easy because it’s every dollar that either went into your bank or all the cash that you have used throughout the year. You as a business owner, that is your responsibility to track all the income you are making and on the other side track the expenses that go into those just because someone gave you cash doesn’t mean that you’re entitled to not report it Um the IRS is kind of funny that way.

42:01

They, you know, and keep in mind, the IRS is an enforcement agency. They don’t write tax law. They are not The bad guys, in essence, no one likes enforcement, but the fact is their job is to collect so that we can have all the benefits we have here in the United States. You may not like the way they spend the money in Congress and the Senate, but the IRS is not spending the money.

42:24

They’re collecting it, putting it into the general fund. General fund is then spent however they spend it. And yes, I’m with you. It’s not spent very well Um, but I had a a gentleman come in my office and he’s like, I don’t want to pay any taxes. I don’t want to have to do this.

42:38

This taxes are unfair. We shouldn’t Well, I think probably every single person listening would say taxes are always high, taxes are not always fair, it’s not a good thing to always have to pay taxes. Some of us Um, you know, some people I I have as clients pay more in taxes than people make in a year. It’s not something that you have a choice, though.

42:58

You’re a U. S. citizen. Our obligation is to pay our taxes Also, our obligation is to take every legitimate tax deduction we’re entitled to. But you can’t take that if you’re not tracking it So again, you know, if you ever get audited, they’re going to do a means test, meaning your lifestyle, if it’s more than what you’re showing on your tax return.

43:19

In some cases, I see people come in and they say they’ve only made $10 or $12,000. They’re raising a child, but yet they’ve got a car payment that’s $600 a month and a rental, they pay rent of $14 or $15. There’s no way you can be living off that if you don’t have both. Just saying, not possible. All right, we’re gonna hit Alley really quick in Manchester because we only have about three minutes left.

43:41

Yes I sold a place in in McGallan, Texas, and uh I took a cash offer And I only received around one hundred sixty five thousand for that, but it was appraised for way over two hundred plus thousand. But I took it because it was a cash offer and to avoid expenses like property taxes and so on. And now with the IRS they say I’m to pay a capital gains tax.

44:09

And I wanted to ask you, uh I’m age seventy seven. Uh do you think I should pay the capital gains tax? Yeah, well you would it just depends. How much did you buy this property for? Uh I bought it for 130,000 in 2021. Uh-huh. It was at a rental.

44:41

other people that could just rent it to all ages. Okay. But w while you owned it, was it a rental for you? Did you have it on your tax return as a rental Well, yeah, I did rent it out two different times and but but not for long because well, one guy moved out early and the second lady moved out because she didn’t want to pay an increase in rent when all the costs went up.

45:06

Yeah. Well, right now just based on what you said, you paid 130, you sold it for 165. If there was closing cost fees, you can back that out. But you do have about thirty thousand plus recapture of depreciation. So yes, ma’am, age has no bearing on it. You do have, based on what you’ve given me, some capital gains issues.

45:24

Now if you don’t have have very much income and um you know this is all you have theoretically there is a zero percent capital gains rate but I don’t do your taxes so you might want to just but yes ma’am I’m gonna have to take a quick break here because the show’s gonna end. But um But yes, you will need to to talk to someone, but you may have taxes due.

45:43

Sorry. Yeah, I’m gonna get back in touch with you. Thank you. Thank you so much. Good night. Thank you. All right. We’re gonna take uh this the end of the show so I need to make sure you guys have my contact information 615-3670819 that you can call on Monday 6153 367-0819.

46:02

You can also email Friday at drfriday. com, Friday at drfriday. com, or just check us out on the web. You can also send questions through the website drfriday. com again drfriday. com again it’s tax season I know there’s a lot of crazy things going around do not fall for some of the phone calls there is I meant to hit on some of the scams the IRS says is happening.

46:28

If you’re getting rejections on your uh tax returns and things, you may have to call the IRS. But keep in mind that we’re here. So hope you copy later, as we always say and also Joy.

Announcer

00:00

For tax services, planning, business, and IRS negotiation, visit drfriday.com. No, no, no. She’s not a medical doctor, but she can sure cure your tax problems or your financial woes. She’s the house. 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.

Dr. Friday

00:35

So I guess I want to start the show with talking a little bit about um some miscommunication that I see keep coming through emails and um I’m going to assume that it’s out there on the internet as well about who can claim and who cannot claim over time and tips. Now keep in mind there are some rules. It’s not like everybody’s going to get it and everybody. Everyone’s not going to get it. You do not have to itemize, which is one of the misconceptions that is not required. But if you are in a managemental position And you have the um federal sta… uh Department of Labor statistics, sorry, um, and there’s a bunch of rules that have to be applied, then that will be how and if you can get this. So if you’re a manager and you’re paid overtime, but your overtime is based on something other than the typical 40 hours, you may be at risk. If you are um um a manager that basically you’re not really a manager, they just give you that title, but you’re really just work clock in, clock out, you know, you probably will be able to qualify. But you do need to make sure because I know everyone’s just going to click the button saying they qualify. So let’s go ahead and hit the phones. It looks like we have someone on line one. Go ahead and bring them in. Sorry, I can’t read my screen right now. Hey, this is Dr. Friday. Can I help? Yeah, I have an IRA question. Okay, go for it, sweetie.

Caller

02:01

Okay, I had I had two uh last year and I combined them and they were in two different places. Well, it turns out that where I put them in the one place, uh, they didn’t add that amount of money in for my required minimum at the end of the year ’cause they said They only send that notice out in the beginning of the year and I put that money in in March. So in realizing it in January, I did go and take the rest of what I’ve my required out. But I’m wondering if there’s some way I can uh or I have to let the IRS know that I took it out for the prior year in January

Dr. Friday

02:43

So you did not take your RN, let me make sure I’m recapping really quick. You did not take your RMD or your required minimum distribution in the year Let’s just say in 2025, but you took it out in January of twenty-six or maybe different years, but the same concept?

Caller

03:00

Well, I took part of it out in the first year i in in December and the m remainder what w what I w had to take out for that extra money I took in January.

Dr. Friday

03:10

So it was and can I ask how old you are

Caller

03:14

76.

Dr. Friday

03:16

Okay. Uh I wasn’t sure if it was the first year in which you had to take your required minimum distribution. There’s a little wiggle room there. So when you do file, there is an eighty-six zero six that would require you to um document. that you um that there was a a um a miscommunication because I would have thought that your fiduci person would have giving you that information properly. Because your RMD is always based on the prior year balance, right? I mean, just for people that are listening, not so much for yours. So Whatever you have to take in a requirement of a distribution for 2026 would be based on your December 31st balance in your 401k IRA, whatever. And so then that’s what you have the whole year to take it out on Sounds like somewhere they dropped it, but yes, there is a form and how we they they they didn’t add it in.

Caller

04:04

They did not add that amount that I uh they added to the IRA. They didn’t include it in my required minimum

Dr. Friday

04:11

Yeah, so they they did not take the add in and add it back in, but you put it in that same year, in the year in which the prior year, I guess is what I’m saying.

Caller

04:21

I took what I I I took I took part of it out in December, what they already had and the additional that I added in, I I wound up taking it out on January twenty ninth

Dr. Friday

04:33

But when you put the additional in, when did the additional get added in? What what year? Last year or this year? In March of the prior year, correct? In the year that we’re talking about. Okay. Okay. Yeah. Yeah. Sorry, I know we’re going back and forth and poor people. Um you’re you’re so if you put it in March of twenty five, that doesn’t go into play until twenty twenty six RMD So 2024, whatever you had in there as of December 24, December 31st, 2024, is what you have to do for RMDs. Anything that got added in 25 will be part of your 2026 RMDs, which they do as of 1231-2025.

Caller

05:15

Except that I always took it out of the other place and I f and I d it didn’t dawn on me that I that they didn’t add it in. I I it was all I always took two two different Right.

Dr. Friday

05:31

Yeah. And so when the one company which is only responding to their percentage because that’s all they know. And the other company was and you were, I got it. So you were taking care, I mean you were basically managing both of them, but somehow one of them did not get added in Right. Okay. Well there it’s not a huge deal. I would just suggest writing a letter when you file your taxes about the innocent mistake. IRS is not so I have not found them to be extremely aggressive about this. They did reduce the penalty for failure to take it out, but you took it out as soon as you found out that the mistake had been made. It’s not like it’s a year later. Um so um I think you’ll find I file that form that you suggested 860606 and then yes you can also attach uh PDF if your system allows if you’re doing it online or if you’re doing paper filing, attach a letter explaining the situation, how it was just a mistake. As soon as you found out you resolved it and the money has been taken out.

Caller

06:27

Okay, thank you very much.

Dr. Friday

06:28

No problem. Thank you. Thank you. All right. Sorry guys. Like a little bit uh more intense than probably some of you, but that’s the problem with some of these. Um not not so much that, but it just it is When we’re dealing with taxes, everyone’s situation is slightly different. And uh what we were talking about for some of you that maybe just caught part of it was is that this listener has required minimum distribution but she also has two accounts. So each fiduciary responsibility is is independent for each one. So Well, this is one of the reasons that I personally I know some people I’m not a financial planner, so don’t come back at me. But I’m just saying as we get older, sometimes it’s nicer to have everything in one place. So that way these kind of things don’t happen as often. I mean, sounds like she’s done a great job up until now. So this is maybe just more of a simple mistake, but it is for all of us. It’s always harder and harder to track things when they’re in multiple locations. So not a bad idea to basically move them into one place where even you have two different types of accounts, move them in so that you have the ability to um you know, go for it and and see what you have. Um so anyways, if you want to join the show, 615-737-9986-615-737 379986. A lot of confusion on tips and overtime. I have found that for the people that it applies to, they are definitely getting better refunds. Um the confusion really still coming out is who’s really going to qualify, who’s not. Um, you know, a lot of people work overtime, but sometimes their overtime isn’t going to be considered qualified and remember if you’ve got double time triple time that doesn’t add more to you it’s only on um double it’s only on traditional overtime So again, making sure that you have that information in the right place, doing the things the right way, that is what we want to be able to do. And We’ll be able to, you know, move things forward. So if you’re working on your taxes this weekend, which you can be because obviously tax season is fully open. Make sure, because I’ve done a couple taxes this last week and a couple people sent me notices saying, oh wait, we did your taxes, but we just got another 1099 in the mail Or we just got another uh interest statement in the mail. So double check, triple check before you send the taxes because that’s what you don’t want to do is send off taxes and then have to amend them. Amending them can usually lead to more, but you don’t want to not file them correctly. So, you know, I mean obviously you want to amend versus that. And then the IRS will come back and give you some sweet little notification saying that we have changed your tax returns because And and also payments. I have one case where we have a gentleman, first we were dealing with 2024, now they’ve come back on 2023, and we’re still, you know You need to make sure if you owe money, you need to make sure that money has cleared your bank. Even if you’ve given the accountant the approval to auto-draft or anything else You need to be tracking. If you don’t see that money coming out of your bank, you need to stay on top of it. You don’t want the two years later the IRS saying you owe a ton more money because the money never came out. It is your responsibility to make sure that money comes out. All right, let’s hit William and Smyrna. Let’s see what we can do for William. Hey Will, what do you got going?

Caller

10:02

Uh well uh uh I got a question about the R and D’ Uh I take uh some out every year uh for for that. But uh my question is, do you have to designate it on paperwork or some kind of special paper or you just take it out

Dr. Friday

10:20

Um I mean from no I mean for the purpose of an a regular required minimum distribution or RMD you you’re gonna take it out you’re gonna receive a form called a 1099R You’re going to report it as ordinary income, assuming that you’ve, you know, traditional and then pay tax on it. It’s really that simple There’s nothing you have to designate. The only reason in her case we were designating more of it was because she took it out late.

Caller

10:47

Oh okay. So I believe that pretty well answers my question. So as long as I take enough out each year to cover the R and D That’s all I have to do really.

Dr. Friday

10:57

Right. Yeah, that’s it. As long as you’re taking out enough or more than what’s required, then there’s nothing really you have to worry about.

Caller

11:03

That that takes care of my question. I really appreciate you. Thanks a whole lot.

Dr. Friday

11:08

Thanks, William. And for any of those that are receiving RMDs or anything like that, you can hang up on William. Then they um you can also do what’s called a QCD, a qualified charitable deduction. And in that case, what you can do is you can give that money directly to a charity, and then that money is not taxed at all. You do have to put it through the system. There is a process. But it is a way of taking money and instead of taking it from your bank account and giving it to the charity, you take it directly from your required minimum distribution and send it to the charity. And now you don’t have to worry about itemizing. or any of that, you can take it directly off and it gives you a really, really good tax deduction. Now you do have to be 70 and a half and older to qualify for that and you do need to be having it through a traditional IRA 401k. It cannot be an inherited IRA or anything. It has to be your But um if you can meet those criteria, I mean most people or many people take money right from their checking account or cash out of their bank and give it to their church or their their uh charities and this would be a way of having them write the check from the fiduciary side and then you can reduce your taxes and You know, right now it’s hard for people to really itemize unless you’re giving, you know, $15,000, $20,000 because if you don’t have a mortgage, it’s very difficult to meet Itemization. All right, we’re going to take our first break. You can join the show at 615-737986-615 737-9986. We’ll be right back with the Doctor Friday show. Alrighty, we are back here live in studio talking about taxes. It is the season, guys. So the most important thing is making sure you file. If you haven’t filed in a number of years, you need to have a conversation because it’s now’s the time. I mean, there is some really good fresh start programs out there But most importantly, you have to be in compliance. You can hear all those ads you want, they’ll say they’ll settle for 15 cents on the dollar or 10 cents on the dollar, but none of that’s going to apply to someone that hasn’t filed First thing you need to file and then you need to find out what the IRS is actually showing on you. I had a case recently where they had taken someone’s ID, someone had filed a totally fraudulent you know, tax return trying to get two hundred thousand dollars or something worth of refunds um on this person that didn’t have that kind of situation Um but the government was trying to collect forty-five thousand dollars on them, which had nothing to do with their normal taxes. I mean they usually owed maybe fifty 1,500 or less, right? So again, making sure what the IRS has is correct and also filing what is correct for you so that that way then you’re now dealing with your particular tax. If it is a fraudulent situation like this one, there is a form that needs to be filed. You need to notify the IRS. You need to show the proof behind it. In this case it was so easy, but in some cases maybe not. But especially if if you’re self-employed and someone tries to fraudulently file a tax re I mean these returns were absolutely ridiculous. I mean, if you ever look at some of the the fraudulent returns coming through, I am totally surprised the IRS allows any of them to go through the system. system but you know it is what it is um and so you are the responsible person to let the know let the IRS know that you need to correct the file file the actual crop proper tax return Do it through the proper system and then go from there and then either make payments or settle, or then you can hear about the offer and compromise, the fresh start program, et cetera, et cetera. None of that can be done if you’re not filing the taxes and if they’re not correct. I had one that came in and they gave us all their paperwork and then recently I got a notice saying that the IRS has changed their taxes I mean it was completely again, it wasn’t that our return wasn’t uh was a fraud in this case. The taxpayer had not told us about additional incomes that they had come in and then the IRS came back and corrected it So you’re not hiding when you don’t do that. And anytime when I see when someone says, well, um, I just got a couple more 1099s and so I need to correct my taxes, that’s a problem because 1099 should not be gearing. your income. Your income should be totally what you received. It shouldn’t make a difference if two years from now you got additional 1099s. Because those 1099s are only a gear to make sure that that person is claiming the same amount you’ve posted to them, but not shouldn’t be your total income. That’s it’s just that simple. You know, I mean, even if you only have one employer, it’s still you should know how much money that person gave you. That is one of the jobs, one of the positions we have as um self-employed people And then the other side is tracking all of our receipts so we have the best uh deductions we can have. You can’t just wing it. I mean, you know, you can’t just say, well, I think I did this much supplies and oh I’m sure I did at least that much in in advertising. It doesn’t work that way. You have to have the physical receipts, guys. That doesn’t mean that you have a bunch of stuff for Amazon and you call it all supplies IRS is going to want the physical inventory. If you went to Amazon, what did you buy? How they know you didn’t buy school supplies or personal supplies So it is your job to do that and making sure that you have everything you’re supposed to have. And nothing the IRS will basically just turn around And, you know, be honest with you, they’ll turn around and basically disallow all of your expenses. You know, they they have no reason to allow them all. It’s not their job to give them to you. So as an entrepreneur, as a self-employed person. Because we have the higher higher chance of being audit. A gentleman with a or a female with a W-2, you’re not going to have much, right? I mean it’s a W-2. There’s no tax deductions against W-2s. You may have some overtime or tips, again, that’s being reported from your employer. So if you’re going to go in there and put $25,000 and you only made 30 is not going to make any sense and you’ll be audited anyways. I feel very strongly that the tip one, especially because you can report cash tips, but If it’s not reported on your W-2 or through your 1099, at least through the 1099, to be quite honest, we pay all of our ta our taxes. on it. But if you write off all these expenses and then you say, well, this much was tips, and then you turn around and show it, the government’s going to probably audit because it’s going to be, how did you support yourself People have a tendency to reduce things down to very, you know, they don’t want to pay any more money than they have to. And I get that. But there is a reality. You have a car payment or you have a mortgage or you have rent You have food, you have clothes, you have medical, all these things come in play. The IRS has already got a lot of that information on you. So then when you go in and say, Well, I only made $2,000 a month based on your tax return. And most of that came through TIPS. So there you four, I didn’t really have any income. Now the IRS is going to sit back and say, wait a second, this person has always been showing this much money, but now they’re saying almost all that money came through tips. You know, and I get it. Your bartender, your waiter, I can see where some of that, but most people only get 20% tip. They don’t get you know, hundreds and thousands of dollars. Um, you know, in even even if you make a thousand dollars a weekend at your job, your your wages should be offset and that should already be in that number So I would just have to say be careful when you’re looking at all of that information. Be truthful because it is going to most likely be one of the highest audited areas. Tips, especially overtime. I think most people can justify. Keep in mind you’re only using the qualified portion. Do not put 100% of your overtime in that box. It specifically asks you on the tax return. Is this the qualified portion? If you say yes and it’s actually 100%, then you’re gonna see that you’re going to either get your taxes uh audited and they’re going to come back and ask you for the money that they that you’ve taken or they’re going to disallow your tax return because they’ve already figured out that that was a problem in the first place So, you know, again, your choice, but no one likes to be audited. No one likes to have these kind of things happen to us. So Really, really important for you to make sure that you’re putting the right information because most of us like to file our taxes, put them to bed, never have to look at them again. That’s the perfect world. You know, you never know if the IRS is gonna pick your number and it does happen, but I usually find that most of the time, most of the time Something different happened in the year in which they’re pulling. Unless you’re just a self-employed person. They see some consistencies in the way that the expenses are going. Um, you know, they see some consistencies in how the numbers are reported. Most people don’t make the same amount in sales, most people don’t have the same expenses every year in same categories. Um, you know, it just isn’t normal associated with inflation and things. Most of the time we are paying more money and therefore we’re actually billing more money in many of those cases. So if you’ve got questions on that, um make sure you can always call the show 615-737-9986-65 So when preparing your taxes, what’s the first thing? First thing, make sure we have all of our documents in front of us. Right. We have our W-2s. We have our 1099 SAs if you have a health savings account. You have your 1098 T or mortgage or your 1098 T for college if you’re in college. Um all the things, interest, dividends, stock portfolios. If you’re into crypto, your stock portfolio, because crypto is stock, right? So all of those forms have to be in front of you before you even start doing your taxes. And all of those forms are also being copied to the IRS So if you have a Coinbase or you have, you know, e-trade, whatever, all of those are going to go to them. So making sure you have all that, then sit down and start putting the information. If you’re not sure of the answer. I will say I know some of these software programs have assistance. Don’t be shy to ask. You can also ask us, but you know, in most cases, it’s it’s a pretty straightforward answer. You know, you may not like the answer because you might find that the answer is basically one of those deals where you’re like, hmm, you know what? If I say yes to this answer That’s fine. But if I say no, I get more money back. I can’t tell you how many times I’ve heard those words. I went ahead and checked this. I married, but my husband and I filed separately. So I went ahead and chose head of household because if I change married filing separately, I didn’t get the kind of refund I did when I was filing head of household. Well of course not. Head of household means you’re supporting that person that you’re claiming as your dependent solely by yourself. You’re not living in the same house as your husband or wife and then claiming that that person doesn’t really exist that you know that’s blatantly lying but also it’s not that confusing Head of household means that you are the only adult basically in that household supporting those other people you listed as your dependent. If you are married, married filing separately is your only option. And right now, if you file married filing separately and you do have tips and you do have overtime, you will not get those deductions. It doesn’t fly when you’re married finally separately because most of them have means testing and they don’t know how much money your spouse made. So they’re not giving it to you at all. So understanding that if you switch from married filing separately to head of household because you want to get all this money, it’s not going to fly in the big picture Sooner or later, I feel that people are going to be caught. I know there’s some people out there that have probably been doing it forever and has never been caught, but you know, karma’s karma, so we’ll find out because theoretically that is just Wrong. That’s my opinion. Head of household should be for the people that are truly single parents trying to raise kids or grandparents that are trying to raise their grandkids, you know, a single parent and a and children because That’s why we’re trying to level the playing field by giving them head of household. All right, we’re gonna take our second break. If you got a question, you can join the show. 615-737-9986. 615-737-9986. We’ll be right back. Alrighty, we are back here live in studio. If you want to join the show, you can 615-737 9986-615-737-9986. And we have Rob on the line. Let’s see if we can get Rob on the line. Thanks. Hey Rob.

Caller

24:36

How are you? I got a question. Um you were talking about the deductions for being uh married, uh and filing head of household and all that. Yes. I have a problem. My wife is medically disabled. But she cannot get disability from the government because I make too much money.

Dr. Friday

24:55

Right.

Caller

24:56

How can I claim her if it won’t allow me to use her as a dependent or anything Just an exemption, but I still have to pay all her medical bills.

Dr. Friday

25:06

Well, I mean theoretically I mean the only option you have is You claim her as your wife, so you would claim married and she would be your spouse, and then any medical expense would go on Schedule A that you might be able to meet itemizing with your income being higher, it may be very hard to actually get itemizing under the current tax code, but that’s the way it would work.

Caller

25:27

Okay, so I I was just checking to see there’s another way around it.

Dr. Friday

25:31

Yeah, there’s no easier way around it. I mean unfortunately either way, you know, um She doesn’t have any way of deducting it. You could gift it to her, but there’s no income to offset and your income’s too high to offset it. So it’s one of those catch twenty-two’s it doesn’t benefit you either way. Okay. All right. Well thanks so much. Thanks, mate. And there’s the true story of how it happens so often. Um and I have a a number of clients with that kind of situation. So Um it it’s not easy. I have a couple that are, you know, theoretically now, you know, he could file Mary filing separately, but that wouldn’t benefit him because then he’d lose the actual higher deduction as being married um and she would have no advantage to being married violent separately because she has no income to report it sounds like so yeah it it’s not a it’s the the system definitely is not a perfect system. So um, you know, I hate to say this, but theoretically divorce, and then you could do head of household, but, you know, and have of her as a dependent but again it’s not really going to get you any more money you’d be better off almost married because the higher uh earnings would be tax lower as a married couple versus as mayor uh head of household or single so um no win in that conversation okay so um if uh you have question you can join the show Show 615-737-9986. 615-737-9986. Taking your calls, talking about taxes. It is tax season. We are working on all kinds of funding. and exciting things. We do have better depreciation this year. So for all of those that may have um purchased equipment, tractors, all those good things, we should have a better deduction. I will say again, talking about cars. Um, sorry, no one knows I’m talking about cars because I was just reading an email and someone had sent in and they are basically asking, you know, hey, I brought myself a Land Rover and I’m a real estate person and I want to take a 179 on it. How does this work? You have to be really careful when you’re truly, I mean, if you are audited and you’re a real estate agent and all you have is one Land Rover and nothing else to your name and you’re trying to say 100% of vehicle uh is being used for business, I would think the IRS would say, hmm, that’d be very hard because you do have to go the grocery grocery store you do go do personal things therefore the car is being used for personal use um say you do have a full car I mean you have another car that you use for personal and you only drive the Land Rover for the purpose of real estate. They could, I mean, for one, it’s a luxury vehicle, so does it really qualify? And you wouldn’t be able to to do it is over six thousand pounds I know you’re gonna say and it’s a bigger vehicle but you know um after the first year my question really comes to this so you got a hundred thousand dollar vehicle You’ve accelerated depreciation on that. So now the next year, all you’re going to have is interest, possibly penalty. I mean um insurance. and petro, but you’re not putting a lot of miles on this car apparently. And that’s my example from this email. So the first year you got all of this, even if you qualify and you you’re able to accelerate the depreciation in the first year and you can take this huge savings. Now you’ve got another two, three years and then you sell this car. And so let’s say you in three years you sell it and now it’s worth $70,000. Well you’ve taken all the expense for $100,000. So now you’ve got to recapture $70,000 as income. Or you go out and buy another Land Rover and now you’ve only got a savings of maybe $20,000, $30,000. After the first time you’ve done it, you’re you’re basically unless the car becomes worthless and you hold it long enough It’s an endless cycle. So yes, if you are a construction guy and you drive your truck to the ground and you want to use it and solely use for your business, or you have a tractor and you’re or a farmer or you’re a land mover, um, you know, you you build roads, whatever. Those types of equipment, no question, easy to do. But when it’s a personal vehicle, and even though you may be able to do something Something with it in the first parts. After the first time you do that, you’re going to then have to always be buying a more expensive vehicle than what you’re reselling it back for. And a lot of these cars have decent resale values. So Just put it in your mind, yes, you may be able to get an initial instant gratification, which is what we call section 179 or I do. Um, but after three or four years and you want to get rid of it and you’re gonna have to recapture 60-70 grand because that’s what it’s still worth, then you have to go buy another car worth more than that because you’re not going to have any depreciation to offset the gains And now you’re taxed three or four years later for what you could have just been paying the taxes for. So just keep in mind, maybe do it more of a straight line, um miles at 70 cents a mile, guys, um, for real use. Usage of vehicle is is pretty clean and you can use a vehicle that is used personally and for business as long as you’re tracking your miles and miles logs are required. IRS has never stipulated that you can just go in and just make an educated guess. You need to know what, when, where, and how, basically for why did you go there? Who did you meet with what was the purpose of the meeting was it business oriented and you need to know that on everything for every mile you do so i mean in some businesses it’s easy i went stopped at the client dropped off the product moved on and they they do deliveries. Um or you know, I went to visit my my my tax person and then you went back. And those are legitimate business if we talked about business. But you know, I went to the coffee house every day and some people try to write off their coffee every day. Now if you are in the coffee business maybe there’s some legitimate reason there. Otherwise that truly is just the stop and it’s not going to fly if you’re ever audited. And we do try to do taxes Just believe it or not, most people should. We try to do taxes based on the true fact. What is going to be legitimate when and if the government ever asks you to prove yourself right you don’t want to just throw some numbers on a piece of paper and then turn around and have to then try to backtrack and figure out well how did I come up with those 35,000 miles? Um and I’m a nail specialist or something. You know, I mean obviously it was commuting. Unless you’re going from location to location and doing people’s nails, maybe there is a business out there like that. Most of mine aren’t and remember commuting is not a tax deduction for nobody that means for Dr. Friday to go from my home here to the office in Brentwood, that is commuting. My clients are at the office in Brentwood. My clients are not where I’m at. So therefore I don’t get to take the miles from my home to the office and my office back home. Commuting. Always going to be. Once I’m in the office and then I go and and uh go to the bank or I go to see a client or I go meet Hank at his office to meet his clients, those would be legitimate business miles from office to go see client back, that’s fine Keep in mind that is very important because I have a lot of times. I mean, if you have a business with a um brick and mortar situation and you only have one business. and you’re coming from your home to that business, that is not a tax deduction. Now if you’ve got four or five locations, your first location would be the place that the you know the from home to the first location would be commuting from there to other locations could be um business miles and then obviously from wherever you’re going back home would be commuting Because it’s no different than a person that’s going to go to work. They have to go from home to the workplace and back. They are not allowed to ride off those miles. We are not allowed to ride off those miles miles. So again, don’t um when you’re when you’re estimating or you’re guessing, those are often the problems that people are not taking into account their true commuting miles. And it’s really important because if we’re ever audited, I will tell you miles are usually one of the first things they come back at, especially for people in the service business like real estate professionals or um Um or any, I mean, if it’s a business, let’s say that you have a hotel or you have a business like that and somehow you’re showing 15, 20,000 miles, but you only are showing one hotel in your tax return. or something like that. They’re going to question, are you really taking commuting from home to that hotel and back as part of your miles? Even if you’re you know, just an investor. I mean, you have to be able to justify those miles. So it’s really, really important that you’re doing that. All right. So for any of you that are just tuning in, I am Dr. Friday, an enrolled agent licensed by the Internal Revenue Service to do taxes and representation. just basically means I have passed all the tests. I’ve been doing this for 32 years this year. So I’ve been at it for a little while. And um, you know, I I find that I totally enjoy doing taxes. It’s always a change. Everyone’s taxes are different. But if you are in a situation where you don’t know what or how to get forward, maybe you haven’t filed for a number of years, maybe you’ve got a a lot of love letters coming. from the IRS, then we’re the people you might want to give a call. At least give us the option to see if we can help you. If you have a question now, you can join the radio show. It is 615 737-9986. Take your call. You don’t have to give us a real name or anything. 615-737-9986. There really are no I know a lot of times people are afraid I’m gonna sound really stupid on the radio. Well, hey guys, I’ve been doing this for what, 18 years or something. Um, I’m pretty sure I’ve said some pretty silly things. But seriously, there’s only, you know, if you don’t ask a question, you’re never gonna really know the answer. So give us a call, we’ll take our last break. We’ll be right back with the Dr. Friday show. Alrighty, we are back to the show. We’ve got two people that have called so let’s start with Jerry from Nashville and then we’ll go on to Greg. Hey Jerry, what’s happening?

Caller

36:14

How you doing doc?

Dr. Friday

36:16

I’m good.

Caller

36:17

Hey, great. Uh question for you. As an airline pilot, say I live in Nashville but based in Dallas. If I have a dedicated car to drive to the airport Can I deduct those miles and the expense of travel to Dallas to begin my job?

Dr. Friday

36:38

Uh there’s some software, I do a couple of different pilots and so when you go from here but let’s say your your flight is out of Dallas is what you’re saying. So if you’re staying in Nashville and you have to go to Dallas to get onto your first flight There is some allowable transfer in there, but in theory, the IRS is gonna say you driving from here to the Nashville Airport is your commute

Caller

37:02

Oh, but then the expense of per say you purchase a ticket to go to work.

Dr. Friday

37:08

Right. You would be able to go most likely from from Nashville to Dallas to have to catch your flight. They would allow that

Caller

37:15

Oh I see.

Dr. Friday

37:16

Just the drive would not be allowed because you’re going from the airport. Once you’re at the airport, you’re theoretically having to get to Dallas and they would allow that commute Okay. Or they can file the cost. All right.

Caller

37:29

That’s that’s good good information to have. Thank you very much, man.

Dr. Friday

37:32

Thanks, buddy. All right, let’s go to number two, which is Greg. Hey Greg, what’s happening?

Caller

37:38

Oh not much. Enjoying the sunshine and no eyes.

Dr. Friday

37:42

I like that.

Caller

37:44

Quick question, we have a small construction company and we run two trucks. I run one and my helper runs it. Construction trucks, loaded ladder racks and all that. Um now my location I do have a active home office at my house that’s got desks and all that in there Um the shop is beside our property. We’re on Acreage, but I walk to that shop and he pulls up to that shop and we take off. Are we allowed to claim mileage from there to the first stop? I’m a little clear. You would have asked for a year.

Dr. Friday

38:16

Yes, and and you would, Greg. You are a little different because your home office or your shop is your first place of business. That’s where you’re stocking up on all your supplies, you’re you’re taking your phone calls, whatever. Everything is starting there. So that is point one. So from there to your first client would be your starting of the meter. Yes

Caller

38:37

Yes. And they don’t like even so we try to keep a good log. You know that if you’ve done any kind of audits with people. It is so tough like Did he stop at the store to get a soda or what? I I can’t keep up with all that, you know, and the mileage IQ goes so far, I mean it’s gotta be a little grace with some of this. You know, we try real hard to keep up with with everything but it is hard when you some pl times we see thirty clients a day. And that truck is active from day one. It’d be nice to have it where you could just Just do your mileage at the end of the year and never have to keep a truck. We keep a dump.

Dr. Friday

39:08

Yeah, that would be sweet, but you could see how many people would cheat. But in your case, since your employee or your helper has a truck when he leaves the office and goes back home, those miles would be his commuting.

Caller

39:21

Yeah he doesn’t we don’t allow him to take trucks home.

Dr. Friday

39:24

We just construction guys do. Okay Um, so yeah, it sounds like you actually have a little cleaner because a lot of times they do allow them to take them home and that’s when it starts getting more because How do we and then they also have a gas card which makes it even harder because how do we know you filled it up to go home, not for business? So It is a it is a very difficult uh thing, but uh the best thing is if in your case would be always tracking a customer calendar so you could actually show all the trips that would have been there. So I have found most of the time if they’re darn consistent. the auditors are much more open than if there’s a lot of blank holes when people do their schedules.

Caller

40:04

Oh I understand. Yeah, I appreciate that. Yeah it’s it’s tough as a business owner trying

Dr. Friday

40:12

It is and that that’s where mileage IQ and stuff has helped, but I agree with you there’s still a lot of work that has to be done for an employer to make sure that it’s meeting compliance.

Caller

40:22

And and and I have had a friend that just said, Forget it, I’m not gonna claim any mileage because I guess he got audited and he was like, I’m just done, I’m just gonna run. I can’t keep up with you know, I went two point eight miles to the next house. You know.

Dr. Friday

40:34

Yeah. But that’s huge because in your life, I mean, I I’m assuming if you’re seeing twenty, thirty people, even if they’re all fairly close together, you’re talking at seventy cents a mile, you know, I mean that’s a lot of money that you’re leaving off the table. By just saying, hey, you know what? I don’t want to have to deal with the IRS. I get that hole, I don’t want to deal with the IRS. Most of us don’t. But if nothing else Play it on the safe side, you know. Hey, you know what? I’m gonna my my car had sixty thousand miles and I’m gonna be able to easily justify forty-five of it You know, at least take what you can easily justify. If you don’t want to push the bucket, that’s fine, but I think he’s probably leave you a lot of money on the table.

Caller

41:14

Yeah, no, we we do that because uh we keep our vehicles until they’re plumb or out. So yeah, doing the what you were speaking about earlier, people buying these hot dollar vehicles and writing them off. Yeah, it’s great that first year to think about it, but that next year you’re kinda in trouble. And I’ll be honest with you, I don’t want to keep up with oil change and all that to collect that money, I’d rather do the mileage and take the 70 cents instead of keeping all the receipts for fuel. Did they put fuel in the you know lawnmower or what? I I I have no clue what all these guys are doing. You know, but I appreciate your time, ma’am. Have a wonderful weekend.

Dr. Friday

41:42

You too. Thanks, Greg, for listening. Appreciate it. All right, let’s see if we can hit Elizabeth really quick. Hey Liz, what can I do for you?

Caller

41:50

Uh just wanted to tell you uh enjoy your show, listen to it every weekend, and thank you for taking my call. I have two questions The first one is do you have to turn it in on income tax if you give your uh child, grandchild like three, four thousand dollars to buy a vehicle?

Dr. Friday

42:11

No ma’am. That’s not sub has to be turned in and it’s underneath the gifting rules so nothing has to be reported.

Caller

42:18

Okay. The second question is do I have to file I don’t file taxes because I’m on social security and low income Uh, but do I have to file taxes on like twenty-five thousand dollars uh interest on a savings account?

Dr. Friday

42:35

If you actually earn twenty-five thousand dollars that would make you taxable yes I’m sorry two thousand five hundred oh twenty five thousand big difference there yeah twenty five hundred dollars would not make you a taxable situation No.

Caller

42:51

Thank you so much. You have a wonderful day. Appreciate you.

Dr. Friday

42:54

Bye. All right. Well, that was great. I love it when you guys participate. Makes my show go so much faster. We’re going to get down to the nitty-gritty. So if you would like to call our office on Monday Sunday morning you can phone number is six one five three six seven zero eight one nine six one five three six seven zero eight one nine and you can can also email friday at drfriday.com. Remember when you’re working on your taxes or someone else is helping you with your taxes, hopefully you’re using a tax tax person and enrolled agent. Um, but you know, make sure that the information you’re putting together is to the best of your ability. That’s what the tax law says. Um and I get it sometimes Sometimes it’s it’s frustrating and nobody likes to go through audits. Um no matter how good your paperwork is, you just it’s just a lot of time that has to go into it. So keeping track, making sure you’ve got everything saved and put into the proper files so that way if some question comes up on your tax return, then you’re able to turn around and respond to that instead of having to open up a full audit. Because if you don’t respond, what’s going to happen is the IRS is going to disallow everything and then it is going to be a full audit because you’re going to have to justify every expense and you know more and more I see that I will be honest a lot of times I see now we have paper audits and a lot of times they’ll come back and they basically say um here’s what we’re we’re auditing and it’s mostly a schedule C or a schedule E. We’ve disallowed all expenses. Please justify the expenses you took on your tax return. And now you have to send in all of those details. So easiest way to do that is obviously when you’re preparing your tax Make sure you’ve saved those documentations, scanned in the files. Um we do have to have receipts that justify the expenses, give or take, unless it’s $75 or less for meals and entertainment, but otherwise we can’t really take any entertainment only meals. Um so if you’re taking people out for entertainment purposes, remember that isn’t a tax deduction for a business right now. But meals would be a tax deduction so again if you’re interested or need help or just if you if we can lead you to someone else in your area because we’re in the Brentwood area maybe it’s a little too far away you can give us a call 615 367 0819 615 367 0819. You can also email Friday at drfriday.com again Friday at drfriday.com. If you don’t have any idea who I am or if you’re a returning customer and you have not yet got your calendar or got um you put onto my calendar I should say say you can check the website at drfriday.com the calendar is there and or you can call the office and we’ll make sure there’s an opening for you. If you’re a new client, we usually like to try to do an intake. So make sure Make sure that we are a good fit because you know your tax person should be able to handle the kind of taxes that you’re doing. Make sure that you feel comfortable because there’s gonna be a lot of personal information going between you when you’re tax person. And if you don’t have that comfort zone, you’re probably not dealing with the right tax person. So if you need to find a new tax person, even if we’re not that person, we might be able to lead you in the right direction. Again, the phone number in the office 615-367-0819. Or you can email Friday at drfriday.com or check out drfriday.com. Hope you guys have an awesome Saturday. Cop you later

00:00

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.

00:17

That’s 737-9986. So here’s your host, financial counselor, and tax consultant, Dr. Friday. Today I’m Dr. Friday, and the doctor is. in the house on this wonderfully cold Saturday. Actually very nice to be working in my office because it’s a bit nippy outside otherwise.

00:39

So we’re going to be talking today. Obviously, tax season has officially opened. We are working taxes as we speak. There has been some confusion a little bit about the tax um deduction that you’re getting on your uh tips and over time

00:59

I had one situation come through the door and I thought it was interesting. And actually I it was confirmed because I had another tax person. You guys hear me talk about Don all the time

01:10

She’s always working like I am on Saturdays and things. But anyways, she had the exact same thing happen on her side. So I think I want to put this out more as a warning than anything else because both of us have seen situations where people are preparing taxes for individuals

01:27

And you guys know I’m always talking about making sure you have somebody that is licensed, someone that’s going to stand behind the work, someone that’s going to be there when the IRS may send a sweet little love letter saying they’ve changed your return. or anything else and you want to make sure that you have the situation where you’re like, okay, I have this problem.

01:49

Well, anyways, they’re using the wrong numbers is what it really comes down to on the W-2. So W-2 box 14 has a number. Now I’ve had it come in in a couple different ways, different labelings.

02:03

I had one that was O B B B T T for overtime. I don’t know what TT stood for, but it should have been OT as far as I’m concerned. And then another one came in as like OT premium. On all the ones we worked on, we just called it overtime, trying to keep it simple.

02:18

But um that number isn’t something that you can make up. It isn’t something that your tax person, and in one of the cases, the tax person apparently got them like $6,000 back because of their overtime.

02:32

Um and that turned around to be um a a six and they took a thousand of it. Never should your tax price ever be based on your refund. Okay, it’s that simple. It should never happen.

02:45

So if that is something that your tax person is bringing up, you need to make sure that it is um I would walk away because you know they’re probably doing something fraudulent. All right, we’re going to go right to the phone lines because I am lucky today.

02:57

We got Pat online one. Pat, I am here for you. What can I do? Yeah, hi, thanks. I’m I’m talking about the uh enhanced deduction for seniors on Schedule one A. Yep Specifically line 33 and 34.

03:16

If the if you do the math on starting with 31 and you subtract 75,000 from 31, line 33 would be zero or less. Do you really put a number in there? Did you really put a negative number in there?

03:30

Or do you just move the the Okay, so then on thirty four it’s the same thing. It asked for a a computation. So that would have been a negative number also. Yeah, you can’t go to a negative on a tax return.

03:42

So it has to just go to zero. Okay, so then on line thirty-five, if those other two are zero, it says enter to six thousand and that’s the that’s the correct thing. You got it. Yes, ma’am.

03:53

Hi, thank you very much. No problem. All right. Thanks. I’m glad Pat’s work you too. Pat is working on her taxes. So um and what Pat was talking about, she’s obviously over the age of 65, and so she’s working on the additional money that you get when you’re over age 65 of $6,000.

04:13

She’s talking about the means testing that they do. And the same thing happens guys when you’re filing the additional Schedule 1A for the tips and overtime. Um, so those are going to be the same situation.

04:27

So just making sure that, you know, when you’re looking at these numbers, I have a young lady that came in and She um she’s qualifying for the the additional I believe it’s coming in on uh thirteen B for the purpose of this uh year on ordinary tax. That’s where um the additional deduction in her case was a little over ten thousand dollars is coming in and that does make a huge difference.

04:51

She was getting like $1,100 and now she’s getting like $4,400 Um that $10,000 can make a difference. And if if you’re getting that, doesn’t mean I’m going to charge you more. That was the whole point before that.

05:03

And so if there are people out there that’s going to talk people into if you have a W-2 and you walk in and they say, well, did you have overtime? And you say, yes. And you may have had over time, but if it’s not reported on the W-2, you better have a letter from the employer that shows it.

05:24

Because you tracking the overtime, the hours, multiplying it out, isn’t going to qualify because we need to prove those are the exact same hours that the employer used when reporting this information. And remember, if you’re tracking your total overtime, then you are going to have a situation where it’s a third of it, right?

05:45

Because time and a half, right? See the the time is two thirds and then a half of that. So you’re only going to get a portion of that number. You’re not getting a hundred percent of that number.

05:57

So You need to make sure that your employer’s number and yours match. If your employer is no longer your employer and they have not provided that information, we are allowed to do our best to recreate But I would be on the safe side on that.

06:11

You had better have timesheets or uh pay stubs, something that’s giving us the details of that information. And assuming that you’re just doing time and a half because if it’s double time or even triple time, it asks that in our our form that we’re completing.

06:28

We have to tell them, did you get normal to uh overtime? Did you get overtime if it was less than eight hours with someone paying you more in overtime? Um, those kind of questions are what you’re going to answer when you’re on. your tax system. And so uh same thing I had I wanted to bring up uh we are doing some energy credits for 2025 and in the past We have not had to have a manufacturer ID. You do have to have that.

06:57

If you have new windows, you need to make sure you call Window World or whoever and I will tell you we called Window World while we’re there in the office with one of my clients and they were very good about getting us that number ASAP. They were quick.

07:10

They were efficient. Um, it was wonderful because I kind of figured, oh gosh, we’re gonna end up not being able to get this number. And they had it on file. So they’re probably getting used to having that information, but you need it for your tax preparer or for you to prepare taxes if you have qualified windows, qualified doors. all of that kind of situation. We want to make sure that you have all the proper information so that you don’t lose out.

07:37

Remember if you’re if you purchased a car in 2020 You’re gonna want to make sure that you have um the fin number, right? making sure that Finn number qualifies and that you can take off that particular interest.

07:53

But you need additional, not just the note that says, hey, I paid this much interest. You need the FIN number. You need to know when the loan was taken over. Was it a fur was it in

08:04

A um new car? Was this something that you try to refinance? All kinds of questions are going to be asked. And not hard. We can handle it, guys. But being organized Totally gonna make life easier for all of us.

08:18

So just putting that out there, making sure that you and I are on the same page. We don’t want to have any issues when you’re in the office when we’re just trying to kick out those numbers.

08:27

We don’t want to have to wait. And then turn around and say something about, you know, oh, we can’t take this because we don’t have this and we don’t have that. Much easier if we can get that information and go forth.

08:38

Okay, so if you’ve got questions, maybe you’re working on your tax return, or maybe you have some situation that you’ve been working with the IRS. Um, I will tell you it’s taking me three years, but we have finally got one of my clients.

08:51

Um I will say it’s very um as much as you know my clients are awesome. I’ll be quite honest with you. Um but sometimes uh you know They can be extremely tenacious and this one was well worth it.

09:02

Finally got someone from the IRS. This was a 2019 issue that we finally Got someone from the IRS to look at what we’ve been submitting for four years, it feels like. I think it’s only been two, but um but you know finally got the right person because you know if the IRS isn’t on the right page, you know what they’re doing?

09:20

They’re collecting. Or they’re trying to collect. And the person on collections cannot help you when it comes to I’ve already amended this return. I don’t owe this money. You know, this is bad, you know, and then the client’s getting stressed because they get letters saying they intend to levy or they’re going to seize property and they’re like, okay, should I just pay it?

09:37

And, you know, of course, the answer is no. We don’t want to pay something you don’t owe. We want to make sure that we have all the right information. But on the other hand, you want to make sure that you’re doing what you need to do and how you need to do it.

09:49

So Just putting that out there to make sure we’re on the same page. We don’t want to have any kind of issues. If you want to join the show, you can. 615-737-9986 615-737-9986 is the number here in the studio.

10:06

Um, and we’re obviously talking about taxes. It’s tax season It’s a busy season. I have a few people that say they still haven’t received their refunds in 2024. I will tell you that um if you haven’t received it yet and it was filed on 11.

10:22

3 or right around that date because you waited till the last minute. Um you you need to go ahead and either get a hold of someone at the IRS, and we have found that they are answering the phone.

10:34

Now resolutions are running a little slow, but they have been for a number of years. So it’s not something really brand new. But it is something that we want to make sure that we have going in the right direction.

10:47

So if you have a situation and you need help or you You’ve got a tax issue out there. Well, you know, that’s what we do. I’m a that’s tax resolution, right? I’m an enrolled agent licensed by the Internal Revenue Service to do taxes and representation.

11:01

I have never, ever, ever worked for the IRS. Let’s clarify that just in case somebody thinks I have. I have not. But I have been, I have passed all their exams and I have made it to a point where I can do resolution.

11:17

I can help people. do what we need done and go from there. But you know, again, it really does come down to if you have an issue with the IRS, your best thing is to move forward with some sort of resolution.

11:30

And um I do want to say, you know, if you’re working with one of those really big companies, one of the worst things I have to say about that is plain and simple Most of the people A aren’t someone you can sit down and talk to because they usually um sell your account to somebody that works for the big guys. So they’re also small companies that work with them.

11:51

Again, you may end up with an awesome person. So that’s not necessarily, but if they’re in Texas and you’re here, it can get a little frustrating. And then also if you haven’t Um, you know, if you haven’t heard, normally they’ll just start billing, right?

12:04

They say, oh, well, we you know it’s gonna cost you $10,000. So start paying us $500 a month or whatever they work out with you But meanwhile, you really haven’t found out what they’re going to do for you.

12:15

I mean, almost always do they have a minimum amount they’re going to charge you before they even know really what they’re going to do for you Personally speaking, doesn’t work for me. So you need to make sure that you are already dealing with this information the right way, right?

12:32

So if someone’s gonna do resolution, find out what kind of resolution. And then find out what it’s going to cost. And find out if they’re supposed to file five years of taxes for you, if they’re doing whatever it is that they’re doing.

12:44

I mean Just make sure that you’re not signing a contract and then moving on with that contract to go from where you’re at. All right, we’re going to take a quick break and then we’ll get to Logan.

12:53

That way we can spend plenty of time with him. We’ll be right back with the Dr. Friday show. Alrighty we are back here live in studio and Logan thank you very much for holding through that break and I will be more than glad to hopefully answer your question.

13:08

What can I do for you Logan? Yes ma’am. Uh I think you touched on it a little bit earlier. Uh bought a uh natural gas tank list water heater to replace electric tank water heater uh just at the end of last year and when I got it it said something about a uh rebate or a tax rebater uh six hundred dollar tax credit.

13:32

Yep Right. And uh so I needed to I’m just kinda curious to know what all I need documentation wise, I guess when I have my taxes done. Yes, you will need to have I ideally in my world I like to see the uh the invoice, the receipt, whatever you have, and then make sure on that, because the one the at Birch is windows, the manufacturer

13:53

ID number was not on it. It’s a five digit, four or five digit number, letters and numbers that they will provide to you. It’s not a real long number. But it should be provided by the company.

14:03

So if you brought it Home Depot or whatever, I’m assuming it might be on the receipt, but if it’s not, you might want to try to call before you get to the tax office because they will need that to get you your credits. Okay.

14:16

And that’s the manufacturer ID? Yes, manufacturer ID. Okay. I appreciate it. I will do that. No problem. Yep, and I’m glad I found out too because I mean normally up until now we haven’t had to have that.

14:29

You know what I mean? So that’s just a new thing for 2025. Okay, okay. Sounds good. Appreciate it. Thanks, Logan. Okay. Thanks. All right. Let’s get Kim on the line. See if I can help her.

14:40

Hey Kim. Hopefully you’re staying warm. I am. Thank you for taking my call. Hey, I am in a really wonderful position where my mother is wanting to pay a hundred and fifty thousand dollars on my house mortgage.

14:58

And um I don’t know how she’s gonna just directly pay the mortgage company. And I don’t know, do I need to claim that on my taxes or what what do I need to do No, um you will not do anything.

15:12

Um and thank you, Mom. Um so in mom’s case, since it’s gonna be 2026. It’s called a 709. It’s a gift tax return. Theoretically, she can give you 19,000 without filing this form. And I’m assuming this money sitting in the bank someplace she saved the money.

15:30

So she’s like, hey, honey, you know, let’s just make life easier, pay off the mortgage, whatever. Um, which is an awesome mom. Anyhow, um So whoever does mom’s taxes or if you help her, make sure the year she does that that they file the 709.

15:44

And basically all this does is it takes it out of her lifetime, which is like 15 million she can give away. So most of us will never get close to that number, but it’s just a form we have to file.

15:55

There is no taxes to her either, assuming that the money she has is like sitting in the bank. Not that she’s taking it out of 401k or you know I’m just saying assuming it’s already in an after-tax situation neither of you will pay any kind of tax So she just needs to have a paperwork of 709.

16:12

And it’s really that simple. It’s um we do them all the time. Uh but you know, as long as uh you guys are both US citizens, which it I’m sure I mean you are, then we don’t have any limitations for gifts or anything like that.

16:28

Wow, that’s wonderful. I I wasn’t expecting it to be that easy. Yeah, we try to keep it simple. But yeah, no problem. So just if she decides to do it, just and all she’ll need is your social security number or whoever does the taxes, social security number, address, and legal name.

16:44

That’s all She’ll need from your information so her tax person can complete that form. Okay, okay. And the 709 form for her. But I don’t I don’t know. Nothing. It doesn’t show up at all on you

16:55

Nothing. Wow. Okay. Thank you so much. No problem. Thanks for listening. Okay, thanks. Thanks. Bye. Okay. Bye-bye. All right. So that was a great question because I meant to bring up the fact that in 2020

17:08

You can have $19,000 per person. So theoretically, if mom wanted to give her $19,000, she could do that without filing this form, the $709. None of that has to play in. to it. If uh if one of them is married, they can each give 19,000.

17:26

If she has uh you know so if she’s married mom could have given her daughter and then the daughter’s husband each nineteen thousand but um You know, in this kind of situation, it’s just very easy. And so there are ways.

17:39

I have a number of parents that are pretty awesome, to be quite honest with you, that are um likely to put a down payment on a house for their children, pay off a mortgage, have more than one of them that’s done that. Um, you know, all those kind of situations.

17:56

I’m not a financial planner, so I’m not gonna tell anyone, but I think it’s pretty nice that any parent might want to I mean a lot of times it’s your inheritance anyways, but they feel better. Hey, you know what?

18:06

This takes the pressure off and I can do this without, you know. causing any kind of conflict. So um no big deal. You’re in great shape. So the exemption again is 19, but if you want to give more you can.

18:18

Only people that we have any limitations would be non-US citizen spouses, you have a limitation of $194,000. But theoretically you can give just about any person $19,000 without any kind of pay paper trail.

18:34

You just need to have name, uh, if ever audited, you would need the name and Social Security number of that person. But other than that, no pap Issues. Okay, so uh that being said, if you want to join the show, you can 615-737-9986-615-737-9986.

18:54

So we have a couple things that are different this year than we haven’t had in uh in the past or last couple years at least. We used to be able to write off Your credit card interest, your car interest, all of that on a schedule A back in the day.

19:08

But that’s been a long time. And now we do have the auto interest Again, this is a no tax on car loan interest provided under the LBBB. Deduction is available for purchase of new vehicle.

19:23

Not a lease, not a use. It has to be a new vehicle. And you know, there is some other expectations there that you have certain type of car. And all of that. So you do need to make sure these are the kind of things if you purchase the new car, you need to bring in the paperwork for the new car.

19:42

One, you might qualify for the sales tax as well. Um, and then you might want to make sure that it has the You know, the fin number is 100% most important thing. You can only write off to $10,000 of the interest.

19:53

So if you went and bought yourself a Maserati, I don’t know if it would qualify, but if it did, you’d only get $10,000 of the interest interest. So not one of those things that you’re going to have, but um again, the other thing is overtime and the other thing is tips.

20:08

So again, be very careful on the whole conversation of tips overtime because I just feel that we’re opening up a situation where there is going to be a lot of preparers that or people, I shouldn’t call them preparers. These are people that throw some numbers on a tax return, don’t have any accountability, don’t even put their name on these tax returns. usually and then they’re saying hey we’ll get you six grand back and you’re gonna pay me a thousand when you get it it really upsets me to be quite honest. It’s like any profession when you find out there are people out there that cheat that profession And you’ve worked hard for 30 plus years in doing it and trying to do your best.

20:50

I’m far from perfect. I’m sure I’ve made more than one mistake, but never intentionally. Never did that to to do something like that. I may have, you know, may have made a typo or two.

21:01

I won’t say I haven’t because after you do the number of returns I’ve done, there are times when that will happen. But I stand up, you correct it. Anybody that actually does taxes, if I make a mistake, people, I’m gonna stand behind that mistake.

21:16

I I will fix it or I will pay the penalties. I won’t pay your tax because you would have paid it no matter what. Um, but I would pay the penalty because that is a mistake I made If you make a mistake, we’ll help you negotiate penalties, we’ll help you negotiate interest.

21:31

But you know, again, you have to be accountable for the mistakes you make. That’s the way I have always done my business and hopefully more people do that. So if you’re interested in enjoying the show, you can 615-737-9986.

21:45

615-737-9986. I had someone email and say, I can’t Keep saying EA. What is an EA? Sorry. I just assume everyone knows these things. An enrolled agent is an individual that is licensed by the Internal Revenue Service, meaning we’ve taken exams that they have done and three different exams. And we have passed and then we have been certified and background checked and all that good stuff. And then we’re allowed to represent taxpayers in front of the IRS.

22:16

We’re also allowed to file, e-file, tax return. And we have to every year have a number of CE credits to keep up our education. And and continue to do that. So if you have someone that doesn’t have uh either an EA or a CPA, then you have someone that’s probably not really been licensed.

22:38

Now I’m not gonna say maybe they’ve been doing taxes forever and they are they are educated in the world of taxes, but you know, if they are registered, then they should be registered one way or the other. Um, as far as I’m concerned. concern. But if you really want someone that’s going to be there year round to protect you, then you need to make sure you go to an office that’s going to do that. One of my biggest pet peeves of the big houses, you know, the the companies that only do taxes during tax season is that uh in my world love letters from the IRS don’t just come January through April. They come all the year round. And sometimes they pop out of nowhere and they come back at us even when we think we have resolution and different situations or

23:22

You finally get one thing and then the IRS comes back with a whole nother situation. And if you’re not, if you don’t have someone that’s going to be there year-round to represent you, then you’re trying to represent yourself.

23:34

Or You’re paying someone else to do what maybe should have been done by that person in the first place. I’ve had a couple of cases this year where even simple things, you know what I mean, like something needed to be amended.

23:48

And uh the person basically wasn’t there, so amendment couldn’t be done because their offices are closed and they send them to someone else. You need to have that because, you know, statements come in late.

24:00

People change things, amended 1099s, amended W-2s, and then you might have to amend your tax return and your tax person needs to be reached so you can do that. All right, let’s see if we can take a really quick break and then I’ll get Charles so that way I don’t have to cut it really tight.

24:15

We’ll be right back with the Dr. Friday show Alrighty, we are back here live in studio. And so let’s get Charles who was nice enough to hold through that break. See if I can answer his question.

24:30

Hey Charles Hey, how you doing? I am good. What can I do for you today? Uh well let’s see. Uh I’ve got a kind of a a deal I’m gonna work on and I want to get a uh Helco loan. And with that money I’m gonna uh buy some land and uh use it for a a business.

24:52

Mm-hmm. Can I write the interest off on the Helco Um well uh h you m you mean a heatlock, right? Like a it’s secured against your house. Yeah, he’ll lock. I’m sorry. Okay. No, it’s right.

25:06

No, I knew what you meant. Um but the answer to your question is um theoretically it it would probably it would depend on how you set it up. You may want to set up the property. Since it’s in your name, Charles, and the business, it may be is it a sole proprietor or is it gonna be some sort of LLC?

25:24

Do you know how that’s gonna be right now? Okay, what I got is it’s um some just plain land anyway. I’m really interested in land and uh I’m thinking that I could put some sort of like a landscape business on it or a convenience store or something like that, you know. Uh right. I mean I love dirt. Don’t get me wrong. I think that’s great. But dirt in itself can’t be depreciated. So and it’s very hard to rent, I mean you can rent it. I mean people can grow crops and things and you can receive a portion of it as a a farming thing. Or you can go into like you said landscaping convenience store put a double wide on it and have someone

26:04

And rent it for their business, something. I mean, depending on how much you’re wanting to invest. The building that you put on it, we can depreciate. The land is not, but the whole loan could be, if you have rental income off of that property, you can then. take the interest off it along with all the repairs, maintenance and things like that that you have going into it. Okay, what about my equity loan? The interest I’ll be paying on that

26:29

Well I mean the HELOC is secured against I mean you have yes the the HELOC will be secured against your primary home but you’re using that as the funding to that property, correct? Correct, right.

26:42

Yes. So you’re not going to be able to do it. Right. I mean you’ll just have the HELOC. You won’t have another mortgage. The HELOC will be the hundred percent that you have or your cash plus the right so yes the interest would be tied to that property

27:05

Okay, but I can write it off, right? Yes. Okay. All right. And uh one other one too. Um okay, wait a minute, let’s see. I’m uh I’m just not quite clear, crystal clear on that. Uh I just my money wanna buy the land and I really don’t know what I’m I’m gonna do with it.

27:30

I do have some you know, some ideas but that’s what I was asking. Is it you know, it may be a year or so before I get anything going on there. You can’t write it off until you actually have a functional rental.

27:42

So if you start buy it today and you don’t do anything for the year, the interest is not going to be a tax deduction because it’s not tied to an to a passive investment or anything else. Now HELOCs themselves can be written off if it’s less than 100,000 right on your Schedule A, but nowadays people have a difficult time meeting itemization and you’re tying this to your rental property.

28:08

I mean what you’re calling investment property. Maybe I should call this an investment property. And so we have to make sure you understand. Okay, so I will not be able to write off any of the interest I’ll be paying on the Helco uh loan

28:22

No, is that what you’re telling me? Um not until it’s actually an active rental. No sir. It has to have a rental you have to have the ability to make, otherwise it’s just an investment

28:32

And it’s not a deduction. I uh I I personally would be owning the business on there. So how does that differentiate with the rental situation? Well I mean If I mean if it’s part of a business, then the business is uh generating income and you could tie it to the expense, but I think any tax person would tell you it’d be better to keep the property separate than a business if there’s a lawsuit.

28:57

You really don’t want I mean you would want to have them separate. I would definitely talk to an attorney if you’re buying dirt and running a business because you might want to protect that asset just in case somebody sues you There are ways of it.

29:14

So uh so there would be no way Is that I could just buy that land and write the interest off uh on the uh the loan on on my residence. Not without turning it into a farm or turning it into a business You have to have some reason to write it off.

29:30

Otherwise, it’s just an investment and that is not a deduction. Okay. All right, so I’ll read Now there’s no uh uh w whatever value to to uh rental and stuff like that that they go through.

29:46

So if I rent the thing out for a hundred dollars for a year and and have a guy uh use it to cut hay on that that would fly, right? Not necessarily you have to charge fair rent because otherwise it sounds like you’re underestimating i mean if you paid ten thousand dollars for and you’re charging a hundred dollars maybe that would be fair but if you paid a hundred thousand dollars and your mortgage is you know, a thousand dollars a month, I’m just saying, or whatever, and you’re only collecting a hundred, they would say possibly you’ve underpriced the rental. So again, there is some rules you have to abide by if you’re gonna do farming and things.

30:23

Which is what you’re talking about, land leasing. You would need to make sure it’s the same price as if somebody rented somewhere else. Yeah, it’s the the the uh property is located right on a major highway, just right at it

30:35

Addiction and uh I’m looking for ten years down the road, you know, it’s big enough that you know you can put Kroger on there or something. It’s a big big big corner lot, yeah. And uh so I mean the investment is there, it’s just the question is

30:50

I mean, will you be able to immediately be doing something with it or not? I’m not sure. I mean that would be some planning, but I would say, you know, the best thing to do would be to turn around and have that conversation with a good tax person and I would definitely say once you’ve purchased the land, talk to an attorney to make sure you’re protecting yourself because you don’t want one to to put something else in risk is all Right, yeah, yeah. That’s all I figured, yeah.

31:14

I need to get some an insurance policy on that code of liability. Yeah, okay, wait just one more. I got uh capital gains. Okay, um let’s see. Uh right now let’s see example here. I’ve got ten thousand in long

31:32

And I’ve got uh that’s a gain, and then I’ve got twenty thousand in short, that’s a loss. What can I do with that So you have $20,000 in short-term capital gains and a $10,000 in long-term capital gains.

31:48

Right. Is that what you said? 10,000 is gained, yeah. 3,000 of that once you’ve passed the the negative. So the 20 will wash the 10, leaving you with a $10,000 loss. Your tax return will show a $3,000 loss.

32:11

The other seven will roll over till next year. Okay. And how long can that in other words if I next year I don’t use I don’t use that seven. Is that what it is? Okay. So I mean just saying in these numbers

32:25

The seven you’ll get to claim another three thousand dollars. You’ll claim another three thousand dollar loss in twenty twenty six, for example, and then it will only be four. And that three thousand every year will go off, you’ll be able to use it in the next couple years or wash it against future gains if something happens in the next year or two. I hope so. I hope uh our good president keeps his mouth shut. We will find out. I’m hoping you didn’t put any bets on that. though we all know that okay well i really appreciate your information all right thanks all right if you thank you bye bye all right if you want to join the show you can 615-737-9986. 615-737-9986.

33:18

Taking your calls. Talking about taxes. Many of you have um a lot of different uh situations going on and um you can easily just give me a call, give me a scenario, and I’ll do my best.

33:31

But otherwise you may want to email or call um our uh our office at 615-367-0819 on Monday. No one will be answering before then but on Monday um and we can set up a time to help you as best we can and then set up an appointment if you’re a returning client make sure Make sure you are on our calendar or make sure you’ve uploaded your documents into the Smart Vault so we can get you started.

34:00

And now I know many of you, I mean some of you have started, but I mean let’s be honest. Carol Schwab’s not going to have anything out till probably the middle of February. So many of us are going to be holding off on some of that.

34:13

And so you know hurry up and wait is often the way we work around. here but if you have the ability to get everything in prior to that that’s awesome we’re working on taxes as we speak many of them we’re trying to get prep now i will tell you you some corporations and even individuals on uh some of the forms the IRS has not yet released so we’re not able to completely finish everybody’s return but within the next few days I think they’ll have a lot of them I think two seven was the last time I saw one of the the forms I’m waiting for will be we cleared off so another week or so and then we’ll be in good shape to finish finish up everything we need to finish. You do want to remember 1099s, W-2s, if you’re an employer, my suggestion would be is to put together a little note or even just have an Excel spreadsheet in your office so when people call they have the ability to receive those overtime and tip numbers if you did not already put them on box 14 um maybe even just putting together some sort of notice and and emailing it out to each client uh or employee excuse me and making sure that you have 1099 all of your subcontractors and that would also include all of us that have rental properties Remember if you have rental property and you have a repair guy that does your heating and air conditioning or you have a handyman that goes out and does things, you have a lawn guy that cuts the grass.

35:33

We are responsible for doing 1099 to those companies and making sure that we have submitted those forms out to them. And so they are due Monday. So if you haven’t done them, it’s not too late, but it’s also a good practice because is um one of the things that happens if you are ever audited. It certainly is one of those wonderful things they turn around and say, ah, you know what, you didn’t do that. So prove you paid it.

36:00

And then there’s a penalty that they can charge up to $500 for each. 1099 we didn’t issue so we don’t like penalties, right? All right, we’re gonna take our last break if you want to join the show 615-737-998

36:13

We’re going to be right back with the Dr. Friday show. Ex-services, planning, business, and IRS negotiation. Visit drfriday. com. Alrighty, we are back for the last bit on the show.

36:29

So if you’ve been waiting to join the show, probably now’s a good time to pick up the phone 615-737-9986 and we’ve got Stuart on the line so let’s see if I can help Stuart Hey, how are you doing? I’m good.

36:43

Stu, what’s happening? Hey, um, I’ve got a question. I was uh working for a sales company for about two years And they hired their sales representatives. This company has business in multiple states.

37:01

They hired us as sales reps as ten ninety-nine employees, but they required us to do meetings, do trainings. um travel for trainings, uh things of that nature. And I received a letter in the mail.

37:17

I do not I no longer work for that company, but a couple of the other employees Um, I guess there is now a lawsuit for the way that the company is. Management of employment? Yeah. Sounds like that.

37:30

Yes, that is correct. And so I didn’t know if that is something I should even look into or kind of a waste of time. The main thing that they were saying is that this company I’m not gonna say the company’s name obviously.

37:45

Um uh failed to provide its workers with the pay and tax treatment afforded to employees, including payment of overtime if earned, and failed to provide its workers with employee benefits including but not limited to health, retirement benefits, paid time off. Worker compensation over time unemployment.

38:04

I didn’t know if this is something that I should have. I mean there’s probably nothing wrong with it. I mean the fact is when you were hired there was probably disclaimers telling you, hey, you’re being hired as a subcon.

38:15

I don’t know this. I mean they should have made sure they understood you were being hired as a subflub, even though they may have told you certain times you may have had the ability to handle your own schedule.

38:25

You may have been able to work from home. Um, you know, there there may have been some, and that’s lawyers, you and I outside that my pay grade, to be honest. I will say if it gets settled, you’ll probably end up with certain amounts of of uh income and it would be reported as income. So it would become a taxable situation. But hey, every dollar you get, what you pay 20%, you still keep 80? I mean I’m just saying uh not a bad not a bad thing

38:51

Um, it just I guess just depends on um what you feel if there was misrepresentation or not. Because it sounds like to me they feel they should have been employees and I have been More than once on this radio, I even talked about situations where people misclassify employees versus subcontractors.

39:07

And it is a savings for employers in some ways. uh because we don’t have to pay the 10% match on Social Security and Medicare if we don’t list them as employees. And then if you’re a bigger company, there’s health insurance, you know, matches on 401ks.

39:21

There’s a lot of different things that are cheaper for me to make you a subcontractor than an employee. So I will say a lot. Salespeople do end up with I don’t know if they would actually have had to pay overtime.

39:33

Most salespeople don’t get overtime because the commission is over sand uh over normal What is it called? Minimum wage. You usually already make more than minimum wage. So usually the overtime is already built into your salaries.

39:47

But Some of the stuff they’re saying probably makes sense, especially if it was truly misclassification. So I guess it just depends if you’re still in that same industry, would your name come across, you know, would there be anything listed that could put you into a situation where you might not like to be listed, you know, between you and I?

40:05

That’s the only thing I’m thinking. But from the tax standpoint All I will tell you is if they win the case, it will be taxable income to you. But other than that, that’s not necessarily a bad thing.

40:14

If they truly misclassified you, we need to make sure that companies are not doing that because it’s it’s bad for all of them. Okay. And that was kind of my main question because they they classified us as a ten ninety nine, but they we were not able to set our own schedules.

40:29

And so I think that’s kind of the same thing. You should have had the ability to make your own schedule. You should have had the ability to um choose your clients in some cases. You know, there there is a rule of what an employee versus a subcontractor.

40:51

People hire me as a subcontractor. I tell you when to come in. You, you know, I mean just saying I have more control. And that’s where the misclassification comes, to be honest with you.

41:00

But I would say it can’t hurt to get a lot more information because it really does sound like and there are a ton of people that misclassify employees. Just let you know. Yeah. Okay, Steve.

41:10

I appreciate your time. Love your show. Thank you so much. Thanks, sir. All right, let’s see if we can get Steve on the line real quick here. Uh we have about five minutes. Let’s see if we can get him on.

41:18

Hey, Steve. Hey, I just I think mine’ll be quicker than five minutes. I work for a local government as a fire captain and we just got a notice From HR saying that our overtime is not going to be tax free because we have an administrative role, even though we’re out in the field with the firemen.

41:40

They have a lot of little clauses that people are gonna find out about. I mean I I only found out about a couple of these recently. But they’re basically gonna say that administrators don’t qualify and if they’ve got you listed as an administrator or a manager, they don’t qualify.

41:58

So basically they’re trying to you know, limit the people that are going to get the qualification. Um but yes, I I have read that that is you True that administrators or or even uh upper management are not going to qualify even though you do have and they do put you on overtime. that you’re not going to fit the criteria for. It’s under the Federal Department of Labor. They’ve got a whole bunch of rules they’ve put in to see who’s qualifying, who’s not. Where’s the best place to find that list of rules?

42:30

Um if you go under Federal Department of Labor, you’ll find it right there. I just read some of it today Okay, thank you. No problem. Thanks. If you can’t find it, just um email Friday at DR Friday and I’ll send you that’s Friday at drfriday. com and I can send you the link Thank you. Okay, thanks. All right. That was less than five minutes. Steve was a hundred percent correct. And I think that we’re gonna be finding a few more of these little things because um again, I am gonna be quite honest.

43:00

I think as a tax person, we are trying to figure out what this is. This is a brand new tax law. We’ve never had this one on the books, even bringing it back. We haven’t had tips and overtime being um. uh something we’ve dealt with in the past and uh the law was kind of brought in for what they consider the I mean a fireman you think is a working class in many ways, but um they’re they’re trying to bring it in. They limited it by income, $75,000 for an individual, $150 for married, and it kind of means test is out Um, and then they’re trying to bring it down to I think they’re trying to find companies, not to find ways for companies to be paying overtime and then giving it like as a kickback in a sense. I don’t know that for a fact, but um it is uh you know part of the OBBBA situation. I I really think that they’re they’re trying to come up with a way of making this a situation where it’s a little bit better for some. But anyways, it’s going to be confusing and make sure again there are boxes that are required to be checked on the tax return. If you are doing your own taxes and I’ve had more than one person that turns around and says, oh, you know what?

44:16

I checked this box and I had a smaller refund than if I checked this box. So I went ahead and checked the one that gave me the bigger refund. You don’t do that. Okay. You need to make sure if it says that are you qualified for the Federal Department of Labor rules and it says yes or no, you have to know the answer to that because one is going to give you the credit, one is not.

44:36

And if you don’t qualify for it and you say you do, it is going to come back at you with penalties, with interest, and that’s going to hurt a lot more because I really do think this is going to be one of those areas that IRS will open up for audits. Because 2025, a lot of employers are not putting that information on the W-2s, which means a lot of people are guessing, man, are doing their best to figure that out.

45:01

But it isn’t going to be easy for anybody. So just Make sure you answer that question. If you don’t know the answer, make sure you find out the answer before you check the box so you have something that works well on your, you know, meaning how you do it, how you’ll track it, how it’s going to work for you. All right. So we are down to the last oh minute of the show. So let’s go through some of the information you might need.

45:26

If you want to set up a tax appointment, you can go to the website drfriday. com. There is some, I think there’s still a few openings on there And if you’re a returning client and you don’t see anything, please call the office direct.

45:38

615-367-0819. 615-367 0819 is the number you can call Monday and set up an appointment. Or if you have some questions and you’d like to try to get the answers to those we’ll do our best to get to you.

45:55

You can also email Friday at Drfriday. com again Friday at Drfriday dot com and we’ll do our best to return your um your questions uh as fast as we can and then hopefully you guys are actually having a wonderful Saturday.

46:11

This has been um a great uh day and we’re getting ready to work on more and more taxes. Things are being updated as we go. But again, if you need help with taxes, you can call our office 615-367-0819

46:26

And um if you’re in the Mount Juliet and you have a appointment you want to have up there with Donna, hey, call our office and we will give you direct information for her. Um but if uh you want appointments, give us a call. As we always say in Australia. Cop ya later

00:00

Hey, I’m Dr. Friday, and the doctor is in the house. We are here on this cold Saturday. Good day to be inside, not have to worry about being outside. May mean that many of you aren’t really listening today because you’re not in your cars going all over the place like you usually are.

00:16

But today we’re going to talk a little bit about a call. I had a phone call earlier this week from another tax person. that I worked really well with. And Donna, she she also does taxes.

00:30

But anyways, we were talking about the Trump account and the election on the 4547. and who should be filing it. And I’ll be honest, when that first came out, I was thinking it was only for parents that had had a child in the year of 2025.

00:47

And then it was going to be for those three years. Not not taking a bigger picture or looking at a bigger picture. And so I want to talk a little bit about how this is really going to affect anyone that has a child 18 and under but I should let’s just say seventeen under because in the year which they turn eighteen it becomes um an adult as far as for this account. So if you have 13, 14 year olds and maybe you’re thinking, I would love to have some sort of account, not a 529 plan, because that sometimes limits Und where uh the school or what they can do.

01:20

They cannot have IRAs because they’re not working yet. So this Trump account is really A a great thing uh because for a lot of my parents who are looking for find out or even grandparents or employers that are looking to put up to twenty five hundred dollars bonus into their uh employees children’s accounts, this all works.

01:41

You cannot be an employee. The employee can’t do it. The employer could do it or grandparents or you as the parent can put it in there But anyways, up to $5,000 a year. If the child was born in 2025, 26, 27, 28, they’re going to add another $1,000. to this. But I mean this is huge because think about in 18, well in some cases 18 years, there’s also a couple other organizations Dill is gifting a supercharge additional funds to the account.

02:13

They’re putting $250 for the first 25 million children. And also another company was doing it as well. But there’s a couple others. So if you have a child, but they’re basically saying that if you contribute that $5,000 for the full 18 years or 17 years.

02:33

Uh plus that 1,000. When that child hits 18, they would have $377,000. If they continue to let it grow and work, they would have um an additional um two million dollars by the time they’re 65.

02:50

If you just put zero contribution just let that one thousand dollars grow over their next um 10 years from when it happens, that would be like $17,000. I’m not a financial planner.

03:03

I’m not telling you I’m I’m not gonna really take calls on how that’s all crunching or working because that’s not my expertise. Expertise. But to me, it is going to be taxable when the children take the money out, unless they use some of it for first-time home buyers, because there’s a exclusion you only have to pay tax ordinary tax i should say on that you don’t have the penalty involved there is some college credits you can get out um uh that you wouldn’t have to pay the penalty on um but ordinary income tax. So this is going to be uh interesting because it is not tax Deferred, yet when the kids take the money out, it is taxed.

03:40

So in theory, there would be some double taxation in my mind, unless I’m not fully understanding how this works It looks like the employer, if they put in the $2,500, that is deferred. But the money that we’re putting in as parents or grandparents or or something like that.

03:57

As far as I know, that is not deferred, but yet it would become this is being treated like an IRA. So there’s still some moving parts. I have a question on one of it would be is if I’m putting after tax dollars in, is there a way to track that so that

04:10

We’re not paying tax on that original contribution at least, not so much the growth, because the growth would be taxed possibly or not, but uh these are not Roths, these are traditional So this is a wonderful thing because normally we can’t start doing anything for kids until they actually get the first job. And if you haven’t gotten your first job yet, and normally seven or eight-year-olds or four-year-olds

04:31

Do not have jobs. Um, so this would be a way of adding money up until they really do get their job, and then Starting an actual Roth or an IRA, whatever you you find to be the best thing for them.

04:45

And then when they’re working, contributing with that. This will stay in the child’s name. The parents don’t have the ability to spend this money. It is in the children’s name. This is supposed to be a way of helping that generation.

04:56

So think about 15, 20 years from now All those kids that might have been fortunate enough to have, instead of buying 15 Xboxes over their lifetime and other things, putting the money into this where they’ll act actually get a really good start, maybe even have money to use to pay for their own college or to start their own businesses. This would be a serious start for that generation um that maybe right now they wouldn’t have that kind of start because normally, let’s be honest, the the parents wouldn’t be sitting on those funds, especially if there’s multiple children. The form of 4547 has to be filed with your 2025 tax return.

05:36

You have to elect to have that done. So whoever’s doing your taxes, if you know this needs to be part of that conversation, we need to have the conversation. Are you going to be doing this?

05:49

Do you want to have this account set up? I don’t necessarily unless somebody that’s listening and you can call in 615-737-9986. 615-737-9986. If you have a little bit more knowledge, if

06:05

If you’ve read something that might not be a pro, I’m not seeing anything because I mean there’s no mandate. You don’t have to contribute to this. You don’t have to do it every year

06:15

But again, if you happen to have an employer that might want to help with that instead of bonusing the money some other way that might be taxed, this would be not taxed. Maybe you have grandparents that are putting money into something or want to put money in or they’ve started a savings account for the children.

06:31

Maybe this would be a great way for for them to help. It doesn’t always have to be um the parents, but you know, I mean obviously it’s designed to help this next generation get a leg up.

06:42

So it’s called the Trump account. You do have to elect to be in it. Not every child is going to fit in it and not everyone’s Going to qualify, I guess, for it. Um, there I’m sure there’s limitations like everything else in life, but this is something you need to be bringing up with your tax person to make sure that they understand, you understand. what you have and where it’s coming and all that so that you make sure you have the right information going through Uh so that way, sorry guys, you hear the the dogs in the back there, but um but uh anyways um It’s a it’s a snow day. I couldn’t put them outside.

07:22

So um we just need to make sure that if you are filing your own taxes or you have your own tax situation that you have the ability to take and put that all um in the in the knowledge of what you have or who you have and all of that. So just make sure that we have that going forward and that you don’t forget if this is something you’re interested in in having this conversation with um your tax person because it’s kind of important all right so now let’s talk about um a couple of the other things that are getting ready we’re gonna get ready to file your 20

07:55

2025 taxes. We some people call it the 2026 tax season. Either way, you want to make sure direct deposit Is going to be basically something you probably want to look into. You’re going to want to make sure that you have reviewed some of the new tax laws, right?

08:12

Because we have a number of new tax laws that may affect you. I’ve talked to a couple. people this week in fact and some of them were all talking about um the uh the interest on new cars like oh I brought a new car

08:27

You know, and that’s perfect, you know. I mean, but does it apply to the situation? Are you able to do something with it? I don’t know because you have to have the FIN number, there’s information you have to understand, but you want to make

08:40

Make sure you have that information when you go in and get your taxes done because that kind of information is going to be key when it comes time to making sure that you’re not leaving Anything on the table. Another huge tax question.

08:54

We covered this last Saturday, but I want to again make sure you understand that nothing on your W-2s are going to change when it comes to overtime or tips. Nothing. You’re going to have the same withholdings.

09:06

You’ll be reporting the same information. Everything is going to be going through The secret is when you file your 2025 taxes, you will be asked, how many hours of overtime did you have?

09:20

What was just the overtime? Not the rate, but just the overtime. Um, and then also tips. How much did you receive and tips? And then based on your income and everything, you will get potentially some money back or applied to the balance due.

09:35

So Really important to make sure you’re watching out for all of this kind of situation because let’s just be honest, it isn’t something that we’re usually asked. A lot of employers were not set up, even though because this passed part way through 20 2025, a lot of them were thinking, oh, I didn’t have to really get ready for this until 26, but no, they backdated it to 2025.

09:56

And so having it in 2025 means that employers are really scrambling in some cases. to get that uh information. I know in our office we’ve worked pretty hard, but um you know I mean obviously in some cases people may not have been even reporting it as overtime. I’ve talked to a lot of employers where they just put in the total amount that they want to pay the kid people the the employers or employees I should say.

10:24

So you know this person worked you know 40 regular and 15 overtime they add it all together and they just put that on a sub and that’s all they did. Now many of them still tracked it manually.

10:35

So this year for 2025 the IRS says hey we’re not gonna really um penalize anybody because it was set up and it was went backwards. But you as an employer are responsible for providing those numbers to the employees.

10:51

It doesn’t have to be in box 14. It does need to be on a sheet of paper or something that you can provide to them because if you as an employee are just looking at your overtime on your last pay stub, you are going to be wrong when it comes to the amount you’re putting in there unless. you’re only taking a third of it. Now if you want to do that, you would be okay because a third of whatever that overtime dollar amount is is what you would be credited for. So you need to make sure that you’re looking and doing all of that correctly because if your employer, or maybe you’re not talking to your employer

11:25

You have your if you have your final pay stub and you do have overtime or tips, you just need to make sure that your number is going to match what might be being turned in by your employer. And I know many times people are like, well, my employer is not talking to me.

11:39

I left on a bad situation. I can’t get my W-2. Um, and if you don’t have your final pay stub, you’re gonna have a very difficult time justifying the number you put on if you don’t have something in box fourteen and your employer has not provided you a number because the information you’re going to have would most likely then be something that you’ve just kind of guessed at. And that’s not one of those categories you want to guess at. So Again, if you want to join the show, you can 615-737-9986-615-737-9986.

12:14

We’ll take a break. We’ll get back to some phone calls and some more about coming up tax issues. after this break. We’ll be right back. All right. So for all of my digital currency people, this was in 2024 too, but they are pushing the 1099 which is the disposal of your currency. You need to make sure that you are filing all of that properly. What that means who sent it, who’s getting it, what all that means. So bottom line is when you have it, you have to have when you purchased it, when you sold it, what type of currency when you did the stable coin uh stabling your coins if you converted them into multiple coins because that seems to be the biggest misconception I have when talking to people about digital Digital currency, a lot of times they’ll say, Well, have you sold any of your digital currency? And they’ll say, No, no, I I didn’t sell anything.

13:04

I I um I only changed types of coins Well, anyone listening probably understands that that in most cases would mean that you sold your currency. So if you went bitcoin to lithium or lithium to some other, um, that is selling It doesn’t mean you have to sell it back to US dollars.

13:21

It just means that you have converted one type of coin for another. And at that point, you need to be reporting gains and or losses. And some of those losses may not be reportable or acceptable depending on the information. information you have and keeping track of the proper digital um what you know I guess the easiest way tracking your your cost basis, when you purchased, how long you’ve owned it, all of that. Because in many cases, it’s it’s not being tracked, you know?

13:47

So you have to have the ability to track your current If you don’t, your cost basis is zero. That’s what the IRS has ruled. So if you can’t prove that you purchased this because you purchased it for different types of conversions back

14:02

10 years ago and you weren’t tracking it because you thought you were going to be kind of off grid unless you have ability to personally recreate And follow that trail and all those and then making sure you reported the gains as they came through. Because I again I’ve had many people that have been with uh digital currency for 10-15 years but for years they were not reporting it.

14:27

So any growth, anything they had, you have to go back to the original purchase. In some cases they won. They were gamers and they they actually won the money through doing different things.

14:37

So there was no basis. then the then it became valuable and then going etc etc but unless that was reported and that gain was reported you are not able to then say, well, here’s my basis as of today.

14:51

That’d be kind of like getting a step up in basis before you even pass away. Doesn’t work that way. So you want to make sure that you have all of your digital currency. You want to make sure you’re doing the 1090 and following that through. The salt tax deduction, I said, should say salt deduction. We have that on our schedule A. We would basically consider that where we have our our state income tax, um, you know, your property taxes, um, in some cases personality taxes.

15:23

We don’t get we don’t have a personality tax in Tennessee from the purpose of tax deductions because we don’t have a state income tax. So all of those. So we have sales tax and property tax.

15:34

That’s the two things we actually get to deduct. We cannot deduct our car titles or our car fees, our titling, um, because we don’t have a state tax. Therefore, you’re not paying something that is actually deductible.

15:49

That’s just a fee that you’re paying out there so again very important but it has gone up so we now have 40 000 per return which means if married finally separately you would each get 20 um otherwise 40 it was 10 so This is huge, especially for people that might have state income tax that might be listening. I have people in California, I have people in New York.

16:12

Those are the two larger, higher incomes. Um, and in both cases, they were leaving a lot of money. I I’ve told you about my brother, he pays about sixteen thousand a year in just state income tax besides his property taxes.

16:23

Um and he was only allowed to get I get 10,000 of it. So he was leaving quite a bit of money on the table. Now we have that. Um the only thing is that there is an adjustable income overall of 500,000.

16:35

So if you’re in the higher income brackets, you may have limitations, but we’ve had limitations. on the schedule A anyways. So that’s that’s an important thing for making sure you have the ability to do what you knew when you’re doing it.

16:49

We also have, of course, the $6,000 per a person over the age of six. Over the age of 65, 6,000 per person that you’ll be able to have. I believe that’s falling on like line 13. It’s a separate deduction.

17:05

Initially we all thought it was going to be added to the standard or itemized deduction. It is a separate line that’s kicking in. for that so we can track that separately so you’ll have that 12,000 and then whatever your standard or itemized deduction might be will still be whatever it is.

17:23

You do get that extra 2,000 if you’re single over the age of 65 or 1700 if you’re married each uh to to be able to um get that additional uh credit on your on your itemization or standard deduction. Um well they wouldn’t Anyhow, so if you have questions, you can certainly join us today, 615-737-9986, 615-737.

17:52

Taking your calls, talking about all the different things we need to talk about. 2025, the standard deduction. In 2025 is 70 cents per mile, 14 for charity, 21 for military and or mil medical.

18:07

That’s actually down a little bit from uh 2020. 23, but 24 is the same. So um, but 70 cents. It’s getting so important to make sure that you are tracking your miles correctly. Every mile is becoming a huge I mean really think about it 70 cents out of every dollar that you spend on your car will be a tax deduction for every mile. Um so You need to make sure you’re using something.

18:34

I use mileage IQ, not attached to it. I know online QuickBooks also has a mileage guide that you can use anywhere because this is also more and more money going out means higher the higher audits likely to be on that category Not worried about it if you have a proper log.

18:53

If you don’t have a proper log, then you should probably be a little worried because you need to be able to justify the deduction And walking in and saying that I I think I drove about 25,000 miles isn’t going to justify anything to the IRS other than totally disallowing you from that that they will completely disallow. So don’t do that.

19:14

Make sure you’re tracking your information, make sure you know what you have going, and then make sure you can go from there and and track what you need to track in doing uh the basic expense for all of those trackings. And remember again, employees, people with W-2s cannot deduct Miles.

19:33

We have no place on the tax return to deduct it against a W-2. Even if your W-2 basically says that, you know, you’re driving 15,000 miles a year. It’s built into your wage. It is not a deduction. for you. It is just part of your wage. Therefore you have to do what you have to do, but it’s not going to be something that you’re going to deduct off the off of it and same thing for home offices.

19:58

Uh home office is great for anyone that has a 1099 or is self-employed, but anybody that isn’t employee and you’re working from home and you’re like well I’m having to use my electricity and I have to set up an office and I have space that I having to use for my employer, the IRS has basically come down and said, yes, you do, but you’re not having to drive every day to go to work.

20:22

Therefore, they’re not considering any type of home office expense. for those employees. So again, all of that should be built into your wage. There is no deduction. So anybody has a W to and that goes for my truckers or any of them you don’t have the per diem you don’t have any of the um uh overnight stays and things you might have been able to to take if you were a 1099 as a W-2, you will be only taking what is there and then itemizing your usual mortgage interest, property taxes. and charitable deductions are the major ones that most people itemize.

21:00

So just making sure that we have, you know, that information. information because that is and again you have to have quite a bit of money to actually itemize. So um you know how do I you know inform know, how do I do it or you know, when should I do it? And anytime I have a new client, I always double check it. But most of the time, you know, if you’re a single guy and you got less than

21:22

$15,000 in interest, property tax, and charity, you’re probably not going to be itemizing. Um but if you’ve got 25, yeah, you’re gonna be itemizing So, you know, making sure that you understand how that works and what you’re gonna do and when you’re going to do it.

21:39

So new car loan interest deduction, which vehicles are you buying and qualifying? So far, the average car price in twenty 2026, they’re saying is averaging about 50 grand, uh, five-year loan, 232.

21:53

Um, so what the biggest thing on that is it has to be assembled here in the United States And it has to be on a loan. It can’t be a lease, needs to be a new vehicle, and it needs to um have an you know have to be paying interest.

22:09

Most loans would be for interest, but you know, some some have zero percent interest. interest and then you will need to provide that thin uh thin a fin number I believe is f I n number I’m sorry vin number fin number uh for the vehicle so that you have the ability to you know take that off some are as high as 70 seven percent they’re saying so this should give you i believe uh up to like ten or twelve thousand dollars in interest so it is a viable usable number you just need to make sure that it’s something that is going to apply for you. Don’t just go buy a car because they’re going to pay the interest or give you a deduction for the interest. Keep in mind, whenever you hear the word deduction, that is not dollar for dollar, right?

22:52

It I mean so if you if you’re in the twenty percent tax deduction and you spend ten thousand dollars in interest, you will get a deduction for two thousand dollars, which means you spent eight thousand dollars that you’re not getting any credit for. So it is not a dollar-for-dollar situation.

23:08

So never go into debt just to try to find a tax deduction. Never ever a good plan. Seriously, never a good plan. So if you want to join the show, you can 615-737-9986. 737986 is the number here.

23:29

Hopefully you guys are all staying nice and warm. We have a pretty snowy uh day outside, at least here in Spring Hill. It is Um definitely got some snow on the ground. So we’re gonna follow up, but we’re gonna take our second break here.

23:41

If you guys want to join the show, or you can also email Friday at drfriday. com Um we can get that on the show as well. We’ll be right back with the Dr. Friday show. Alrighty, we are back here live in studio.

23:54

We got Andy on the line. I think he held through the break, which I appreciate. What can I do for you, sweetie? Okay, no problem. That happens. Associated with all the craziness. Well, and if you want to call back, you can.

24:05

Otherwise, I will keep it going So I did want to talk a little bit about the I I got an email and someone asked, what exactly can they deduct on the interest from their car? So let me get a little bit more detail first.

24:17

You have to purchase the car after December 31st, 2024. So basically as of January 1st of 25. It has to have a lien secured against that loan You cannot have refinanced or done some sort of jerry rigging to get it.

24:34

It has to be secured against that car. And it must include a valid identification number, a legitimate lender or dealership, and the interest is paid during that year. You So some cases

24:47

Sometimes people will accumulate interest and if they pay it all off, they’ll forgive it. It has to have been paid and applied for that year. In fact, you should have a form. That would show what your balance and how much interest you have.

24:59

It has to have been manufactured and mainly used only on public streets, two wheels or more, cars, minivans, SUVs. Does not allow for RVs or campers. The gross weight must be under 14,000 pounds, and it must be new

25:17

Used cars are not qualified for this. It must have an original owner. The vehicle is primarily used for personal use. And the income uh and you must still meet the income requirements.

25:28

You will get which is $100,000 for a single person, $200,000 for a married couple, up to $10,000 interest. And then it will work its way out. So if you have $105,000, you might only get $5,000 of interest deductible.

25:45

So well give a little wiggle room there but that hopefully will make it work again the whole secret is new car you have to have a lender that is actually showing this interest paid And then the ability to go from there. And it must, thank you, Donna, and the fin must start with one, four, or five.

26:05

There you go. See this? Well, I couldn’t do the show without Donna. I’ll let you guys know that. She’s a sweetheart. So anyways, one, four, or five, the fin number must have those numbers starting with, right?

26:17

Must start with those. So okay, so hopefully that answers the basic questions for most individuals. But if you have more questions, you can certainly um Email us or give us a call Monday and uh make sure that you have already set up your tax appointments.

26:34

Let’s just be honest. If you haven’t set up your tax appointments you’re probably going to be in trouble. You really do need to make sure that you have if you you’re in the Mount Juliet area, you might want to just call Donna Blackwell.

26:46

I’m just being honest She’s awesome. We’ve known each other, gosh, I don’t even want to say how many years now. Uh Mount Juliet Taxes, awesome. She’s an EA just like me. So that means she’s totally knowledgeable.

26:57

In fact, you can see sometimes she’s more knowledgeable than I am in some of these things. Um, so if you um need to to find someone in the mouth, Julie, because you know I am actually in uh in the Brentwood area.

27:10

So that’s how we always make uh Donna, send me the number they should contact you directly at, or how do they make appointments at your place? Just so if they’re up in that area, they might as well call you direct.

27:20

So I don’t have to refer them up that way Um, so I can move that in. But if you want, so you know, bottom line, talking about EAs, Donna and I are both enrolled agents, licensed by the Internal Revenue Service to do taxes and representation.

27:35

All that means is that we basically um do taxes. That’s all we do. I mean, I’ve been doing it for 30 plus years. I think Donna’s right there behind me. She’s a little younger, but still basically in that same ballpark

27:47

And we basically don’t do, you know, we don’t do bookkeeping. We don’t do auditing. Now we have bookkeeping in my office. My brother does. But we make our our income by doing taxes.

27:58

That’s what we’ve studied, that’s what we understand, that’s what we’re constantly trying to figure out. Donna was the one that brought up the whole thing on the Trump um Trump credits for kids the Trump accounts.

28:10

Um I was still thinking this was only for people that had kids from, you know, 25 through 28. I never even put it out there until she brought it up that, you know, this is awesome for parents that have children.

28:22

They’re basically 17 and under and you’re looking for another way to put money aside for your children I doubt that, Donna. 615, if you guys are in Mount Juliet, or maybe you’re looking for someone in the Mount Juliet area.

28:35

Enrolled agent, totally important, okay, because if you are not, um, you’re just going to HNR block or one of the others, no disking them because Both Donna and I know people that basically have work for them. But if you’re looking for someone that’s there 24, well, I should say at least 365 days a year, when we do our taxes, we actually stand behind our taxes not give you a phone number to call afterwards. So if you’re in that area and you’re looking for someone, 615-773-2736, that’s Donna’s number 615-773-2736. I don’t know, she may be like me.

29:09

Our calendars are getting booked full, but um, you know, if you want to call, see if there’s an opening she’ll be a little closer to you in that area versus coming all the way down to Brentwood. And I will be honest, unless you are um a returning client at this point, we’re pretty much at our max So the advantages of being around for 30 years is that we seem to keep our clients coming back.

29:33

The disadvantage is that I’m always fortunate enough to find new people and making sure you guys get qualified help. And that’s something that I really want. Donna does taxes like I do.

29:44

She’s always doing her best and So as an enrolled agent, us girls have to stick together. But also seriously, if you are right now, a lot of you are just getting your documents together and make sure you have everything together right make sure hey did you get any of these new tax things where if you have a new baby do you have a social security number for example

30:04

Um, do you uh new car? Do you have all the information that’s required? If you have um tips over time This isn’t something that as a tax person, we’re going to magically be able to come up with those numbers.

30:17

Those have to come from the employers, which means a letter, the employer great thing would be is if they have it in box 14 But since this was such a change, employers are going to be waived. But we do need a letter from your employer or something that says this is the actual overtime and this is the actual tips that we’re reporting.

30:38

It’s so important because if we don’t have that, we can’t just guess it. We have no idea. It does no info on a W4 or W2 for that information. W-2 information is just going to have box one, three, and five, how much earn, box two, four, and six, how much taxes come out.

30:54

That’s it really. So box 14 is what we’re looking for, or we’re looking for something that gives us that additional detail. Sometimes if you’ve only worked and you got your final pay stub, you know, we could probably take a third of the overtime and assume that that was pretty much close number, but I would not be overly confident with that. I would much rather have the employer giving us those numbers because they’re going to potentially have to get that back from uh the government, you know, is going to eventually ask for that information.

31:25

So we want to make sure we’re matching. The last thing you want is your tax return changed because the IRS says, well, we can’t comply with this because we don’t, you know, we don’t have that same, it’s not matching our information Then we’re in trouble.

31:38

We can’t do anything with that if that happens. So all we need to do is just make sure you’ve got all of your information together. If you’re not sure, when you call either of our offices, we have a checkoff list. of what basically is going to be, you know, what you need, how you’re going to make things happen, all of that. And we can run through some of the things you might need to bring in If you’re you can’t really bring too much information to my office, at least, I’ll be honest.

32:04

I’d rather you have too much and me say no, that doesn’t apply than coming and then having to make a second appointment And then that’s gonna in many cases cost you more money because we had to do two appointments. Not a good thing.

32:16

So make sure you’re organized, make sure everything’s going through, and then you’re in good shape to have that going through and where you’re at. So 6153 7379986 is the number here in the studio.

32:30

615-737-9986 is the number here in the studio. Um if you are wanting to um sometimes I have people that call a lot of times and they’re wanting to find out, hey, I do my own taxes, but I really like someone to check them I’m gonna be honest.

32:49

Um, we don’t do that very much anymore. We basically end up redoing the taxes and then you can compare and see if it’s the same. But if you’ve done your own taxes and just the reason you want to have someone else do your taxes is because you think you owe too much money.

33:04

That that probably isn’t going to save you a lot of money unless you’re unless you’ve never done your taxes. But if nothing’s really changed, I had a gentleman that called this last week and he’s like, well, nothing’s really changed, but now I owe $25,000.

33:17

Yet I found out he got married in that last this next year. Last year he was able to claim head of household with his daughter. Now he’s married and he’s doing he’s gonna have to file marry filing separately because his wife um wants the file separately, he couldn’t claim head of household. So right there was a huge change. And after the conversation, yes, we were able to help him, but When people say things don’t change, a lot of times they really have.

33:43

Or you’ve ended up changing jobs and you find out that you were claiming married in three for some reason, yet you’re single in zero And you didn’t have enough money come out. And that is often the problem with a lot of us.

33:56

So again, want to make sure that you, when you’re this is the perfect time, guys, to look at your tax situation and say, hey. Maybe I need to be claiming single and zero. I don’t care if you’re married with three children, but you’re not having enough tax come out because either your spouse works or you work two jobs and enough money is not coming out of your wages to make it work. then that’s fine. But all you need to do is adjust your withholdings. Now it could be simply just going to your W4 and going into box four and say, you know what, I was short twelve thousand dollars this year

34:29

I need an extra $500 for a paycheck every two weeks coming out. So I have that $12,000 coming out of my check. So I don’t have a Huge heart attack when my tax person says I owe money.

34:42

Now is the time. Not waiting until April or May, when then you’re three, four months into the year, five months into the year, and then you’re making it or Worse, waiting until October when we finally file the final tax return, and now you’ve got a whole nother year of that same problem.

34:58

Even if you’re not filing your taxes, even if you’re saying, hey, you know what, I might not have everything, you need to do a rough workup to make sure that you’re not going to owe $15,000 on October 15th because you extended it. And also that means the next year, most likely, if nothing’s really changing, you need to do the same thing.

35:18

Now is the time to make those adjustments. All right, we’re going to take a break and we get back. We’ll do the last part of the show 615-737-9986 is the number here in the studio.

35:28

We’ll be right back with the Dr. Friday show. Mike’s hot. Thanks. We’re back here in the studio. And if you have any questions, you can. 615-737-9986 615-737-9986. So for all of you that are sitting here thinking, okay, I gotta get ready.

35:50

Tax season’s here. I gotta start planning it. If you’re single and you have $15,000 or more in standard deductions, again, that would be itemizing, which would mean charitable deductions. mortgage interest, property tax, sales tax. Those are the four big things that you would have. If that all exceeds $15,000, you will be itemizing. In a married couple, $30,000. Head of household $22,500.

36:17

If you’re over the age of 65, single filers will be $32,000. Married filers would be $33,000. 200 and then obviously not part of the deduction. If you’re 65 and older, for each person on, you will have $6,000 in addition that you’ll be coming in, but it doesn’t affect your standard or itemized deduction.

36:38

So it is a separate bonus deduction that’s on the returns. Um we have the loans, tips, and overtime. Again, I just want to make sure you can deduct up to $12,500 of overtime, $25,000.

36:52

And tips as long as it matches your W-2, right? It’s important. And if it’s not on your W-2, you need something from your employer. We need to make sure all of this is gonna. to come back um and and pass because you can put any number you want on the tax return and i’m sure there’ll be people out there fraudulently doing tax returns

37:15

Or and you know doing something. In fact, there’s a big warning on the IRS website if you look under frauds. Any preparer that basically says, I’m going to take a percentage of whatever I get you back

37:27

Or any preparer that’s not willing to put their name on a tax return is not a preparer. I’m just being honest. That’s a fraud. Those people are doing something illegal as far as I’m concerned.

37:38

I don’t know if it’s truly. I’m not a police officer, but if you’re paying me to do a tax return, I better well have my name on that tax return. Return to prove that I am the person that put that information on that.

37:50

If I’m not willing to put my name on it and it says self-prepare, but yet you went out and had someone else prepare it Then you could have prepared it yourself as far as that’s concerned. You paid somebody that’s not taking any responsibility.

38:02

And that is not right Same thing with anybody that’s going to take a percentage of your refund. Well, that’s your refund. A. My fee should be based on my fee. Whatever I charge you shouldn’t be different than the next guy that walks in the door just because this guy has a larger refund or more money due or less money due.

38:21

None of that applies in our world A true tax person is just like anybody else. When you go in, there’s a set fee for those services. Those services are going to be billed based on that, not based on how it affects your refund.

38:33

And if they’re putting in numbers that are not right, if you go in there and they say, hey, you know what? We can get you $10,000 back this year. And you’re like, oh my God, that’s awesome.

38:43

That’s totally great. But Are they doing it correctly? I mean, are they just throwing in $12,000 and $25,000 in tips and $1,200 in overtime and just saying, hey, let’s just take that money and see what happens

38:57

Keep in mind the IRS doesn’t have to come back to you for a couple years before they can correct this. And they will catch a lot of this. They’re going to have a huge audit going Because one of the reasons I think they opened up overtime and tips was to be able to see if employers as well as employees were properly being paid and reported.

39:14

This is a great way for them. People are all excited about getting some money back. This also opens up a huge reporting issue for employers and employees. So she on tips, employees are responsible to help report that.

39:26

It may not be coming out properly. And then then of course on um Overtime, many times people are paid straight time or paid cash under the table for their overtime. That way they they think they’re getting away.

39:39

But again When people are throwing numbers in on tax returns, this is going to cause a lot of questions, which means Federal Department of Labor, State Department of Labor will be very busy in the next couple of years I just guarantee, as a as a person that has also bookkeeping in her office, I am predicting in the next two to three years we’ll have large numbers of federal and state unemployment audits or or just employment audits because um because now they have more information this employer said this employee said he had this much in overtime yet you didn’t report that Now is that a fraud from the employee or employer? And they’re going to be finding that out.

40:18

So just making sure you’ve got those key changes Um oh I think I misstated uh single followers are 157. Sorry, married followers are 31. 5 and head of household is 23625. I’m sorry, I was using

40:34

2024 numbers, 2025 numbers for the standard deduction are up. There you go. And then if the the The they still have the other caps. And then we used to have the salt caps at 10 is now $40,000.

40:49

That is huge. I think a lot of my people, um, you we stopped having people um track their sales tax because between property tax and the basic sales tax they were hitting that ten thousand dollars.

41:01

Now I will say for people that used to track how much money did you spend on sales tax. It’s well worth having that conversation again now that we’re not locked into that ten thousand dollar mark.

41:12

I had many people that would spend, you know, ten, twelve thousand a year in sales tax But when you can only put in five because their property tax was five, it wasn’t worth the tracking as much as it would have been on all of that. IRA contribution 7,500 over the age of 50, 8600.

41:33

So those are some of the changes. Earned income credits. Updated tax potential credits and potential taxpayers for qualified children. The child tax credit portion up to 1700 per may be received as a refund, 2200. is the dollar amount that we have. Um so again, and you know, income does apply in that. I had a person that come in and she only had like, I don’t know, four thousand dollars earned income and she had two children and her refund was like, I don’t know.

42:06

$400 and she was quite upset because she’s like, well, don’t I get the $1,700 refundable credit? And you don’t get it just because it’s available, you get it because you actually had some earning earnings.

42:17

So again, one of those things you want to follow up with. All right. So we’re getting to the end of the show. Here’s what we need to know. Um e If you are a returning tax client to Dr.

42:26

Friday Tax and Financial Firm and you have not gone on our calendar, you do need to call our office Monday or Tuesday, depending on how weather is for you guys. It is a little snowy out there today 615-367-0819.

42:39

615-367-0819. And again, for anyone that is looking for a great Tax person at Mount Gilliet, you can call her at 615-773-2736 or call my office, be more than glad to get you that information.

42:55

Um, and then we have My email, friday at drfriday. com. Friday at drfriday. com. You can also just check us out on the web, drfriday. com. Pretty easy. D-R-F-R-I-D-A-Y. com. And um make sure you just put together a minute envelope.

43:15

Start your 2025 year, put everything that comes in. I know you’re getting a ton of stuff in the mail, but just make sure you’re getting everything put away nice and organized, right?

43:24

So you don’t have your tax appointment and find out, oh, I forgot. I had two W-2s. I only got one of them. And if your employer is not very community Then you’re going to need to figure out, and I don’t have a good answer right this second.

43:38

Maybe uh other people listening might have some ideas of what we’re going to do if an employer doesn’t provide overtime or tips And they don’t have their last paycheck stub that we might have some information on. And the employer’s not talking to them We will have to find out and hopefully we’ll also have some information from the IRS that will be able to give us a little more information on how or what we’re supposed to be doing. to submit. Also don’t forget, if you have a child under the age of 17, really look into the Trump fund. Even if you hate Donald Trump. No one says you have to like the man to like the service

44:13

This is something that you could start that may give your child a great leg up 10, 15 years from now, when they decide they want to go to college, they want to buy their first house Um or they just want to save it and just keep it going, keep uh, you know, moving it through and and moving it through as the market and just let it be managed till they’re 65.

44:33

That would be a huge um way for them to move into the next step of life and have those ex uh extra funds to to do it with. So um if you don’t know what I’m talking about, you haven’t heard any of this, just give our office a call.

44:47

615-367-0819 is the number. You can call us Monday morning. We’ll do our f uh best to get you some information out on your questions you have, or just email Friday at drfriday. com.

44:59

That really is the easiest way probably to get a hold or get some information on what you have or a well way for us to actually send you additional information um whatever your question might be. And then make sure that when you file your taxes that you’re using a good tax person.

45:15

You’re not just out there and you may be a good tax person. Person listening may be a great tax person. If you’re doing your own taxes, not a problem. Just make sure that if you have questions, that you have someone you can ask those questions to.

45:27

All right, we’re going to be winding up the show one more time. The office number is 615-367-0819. Hope you guys all stay warm and cozy and we’ll be here again Next Saturday at 2 b. As we like to say, cop ya later.

A: No. The deduction is applied at filing time, and you need employer-provided totals to support it.

A: Taxpayers age 65+ with required SSN and income limits; married couples must file jointly to qualify.

A: Separate business and personal payments, show a profit motive, and keep records; repeated losses can make it a hobby with limited write-offs.

00:00

have some questions today it’s a beautiful saturday uh it’s a little nippy outside to be quite honest the 17th and we’re getting ready to go into a full-blown tax season we’re gonna cover a little bit of the questions that keep coming in i know the last couple weeks We’ve had um some different shows on, but let’s get into the 2025 tax season. We file in 26.

00:21

Some people refer to it as the 26th tax season, but We are filing the year of 2025. If you want to join the show, you can. 615-737-9986. 615-737-9986. So we’re going to do a quick run through of some of the changes and that people keep calling and requesting more information on.

00:42

Let’s talk about first What they refer to as the senior or anyone over the age of 65. You have an additional $6,000 deduction. This is only going to be for the years that you filed 25 through 28 at this time.

00:59

In addition to your standard deduction. So whatever your standard deduction is or itemized deduction, whatever that is, you will have an additional $6,000 deduction. If you’re married, $12,000 deduction.

01:13

This does have a income limitation. So if you are single, that income limitation is going to to be um 75,000 it will work its way up from there and married couples it will be 150,000.

01:28

The good news in that conversation basically is there’s no penalty for being married. And we have talked about that over and over. You must be a U. S. citizen. You have to include your social security number. and filing jointly if married. So if you’re married filing separately and you’re over the age of 65, you will not qualify for this deduction. So again, if you’ve got questions, you can join the show.

01:52

615-737-9986. 615-737-9986. And that way we can deal with your situation. So again, one more time, really quick, standard deduction, which the standard deduction basically for what single person. is going to be 14,000. Then you’re going to add another 2,000 if you’re single. So $16,6 plus you’ll get that $6,000 deduction. And if you’re married filing jointly, the standard deduction is $29.

02:25

2 plus you’ll get sixteen hundred dollars each. So That’s going to be $32,400 plus $12,000 on top of it. And this applies to both itemizers and non-itemizers. So standard deduction or itemizing.

02:44

Either way makes it no difference. You’re still going to qualify. You just have to be over the age of 65. Okay. This next one, I think I’ve probably taken 20 or 30 phone calls in the last 15.

02:56

20 days. This has to do with tips. There seems to be a slight misconception because people People were thinking that they were not going to be paying any tax on tips on or from their wages.

03:12

Let’s clarify, this is a tax End of the year tax deduction or um you’re going to get the money based on what happens at the end of the year because again, it is income-based. So your W-2, your employer is not going to change. anything from what you had been filing before. Effective starting in 2025, but if you’re an employer and you’re listening There has been several different things coming down the line, but bottom line is you don’t necessarily have to put this on they’re giving us a window.

03:49

So you don’t have to have it on the W-2, but you do have to provide. the information to the employees of what their um tips and this would also apply to overtime. We’ll talk a little bit about that because again, a huge miss

04:03

But on the tips that are being reported, because in box one, three, and five on the W-2, their tips could be in there. Now sometimes if they’re waiters or waitresses, some of those tips could also be on line seven, which you hadn’t already. already paid tax on this will be a huge relief for those individuals. This will be a maximum annual deduction of $25,000, um, which I think pretty much in Tennessee a lot of the waiters and waitress.

04:30

I think that will be a nice kick in there. Self-employed individuals deduction cannot exceed net income. So If you’re in, I don’t know, this let’s say you’re a hairdresser or a nail specialist or something and you get tips and you’re reporting these because you’re self-employed and you do have to be in a specific business

04:51

They’re not going to say, hey, you’re an accountant and you’re living off tips. That would be very wed, right? It’s not not normal. That would not be on the typical situation. They’re not going to allow someone like myself to report tips and deduct it.

05:04

It needs to be in a profession kind of known for tips. So that’s one of the things they’re going to ask for. Um You have to have a specific trade. It needs to fall under the 199A. An employee of an employer must have that, including social security number filing, joint, so married filing separately.

05:24

This is not going to qualify. You can be single, head of household, or married finally jointly. Married finally separately will not happen. Employers and other payers must report certain cash tips and the occupation of the tips to the IRS or SSA information.

05:43

Treasury and IRS will provide penalty relief for the year of 2025. We’re scrambling here as well and we use ADP, uh, but they’re changing. I mean, really a lot of this is coming in new to them.

05:56

So what happened in 2025 isn’t going backwards So again, effective 2025 through 28, same thing as we talked about with the seniors, qualified tips received through an occupation that receives customarily and regularly tips through December 31st of 2020. 2024.

06:15

I mean honor before December 31st, 20, and reported on W-2 or 1099. So if you have people that are being 1099 And this is going to be a little bit unusual. It’ll be interesting to see.

06:29

I I have not yet done a 1099 and reported tips on a 1099. because normally a 1099 is used for I provide a service, you send me back the money, you 1099 me because of it. So it is something that has to be other statements furnished to an individual like a 4137 that are individually directly reporting their tips.

06:54

So I’m gonna put a little clause out here. I think sometimes the IRS and the government gets pretty darn smart, even though I know a lot of people don’t like it But if you are an individual and you have not been reporting all of your tips, and I will tell you, long time ago, many, many Decades um ago.

07:17

But anyways, I was a waitress and I reported what I had to report. There was a lot more cash back in those days. Nowadays it’s a little bit harder because almost all bills are paid with uh credit cards and tips show up on those credit cards. But I think the IRS is looking for industries that may be underreporting tips. The reason this is so important is that an employer is responsible for paying a matching social security and Medicare, right?

07:44

Uh what comes out of your check is sometimes some of you that actually receive large amounts of of tips may know at the end of the year you almost always end up owing money because enough did not come out. So just make sure the form again is a 4137.

08:00

It is currently what they’re going to be used. This is a brand new form that’s out there. Social Security, Medicare tips, and unreported tip income. And then they’re going to need the name, the employer’s name, the cash amount that you’re saying.

08:14

So this is going to cause some pretty interesting audits in my personal opinion. I think the IRS is going to be looking at that to see exactly how that’s going to tie into what they know.

08:27

But again, employers you need to be reporting because if your employees start reporting that you did not report all of their tips, there’s going to be um at least a state department of labor, possibly a federal department of labor leading. May it not be this first year, might not be the second year, but keep in mind this is running from 25 through 28 and they have two years to audit.

08:48

So just putting that out there so you have that information. Making sure you know what’s going on and how that’s going to affect you because, well, it is going to affect your business possibly.

08:59

So I would start now making sure that all the employees that I had was reporting to you any tips, make sure they’re signing off on that. Make sure there is a paper trail so you can then justify what you put down on their wages and on their W-2s or W-2s.

09:20

And again, every week or every uh day, I know some people, whatever they have at the end of the day, have the employees report what said tips if it’s An employee then turns around and reports different numbers to the IRS, that is going to cause one of two things, the employee or the employer, or both to probably fall into an audit. This is going to be a big area.

09:43

I don’t think it’s going to happen until 27. Probably it’s going to give some time. They’ve got to process all of this make Making sure it’s there. But if you are a person that makes a lot of money and tips and it does not reflect properly on your W-2 and you’re gonna say, oh well, I can go in here and I can file the 41

09:59

37 and I can put all that money in there. They’re going to wonder why it wasn’t reported properly. They’re going to bring that up to not just you, but the employer or or both. So um

10:11

As an employer, you can protect yourself by having the employees sign off on tips reported that way, at least for the purpose of the employer you could do that if an employee um I would again I would just be careful I’m making sure that I’m not reporting numbers that maybe you’re inflating your income because you can now show that you made $25,000 in tips, which could be more than your wages in some cases, and then then that is probably if it’s not matching the W-2, I would be prepared that you need to justify that number. you need to show where it was deposited or used and processed. And the problem is if it’s on credit cards, that’s easy to do. But if it’s cash every day, I think you’re going to have a hard time really tracking that properly and making sure that information.

11:02

I mean that’s really the biggest thing. We just want to make sure that whatever we have going on, that we can document it. There may be some employers that are not even reporting tips.

11:12

And the people have said, oh, that’s great. I go home. I don’t have to pay any tax on this. Um and that’s what I think they’re trying to, that it’s a huge fraud area. So I think that’s what the government is looking for.

11:22

And a lot of times when people think that they can get more money back because they can show a higher income. I think that is tempting for those individuals. All right, we’re going to get ready to take our first break.

11:33

If you want to join the show, you can. It’s 615-737-998. That’s 615-737-9986. Go take your calls when we get back, or if you want to, you can also email Friday at drfriday. com, and I’m more than willing to to put that on the air as well. We’ll be right back with the Dr. Friday show. Hey Mike, can you hear me? Yeah I can Good. Yeah, I got you on speaker. Ah, much better there. Thank you.

12:07

Well what it is is I was just asking about the overtime. I heard you I just heard you talking about the tips. And I thought, I wonder if she’s already talked about how the overtime is supposed to work for last year, this year and all of that.

12:21

Thank you so much. Because that was actually the next thing I was gonna walk into anyways because that it seems to be the the more confusing situation than most, right? Because a lot of people thought they weren’t gonna have have to pay any overtime tax um or how it was going to come. They thought their paycheck was going to change. And again, it’s not going to change, Mike. Everything that we talk about, these are all going to be stuff that’s going to actually go in effect.

12:43

Really, you’ll see the refunds come. um when you file your taxes this year. Then you’ll get your refund for 25 and et cetera into 26. But the biggest thing people don’t seem to understand is that the overtime is really just time and a half, right? Or the halftime. That’s what you’re going to get credit up to twelve thousand five hundred single or twenty-five thousand jointly filing, assuming both people have um the overtime on their wages and there is income limitations.

13:14

Do you get overtime? Oh yeah. Okay. So hopefully hopefully assuming that you are uh making less than 150 single or 300 jointly, you should see some extra money on your um refund this year.

13:31

Okay, so th but they’re only gonna credit the half, not the time and a half. Exactly. Thanks for yes, that is exactly right. So if you’re making fifteen dollars an hour, um then they’re only gonna credit that extra or maybe make ten dollars an hour and you get fifteen for overtime, you’re only gonna get that five dollars, not all fifteen, for your overtime.

13:57

Wow. There’s always a catch, ain’t it? There’s always a catch. But the way you have to really look at it is how many years have you been working? Have you ever got any extra time? No.

14:07

So Yeah, but if I’m working time and I I work forty hours, so if I work ten hours overtime, that whole ten hours is Overtime, not just the half. Well, but they’re only giving you the extra I mean they’re basically saying all straight time, no matter if it’s overtime, double time.

14:28

I got people that make triple time sometimes But that’s straight time, whatever that is. Go ahead, Mike. Yeah, some people do, but I mean most of us only get time and well, I only got time and a half when I actually did that but I mean Yeah, I used to work for a place, but anyway, they used to do that too, but depends on the company and all that stuff.

14:50

But anyway. Okay, I was just wondering because I thought I mean the way it sounds, you know, no tips, no, no, no tax on overtime. Tips or no I know. Yep, you’re right. No tax on tips, no tax on overtime.

15:04

That’s exactly the way it’s worded. on the basic big bold letters of the one big beautiful bill. Then you start reading and they’re like, wait, only portion is the half portion of the time and a half. specifically says or in tips and then of course they caveat that with how much money and it has to be reported on a W-2 and or a 1099 again Anyone working for a 1099, you should be, you shouldn’t be getting overtime or straight time. All of that should be billed as if you’re a subcontractor.

15:35

But um I think the IRS is looking for loopholes. Well, I mean the good news is this, Mike, no matter what, assuming your income fits in, you’re going to get a bigger refund this year than you’ve had before.

15:50

That’s the positive I’m looking at in this whole thing because you know, the 35 years I’ve worked, or you know, whatever, I never got anything for tips and or overtime. So I think it’s a unique approach, but it is to a lot of people.

16:03

And thanks for asking the question Yeah, it does. Yeah, I’m glad I called. I appreciate it. No problem. Thanks, Mike. All right, take care. All right. You two. Let’s go ahead and hit uh Jennifer, I guess, next

16:16

Yes, hello. Hello, sweetheart. What can I do for ya? So I have a question. I do a lot of flipping on um on stuff that I just pick up and I flip it for extra m or double the money or whatever.

16:29

So some people pay me by Venmo. And I’ve got Then on then though I have like my family reimbursing me for stuff, maybe loans or whatever. And then I have like a small homestead where I sell my eggs and I get money from that. Some some customers pay me on Venmo. How am I gonna report um what’s an actual clip, what uh my eggs, the eggs that I sell and all the feeds that I put into that.

16:57

So it’s actually a losing business on that that behalf. And then deciphering it out what’s what’s family, what’s not um any kind of business related item. Well, I will tell you what the IRS will tell you is that Venmo has two pie sides.

17:13

One is for purple Personal family and friends. One is for business. You probably have everybody reporting to you under family and friends, even if they’re buying eggs or doing a flip, because you have one

17:24

Venmo account. You don’t have one for your business because there’s a fee if you turn it on for business, right? Um and there’s no fee if you use it between family members. So I would hate to tell you this, but the best way to do that would be having some basic accounting.

17:39

So when you’re done at the end of the the month or at the end of the year, you can say, okay, I sold 400 worth of eggs, I had chicken feed, I had vet bills, I had whatever, whatever it takes to raise chickens. I had to buy new chickens, whatever.

17:53

And you have the cost. So the 400 would be the income, the cost, and this would be potentially falling on a a schedule F because it’s a farming situation, not uh a business situation.

18:05

And then the other flip would be a schedule C in which a Assuming that you’re not doing it as a hobby, that you’re actually intending to make a profit, then you again would have how much money? Not just Venmo, but this would be cash, all the money.

18:19

And I know, I know you know this, but I’m just kind of saying this for everyone listening jennifer as well but all the money you make the IRS basically says we have to report it all doesn’t make a difference if it comes to us on a form if it’s all cash if it’s a Supporting your lifestyle theoretically, if you’re ever audited, they’re going to say, well, how did you afford this if you didn’t make any money?

18:39

Um, so but on the flips, you’re gonna do the same thing. I made $1,000 in flips, but my purchase was $700, and then I had to. By the rehab, materials, blah blah blah, repairs, blah blah and maybe you broke even.

18:51

Most people will say after two years, if you have a business like Flips, um And you’re not making a profit, then you’re really doing it more of a hobby. I will let you know that, Jennifer.

19:01

That’s what the IRS would say. Two out of five years If you’re not making a profit. Oh, they’ve had a hobby. And if it’s a hobby, the downside to that is they don’t allow you to write off your expenses.

19:14

So we don’t really want a hobby because we want to be able to claim our income and expenses and in your case possibly a home office um whatever you know to to bring it down but uh and you know so the answer to your initial question would be You need to be tracking because if ever audited, they’re gonna say, well, how much money did you make? And you’re at the say, Well, I I sold 500 eggs.

19:38

I have no idea. I’m throwing a number out there, you know, and whatever that is. And I sold some chickens and I, you know, whatever. And same thing with the flips. The flips are probably in some ways trackable because you’re probably using um.

19:53

Facebook or some of those places to buy the original and there is a way of them tracking all of that. Um but it also for your purpose you need to make sure you keeping receipts on everything you purchase because we’ve had a number of audits in the past number of years where people would go out and and just buy things at garage sales and things like that but they didn’t keep a receipt

20:23

You need to carry a little receipt book with you, Jen, and you need to write down the address and the garage sale that you went to and then how much you paid for it and maybe even just take a picture of the two things so you have proof of what you you know what you did so that way you have a paper trail because I’m sure there’s a lot of cash going especially for garage sales right most people don’t want you to write a check or anything. They want they want the cash. So you need to make sure you’re protecting yourself more than anything else in that conversation. Because you know they’re not I mean the odds of being audited are very low, but th you know if you’re if you are doing more than what five thousand dollars now, I think a ten ninety

21:06

Venmo is funny because again, if it’s all done under your personal um then I don’t believe they’re 1099 because you’ve said that this is not a business situation. This is um I’m sorry.

21:20

So the threshold of six hundred dollars for reporting is no longer instead it’s twenty thousand or two hundred transactions is the current threshold for a Okay, well I don’t think I’ve made twenty thousand, but I definitely have done over two hundred. Right.

21:35

So if you’ve done over two hundred, you may see a 1099 Because even if it’s less than 20,000, they’re basically saying anyone that does 200 transactions throughout the year is basically running something other than friends and family. family.

21:51

Okay. Okay. Thank you. Sorry girl. No problem. Thanks for calling though. Great question. All right. Let’s see if we can get Lisa on and off before the break so she doesn’t have to wait for it.

22:03

Hey Lise, what can I do for you? Hey I have a question about my filing status for 25. I was widowed in twenty four And I still have two uh children even though they’re both adults that live at home.

22:19

One is disabled so he’s gonna be there, you know, forever because I’m his caregiver. So would I be head of household for twenty five? Definitely be head of household, yes. But at least with the I mean depending on the second child, with the disabled child, you will stay head of household because I’m a

22:38

Assuming that child’s only probably receiving Social Security benefits. If if they’re receiving that, maybe some well we we are both receiving survivor benefits off of my husband Right.

22:49

And that will that’s perfect. And then if the other child is what seventeen or or under, they may be receiving something. I think they get too old, they don’t get the benefit. Yeah, no, he’s not getting he’s just graduated from college so he’s not getting anything but you know he’s still living at home currently.

23:06

Uh so that one the head of household may come into play because he may have earned more than twelve thousand dollars. Yeah. No. The adult child going to college. Maybe not. Then if he hasn’t, then he can be your dependent as well as obviously the child that is

23:22

Disabled. Both would be. Okay. All right, good. And but so head of household is my best option. Oh yes, definitely. Yeah. Okay. All right. I just wanted to make sure. No problem, sweetheart.

23:34

Thank you. All right. We’re going to take a quick break here and we get back. You guys can join the show at 615-737-9986. 615-737-9986. We’ll be right back. Alrighty, we are back here live in studio.

23:52

If you want to join the show, you can. So we have covered no tax on tips, no tax on overtime, and kind of the exclusion that come with those. It always sounds great until we get into the details.

24:09

Now let’s talk on no tax on car loan interest. A lot of phone calls on this one as well. So let’s talk effective 2025 through 28. All of these are pretty much the same time period originated a car loan after jan uh december 31st 2024 so if you purchased a new car in 25

24:29

You should be good, but let’s talk about the exclusions. Individuals may deduct interest paid on loans used to purchase a vehicle for personal use. This is not something that’s going to happen.

24:41

Or if you tried to or if you purchased a lease vehicle, that isn’t going to qualify. Phase out for individuals that are making over $100,000 and for joint filers that make $200,000.

24:52

The origination has to be after December 31st, 2024, was used to purchase an original a vehicle originally used by the taxpayer, was secured by a lien on the vehicle, and was for personal use non-business. vehicles.

25:08

If the qualified vehicle loan is later refinance, interest paid on the refinance amount is generally eligible for the same deduction. Uh qualified vehicles, a car, minivan, van, SUV, pickup truck, or motorcycle that has a gross weight rated in less than 14,000 pounds, which is Pretty much all cause, even my big old uh truck is is under fourteen thousand.

25:32

Underwent ve uh final vehicle assembly in the United States. That is a key thing Went to the final assembly, had to be here in the United States. Vehicle label on the dealer. When you come in to get your taxes, you need to make sure you have the vehicle ID number or VIN number.

25:53

And there has to be a National Highway Safety Certificate with a decoder available for both itemized and non-itemized deductions. You must have the FIN number and the year you claim the deduction.

26:05

Lenders of other receptions and interest may be filed. So again A lot of times when we’re doing taxes, we’re not usually asking for your interest paid on a vehicle because, well, let’s be honest, we haven’t been able to deduct interest other than mortgage interest goodness for 20 plus years.

26:23

So very important that you if you purchase the car in 2025, the car was assembled here in the United States. You can have the FIN number and therefore you can go forward and see what you have on that one.

26:38

And then the last one that’s going to deal with pretty much a straight across the the table is the health savings account expansion Telehealth is now available that removes the care service now is available for higher deductible plans. People can still contribute to the HSA even after telehealth before meeting the deduction.

26:58

The rule is permanent for plans. that started on or after January 1st, 2025. Expanded bronze and catastrophe plans starting in January 1st, 2020. Um I would definitely say that the Treasury and the IRS invite a public comment. might be something if this at all applies to you or maybe you sell health savings accounts March 6th of 2026 they’re going to have a big forum and you’ll be able to participate in that to find out. I am a huge advocate for health savings accounts.

27:35

Just think that they’re very good, especially for the self-employed and also for many of us that don’t really um do much when it comes to medical. I’m I’m blessed, so I don’t have a lot of out of pocket and when I’ve had a few things it has been easy to deal with because I’ve already had a big chunk of money sitting in my my health savings account and my program that I have, my normal health insurance, I think, is very limited.

27:59

I mean I have people that you know I’ll pay four or five hundred dollars a month. Mine is less than two hundred a month, but I do have the higher deduction. on that. So I just want to make sure that we understand where that’s going and where we’re going to go with that.

28:12

So um again, so if you have a hill savings, no tax on car loan interest. No tax on overtime, no tax on tips. Let’s clarify. We all know that that word no tax on has caveats, that there is going to be some exception to that. that and to make sure you understand what that is. You know what? Let’s hit uh Steve real quick while you’re at it, uh RJ, if you don’t mind. Thank you. Hey Steve, what can I do for you?

28:39

Hey Dr. Friday, I always enjoy your show and I learn a lot. But I got a got a quick question for you. Okay, uh I I had a brother and uh him and I inherited a house from my mother in 2017.

28:53

She passed or she passed away in two thousand seventeen. Okay. Then my brother passed away this year. We were tenants in common with right of survivorship. So I inherited that house and actually sold the house exactly one month after he passed away

29:11

Uh if I understand the law correctly, I have zero uh oh or I inherited I have zero gain because I inherited it at the Whatever the new basis was. Both of you guys gotta step up in basis because neither of you own that house until she passed, right?

29:36

In seventeen. Okay. And then in twenty twenty five, since you owned half and he owned half You inherited his half, but you only get a step up on his half. You don’t get a full step up because you were now an owner of 50% of that home before he passed away.

29:56

So you will only get a step up in basis on the step up on what you just inherited, which would be his fifty. So you need to know what the house was worth. Hopefully you already know that at the time mom passed.

30:09

Let’s just use an example of $200,000 because it’s easy math. That was $100 on you. a hundred on him and let’s say now in twenty twenty five the house was worth three hundred thousand dollars so his share then became one fifty so you would get an additional step up, you know, 150 and 100, so your value would have been $250,000 because you inherit his at the full value of his share of the step up. Okay, I do understand that. Now let me ask you this question then.

30:41

This house it was in marginal condition w when we inherited it in twenty seventeen. He continued he never got married. He always lived with my parents And so he continued to live in the house.

30:56

Well, the house further declined in you know, in its condition. I and but I do know there was there was a whole lot of, you know, property value increase uh e from two thousand seventeen till today.

31:09

Uh on a standard property, but it definitely decl I mean it just needed a roof, it needed a central heat and air system I mean, is that gonna be something that uh Well I mean it really comes down to is what was the value of the house and then what did you sell it for? Because what you’re sounding like you may have gotten out of it without having to you I mean theoretically you could have invested money, not saying that would have been a good idea at all to improve the property.

31:36

You may have to do some improvements just to um clean it up or whatever after he passed away. But anything you have to put in the house, that would be a deduction on top of, right?

31:47

Because you had to improve the property. Uh and then I guess the the biggest question comes down to is what did you sell it for? And this is something you can call my office for. We don’t have to put it all on the radio necessarily

31:59

But whatever you sold it for, the question’s gonna be, because I’m assuming you didn’t get top value for that property. I’m just assuming that because You know, it sounds like it’s didn’t y yeah, did not because it was in such poor condition, I just auctioned it off right.

32:14

So but it was probably a lot more than what mom left it to you at. But uh the question is what was the difference which Between mom and w 17 and 25. Because like you said, okay in Tennessee, 20 and 21, we all saw unfortunately

32:30

Unfortunately, our property taxes go up quite a bit because of the value that all the property apparently just overnight became worth a lot more. We have to thank all those Californians that love us here um for some of that.

32:44

But you know, but we need, you know, honestly, we need to sit down or you’re tax person, you need to kind of sit down if you’re doing it yourself, whatever Get the the starting number, what you inherited at, and then find out what and the person that sold it might be able to give you some comps of what that house would have been worth Had you put it on the market, um, you know, what other houses in that area were selling for?

33:06

Because that’s what we, you know, a rough appraisal. And then the fact is you may have sold it for undermarket Because theoretically you wanted out. You knew it was going to be costing you more to maintain and to probably take care of than it would have been to hold out, do some things and just

33:23

You know, it’s just never easy. But that’s my two cents. But you need to get all those numbers. And a lot of times a real estate agent, especially if you paid an auction house, they can give you some estimated comps of what it would have been worth in what was the market selling those homes for.

33:38

Right. In 2017. Right. And then again in 25. Because, you know, we need both those numbers to give you a decent idea of what your real basis is in that house. Okay. Even though the what what I even though what I receive for it at auction doesn’t determine okay, well that’s what it was worth since you had a

34:00

Ready, willing, and I will buy at all. Not really, because an auction means that you took the highest bid that was available that day. Had you been willing to possibly put it on the market or do something, you know, they call that a flash sale in essence.

34:14

You may have put a minimum out there saying, hey, I’m not going to sell it for less than this, but you did not probably take the highest that could have been available had you been willing to play the market. Okay.

34:26

Auction doesn’t necessarily mean it was the highest price. Okay. Well, uh not not exactly the answer. I was looking I know, I’m sorry. So sorry. All right. That’s the way it goes. Uh I know.

34:38

All right. Thank you very much. Have a good one. No problem. You too. All right. We’re going to take a quick break here. When we get back, if Eddie can hold on the line, that would be awesome.

34:46

If you guys want to join the show, we’ll have a one more break after this. 615-737-9986. 615-737-9986. We’re going to take a quick break here and for any of you that have no idea who you’re actually listening to I am Dr.

35:03

Friday an enrolled agent licensed by the Internal Revenue Service. I do not work for them. I am licensed by them to do representation and taxation So if you need help with those converts, that’s who I am.

35:13

All right, we’ll be right back. And Eddie, I’ll get right to you. We are back here in studio. This is the last part of the show. So let’s hit Eddie and see if I can help it. Hey Derek Friday.

35:26

Hey buddy, what can I do for you, sweetie? All right, about three. You had a commercial on your ads about TBI, something to do with real estate. Or TIB or not ringing a bell yet. I mean I’ve been listening to my own ads, uh prepping the new things.

35:48

It was about the real estate though, that they had new tax law changes. Oh, on real estate For Tennessee? I mean like for Go ahead, keep talking, Eddie. We’ll get it in. Okay. All right.

36:04

Well, I’ll go on to the next thing. Life insurance, is that taxable to the receiver? 99% of the time, no. Sometimes there are some annuities that have life insurance tied to them, I have found, and some of that can somehow circle back around, but normal typical life insurance when someone passes away becomes tax free to the person receiving it. Okay, cool. And what about property sold at an estate sale? Uh property sold in an estate sale, meaning that someone passed away and there’s an estate sale?

36:39

Just making sure I’m correcting that. Okay. So yes, in most cases, property um kind of like when I was talking to Steve, when someone dies, everything gets a step up in basis. your property, your car, your furniture, all of that, right?

36:53

So when you sell it pretty much immediately after the passing, that’s basically considered considered a wash unless there was something found like a collectible or you know and didn’t get appraised or something like that that may have a actual auctional a a higher value than some of those you would still get a step up in basis, but sometimes people will hold on to them and then they’ll actually sell them later and make a profit.

37:18

Yeah, which one’s better, selling immediately or taking the profit? Well I’m I mean to me I I would always take money. Sorry. You know, because taxes on most things if if you let’s just say the tax on that is 20%, you’re still going to put $80 more profit than doing a fast or a faster sale just to get it out.

37:40

But sometimes you don’t have control. Estates are often because there’s many people inheriting that sometimes they don’t let you pick and choose what’s going to come. But if you’re like the only person inheriting, then you have a lot more control in saying, hey, wait, this person’s got gold this person’s got antiques you would be better to sell those to those particular collecting higher market areas and it could take you a year or two which means it could I mean like gold could go up or down you may even Leave it in a safe for the next generation in some cases. Yeah.

38:12

All right. Well so much. Have a good one. Hey, thanks for holding through. I appreciate it, Eddie. Thanks. All right, guys. We are going to wind up a little bit of the show. Let’s talk about one or two more things.

38:25

The big thing I haven’t heard a lot about is the Trump account under the the Working Families Tax Act that came out kind of part of the OBBB, but it’s a different one that came. Parents Guardian and others can establish Trump accounts for eligible children.

38:38

Trump accounts cannot be funded before July 4th, 2026. We can hang up on Eddie if you want. The federal government will make a one-time $1,000 contribution for each child account. And authorized contributions for individuals and employers are up to $5,000 per a year.

38:58

So wait, the government’s gonna put a account in your child’s name for $1,000. And then every year you and or your grandparents’ parents or your employer could put $5,000 in. An employer can contribute.

39:14

$2,500 per year towards an employee’s Trump account without it counting as taxable income. Think about this. Wait a second. I’m an employer. I want to really help bonus out some money to my employees.

39:26

But if I put it on their paycheck, you’re going to get a ton of money having to come out for taxes. But wait, you have a newborn baby and you’re you’ve got a Trump account set up and you’re like, wait, let’s put that $2,500 over here and let it grow.

39:40

Sooner or later you need an account for your child to go to school, whatever, and that money can be. Funds will be invested through certain mutual funds trades. You’re not going to have any control over this money, but think of it as a 401k or an IRA you really have very little. Generally money cannot be withdrawn before the child turns 18. After that point the account is treated like a traditional IRA or similar, which means there would be penalties if anything comes out before the age of 59. and a half. The eligibility, the child, I do believe needs to be born in 2020. five so it it’s for newborn children it’s not for just every child um let’s see if it tells us when the account has to be established because I think I I heard a seminar where some

40:28

Someone said that the child had to be a newborn child. It wasn’t like for every child under the age of 17 or something. And there is some additional maxes coming out. I want to say it was Microsoft or Elon Musk.

40:41

Somebody was matching. some of these contributions for the first 150,000 or million or whatever. Okay, they count before January 1st calendar year for child that turn. Okay, count generally cannot be coming out. So we will get more detail on exactly how that’s going to happen. It’s not going to happen quite yet because it’s uh they’re not going to allow us to do much with that until after uh July, which will be after tax season. You also have a beginning in December 31st, 24, up $5,000 the inflation for adoption credits. So that’s going to hit inflation instead of doing all the other good things.

41:19

There are so many changes, but I think most of those are going to be what you needed Keep in mind that a lot of the clean vehicle credits and the home energy credits, most of those expired on December 31st, 2020. 25.

41:35

So um if you did do anything in 25, you want to make sure that information is also put into your little packet so that way when you go do your taxes, do it yourself or have someone else help you with those taxes that you have them in the right place and you’re doing the right thing and you’re not sweating it because you’re like, oh My gosh, I forgot this.

41:55

I forgot that. You know, again, it is a little bit of a crazy um year. We’re gonna have a lot of different things. And I know many of you are looking at your paycheck thinking it was going to go up because of the tips and or uh overtime and again none of that is going to change on your paycheck the only place you’re going to see any additional refund or additional money is going to be from the IRS when you file your taxes. It’s going to be a larger refund. at the end of the year. And you know, of course, for some of you, this might be a perfect time to think about if you haven’t filed taxes in a number of years and you happen to be a person that works with tips or overtime, um, it may be a way of helping reduce your tax bills because your refunds will go back to any back tax anyways. And so it might be a good time to think about do I want to go ahead and address back tax issues so that way let the IRS kind of give you these extra funds and then use that money to pay them.

42:52

It’s not really coming out of your pocket because you’ve already lived the whole year with the paychecks that you have. All right, so let’s go through the numbers. If you are a current tax client of mine, again, if you do not have a tax appointment, please call our office on Monday, 615-367.

43:11

0819-615-367-0819. That way we can make sure that you have an appointment or if you just uh also you’ve probably received a lot of things from the lockbox. If you don’t know what that is or you you’re a client and you need your lockbox, again, feel free to contact us on Monday, 615-367-0819.

43:34

There is a calendar on the website. If you need to set up an appointment, if you’re new, we usually try to at least get an intake so we make sure we’re a good match for you. But We still have some appointments, so we’ll do our best to get you in.

43:49

And then obviously if you’re if you’re working with back tax issues or those kind of things things. I will tell you the IRS closed down in in November and they will reopen tax day on January the 27th.

44:03

And that’s when we can start e-filing. actually doing uh completing tax returns. Not that we’re not doing them, but um that being said, it seems like we’re not getting a lot of information on like 2848. I don’t know if anyone else is having this issue. We seem to be having a very slow fulfillment of that form. And I’m not too sure why, but it does seem like it’s happening.

44:26

So, um, but we, you know, if you need help dealing with IRS, dealing with collections or audits, that’s what we do all the time and we’ll be more than glad to help you out. If you would like, you can also email Friday at drfriday. com. That’s Friday F R I D A Y at D-R-F-R-I-D-A-Y dot com or just check me on the web, drfriday. com. Pretty easy. D-R-F-R-I-D-A-Y. First name is Friday. That’s why we keep carrying that over there.

44:59

And if you um you know need help doing your taxes, if you have someone that needs help and you don’t know where they can start, trust me with the doing this 30 plus years. We can help you help them get organized, make sure they know what they need and get everything going.

45:12

It’s not as stressful. I do my best at least to keep it less stressful than necessary. A lot of people will stress over taxes. I totally get it, but we can work together and make it a little less stressful for you.

45:23

I hope you guys are enjoying this Saturday. It’s a little nippy outside, but you know, it’s January 17th and You know, we expect it to be a little bit nippy. And for all my bee lovers out there, hopefully your hives are thriving. Um, and uh we are going to be here again next Saturday and hope you guys enjoyed the show. Cop you later

Key Summary Points

Episode FAQ

Transcript

Dr. Friday

00:00

All right, we are here with the Doctor Friday show. The Doctor is in the house, and we have some guests in the studio. Matt, could you say your name, please?

Matt Folker

00:08

Yeah, my name is Matt Folker.

Dr. Friday

00:10

And what’s your job title?

Matt Folker

00:11

Well I’m got a little bit of everything, but um pretty much I’m the chief information officer for a company called ISTT, which is also a mouthful. It stands for Innovative Solutions Through Technology. Yes, I run out of breath every time I say it. That’s why we say it ISTT. But thanks for having me on today.

Dr. Friday

00:28

Thanks for joining me, and I’m so sorry. Everyone that knows me knows I am Horrible with names. Dennis is also here. Dennis, you want to tell him a little bit about who you are?

Dennis Buzard

00:37

Yeah, Dennis Buzard. I’m the senior sales manager with ISTT, helping folks stay safe and not let any cyber issues hit them.

Dr. Friday

00:44

All right. And that’s what the show’s about today, guys. We’re gonna get into a little bit off the normal path. Taxes are fine and exciting and for me totally fun. But I think sometimes we need to, you know, let our brain rest and go and think about something else. And I um being an enrolled agent, we have to keep things kind of cyber safe And so I called these guys and Dennis came to my office and did this really cool evaluation. And so Matt, I guess we’ll just let you tell a little bit about what is the first step. How does IST keep the bad guys out?

Matt Folker

01:22

So really it boils down to our objective is to eliminate risk. Okay, we we want to go into a facility and we do some technical assessments. We have some cool technology that helps us with this, but overall our objective is to find risk and eliminate it.

Dr. Friday

01:40

And I guess the next question following that would be, how do you do that?

Matt Folker

01:44

So um like when when Dennis went to your office, he had a little USB drive that I’d loaded up for him. Um and basically it does Kinda just an entry level scan, kinda looking to see if at least you’ve got your front door is is shut and locked, which, you know, most of the time the doors are wide open. But that’s okay. That’s part of the business. That’s why we’re here. Um but our our objective is to find things that have been overlooked and sometimes it’s things that have been set up incorrectly when it was first set up fifteen, twenty years ago and was just kind of forgotten about. Um but then we we evaluate, you know, what users have access to what, those kinds of things. Um and really the the skinny of it is if it’s really easy for, you know, one of your employees to come in and access some things that they shouldn’t shouldn’t have access to. Then that means the bad guys can too. And so if you have a really simple password, for example, um then It’s gonna be really easy for those bad guys to to get that password, or if you don’t have two FA, uh, which we can we can go into a little bit of that a little bit later. But But yeah, basically we are looking for risk and we are trying to eliminate that and we and we eliminate it via technology.

Dr. Friday

03:00

Right. And I think that’s the any business owner or maybe you work for a firm where you work under the, you know, the the office staff and you know that maybe nothing’s been updated for a while, nothing’s been taken care of for a while. And you’re like, cause I mean my office you know, Matt hit her on the head. We’ve kinda just continued with what was set up decades possibly ago. Pretty sad. I mean we’ve updated the softwares we’ve updated and we think if we’ve got McAfee or Norton that it says it’s security software, hello, um, that we’re actually doing what we need to do. But we know now Thank you, Dennis. Um that we were not actually necessarily doing everything that we should. So so now let’s say you go in and you find the flaws. What would be the next step Um for someone, you know, not talking financial so much as, you know, what would you be doing to help them secure their borders?

Matt Folker

03:55

So basically once we we’ll compile a report, okay, and a lot of it is kind of technical, nerdy jargon. And that’s why I keep Dennis really close. So ’cause he he’ll he’ll keep he’ll keep me close and he he’s a much better communicator than I am, as you can tell. That that said, um we we run this report um and then we review it with the the business owner or the decision maker of Hey, here’s all of the holes that we found and just lay the data out. Here it is. Here’s what we found. If you want to hire us to help you close some of those gaps. Great. If not, here’s the data. Here’s the report. Our objective is to make the community a safer place, whether you use us or not.

Dr. Friday

04:39

And I I have to say that was a huge selling vehicle for me because I was thinking, Okay, I have Norton, I have the he’s gonna come in, he’s gonna say, Okay, there’s these little things, passwords. I know mine aren’t the most high tech, maybe Now knowing they’re even less high tech. But anyways, um, you know, I didn’t I didn’t think about it too much because I was figuring we we have these different things, but After seeing the report, it’s kind of guys like when you get in a love letter from the IRS and it says, we’re changing your tax return and you have no idea why. And they send you this whole booklet of stuff. This guy came into my office and he had to have twenty-five, thirty pages of all kinds of jargon. And Matt is correct. I’m feel myself a fairly intelligent individual, but with looking at that, I’m like, Dennis, break it down. Get it down to the layman terms because there’s a lot of information. It wasn’t necessarily something that an everyday person But the hackers would understand this information. And that’s what was scary for me.

Matt Folker

05:36

So here’s a here’s a good example of I I’m gonna put myself in your shoes.

Dr. Friday

05:40

Okay.

Matt Folker

05:40

Um I have three three boys ages eleven, nine, and five. And my two oldest, uh, in in twenty seventeen, the hospital that they were born in had a huge breach. And two of my kids, they had their social security numbers stolen. And so in twenty seventeen or twenty eighteen when I went to file my taxes, uh, and y I I wasn’t late, but you know, I filed it in end of March somewhere in there. Um my taxes got rejected because someone had already filed taxes against my children. Yes. Okay. So you know, but so one kid was four, the other kid was two, and they had already had their identity stolen. Okay. Totally sad. And it’s it’s been, you know, there was two years of nightmare and a lot of paperwork, but at the end of the day, I can’t change my kids social security number. That’s what was assigned to them. Yep. And when they hit adulthood I expect they’re gonna have a lot of issues. They’re gonna have, you know, alerts of people trying to get loans and car loans and stuff like that and liens. On their social security number.

Dr. Friday

06:47

They need to start a corporation with an EIN number, just create themselves an entity.

Matt Folker

06:50

Yeah.

Dr. Friday

06:55

We’ll talk about that when you get old enough to worry about it.

Matt Folker

06:57

Yeah. I’ll I’ll bring them in.

Dr. Friday

06:58

We’ll we’ll get that figured out.

Matt Folker

07:00

Um but anyway, it it’s an absolute nightmare. And these are for my kids. Like I I’m the I’m supposed to be the cybersecurity expert and it still happened to me. You know, I mean there wasn’t there wasn’t anything I could do in this case. It was the hospital had a really large lapse in security and I was the victim of it as were a lot of their people.

Dr. Friday

07:21

How many times do we get letters from TOGAT? and all kinds of places where we’ve used our credit cards or whatever and they come back and they said you’ve been your identity may have been stolen or or your information may have been hacked. IRS I got one from because they got somehow your information So we know that’s out there. And we also know our dentist’s office where we forgive them everything is probably not as secure as it should be and those kind of things, which is why I wanted you on actually, because I think a lot of times Us smaller guys, you know, maybe IBM or you know Coca-Cola, the big guys, they have these whole departments.

Matt Folker

08:01

I know that there was a Couple couple well this was last year I believe T Mobile got hacked and they had gotten hacked previously like five or six, seven years ago. So even the big names in technology where you’d be like, Oh, they’re fine. We’re all humans. Yeah. Big or small. There’s gonna be mistakes that are made. Um and and so that’s why we we really take it seriously of keeping the bad guys out and keeping the good guys in. Right. That that is is is what we’re trying to accomplish on any level. It’s it’s the big corporate level and then also the the personal level.

Dr. Friday

08:36

Right. So the bad guy out we all understand. I think that’s pretty much the hackers or the people that are trying to steal something from us. And then you have the the education side, which is like For me, if I work with you, it’s like keep the good guys in.

Matt Folker

08:50

Yeah.

Dr. Friday

08:50

How does that I mean how do you help do that if that makes sense?

Matt Folker

08:53

So we we do a lot of end user training for our clients and really that that helps out in twofold Number one, our clients obviously they want to educate their staff to where, hey, you’re you’re handling this important company data, this important client data. And we don’t want it to get mistreated, we don’t want it to get leaked out, we don’t want it sold off to the highest bidder, those kinds of things, obviously. Um but at the end of the day, the our clients realize that even if they’re able to teach their clients or their their employees of, hey, this is how you detect a malicious email. Okay, here’s some password hygiene that you need to have. A term that I use is you never share your toothbrush, so don’t ever share your password. All right. Um the the our our clients understand that employees when the when they’re educated and even when they’re in their everyday life when they’re able to um kind of When when they’re able to um sorry, when when they’re able to do a better job of keeping their own data safe. When they have those good intentions, when they have you know good password hygiene personally, then they’re also going to do that on the on the business level.

Dr. Friday

10:10

Sorry, Matt was stuttering partly because I’m doing this little hand signal that we have to take a break and I’m like Matt’s like, Okay, I get it, Friday. Anyhow, just so you guys don’t have a camera on here so you don’t see how Funny that isn’t here. If you guys want to get a free evaluation, they’re gonna stay on the show. But for our first break, if you want to call them 615-225-7070, 615-225-7070 Free evaluation. We’re gonna take our first break. We’ll be right back with the Dr. Friday show. Alrighty, we are back here. Dr. Friday. This is the Dr. Friday show for all of you that are listening. I’m Dr. Dr. Friday and enrolled agent licensed by the Internal Revenue Service to do taxes and representation. That being said, today we are going off grid. Well, I don’t know if that Eric C fits perfectly with this conversation, Matt. Dr. Matt is here with I S T T Inc. I’m trying to say it slow guys ’cause I I’m a mess it up. And you notice I didn’t use Matt’s last name. It’s a easy name, but I’m gonna mess it up no matter what I say. Maybe by the end of the show I’ll be calling him the proper name. Anyways, when we left the last break, you were talking about how, you know, keeping the good guys in, educating people so that they and I thought that was great because Um again, we’re working with these guys and they’re gonna be educating us because I think that’s something we take a lot of seminars. We’re big on CE credits and seminars. Um but you only apply what you know. With someone could come in and say, hey, we know your system. Right? We know, and this is what we need you to start doing. Passwords need to be better. Not sharing your toothbrush, that’s true. So therefore you don’t want to be sharing your passwords And I will say that happens in our office. I already know that because someone will get locked out and we have to, you know, get someone else in, whatever. And and Since Alone’s almost family in my office, it’s it’s very laid back. Only have two people that aren’t physically related to me, so it’s very close in my world, but it doesn’t mean that that information can’t get out the wrong way. And that’s what I feel um People trust my firm to keep their information as best I can. I need to do the best I can. And that’s why you guys come in. You’re the best.

Matt Folker

12:12

Yeah. And that is their their personal data. They don’t realize the value of it on the dark web. And then also with obviously w with company data. You know, j one small breach. Can mean that all employees W twos get stolen. You know, name names, addresses, social security numbers, all that can be gone.

Dr. Friday

12:28

And think about an accounting firm who has payroll. And all those, right? So I mean we have a lot more and the IRS has put out a lot of notices for accounting firms because they hijack it, right? They want to put some sort of A couple I I’ve never known anyone, but they had articles on the IRS where people had gotten hijacked they had to pay a fee to get their hard drive back.

Matt Folker

12:47

So we call that ransomware.

Dr. Friday

12:49

Ransom, okay.

Matt Folker

12:50

And and basically is the bad guys will hack your system they will take a copy of your data and then destroy the data that you have. Okay? And so some people are like, oh, we got good backups, we’ll restore it, have a nice day. Well, that’s only half the problem because they have a copy of all of your data. And and it it may sound a little bit strange, but yeah, they’ll they’ll ransom your data and they’ll say, hey, we want five Bitcoin and we’ll delete the copy of the data we have and and First glance you’re like, well, I I can’t trust you. You’re you’re a criminal.

Dr. Friday

13:20

You’re a bad guy.

Matt Folker

13:21

And yeah, at face value, that’s true. But fr in their point of view, you know, these are guys in North Korea, Russia. Uh, you know, a a lot of a lot of naughty places and it’s a business for them. Oh yeah. And a lot of people, they’re just working for a company. Going out trying to steal people’s data, they don’t really see any harm in it. They’re and their their mindset is well if we got in, then you know

Dr. Friday

13:56

Those are the kinds of things that you read about and you know of course you hope never happen, but it happens to somebody. So therefore I can’t live my life with the idea I hope I’ll never be the guy that gets caught So that’s the reason I have you guys in here. This reason I want you as my listeners to listen because if you’re working in a small office. Medium sized, large. These guys aren’t limited to numbers. I’m more thinking that and and Matt pretty much already said sometimes you think the big offices you already think have IT departments, therefore they should be But maybe this would be a cool test if you do work in a big office, have these guys come in and I mean again, it’s free. You’re not wasting anyone’s time, but they’re so hey, it’s really just a matter of Have them come in, run this test, and see if you are as safe as you think. Because if you aren’t, well, hey, they can fix that. But if you are They’re not going to do anything. I mean, it was their time, right? So it’s a it’s a free evaluation. So it really is only a matter of how long does it take, Dennis?

Dennis Buzard

14:52

Thirty to forty-five minutes.

Dr. Friday

14:53

Thirty-to-forty-five minutes. He comes into your office He’s he’s a sweet guy, to be honest with you. I have great Danes in my office and everything else. I did hang him off, but I mean bottom line is he’s having to move around dog beds. I mean it’s a really crazy world in there Um and and it’s in a big barn. So just so you guys you guys know where I live. Anyways, that being said, he he was cool. He went in there, left a few 30, 40 minutes later And then like I said, a week later or so he calls me, gives me this absolutely wonderful report. Um and then, you know, I’m like, well, how fast can you get in here? Um and and seriously, I I mean, I I I never thought I was as potentially as in a threat situation as I am. And that’s why they’re here. But I if I figure if I am after 30 years of business, how many of you guys who have been listening to me for 15 to 18 years are in that same place because we all kind of get that comfort zone. Never had anything happen. Never had to worry about anything. Everything’s good. So you need to give these guys a call. Again, if you want to call them Just pick up the phone right now. 615-225-7070. How easy is that? 225-7070.

Matt Folker

16:01

The phone number was really expensive, by the way.

Dr. Friday

16:03

Was it?

Matt Folker

16:08

Yeah. Yeah.

Dr. Friday

16:09

I like that Matt. And Matt, why don’t you tell them what the website is?

Matt Folker

16:13

So the website is Istinc. Com. I I’m from I’m from Kentucky, so sometimes my my T’s and my P’s sound a lot a lot alike.

Dr. Friday

16:25

They have no idea what I’m saying half the time. So they keep listening, don’t worry. They’ll they’ll they’ll figure it out at some point going through their So your basic plan is first keeping the bad guys out, which is a cyber you you do whatever the cyber world is. Mm-hmm. And then you come in, once you figure out what those you help educate that office to hopefully eliminate some of the Maybe I don’t want to call it laziness, but to a point it is our laziness.

Matt Folker

16:49

Sometimes it’s it’s maybe it starts out as laziness, but then you know it turns into bad habits.

Dr. Friday

16:53

Yes.

Matt Folker

16:54

Or vice versa. You know, I don’t really want to call anybody lazy. I just want to educate.

Dennis Buzard

16:57

Yeah

Matt Folker

16:58

When I see a password on a monitor, you know, I’m gonna take it off the monitor, I’m gonna hand it to you, okay? And I’m gonna say, hey, I’m sure you can remember this now. Put it in your pocket. And we’ll and we’ll be on our way. You know? we we do have we we can help you with the password manager and those kinds of things. But but yeah, yeah. And I promise you if you keep your password under the keyboard Everyone knows that trick. Okay.

Dr. Friday

17:23

Okay. So those are not the hidden places. I’ll have to rethink about that. Um and then then support. Okay, so we’ve got it. We’ve figured out the problem. We’ve educated and hopefully Taking our passwords out of the most obvious places, hopefully taking them out where people can’t find them, period. Yeah. And then what is the the

Matt Folker

17:42

Yeah, yeah. So we we want to elevate the good guys. And what does that mean is is we can also be just your IT support. Okay? And whether that is we’re an on-site presence there or just phone call away or sometimes it’s a little bit of both. Um but we we see a lot of of businesses, and mostly this is in the smaller business field, but Um basically whoever fixed the printer seven years ago is now the IT guy or gal, okay? and and that’s not really what their passion is. That’s not really what their education is. They’re just kinda doing the best that they can. Right. And that y creates a lot of problems. A lot of times when we do the technical assessment, a lot of the holes we find is because someone didn’t know any better. Yeah. They just they needed Wi-Fi, so they went to Best Buy and they bought something, uh, put it in and they were amazed that it worked. And then they never touched it again.

Dr. Friday

18:36

No. And and you guys are all listening and we’re laughing here in the studio because we all know that is exactly how most of our offices got established. We we hired someone and we had to have a second station and we’re like, okay. Well, according to m chat well nowadays ChatGPT or Amazon or Ma Microsoft, whatever, whoever we were doing back then, Google. It said, just open up this port and you can just have this person come in as another person and et cetera, et cetera. You may have five, six computers later, but you just continued that exact same process as we had before. So when we get back, because I’m gonna let Matt this time I don’t want him to feel like I’m pressuring him because we have a time clock going here. So when we come back, Matt and I are going to go back into that subject and let him talk a little bit more about how to elevate the good guy as well as probably just hit again on some steps we can be taking. Before or during this time when they come out and do this evaluation. So again, go to ISTTINC. Com. It’s an easy website, even though if you can’t get the letters just Come to me and I’ll give them to you personally.

Matt Folker

19:42

You can Google this.

Dr. Friday

19:43

You can Google it. So if you have the right ISTT, you can Google them or otherwise you have no idea what you’re doing. Um or the 615 225-7070. I still think that’s the best way, guys. 615-225-7070. Again, set up that free evaluation. This is costing you nothing, but could save you God, it could save your business. I mean all honesty. It could save you your entire business. After thirty years, the last thing I want to do is lose it to somebody or not doing the right thing. And that it could happen. It happens all the time. We’re gonna be right back with the Doctor Friday show. Alrighty, we are back live in studio. I’m Dr. Friday, and you guys know that. And if you guys are listening today, then you know today is not about taxes. It is about how we’re going to protect ourselves. And mainly this is for small businesses or people that work for businesses that have larger companies. Again, I keep saying the word small because I always consider myself a small business But this kind of thing, these guys don’t care how many computers, how many different states, they can do it all. They’re just looking at how someone’s getting to our system and how we can protect ourselves. So when we left Matt You were going to talk a little bit about how if you do have an IT guy, let’s say you have a company that’s doing your IT, maybe just like some of the tax people are just throwing numbers on a tax return, maybe they’re just kind of doing the same thing?

Matt Folker

21:05

What do you think? Yeah, so one of the problems that we see is um y that that person that was never originally hired to be the IT guy but now is really good at printers and unjamming things. Um they wait around and hope a problem doesn’t find them. Right. Whereas w we’re the opposite effect is Going back to the risk conversation, um, if your business is unable to work, unable to function, if your internet is down, if your systems are down, that that is a huge risk. So we are going out and trying to find the problem before it finds us. So if if there is any kind of potential outage or a system that’s about to fail. We we want to get in front of that. And it’s a lot easier to like let’s say you’ve got a a piece of equipment that is about to fail. Hopefully we can catch that very quickly. And then we can schedule that downtime. You know, we can we can do it on an off day or do it on a Saturday or do it, you know, do do it w when it’s not when it’s not critical. Yeah, we want to be proactive. That’s a lot lot better scheduling than you know, it it’s Wednesday morning, you’re trying to run payroll, and

Dr. Friday

22:17

Then that person that fixed the computer is now trying to jerry rig on internet access so that they can actually get the payroll run on time so that the clients are done. Yep. And now they’ve opened up probably more ways for somebody to do something because of it. And again, I can relate totally to this because and I think a lot of you guys listening can also because I have Well, a couple thousand people I deal with on tax seasons and most of you guys are small business and medium size and even a few of you are large and basically what you always talk about is You either the IT guy’s not available, so you have to fix it because you gotta do the payroll or whatever it is, or you can’t have the the the factory can’t be down because you have an order that has to be out because you’ve promised it. So Somebody is figuring out a way to bypass what may have been put in. And that’s when we’ve actually just opened up the if the barn door has now been flown open because we you know we may have gotten the system working, but we don’t know anything about Cyber, internet, anything.

Matt Folker

23:16

Another good example of that was during COVID. A lot of businesses had to work from home. The the part-time IT guy or the the employee that just knows more about computers than anyone else, they were scrambling trying to set up remote access and those kinds of things. And overall, you know, a lot of businesses did a good job with that. Uh, you know, w we were able to keep on trucking along through COVID, or at least most of us were. But then when COVID ended and everyone went back to work, no one ever shut off. That remote access back.

Dr. Friday

23:48

Okay.

Matt Folker

23:49

And so even if you have nothing to do with your IT department, but if you were working remotely during COVID And you haven’t worked remotely since, go to your IT professional and say, do I still have remote access? Is this still turned on?

Dr. Friday

24:06

Well that’s it. So again You know, I think that’s an example is that anyone listening today, in you we all live on computers. I mean it doesn’t make a difference if you were. It doesn’t matter what you’re doing. What you’re you almost all of our careers fall into something like that You might want to take this number down and give it to whoever’s the boss. Maybe you don’t have the authority, but this is free. So when you go in and then you save the day because you know what, these guys come in, they find all these problems and then they fix and educate and now your boss is like wow what a relief I just saved the day in essence because if any of these things that went bad and I didn’t do anything. Now we theoretically lost millions of dollars for ransomware or in smaller business. You put us out of business. I mean that would put us mostly out of business.

Matt Folker

24:50

We’ve done investigations before where, you know, people have called us after an attack. You know. And it a lot of times it’s people we’ve marketed to and they’re like, nah, we’re good. They’ll call us six months later, help, my business is on is literally on fire and we don’t know what to do. There was there was one small business that we d we helped out in this has been a couple of years ago in Kentucky. Um the the owner of the company, he was in the midst of selling the business. Oh. Okay.

Dr. Friday

25:15

So he didn’t want to put any more into it than he had to.

Matt Folker

25:18

Yeah. He he he was Things things were progressing for him to sell. Um they had a a really large ransomware attack. They lost eighteen months worth of data. All of the employees data was stolen. Um and when when he was talking with the attorneys and I was at the table as well. The attorney recommended of like, hey, you’re gonna have to buy identity theft protection for all of your employees. U And he was like, okay, you know, well, we’ve got you know, thirty, forty employees, like, okay, I can afford that. And the attorney was like, Oh no, it’s every employee you’ve ever had for the past seven years.

Dr. Friday

25:52

Right. Because that was stolen.

Matt Folker

25:54

Yeah, because it was all stolen. You know, again, going back to our social security numbers never change. And so he ended up having to buy identity theft protection for three hundred and fifty people. Um That’s just the start of the problem that and he he did end up selling, but it he had to sell to a private equity. And it was pennies on the dollar.

Dr. Friday

26:14

Yep.

Matt Folker

26:14

And so that was his his entire retirement plan of selling the business, moving to the beach. Nope.

Dr. Friday

26:21

Well and I think that’s the way I’m looking, not so much but it’s always proactive. I mean the same thing happens that people come in and they’ll talk and I want to resolve my IRS issues or whatever. And then then tense a levy letter comes in or they actually get their bank or their home has a levy or or a lien put on it. And then they’re bringing you back in. But then The door is wide open again, right? Now the IRS has you, they’ve already got you on a collection system, they’ve already went through three letters saying you owe. You it’s a lot harder to put that fire out than it is to go and if the IRS took money from you, a lot harder to get the money back from the IRS than it is to keep it out of their hands in the first place. The And so I look at this similar everything in my world, as you can tell, Matt, goes around Taxes. Sorry. Just the way my world thinks. But it’s it’s very similar. I want to be proactive with my taxes. I want to make sure I’ve got everything done. And that’s what I think people need to think about with their computers. We now have cell phones, iPads, laptops. Hard top um desktops, servers. I mean every printer, everything is now hooked up to the internet.

Matt Folker

27:24

Even your thermostat.

Dr. Friday

27:25

There you go. My thermostat and you’re right, mine is actually hooked up. That’s right. He knows these things. Um and all those different things, besides, you know, probably my cameras, you know, all these things all have internet access. And I know that was one of the big things Dennis, who’s been actually surprisingly quiet, I think Matt and I have taken over the conversation. But Dennis came in and that was one of the first things he he basically says is you don’t realize The main entrances th right through the laptop you think, okay, I’ve got that kind of but you don’t think about the printer or the cameras or the the thermostat, which is what Dennis had brought up, the thermostat that someone could get into my server. I mean everything. They can get into my life because everything’s in that computer.

Dennis Buzard

28:07

Yeah. I’ve had a hack through the internet.

Dr. Friday

28:10

So those are the kinds of things I think that’s reason I’m doing this show. This is reason I think people need to be listening because we’re all proactive with things that we think are important, our medical or our things, but This has all of our information in it. So they can find out everything about you through your computers and our things. We save every document, right? I mean most of the time, hey, I went to the dentist. I scanned in my receipt. Everything is in my computer. They know more about me than I know about me.

Matt Folker

28:38

Yeah. You know, and so And and you’re keeping things in your downloads.

Dr. Friday

28:41

Everything’s like.

Matt Folker

28:42

You know, and no one no one is no no one is going through there and cleaning that out. You’re not cleaning out your own downloads folder.

Dr. Friday

28:47

One of the few things we do is we never open an email we don’t know who it’s from. I that’s probably one of the strongest things I can say in my office, but other than that, there’s a lot of failures. So I’m not gonna chu pat myself too hard on the back. All right, so I S T T is um a local company. Um and so that’s good guys. We we want to keep it local. We don’t want to be working from someplace out of the

Matt Folker

29:09

Yeah, we don’t use any offshore support and anything like that. All of our employees are either in Kentucky and Tennessee, but we do serve the country The majority of the United States.

Dr. Friday

29:18

Okay. And so again, I did kind of say no s company too big, that’s pretty much the case, right? I mean you guys can handle the colour.

Matt Folker

29:29

Right. And just again. Our goal is to better the community.

Dr. Friday

29:33

Right.

Matt Folker

29:33

Uh, so that if if we really believe that, we can’t pick and choose of who we want to work with. We want to work with the people that need help.

Dr. Friday

29:40

Yeah. They’re working with me guys. I’m just saying. You got that right? So anyways. Just saying. Um but yeah, no, I love these guys because I think one thing I like best is normally when I have an IT company come in, it I it often makes me feel like I don’t know what I’m talking about, right? And they never make me feel like I ever really figure out what I’m talking about. They give you all this and they say Well, you need this or you need to and the biggest thing is, oh, you can go to the cloud. You can go to the cloud. Well the problem I have with the cloud people is plain and simple, what if the internet goes down? I can’t work So I like having access to things inside the office. And so when we come back, we’re gonna talk again a little bit about this will be our last break. So we’ll come back and just talk about the three big steps you guys have. And maybe some insight to what people should expect when Dennis comes in really quick and all of that. So again, free, that’s the week word, free evaluation. Dennis is awesome. He’s gonna come out. And if he can make that thing work, it means you’re in trouble. So just letting you know it works. Six one five two two five seven zero seven zero six one five two five two two five 7070. I can’t even do a telephone number. And their email or their website, I stinc. Com. It’s actually not too hard, guys. And we’ll probably try to put a link on our website too. So if you guys find me, you know me, you can always link right over to them to get this free evaluation. Because I think every company, no matter how big, how small, should have this and that way, you don’t have to use them You don’t have to do anything after it, but then you can’t say you don’t know that you have issues or not. We’ll be right back with the Dr. Friday show. Alrighty, I’m Dr. Friday. This is the Dr. Friday Show. And we are here in studio. With Matt Fulker. Yes. I did it, people. All right. And Dennis, we’re not going with his last name. All right. We got, you know, you can only have so many wins in one day. So Matt, we’re going to rewind a little bit So we have people are always coming in and out of the station. So again, we’re here. You guys are a cyber company. A quick overview of what exactly your company does and how it’s gonna make my business or anyone’s business. I use myself because I like to talk about myself, but people’s business a little better.

Matt Folker

31:54

Yeah. So our objective is to eliminate risk and and define that risk so we can eliminate it. So we do have like a quick easy assessment that Dennis runs Um and it’s just, you know, if you’ve got 300 computers, we’re just gonna run an assessment on, you know, two to three or four computers. It just takes usually a few minutes to run on each one. And really if the assessment is able to run that’s actually a bad thing. The the assessment is kind of simulating to where if you were to to open up an email and click on something malicious, okay? and so if it’s able to run at all, then there’s a problem. But the longer the scan is able to run, we’re able to p pick out more data and just find more risky things going on. Um and but then we also we want to keep the good guys in, so we want to keep the the data that you have secure. We want to empower the your the employees there to that they’ve got access to everything that they need, that they’re they’ve got good w what I call cyber hygiene. You know, again, you d you don’t want to share your toothbrush. Another thing that that I I like to talk about is Um you gotta stick a deodorant, right? Well does that email pass the sniff test? Okay. Um, you know, just just Just kind of little dorky little things to remember that to kind of you know just. Yeah, does this email pass a sniff test? You know, take your password down, put that on there, boom. You you are set you are set for life. But then we also want to elevate the good guys and and what that means is we want to provide good, easy, fast, IT support. So your staff isn’t scrambling trying to fix something that they know nothing about. Or opening up security holes in order to run payroll that day. We we want to elevate your team with our IT team and you’re you’re not just getting an IT guy or gal. You’re you’re getting an entire team.

Dr. Friday

33:52

And that’s you know that’s the way I I like to think of it. And and the cost, to be honest, and we’re not gonna get into the dollars, but for what I was quoted, it’s extremely reasonable when you put it against the fear of loss, ransomware, even just having systems down. Yeah. I mean there that seriously their rates are extremely good. But I won’t put them on the spot because I’m sure every company, everything is going to be different on that. But um so Dennis, we’re gonna give you a a minute here just because you came all the way to the studio and Matt and I didn’t give you much time to chit-chat. I But again, if s if once someone calls 615-225-7070, what should they expect?

Dennis Buzard

34:31

Sure. So it’s a really simple process. First thing we do an appointment. I mean it’s I really want to take a look at the company, yourself. I want you to vet the company, make sure it’s a fit. So that’s first step one. Then step two would be an assessment. If it’s a fit, we’ll do the assessment. Very simple process. I mean, basically I come in, if you have whether you have 20 computers or whether you have 2,000 computers. We’re going to sample test three to four, hit the whole system, come back with some very extremely detailed information, probably within a one-week period. We have all the data within about within minutes we have it, but it takes us about a week assemble everything. Thirdly, I come back and during that period I would do an assessment review and go over every single thing top to bottom. Basically, if the assessment runs, again, that’s a bad sign because that means that a cyber goon can get in there too. Then we talk shop regarding pricing, two-fold program, monthly fee regarding computers and workstations. Then also if there’s hardware needed, we take a look at that too. So it’s kind of a one-stop shop

Dr. Friday

35:30

Perfect. All right. And that in again, guys, this is exactly what I did. And that’s how I um Dennis reached out to me. And this is exactly, I called the number, he came in. And we did this and it’s been extremely pain free. Otherwise I wouldn’t put ’em on the radio because well why would I want to promote someone I don’t like? Um and and it it really does. I mean I know that it’s it’s always scary to think, but if these guys can do what they do Then imagine what the bad guys can do. And then I don’t have any idea. Seriously, I thought I had Norton and McAfee on my I have both on my computers thinking, oh, I’ve doubled down And yet I didn’t double anything, people. I’m just letting you know. I am blessed. I live in the country. Um, so not as many people know where and how to get to me, I think, is what saved my hide But I will be in better shape. I am taking the responsibility, and that’s it. I’m an owner of a business. I take in your information. I feel very responsible And so that information needs to be as safe as I can make it and all of you guys do the same thing. I know you feel the same way. If you’re a dentist, a doctor. Anyone. I mean you’re running a manufacturing company, you’re a real estate agent. You take in a lot of this information. If you run a large real estate office, Imagine what’s in there. We all fill out applications. We all that that data could become something that then someone’s putting on the black market and then they’ll track it back and they say, oh, you know what? That real track Came back up this or whatever and you don’t want to be the the weak link. That’s all I’m saying. I don’t want to be the weak link. So in conclusion We want to make sure that everyone knows this is a free evaluation. And in given take how fast their surface is, he came really quite quickly too. I mean their turnaround is fast. So if you give him a call, within a week or so he’s gonna be out evaluating you and then out putting the test. It and it it’s a lot of time on Dennis’s side because he had a visit He then had to go out and do the the evaluation and then he had to come back and tell me his great news. Um and then they they still I mean so then they have to come out and then set up the system and and fix everything. So it is a Very time consuming considering, yes, they’re going to eventually get their money because they’re going to be paid monthly. But if you look at what their input for this upfront, it’s awesome because most of the time people don’t want to put that in without Oh, pay us a consulting fee.

Matt Folker

37:49

Yes. If you want to reinvest in your business or not. And this is also c very similar to insurance. But yeah we we just you know we’ll we’ll come in, we’ll get everything set up and it’s just build monthly. Um later.

Dr. Friday

38:04

Yeah. So Dennis is telling Matt to say it’s a month later. So we built afterwards. So it’s the next month after they set it up.

Matt Folker

38:11

Yeah, we we set everything up first and then we built.

Dr. Friday

38:14

And then yeah, wait, yeah, they’re a lot like me. I do the taxes and then I bill. I don’t bill before I do your taxes. So they’re doing the work and then doing it. So that’s what I love about these guys. All right, one more time, their phone number, free evaluation 615-225-7070, website isttinc.com. Again, I’m Dr. Friday. You can reach me at 615-367-0819. Friday at drfriday.com or drfriday.com. And as we love to say in Australia. Cop ya later.

Transcript

Dr. Friday

00:00

Alrighty, we are here on the Doctor Friday show. The Doctor is in the house, and today we have an awesome guest, one of my best friends, Hank Parrott Estate and Financial Strategies. He is one of the best financial planners. If you don’t have one, you need to get him. And if you do have one, you need to come in and get a free evaluation. So that way you know if you actually have the best person because you don’t know. Sometimes you have to have someone check out the number, see if it’s a better deal. Sometimes we kind of get stuck in a a little bit of a a system, okay, I’ve I’ve got my accountant, I’ve got my tax thing, I’ve got this. And we don’t really go back and see are they really giving us the best advice? Are they really looking at the current tax changes? Because wow I think one of the biggest things we’ve known each other for a number of years. We don’t need to count how many numbers. Uh, but one of the things I’ve always learned You had to go there, didn’t you, boss? Um but no, we have known each other a long time and most of what I know of financial planning has come from sitting in on meetings because every year you bring your clients and I bring mine. We all do these conversations and while you’re in the office a lot of times you’re evaluating

Hank Parrott

01:03

and and it’s that team approach which we’re big believers in and it it’s a combination of working with uh on on taxes together for uh for our clients as well as Uh estate planning, working with, you know, we’ll bring in an estate planning attorney like uh Russ Cook over in Brentwood, uh board certified estate planning attorney, great guy. Uh Jack McCann in Cool Springs, another great guy, both real estate and uh estate planning. So w when we do that team approach, now you’re you know, they say two heads are better than one, three maybe even better yet. Exactly. Uh bring it all to bear and and this is one of those areas with uh when we get together we got what, about six I think six different days that we Just our clients in tax season. But that that means that whole day we get we’re getting 10, 12 of our clients at least in. And then I can come spend the day with you.

Dr. Friday

01:59

And I get to pick your brain. And and vice versa. But what’s nice about those meetings that I do with you and I I mean I do a lot of different financial people as far as everyone has their own financial planner, but you’re the only one that really ever maximizes that same partnership because How many times does someone have a mistake on a tax form? And I’m like, I can’t this is what it says, Hank. I can’t change it. And you’re like on the phone dealing with that issue right there. So the client is getting such a nice simple relationship versus I’m sending them back to their financial person, then they’re gonna say, well, this is what it you know, and it could take months. It could take a bunch of things. A lot of times you actually get it before we actually leave the office. They’ve got a amended or corrected return so we know we can continue. It just makes that experience and also The um future tax planning. A lot of times people want to know about are we going to do a conversion? How much will my RMD? How’s that going to affect my IRMA? All these kind of questions come up and all those words I just use is because I sit in these meetings and now I know more about I mean, uh even in my tax office we talk a lot more about like Irma because it gets affected a lot faster. Everyone’s making But Irma is a big number. So if you sell a piece of real estate, for example, or you’re coming out of uh working a real job and going into retirement. But most of the time it’s when people do big stock sales or something and then the next thing they know they get a love letter from Social Security saying we’ve reduced your benefits And they think it’s Social Security being reduced, but actually it’s Irma being affected. And since you’ve looked it up, what is the affection of IRMA on a basic?

Hank Parrott

03:40

If you are a married couple uh filing jointly and you exceed two hundred and twelve thousand between two twelve and two sixty-six, uh, you’re gonna add about seventy-four dollars to your uh Part B uh premium and an additional 1370 on your Part D prescription coverage.

Dr. Friday

04:00

And I think that’s on AGI, which is your adjusted gross income, not modified, which is after your standard deduction. So this would be more like your gross income.

Hank Parrott

04:11

Hit with it a lot of time, they sell a property, or maybe they’ve sold off a bunch of stock and they’ve so they’ve bumped up

Dr. Friday

04:19

Through any or it could be an IRA distribution or conversion. That’s the one. I’ve had a number of them come in this last year. We’ve been playing the game a little bit. And before I was always just worried about tax brackets.

Hank Parrott

04:30

Right.

Dr. Friday

04:31

And then the last couple of years we in our meetings with your clients and stuff, it kept coming back with the Irma situation. Irma was being affected and people didn’t, you know, because I’m only I’m a tax person. I won’t keep you in the twenty-two, I want to maximize twenty-two, but if I do I now have affected your other side, possibly, Irma. So you want to have that team effect is all I’m saying, because you go to a tax person and say, how much can I convert? I’m gonna say tax wise this is what you can convert and this is how much, but what no one’s gonna say in that meeting most likely is now I’ve affected your IRMA and you’re gonna be paying $75 more a month for your healthy care for another year. And if you do these for multiple years, that could add up. It needs to be at least in the mathematics.

Hank Parrott

05:11

And this is one of the things with Irma that a lot of people, you know, this is by the way, IRMA is a Acronym income related monthly adjustment amounts. And basically this has to do with Medicare.

Dr. Friday

05:22

Right.

Hank Parrott

05:23

So on your Medicare, if you’re 65 or older, that’s where this can affect you. And and when you’re doing a Roth conversion. You got to think of things not just about the tax on the conversion. That you’re taking out of that. It’s going to be taxable income that year. You’re then going to put it into Roth IRA.

Dr. Friday

05:41

Yep.

Hank Parrott

05:42

And if you’re over 65, you’ve got to be concerned there may be an additional cost to the tax. This Irma may just if every year that you do it. Now let’s say if it’s just a one-year conversion. You’re going to get tagged with that extra money. And it goes up, by the way. We just, you know, we shared the uh the base part. If you go over two hundred and twelve thousand, but if you go over two sixty-six, that’s 74 goes up to 185. Right.

Dr. Friday

06:07

I’ve got some that are like six hundred dollars a month because um and then and then some people are like, well then let’s just convert it all.

Hank Parrott

06:14

Right.

Dr. Friday

06:15

Because then I only have to worry. But the penalty is so much lower than what the additional tax would be. In in my i scenario, I was working at the off

Hank Parrott

06:24

You get a big million-dollar conversion.

Dr. Friday

06:25

A million-dollar conversion. And so you only have, you know, so you pay six hundred dollars for a year versus maybe doing it over a period of years on multiple lower numbers. But you’ve now kicked yourself into Well, you’ve got the Medicare tax, there’s an additional. 09, you’ve got the 2. 9 of investment tax, you’ve got um ordinary income tax. It’s just going to be a little bit more than a little bit more.

Hank Parrott

06:46

So it’s going to be pretty expensive. And we find that a lot of times it’s better to spread those conversions over time. And Irma is just one of the calculations we look at. And another of course is uh the effect on your t if you’re receiving social security benefits.

Dr. Friday

07:01

Taxable amount, right? Yes.

Hank Parrott

07:02

Most of my clients are receiving social security benefits. So Now 85% of the Social Security is going to get taxed as well. So you get all these little kind of hidden costs that we don’t think about necessarily, or at least the the consumer probably doesn’t think of. Uh but it’s our job to make sure they’re fully aware of of all the uh implications and costs associated with the show.

Dr. Friday

07:24

Which is probably one of the big reasons I I wanted you on the show, partly because I think a lot of times I’ve had a number of clients that are hitting retirement and they’re actually retiring at sixty-six, sixty-seven, um, making the determination they don’t necessarily need to take social security, they may take it. Um, and that’s when you need to have that conversation about conversions. Cause if you’re not n mandated to have to take your social security and you have a window of time, I’ve seen you do some magic there where you’re converting and doing and being able to keep social security non-taxed, keeping them in a lower tax bracket, converting more. Um and again, it would still you just have to have in your mind there is other taxes than ordinary income tax. We keep saying the word Irma or your Medicare adjustment ’cause it’s based on your adjusted gross income. It’s not uh a set fee. But that’s one of the things I think that you bring to the table often is, well what about if this? Or you you don’t just have this like one path, you kind of

Hank Parrott

08:28

Don’t be paying more in taxes than you’re legally required to pay. And as common sense and no-brainer kind of statement as that seems to be. We see it every year that people are in fact paying more in tax than they’re legally required to pay simply because they don’t understand the rules, don’t know how to take advantage of some of these things, or make poor choices like Oh, I’m gonna go ahead and do it.

Dr. Friday

08:49

Pay off my mortgage so I pull it all off because I’m gonna hit retirement and instead of just taking a larger distribution which keeps you in a lower tax bracket, you know, I know a lot of people are getting s Kind of I wanna say fed up, but they’re at a point where they’re basically like, I just don’t want the IRS in my money. I don’t want the IRS. And of course all of us have it because Well, self-employed people. We’ve had them in our business since the day one, but also in our retirements, SEPs, IRAs, four three Bs or whatever. All of them are deferred. So there but there’s gotta be uh a path or a a a system versus I’ve got two million dollars. I’m gonna take it all out and give it, but then you’ve just given a third of fifty percent almost if you really think about all the things. Probably double. uh versus just taking a ten year window and saying, I’m gonna do this much per a year and do it over this period. So I think that’s what I want people that are listening kinda to walk away with on this. It there isn’t a set thing. All of you are different, just like in taxes, when you come in There may be a 1040 form, but how it’s filled out and what numbers go where is not always the same for each person. You have two people come in with almost the same numbers and have different numbers theoretically because of where and how it came in. So I want you to think One, Hank’s gonna give you a free evaluation. Okay. He’s not gonna charge anything. He’s gonna do the whole workup, not just like one of these little sit-down. It could take one or two meetings He’s still going to put the time in to see if he can do and explain where your money is, how much it is, why it is making money, why it’s not. And he may come back and say, this is an awesome plan. Just like I do with taxes sometimes. But other times you may come back and say, hey, this looks good, but do you know you’ve left this big door open or this window of of money that’s just turning and not not really making you money Um because in the right.

Hank Parrott

10:35

So there there’s like I’d like to retire and they’re asking me Uh I’m saying, you know, when do you want to retire? And they’re saying, well, how soon can I retire?

Dr. Friday

10:50

All you do is save, right? You’re just supposed to continuously save. And we never really knew how much we should save, but we needed to save because, you know, and Having those numbers and you being able to say, you know what, we can take this much out, we can move some money over here, you do this, you’ll be in this tax bracket. I think it gives them the peace of mind to say, you know what, I can put in my notice and quit when I’m ready. H Or, you know what, I can work another two years ’cause I love what I do. But maybe I don’t need to do this. Maybe I can do sh less hours, less overtime, whatever. All right, we’re gonna take our first break. But if you want to call Hank’s office, there is a phone number. That’s always good. 615-376-5325. Tell them Dr. Friday sent you 615-376-5325 is the phone number. Um and then they will is that an answering service they’ll answer probably most likely on a Saturday and Sunday

Hank Parrott

11:41

If it’s on the weekend they’re gonna get uh we do have a service.

Dr. Friday

11:44

Okay. The service will answer and then they will get back with you and just tell ’em you’re looking for that free evaluation. And then he’ll send you a checkoff list and you’ll need to bring a bunch of stuff in because he can’t do nothing unless you provide the numbers. All right, we’re gonna take our first break. We’ll be right back with the Doctor Friday show. Alrighty, we are back here live Well, recorded live, I guess I should say on this show, just so we have it covered, with Hank Parrot, Estate and Financial Strategies out of Brentwood, Tennessee. one of my best mates. And w during the break we brought up something I thought was great. And um let’s talk a little bit about how another way you help clients save money, but also using the right I’m only using one of his terms, buckets um to to take money out. So if I have a parent that is in a um assisted living or a memory care facility Maybe explain a little bit how that might work in your side and then I can jump into mine.

Hank Parrott

12:36

Yeah, first thing we want to do is uh and we’ve of course over the years I’ve been doing this 35 years now. So and going back 30 plus years of those uh 35 years was doing estate planning. Yes. And so I had clients in, you know, 70s and 80s back then. Obviously they’ve of course passed on, gone h gone home. Uh and what I have found with that is that there are opportunities you look for as well. So when sometimes when something bad happens, I’ve got to go and assist a living, for instance. The good news is, well, we’ve got now a bunch of medical we can write off. Exactly. So I’m first thing I’m going to start looking at is IRAs, uh if there’s if they have maybe annuities with deferred interest buildup in them. uh we’re gonna start looking at ways that we can spin down those dollars. Right. Uh if you think about it you say with estate planning, we’re looking at not just you and your lifetime, but now on to your children and grandchildren and on on down generations. So when we’re looking at the in a situation such as that How can I get rid of the taxable dollars so that what’s left to your family? uh when I’m gone. It’s one way at least we’re gonna make uh lemonade out of lemons, right?

Dr. Friday

13:51

And we’d love that. I mean and that’s the way that I mean what I a lot of people come in my office and the first thing they didn’t realize Because everyone always hears about the seven point five of medical and you know, I’m not gonna be able to itemize. But when you start going into assisted care And if you don’t have the ability to fully take care of yourself that you need help dressing, taking medication, cooking, clothing yourself, these things are now impossible to do unless you have assistance, then you now have turned that into a medical deduction. Um at least a large chunk of it can be considered a deduction. And most of the time the uh facilities will actually give us a percentage that they have worked up of what is considered medical, what is considered just basic housing. Um and so Those numbers and when you’ve got ten thousand dollars a month going out for a memory care facility for one of my clients and I think they came back and said it’s basically eight thousand for medical purposes. So you got eighty, ninety thousand dollars a year coming off. You’re itemizing, big time itemizing. So what you’re saying is then you’re looking at where can I get that money that I can also

Hank Parrott

14:58

And this is where when we get together and do like with this particular client I’m thinking of that uh is in uh memory care unit currently One of the things that we’re going to be doing when we sit down and do their taxes, just as we did last year, is we’re going to look at, okay, how much Can I cash out here to maximize the value of this write-off and not miss out on it? Imagine that’s

Dr. Friday

15:25

I have amended more than one tax return when someone’s come in and said, well, my wife’s been in a facility. Right. And you know, we’re we’re low, low, so I have to take all this money out, but then I look on the schedule A and I don’t see any medical deduction. And you’re like, well I didn’t know I could itemize. You know, I’m like and and and and I get it. Itemizing can be confusing. Especially a lot of times they just go to, you know, um a regular AARP place and they just basically say, here’s my forms. You know, they’re not really going into asking those questions. So if you don’t ask where’s your wife And you’re like, oh yeah, she ended up in a nursing home and then that would have triggered possibly something, but we always have all of those conversations. So um as you can see, I have no problem in talking But it’s a great way and then of course you maximize charity, you you charitable deductions, and then your say your property tax and sales tax. All of that will also add to my Schedule A. So not only do we have potentially 70,000, 80,000 after meeting the IR uh the IRS exclusion, we now have the ability to take out $100,000 out of a taxable account and basically pay almost zero tax.

Hank Parrott

16:36

and we’re going over with my clients. But one of the things I love is the fact that we get there a thirty minute meeting and in that thirty minutes and it’s one I one of the reasons, you know, for a lot of my clients that they really appreciate go uh going to have you do their taxes is that they leave with their taxes done. Right. You know, in 30 minutes, it’s not like I’m sending it off to my CPA and and hoping uh that they’re going to get it back to me in time. Right. Or that I and typically right I’m calling them a month after I’ve sent them everything. Hey, remember me. Yeah, I can’t see. Uh as opposed to going in and not only they get in that thirty-minute meeting are they getting their taxes completely done and and they walk out one th less thing to worry about. Right

Dr. Friday

17:17

But we’re doing a mini review of I am with them at the same time. But also I have that person there. Convert or how much can I cash out because of the medical.

Hank Parrott

17:34

How do we max What’s the maximum amount?

Dr. Friday

17:36

That’s the sad thing with most people that don’t have these kind of relationships, in my opinion, is because I have, I mean, I will have a number of financial planners that might call and say, hey, my my person said I should call you because they want to do a conversion. Well, that’s never happened in this relationship. I will tell you that. He’s always calling me saying, hey, I’m looking at this one. It looks like their income’s come down a little bit. Maybe we can do more on a conversion. Can you run the numbers? And that’s the way it works because I don’t think of conversions. I mean it’s not in my wheelhouse as far as it doesn’t save tax dollars. It does save estate dollars, and don’t get me wrong, but I don’t know why more financial planners aren’t talking more to the tax person because what’s worse is you do this conversion or you do a rebalancing. They come into my office. I now tell you you owe $25,000. They were never prepared for that number, and then they’re having a freaking heart attack as if I did it because the numbers came out of my computer. And I get that. I mean, but it would be such a better relationship even with even when that happens in our office and and uh something done. We converted, we did something You’re always there saying, Nope, we accounted for that, the money’s sitting here, we just held on to it, we weren’t sure how much. You always have a way of saying, Hey, don’t worry about it, we’ve got and that just takes that immediate shock instead of going home, having to Call the person, wait for them to call back, come back into the situation. They’ve already got a stressful day. They’ve lost all that wonderful day that they had. Because now they’re not sure or they ought to take it out. C How much more should I be taking out? What’s the percentages? Why didn’t you tell me I should take taxes? Hey guy took three hundred thousand out the other day. No taxes.

Hank Parrott

19:15

Yep.

Dr. Friday

19:15

And that was crazy as far as I’m concerned. Who gets a no tax unless you have a three hundred thousand dollar loss? Um again, so we are here with Hank Parrot with Estate and Financial Strategies. He’s 30 plus years of doing this, so he has heard and probably seen most everything. But more importantly, he’s always up on top of the changes. Because just like my world, which I love about taxes, and I’m frustrated with taxes is the changes, right? We always have something that’s kind of changing or quirking. And when we come back from this break, we’re gonna talk a little bit about QCDs and a couple things like that because I still think it’s not out there popular enough for a lot of people, so maybe we can get a few more. If you want to reach Hank’s office, 615-376-5325-615. 376-5325. Tell them Dr. Friday sent you and you want a free appointment to do uh an evaluation, and that way you can find out where you’re putting your money and if it’s actually really making you as much or if you can be making more money on your money. All right, we’re going to take our next break. When we get back, we’ll be continuing this conversation with Mr. Perrett Alrighty, we are back again here with Dr. Friday and Mr. Hank Parrott. He is a financial advisor, you know, and I realized I didn’t really have him tell his credentials. So really quick, tell them what a wonderful guy you are.

Hank Parrott

20:34

Well, we’re doing uh first off, it’s the company, by the way, is Estate and financial strategies. We’re over in Brentwood, as as Dr. Friday said. I’ve been in business now for thirty-five years. Uh we also, by the way, a little cross promotion here, we we do a I do a TV show and Dr. Friday’s a a regular guest on called the Retirement Report. That’s on uh News Channel 5 Plus. That’s the uh cable outlet for the local CBS affiliate. Uh news channel 5 plus uh check your local listings for it. We’re on Friday mornings from 8 to 9. It’s live. Uh repeats again at 3 o’clock Friday afternoon, at uh 1 o’clock on Saturday, uh let’s see, 10 and 5 on Sunday, Monday evening. And I think I miss oh, there’s Saturday at eight A. M. I think we’ve got another one. So it’s it’s uh plenty of opportunity to catch it and we it’s an hour long uh program and we get into much of these same kind of conversations about planning. So we do comprehensive financial planning. It’s not just about your investments, not just about insurance and offsetting risk. It’s comprehensive. So we look at at everything. We look at your income, your expenses, your assets, liabilities, we factor in for taxes. for uh inflation, uh rates of return on your money, how well are you doing, what’s the needed rate of return to accomplish your goals. So all of that is part of the comprehensive planning that we do. And As Dr. Friday said, we’ll offer it up to you if you’d like to take advantage of that. It’s going to be two to three visits. You’re going to have to invest some time in it, but we’ll do it at no cost. It’s a great way for us to get to know you, see if we can be of value to you. Uh you’re welcome. You know, this is how we get a lot of new clients, of course, but there’s no no cost or obligation. And you’ll have something of real value because you will answer questions like, we’ve been talking about tax questions. Of course we get into that to tax planning. But we also get into things like Social Security and Medicare, the other uh complex areas that you’re going to have to deal with, health care costs and retirement. You know, that’s 250,000 to 300,000. out of pocket for the average sixty five year old couple that they can expect over their lifetime. So having a plan for that and how to minimize that is a big part of it. Just like with taxes, as we’ve been talking about QCD, you mentioned this is probably one of the most favorite tools that we have for our clients that are 70 and a half. uh and older. This allows them to give money to the charity that could be their church if they’re tithing to their church rather than If they if they take the money out of the IRA and then gift it over to that church, you know, or charity then uh they’re likely not gonna get any write off.

Dr. Friday

23:16

I mean especially when you’re looking at forty thousand, forty four thousand for a married couple is

Hank Parrott

23:21

Forty forty for a standard yeah age age sixty five and older so forty six thousand seven hundred zero tax but standard

Dr. Friday

23:29

So you have to be giving fifty grand or more to give. And then now with some of the new changes, and that’s the big thing. This would also reduce your income right off the top. So if if you were doing Irma, for example, um and you gave the money out of your bank, let’s just say you gave fifty thousand dollars and you put on your schedule A. That is not going to give you the same deduction as if they came out of a QCD, because QCD is right off the top. So if you took $100,000 and you gave $50 to your church, it’s only going to show $50,000 taxable. Now we’ll show the hundred that you receive, but the other fifty or half of other fifty thousand will go to that charity and reduce. So

Hank Parrott

24:11

It’s basically a hundred where you’d get zero write-off or maybe very little write-off, a small percentage, you can get a hundred percent write-off. So if you give them You know, in your example, fifty thousand, uh, zero you pay zero tax on it. Right. Uh that’s huge. I mean imagine re being able to uh do that each year. And we have I have one client I think they set the record, they were like I think it was either fourteen or I think it was fourteen charities that they were.

Dr. Friday

24:44

Check with the custodial on what they I’m sure there’s rules and how often they work with the code.

Hank Parrott

24:49

This doesn’t mean that you take money out of your IRA and give it and put it in your bank and then write a check to the charity, you don’t get to write off

Dr. Friday

24:56

No.

Hank Parrott

24:57

It’s got to go direct from the custodian, the person that holds your money. It’s got to go direct from them to the charity. Now that’s Sometimes it’ll go it’ll mail it to them, other times they’ll mail it to you. Right. To give to the charity, but the check is never going to get deposited into your account. It’s not in your name, it’s in the name of the charity.

Dr. Friday

25:18

And that’s the that’s the that’s the tax loophole, right? That’s what we want to happen. So And that’s the biggest thing. You could take $100,000, put the money in your checking account, write checks for 10 different charities for $50,000 total. That is a possibility. But if you’re 70 and a half and you’re taking that out of an IRA You just paid tax on money that you’re waiting for a tax deduction on that you might not get a hundred percent of. This is a one hundred percent deduction. And if your financial planner is not talking about this all the time, because again, I don’t think ten, fifteen years ago you started talking about this. Um I thought he was crazy at first, but it he wasn’t. He just Thought he was. Uh but anyways, that being said, it is something if you don’t have him talking, you need to call Hank because this can save you. tens, if not hundreds of thousands over your lifetime because think it’s seventy and a half and you live to be ninety and you’re taking money out and giving to charity anyways Th I mean a lot of our clients give a lot of money to charity. So it’s not like, you know, uh it you’re gonna give. And it’s not because you’re giving because of a tax deduction, but you’re giving anyway. So why not give and give more with a tax advantage versus the other. You can even give a little bit more because you don’t have to have the taxes come out. Um so it’s a game. And that’s what I love about these shows in in our life and we get to be to your point.

Hank Parrott

26:35

You give fifty thousand and if you if that’s taxable income to you and you had to pay fifteen thousand tax on it then Does that mean are you absorbing it? Is it net thirty-five to the charity? You know, how’s that gonna work? Or absolutely where I can give fifty and it’s hundred percent

Dr. Friday

26:50

Yep.

Hank Parrott

26:52

Win-win.

Dr. Friday

26:52

Win-win. That’s what I consider too, yes. Because the only person that really loses on that is the IRS. And are any of us going to really cry if the IRS does not have to get their money? I’m pretty sure if we can find a lot of those little loopholes, we will. I jump in there real quick. In 2026, under the OBBB, we do have the $1,000 per person, $2,000 for a married above the line charitable uh deduction available as long as they’re under the thirty seven percent tax bracket. So um just something to put on the table So if you are going to give money, um, and maybe you’re not 70 and a half, or maybe you’ve you’ve done your big ones through that, but you’re still a couple little ones that you just wrote checks because the Girl Scouts came to the door or whatever Keep make sure though you have to have receipts. And this doesn’t have to be cash, which is what we had back in twenty eighteen or nineteen when they had the above the line. This can be um any type, but you have to have a documentation proving that it either cleared the bank or that you, you know, have a cash receipt or you went to Goodwill and you have a physical receipt that does need to list exactly what you gave and they usually just give you a blank your seat. So you have to have that completely filled out um with the address of where you went and everything. So it’s it’s acceptable because I have a feeling that might be an area They might look at. Who knows? It’ll be three years from now after that because they’ll wait. Uh but just so you if you’re a person that likes to do brunching or bunching, excuse me, I like to do brunching too. But uh bunching, we used to talk a lot about that, Hank, where we have people save all of their sales tax and then um obviously double up on their uh property taxes. uh every other year because now you have forty thousand dollars. Um if married filing separately it’d be twenty twenty. This is also where there’s a penalty for married couples. Sorry guys Uh us single folks make out better on tax code. We get forty or you get forty. That’s just the way it is. Um so if you are a person though, that’s a big number because if I pay twice my social I mean S I get to itemize because of mortgage interest and things, but let’s say you don’t normally get to itemize. If again, if you’re hitting forty four forty-six you said thousand dollars and you have no mortgage. The only way you’re hitting that is going to be potentially sales tax, property tax, maybe doubling up on some of that, and charity.

Hank Parrott

29:14

Uh and maybe some hefty uh medical.

Dr. Friday

29:16

And yes, yes, we talked about yes. A medical may get you so maybe having those numbers. I used to tell people last couple years you didn’t need to save all your receipts, you didn’t need to track your sales tax. Well, as of January 1st, I’m saying let’s get back to the game. Because we probably will start doing every other year for some of my clients. So they can itemize those years because they can double up on that property tax, which kicks them over. Now I don’t know. If it’s single, it’ll be easier Married forty some thousand, that’s gonna be hard for most people to really get over, even if you saved every receipt and every property tax you have. Um But you need to make sure you’re not leaving money on the table. That’s what this this is all about. That’s what I I live for. And that’s the reason I have Hank out here. Now Hank, you also have a radio show.

Hank Parrott

29:59

Yeah, we do. I think we’re on 12 to 1. And then uh W-L-A-C. And then simulcast actually, it’s on an FM and then 1510 A. M. And then also, by the way, uh we’ve talked about the workshop uh we didn’t talk about the workshops, but we got a workshop coming up. Uh we do one uh most months uh in the year. January thirteenth is the next one. It’s a Tuesday from eleven to one. There’s no charge for the event. We’re going to do these are educational workshops. Our goal is to help you become better stewards of all the resources God has blessed you with. And one of the ways to do that is become better educated, uh better informed, more knowledgeable about all the rules we talk about and and understanding how these things work. So If you’d like to attend, just call the office, 615-376-5325. You’re welcome to bring guests as well. We just need to know how many to expect. Again, no charge for the event. Uh one other thing, by the way, we talked about the comprehensive financial plan. If you’d like to take advantage of that, uh we’ll get your information, send you out a checklist of things to bring to your appointment with me. Uh and when you come in to see me, I’ll also give you a free copy of my book, Seven Steps to Financial Freedom in Retirement. So again, 615-376-5325.

Dr. Friday

31:18

Great. And that’s those are important because I know um I I every once in a while I’ll do a workshop with him, but I’ve had clients that’s went to his workshop and that’s how they’ve kind of come circling towards me and towards you. I mean again, anytime you can get um knowledge and see how it applies to you. I mean that’s the the game, right? Because we talk a lot of times, but it’s generic to a point. You know, I I don’t know who’s listening, so I can’t target this conversation directly. But when you’re in our offices, we can. It’s one on one. We know what we’re doing, we know how to do it, and we make it work for us. All right, we’re gonna take another break here. So if you want, you can call Hank’s office 615-376-5325. 615-376-5325. Ask him for the free consultation or just Sign up for the free workshop and that way you might not even like the guy before you actually have to go in for it. You know, come on, it’s a win-win situation. Um sign And then we’ll take this break and then we’ll be going into the last part of our show and I’ll give you my contact information and all that good stuff at the end of that one. We’ll be right back with the Doctor Friday show. Alrighty, we are back. This is the final time. So if you’ve been listening, thank you. But we’re here with Hank Parrot with Estate and Financial Strategies. We’re both out of Brentwood, Tennessee. And uh just for anyone that just tuned in, I am Dr. Friday, an enrolled agent with the Internal Revenue Service, licensed by the Internal Revenue Service. to do taxes and representation. That’s kind of all I do, guys. For the last 30 years, that’s all I’ve done. So that’s why Hank’s here, because I can only absorb so much information. And I do not want to be a financial planner. So a disclaimer, I am not. Hank is the financial planner. I am the tax person. Um Uh I I will help and lead people mainly when you convert and you need to know how much taxes or if you’ve taken money out, I will tell you how much, but I will never tell you it’s a great idea to cash all your money out to go pay off your mortgage That’s because Hank says that’s a bad idea. For most people, I guess there’s always an exception to an exception, so don’t lock me into those because someone’s gonna call up and says, I did it and I didn’t, you know, whatever. Um but I also love the ones where People are um in the lower income bracket. Say they’ve done a great job savings. They haven’t really done anything, and I’ve actually been a part of where you’ve done conversions for zero. Every year you just take out 10, 15 grand, whatever it is that keeps them and even though they don’t need it, but you just say, hey, we’re i you don’t need to file, right? You you’re not a filer, you don’t need to file. But now if you have an IRA, that’s kind of silly not to file. Because tell them a little bit.

Hank Parrott

33:46

Sure, if you’ve got somebody with modest means maybe they’re able they’re living on, say, Social Security and a small amount of income from their investments. And they’ve got the the IRA and now they’re they’re hitting that required minimum distribution age is coming up. Right. We say, well before we hit that where you have to start taking money out We can, you know, sometimes it’s only $8,000 or $10,000 that we can convert and turn those taxable dollars into tax-free dollars and and pay zero tax in the process. So We’re always looking for opportunity to help uh improve our clients uh uh tax and well taxes is a big example. We’ll I help with tax planning. I know kind of the things to, you know, look for and then get with someone like yourself, well mainly in your situation Friday, it is you. Because we’ve been working together now for, as you said, over thirty years and and one of the things that uh I have found to be so uh advantageous is that team approach that, you know, I can sit down with you and I can say, okay, I’ve got this client, you’re doing their taxes, here’s what their situation is. Uh we want to do some conversions and can I do forty? How about forty-five? It’s like an auction. Fifty.

Dr. Friday

34:57

Can I get can I hear sixty?

Hank Parrott

34:58

Can I get sixty, please?

Dr. Friday

35:00

Yeah. How close can we get? And then we leave a little wiggle room. But yeah, cause I know um there’s a a number of clients and a lot of times I realize a lot of financial planners There’s not a huge advantage to doing conversions for you. I mean it’s the managing of funds. Everyone has to make a living. That’s not but if you’re listening, and maybe you are a person that only has Social Security or maybe a small pension in social Even your RMD, maybe it’s a thousand dollars a year you have to take out ’cause like you said, maybe there’s only ten, fifteen thousand dollars in there and you don’t need to take it out, but you’re mandated to be taking it out. Maybe you should make that phone call and at least talk. It may or may not be something necessarily for for Hank’s office or something, but talk to someone and find out if you were to convert that, put it into a Roth, let it sit for the next 10 years, or let your children inherit, because you really didn’t need the money Now, talk a little bit about what I was just thinking about. Everyone, I mean, um, you don’t want to convert if you really need the money in a period of time, right?

Hank Parrott

35:58

Well that’s like on the spending down uh when you were looking at retirement accounts, or is it a conversion or are we just going to spend it down? And one of the things we’re looking at is the value during your lifetime. Okay, so for the client, this is and f and if they’re married, of course, for their spouse, first and foremost, how do we make sure you’re gonna be okay? That you’re going to be able to attain and maintain your standard living, quality of life, you know, no matter how long you live. So that’s first and foremost. We do that. And that’s one of the reasons for doing the comprehensive planning. The next piece then that comes in, once we’ve made sure of that, we start thinking, okay, now when you’re gone, what do we want to have happen? And do you want uh one of the things for most people, uh when you when you ask them, do you think you, you know, pay too little in taxes? Exactly. That’s the response. No, I don’t think that. If anything too much. Even though we’re at historically low rates. But this is one of those areas do you want to have the IRS as one of the beneficiaries, or maybe even the biggest beneficiary of your estate? Because that comes into conversions and stuff. And keep in mind since the Secure Act uh back in 2019, we’ve got the now the 10-year rule.

Dr. Friday

37:06

Yes.

Hank Parrott

37:07

So this is one of those areas. Exactly. So when you uh leave money in an IRA or any kind of retirement account to a non-spousal beneficiary, in other words, to your children. They’ve only got 10 years, they’ve got to cash that out within 10 years. They don’t they no longer can spread those distributions out over their lifetime and and basically minimize taxes. it’s gonna probably increase the amount of tax that gets paid. So if we can convert that, maybe over to a Roth The benefit is now you still have the ten-year rule, but it’s here it’s a different strategy.

Dr. Friday

37:45

Roth would be great. I’ll wait to the day before I have to take it out, let it ride the entire time it can cashy because there’s no tax improvation. Exactly.

Hank Parrott

37:51

I would grow it tax-free for ten years to push it out.

Dr. Friday

37:55

Exactly. Where the IRA and that’s the kind of thing, because I know sometimes people think about they keep hearing I need to do conversion but it really is a an individual again I know on taxes I think it’s very individual because The advice I may give you may be completely different than I give someone else that’s in the same industry because of just different life expectancies and different things. And that’s the same way with IRA conversions and all these conversations, one of the reasons you do this free evaluation is to find out more about that. You need to know that person to know what kind of advice to give them, I’m assuming.

Hank Parrott

38:28

Oh yeah. This is one of the areas and imagine going to a doctor. and you walk in the door, say hello, and he writes a prescription before i ever examining you. I mean, how are you how does he even know what you not you you might need? Well Financially, it’s basically the same thing. I’m not sure what I would recommend for an investment plan before I know more about your entire situation, including what those income needs in retirement are going to be.

Dr. Friday

38:52

Alrighty, we are winding down the show. So again, if you want to reach Hank Parrot, Estate and Financial Strategies 615 376-5325. Again, free consultation as well as a free workshop. Come on, how much more free can you get? It’s almost like a Christmas present after Christmas. 615-376-5325. You can also reach me, Dr. Friday, at 615-367-0819. 615-367. You can also check us out on the web at drfriday. com or email Friday at drfriday. com And um this way if you have any questions or if you need help with taxes or maybe you have a friend that’s received love letters and they don’t know what to do with them or you just put them in a drawer because you think that’s the best place to hide them. Not really the best idea. Just to let you know that, but you can give us a call as an enrolled agent. I can deal kind of like a superwoman between you and the IRS. I can shield you, but I also need to have that same information.

Hank Parrott

39:53

So Hank, thank you for joining me. Absolutely.

Dr. Friday

39:56

All right. We’re gonna take a um final out, so this is the Doctor Friday show, cop you later. Ab

00:01

No, no, no.

00:02

She’s not a medical doctor, but she can sure cure your tax problems or your

financial woes.

00:07

She’s the how-to girl.

00:09

It’s the Doctor Friday show.

00:15

Question for Dr. Friday, call her now.

00:17

737-WWTN.

00:19

That’s 737-9986.

00:23

So here’s your host, financial counselor, and tax consultant, Dr.

00:27

Friday.

00:28

G’day, I’m Dr. Dr.

Friday and the doctor is in the house on this absolutely beautiful Saturday.

00:35

I was actually able to go out to my beehives and make sure they were all

happy.

00:38

Didn’t want to open them with

00:39

It’s too cold outside, but it is a pretty day.

00:42

So everybody is out flying around and hopefully you guys are out doing your

last minute Christmas shopping.

00:48

Um, it’s probably almost too late

00:51

to think about any kind of conversions or anything like that.

00:56

In my opinion, I doubt you’re gonna have a lot of financial planners that will

be putting in a lot of extra time into uh dealing with, you know

01:06

That kind of stuff.

01:07

They’re pretty much probably full up and ready to close out the year at the

thing, but the you still have time.

01:14

Theoretically, um a Roth conversion or

01:18

Contributing if you haven’t received your last paycheck, you could maximize

your 401k.

01:24

Um, those kind of things would be a way of helping to reduce your current

income situation.

01:30

But seriously, it’s the 20th and not a lot of activity probably happening in

the next few days.

01:36

I came across this with one of my

01:38

One of my good friends, Hank Parrot, he had this uh saying by Albert Einstein.

01:43

I thought it was kind of a good one.

01:44

And why not?

01:45

Since I know most of you guys are out there probably shopping.

01:48

Preparing my tax return is too difficult

01:51

For a mathematician, it takes a philosopher.

01:54

The hardest thing to understand in the world is income tax.

01:58

That was what Albert Einstein said.

02:00

And think about back in the day, he was doing taxes.

02:03

It really wasn’t as complicated as it is now.

02:06

I mean, now it’s ten times the size of the King James Bible.

02:11

So I thought that um

02:12

Little information would be good for you.

02:14

Top income rates throughout history.

02:16

We all think that we’re paying a lot in taxes, and I’m sure some people feel

that way.

02:21

And taxes has changed who they’re taxing, right?

02:24

So back in 1913, when the tax code was about 6%, that was actually only on the

top earners, right?

02:32

I mean, you had to be making more than, you know.

02:34

$10,000.

02:35

And back in 1913, that would have been making like $200,000 today.

02:41

Um, and that’s my personal estimate.

02:43

I’m sure that’s not the exact conversion

02:46

But then if you look at like by by 1916, you’ll see that the tax rate went up

to 80%.

02:55

80%.

02:56

Do you think those people felt like they are paying too much in taxes?

02:59

That’s when they started finding loopholes.

03:02

They find try to find some way to save.

03:05

And then by 2025, it was back down to about 25%.

03:09

Then we start kicking our way up the highest in the last.

03:12

hundred plus years was about ninety-two percent tax.

03:17

And that was right around nineteen forty-three.

03:22

That’s what they were paying in tax.

03:23

And then it kind of works its way down.

03:25

And we’re not actually, of course, the lowest was back in 1913, but we’re

right around the lowest.

03:31

But the the lower period, there was some low periods back in the 1980s.

03:35

where we were pretty close to what we are, maybe a little bit less, but mostly

we are at the lower period of our lifetimes of the tax cut.

03:45

So if you think you’re paying too much today in taxes, you must be prepared

because it used to be when when

03:53

when I was working and still am, but when people used to always say, you save,

save, save now, because when you hit retirement, you’ll be at a lower tax

bracket.

04:02

But the question is, for some people, depending on what their work history

was, they may may or may not be, but basically most of us right now are at a

lower bracket than we most likely will be

04:14

Especially if you look at the spending of our government, most likely will be

in our lifetime.

04:19

So the the the likeliness of taxes going down further

04:23

I think is fairly rare.

04:25

Will it stay the same?

04:27

I hope.

04:27

That would be great, at least for the next 20, 30 years.

04:30

I’d like that.

04:31

But, you know, no one really knows what’s going to happen.

04:35

So we do taxes based on what the current tax laws are.

04:38

And then we have to change those.

04:40

So the new tax brackets for 2025, 2000, 10%, 12%, 22, 24, 32, 35, 37.

04:48

Those are the brackets

04:50

And you can see there’s a big jump between 12 and 22.

04:54

And not only, and they’ve done a fairly good job.

04:58

of making there be no marriage penalty.

05:01

So if you’re single, your your 22 ends at 103 and a married couple 206

05:08

No penalty.

05:09

The penalty actually comes into play when you’re in the 35% going into the

37%.

05:15

At that point, if you are both high income earners.

05:20

Um, you know, there is a lot of penalty because you lose a huge amount of

money uh being married at that point.

05:27

But up until you get past the 32 or a couple making more than about six

hundred thousand dollars.

05:33

You don’t really have much of a marriage penalty at this point.

05:36

Not too sure why we have any marriage penalty.

05:39

It doesn’t really make a lot of sense.

05:41

But you know what?

05:42

No one really asked us.

05:43

So all we can do again is dealing with the tax picture.

05:47

All right.

05:48

So then we’ve got mortgage interest.

05:49

Here’s some good things about the OBBBA, the new one, the deduction for

mortgage interest.

05:56

Of course, that stays if you have a home for $750,000.

05:59

You purchase it after December 17th, that’s the mortgage you can have.

06:03

So if you have a home today you purchased last year and the mortgage is a

million dollars, you will not get 100% of your mortgage interest.

06:13

You will have to take a percentage based on how much the mortgage is and based

on what you’re allowed, up to 750.

06:19

If you had a pre-existing to the 2017, then you had a million-dollar cap.

06:26

So it’s important for that information to be provided to whoever’s doing your

taxes, right?

06:30

They should ask you that information.

06:32

Now, most of the time on the 1098, it will say the origination date.

06:36

So we don’t always have to ask, but we need to know it.

06:39

This is something that I’m not too sure if people know interest on a loan for

a second home is still allowed.

06:46

So I have a lot of people that do have second homes.

06:48

Maybe they have a home here.

06:50

Home in Florida.

06:51

I have one that has one in California and his second home is in Utah because

that’s where the two families are.

06:57

And they don’t rent them.

06:58

They don’t do anything.

06:59

It’s a

06:59

true traditional second home a mortgage on both as long as those mortgage

interest up to uh value of the home was seven hundred and fifty thousand

07:09

You will only be able to deduct the interest on the first $750 of the combined

value of loans on your first and second home

07:17

So again, that $750,000 is the prior or is the priority number.

07:24

So if you’ve got a first on your home, your your main home and it’s

07:28

400,000 and you have a second with a home of 350, we’ll be able to take all

the mortgage interest.

07:35

If your first home is already at 750 and you have a second home, we will not

be able to

07:40

take any more of that mortgage interest.

07:43

But you know, a lot of times people can can do that and make it work.

07:47

The new state and local tax deduction, we call it SALT tax.

07:52

state and local tax deduction.

07:54

And that’s where we take off our property taxes, the sales tax, that’s the two

main ones, and then your primary home and if you have different properties,

you can add additional properties.

08:06

We have it up now, now it’s jumped up to 40,000, right?

08:10

For the last couple of years, we were locked in at $10,000.

08:14

very hard to um really do um where where we would bunch.

08:19

We did bunching.

08:20

So every other year, like every even year, I made sure I doubled up on my

property taxes

08:25

I had any big purchases I tried to do in the even years and and did that so

that way I could maximize my property taxes and then take my mortgage

interest, etc.

08:36

etc.

08:36

Right

08:37

Um you don’t have that uh as concern now because the ten thousand we we

weren’t able to do it.

08:44

I mean with my property tax and my standard sales tax

08:47

I was already basically hitting that number and many of my clients were.

08:51

So what you do have is now the ability to go back to bunching

08:56

Right?

08:56

Because again, we’re going to talk about how much money you have to have to

meet those standard deductions, but you know, if

09:04

If you’re single and you’ve got more than 15,000, great.

09:07

Uh if you’re over the age of 65, it’s like 17,000.

09:10

If you’re single and if you’re married, it’s like 31.

09:13

5, plus if you’re over the age of 65, you get an additional 3,200.

09:19

plus another 12 based on your income.

09:22

We’re going to talk about that new one on the OBBB or the one big beautiful

bill.

09:28

Talk a little bit about how that um 6,000 per person over the age of 65.

09:33

Remember, this show is live, so if you want to join us, 615

09:37

737-9986-615-737-9986 is the phone number here.

09:46

So we’ve talked about bunching, we’ve talked about the sales tax.

09:48

The only other thing that really hits the itemization.

09:51

Uh there’s two things.

09:53

The next thing would be medical expense.

09:55

This one is a a very difficult because first thing you have to do is you gotta

figure out what your adjusted gross income is.

10:02

Then you have to take off the top 700 7.

10:05

5%.

10:07

So, you know, if you have $100,000, 7.

10:09

5%, $7,500 would be not deductible.

10:15

So if you had $8,000 in medical, you’d only get $500 of that applied to your

itemization.

10:21

So if that’s the case on this

10:24

Then, you know, and it does cover everything.

10:26

It’s surgeries, you know, petro for or or miles for yourself, um, qualified

appliances, glasses, all that stuff, right?

10:34

You you can add it all together

10:35

Um, the ones that I find that mostly, unless you have high medical and fairly

low income, then you can sometimes and I mean there are times when I I mean

10:44

I always hope that you have low medical because that means your health is

good.

10:47

Cause sometimes I do have people that spend twenty, thirty, forty thousand

dollars a year, but they’ve usually went through something horrific like

cancer or they’re fighting something at a lot of out of pocket cost.

10:58

But the other is if you are a person that’s taking care of or helping maybe

your parents and they’re in assisted living.

11:05

Keep in mind assisted living normally a portion, if not all, depending on the

situation

11:11

um could be considered a medical deduction, right?

11:15

Because they have to stay in these facilities.

11:17

Someone has to tell them or give them their

11:20

prescription, someone has to help them with their hygiene.

11:23

Someone has to help them maybe even get up in and out of bed or or showering

and bathing.

11:29

These are essentials.

11:30

If they can do all that themselves, then no, that’s not essential.

11:33

They may be living in an assisted living just because it’s easier, but it may

not be essential.

11:37

But most of the people we deal with, it’s really essential that they’re in

there.

11:41

And then

11:41

Now you really you know you might want to consider where the money’s coming

from because if you’re spending $70,000, $80,000 for um assisted living or or

dementia care or whatever

11:51

Um, you know, now we we are going to have a huge medical deduction that you

want to maximize.

11:57

And maybe at that point, instead of using money that’s been saved, you might

want to consider taking IRA distributions if they have some or something.

12:04

All right, we’re gonna get ready to take our first break.

12:06

We get back, we can have you on the phones at 615-737-9986.

12:11

We’re gonna continue talking about some of the changes that’s happening for

the 2025 taxes.

12:16

We’ll be right back with the Dr. Friday show.

12:20

Common at the last Alrighty, we are back here for the video talking about

time.

12:31

Many of you have listened and

12:33

And and followed me for a number of years.

12:36

Obviously it’s been what 14, 15 years now.

12:38

Uh but you know, just the last eight years we had what the Tax Cuts and Jobs

Act that happened what 2017

12:45

Then we had Inflation Reduction Act of 2022, and now we have the one big

beautiful bill or the OBBBA in 2025.

12:55

And this is just what’s happened, you know, in just in the last eight years.

12:58

We’ve had a number and it within those, you know, like the one big beautiful

bill took and made several of the TCGAs, the the tax act, um

13:09

bills permanents, right?

13:10

They they made them through and then some of ’em were actually made permanent

through the other uh through the tax act.

13:17

So

13:17

All of these are ones that are working.

13:19

Now I do want to say that I was talking about the new salt tax, uh, the state

and local income tax, which we had the $10,000 limit on, and in 2025 that goes

up to $40.

13:30

That has not necessarily been like a permanent thing, right?

13:33

We know it’s going to 40.

13:35

It’s also going to have an income phase out.

13:38

So

13:39

We have to be careful.

13:41

The way that a lot of these credits are coming to us are going to be

income-based.

13:48

subjected to income limitations.

13:50

Most of these new temporary phases.

13:54

So the main ones are, of course, is tips.

13:58

Qualified tips, qualified overtime, the $10,000 loan up to $10,000.

14:07

You have an additional $6,000 for seniors over the age.

14:09

These are all

14:11

subjected to income limitations.

14:14

So if you have um an upper income situation and some of these

14:19

sound great because I was just doing someone’s 2025 already.

14:23

Yes.

14:23

Well we were estimating to give them an idea of what their estimates should

be.

14:28

So we make sure we don’t underestimate this year.

14:31

Um, and we were going through the numbers and we were thinking we were going

to have a wonderful benefit of an additional six thousand dollar deduction

because this person was over the age of sixty-five.

14:42

But due to their income, that benefit did not show up.

14:47

And it took us a while because we’re all new at some of these and we haven’t

really done

14:51

you know, hundreds of tax returns yet.

14:53

So we don’t have all of the exact details on that.

14:56

But that limitation um was

15:00

Pretty um, it seems like a limiting 75,000, but it basically phases, starts

phasing out, and then it phases all the way out at like 175 for a single, and

then it’s like 150 and it phases totally out by like 250.

15:12

Um

15:14

It’s just one of those things where it it sounds so great, but when you’re

really working on the the information that’s being given to you.

15:22

And this person, the the problem was

15:25

um or not the problem, but the situation was this person had a large stock

that they went ahead and sold to take care of, paying things off and, you

know, making themselves more comfortable in

15:37

um retirement.

15:38

And at the time didn’t really know.

15:41

She did this early in the year.

15:42

She didn’t know anything about this six thousand dollar deduction.

15:45

And she could have, maybe she would have.

15:47

I don’t know.

15:48

uh moved it down and maybe took a portion this year and a portion next year,

um, it was on the table.

15:54

But for us, it really wasn’t going to save tax dollars, right?

15:57

So

15:57

We didn’t know.

15:58

And that’s always the hard sense.

16:00

So basically the deduction is reduced six cents for every dollar over your

modified adjusted to gross income over the initial threshold.

16:08

So if you are

16:10

eighty thousand dollars, um you’re gonna take six cents out of every dollar

that’s above the $75,000, so $5,000, and you’re gonna reduce your $6,000 by

that

16:21

It uh seems fairly straightforward, but you know, a lot of times people,

especially as we get closer to retirement, and I deal with a lot of financial

planners.

16:30

There seems to be a point where we’re really just trying to get the houses

paid off, making sure we have the cash flow, reduce the overhead cost, and

some of that sometimes can trigger these things.

16:39

So, you know, I’m just saying that you may hear a lot about these different

deductions.

16:45

But sometimes they’re not going to apply to you.

16:47

It’s really that simple.

16:48

They’re just not going to um take in the effect.

16:52

I mean, most of the energy credits

16:54

uh for like clean vehicles and ever all those you had to uh purchase before

September 30th.

17:00

Uh corporate law did get extended and uh I had an interesting conversation

with a financial guy um yesterday, uh Friday.

17:08

And um he had an interesting, he was under the he’s a young guy, very young,

um, and he just had the idea that a corporation should be paying more in tax

instead of building up their

17:20

finances and that would help reduce the uh overall cash flow that the

government has.

17:28

And you know

17:30

I totally disagree with that, to be quite honest.

17:33

I feel that a corporation’s tax is flowed down to the people that are the

consumers

17:38

And the profits that mi corporations make show up in the stock portfolio,

which my portfolio, if I’m invested with them and I’m invested with

17:46

Thousands of stocks in my 401k, or in my case, a SEP, then my CEP improves

when those businesses do good.

17:53

So in essence, I’m getting a portion of that

17:57

Growth when I invest into these kind of companies.

18:00

And so my opinion, them paying more in taxes doesn’t help.

18:06

And also

18:07

you know, I find that a large number of these companies also have a very large

charitable fund that, you know, they get a tax deduction for.

18:15

It doesn’t, you know, I mean there’s an advantage to them for it.

18:19

But it still doesn’t stop the fact that that also helps billions of dollars

into the f the the charitable markets to help people, you know, feed children

and everything else.

18:30

So

18:30

Everyone’s got their own opinion.

18:32

My opinion is that.

18:34

There is the new Trump fund.

18:38

I do want to bring this up because

18:40

If you have a child that was born as of January 1st, 2025, and I think it goes

through December of 28.

18:49

They will put in the a in account.

18:51

You have to file this with your tax return.

18:53

So your tax person needs to know this.

18:55

But basically it comes down to is they’ll if you have a child and that was

born

19:00

The first of this year or anytime after the first of this year, um, there’s a

$1,000 account that the government will set up.

19:08

And I do believe I read something about a grant of $250,000

19:13

given by Dell Corporation for the first, I don’t know, 200 million or

something like that.

19:19

So if you if you’re on top of it, you may qualify for both.

19:22

And then

19:23

Grandparents, aunts, uncles, or parents can put up to $5,000 into these

accounts up until the age of 18.

19:32

Um the the the cool thing about this is is that normally we don’t have a lot

of vehicles where we can put money into these counts.

19:40

for a minor child that’s not working.

19:42

Sure, as soon as your child goes to work, we can help put money into Roth

IRAs, whatever their W-2s are.

19:49

w uh you know, Roth IRA could theoretically be gifted to them and that money

could go into a Roth um and that would start.

19:55

But that’s usually fifteen, sixteen years old.

19:58

I don’t know what age kids start working nowadays, but in that ballpark.

20:02

Um, and then only grandparents or parents can really help and maybe the kids

would actually contribute some.

20:07

But again, there’s not a lot and you’d hope to be able, but this would be the

first

20:12

Let’s say fifteen years then and then they go to get a job and then maybe they

can help fund the money.

20:17

I think it is great to teach everyone.

20:19

I mean it’s

20:20

It’s hard when you’re just making a few dollars on every paycheck and your

petros is sp is is the entire paycheck.

20:26

Uh but you do, you know, if possible, teaching them that portion of every

check should go to I had a

20:33

uh financial another a different financial guy and he was telling me he works

so the rule of thumb that ten percent for savings, ten percent for church

20:42

and um and 80% or whatever for for lifestyle, something like that.

20:47

I seem like it was like 70%.

20:48

I’m missing 10% on something.

20:50

Uh, but that was his his whole mathematics.

20:53

So you should be living off basically 70% of your paycheck, not 100.

20:57

And that’s true.

20:58

We all know that, right?

20:59

We should never be living off 100% of our paychecks.

21:02

You owe me it’s always savings.

21:03

So it’s 10% uh retirement, 10% church, and 10% savings.

21:08

That way, you know.

21:10

you lose your job or your boss is a butthead and you need to change your jobs.

21:11

You

21:13

Um you’re not sitting there trying to figure out how you’re going to pay your

rent or putting up with somebody because you don’t have the extra money to be

able to

21:21

do what you need to do to move up in the chain.

21:24

So, you know, it’s and it’s I’m not going to tell you it’s not easy for

someone to tell you this versus living it because

21:30

um a lot of things happen, your car breaks down.

21:32

But that’s where the savings come in, right?

21:34

I mean, you do have the ability because if you don’t have savings, guess what?

21:38

You’re getting into a credit card most likely.

21:40

And then the credit card, you’re gonna pay twice as much as what you paid if

you had cash.

21:44

because you have to pay them money and you don’t pay it off fast enough, it’s

gonna have interest in penalties and everything going there.

21:50

So I’m just saying it’s it’s not as simple, but ideally

21:55

um these these accounts.

21:56

And you need to tell, I mean, again, that tax person should know that.

22:00

But some of you guys do your own tax returns when you get ready to

22:04

um do them.

22:05

And if you do, make sure you’re looking out for that because, you know, you

want to I’m I’m gonna assume there’s going to be a question um, you know,

about the the Trump fund and what it has and everything.

22:17

But

22:17

uh you you are going to want to make sure that you qualify because $1,000 is a

thousand dollars.

22:23

Now you can’t really take it out early and it’s very important that you um

22:28

you know, do what you have to do.

22:31

And you can look it up yourself.

22:32

It’s called the Trump account.

22:34

And no one should be shocked that we actually have something called the Trump

account.

22:37

But it is an investment fund.

22:39

The money is invested for you.

22:41

You take it out early.

22:42

If you take it out anytime before you full retirement, basically, there is a

penalty.

22:47

Um, it’s just like an IRA in many ways, but

22:50

I do think it’s important, I mean again, even if you never fund any of it,

it’s a thousand dollars that this child would have and who knows what it would

be worth.

22:58

assuming that the market holds or whatever, um keeping it moving forward.

23:03

But it is one of those things.

23:05

You can go to trumpaccounts.

23:08

gov also if you want to know more about that.

23:11

Again, I don’t have children, but anytime someone’s going to give away some

free money, I want to make sure my listeners know that it’s available.

23:18

And then it’s another thing.

23:19

I mean, because you have the 529 plan.

23:22

As a parent or as grandparents, I am somewhat I’ve been researching them

because I had a friend that actually got involved and I thought back back when

they first started

23:34

There was some pretty bad features to it, right?

23:37

You couldn’t pay for your your rent, you couldn’t pay for almost anything.

23:41

It just basically could go towards um college uh tuition.

23:45

at at the beginning.

23:46

So now it goes for everything, right?

23:48

Tuition, fees, books, supplies, equipment like computers, room, board for

students enrolled at least half the time.

23:54

Tuition for elementary.

23:56

and secondary public, private, or religious schools up to the federal limit of

$10,000 annually per beneficiary, increasing to $20,000 in 2026.

24:07

So, you know, um those are those are huge.

24:10

And that’s a great way again, great way for grandma and grandpa, aunts and

uncles to help

24:14

Do something with that.

24:15

All right, we’re going to take a second break.

24:17

If you want to join the show, you can.

24:18

615-737-9986.

24:22

We’ll be right back with the Dr. Friday show.

24:28

Alrighty, we are back here live in studio and you can join us live 615-737-

24:37

9986 and we have Ross on the line and Ross tell me what I can do for you

24:52

I’ll be starting collecting social security next year and I’m gonna be signing

up for it

24:56

And I was wondering, do I need to withhold like uh withhold is you know as far

on taxes?

25:03

‘Cause I’ll be I will I be taxed on that?

25:04

‘Cause I I understand there’s no tax on social security.

25:07

Are they doing away with that or

25:09

No.

25:10

I’m glad you asked, Ross, because it seems to be somewhat of a

miscommunication throughout the uh internet or whatever.

25:17

Basically what they’re giving is if your income is within a limitation

25:22

you will qualify for a six thousand dollar deduction, which will reduce your

income tax based on your income bracket.

25:29

So yes.

25:30

I mean, are you only receiving Social Security?

25:32

I missed part of that, Ross, and I’m sorry.

25:34

Is it only Social Security or do you have a job too?

25:37

No, no, no, I I’m retired now.

25:38

I mean I I receive a pension and plu well with pension and interest, you know,

I I’ll probably earn about maybe thirty five thousand

25:45

And uh course I’ll be collecting social security starting and I said, Well

should I withhold taxes on that too or cause it again?

25:53

Do you withhold anything on your pension right now

25:56

Yes, I do, yes.

25:57

I c currently hold like I don’t know fifteen, twenty percent in that range,

but uh right, and you usually get a fairly decent refund every year.

26:05

Yeah, yeah, uh roughly yeah, just a little bit.

26:07

I usually break even or maybe owe a little about a hundred dollars, so it’s

pretty close.

26:12

Yeah, so I will say yes, because

26:14

If you’re making $35,000 before Social Security, they do what’s called the

provisional tax code, which basically take half of your Social Security.

26:22

and add it to your other income.

26:24

If it’s over twenty five thousand, you’re gonna pay tax on Social Security.

26:28

Well yours is gonna be over twenty five because you’re already over twenty

five before we even add social

26:32

security so I would suggest at least having 10% coming out.

26:37

I don’t know if they do percentages or how they do it, but um I would suggest

yes, have some withholding coming out of your social security.

26:44

Okay, that’s what I’m talking about.

26:46

Otherwise, but if you don’t have enough taken out, I I believe you’re

penalized, aren’t you?

26:50

Well there’s a there is always a penalty in the first year you wouldn’t be,

but after that they would require you to pay quarterly or estimated payments

and that’s a real pain.

26:58

as far as I’m concerned.

27:00

Okay.

27:00

Okay.

27:01

I got you there.

27:01

Okay.

27:02

All right.

27:02

Well I appreciate the information and have a Merry Christmas.

27:05

Thank you.

27:05

Merry Christmas, sir.

27:06

Thank you.

27:07

Um, and that was a great question because I will tell you and I let let me go

over that one more time because um for some of you you may have just tuned in

and some of you may have no idea.

27:17

You may have just been listening to the radio and you’re like, oh wow, who’s

this person talking about tactics?

27:21

right before Christmas.

27:22

What a fun person that person is.

27:24

Well I am Dr.

Friday, an enrolled agent licensed by the Internal Revenue Service to do taxes

and representation.

27:31

That’s all I do.

27:32

I do taxes or I represent those that are either having IRS audits or haven’t

filed for 10 years or five years or two years or they

27:40

have balanced dues, but maybe they don’t qualify for a fresh start or an

offering compromise.

27:45

Maybe they have to do a partial payment plan or a payment plan.

27:48

Um, you know, it and it’s not as crazy.

27:52

Um

27:53

I have one that’s just closing right now.

27:55

The gentleman owes close to $300,000 and he’s going to settle for a little

over $100.

28:01

So obviously it’s not always

28:04

You know, you hear on the radio so often and people call all the time, Oh, I I

can only, you know, I p I owe four hundred thousand dollars, but can we settle

it for like twenty

28:13

Um, and you know, first it’s based on your assets, based, then it’s based on

your income.

28:18

And it there is a mathematical way of figuring out what the IRS would expect.

28:24

uh you to pay.

28:26

And if you can settle, that’s great.

28:29

And this gentleman was very happy to get this

28:32

off his back.

28:33

He knew, I mean, we pretty much came within I think like they came back

counter countered us like six, seven thousand dollar difference.

28:39

Um and he was

28:41

uh very happy to be able to just get this done.

28:44

And that’s you know, but even after that, he has to stay current for the next

five years.

28:49

they will keep his refund for the first year.

28:51

Usually after that they don’t.

28:53

But these are the different things you have to deal with and you want to make

sure that you are uh ready to be in compliance because sometimes people

29:03

Um, what want and I’ve had more than one case.

29:05

I’ve gone all the way, we’ve made the deal, and two years later or three years

later, I find out that they haven’t filed taxes or they haven’t paid and they

want to set up a payment plan.

29:13

Nope, you cannot do that.

29:15

You have to be paying your quarterlies.

29:16

you have to stay on top of it.

29:18

Um and some people are just not good at that.

29:21

Other people are really good at it.

29:23

So um if you if you have problems with the IRS or you need help or you’re just

trying to figure out where to start, working on right now a guy that has to

file for

29:31

2014 forward because of uh IRS already filing certain tax returns.

29:37

So these are all the kinds of things we we do, and we have no problem in

helping you.

29:41

All right, so let’s go back to some of the changes that are happening in taxes

or things that people might need to know.

29:48

This next one is not really a change, it’s capital gains.

29:51

We all have heard about capital gains forever, but

29:56

There is the 0% capital gains, which I feel doesn’t get as much love as it

should.

30:01

Sometimes people basically have no real income.

30:05

And maybe they’re sitting on some stocks, and maybe it would be a good idea to

sell some of them.

30:13

So

30:14

If you’re only on social security making 20 or 30 grand, um likeliness is you

have some wiggle room to potentially

30:21

Cash out $10,000, $20,000, $30,000 in in stock.

30:25

You know, I mean, and again, you need to have an expert calculate it, figure

out what it’s gonna be and where you’re at, but that is the important part.

30:32

And then you have the 10%.

30:33

I’m sorry, the zero, and then you have the fifteen percent.

30:36

Now the 15% truly only goes for 200 for a single person and 250 for a married

30:44

Then we have the investment tax that kicks in and it’s based on capital gains.

30:49

So I don’t know why most people don’t talk about this fact because I have so

many people come in and say, hey, I’m in the 15% tax bracket.

30:56

I made less than $500,000.

30:59

Well, no, because the last 250 of that that you had really was taxed at 18.

31:05

8 or an additional 3.

31:07

8 is in there

31:08

Oh no one tell me about the and that’s a bit of a shock when you’ve got a

couple hundred grand of of stock or capital gains going through.

31:16

So it’s always important to make sure that you’re minimizing your tax.

31:20

And we always love capital gains.

31:22

Don’t get me wrong.

31:23

Capital gains are a good thing to do

31:25

But it is important to make sure that you know where it’s coming from and what

it’s going to do and you know just the whole reaction to it.

31:33

So again, we were talking a little bit about um

31:38

Going back and let’s talk a little bit about the standard deduction, right?

31:42

We have a standard and we itemize.

31:45

Harder and harder to itemize

31:47

15,750 for a single person right now, 2025.

31:53

23625.

31:55

31,500.

31:57

These are the amounts for everyone that is under the age of 65.

32:02

If you’re a single person over the age of 65, you go from 15,750 to 17,750.

32:09

You have to have a decent amount of charitable contributions, a decent

mortgage or property tax thereof, something to kick you over that dollar

amount.

32:18

Head of household was 23,625.

32:20

Again, if you’re over age 65, you would also get the $2,000, which would be

$25,625.

32:28

Again, you have to have it.

32:29

But the married couples, you’re at you’re already at $3150, $31,500.

32:34

And then

32:35

Because you’re married, they they don’t give you the full $2,000 a person,

they give you $1,600, which brings you up to $34,700

32:45

Then if you’re over the age of 65 and your income is within those limits we

talked about for the Social Security deduction credit that they’re giving.

32:54

I don’t want to call it a credit because a credit is a dollar for dollar.

32:56

This is a deduction.

32:58

Um then, you know, theoretically that’s what 46.

33:02

7?

33:03

46.

33:04

7 is what you basically are going to be getting.

33:07

That could give you a little wiggle room in there.

33:09

So, I mean, and think, you know, itemizing means you have to spend more than

that.

33:14

So that’s when we get back into that conversation.

33:16

Like some of my people sometimes we do bunching

33:19

Um and again when I use the word bunching, all I’m talking about is paying

your property taxes.

33:25

Um, because you can pay property tax right now you could pay your 2025 proper

2026 property tax, but it’s not due.

33:33

until February, right?

33:34

So you could pay the one in February, one in December, and then you get to

count them both in that same year because they were paid and we do taxes on

the cash basis.

33:44

Same thing with charity.

33:45

You can maximize some of your charitable deductions and even big purchases.

33:49

Sales tax in this state is great, but we pay a lot, right?

33:53

9.

33:53

75 in most areas

33:55

And then you want to turn around and add on top of that, maybe you purchased a

car or maybe you refurnished the whole house.

34:01

I was just talking to a guy that brought a brand new house and he didn’t

34:04

take any of his finances.

34:05

So he repay so he was going to go back and just do some.

34:08

So we have the opportunity on the tax return that says actual or or

calculation.

34:14

And if you have your actual sales tax that you paid throughout the year.

34:18

That is a deduction you can use or or just adjustments like I was talking

about, brought a new boat, car, motorcycle, and paid the sales tax.

34:27

Those would be things that you could also add in with the normal calculation

based on your income.

34:33

Um it really just depends.

34:35

If you’re you’re like me and you you like to spend money a little bit too much

34:39

Your your sales tax will probably calculate better if you tracked it versus if

you’re uh fairly frugal and you know you don’t go out and spend too much money

outside of the normal things.

34:49

But just keep in mind groceries we pay

34:51

Sales tax, um, restaurants, food, clothes, um, even most of the gifts and

things you buy, a lot of them have sales tax involved.

35:01

So

35:02

Just putting that out there because it is a way to help reduce your taxes.

35:05

But I do find that most people do better if they do the bunching.

35:09

And it looks like you might be able to do that, at least for 2025.

35:12

So right now might be a good year for you to go back and take a look at your

sales tax.

35:16

before you do your taxes because this year you might be able to exceed because

we’ve got that 40,000 instead of 10, so you can actually show up with you know

a $4,000 or $5,000 sales tax number

35:29

and not have to worry about kicking over the ten thousand dollars and then we

just lost the difference.

35:34

It didn’t help us much.

35:35

And of course for all of you that might live in another state

35:39

California, Alabama, Mississippi, Kentucky, all of you guys have a state

income tax.

35:44

Therefore, the state income tax will kick in it, which is great.

35:47

My one brother lives in California and he’s usually leaving

35:50

you know, ten twelve thousand dollars under the salt tax.

35:53

So um anyone in a state would would benefit from that.

35:56

All right, we’ll come back.

35:57

We’ve got one more

35:59

uh session and when we get back you can also call us 615-737-9986.

36:04

We’ll be right back with the Dr. Friday show.

36:14

Alrighty, we are back here live in studio.

36:17

This will be the last bit for today.

36:19

And so if you have been waiting and you’re curious to have a

36:22

Question answered, you can at 615-737-9986.

36:28

So we’ve been talking about some changes.

36:30

We’ve been talking about different things that are going to be happening here.

36:32

We’ve got tax season that’ll be opening up very soon.

36:35

uh for the 2025 taxes open up in 26.

36:39

So the Secured Act of 2.

36:41

0 major changes increase the age for the RMDs.

36:44

That was probably one of the big things, right?

36:46

Age 73 beginning as of January 1st, 2023, and then it’s increasing age 75.

36:55

So at some point in my life, I will be 75 to do the RMDs.

36:59

Um, but people have, and they reduce the penalties.

37:02

So sometimes

37:03

People don’t even realize they should be taking these because personally I

think the fiduciary people drop the ball.

37:10

Um, I mean, you you receive a fee for managing a 401k or an IRA or whatever

37:15

Least you could do is notify the person that they have a common uh penalty or

they need to be taking these distributions.

37:23

And so they did go from 50% down to 25%, which is better than nothing.

37:28

Index the $1,000 age 50 IRA catch-up provision was

37:33

uh going to go with inflation since 2024.

37:36

So that extra $1,000 that you can put if you’re in it if you have an IRA and

you have $7,000, you’re over the age of $50, you can put in $8,000.

37:44

And double the age catch-up limits for participants in deferred plans like

401ks, 403Bs, they have um ability to double up age 60 through 63.

37:55

These are important numbers because

37:57

Uh let’s be honest, a lot of times people have a really difficult time, um,

especially when you’re first starting out and you you have your house, your

family, your kids.

38:06

And then, you know, kids are getting ready to go to college and all these

different things.

38:10

And the one thing you don’t really think about is how much you’re putting into

retirement because sometimes you just have to have the money in the house

38:17

So now hopefully the kids get to age and then you can spend a lot more time

doubling up and doing what you want.

38:23

But now it this is something that could still possibly be done before the end

of the year.

38:29

um would be if you are 70 and a half and have money in IRAs, you can take an

RMD, a required minimum distribution, not a mandated one, but you can do one

for a qualified charitable deduction.

38:43

And what’s beautiful about that, most of people are sometimes trying to um,

well, for one, if you’re giving money to a charity out of your pocket or out

of the bank account, you’ve already paid tax on it.

38:52

And maybe you’ll be able to itemize it, maybe not.

38:55

But this is a direct deduction.

38:57

So this is only good for people over the age of 70 and a half and that people

that have money in IRAs or 401ks, 403Bs, a deferred account.

39:06

Then you can go and have a fiduciary individual write a check to your church,

to your charity, to feed the children, whatever it is you want to do.

39:14

And they that whatever that checks for, they’ll come to you on a 1099R, but it

will not be taxable, not a dollar of it.

39:22

So it’s a much cleaner way for you to give money

39:26

to a charity than it is giving it through your bank, paying it through your

credit cards, doing any kind of auto draft.

39:34

Anything like that, we’ve already paid tax, right?

39:36

Because if it’s in my bank account, I either will owe taxes at the end of the

year or I have paid taxes already on that money.

39:43

So

39:44

It is so much smarter.

39:46

And again, this is just reiterating, this is only for people that are over the

age of 70 and a half and have deferred programs.

39:54

But

39:54

If that’s a large number of people, a lot of people have IRAs and things like

that.

39:59

So if you are one of those people, um, and if you can’t do it in time for

2025,

40:05

Think about maybe they, you know, doing something like that starting in 26.

40:09

Instead of writing checks to your your church, instead of giving money to your

big charities, and I’m not talking about the $25 to the Girl Scouts and all of

that.

40:19

I doubt your fiduciary individual is gonna love that.

40:22

But I’m talking about the the church that you give two or three thousand

dollars to.

40:25

I’m talking about any of those kind of, you know, cancer foundations, towers,

any of those um

40:32

That but a lot of my clients are very big givers.

40:35

And if you’re not giving at that age through that forum, then you’re leaving

money on the table and you’re allowing Uncle Sam to take the money out.

40:45

of the money before you give it to a retirement uh to a nonprofit.

40:49

And that just doesn’t make any sense.

40:51

I mean it’s kind of like leaving your IRA to a trust

40:56

And yet you want to give a third of all your assets or ten percent of your

assets to um a charity.

41:03

I mean, again

41:05

You need to go right from your IRA or 401k directly to the charity.

41:10

That way there’s no distribution, no tax before the charity gets their money.

41:14

Charity’s not paying tax.

41:15

That’s why they’re a nonprofit.

41:17

I mean, it has to be a legitimate 501c3, but you don’t have to worry about it.

41:22

And it gives you the tax deduction.

41:24

And if you’ve got a good financial planner, a good tax person, they should be

talking about these strategies.

41:30

What I’m talking about doesn’t work for just one person.

41:33

It’s not going to be a one-size-fit-all.

41:37

But you know what?

41:38

That’s not the way taxes or financial planning or money works.

41:43

You know, one guy can go out to work and he ends up, you know, being the owner

of the business.

41:48

The next guy ends up never changing the same job he started at his entire

life.

41:52

Why?

41:53

Because things happen.

41:54

Life’s different.

41:55

Everyone’s life is different.

41:56

Things you you can’t just look at one size fits all.

41:59

So when you’re dealing with finances or you’re dealing with financial person

or attorneys

42:04

or um anything like that, you’re gonna find that you need to find the ones

that match because next couple weeks um you’re gonna have recorded shows

coming out.

42:14

And uh you’re gonna have one that’s gonna have a great financial planner, Hank

Perrott.

42:19

We’re also gonna have a security company because

42:22

I have realized going through to so many of these security seminars that at

least to the best of anyone’s ability, especially a small business.

42:33

We need to take the bull by the horn, right?

42:35

We need to to at least have somebody because I’ll be honest, I’m not a

computer person.

42:40

I mean, I know how to turn on, do my work, and do what I need to do.

42:43

But I couldn’t tell you how all of it works.

42:44

And I certainly can’t tell you how AI is going to interact with everything.

42:48

And am I opening up some sort of back door because my thermostat in the office

42:53

um is on my internet.

42:55

These are the kinds of things these guys do.

42:57

And so you’re gonna have a whole um day of of listening to that.

43:01

And then of course you guys just heard Russ Cook last week.

43:05

And um he’s a a wonderful estate attorney and I mean I’ve known him for 30

years as well.

43:10

Russ Cook, uh Russ and Telman Associates, but

43:13

Again, these are the kinds of people you need to have as a team.

43:16

If I were to have any New Year’s resolution for any of my listeners or my

clients.

43:22

Um, you know, it’s to get yourself a team.

43:24

We’re not gonna all live forever.

43:26

It’s not gonna happen.

43:26

And the best way for us to leave things in good condition for the next

generation

43:31

would be to make sure that we have a good attorney.

43:34

If something comes up, they know who to contact, a good financial planner so

that they know the money is being handled, a good tax person, so that they’re

not paying taxes on things they shouldn’t be.

43:44

or cashing things out thinking everything should be cashed out and then I’ll

distribute, but maybe that’s not the best idea.

43:49

I had a case where the girl just went in, the she she was the executor, so she

would went in and cashed out all the stocks, cashed out everything.

43:58

um which created a huge tax, even though some of it was a step up in basis,

there was still a lot of money in IRAs that could have been deferred and

spread over ten years to each custodial

44:08

or each uh beneficiary, there are ways, even five years through the trust if

that’s what you want.

44:13

Don’t just cash everything and say I just want the money because that’s the

the wrong idea.

44:19

Because

44:19

Only the only person that wins in those kind of conversations is the IRS.

44:23

Same thing with divorce.

44:24

I have couples that come in and they’re smart, right?

44:27

They’re like, okay, here’s the situation, here’s what we have

44:30

How can we, you know, how can we make this work where we’re not paying more

money in taxes?

44:34

Because there are ways, especially if there’s children and things.

44:37

And then you have the ones that just

44:39

Don’t care and they, you know, hey, I don’t want my ex-wife to have anything,

or I don’t want my ex-husband to get anything, so I’ll just do this.

44:46

And only person that wins in that is the IRS, right?

44:49

So it’s fine if you want the IRS to get richer, but let’s be honest, the IRS

does not manage money.

44:54

Or it’s i it’s not even the IRS.

44:56

I mean the IRS collects, but it’s the government that spends the money, not

the IRS.

45:00

Um they’re really uh um a big collection company and management.

45:04

Anyhow, I hope you guys all have a wonderful Christmas.

45:08

Again, this will be my last show for the year, so I want to make sure that you

guys enjoy.

45:12

If you are an existing client and you have not yet

45:16

got on the calendar for the 2025 taxes or 2026 tax season, please call our

office the first of the week and we will make sure we sent you.

45:25

And a lot of you guys are probably getting

45:27

Some emails from our office.

45:29

We’re trying to make sure again, we’re going through a lot of uh security

different things, so lockboxes and different things.

45:34

We’re just trying to make sure all of your information is as safe.

45:38

as it can be and making sure that we’re doing everything we can, uh, you know,

as much as we can with the information um provided.

45:45

So

45:46

If you um are wanting to have a tax person, again, call our office and we’ll

do our best to get you on the schedule.

45:52

And um I hope that you guys, when you’re

45:54

out there enjoying Christmas, think about those that are maybe not as uh

fortunate and you know share a little of the uh

46:02

Good times with everybody else.

46:04

If you want to reach our office, 615-367-0819-615-0

46:10

367-0819.

46:13

Check us out on the web also.

46:14

It’s drfriday.

46:16

com, drfriday.

46:17

com.

46:17

Or you can email.

46:18

Sometimes that’s the easiest way to get me.

46:20

Friday at drfriday.

46:23

com.

46:23

Again, Friday at drfriday.

46:26

com.

46:26

Cop you later.

Transcript

00:01

No, no, no.

00:02

She’s not a medical doctor, but she can sure cure your tax problems or your

financial woes.

00:07

She’s the how-to girl.

00:09

It’s the Doctor Friday show.

00:15

If you have a question for Dr. Friday, call her now.

00:17

737-WWTN.

00:19

That’s 737-9986.

00:23

So here’s your host, financial counselor, and tax consultant, Dr.

00:27

Friday.

00:29

Alrighty, the doctor is in the house.

00:32

We are here.

00:33

We’re going to talk today a little bit about maybe some of the things you

don’t know you should be doing for estate planning, or especially since we

have an at

00:41

attorney on the line, we’re gonna try to get some good information about what

you should and shouldn’t do when you’re thinking about planning or even just

00:50

giving things to your children, maybe putting your name on bank accounts.

00:54

We have Russ Cook on the phone.

00:57

Hey Russ, you there?

00:59

Yeah, I am.

00:59

Thanks for inviting me.

01:01

No problem.

01:02

Been a while since I’ve seen you, even though I seem to send things back and

forth.

01:06

So he’s with Cook Telman Law Group.

01:09

Um, and uh Russ and I have known each other for a lot of years.

01:13

We’ll just leave it at that.

01:15

And um and it’s uh it’s it’s always great when I get to to get him on the

phone because I think a lot of times

01:23

First, Russ, why don’t you tell them a little bit about what you do, how long

you’ve been doing it, all the good stuff so they know who you are.

01:31

Oh, that’s great.

01:32

Yes.

01:32

Um I’m a board certified estate planning attorney.

01:36

I’ve been doing this for over thirty years.

01:39

My father and grandfather were also estate planning attorneys.

01:43

Uh, went to law school in D C, got sick of the traffic and then moved to

Nashville.

01:49

Yeah.

01:50

Well I don’t blame you on that one.

01:51

one.

01:51

I can only I’ve only visited DC and I can imagine living there or anything

else.

01:56

That’s just a little too busy.

01:58

The whole East Coast is a little too busy for me.

02:00

Um, all right, so one of the biggest questions a lot of times people think is

um is a lot of my clients as their parents get older

02:08

They want to be able to make sure they can help or manage or even um

situations where elderly people are sometimes targeted for fraud, different

things like that.

02:19

What can be some steps that you should take maybe to help?

02:23

you know, to protect if you can.

02:25

I mean like should you put your name on the bank account?

02:27

Should you um what documents should be being gotten together so that you can

do something to help or protect your um family or yourself as you get older?

02:36

That’s a lot of people.

02:38

Yeah, it is it is a great question.

02:41

Uh uh I get it a lot and the documents that I suggest clients

02:46

have in place are durable power of attorney.

02:49

It’s a power of attorney in which you are appointing a family member to make

financial decisions for you in the event you cannot

02:58

A power of attorney for health care and a living will.

03:01

The reason the power of attorney for financial matters is so important is that

it allows the person that you’ve named

03:08

to make uh decisions concerning your assets in the event that you become

incapacitated or need help just kind of managing things day to day

03:19

And you mentioned putting names on bank accounts.

03:21

We usually tell clients not to do that.

03:24

In fact, we always tell clients not to do that because

03:28

we found that when the child runs into creditor problems then the creditors

can go after those bank accounts.

03:35

So if you have your daughter on the bank account and she gets divorced, then

your son in law might end up with it.

03:42

So

03:43

we try to keep the bank account with just the client as the owner and you can

file the power of attorney with the bank and they’ll honor it and allow your

child to still continue

03:55

to control the account or sign for you I guess in a way but you don’t have

that risk of it being attached.

04:02

So I guess that was a question.

04:03

Um so on the durable POL of attorney, let’s say they come in, they get all

those documents set up with you guys.

04:09

Is that something you should go ahead and go to the bank and put down?

04:13

I mean, now while everybody maybe doesn’t need it?

04:16

Or is it something you only really need to think about unless somebody is

04:20

Um because you know, I mean if they’re already incapacitated then it’s a

little harder maybe.

04:25

Or maybe it’s not because the power of attorney.

04:27

Well, we usually recommend that you do go to the bank right after you sign one

and

04:32

and put it uh give it to the bank officer and let them have it on file.

04:37

And the reason that I say that is because and

04:40

Some banks are very good at accepting those and whenever you’re dealing with

brokerage firms, however, they might have their own version of that.

04:49

that they would want you to sign in addition.

04:52

So obviously if you wait until you’re incapacitated, you won’t be able to sign

the one that they present you

05:00

‘Cause you won’t you’ll be incapacitated.

05:02

So I think getting it done now is the best bet because you don’t run into that

risk.

05:08

Yeah, and and that’s good news.

05:10

‘Ca

05:10

I mean, because that’s what I was trying to figure out.

05:12

Had a client come in and maybe it was uh a brokerage account.

05:16

It was like a Schwab account, which would be, I guess, a brokerage account.

05:18

And that was one of the things they said is that even though they had it

05:22

They had just put it in the file, right?

05:24

Waiting, figuring they would use it when they needed.

05:27

And they had a difficult time trying to get that switched over.

05:31

when the time came or, you know, when because she hadn’t passed away, but she

had become um she she wasn’t herself or whatever it’s called where you

basically start losing your memories and things.

05:43

So um

05:44

She, you know, they they had uh they had to go through and they had to get her

what is it, incapacitated?

05:49

There’s a term anyways, and I’m so good at these legal terms, Russ.

05:52

Um But they go to court and get something.

05:56

There you go.

05:57

They had to do that, which

05:58

Seems like that if they had been done the way you wanted it or the way it

should have been done, it seems like they would have been able to get it with

the pile of attorney that they had.

06:08

already signed or whatever, but apparently that’s not the case.

06:12

Um so yeah, so the the thing is, and now let’s talk a little bit about the

difference between a will and a trust

06:19

I mean, I’ve known you long enough to know or you and Hank Perry and a couple

others.

06:24

I have fallen in love with the idea of a trust.

06:26

And we’re all talking about a couple different types of trusts, but

06:29

Um, what’s the difference between a traditional will and kind of a traditional

trust, if that makes sense?

06:36

Yes, the traditional will is a document that doesn’t come into effect until

you pass away.

06:44

And when you pass away, the person that you name as the executor is the person

in charge of carrying out the terms of your will.

06:53

And in order for them to have the power to do that

06:57

they have to be appointed through the courts and that process of getting

appointed through the courts is called the probate process.

07:05

Uh it’s a process that could take a few months.

07:08

It does require disclosure of certain assets.

07:12

It allows for certain creditors to file claims.

07:16

And so when we’re doing estate planning, we probably do what we can to avoid

that process.

07:23

And so we do estate planning using what are called revocable trusts

07:28

A revocable trust is an agreement that you would set up now.

07:32

A trust you set up now, you make yourself the beneficiary and the trustee

07:37

You can amend or revoke it at any time.

07:40

It’s not a separate legal entity.

07:42

It does not have a separate tax ID number.

07:45

And then you fund the trust with your assets.

07:47

And so in the event of your passing

07:50

the person that you’ve named as the successor trustee can step in and manage

those assets without having to go through that court proceeding

08:00

And also to dovetail on the prior uh subject, in the event that you become

incapacitated or need help

08:08

when you’re dealing with banks and financial firms, if your account is already

in a trust then it’s much easier for the successor trustee to take over with

either a death certificate or a resignation.

08:22

from you or whatever they need and that way they don’t have to worry about the

power of attorney, you know, effective or not effective.

08:31

Uh that, you know, that brings up, okay, so a lot of people are concerned when

they say, well, you’re gonna put everything in somebody, you know, in the

trust name.

08:39

Um, but that really, I mean, for the revocable trust, that doesn’t change

anything because I know I have one and I have taken things in and out of it

all the time when I’m either refinancing or selling something

08:49

but it doesn’t really affect your day-to-day operation.

08:53

But you do want to have everything in the truss so that way when you pass away

it does easily transition.

08:57

But what if I don’t have it in the truss?

08:59

What happens?

09:00

Do that to go the probate?

09:02

Ye yeah, it depends.

09:03

Sometimes there are clients that because of the nature of the asset we don’t

title it in the trust, like a retirement account.

09:13

Because as you know, if you change the owner of a retirement account, the

government’s gonna want all their income tax money up front

09:23

So we instead name a beneficiary of the retirement account and typically it’s

the trust.

09:29

So in the event that there’s an asset that’s not in the trust

09:33

then if it names the trust as a beneficiary, you’re still okay.

09:37

It’s gonna pass directly to the trust as a result of your death and there’s no

probate.

09:43

However, if the asset you own is in your name alone

09:47

and it does not have a beneficiary or joint owner, regardless of whether you

have a trust or not, it’s gonna end up going through probate

09:56

‘Cause that’s the only way that you can get it in the trust is by passing it

through the estate and then into the trust through the the will.

10:05

So so when you’re buying and selling and doing things you do, how often should

someone update their I mean obviously when something happens because basically

what you’re saying is hey if I haven’t brought another piece of property, I

should probably have that

10:17

put over or at least make it named as the trust.

10:20

But how often should we be looking at these documents or updating them?

10:25

Well, we send our clients a letter every two years reminding them to look back

on their uh state documents and make sure that they are up to date.

10:35

especially when it comes to revocable trusts and the and the revocable trusts

being funded.

10:40

And if there’s some question as to that, they can always call or email and we

can help guide them through it.

10:47

Uh but that would be my thought.

10:49

Now obviously if you’re getting into the six and seven year period, then

you’re you really want to get it updated, um, because we’ve seen there’s been

a lot of family changes.

11:01

that occurred since then, asset values have uh changed and situations have

changed.

11:07

So I would not wait any longer than six to seven years for sure

11:13

Hopefully that wasn’t a hint to me, because it’s probably been a while.

11:19

Have you gotten married or anything that we don’t know about?

11:22

No, thank goodness I haven’t made those kind of life changes, but I now own

about twelve properties and so it it may be that it’s time for us to update.

11:30

It’s time for us to get together.

11:32

Exactly.

11:33

I knew that was going to come up in this conversation because it’s like, oh

man, I should have seen before I put them on the radio.

11:39

Um, all right, we’re gonna get ready.

11:41

to take our first break here.

11:43

Again, I am speaking with Russ Cook with Cook Telman Law Group.

11:47

Um the phone number there, if you would like to call and get um a

consultation.

11:52

I’ve been working with Russ for 30 years and to be honest with you.

11:55

He’s uh not only a great guy, but he does know um a state law better than

anyone I know.

12:01

Even when I have questions, I’m always and he’s great to answer my crazy

questions sometimes and come on my radio show.

12:07

But you can call the office at

12:08

615-370-2444.

12:13

615-370-2444 is their direct number.

12:17

right there in the Brentwood area.

12:19

Um and they can uh set up an appointment and then talk about, you know, what’s

going to be best for you because today we’re going to talk generically about

estates, wills

12:29

We’re going to get into different types of trusts that are out there, maybe a

disability trust, which uh will work with some people and we’ll have Russ

12:37

Talk a little bit about all those different options and what you might want to

have.

12:41

So keep pen and paper so that way you can make a little list of all the things

you want to do and pick Russ’s brain when you meet him

12:48

And uh we’ll take a quick break when we get back with the Dr.

12:51

Friday show.

12:57

Okay, we are back here

12:59

In the studio with Russ Cook with Cook Telman Law Law Group.

13:04

Sorry, I keep wanting to think if it’s association for some reason, but that’s

all right.

13:08

Cook Telman Law Group.

13:10

And um

13:11

Let’s go in a little bit into the different types of trust and not too far

because I know there’s a lot of trust I’m not even going in.

13:18

But what’s the difference between the revocable we were just talking about and

an irrevocable, Russ?

13:24

The revocable trust is one in which you’re setting up where you want to be

able to change it.

13:30

It’s not designed to move assets out of your s your your estate for any

reason.

13:37

And so most folks that are doing estate planning use a revocable trust because

like a will, they want to be able to change it as time and life goes on.

13:47

Right.

13:47

Uh irrevocable trust is one in which let’s say you create it during your life,

but you do not have the ability to revoke it

13:57

it’s typically put together for a specific reason.

14:01

Like you’re trying to move assets out of your estate for estate tax purposes

or

14:08

You’re trying to set something up for someone else in a way that makes them

not be able to control it or do anything about it.

14:15

And so normally we’ll pick uh that trust to use for very specific situations.

14:21

And then when you die and you’re no longer able to revoke the trust because

you’re dead, your your revocable trust does become an irrevocable trust

14:33

But you do want that because you don’t want someone else stepping in and

changing all the things that you did.

14:39

So obviously you want the ability to do that while you’re living and when you

pass then it becomes irrevolution.

14:46

Okay, so that’s the simple ones.

14:48

But now a lot of times you’ll hear about like a charitable remainder trust.

14:52

What would that be used for?

14:55

That would be used for people that are looking to sell an asset but they don’t

want to pay all the capital gains tax on it at once.

15:06

And so before they get into any negotiations on the sale, they create what’s

called a charitable remainder trust

15:15

which basically pays them over their life expectancy and you can either use a

a single person or husband and wife, it’s joint life expectancy.

15:25

a percentage of the assets that are valued each year in the trust and I’m just

using five percent as a

15:33

a number.

15:34

So husband gets paid five percent for his life, he passes, wife gets paid five

percent for her life, she passes

15:42

and then at the second death the assets go to a charity or a donor advised

fund that they’ve picked during their life and they can update that as they go

by in the trust.

15:53

And the benefit of that is when you

15:55

You when the trust sells an asset, so let’s say you put a piece of real

property into it, if the trust sells the asset, it’s a tax exempt entity, so

it does not pay income tax on the monies it

16:09

receives from the sale of the asset.

16:11

Now every time you get a payment from the trust you’ll pay tax on that.

16:16

But you can see that you’re spreading that tax liability out over your

lifetime and creating a stream of income.

16:23

that you can depend on until you pass away.

16:26

Yeah, I I actually really love those, especially when you have things with a

lot of capital gains in them.

16:32

Yeah.

16:32

Um it’s

16:33

It’s a wonderful.

16:34

All right, so um we have one in our family, but um let’s talk a little bit

about I call it a disability trust.

16:39

I don’t know if that’s the proper term or not, but uh setting up for someone

that maybe um is on the spectrum or something like that.

16:47

Uh-huh.

16:48

Um those are irrevocable trusts and there are two different people that can

set it up if the let’s say I’m gonna use a parent child relationship.

16:59

If the parent sets the trust up either during life or at death, and the parent

funds the trust with the parent’s assets

17:08

It’s called a third party supplemental needs trust.

17:13

And in the trust there’s a trustee selected who’s able to make

17:17

Distributions, but only after ru the trustee determines that the person has

received all their government benefits.

17:26

So it basically is a way of setting aside funds for a disabled beneficiary

that are available but they’re not counted when you

17:36

count the benefits that are available to someone with that disability.

17:41

So it’s a very useful tool and and actually it’s a

17:45

It’s a slam don’t you have to do it basically if you are if you have any kids,

parents that have kids that are special needs or things like that.

17:53

Um, the other trust is called a first party supplemental needs trust.

17:59

It’s when there’s a uh oh or an oops where the person

18:03

that is disabled actually receives assets directly.

18:06

It could be through a lawsuit, it could be through a an aunt or uncle that

didn’t realize that they shouldn’t

18:16

And what it does, it allows for the person who’s disabled to take the funds.

18:21

Well actually their parent takes the funds and puts them into this trust

18:25

and they’re not counted for uh government benefit purposes.

18:30

The only difference is that when the disabled person dies

18:35

then the um trustee has to pay back to the government whatever benefits that

they’ve paid during the life of the beneficiary.

18:45

So that is a payback trust, um, just delaying the issue.

18:50

So the first party one is a payback trust, but if you do it in advance, the

third party one would not be.

18:57

Would not be, yes.

18:58

Gotcha.

18:58

I didn’t know that.

18:59

All right, so that’s why I always love having Russia.

19:01

on the phone because I can just pick this brain for a while.

19:03

Have a un one hour of unreliable.

19:05

Okay.

19:06

Um so there’s also something called a spendthrift trust

19:11

Yeah, that’s and if these don’t apply, just let me know.

19:14

No, no.

19:22

who’s not capable of handling money for whatever reason.

19:26

Um, it could be an addiction, it could be just bad financial

19:31

decisions.

19:32

It could be always picking the wrong spouse like me.

19:36

It could be all sorts of s not no offense to my current wife.

19:40

I’ve just been married a few times.

19:42

We love her

19:43

Um, but in the event that there’s a s situation where the client feels the

parent feels that the child cannot handle the money, then instead of giving

the

19:54

inheritance to them outright, they would allow for it to go in trust, and that

trust would have a trustee who then makes sure those

20:03

Funds are managed properly and they’re doled out to the child in ways that

allow the child to live comfortably.

20:11

But not to like give the a huge chunk to the child and they can go to Las

Vegas and put it on red and Lou Rulette wheel, that sort of thing.

20:20

I have seen that, unfortunately.

20:22

Okay, so all these you keep talking about, a trustee, um, executor, I think

mostly trustee.

20:28

How how do you I mean how do you check and see if you have current trustees

20:32

How important?

20:33

How many do you put in there?

20:34

Do you have multiple trustees?

20:36

How does that kind of work?

20:37

And I’m sure it’s not black and white, but what’s the basic rule of thumb?

20:41

Well, when I talk to a client about who should be trustee, I describe what

they’ll be doing.

20:47

So in the case of a parent setting up a trust for a child

20:52

who’s a spendthrift child, then the trustee will have to be able to say no to

the child in order to make sure that the funds are taken care of.

21:02

Now that may mean that the child’s

21:05

sibling is not the best choice or some other close family member.

21:10

It might be that they want someone or an entity that’s a little bit distance

or separate from the families so there’s no emotional issues there.

21:20

if the trustee that we’re picking for a uh a third party special needs trust,

that has to be someone can be family member, but it has to be someone who’s a

little bit knowledgeable on how government benefits work.

21:34

And so we tell clients there might be some education that goes into this

because again, you’re picking somebody to be in charge of money for somebody

else.

21:44

So you just gotta be conscious of what sort of dynamics might be involved

there and if the person that’s doing it can take care of it for them

21:54

But that’s great.

21:55

Because and then I’m assuming like in our family the case is the child that’s

in the special needs has just turned sixteen.

22:02

So having someone myself who’s just about ready to turn six zero um is going

to be it’s not you know, I’m just saying age comes into play, right?

22:12

So you do you need to have

22:14

multiple people, I’m assuming so if one is unable or or deceased, that you

have someone else that can pick it up.

22:22

Yeah, that’s true.

22:23

And we try to get, you know, initial trustee of maybe at least two alternates

just in case something like that happens

22:31

And then we put in a mechanism that allows for us to select successor trustees

if we run out of existing trustees.

22:40

And if it’s successor trustees, you know, i are we just dealing with banks or

trust companies or can we pick individuals?

22:48

But we make sure that we’re not in a situation where we run out of trustees

and we don’t have any any way of getting a new one in there.

22:56

And so for the typical revocable trust, again, it it do you have you have a

trustee that will assume once I pass away there’s going to is that a trustee

that takes over at that point

23:09

Yeah, so in the case of an individual who has a revocable trust, obviously

they’re trustee of their own trust till they pass away, and then you have

someone step in as a successor trustee.

23:23

And the process of administering a trust is uh somewhat similar to what people

would describe as what an executor goes through with a will, only you’re not

going through probate.

23:36

You have to gather the assets, pay the final debts and expenses, and then

distribute the assets according to the trust.

23:44

And the trustee again has to be able to kind of navigate all of those

situations.

23:50

When I tell clients about who you should pick as a successor trustee on your

revocable trust to go through that process

23:58

just know that it might be almost a part time job for them in the very

beginning, depending on how much they want to take on.

24:06

‘Cause in our office we have an attorney that does that for anyone that wants

to just hire us to do it.

24:12

And so it might not be that big a deal, but a lot of folks want to do it

themselves, they want to learn all about it, so you know, we kinda walk ’em

through it.

24:21

It’s a lot of work.

24:22

All right, we’re going to take our second break and we may talk a little bit

about what your expectations of that person would be.

24:28

When we get back here in just a moment with the Dr.

24:31

Friday show

24:34

We are back here live in studio with Russ Cook with Cook Telman Law Group.

24:40

And their direct number if you’d like to set up an appointment to talk to them

about, you know, estate planning, because there’s a lot more to it than we can

do on a little radio show.

24:48

But 615-370-2444 would be the direct number to set up a time because if you

are trying to figure out what happens

24:58

when you’re not here, if you’re the one that’s providing and there’s a lot of

different moving parts.

25:03

Russ, is there anything that should I mean, I heard you say obviously, um,

like an IRA or 401k would not put directly into um

25:13

a trust because you’d have to show it’s sold to change the name at least on

but you could do paid on death situations.

25:19

How about land, primary homes, step up in basis for all those?

25:23

Does that apply if they move it into a trust?

25:26

Yes, the the best asset to put in the trust would be your home and any

investment accounts that you have or stock, bond, mutual funds that are

carrying capital gains.

25:41

Um, especially if you’re a husband and wife, because a husband and wife in

Tennessee can create what’s called a

25:50

Tennessee Community Property Trust, which is a fancy name for a joint

revocable trust.

25:56

So instead of there one trust for husband and one trust for wife, we just make

one trust for both.

26:02

The two of them are trustees, the two of them are beneficiaries.

26:06

Again, they commend to revoke it at any time.

26:09

And the benefit of this trust is if you have real estate

26:14

or capital other capital gain assets in the trust, then when the first spouse

dies, the trust assets receive a full cost basis step up.

26:25

And so you can see especially in some of the surrounding counties here where

value of real estate has gone up significantly, that could be a big bonus to

the surviving spouse if they have to sell and downsize.

26:38

‘Cause they won’t be looking at hardly any capital gains tax.

26:42

Yeah, that’s I mean that’s one of the things I do love about if people just

sit down and do

26:47

a little planning.

26:48

I mean, because I have a woman that’s her husband passed away three years ago,

brought a home back 40 years ago in Williamson County, you know, um, but it

was just jointly held.

26:58

There was nothing there.

26:59

And so, you know

27:00

There’s gonna be a lot of taxes uh that she’ll be looking at on this

particular situation, which could have been a different story had she just

taken a little time

27:09

time to talk to someone about estate planning while both of them were still

living.

27:13

And you know, you never know when that last day’s gonna be, and I get that,

but you know

27:18

A little planning is always a good idea.

27:20

How about because a I’ve also talked to a lot of people that are young um and

you know they have children.

27:26

and they basically don’t have anything in writing, what would happen if, God

forbid, the parents pass away and there’s children in the state of Tennessee?

27:35

Well there’s a a couple things that are concerning, one of which is who’s

going to be named as guardian for the kids.

27:43

Oh I told my mother she’d always have them

27:46

That’s right.

27:48

Um that’s unfortunate that it’s not in writing.

27:51

Um so what we look at whenever someone passes and

27:57

there’s no one specifically named, then it allows for all the family members

to step forward and put in their two cents as to why they should be the uh new

guardians of the kids.

28:11

And that can be a bit of an uncomfortable situation when you’ve got, you know,

different families from you know, the husband and the wife trying to work in

with this

28:21

That’s that’s one of the big problems.

28:23

The other problem is uh the assets that a person owns, if they don’t have any

estate planning documents, whether it’s a will or a trust

28:33

then they’re gonna have to rely on the state of Tennessee’s qu quote will,

which says that when the husband dies, the wife doesn’t get everything if

there’s kids, the wife basically

28:47

uh get shares with the kids.

28:50

So if the husband dies and there’s a wife and two kids

28:55

the wife’s gonna get a third and the two kids each get a third, and I’m pretty

sure most clients I’ve met with don’t necessarily want to skip over their

spouse and have assets go to their kids

29:06

No, I’ve and I’ve seen that happen unfortunately.

29:09

I even had one where the kids tried to sign back the assets to the mother.

29:14

Um, it got very messy.

29:16

I mean again, I’m not an attorney, but it you know, just hearing their side it

w it’s not as easy as you think.

29:21

Well, I’m just not gonna take the assets, but the courts mandate it.

29:24

You know, I mean so it

29:26

It’s it’s not as simple as even if the kids want to take care of the mother,

knowing that dad would have wanted that, um, the courts have a different idea.

29:35

Yeah, and I’ve had uh a few cases like that as well where the clients if they

had come in and

29:43

planned initially, then this wouldn’t have been a problem, but in a certain

case the assets ended up getting split between the wife and the kids and the

kids had to go through all these ho hoops.

29:56

after they received the assets then they had to s set up their own estate plan

to get it back to the wife and

30:04

Or mom at that point.

30:05

So it was a very expensive mistake, unfortunately.

30:10

I feel sorry for the family, but

30:12

Right.

30:13

You know, it’s just something, you know, that people should consider if

they’re thinking, Oh, I’ll I’m never gonna pass away or let the kids.

30:21

I like to believe.

30:22

I’ll live forever.

30:23

Put the burden on my children.

30:25

It doesn’t make well I don’t have any of those, so I don’t have to worry about

30:27

Yeah.

30:27

But um the the other side of that is um I know I I don’t know if you told me

or someone, but um if you don’t look at your estate from time to time and

you’ve married, you divorced, you’ve married, you divorced or whatever.

30:41

Um, I have a I have one that the ex-wife received the life insurance and now

the current wife is suing her because it never got changed on the policy.

30:51

Yes, and that is a problem too.

30:53

I’ve had that happen.

30:55

Especially on retirement accounts.

30:57

So whenever we meet with a client initially, we always ask

31:01

uh about their assets and we ask who did you name as a beneficiary?

31:06

And if they say I don’t know, then we usually ask them to go and find out.

31:11

Right.

31:11

Sometimes this does come up and we’ve had I had a situation not recently, this

is back in the early years when estate taxes were a huge problem.

31:22

Uhhuh

31:23

Um the ex-wife ended up getting a big chunk of a retirement account and

unfortunately the ex wife was not a spouse, so it was a taxable transfer.

31:34

And it ended up creating a state tax that the current wife had to pay.

31:40

So you can imagine what sort of problems that rose.

31:43

Right.

31:44

Well, I mean, and that’s the problem.

31:45

We we get busy in life, and I guess that’s the reason I really wanted to have

this show, uh, because

31:52

It is one of those things where we get busy and next thing you know, you think

you’ve got everything kind of, oh, I’ve got a will someplace.

31:58

I’ve got this someplace.

31:59

Um, but you know, again, we don’t always

32:02

um keep track of everything that we think we should.

32:06

And then unfortunately it’s not us, it’s the people we’re leaving behind that

will have to clean up the mess.

32:12

So it’s kind of our job before we pass away to make sure that these things are

in play.

32:17

What kind of documents would you need?

32:20

Um, is there, I mean, do I have to go through and and get a ton of documents

to give you or is it fairly straightforward if I was going to come in and and

take a meeting to set up a basic revocable trust and all the documents that go

with it?

32:34

We suggest that you come in with a list of assets if you can put that

together, values and if they have beneficiaries, who are the beneficiaries?

32:46

and then have a general idea of who you want to appoint and all these

positions we’ve been discussing, like who you would want as a successor

trustee

32:56

or executor if you decided you just have to have a will.

33:00

Uh who would you want as an agent on a power of attorney for financial and

health care matters and living wills?

33:07

Um, but don’t let that be a barrier to come in and get started.

33:11

We’ve had clients that come in and don’t have all that.

33:14

We can certainly gather it later.

33:16

But that would be very helpful to get organized as far as those uh issues are

concerned, and then bring it to us, and then we’ll be able to handle uh have a

really good discussion about what direction they should probably go in.

33:31

So not everybody probably needs a trust.

33:34

Is that cr true?

33:35

Yeah, not everybody needs a trust.

33:37

If you’re, let’s say, a single person, no kids.

33:41

um and you have accounts going to just one person like your parents, like I

mean obviously we have plenty of clients whose kids are in college.

33:50

They don’t they don’t need a trust

33:52

Um, you know, a lot of folks do it through beneficiary designation.

33:57

But I would say the the the change is if you go out and buy a piece of real

estate

34:03

then you might want to consider a trust simply because you can’t name a

beneficiary of real estate and if you’re a a husband and wife, you want to get

that step up and cost basis at first death.

34:17

So that’s usually when we we start talking about trusts over wills.

34:22

But you also I mean if you do have a kid in college and then

34:26

you do, God forbid, pass away and now they’ve got five hundred thousand

dollars worth of assets and they’re twenty, twenty-one years old.

34:36

It seems to me you might want to have more control even though you’re not

here, if that makes sense, which a trust would give, versus a will, which

would basically say go to probate.

34:46

They now have all that money in the bank.

34:48

And you know

34:50

Yeah, you may have raised them right, but I’m just saying that sometimes

really temptation is a little hard.

34:55

Yeah, and you can create a trust for the beneficiary under a will.

34:59

It’s just gonna require a whole lot more steps to get there.

35:03

Whereas if you already have your trust in place and you pass away and your

child’s the beneficiary, then the successor trustee takes over right away.

35:13

But it’s just like the scenario we talked about, you know, what is a

spendthrift trust.

35:18

Uh anytime you have a beneficiary who either cannot control their own expenses

or they’re just not old enough to handle money or finances.

35:27

then you definitely want to make sure what they’re inheriting is in trust

because there’s no better way to take care of it than through that

35:36

All right, we’re going to take our last break here in just a moment.

35:40

Again, this is Russ Cook with Cook Tellman Law Group.

35:47

You know I am Dr.

Friday, an enrolled agent licensed by the Internal Revenue Service to do taxes

and representation.

35:53

That is why we have Russ on the phone because I am not an attorney and I have

too much work to do without having to become one.

36:00

So if you have questions that deal with legal issues, even establishing an

LLC, setting up a corporation.

36:06

These guys do it all.

36:07

I have Russ talking about estate planning today, but the firm handles all of

that.

36:12

Um, and they’ve handled all that for us for years.

36:15

And so it’s it’s also a good way because if you have businesses

36:20

you need to also talk to them because what happens to you if something happens

to the business?

36:25

And we’ll probably come back and talk a little bit about is there some steps

we need to take to make sure our businesses can continue to work

36:32

And or should there a certain entity that we should be looking at, all that

good stuff when we get back with the Doctor Friday show?

36:39

We’ll be right back

36:44

Alrighty, we are back here in Stydia with Russ Cook

36:50

And Cook Telman Law Group, 615-3702-444.

36:56

And if you uh are listening and you’re thinking, what should I be doing?

37:00

First thing you need to do is just give them a call, set up an appointment,

talk to them.

37:03

because they’re going to be able to tell you what you need.

37:06

Maybe you don’t need any of the trust that we’ve talked about.

37:08

That there’s a whole bunch of others and it gets just a lot.

37:11

So Russ is one of those people that can say, hey, this would be what was best

for you.

37:13

Be

37:15

But when we took the last break, Russ, I I jumped in on something.

37:18

I was thinking, because someone had emailed me saying something about, well,

if I’m in an LLC, do I need to do something with my trust?

37:26

That’s a good question.

37:27

If we have businesses, corporations, LLCs, do they need to be listed somehow

as beneficiaries or something?

37:34

Well, when we create a revocable trust and we’re looking to make sure

everything at the decedent’s death is

37:42

is in the trust or payable to the trust, then that would include any business

interest that the client owns.

37:49

So as part of our intake we ask the client

37:54

Are you a member of an LLC or are you a stockholder in a business?

38:00

And then we normally

38:03

determine if that person can transfer the it that asset to the trust and

whether it makes sense to do it now while they’re living.

38:12

Now, there are situations where we can’t put a business interest in a trust

easily.

38:20

Sometimes we run into cases where the operating agreement or the bylaws

38:25

say that the person that that owns the interest can’t put it in anyone else’s

name including, you know, a spouse.

38:33

Right.

38:34

Right.

38:34

So we have to maybe jump through some hoops to get that done.

38:38

Because remember when you set up a joint trust, you’re setting up a trust in

which you and your spouse own a half interest.

38:44

So if there are restrictions you have to be mindful of that.

38:48

And then the other is just there are some tax these this is Tennessee tax.

38:52

Tennessee tax issues.

38:54

that we have to make sure we address when we’re dealing with business

interests and whether or not we’re claiming certain exemptions.

39:03

So we go through all of that with the client to make sure we got the right

39:08

uh information and then if we do then we go ahead and we’re able to we’ll go

ahead and just assign that business interest to the trust

39:16

and hopefully that’ll take care of it.

39:19

If not, then sometimes we get an amendment to the documents that they have

that say when they pass away that business interest automatically goes to the

trust if we have to do it that way.

39:31

Yeah, because I mean I know I have uh a family one and we specifically put in

there that they couldn’t sell or transfer to someone else because we none want

to be in business with the sister-in-laws in my case

39:42

Um, you know, so you know, at that point they would just be brought out um of

that situation.

39:48

So I could see where they wouldn’t want that

39:51

to come up.

39:52

Um and and then with corporations, since it’s stock based, is the stock just

transferred over?

39:57

Like do you get step open basis for a regular

40:01

Situation on that?

40:02

I’m just curious.

40:02

Yeah.

40:05

Well, it’s the same as the LLC if the documents

40:09

have a shareholders agreement that prevents transfer, then we’ll have to be s

we’ll s we’re stuck with the person still owning it.

40:17

But if there’s nothing like that in place, you’re right.

40:20

We just change the stock ownership from the client to the trust and that

allows us to get the full step up at first death and not go through a probate.

40:31

Gotcha.

40:32

Yeah.

40:32

And why does people not I mean, I know one thing I like about trust is the

fact that without probate, no one really knows everything, right?

40:40

Because in in a probate, doesn’t all your assets get listed somewhere?

40:46

Depends on the county.

40:48

Oh, okay.

40:49

Yeah.

40:49

Um certain counties require a complete disclosure

40:54

Certain counties don’t.

40:55

Um I’m just gonna pick on Davidson County.

40:59

Uh although they might not ask for all the detailed information, if you do

have a business and you pass away in Davidson County

41:08

then you do have to list your interest in all of those businesses as part of

the probate proceeding.

41:15

And a probate proceeding is public record.

41:18

So any person or

41:21

Any uh let’s say bad actor can find out what your documents say, what your

will says, and then

41:29

decide whether or not they want to uh make a play for uh whatever it is that

they think you own and they’ll know who gets what and everything else.

41:39

Um certainly if you’re the type of person that wants to keep your personal

information close to the vest, you definitely do not want a will because that

will just expose who gets what of everything you own.

41:53

And like for instance when we talk about who needs a trust, every person in

the entertainment industry needs a trust.

42:01

I mean if they come in and say, Hey, I’m you know, I got I’m writing songs or

I’m in this band, we’re like, Okay, trust.

42:07

We don’t even talk well.

42:09

So it

42:10

‘Cause they’re in that public eye and we just don’t want to create more um,

you know, fodder for TMZ or anyone else that might want to know what’s going

on.

42:21

Well that’s what I mean, not that I I mean myself, I mean I just don’t like

the idea that when you pass away everything gets kind of or at least a lot of

it can

42:31

get out there and that just seems to me it’s no one’s business what you have

or don’t have besides the people that are either inheriting or needing to deal

with the documents directly

42:41

So that to me would be a big reason to have a trust.

42:45

And again, I think one of the biggest reasons I love a trust is the fact that

I can control things even if I’m not here

42:50

here.

42:51

In essence, I still am here because I’m still controlling something.

42:54

Um, you know, it’s a power thing.

42:56

I I I like that kind of situation.

42:58

My clients know that too.

43:00

So any last bit, we have uh about two or three minutes, Russ.

43:04

Any back uh wisdom or suggestions if someone’s listening and they’re like,

okay, I I want to do this, what would you know, steps to move forward to get

this?

43:12

moving because a lot of people procrastinate on this subject big time.

43:16

Yeah.

43:16

Well we would encourage them to call whomever they feel is is good enough to

handle

43:23

advising them on this.

43:25

If if they’re doing estate planning, they probably should seek out the advice

of a board certified estate planning attorney or someone that clearly

indicates that that’s all they do because

43:37

There’s a lot of complex issues that come up in estate planning and if you

only do it maybe once a month, uh you’re not gonna have the the background to

be able to help clients navigate these situations.

43:51

So

43:51

Um I’m not trying to make a full pitch for me, but I’m just saying if you need

to get work done, make sure you do seek out

43:59

a competent estate planning attorney because they can they can not only talk

tell you what you should do but they can also tell you what you shouldn’t do

44:09

And a lot of times uh when you don’t get that conversation uh in the you know,

you don’t have that one, you’re in you’re in big trouble, or at least your

family is

44:19

Well again, that that’s I think that’s the big thing to take away too is that

if you know you’re listening, you’re any age, because again, I used to say,

well, if you’re over the age of 50, you should have this, but then I started

talking to some young people and I’m like, well

44:33

You know, if you’ve got children, if you have some assets, you should at least

be talking the idea of a will.

44:39

Maybe you don’t need to go through a through full-blown trust

44:42

Uh, but you know, if you want to be able to make things easier, you should be

moving forward towards that kind of conversation.

44:48

And I know Russ will not, he’s always been that way, will not push, but there

is only a handful of attorneys that are certified, correct?

44:57

Yeah, yeah, there’s not many.

44:59

All right.

45:00

So thank you.

45:01

You’re so good at this.

45:02

Um all right, we got about one minute, 30 seconds.

45:05

left so I’m gonna go through the big closing again Russ Cook Attorney at law

with Cook Telman Law Group 615-370-2444

45:16

615-370-2444.

45:20

Um you can also call our office, um, Dr.

Friday, tax and financial firm, six one five three six seven.

45:27

0819.

45:29

Again, 615-367-0819.

45:34

Or you can always check us out on the web at drfriday.

45:38

com.

45:38

If you are a current tax client and have not yet

45:41

booked your 2025 tax appointment, you better get hustling because it’s pretty

full and I want to make sure I get all my returning clients

45:50

before we open up the calendar.

45:52

And then that way we’ll be able to move forward and do what we need to do.

45:56

And if you’re a new client and you would like to set up an appointment, we

still have some of those too, but you can call the office on Monday,

615-367-278-278-275-27.

46:05

0819 Russ again.

46:07

Thank you for joining me.

46:09

Thank you for bringing me on.

46:11

No problem, buddy.

46:12

All right.

46:12

If you want to reach Russ’s office one more time, 615-370-2

46:17

444.

46:18

You can check them out on the web too.

46:20

Cook Telman Law Group.

46:22

Um, and if you have questions, you can also email friday at drfriday.

46:27

com.

46:28

Friday at drfriday.

46:31

com.

46:31

And one more time, my phone number 615-367-0819.

46:38

615-367-0819-DrFriday.

46:42

com.

46:42

And if you um haven’t

46:44

File taxes in a number of years, guys.

46:46

You just need to give us a call.

46:48

And I think that closes out the show.

46:50

And as we always say in Australia, cop you later.