The Tax Doctor is In

Taxes and milk

2010-12-27T04:49:00.000-08:00

So you are asking how can milk and taxes have anything in common will let me tell you. In Florida they are discussing taking chocolate milk out of the school because so many 10 to 17 year old students are overweight. So their answer is to take it away from them so they don't have to learn moderation. In fact their are very strong studies including The university of Connecticut that shows chocolate milk is very good for you. Doesn't this sound familiar let's tax the wealthy so that more than 50 percent of taxpayers do not have to pay or even worse they can get money back. This is a reward system they rewards those that do not want to achieve anything and it punishes those that succeed. Think about it the tax code says if you are making 40k and you have a child you will get a what is called earned income credit which you must ask why because with the same situation but if you are single you will pay taxes with no earned income credit yet you have earned income why don't you get the same treatment because the tax code rewards failures and punishes success. As far as the school system they should do what they are paid to do and the parents of these children should also do their part that is educate these kids, show them what they can and can not do. Teach them to take responsibility, not to look to someone else to tell them what to eat, where will that lead. What to think, what to wear, where to work how successful you can be. This is the land of opportunity a place where your dreams can come true. Teach our children that they can do anything stop putting limits and let them fly.

Watch In Your Prime at 1pm or at www.newschannel5.com
Or join me live every Saturday at 2pm on 99.7 or www.997wtn.com

Need your attention please!

2010-01-27T08:54:00.000-08:00

BE SURE you are current with all your state, county and city taxes because they are now all one!

State/Local Governments Form Partnership to Improve Compliance, Increase Revenue and Simplify Tax Process for Business Owners

NASHVILLE – This past legislative session, the 106th General Assembly enacted Public Chapter 530, shifting the administration and collection of business tax from local municipalities and counties to the Department of Revenue. With this change, the Department of Revenue will use its resources and experience in tax administration to collect the business tax, resulting in greater efficiency in the collection process and increased revenue for the State and for local governments.

"This undertaking is a true partnership between state and the local governments," said Commissioner Reagan Farr. "While increasing revenue through improved tax compliance, we also plan on simplifying the tax process for business owners including developing a new, simplified tax return and initiating major education programs."

Beginning with Classification 1 taxpayers, due Feb. 28, 2010, all business tax returns will now be filed with the Tennessee Department of Revenue. Businesses will continue to obtain business licenses from the county clerks and/or municipal officials.

The Department of Revenue is working closely with local municipalities and counties to make this transition a smooth process. The department is currently gathering registration data from the counties and cities to register the business owners and mail out tax returns by the end of 2009. More information is available at the Department of Revenue’s Web site www.TN.gov/revenue.

The Department of Revenue is responsible for the administration of state tax laws and motor vehicle title and registration laws established by the legislature and the collection of taxes and fees associated with those laws. The Department of Revenue collects approximately 92 percent of total state tax revenue. During the 2008-2009 fiscal year, the department collected $10.2 billion in state taxes and fees. In addition to collecting state taxes, $1.9 billion of local sales tax was collected by the department for local governments during the 2008-2009 fiscal year. Besides collecting taxes, the department enforces the revenue laws fairly and impartially in an effort to encourage voluntary taxpayer compliance. The department also apportions revenue collections for distribution to the various state funds and local units of government. To learn more about the department, log on to www.TN.gov/revenue

Tax Q&A Time

2010-01-26T12:41:00.000-08:00

This was a great question I think a lot of us will learn from:

I lost my job 12-31-08 with my income greatly reduced I fell behind on some loans auto and credit cards I was told by two different companies that my failure to pay these loans would result with them sending a 1099 to the irs as well as me indicating that loans were taxable income. can they legally do this and is it actually reportable income?

The answer is yes it is legal and no one tells anyone about this until they get the 1099. When you are negotiating your reduction on your loans and credit cards you think great I have just paid off for less than I owed. But, wham! now you owe taxes on the amount you did not pay and for someone that is already in financial straits this can put you over the top.

Again this a good time to visit your tax planner before you make these choices to see how it is going to affect your entire financial picture.

You're never anonymous

2010-01-19T08:00:00.000-08:00

This shouldn't come as much of a surprise but in case you live under a rock, the IRS is using social networking to catch tax evaders. Thanks to some people's errant Facebook, MySpace and Twitter updates, the IRS has tracked down some tax evaders.
They're mining through posted information such as relocation announcements, professional profiles and financial gains. Agents at the IRS have been able to collect all sorts of bucks from would-be tax dodgers. One Nebraska agent was able to collect $2,000 from a disc jockey after he advertised on MySpace that he’d be working at a big public party.

"These new supplements are often far more efficient than the older ones, such as reading the local newspaper or making inquiries at barbershops and church meetings," said Jim Eads, director of the Federation of Tax Administrators. Another agent was able to collect $30,000 of unpaid taxes after a Google search lead him directly to his target.

So, if you’re the type of person that likes to boast about income that hasn’t been reported on Twitter or any status updates you have, think twice. The IRS could be, and probably is, watching.

Oh my how I procrastinate!

2009-12-29T08:33:00.000-08:00

The holidays got the best of me but here I am right on time because we all know, as soon as the ball drops, it's time to start getting those deductions and tax plans in order!

We had Free Money Part 1 and Free Money Part 2. Here are the final two tips:

#10 - The best way to save tax dollars is to reduce your income before you pay taxes. So how about getting a miscellaneous fringe benefit from your employer instead of cash? Often an employee wants that green stuff that they often miss the bigger picture.

Not sure what I'm trying to say? Let me explain: You get your paycheck after paying all of your taxes or so to get to work every day you must ride a bus so you buy a pass for $120 dollars a month. Now instead of that let's have your employer give you a discount fare card up to $120 a month. This is considered a de minimis fringe benefit plan (it's tax free) so not only do you get this for free but it does not show up as income so you are keeping more of your paycheck in your pocket.

#11 - Free Money isn’t always about what you can get for yourself but what you can give to someone else and in return you pay less in taxes therefore you put more money in your pocket. Gifts, Bequests and inheritances do not constitute taxable income but any money you earn from that money is taxable so one way to reduce those taxes is to give some of those earnings to a charity then that will reduce your income and your taxes. Sometimes to give you actual get and this is one of those times. This is also a great way for anyone that itemizes to reduce their taxes. Just be sure you document what you're giving and if you are using an IRA or some other retirement account have them send the check directly to the organization then you avoid taxes on those distributions.

I do encourage you to always check with your tax planner to be sure you are keeping all or as much as you can of your hard earned money.

Have a safe, happy new year, and I hope this helps you with reducing your taxes for 2009!

More Free Money Tips Part 2

2009-12-16T09:02:00.000-08:00

Consider this my Christmas present to you! Picking up where we left off last time...

- Group Life Insurance
Group term life insurance coverage $50000 or less provided to you by your employer is excludable from your income. You are not taxed on the cost of group term life insurance protection of more than $50000 if the coverage is provided after you have retired and are disabled, Your employer is the beneficiary of the policy for the entire period or the only beneficiary of the amount over $50000.00 is a qualified charitable organization for the entire period the insurance is in force during the tax year by naming a charitable organization as the beneficiary of the policy.

- With the holidays coming how about making your employee really happy by giving them FREE MONEY that’s right I know too good to be true but you can give your employees a distribution that is excludable from their income if it is not of substantial value and is given for substantially non compensation reasons. So the IRS policy allows you to give each employee up to two non-cash gifts per year, tax-free, for a special occasion Gifts up to $500 per employee so think outside of the box cash isn’t everything and you can sure enjoy thing just as much as money especially when it is FREE.

Also think about setting up awards, be sure all employees can participate the IRS policy is the cost of the awards to $500, including taxes Awards up to $500 per employee.

- Which brings us to Employee Awards/ Achievement Awards

This exclusion applies to the value of any tangible personal property you give to an employee as an award for either length of service or safety achievement. The exclusion does not apply to awards of cash, cash equivalents, gift certificates, or other intangible property such as vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds, and other securities. For this exclusion, treat the following individuals as employees:

A current employee.
A former common-law employee you maintain coverage for in consideration of or based on an agreement relating to prior service as an employee.
A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control.

In addition, the pay must meet both of the following tests.

Test 1. It must be reasonable.

The duties performed by the employee.
The volume of business handled.
The character and amount of responsibility.
The complexities of your business.
The amount of time required.
The cost of living in the locality.
The ability and achievements of the individual employee performing the service.
The pay compared with the gross and net income of the business, as well as with distributions to shareholders if the business is a corporation.
Your policy regarding pay for all your employees.
The history of pay for each employee.

Test 2. It must be for services performed.

Achievement awards. .
Length-of-service award. An award will qualify as a length-of-service award only
Safety achievement award.

- EXPENSES of YOUR Employer
The IRS does not tax reimbursement expenses that are true reimbursements for expenses you paid on behalf of your employer. The IRS recognizes the impossible administrative verification problems in auditing such expenses. For whatever reasons, therefore, they are nontaxable. So here is an example let’s say your employer arranges for you to work from 11am to 7pm instead of 9 to 5 and your boss agrees to provide you with dinner money, these personal supper expenses therefore can be converted into nontaxable income. In effect, no matter what tax bracket you are in. you have arranged for the irs to buy you dinner.

Check back, I'll have the rest of the tips for you before Christmas hits!

Free Money - Part 1 of 16

2009-11-19T10:06:00.000-08:00

Hope you all have been enjoying the Free Money tips I've been sharing on the radio! In case you missed them, I'm going to be transcribing those great tidbits on here. Let's kick this off with #1 - Hospitalization Premiums:

Hospitalization premiums paid by your employer are excludable from your income. For example if you normally would purchase hospitalization insurance costing $500 a year and you are in the 28% tax bracket, you would require pretax earnings of $694.44 in order to make that purchase. Which means you your have to earn $694.44, and 28% or 194.44 would go to your taxes. In other words having your employer pay your hospitalization premium in the case $500 for you would be saving 194.44.

Now that’s FREE MONEY

Check back soon, we'll have the rest of them up before the holidays so you can settle your tax prep with ease!

Quick update

2009-10-28T21:24:00.000-07:00

It's been quite the whirlwind in the past couple of months - finishing up business tax filing back in September where my clients had originally filed for extensions in April and same for the ones I help file personal taxes (deadline October 15th). Luckily WilliamsX3 is efficient and quick (precise) turnaround is easy peasy.

Both radio shows are going really well, Hank and I have been getting a lot of good response on the Financial Lifestyle Show. And hey, if you haven't caught the live episodes you can find the podcasts here.

I stumbled upon a lovely site called Design*Sponge where they feature a women's business (Biz Ladies, if you will) segment each week. It's really wonderful stuff, great tips for entrepreneurs and creative types and even though it's geared towards us girls, I really think it's worth checking out regardless of which gender you are. The topic I chose to weigh in on was on Tax Info for Small Business. Highly recommend it.

This November, I start a series on WLAC News Radio 1510AM. It's called "Free Money" and I know you're going to like what I have to share. Just a sneak peek for now, I'll be giving you some tips on how you can get some free $$ when it comes to selling your home, work expenses, hospitalization premiums, and separations/divorces. You're not going to want to miss this.

Check back soon, I'll have the first installment of Free Money for you. Cop ya later!

Taxes - it's not just for the rich.

2009-10-08T20:12:00.000-07:00

People who are for tax think that the death tax is a great source of revenue for the government because this tax allegedly applies only to the rich. Inheritance or money passed from one party to another - proponents of raising taxes say this money should be taxed, just like income or taxable gifts.

But what is inheritance tax? Why is there a tax on death? And how does this "death tax" work?

The inheritance tax rate depends primarily on the type of property being inherited and the relationship of the heir to the deceased. For example, when Mr. Smith dies, he leaves his mansion and fortune to his children, his fancy car collection to his brother Ralph and his yacht to his old fishing buddy Terence. Usually, each child must pay taxes on what he or she inherits. That's what we already know about inheritance.

Ralph must also pay taxes on the car collection. He will probably be taxed at a higher rate than Mr. Smith's children because he is neither a child nor parent of the deceased. Non-lineal heirs are generally subject to higher inheritance taxes. Since Terence is not at all related to Mr. Smith, he will be subject to the highest taxes.

Just because you inherit money doesn’t mean you’re rich but it does mean the government could take almost half of your inheritance. They say they are taxing the rich, but they are really taxing everyone. The government saw a chance to get their hands on your family's dynasty, they are taxing your inheritance because they feel you are getting more than you need. That’s right, rich or poor they really do not care - it’s all about how much money they can get so they can keep spending.

Tell me, what is your opinion on the inheritance tax?

Tax planning seminar

2009-09-28T20:25:00.000-07:00

I'm real excited about tomorrow - my co-host on both the Retirement Report and the Financial Lifestyle Show, Hank Parrott and I are holding a free financial planning seminar and so far the response has been great. We have 70 people signed up, and here's hoping we can turn this into new clients and new people we can get to know and help.

Mum and dad are coming to help set up and I think dad's going back to the office but good ol' Gigi and I, we're a team and I think she'll be sticking around for moral support.

We're going to be discussing the pros and cons of the services provided by Brokers vs. RIA's, and for my part, a Tax Preparer vs. a Tax Planner. I am the latter, and I cannot stress enough how different both are. Yes, we work with your taxes and we're super busy in the months of March and April. However, a tax preparer is someone who just puts the right numbers in the right columns and boxes so you don't get in trouble with the IRS when you file your taxes.

Tax planners like myself, well, we do much more than that. I try to get to know my clients and their objectives, whether it's personal or with their business. Like I always say, I'm here to maximize your income and minimize your taxes. I will help make objective decision in your best interest, come up with ideas and I work with you in mind. At the end of the day, you're happy and I'm happy. And that's what matters.

Mommy and Me

2009-09-18T07:32:00.000-07:00

Author Linda Gordon and Susan Shaffer wrote the book Too Close for Comfort? Questioning the Intimacy of Today's New Mother-Daughter Relationship.

They were interviewed this week in the Life section of the Tennessean, and according to the article their viewpoint is that a mother cannot be a friend to her daughter and vice versa. In fact it goes as far as to say that a mother can undercut the daughters self esteem. Even though I can only speak of my own relationship with my mother I do think that is just baloney.

Why would a mother that gave you life or, in my case, build my self esteem by believing in me and educating me want to undercut all of those years of work? Gordon says in the article,

"They're struggling with how to be a loving, generous mother and "Where do I draw the line between letting her be her own person?" There is one type of mother that is also too dependent on her daughter. The daughter really starts to feel guilty and feels like she's carrying Mom on her back."

How many of us haven't had to struggle saying yes or no to our platonic friends? One must wonder if these ladies have any sort of relationship with their mothers. They also say that any relationship between two women of different ages cannot be equal because they are not at the same point of life. Again, I call baloney. What they are missing is that throughout time women have learned from each other and who better to ask than someone who has been already there? My life and my mother’s life might be completely different - she chose marriage and children over career, I choose career over family. But it doesn't mean we haven't had any similar experiences in our lives.

This article is mostly about daughters that are too lazy to do things for themselves and mothers that will do anything for their child. In the real world if a mother and daughter are to work, live and play together they need respect, trust and most of all they need to be able to talk and to build dreams together. That is what a true mother and daughter friendship is all about.

I would love to hear your thoughts on this!

Ask Dr. Friday

2009-09-11T10:02:00.000-07:00

This is the first in a series of questions I've received from people that I've met, work with and even from Twitter.

The first comes from @lifealamode, a local blogger:

How do I keep myself and my little business organized through the year so I'm not scrambling when it's time to file my taxes?

The easiest thing is to first set up a computerized program (Quickbooks is good or Quicken) so every day or month or however you schedule your banking, you are assigning accounts to whatever you’re spending money on so at the end of the year you have everything totalled.

I think Quicken might be free, at least for first year, and there are online programs you can use on the run too so you don’t always have to be strapped to your computer. Definitely scan documents - organize your receipts or anything you have to show if you ever have to justify your cost of goods or supplies. That way if/when the government decides to audit you, you're ready to show them what they need to see. Most of us can barely remember what we did last month, let alone what we've spent every penny on in the past year, so it's just best to keep documents scanned and eliminate any chance of misplacing or losing things.

You can then use the scanned documents and start the way you plan to continue. Now, I'm not personally big on spreadsheets because those can get overwhelming. Plus you have to manually input details into it. They don’t download easy from bank accounts either. For example, SunTrust statements download right into Quickbooks so that's extremely helpful.

So that’s the easiest way to keep a small business organized - Get computerized.

What advice would you give to someone starting their own business?

I work closely with individuals who are entrpreneural as well as people who are starting up their own businesses. The three main things to keep in mind are:

1) Create a business plan - know what you want, where you want it to go, have an outline. How are you going to make money with your business? Immediate, short and long term goals? What do you have to offer that makes you unique? Figure that out, put it on paper and you're setting yourself in the ideal direction.

2) Make sure you sit down with a lawyer or an accountant. I will know all the taxes and licensing required when you open a business, and obviously the lawyer deals with legalities of owning a business. This way you are fully aware of what you're about to get yourself into and you avoid ever paying paying penalties and/or interests. What a lawyer may tell you vs an accountant is different so if you can, meet with both. It really is worth the up front investment rather than paying a lot more later on.

What kind of business are you running? Sole propriertorship? LLC? Employee? Draw? What kind of taxes go along with that? Will you need a sales tax number? Federal tax ID? All those things need to be established before you open your doors. Know how you’re going to do those things so you know what’s going on.

The initial investment in a good lawyer or accountant will save you more time and money in the long run.

* When you make good decisions in the beginning you’re going to pay a lot less taxes later. This applies to every single business, small or big. Lastly...

3) How are you going to afford to go into business? Along with your business plan, make a financial outline. Have an idea of what you can vs. what you need to spend, same with what you expect to make. Lately, a lot of people are losing/closing their business because they weren't prepared to slow down. You can't expect to make money consistently 100% of the time and you have to have fall backs. Can you afford to make employee reduction? What is your Plan B to keep your doors open and your business running. Can you, if you need to, get back to the bare bones of the company if business dropped off enough and what steps would you take to keep going? How are you going to pay your own bills?

These are what I personally think and it's not all of the advice I have for budding business owners but they are the three that really stick out when I'm asked that question. I hope this helps your endeavors! And come back soon for more Ask Dr. Friday!

Healthcare on my Mind.

2009-08-25T21:41:00.000-07:00

While reading the Opinion section of the TEnnessean online last week, I came across this piece by a Hal Roberts of Franklin, TN titled, "Obama team turns its back on free-market principles."

Choosing to ignore the political sides Mr. Roberts has taken, I couldn't help but have my mind go back to the hottest topic of debate today - healthcare reform and health insurance and got to thinking: It amazes me on how everyone talks about how there are millions uninsured but no one wants to face that money plays a big part of how these programs work.

But let’s get the number right according to the most recent U.S. Census Bureau’s report on Income, Poverty and Health Insurance Coverage in the United States. The non-citizen rate of uninsured individuals clocks in at 43.8%, or roughly 9.4 million non-Americans. While the number continues to drop, it’s also worth noting that we’re not talking exclusively about the abject poor who can’t afford insurance, that same Census Bureau summary includes the following:

There are 8.3 million uninsured people who make between $50,000 and $74,999 per year and 8.74 million who make more than $75,000 a year. That’s roughly 17 million people who ought to be able to “afford” health insurance because they make substantially more than the median household income of $46,326.

Once you do some fairly basic math, you come up with the same figure that the Kaiser Family Foundation arrived at: The liberal Kaiser Family Foundation puts the number of uninsured Americans who don’t qualify for government programs and make less than $50,000 a year between 8.2 million and 13.9 million.

If we are to provide 14 million people with insurance don’t you think it would be better to just change the systems we already have and provide those people with the needed care along with the other people that are already in the system? This would put less of a burden on our budget and still provide the help that people need. What we do not need is too many people living on the system and see to it that everyone takes personal responsibility so the system is not abused and is used for those who truly need it. We must balance the budget in this country or we will all be facing a country in bankruptcy and that is not going to be pretty.

I know you're wondering

2009-08-20T19:31:00.001-07:00

People ask me, "Why 'Dr' Friday?" Well, I'm a tax guru, I am the doctor of money
.
My company is a family run business and as much as it prides me to follow in my dad & mum's footsteps, I do this mostly because I like helping people. The way I see it, we're already losing our hard earned money in so many different ways to the various ways we're taxed by the government. I would be doing people a disservice if I couldn't help you minimize your losses and maximize your money. My focus is mainly on small businesses - the industrious people who deserve to reap as much as they sow. I love helping them from the get go and seeing them build their dreams and hold on to those dreams.

There's several ways you can get to know me and what I do better:

On the telly: I'm on the panel for the Retirement Report with Hank Parrott every Friday morning at 8a.m. on NewsChannel 5+ here in Nashville. I also have my own show on NewsChannel 5+ called In Your Prime that airs everyday at 1p.m.

On the radio: On Saturday nights, if you're not out on the town, catch Barry Burke, Mr. Free Enterprise (you'll have to ask him why that's his name!) and Myself on our radio show The Money Doctor on WLAC 1510AM (Podcast available after the show here) . It airs from 7p.m. till 10p.m. The show spans 25 states.

I'm a busy girl, and on Sunday, I will be partnering up with Hank Parrott again for the Financial Lifestyle Show also on WLAC at 10a.m. This show kicks off this Sunday so if you missed me on Saturday, there are plenty of other opportunities!

While you're at it, please do follow me on Twitter. I'm always open to questions so feel free to drop me a line and ask away - don't forget, I like to help! I am, after all, the Tax Doctor!

We Are An Innovative People

2009-08-14T21:11:00.003-07:00

Surely we can come up with good ideas and better ways to make some extra cash?

As an apropos follow up to my last blog post about the unemployment rate in TN costing hardworking taxpayers and employers more unemployment tax money, the Tennessean had another article: "Stimulus keeps checks coming as job hunts fail."

Here's my question: Why haven’t these people tried self employment going and cutting grass, housecleaning, handy man services... Like that 52 year old man who worked in the printing business - with that experience he could write and print on his home computer. Take small orders or help companies print and package material. What about a hobby like gardening? Then he can sell his veggies at the farmers market. People could bake, or a tutor kids etc.. these take little to no money to start up just your time and, let's face it, the unemployed have a lot of that.

This article (and also Sean Hannity) says people are giving up but you know in the Great Depression we did not have unemployment and those people had to find ways to support their families. And they did it without computers and the internet. But they were unemployed, and they did it. And it was the self employed that pulled us out of those hard times, instead of causing more strife.

This weekend, let's think about the talents we have that we haven't put to full use. It all starts with a simple thought of "what if" to take us to "maybe I could try..." to take us to the next level to where we become our own best resource.

Solution? Or Problem?

2009-08-11T22:05:00.000-07:00

Earlier this month I saw an article on Tennessean.com about the jobless’ taxes putting a strain on business. Every single one of my 250-odd clients are affected by this - because of the ever growing unemployment claims here in Tennessee, because of new legislation being passed, employers here will have to cough up millions in unemployment taxes to cover benefits for the growing population of the unemployed.

In May this year, the TN Department of Labor did their annual evaluation and most of my clients had a increase of almost 1.5%, then in July they made the change to increase the bases to $9000.00 and charge every company another .06%.

All of this because of the huge burden the unemployed have put on the system.

Unemployment benefits provide temporary compensation to workers who meet the eligibility requirements of Tennessee law. The key word here is “temporary.” In December 2008 the average unemployed person collected 13 to 26 weeks of unemployment benefits. We have now seen as many as three extensions so that person can collect up to 79 weeks of unemployment - talk about milking the system!! And, let’s not forget the stimulus package and how that adds another $25.00 a week (for families. It’s $13 a week for an individual).

I’m not saying there’s anything wrong with unemployment benefits - we all need some help staying on our feet as we try to find new employment in these trying times. But it doesn’t change the fact that people need to be prepared for situations like this. In my humble opinion, if more people learned to look to themselves and depend less on government handouts, maybe we’d see more jobs available now.