Hello, my name isXXXXX & I'll be helping you today. My goal is to give you a complete & accurate answer that you can understand.
There could be several reasons, it is impossible to know for sure. However, the most likely reason is that they have the resources to make the payment now.
I see. They have a house, and two children in college, and they both have jobs. But she was unable to practice medicine for 4 or 5 months because she failed a test she has to take every 10 years to maintain her certification. Now she's certified and back at work, but that only happened quite recently.
He wants to borrow $60,000 from me, and says he has no alternative, and they'll lose the house, etc. if they don't have the full $130,000 in two weeks.
They may have retirement resources, investments, etc., unless you are familiar with all of their financial data, it would not be possible to know why the IRS is asking for this (if in fact they are).
They should have a notice, letter, lien notice, or other correspondence that makes such a demand. If you are to loan him this type of money, be advised that they will be precluded from paying you back without paying 100% of their IRS obligations first, including being current on their estimated payments.
I see. He told me a little about their finances, but I'm having a lot of trouble understanding him ... he's very upset, and has always been a little difficult to understand. He claims they have no other investments. I said I could loan him $20,000 but no more, and he got very afraid. Said they'll go bankrupt, lose the house, and may go to jail.
Another question I would have is how did they wind up owing 130,000. for last year? They must have generated substantial income to generate that amount of income tax.
His home would be protected in a bankruptcy unless he was foreclosed on.
Yes. That's good to know. He could scan and send me a copy of their notice, letter, or lien notice. Yes. They're both medical doctors, and kept their children in private school...lived beyond their means I guess and saved little. I imagine they've made more than $300,000 per year for many years. It's quite a shock to me to hear they have no savings and nothing put away for retirement.
Are they employed by a hospital or are they in practice on their own?
He told me tonight that they are current on their home loans. Their house is worth about $700,000 and they have two vacant lots beside their house in a beautiful gated golf course community in Gig Harbor, near Tacoma and Seattle. He's a neurologist in his own practice (a limited liability corporation). She's probably in a partnership, working as a pediatrician and urgent care physician.
He said they have a primary home loan that costs $3,000 per month, and a second loan that's $800 per month. He has also borrowed money from some company on the internet ... I think it's BGH, he said.
The IRS is probably considering that the vacant lots can be liquidated to satisfy their tax obligations. His story doesn't make a lot of sense; most likely he has 2 weeks left in whatever longer time period he had & ignored until now at the last minute.
Yes. I'm sure that's true. I asked about the vacant lots, and he said they made some mistake when they bought them, and they can't be sold separately from the house. Doesn't sound right to me.
$3,800. a month is pretty low considering their income; they each should easily be earning in excess of 300K per year.
My questions would be how did they wind up owing 130K for 2012; what about 2013; are their estimated taxes current?
He also said he could pay me back in two weeks after he pays the IRS, but it's not clear to me how he can do that. I drew up a promissory note, and was going to have him sign in it in the presence of a notary, then send it back to me, before I wire the money. I live in Virginia, and he's in Washington state.
I guess they're short on estimated taxes for 2013 also.
If he has 2 weeks to pay the IRS & he can pay you back in 2 weeks, why does he need a loan from you at all?
Exactly. I was very unclear about that too. I am an engineer, and have an MBA. I was asking, but he wasn't answering very well. I'd really like to help him if I could, but after our conversation tonight, I think I need to just do $20,000 or $30,000 and not expect to see any of it returned. My wife is also very unhappy about the whole thing, and two friends advised me to not lend anything.
If I were you, I'd tell him you need to check with your accountant about where to take the money from & then I'd ask your CPA (hopefully you have one) to review his request & advise you what you should do. If I was going to loan him anything, I'd get a security interest in his real estate (your note backed by a mortgage).
I agree with your friends. Clearly I'd ask for his documentation from the IRS at to what he owes.
No, I don't have a CPA. I do all my own taxes with turbotax. His father was an accountant, though.
Well you've certainly given me a lot of great info.
See, that's why you should have your own CPA; not necessarily to do your tax returns.
What I should do is not talk to my friends, even my closest friends, about money. I've accumulated a lot, by putting 10% away in a 401K for decades and doing my own investing.
You can't beat slow & steady.
I also never had children, and no fancy house, etc. Thanks so much for your help.
You are absolutely right about not discussing personal financial matters with friends. You'll never get the straight story because most people don't know what they are talking about in the first place.
Doctors are some of the worst when it comes to money;
one more thing
Tell me about it. My father was an anesthesiologist. I took over his finances for the last decade of his life. I was amazed at his ignorance.
In similar situations, when people have asked a client of mine for a loan & they don't know how to say NO, I've advised them to just say that their money is tied up in investments & this isn't a good time to be liquidating investments & you don't need the loss this year.
Thanks, XXXXX XXXXX been great.
It's not just the money, it's also what the money would earn over time; especially if it isn't paid back.
If you need to contact me again with any tax or financial questions, you can just ask for "Steve G" at the beginning of your question. Thanks again for using us for your tax and financial questions. You may get a short survey from the site; if it isn't too much trouble I would appreciate it if you would answer it; the survey results are used to rate our performance;
Yes. I'll do that. My friend also told me he has cancer. Has had it for a year. I didn't know that before tonight.
Please remember to rate my response to your questions, it is the only way that we get credit for our work.
Thanks StephenYou'll be interested to hear that when I called my friend back the nextday, he was a totally changed person. His wife had spoken with a taxattorney, and they no longer need any money from me. I don't know whetherthey got the money from someone else, or whether they can pay the IRS backover a several year period. But the problem is solved.I don't have any other questions for justanswer.com, but I'm really glad Icould get some advice from you.Best regards,John