Q&A: 2020 taxes bring another stimulus shot

Dear Liz: My 2019 tax return was electronically submitted May 11 and my income was low enough to qualify for a stimulus payment. I got my refund at the end of July but was told I wouldn’t get a stimulus check because my 2018 income was too high. The IRS agent on the phone said I could request the money when I filed my 2020 taxes. But isn’t that past the deadline? The agent sounded like he was just trying to get me off the phone.

Answer: He probably was, but he gave you the correct information. The IRS used the tax returns it had on hand this spring when it started sending out stimulus payments. Since your 2019 return hadn’t been filed, it used your 2018 income to determine how much, if anything, to send you.

People who didn’t get checks or got too little aren’t out of luck. The stimulus checks were an advance payment of a credit that will be added to people’s 2020 tax returns. If you should have received a check but didn’t, you’ll get the full credit added to your refund next year.

Friday’s need-to-know money news

Today’s top story: How first-home shoppers can keep a cool head in a hot market. Also in the news: When debt relief does more harm than good, how to make a debt-free switch to cashless payments, and what to know before using buy now, pay later financing.

How First-Home Shoppers Can Keep a Cool Head in a Hot Market
Know what to expect, stick to your budget and priorities, and don’t let anxiety get the upper hand.

When Debt Relief Does More Harm Than Good
There are risks involved.

How to Make a Debt-Free Switch to Cashless Payments
Tracking your spending, using prepaid cards and setting low credit limits can help you avoid debt when you switch to using more digital payment methods.

What to Know Before Using Buy Now, Pay Later Financing
Look for high interest rates and fees.

Thursday’s need-to-know money news

Today’s top story: Working remotely in the pandemic may generate a tax surprise. Also in the news: Advice on how to fly safely over the holidays, student debt continues to rise for new pharmacists, and how to save money during Medicare open enrollment this year.

Working Remotely in the Pandemic May Generate a Tax Surprise
Many states require people who work within their borders to pay taxes, even if they live elsewhere.

Ask a Points Nerd: (How) Should I Fly for the Holidays?
If you must travel for the holidays, here’s some advice for how to book hotels and stay safe while flying.

Student Debt Continues to Rise for New Pharmacists
Average student debt among pharmacists increased by 4% to $179,514 for the class of 2020.

How to Save on Medicare Open Enrollment This Fall
Open enrollment is just six weeks away.

Wednesday’s need-to-know money news

Today’s top story: New ways to get more for your old car. Also in the news: How the pros ride market volatility – and why you shouldn’t, if your travel plans are up in the air should you cancel your rewards card, and how the new eviction ban may impact you.

New Ways to Get More for Your Old Car
Online buyers make offers in minutes — a safety net for car shoppers wondering what their trade-in is really worth.

How the Pros Ride Market Volatility — and Why You Shouldn’t
Professionals try to harness the spikes and slumps, but most investors should stick with diversification.

If your travel plans are up in the air should you cancel your rewards card?
Not so fast.

How the new eviction ban may impact you
A new reprieve.

Tuesday’s need-to-know money news

Today’s top story: How to be reunited with your long-lost money. Also in the news: What the metro areas look like for first-time homebuyers, avoid flight change fees with these airlines, and 5 things to do after you get into a car accident.

How to Be Reunited With Your Long-Lost Money
Finding your unclaimed property.

First-Time Home Buyer Metro Affordability Report – Q2 2020
Low rates are helping buyers.

Avoid Flight Change Fees With These Airlines
The big airlines drop their fees.

5 things to do after you get in a car accident
Take a deep breath.

Some remote workers may be in for tax surprise

If the pandemic caused you to relocate across state lines, even temporarily, the next surprise could be having to file an extra tax return and potentially pay more taxes.

The issue gained national attention in May, when Gov. Andrew Cuomo of New York said out-of-state health care workers who came to help with the pandemic would face New York income taxes.

Cuomo’s comments generated outrage, but in fact, most states tax people who earn money within their borders, even if those people usually live and file tax returns elsewhere. Even a single day in some states can trigger a tax bill. In my latest for the Associated Press, how to prepare for possible tax hassles.

Monday’s need-to-know money news

Today’s top story: If doing less means saving more, try these 5 money moves. Also in the news: A new episode of the SmartMoney podcast on 401(k)s and struggling renters, how to diversify investing, and refinance your mortgage now to avoid a new fee.

If Doing Less Means Saving More, Try These 5 Money Moves
If the economic effects of the pandemic have cut your spending, you may have extra savings. Here’s what to do with them.

Smart Money Podcast: Renters Are Struggling, and What to Do With an Old 401(k)
Renters are

How to Diversify Investing in Stocks, Bonds and a Bit Beyond
Looking at alternative investments.

Refinance Your Mortgage Now to Avoid a New Fee
The new fee begins Dec. 1st.

Q&A: Why it makes sense to play the Social Security waiting game

Dear Liz: I’m concerned that you don’t make it clear that in order for a Social Security benefit to grow, a person needs to keep working and earning the same income that they’ve been making. I’ve retired recently and am lucky enough to have a pension to live on. I talked to someone at the Social Security office recently. She recommended that I go ahead and start drawing my benefits now because there will be minimal growth for the next seven years if I’m not working. She says lots of people think that they should wait, no matter what. However, she says it doesn’t make sense if you’re not working. Even my personal financial advisor was recommending that I wait, but the person at the Social Security office convinced me otherwise. When you go on Social Security’s website to check your benefits, all the estimates are based on continued employment at your current salary. There’s no way to check and see what your estimates are if you are working less or not at all. I think it’s important to give the whole story.

Answer: Yes, it is, and you didn’t get the whole story — or even correct information — from the Social Security employee who convinced you to ignore your financial advisor.

Benefits grow by 5% to 7% each year you delay starting between age 62 and your full retirement age, which is between 66 and 67, depending on the year you were born. After your full retirement age, your benefit grows by 8% each year you delay until age 70, when it maxes out. That guaranteed growth happens regardless of whether you continue working or not.

You are correct that Social Security’s estimates of the dollar amount you’ll receive assume you will continue working until you apply, so it’s possible that your benefit will be somewhat lower when the agency actually calculates your first check. But that doesn’t mean you won’t benefit from the delay — you just won’t benefit quite as much as they’re estimating.

If you want to get a better idea of what your benefit will look like without additional earnings, you can use an online tool like Social Security Solutions or MaximizeMySocialSecurity.

Your financial advisor probably has access to similar tools, as well as a wealth of research about the best claiming strategies that make it clear most people are better off delaying. Plus, your advisor knows the details of your personal financial situation.

The woman at the Social Security office did not. Even if she had her facts straight, she should not have been giving you advice about maximizing your benefits.

You may still have time to rectify this mistake. You can withdraw your application within 12 months and pay back the money you received to reset the clock on your benefits. If it’s been longer than 12 months, you can suspend your benefit once you reach your full retirement age and at least get the 8% delayed retirement credits for a few years.

Q&A: Retirement funds and creditors

Dear Liz: I keep reading conflicting things about 401(k)s and IRAs. If I roll over my 401(k) from my previous employer into an IRA, is it still protected from creditors? I’ve left it in the old 401(k) plan for now because I’ve read IRAs can be seized in lawsuits or bankruptcy, or alternatively that only $1 million is protected and the rest could be at risk. I’ve read that if I leave it in the 401(k), the whole amount is protected. Can you please help clear up this confusion so I can make a wise decision?

Answer: Your 401(k) is protected from creditors, full stop. Federal law bans creditors from taking money in a pension plan that was set up under the Employee Retirement Income Security Act (ERISA), and that includes 401(k)s as well as traditional pensions.

Your IRA is protected in bankruptcy court up to a certain amount, currently $1,362,800. Whether creditors outside of bankruptcy court can access your IRA funds depends on state law. In California, for example, there’s no specific dollar amount.

If a creditor wins a judgment against you and goes after your IRA, a court would decide how much of the account was necessary for your support and protect that. The rest could go to the creditor.

Q&A: Missing refund update

Dear Liz: Thank you for including my previous email about a missing tax refund in your recent column. Just to update you, on Aug. 20 I checked the IRS “refund status” website and lo and behold, it showed they had received my mother’s paper return, processed it, and even approved the refund (with $3.59 interest no less)! The check is to be mailed on Aug. 27. So for those concerned about the delays: The IRS will indeed get to them eventually and, as you’ve previously advised, there is no need to call them and check. Their backlog is massive, so let’s keep them working on that.

Answer: Thanks for the update!