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Liz Weston

Q&A: Social Security divorced spousal benefits

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Dear Liz: A friend was told by Social Security that she could not collect spousal benefits on her ex-husband’s work record because she did not have his Social Security number. How can I help her find it?

Answer: Your friend may have run into a new Social Security employee, or at least one who is not well-informed. Social Security says on its website that people who qualify for divorced spousal benefits do not need their exes’ Social Security number as long as they can provide enough identifying information for the agency to locate his record. She does need to have a marriage certificate and divorce decree along with her own birth certificate.

To qualify for divorced spousal benefits, the marriage must have lasted 10 years and your friend must currently be unmarried

Q&A: Income tax vs. capital gains tax

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Dear Liz: I was wondering about the disabled vet who wanted to sell his home, which had increased in value by about $1 million. You mentioned that “[S]ingle people with incomes over $415,050 in 2016 are subject to the 39.6% marginal tax rate. Most people pay capital gains tax at a 15% rate, but those in the top bracket face a 20% rate.” Would he have to pay federal income tax on the non-exempt portion of the equity as well as paying 20% capital gains on the non-exempt portion?

Answer: You may pay income tax or capital gains tax on a source of income, not both. If an investment has been held less than a year, the gain is considered short term and subject to income tax. Investments held more than a year are considered long-term and qualify for capital gains treatment.

When you’re selling your primary residence, the first $250,000 in profit is typically exempt from tax. The rest of the gain would be taxed as a capital gain.

Friday’s need-to-know money news

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imagesToday’s top story: How life insurance can affect your estate taxes. Also in the news: Money tips for new workers, 401(k) tips for when you quit your job, and important money lessons for kids under 5.

How Life Insurance Can Affect Estate Taxes
Life insurance comes into play if you have a sizeable estate.

4 Money Tips for New Workers
Using your paycheck strategically.

Roll over or not? Smart 401(k) moves when you quit your job
Don’t lose out on your contributions.

3 Important Money Lessons Kids Under 5 Should Know
It’s never too early to start.

Why We No Longer Fear the IRS

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gpbh8nungoaljipue96oOur tax laws are complex and often difficult to understand. Tax professionals warn us of the perils of audits. Penalties for getting our taxes wrong can be stiff — up to and including jail for those who deliberately evade the taxman.

So why don’t we fear the IRS?

Clearly, we have some fears about April 15. A recent NerdWallet survey found seven out of 10 taxpayers have concerns about filing their taxes, such as making a mistake (17%), paying too much (15%) and not getting the biggest possible refund (14%).

But only 11% feared getting audited, NerdWallet found. A recent Rasmussen Reports poll put the number at 14%.

In my latest for NerdWallet, why Americans are less afraid of the IRS than they are of reptiles.

Wednesday’s need-to-know money news

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Today’s top story: How to start investing. Also in the news: Inexpensive online money management classes, social media scams to watch out for, and why your busted March Madness bracket isn’t all bad news.

New to Investing? 4 Steps to Get You Started
Putting your money to work.

Your Guide to Inexpensive Online Money Management Classes
You can’t afford not learning how to manage your money.

3 social media money scams you need to watch out for
If it sounds too good to be true…

Your March Madness Gambling Losses Could Soften the Blow of Tax Season
Your busted bracket isn’t a total disaster.