Ask Liz Weston

Get smart with your money

Q&A

Q&A: She counted on pandemic rent relief but didn’t qualify. Now what?

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Dear Liz: I have a friend in dire financial straits. She has borrowed from her retirement, spends too much and didn’t pay her rent thinking she would get pandemic relief, but she makes too much to qualify for emergency rental assistance. She has mental health issues, which are being addressed by a therapist, but I would love to offer her financial counseling services as well. She is in her late 50s and desperately depressed over this. It’s hard to stand by when the rest of our friend group is doing well, and we’re not sure how to direct her. I would possibly be willing to pay for a financial counselor but will not “loan” her money because that is a losing proposition.

Answer: Congress approved nearly $50 billion in emergency rental assistance to help pay back rent and utilities for low-income people impacted by the pandemic. The key phrase is “low income.” The help isn’t available for people who earn more than 80% of the area’s median income, and many programs are limiting the aid to those with incomes below 50% of the median. The aid is being distributed through more than 100 state and local agencies, and more programs are on the way. The National Low Income Housing Coalition is keeping a list.

Currently, landlords are mostly prohibited from evicting non-paying tenants, but eviction moratoriums will someday end. Your friend could find herself not just turned out of her home but unable to rent decent housing, since many landlords won’t consider anyone who’s been evicted. Avoiding that fate needs to be a top priority for her.

Nonprofit credit counseling agencies, such as those affiliated with the National Foundation for Credit Counseling, offer a variety of low-cost or free services that may help your friend, including housing counseling, budgeting help and debt management plans. She also should consider discussing her situation with a bankruptcy attorney.

Her depression may make it difficult for her to take action, so you could help her make the appointment and even offer to accompany her. Ultimately, of course, it will be up to her to make the necessary changes, but supportive, nonjudgmental friends could be an enormous help.

Q&A: Maxing out retirement benefits

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Dear Liz: I turn 70 in July. Will I need to wait to start my Social Security benefits until 2022 to receive my full benefit, or can I start them in August 2021?

Answer: There’s no need to wait to claim your benefits once they max out at age 70. If you did apply late, you could get a maximum of six months of retroactive benefits but no more.

Q&A: Filing taxes after a spouse’s death

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Dear Liz: I am writing this email on behalf of my 88-year-old dad. He wanted to ask you this question: “My wife passed away Jan. 7, 2020. In filing my 1040 income tax for 2020, am I allowed to file as a married couple or required to file as a single person?”

Answer: Your dad can use “married filing jointly” with his deceased spouse for the year of her death, assuming he didn’t remarry in that year.

If your dad claimed one or more qualifying dependents — a child, stepchild or adopted child — he might be able to file as a qualifying widower for the following two years as long as he paid more than half the cost of maintaining his home and it was the main home of the dependent or dependents. Most people your dad’s age no longer live with their kids or claim them as dependents on their tax returns. But if he did, this could preserve the larger standard deduction and other benefits of filing jointly for another couple of years.

Q&A: Paying taxes with plastic

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Dear Liz: I am selling a rental property that I have owned for several years. I know I could do a 1031 exchange, which would allow me to put off the tax bill by investing in another commercial property. But I just want out. I’ll pay the capital gains tax and invest the rest of the proceeds. I am considering paying the taxes by credit card and taking on the 3% premium to get rewards points offered through the card issuer. Is this a dumb idea, or does it have some merit?

Answer: The companies that process federal tax payments have processing fees of just under 2%, not 3%. You’ll still want to make sure you get more value from your rewards than you pay in fees, and that’s not a given. If your card offers only 1.5% cash back, for example, charging your taxes doesn’t make a lot of sense. But the math changes if you can get more than 2% in rewards, or if you could use the charge to help you meet the minimum spending requirements for a new credit card with a generous sign-up bonus.

If you do charge your taxes, you’ll obviously want to pay the balance in full before incurring any interest.

Q&A: Refreshing an old credit card

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Dear Liz: I have and use three credit cards, two of which offer cash-back rewards. The third has no rewards program, so I would like to get rid of it and replace it with a new card that offers cash back or miles. But I’m afraid if I cancel this card my credit score will take a hit, especially since the card has a big chunk of my overall credit limit. What do you suggest?

Answer: You can ask the issuer for a “product change,” which allows you to swap one card for another without closing your account. Typically, your history with the old card is simply transferred to the new one, as is your credit limit.

The new card must be from the same issuer and you usually won’t qualify for any sign-up bonuses. But you won’t risk damaging your scores by closing one account and applying for another.

Research the issuer’s offerings and know which card you want before you call. This is usually a fairly routine process, but if you encounter any resistance, just mention that your other option is to cancel the card. If you’ve been a good customer, the issuer probably will want to keep your business.

A product change also can be a good idea if you want to switch from a rewards card with a high annual fee to one with a lower fee, or no fee. Any rewards you’ve already earned may not be transferable, so be sure to ask.

Q&A: Don’t file an amended return after the stimulus tax break. The IRS is begging you

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Dear Liz: You might want to inform your readers that they do not need to file an amended return if they filed before Congress passed its most recent stimulus plan, which excludes the first $10,200 of unemployment benefits. The IRS will automatically recalculate their taxes and refund the taxes paid on that amount of benefits.

Answer: In fact, the IRS is begging people not to file amended returns. (An exception, the IRS has said, is for those who the tax reduction would make newly eligible for the earned income tax credit or other tax breaks for lower income people.) The agency is still processing a backlog of returns and correspondence while issuing a third wave of stimulus payments and gearing up to send monthly child credit payments to millions of families.

You may need patience, however. The IRS has promised to refund any taxes paid on the first $10,200 of unemployment benefits earned last year, but has said the money will go out “this spring and summer.”