Q&A

Q&A: Getting your delayed refund

November 14, 2022 By Liz Weston

Dear Liz: Here’s another option for the person whose tax return got amended and who was still waiting for a refund. Contact your member of Congress or U.S. senator. They have constituent service staff who might be able to prod the IRS. This worked for our family when we learned my late father was owed two refunds from a few years before his death. The abysmal IRS phone system kept hanging up on me. My U.S. senator happens to sit on an IRS oversight committee and his staff is the only reason we finally received the refund checks after 11 months of wrangling.

Answer: Thanks for sharing your experience. Constituent service staffs can be helpful in resolving serious problems with various government agencies, although many people currently expecting refunds will simply have to wait to get their money. That’s extremely unfortunate, since refunds are a financial lifeline for many struggling households.

As mentioned in the previous column, the IRS is still slogging through a massive backlog created by the pandemic and years of inadequate funding. Getting through on the phone remains difficult, so people’s first stop should be the IRS.gov website, which offers a number of self-help resources for routine tasks, including the “Where’s My Refund?” tool, the “Where’s My Amended Return?” status tracker and a wealth of articles, publications and calculators.

The next stop might be the Taxpayer Advocate Service, which allows taxpayers to file a request for assistance if a missing refund is causing financial difficulties. The service is also warning about significant delays in helping taxpayers because of the IRS backlog.

Q&A: Flexible spending account use-or-lose deadlines are back after a pandemic hiatus

November 14, 2022 By Liz Weston

Dear Liz: The hospital where I work was bought out by another hospital last summer. I was in a flexible savings account at that time with my workplace. I had to enroll in a second FSA through the new medical facility. Trying to keep these two separate FSA accounts was not easy. I thought by March 31 of this year, my 2021 FSA accounts were spent. However, I recently found out I still had $700 left in one of my FSA accounts. I contacted the organization, pleading my case in regards to the midyear takeover and the difficulty of trying to keep two FSA accounts straight. No luck! Do I have any recourse?

Answer: The rules about spending FSA money were loosened after the COVID-19 pandemic hit, but it’s possible your employer didn’t opt in to those changes.

Medical FSAs, which allow employees to put aside pretax money to pay qualified healthcare expenses, have “use it or lose it” provisions that require the money to be spent within certain time frames. Normally, the deadline is Dec. 31, but employers can offer a grace period that extends the cutoff to March 15 of the following year, or allow employees to roll over a few hundred dollars ($550 in 2021 and $570 for 2022).

The federal Taxpayer Certainty and Disaster Tax Relief Act of 2020 gave employers the option of extending their spending deadlines by up to a year, or allowing their workers to roll over all the funds left in their FSAs in 2020 and 2021. Employers weren’t required to make these changes, which have since expired.

If your employer didn’t change its rules, it may not be too late, said Nitasha Kadam, a tax analyst for Wolters Kluwer Tax & Accounting. Plans can be amended retroactively to provide this relief. But the deadline is fast approaching — changes for the 2021 plan year would have to be made by Dec. 31, 2022. It’s worth asking about, although your case might be stronger if you can find co-workers in the same boat.

In any case, this is a timely reminder for other people who have money left in their FSAs: Check the deadlines, and make sure you spend the money before it’s gone forever.

Q&A: Why you need a credit score

November 14, 2022 By Liz Weston

Dear Liz: I use a credit card for most of my shopping and pay the balance in full every month. The card was opened years ago as a business card, but the business has since been closed. My credit scores are high but my card isn’t listed on my credit reports. I believe that is because it’s a business card. Should this be of concern to me? My wife and I own our home outright and have no other debt.

Answer: Your scores should be fine as long as you have (and occasionally use) other credit cards that show up on your reports at the three major credit bureaus.

If you didn’t have other active credit accounts, eventually your credit reports would no longer generate credit scores. That could make it much more difficult and expensive to borrow money, rent an apartment, get a cellphone and, in most states, insure a home or a car.

Q&A: Mom has dementia and credit cards. How does her family cancel the accounts?

November 7, 2022 By Liz Weston

Dear Liz: My mother has two credit cards that have had no activity for a year and a half due to being in an assisted living facility. She is living with dementia and no longer able to make any decisions (personal or financial) on her own. Should I or am I even able to cancel these cards or do I have to wait until she passes and send in a death certificate to the bank?

Answer: Theoretically you could close the accounts for her if you have a legal document known as a financial power of attorney. These documents are designed to help you take over the finances of someone who is incapacitated. Unfortunately, banks and credit card issuers sometimes refuse to honor powers of attorney despite legal requirements that they do so. You might need to hire an attorney to force them to accept your authority. You can get referrals to experienced attorneys from the National Academy of Elder Law Attorneys and the American Bar Assn.

If you don’t have this document and your mother is no longer of sound mind, you probably would have to go to court to become her conservator to make financial decisions for her. That can be an expensive process.

But there might be a simple solution. Some credit cards have an “off” switch that prevents anyone from making charges on the account. If the card has this feature and you can access the account online, you may be able to effectively disable the account even if you can’t formally close it.

Q&A: Offsetting home sale taxes

November 7, 2022 By Liz Weston

Dear Liz: We recently sold a house and have taxes to pay on the proceeds. I’m wondering if we can take some of the proceeds and put them into 401(k) accounts, and pay taxes on them later?

Answer: You can’t do this directly, since 401(k) contributions are made through payroll deductions. If you haven’t already maxed out your retirement contributions, however, you could increase your contribution rate to offset some of the taxable income you created when you sold the house. Some employers allow you to contribute 100% of your pay, up to the IRS contribution limits. In 2022, the limit is $20,500 for people under 50 and $27,000 for people 50 and older.

You also could contribute $6,000 to an IRA (or $7,000 if you’re 50 and older), but your ability to deduct the contribution depends on your income if you’re covered by a workplace plan such as a 401(k). If you’re married filing jointly and have a workplace plan, your ability to deduct an IRA contribution phases out with modified adjusted gross income of $109,000 to $129,000.

Remember that you can exempt up to $250,000 of home sale profits (or $500,000 for a couple) if you owned and lived in the property as your primary residence for at least two of the last five years. You also may be able to reduce the taxable gain if you kept good records of qualifying home improvements. For more information, see IRS Publication 523, Selling Your Home.

Q&A: Don’t forget ‘Where’s My Refund?’

November 7, 2022 By Liz Weston

Dear Liz: My CPA left off some income when electronically filing my return at the end of March. The CPA filed a corrected return a few days later. I’m owed $10,895 and still haven’t received my refund. What happened to the 21-day refund period for e-filing? I can’t get through to the IRS on the phone. The state refunded my money in only eight days.

Answer: The IRS tries to process refunds within three weeks when taxpayers file electronically and use direct deposit. But that timeframe goes out the window if there are any problems, especially in recent years.

The IRS is still dealing with a massive backlog triggered by the pandemic. The agency was already struggling with antiquated computer systems and a dwindling workforce because of years of underfunding. Then its processing centers were shuttered by lockdowns, followed by congressional orders to distribute hundreds of millions of payments (the three economic relief payments, followed by six months of advanced child tax credit payments).

You can use the “Where’s My Refund?” tool on the IRS site to track the status of your refund, but unfortunately there’s not much you can do to hurry things along.