In thirteen previous columns, I discussed my use of “tax tidbits” to enliven conversations when talking taxes with clients or speaking to groups like retirees, business owners and home sellers. The tidbits discuss, among other things, IRS rulings, law changes, court decisions and tactics that trim taxes for this year and even future ones.
Here are a few other topics I’d like to touch on.
Newly married and recently divorced individuals: The IRS reminds newlyweds and the recently divorced to make sure that the names on their 1040 forms match those registered with the Social Security Agency (SSA). A mismatch between a name on the tax return and a Social Security number (SSN) could unexpectedly increase a tax bill and reduce the amount of any refund.
For newlyweds, the tax scenario can begin when the bride says “I do” and takes her husband’s surname, but forgets to tell the SSA about the change. If the couple files a joint return with her new name, the IRS computers will be unable to match the new name with her SSN. Their refund will be delayed until they resolve the discrepancy.
Here’s what to do if they’re up against the filing deadline and don’t have time to change her name with SSA. They can file a joint return using her maiden name (the one that matches her SSN) and then straighten things out in time for next year’s return.
Similarly, after a divorce, a woman who had taken her husband’s name and had made that change known to the SSA should contact the SSA if she reassumes a previous name.
It’s easy to inform the SSA of a name change by filing Form SS-5 (Application for a Social Security Card) at your local SSA office. It usually takes about two weeks to have the change verified. The form is available on the agency’s website, ssa.gov, by dialing a toll-free number, 800-772-1213, and at local offices. The SSA Web site provides the addresses of local offices.
Seminars for seniors: I advise the elderly to decline invitations to free lunch seminars hosted by retirement planning services and estate planners. Those supposedly free lunches frequently prove to be prohibitively expensive. An AARP survey of more than 1,000 people 55 and over found that many who attended seminars on retirement and estate planning were “pitched investments that were unsuitable for them or were asked for information that could expose them to financial fraud.”
The invitations consistently offer the same enticements: “a free gourmet meal, and tips on how to earn excellent returns on your investments, eliminate market risk, grow your retirement funds, and spouses are urged to attend. These words should be red flags for investors,” cautions the North American Securities Administrators Association on its Web site, nasaa.org. NASAA is an international organization devoted to investor protection.
President Richard Milhous Nixon on income taxes: When Mr. Nixon was struggling to avoid impeachment and stay in office, he informed the nation that “The President, when the IRS is concerned, I assure you, is just another citizen and even more so.” Time magazine waited until the issue that coincided with the tax filing deadline of April 15, 1974, to note Mr. Nixon "offered that wry observation exactly one month ago, when advance warnings had been posted that he might owe half a million dollars in back taxes." He resigned on August 9.
Letter rulings or private letter rulings: They’re written statements by the IRS in response to taxpayers’ requests for guidance. They apply the tax laws to specific sets of facts.
Look for more tidbits in subsequent columns.
Additional articles. A reminder for accountants who would welcome advice on how to alert clients to tactics that trim taxes for this year and even give a head start for next year: Delve into the archive of my articles (more than 300 and counting).
Attorney and author Julian Block is frequently quoted in the New York Times, Wall Street Journal, and the Washington Post. He has been cited as “a leading tax professional” (New York Times), an “accomplished writer on taxes...