IRS Offers Five Tips if You Changed Your Name Due to Marriage or Divorce

From the IRS website

(The IRS recently published this tax tip to remind taxpayers it is important to let the IRS know you have changed your last name. It is also important – if you are a client of JK Harris & Company – to contact us to update any name or address changes so that we can stay in contact with you.)

If you changed your name as a result of a recent marriage or divorce you’ll want to take the necessary steps to ensure the name on your tax return matches the name registered with the Social Security Administration. A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund.

Here are five tips from the IRS for recently married or divorced taxpayers who have a name change.

1. If you took your spouse’s last name or if both spouses hyphenate their last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security Number.

2. If you were recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.

3. Informing the SSA of a name change is easy; you’ll just need to file a Form SS-5, Application for a Social Security Card at your local SSA office and provide a recently issued document as proof of your legal name change.

4. Form SS-5 is available on SSA’s website at http://www.socialsecurity.gov, by calling 800-772-1213 or at local offices. Your new card will have the same number as your previous card, but will show your new name.

5. If you adopted your spouse’s children after getting married, you’ll want to make sure the children have an SSN. Taxpayers must provide an SSN for each dependent claimed on a tax return. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS website at http://www.irs.gov, or by calling 800-TAX-FORM (800-829-3676).

Retirement related news that may affect your taxes

Whether you are already enjoying retirement – or just planning for it, three recent developments about retirement were recently the subject of a news article by Anne Tergesen of the Wall Street Journal. Read the full article below.

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This week, we take a quick look at three developments on the retirement front: good news for IRA owners, not-so-good news for some Social Security beneficiaries and a valuable resource for older job seekers.

First, the good news: The Internal Revenue Service, in a recent private-letter ruling, has reiterated that Uncle Sam is willing to be flexible with its 60-day deadline for transferring money from one tax-deferred account to another.

Under the rules, those who seek to move money from one account, such as an individual retirement account or 401(k), to another must do so within 60 days—or pay income tax on the entire amount. (Those under age 59½ are liable for a 10% penalty.)

But under a 2001 law, Congress gave the IRS leeway to grant relief from this 60-day deadline. Robert Keebler, a certified public accountant in Green Bay, Wis., says taxpayers must prove that they had intended to roll the money over but were prevented from doing so by an event, such as an illness or an error on the part of a financial institution. The recent private letter ruling, for example, concerns a taxpayer whose financial adviser erroneously told him he had 90 days—rather than 60—in which to complete a rollover.

“If you mess this up—and this happens every day—you can write to the IRS and ask them to grant you special permission to put the money back,” says Mr. Keebler. Be aware, though, that there is a cost, which ranges from $500 to $3,000, depending on the amount of money you are seeking to rollover.

Turning to Social Security: For those born in 1947, the news isn’t so good. Due to a quirk in the formula for calculating Social Security benefits, such individuals stand to receive a slightly lower benefit than those born in any other year from 1930 to 1948.

Andrew Biggs, resident scholar at the American Enterprise Institute, says that Social Security, on average, replaces 43.5% of income. But for those born in 1947, the replacement rate is just 42.4%. By the time a couple born in 1947 with average benefits turns 83, the cumulative reduction will amount to almost $13,000.

The problem boils down to unlucky timing. Under Social Security’s benefits formula, there’s a two-year period—from ages 60 to 62—in which the Social Security Administration adjusts neither earnings nor benefits for inflation. Those born in 1947 had the bad luck to enter that period in 2008, just as others were receiving an unusually high 5.8% cost-of-living increase. Without that 5.8% increase, the 1947 cohort has fallen permanently behind, says Mr. Biggs, who believes Congress should consider enacting a fix to give this group an average replacement rate.

Finally, for older adults who are thinking about returning to the work force, the federal Eldercare Locator and the nonprofit Senior Service America, have published a free brochure: “Employment Options—Tips for Older Job Seekers.” (Available at www.eldercare.gov.)

The publication includes information about networking, résumés, interviews and how to highlight skills acquired through volunteerism and hobbies. Well worth your time.

Posted by JK Harris