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My landlord gave me a waiver on rent as I waited for Section 8 rental assistance — 25 years later, she wants me to pay $1,700

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Dear Moneyist,

Twenty-five years ago, I was renting a duplex home and I was experiencing economic hardship. While waiting for Section 8 to help cover two months’ rent, I kept paying what I could.

I was also a single mother of two children with child support that was missed by the father. The manager at the time was not very patient and decided to evict me from there.

I spoke with the owner of the duplex at the time about my hardship. I was given a waiver from her, but there was no letter or note to state that. Three months later Section 8 came through. It was too late by then, and I had moved on.

Fast forward to 25 years later. The owner has a little black book and demands that I pay her back the debt that was supposedly waived years ago. She wants $1,700 from me today. So I am left with the question: What should I do?

Pay it or Dispute It

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com

Dear Pay or Dispute,

You are under no legal obligation to dispute it. The statute of limitations on personal debts typically expires somewhere between three and 10 years, depending on the state and circumstances of the loan. You did not obtain a written waiver on your rent as you waited for Section 8 rental assistance, so you technically still owed the debt in the eyes of the law at the time, unless you could have convinced a court that there was an oral agreement.

I have a few questions for you, although my answer remains the same. Did the landlord receive your Section 8 rental assistance at the time, even though you moved out? Or did you move out leaving those two weeks completely unpaid? That will affect the amount of money that the landlord has a right to ask you for (as opposed to a right to demand that you pay under the law). Your financial hardship must have been difficult, but it should not alter the facts of this case.

There’s a possibility that if the Section 8 subsidy “went through,” the landlord could have received the subsidized share of the rent for the period of time that you were a leased tenant. I would also be skeptical that the landlord didn’t write off the debt owed during this 25-year period. Meanwhile, both you and your former landlord probably don’t have the documents to prove much of anything — so if this advances to a legal case, the outcome probably depends on whether you lived in a state or municipality with laws more favorable to tenants or landlords.

With that said, we don’t know what kind of financial hardship the landlord is currently experiencing, especially with the COVID-19 pandemic, so it would not hurt to have compassion on that basis now. Assuming you are in a position to pay the landlord this money and you lived in their building rent-free for two months despite the terms of your lease, I would nudge you toward paying the $1,700. It will clear the slate with the landlord. But perhaps more importantly, it will also clear the slate with yourself.

The Moneyist: ‘My husband told me that my $1,400 stimulus check will be spent on aluminum siding on our home.’ What can I do?

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These money and investing tips can help you stay upright against the market’s headwinds

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Don’t miss these top money and investing features:

These money and investing stories, popular with MarketWatch readers over the past week, can give you greater knowledge about the financial markets’ current condition as you monitor your portfolio and plan ahead. Plus, check out several short videos about whether to include bitcoin and other cryptocurrency in your portfolio and how to go about it if you do.

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Opinion: I took advantage of the 2020 RMD rule but now my 1099-R looks wrong — what should I do?

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Q: I took advantage of the 2020 RMD rule and returned what I had taken from my IRA thinking there would be no taxes. I just got a 1099-R showing the full RMD. That can’t be right. How do I correct it?

—Pauline

A.: Pauline,

If the 1099-R is incorrect, you will need to contact the firm that issued the statement to get it corrected. However, the 1099-R is probably correct.

Read: Are there new RMD rules this year?

Under the law, the firm issuing the 1099-R has no responsibility for reporting how much of a distribution is taxable. That responsibility rests on your shoulders as a taxpayer. The issuing firm need only report what was paid out of the IRA on 1099-R.

Not sure where to retire? Let us help you find the right spot

That does not mean you will pay any tax. Any funds returned to the IRA by Aug. 31, 2020 is considered a rollover and is not taxable. Normally, Required Minimum Distributions (RMD) are not eligible for rollover, but IRS guidance after enactment of the CARES Act that waived RMD for 2020 changed that. The guidance stated the normal 60-day time limit for rollovers would not apply and instead instituted a fixed deadline of Aug. 31, 2020 to return such distributions and avoid taxation.

Read: It’s not too late to save on your 2020 tax bill — here’s how

I get similar questions about 1099-Rs every year. The reporting of the gross distribution looks like an error but in most cases, it is correct and the person receiving it simply hasn’t learned how it is accounted for yet.

Here’s how the accounting typically works.

As with any gross amount reported on Form 1099-R, you declare the amount that is not taxable when you file your 2020 tax return. What I hear most tax preparers would do in your situation is put the gross distribution amount from 1099-R on line 4a as per the normal procedure. Then, they would place a zero in 4b of your Form 1040, and put a note on the return near those lines that it was “returned to the IRA under the CARES Act,” “CARES Act rollover,” “CARES Act,” or simply “Rollover.”

Read: These are the best new ideas in retirement

If you did not return all of distribution by the deadline, the portion that was not returned would be taxable. You would put that number on line 4b.

Read: 5 things to do if you inherit a Roth IRA

As I mentioned a moment ago, the discrepancy between the gross distribution reported and what should actually be taxable comes up in other situations. Three of the most common are other rollovers, Qualified Charitable Distributions (QCD), and distributions from accounts that had received after-tax contributions.

In all those cases, the reporting process looks like what I described above. You put the gross distribution on line 4a and the taxable portion on Line 4b. Then note why the numbers are different with “rollover,” “QCD,” or “See Form 8606” on the 1040. Form 8606 is the form used to determine the taxable amount of an IRA distribution when nondeductible contributions have been made to any of one’s IRA accounts.

If you have a question for Dan, please email him with ‘MarketWatch Q&A’ on the subject line.

Dan Moisand’s comments are for informational purposes only and are not a substitute for personalized advice. Consult your adviser about what is best for you. Some questions are edited for brevity.



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Video: Why Mike Novogratz sees bitcoin reaching $500,000 by 2024

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Galaxy Digital’s Mike Novogratz explains the outlook for crypto as Coinbase goes public.





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