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My cautionary tale — after an $11 mistake on my 2020 tax return my $11,000 refund and stimulus is now in limbo

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I wanted to share how my small oversight turned into a much larger problem. It all revolves around the timing of my family’s stimulus checks, and some inheritance from my late father in 2019.

In the first round of the economic stimulus last year, we received the full amount for our family of four. I intentionally waited to file my 2019 taxes last year, so that payment would be based on our 2018 returns. My dad passed away in 2019, and he left us just enough.

For the second round, however, I didn’t have much choice. It was based on 2019 tax returns, and there was no way around it. So our income was higher and we received $1,900 instead of $2,400. I was OK with that. But the actual amount on the check was $1,911, not $1,900, and therein lies the problem.


Our third stimulus is once based again on our 2019 tax return instead of 2020. I got our new Economic Impact Payment card last week, and the amount on it is only $131.04, instead of $5,600.

For round three, I wanted to rush through my taxes so the stimulus payment would NOT be based on my 2019 taxes, but rather on our more typical income that we received in 2020. We were due to get the full amount, which is $5,600 for the four of us.

But when I did my 2020 taxes, I was pleasantly surprised to learn that I could get that extra $500 from the second round if I filled in the blanks correctly on my tax return. Turbo Tax
INTU,
-0.04%
,
to its credit, advised me to enter exactly the correct stimulus I got for Round 2 to avoid a delay.

I should have listened. I thought it was a safe bet to leave it at $1,900 — not $1,911. There’s my mistake. We are due a tax refund of about $5,400 for 2020, because we made a sizeable donation to charity last year with some of my father’s inheritance. I filed our taxes well over a month ago, but it still only says “received” when I check the status. I think it’s because of my $11 mistake.

Because of this delay, our third stimulus is once based again on our 2019 tax return instead of 2020. I got our new Economic Impact Payment card last week, and the amount on it is only $131.04, instead of $5,600. I’ve since learned that I can claim this money, but not until next year when I file my 2021 taxes.

So because of my mistake, I’m still waiting for our $5,400 refund, and our $5,600 stimulus payment, for up to a year. Ouch.

What say you?

Tom

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

Dear Tom,

Ouch is right.

I commend your stoicism in the face of your delay. And it is only a delay. That’s the good news.

Here are the instructions from the IRS: “If there’s a mistake with the credit amount on Line 30 of the 1040 or 1040-SR, the IRS will calculate the correct amount, make the correction and continue processing the return. If a correction is needed, there may be a slight delay in processing the return and the IRS will send the taxpayer a letter or notice explaining any change.”

Here are some common reasons the IRS may have to correct the credit: You were claimed as a dependent on another person’s 2020 tax return. You did not provide the correct Social Security number. And math errors relating to calculating adjusted gross income and (where you were hoisted on your own petard) previously-paid economic impact payments.


‘You have also touched upon one of the most challenging aspects of the coronavirus pandemic: the waiting game.’

“Taxpayers who receive a notice saying the IRS changed the amount of their 2020 credit should read the notice,” the IRS adds. “Then they should review their 2020 tax return, the requirements and the work sheet in the Form 1040 and Form 1040-SR instructions.” You can also check here for additional information to explain what other mistakes may have occurred.

You are in a fortunate position, of course. You will survive without the check. But you have also touched upon one of the most challenging aspects of the coronavirus pandemic: the waiting game. You think your stimulus check is on the way, but then you realize you filled out a form incorrectly. Or you believe that restaurants will open up again and they do, until they don’t.

Behavioral economist George Loewenstein wrote about this phenomenon in an essay for MarketWatch. “One of the things that makes waiting most unpleasant is uncertainty,” he said. “This is even true of good things. Waiting for a date or a vacation or a wedding that one is confident will happen can be mildly pleasurable, but the tiniest bit of uncertainty, and the pleasure is gone.”

You know that your stimulus check is coming. I am glad you have chosen to take pleasure in that.

The Moneyist: ‘I cut his hair because he won’t pay for a haircut’: My multimillionaire husband is 90. I’ve looked after him for 41 years, but he won’t help my son

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My parents made my sister executor of their $4 million estate, and joint owner of their bank accounts. Should I be worried?

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Dear Quentin,

I just found out that my parents (who are in their mid 80s) have named my sister as their successor trustee, and executor of their estate and wills. They have also put her name on all their financial accounts “in case something happens to us.”

I have no reason to suspect my sister of any nefarious motives, but having her name as joint owner on their accounts seems potentially problematic to me in case of their passing. What are the pros and cons of this arrangement?

Their estate is probably worth about $4 million. We have five other siblings who are currently unaware of this arrangement. Can you provide any resources or articles I could show my parents regarding better ways to accomplish their goal of having someone in charge of their finances?

Concerned Son

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

Dear Son,

People often don’t do anything nefarious, until they have the opportunity to do so and/or run into financial difficulty of their own. That may not be the case with your sister, of course, but your parents should absolutely know the meaning of making one of their children a co-owner on their bank accounts, if their intention is to merely have your sister assist with bills.

Is she a co-owner of this account, or is she a co-signer? If it’s the former, your sister is a joint owner and can spend the money as she wishes. She would likely be liable for debts on that account after your parents’ death. If it’s the latter, your sister has the right to sign checks on your parents’ behalf. To complicate matters, not all banks have the same definitions for “co-owner” and “co-signer.”

Many people don’t understand the difference between being a co-signer and a co-owner. There are many cases of children listed as co-owners (rather than authorized signers) on those accounts who have emptied their parents’ bank account before and after they died. Sometimes, they did not keep enough (or any) receipts, and have been wrongly accused of emptying a parent’s account.


Many people don’t understand the difference between being a co-signer and a co-owner.

In the letters I have received on this issue,the damage was often already done, typically caused by a combination of the three “Gs” — grief, gripes and greed — when long-simmering sibling rivalries boil over. People do things that they may not otherwise do if their parents were there to witness it. You are correct to ensure your parents’ action is in accordance with their wishes.

There are other ”what ifs”: What if your sister dies first? The account would likely become part of her estate too, with a share to be distributed to her children, which could then involve paying a state inheritance tax. Your parents’ accounts could also be “paid on death” or “transferred on death,” avoiding the public and often time-consuming probate process. Read more here.

The Moneyist: ‘I cut his hair because he won’t pay for a haircut’: My multimillionaire husband is 90. I’ve looked after him for 41 years, but he won’t help my son

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S.E.C. Commissioner Hester Peirce on the outlook for crypto regulation, and whether this will finally be the year we see a Bitcoin ETF.





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My husband doesn’t get along with my son. I brought most of the wealth into our marriage. How do I split my estate?

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Dear Quentin,

How do couples typically handle their estates in a second marriage? My husband and I have been married for seven years, and it is the second marriage for both of us. I have one adult child from my previous marriage; he has no children.

I brought the majority of our wealth to our marriage, including almost $1 million in my 401(k) and a nice home that is almost paid off; otherwise, we have no debt. My husband and I bought a second home together. We work hard to fund our new 401(k)s, and own a successful business together.

I am turning 65 this year, so estate planning is long overdue. My husband is five years younger than me, and we are both in very good health. We have two issues facing us: I see our retirement as living very comfortably on the monthly income generated by our 401(k)s, pension, Social Security, etc., and leaving whatever may be left to my son.


‘The other issue is that my husband no longer gets along with my dear son at all, and feels no obligation to get along with him.’

I am not interested in scrimping, but I want to be able to have enough money to last us until age 90 (or beyond) by not touching the principal. My husband is more interested in dipping deep into our savings, and living it up in retirement while we are young enough to enjoy it.

The other issue is that my husband no longer gets along with my dear son at all, and feels no obligation to get along with him, to the point that neither one wants anything to do with the other. As far as he is concerned, my son doesn’t meet his expectations, and so deserves nothing from me and certainly nothing from him.

I want my estate planning to be fair to both my new husband and my son. How do people typically handle this type of quandary? I think that I need to create some type of trust to pass on my share of our estate to my son. My pre-marriage assets involved my son as I pursued my graduate degree through night school and worked long hours throughout his childhood.

Second Wife

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

Dear Second Wife,

Don’t allow your husband’s feelings toward your son to influence your estate planning.

Your relationships with your husband and your son and your own plans for retirement are all fair game when making decisions about your estate, but your husband and son’s fractured relationship is their business, not yours. You worked hard for this money, and your son is your legal heir. Any effort by your husband to spend all of your savings and fritter away any inheritance that you intended to leave to your son should be resisted at all costs.

You have worked too hard your entire life to compromise your plans for a comfortable retirement where you have money set aside for long-term medical care insurance, unforeseen emergencies and/or your son. If you jointly own your home, you can leave your half to your son in your will, and specify it can only be sold after your husband passes away.

If you own the home, you can give your husband a life estate. Your son would pay capital-gains tax on the value of your home when he sells it, and not when you bought it. You could also make your son the beneficiary on your life-insurance policy, and/or gift him a certain amount of money per year to see how he manages and spends that money.

Figure out what is fair to yourself first before moving on to what is fair to your husband and your son. It’s OK to put your needs first. I caution against your dipping into savings at a rate that is beyond your own risk tolerance.

Ultimately, you are entitled to leave all other separate property to your son when you die — and, along with a financial adviser, set up a trust with that in mind for you, your husband and your son. Not necessarily in that order.

The Moneyist: ‘I cut his hair because he won’t pay for a haircut’: My multimillionaire husband is 90. I’ve looked after him for 41 years, but he won’t help my son

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