DEAR BRUCE: My father had his Social Security number stolen. He received a letter from the IRS stating he had unclaimed income and tax due. I'm a CPA and I am his power of attorney, so I went down to the local IRS and was given printouts of the unclaimed income. In my father's case, it was W-2 income in a state 1,000 miles from his home, doing work he is physically incapable of performing. I wrote a letter to the IRS explaining that the name on the W-2 didn't match my father's name, it was in a state he didn't live in, and from the name of the company. it was work he couldn't perform. The IRS wanted a police report to show his identity had been stolen, which, when presented with the facts in the case, the local police department was happy to provide. The correspondence took three months to complete, but we were able to get the tax and penalty removed from my father's account. I saved all the information because I figured we had one more year of this potential use of his Social Security number. My father died this past September, so in the future I'll be doing it as the executor of his estate and not as his tax accountant. But the process was very amicable and the IRS was helpful in letting us know what they needed to clear up the issue on my dad's Social Security number. -- M.M., via e-mail
DEAR M.M.: My condolences on your dad's passing. Thank you very much for sharing the manner in which you handled this matter. You provided the IRS with facts, not feelings. You answered their requests about police reports. You did everything correctly and got the matter straightened out. There is a message here for my readers, and I'm very appreciative of you sharing your experience.
DEAR BRUCE: I recently lost my job of 28 years, and I am looking for an appropriate way to invest my 401(k) until I am age 59-1/2. How can I find a financial adviser who doesn't have an allegiance (i.e. earns a commission from) a particular fund or annuity? -- Reader in Pennsylvania
DEAR READER: You didn't indicate your age, but I'm guessing it's about 50, so you have some time before you reach 59-1/2. Can you leave the money in the 401(k) with your former employer? You can check with their Human Resources department. Assuming you don't, you need an outside person, broker or bank, etc., to move the product into a self-directed IRA. A very painless process, but the third-party is required. You can choose to hire a fee-based adviser, which means you'll pay them an agreed upon dollar amount and they will make their best recommendations. However, you still will have to have someone else execute these directions because the law does require this third party. There are numerous brokers who can assist you in this matter. They are entitled to a commission, and there's no reason why it shouldn't be paid, plus a small fee. The amounts involved are significant. If it is a very large amount in your 401(k), then a fee-based adviser may be desirable. If it's a relatively modest amount, the cost would be hard to justify.
DEAR BRUCE: I have seven key employees that I give a year-end bonus to. Is there any way to give the money without deducting income and Social Security taxes? -- T.K., via e-mail
DEAR T.K.: No. If you give them the money, then you are required to withhold the appropriate Social Security and income tax. I'm sure your employees appreciate your generosity. You could give the money out of your personal funds that taxes have been paid upon, not company funds, and then this would allow you to give $11,000 to each one of them with no taxes to either of you. This may not be company money, and you may not take any kind of a deduction.