Social Security’s Got His Number
Q: I was married for 21 years and then divorced. I want to collect Social Security as an ex-spouse. My former husband is still alive but I have no way of getting his Social Security number. Is there any way the Social Security Administration can help me? I am age 67. -- K.A.S .
A: To be eligible to collect benefits as an ex-spouse, you must have been married at least 10 years and your ex-spouse must be drawing benefits. (If the wage earner is not yet drawing benefits, the ex-spouse may begin collecting on the account if the couple has been divorced at least two years and the wage earner is 62 or older.) The Social Security Administration requires a former spouse to present copies of the marriage license, divorce decree and the wage earner’s Social Security number as part of the application process.
That said, you should know that the Social Security Administration is willing and prepared to help you get your ex-husband’s Social Security number. First, check old tax, insurance and medical records where your ex-husband’s number might be recorded. If you find nothing, your local Social Security office will help you get the number if you can supply your ex-husband’s date of birth, place of birth and his mother’s maiden name. You must still present the marriage certificate and divorce decree.
By the way, you could have contacted your Social Security office as soon after turning age 62 as you wanted to begin drawing benefits. As soon as you make your application, your potential eligibility begins. So even if you don’t have all the information you need at that moment, your benefits can be paid as of your application date, not the date the paperwork is completed.
Where to Deduct Costs of Investing
Q: I buy stocks on margin by borrowing against my existing holdings. How do I account on my tax return for the interest I pay on these borrowings? I no longer file a Schedule A, since the standard deduction is larger than the rest of my deductions. Is there any way I can deduct my margin account interest? -- A.L.S .
A: Investment interest expense, the type of interest your margin account borrowings generates, is deductible only on Schedule A. If you don’t file that form you have no place to deduct it.
Other taxpayers may be interested to know that investment interest expense is deductible only to the extent that a taxpayer declares taxable dividends, interest and, perhaps, capital gains from investments.
Don’t Give Up on Ginnie Mae Bonds
Q: My wife and I are in our 80s and are watching helplessly as our investment portfolio is dwindling. The bulk of our portfolio is invested in mutual funds, notably Government National Mortgage Assn. (Ginnie Mae) bonds. The rest is in certificates of deposit and income-generating stocks. We reinvest all the dividends except those from the stocks, which we use for our living expenses. Given this, should I redeploy my portfolio and cash out of the mutual funds? -- R.H.B .
A: Based on this and additional information provided in your letter, our investment advisers feel confident that you should relax and leave your investments alone.
Clearly, you have no external pressure to cash out of your positions, since you do not even need all the dividends they generate to cover your living expenses. Further, you may not have considered the tax consequences of selling your funds. Depending on your tax bracket, your tax basis in these funds and how long you have held them, your nest egg could be substantially eroded by a tax liability.
By now your Ginnie Mae fund should have settled down considerably. To put it mildly, last year was a rough year for bond funds as interest rates soared. However, in the last two months, bond market fluctuations have eased and the movement of long-term bonds such as Ginnie Maes has been disengaged somewhat from that of more volatile short-term bonds. Remember, too, that Ginnie Maes carry the “full faith and credit” of the U.S. government and repayment, plus interest, is guaranteed.
What is concerning you and thousands of other investors is the fact that the value of old Ginnie Mae certificates has plummeted on the secondary market because the interest rates they carry are below current market rates. These fluctuations don’t affect you unless you are actively trading. You can’t lose anything unless you sell--and even then, your actual return would depend on what you paid.
Foreign Transaction May Not Be Taxable
Q: I came to the United States with proceeds from the purchase and sale of stock in another country. At the time I bought and sold the stock I was a resident and national of that country. I have used my profits from that transaction to purchase a home here. Do I have to report this income to the IRS? -- C.V .
A: Assuming that you were not a U.S. citizen at the time of the transactions and that the transactions were completed before you entered this country, our experts say you owe the IRS nothing.
Payroll Deduction Costs for This Year
Q: With the new year comes a new round of Social Security deductions from my paycheck. How much will it be this year? A.A.R .
A: The deduction rate for 1995 remains 7.65%--6.2% for Social Security and 1.45% for Medicare insurance. The maximum annual earnings subject to the Social Security tax rises to $61,200 this year from $60,600 in 1994. All earnings are subject to the Medicare tax. By the way, the California disability insurance tax rate decreases in 1995 to 1% from 1.3% on the first $31,767 of earnings. The maximum deduction is $317.67.