When an online shopping money-saving scheme is tax evasion
Dear Liz: My father lives in Washington state. He often purchases higher-priced items online, has them shipped to relatives living in Oregon and picks them up later. That way he doesn’t have to pay sales tax. Is this a form of tax evasion? Does he need to pay a “use tax”? Could he (and the Oregon relatives) possibly be in any kind of legal danger? He claims it’s perfectly fine to do this because Washingtonians “do it all the time” by driving down to Oregon to do their shopping.
Answer: Yes, people do this “all the time” but it’s still a form of tax evasion.
Washington and other states with sales taxes typically have laws requiring people to pay a use tax when they bring home goods purchased in another state that either doesn’t charge sales tax or charges less. People may also owe use taxes when they purchase something from an individual who doesn’t collect sales tax. An example might be furniture purchased from a Craigslist ad.
But these laws can be difficult to enforce. While businesses can be subject to sales and use tax audits, individual taxpayers are unlikely to face the same scrutiny.
Drugstores are locking up more products, frustrating shoppers. The Times surveyed stores and found vastly different approaches to preventing theft.
Divorce complicates retirement benefits
Dear Liz: I was told by Social Security that because I remarried at 60, I could still collect half of my ex’s benefits once he died. He has just died, and half of his benefit is greater than my own retirement benefit. My current husband has not started benefits. If I collect half of my ex’s benefit but want to later switch to collecting benefits on my current husband’s record (once he starts to collect) or to survivor benefits should he die before I do, can I do that?
While your ex was alive, you might have been eligible for a divorced spousal benefit if you had remained unmarried. That benefit would have been up to 50% of your ex’s primary insurance amount (the amount he would receive at his full retirement age).
The rules changed once your ex died. As a divorced survivor who remarried after age 60, you are entitled to up to 100% of what your ex was receiving. The survivor benefit will be reduced if you haven’t yet reached your full retirement age (which is currently between age 66 and 67).
Survivor benefits also offer more flexibility to switch later than other types of benefits. If you choose to begin receiving a surviving divorced spouse’s benefit now, you can switch to your own benefit at any point through age 70, if your benefit is higher, says William Meyer, founder of the Social Security Solutions claiming strategies site. You also can switch to receiving spousal benefits from your current spouse’s record once he starts collecting, if that benefit is greater than what you’re receiving from your former spouse’s record.
Figuring out the right way to claim can be tricky, so consider consulting an advisor or using claiming strategy software to determine what’s best in your situation.
Even if you’ve lived your whole life without worrying about your credit scores, they’re hugely influential and have some quirks worth knowing about.
Multiple payments may help credit scores
Dear Liz: You recently wrote that using more than a small percentage of your credit cards’ available limit can hurt your credit scores, even if you pay your balances in full. I pay my credit cards in full each month and I also make several payments (via my bank’s online payment service) during the month. Do these multiple payments hurt or help my credit score?
Answer: They probably help. The balance that matters for credit scoring purposes is the balance that’s reported to the credit bureaus, and that’s typically what you owe on your statement closing date. Making multiple payments before the statement closing date should lower that balance. Just remember to make a payment between the statement closing date and before the due date to avoid late fees.
Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.