Some Extra Social Security Benefits?

Q: I am age 70 and have been receiving Social Security for the last five years. I also have a part-time job and my employer withholds Social Security taxes. What benefit do I get from these payments? Will my Social Security benefits be increased or should I consider them a donation to the Social Security system? --H.H .

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A: The Social Security contributions you currently make may or may not affect your benefits; it all depends on the amount of your current contributions and how they compare to your previous contributions.

Your Social Security benefits are based on the highest 35 years of your contributions to Social Security. So, if your current annual contributions are greater than any of your previous yearly contributions your benefits will be increased.

How? The Social Security Administration says it receives information from the Internal Revenue Service every year detailing earnings and Social Security contributions reported by taxpayers. That data is used to recalculate benefits. When can you expect any increases to show up? Social Security officials say increases generally do not appear until midyear, but they are retroactive to the previous January. So, if you are entitled to additional benefits, your check next May or June should contain a retroactive payment and subsequent checks should be larger.

If, however, your current annual Social Security contributions are lower than your lowest previous annual contributions, your monthly benefits will not change despite your contributions.

Precision Key When Selling Plan Shares

Q: I belong to a stock purchase plan at work and have accumulated stock in five separate accounts. I sold the shares in one account last year. The account I selected for sale contained the shares for which I paid the most because I wanted to have the lowest possible gain. Now friends tell me that the law requires that I sell the first shares I purchased. Is that true? -- J.H .

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A: If you can readily identify the shares you are selling--and you certainly can since they are grouped into separate accounts--the IRS allows you to sell whatever you want. The key is your ability to say with precision what you paid for the shares you are selling and accurately and honestly calculate your gain or loss.

Splitting Holdings in Jointly Owned Property

Q: My wife and I and another couple jointly own two industrial buildings. We are considering splitting the holdings in half with each couple getting full ownership of one building. How would this transaction be treated? Is it a sale or an exchange? --E.Z .

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A: Assuming that the properties are of equal value, have been owned equally by the two couples and have equal amounts of equity and debt on them, you should have no tax-related problems. Our experts say you can simply execute quit claim deeds to each other for your interests in the property.

However, if you have mortgages on the properties, be sure to check with your lender. You could face obstacles if the lender feels its interests are at risk from the split you propose. You should also check with your county assessor’s office to determine whether they consider transfer an event that triggers a reassessment of the property forproperty tax purposes.

Disbursing an IRA Without Penalties

Q: I have just turned 55 and want to begin taking disbursements from my IRA. How can I do this without paying a penalty? -- S.M.

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A: Able-bodied taxpayers may begin making IRA withdrawals without penalty before turning 59 1/2 by “annuitizing� the disbursements over their remaining lifetime. This means that you divide the amount in your IRA by the number of years that government life expectancy tables say you have to live. You must continue making withdrawals at this level until you turn 59 1/2 or for five years, whichever period is longer. After that period, you may begin making withdrawals of any amount you want without penalty. Remember, even though your withdrawals are not subject to the 10% federal and 2.5% California penalties, they are still liable to ordinary income taxes.