Tax season is generally stressful for all adults, and seniors are no different. You must keep your tax affairs in order so that you remain in good standing with the IRS. The last thing you need is to be slapped with a huge penalty that you cannot afford to pay from their retirement funding.
Given the rising cost of living, you need to conserve every cent you can to enjoy your golden years. One way of doing so is taking advantage of the tax benefits you’re entitled to.
Get help for free
There’s no need to worry about paying someone to do your taxes if you’re over the age of 60. You have access to Tax Counseling for the Elderly (TCE), where IRS-certified volunteers take you through the entire tax filing process free of charge. TCE representatives are well-educated about tax filings for seniors and can advise you of benefits you might not have known about.
However, beware of scammers. The IRS, and by extension, TCE will not make unsolicited calls to people asking for confidential information. Fraudsters take advantage of the elderly by pretending to be in a position of authority and demanding personal details.
Seniors should never share any such information with anyone unless they can prove they’re from the IRS. Report such scams to your local IRS office for investigation.
Make medical deductions
Taxpayers can deduct certain medical expenses from their income before calculating how much tax they owe. IRS guidelines stipulate that payments of premiums for policies that cover medical care and qualified long-term care are tax-deductible. Therefore, Medicare Advantage Plans 2021 and their premiums can be recorded on a tax return.
However, taxpayers should know that they can only claim this deductible if they itemized them on the tax return. Weigh up this option against electing to take advantage of the standard annual deduction, depending on which will save you more money. Consulting a TCE representative will help you with this decision.
Use tax credits for seniors
Among the credits that seniors can take advantage of is the Credit for Elderly or Disabled Persons. You need to be 65 or older to qualify, or permanently disabled. The credit is designed to help lower-income seniors by offering them additional tax relief. There are requirements you need to meet to be eligible in addition to your age, including your filing status and income.
Most seniors are advised to take advantage of the standard deduction for seniors and their spouses. This eliminates the need for itemizing deductibles on your tax return.
However, you can only use this standard deduction if you have accepted payments from Social Security, taken few or no payments from retirement savings, such as IRAs and pensions, and aren’t running a business. If you don’t meet these requirements, meet with a tax specialist for advice.
You might not even need to file a tax return
There is a higher income tax threshold for taxpayers over the age of 65. Find out from the IRS or a TCE representative what that threshold is as it changes annually. Once you’ve got the figures, you can see if you even need to file a tax return at all.
However, this doesn’t mean that you don’t need to keep your paperwork in order, because the IRS may query your failure to send in a tax return. Therefore, whether you’re submitting a tax return or not, keep your documents filed and ready as you never know when you’ll need them. Make sure a loved one knows where everything is in case of an emergency.