2014 Tax Tips for Seniors and Retirees: Learn How to Avoid Common Errors

January 31st, 2014 | Posted by Angela Chen in Baby Boomers | Health & Lifestyle
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2014 Tax Tips for Seniors and Retirees: Learn How to Avoid Common ErrorsOlder individuals may need to file a tax return in 2014 even if they already collect Social Security benefits. Here are some 2014 tax tips for seniors.

The tax season is upon us once again. Starting today, Friday, January 31, 2014, the Internal Revenue Service (IRS) will begin accepting all 2013 federal tax returns. The deadline to file and pay your taxes this year is Tuesday, April 15, 2014.

Some seniors will not need to take any action during the 2014 tax season. The IRS does not require seniors to file a tax return if Social Security is their sole source of income. However, with more and more seniors working past retirement age, some may find themselves needing to file a federal tax return in 2014. The following tax tips were gathered to help seniors avoid common errors when preparing their 2013 tax returns:

1. Find out whether you need to file a 2013 tax return.

Seniors should not automatically assume that they do not need to file a 2013 tax return. While Social Security benefits are generally nontaxable and not included in your gross income, any other income that is not tax-exempt needs to be taken into account. If you are single and age 65 or older, you must file an income tax return if your gross income is $11,500 or more. If you are married and file a joint return with your spouse, then the threshold varies. If your spouse is also 65 or older, a return must be filed if your combined gross income is $22,400 or more. For those with spouses younger than 65 years old, the threshold decreases by $1,200 to $21,200.

If you are still unsure, please visit the IRS website and answer some questions to find out if you need to file a federal income tax return.

2. Carefully calculate the taxable amount of Social Security benefits.

There are certain circumstances in which Social Security benefits are taxable. For example, if you are married, but file separate tax returns and live with your spouse at any point during the year, all of your Social Security benefits are considered gross income and taxable.

In any year, if the sum of half of your Social Security benefits plus all other income, including any tax exempt interest and other exclusions from income, is more than the threshold for your filing status (as stated above), some of your Social Security benefits may be taxable.

Be sure to carefully calculate the taxable amount of your Social Security benefits and use the worksheet found in the instructions of the IRS Form 1040 and Form 1040A. Learn more about this in Publication 915.

3. Consider not itemizing to take a higher standard deduction.

Seniors may want to take the standard deduction when it is higher than the total of their allowable itemized deductions. Taking a higher deduction will result in lower tax.

If you are age 65 or older by the end of 2013, you can get a higher standard deduction amount by not itemizing your deductions. Thus, anyone born before January 2, 1949 can take a higher standard deduction for their 2013 tax return. There is also a higher standard deduction available for those with complete or partial blindness.

This may also apply if your spouse is age 65 or older and/or blind and certain requirements are met. Visit this IRS publication to learn more about standard deductions and qualifications.

4. Take advantage of a tax credit for seniors and the disabled.

There are ways to lower the amount of tax you must pay on your taxable income due to your age or disability status. If you and/or your spouse are age 65 or older OR under 65 and meet certain disability requirements, you may be eligible for the Credit for the Elderly or the Disabled if your income, particularly the portion from Social Security, is not high. This tax credit can reduce your taxes on a dollar-for-dollar basis, but is generally only useful if you owe money to the IRS.

In order to qualify for this credit, your 2013 income must fall between the following specified limits:

Filing status Adjusted gross income on Form 1040 less than… Social Security payments and other nontaxable income less than…
Single, head of household, or qualifying widow or widower with dependent child $17,500 $5,000
Married filing jointly and only one spouse qualifies $20,000 $5,000
Married filing jointly and both qualify $25,000 $7,500
Married filing separately and lived apart for all of 2013 $12,500 $3,750

For more information about The Credit for the Elderly or the Disabled, please refer to the government Publication 524.

5. Check to see if you are eligible for other tax credits.

There are a variety of other tax credits available that may help eligible seniors, particularly those who are still working, lower their taxes.

The Child and Dependent Care Credit is for individuals who pay for someone to care for any dependent under the age of 13 or any other spouse or dependent who is not able to care for himself/herself. You must be paying these expenses so that you can work or look for work in order to qualify for this credit, which can be up to 35% of your expenses.

The Earned Income Credit (EIC) is another refundable tax credit that can be available to seniors who are still working. To qualify, you must have an earned income under $51,567 in 2013. While you do not need to have a qualifying child to be eligible for this credit, there are specific rules you must meet that will vary depending on if you have a qualifying child.

If you want to learn more about these tax credits and get other help filing taxes as a senior, please read Publication 554.

6. Don’t afraid to ask for help.

The government provides free tax return help for older taxpayers, as well as those with limited incomes. This is provided through two programs: the IRS Volunteer Tax Assistance (VITA) and the Tax Counseling for the Elderly (TCE). These programs are made possible thanks to the help of local volunteers who are trained and certified by the IRS.

The VITA Program provides tax return preparation assistance to individuals who make $52,000 or less. Volunteers can help with electronic filing and inform taxpayers about special tax credits for which they may qualify. VITA sites may be located within your local community, neighborhood centers, libraries, schools, and shopping malls to name a few. Each county in each state has at least one VITA site. Visit the IRS VITA site locator to find one near you.

The TCE Program was specifically designed to provide assistance to individuals age 60 or older. These volunteers, generally retired individuals themselves, are trained in topics such as pension, retirement, and other issues unique to the senior demographic. Many TCE sites are operated by AARP Foundation’s Tax Aide program. Use the TCE or AARP Tax-Aide Site Locator to find a location near you.

Don’t forget, the deadline to file your 2013 federal tax return is Tuesday, April 15, 2014!

Medicare has neither reviewed nor endorsed this information. 

About

As a contributor and editor of the PlanPrescriber Blog, has extensive knowledge about the Medicare program and the various associated private insurance products, including Medicare Advantage, Medicare Part D, and Medicare Supplement (Medigap) plans. Her areas of interest include health and wellness, marketing, journalism, and social media.

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