Tips for Seniors and Retirees in Preparing their Taxes
|Current research indicates that individuals are likely to make errors when preparing their tax returns. The following tax tips were developed to help you avoid some of the common errors dealing with the standard deduction for seniors, the taxable amount of Social Security benefits, and the Credit for the Elderly and Disabled. In addition, you’ll find links below to helpful publications as well as information on how to obtain free tax assistance.
Standard Deduction for Seniors – If you do not itemize your deductions, you can get a higher standard deduction amount if you and/or your spouse are 65 years old or older. You can get an even higher standard deduction amount if either you or your spouse is blind. (See Form 1040 and Form 1040A instructions.)
Taxable Amount of Social Security Benefits -When preparing your return, be especially careful when you calculate the taxable amount of your Social Security. Use the Social Security benefits worksheet found in the instructions for IRS Form 1040 and Form 1040A, and then double-check it before you fill out your tax return. See Publication 915, Social Security and Equivalent Railroad Retirement Benefits.
Credit for the Elderly or Disabled – You must file using Form 1040 or Form 1040A to receive the Credit for the Elderly or Disabled. You cannot get the Credit for the Elderly or Disabled if you file using Form 1040EZ. Be sure to apply for the Credit if you qualify; please read below for details.
Who Can Take the Credit: The Credit is based on your age, filing status and income. You may be able to take the Credit if:
Age: You and/or your spouse are either 65 years or older;or under age 65 years old and are permanently and totally disabled.
Filing Status: Your income on Form 1040 line 38 is less than $17,500, $20,000 (married filing jointly and only one spouse qualifies), $25,000 (married filing jointly and both qualify), or $12,500 (married filing separately and lived apart from your spouse for the entire year).
And, the non-taxable part of your Social Security or other nontaxable pensions, annuities or disability income is less than $5,000 (single, head of household, or qualifying widow/er with dependent child); $5,000 (married filing jointly and only one spouse qualifies); $7,500 (married filing jointly and both qualify); or $3,750 (married filing separately and lived apart from your spouse the entire year).
Calculating the Credit: Use Schedule R (Form 1040 or 1040A), Credit for the Elderly or Disabled, to figure the amount of the credit. See the instructions for Schedule R (Forms 1040 or 1040A) if you want the IRS to figure this credit for you.
Also see Publications 524 (Credit for the Elderly or Disabled); 554 (Tax Guide for Seniors); and.967 (The IRS WIll Figure Your Tax.)
Free IRS Tax Return Preparation – IRS-sponsored volunteer tax assistance programs offer free tax help to seniors and to low- to moderate-income people who cannot prepare their own tax returns.
IRS Tax Tip 2011-36
You may be eligible for a tax credit if you make eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement. Here are six things the IRS wants you to know about the Savers Credit:
- Income Limits The Savers Credit, formally known as the Retirement Savings Contributions Credit, applies to individuals with a filing status and income of:
• Single, married filing separately, or qualifying widow(er), with income up to $27,750
• Head of Household with income up to $41,625
• Married Filing Jointly, with incomes up to $55,500
- Eligibility requirements To be eligible for the credit you must have been born before January 2, 1993, you cannot have been a full-time student during the calendar year and cannot be claimed as a dependent on another person’s return.
- Credit amount If you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans, you may be able to take a credit of up to $1,000 or up to $2,000 if filing jointly. The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.
- Distributions When figuring this credit, you generally must subtract the amount of distributions you have received from your retirement plans from the contributions you have made. This rule applies to distributions received in the two years before the year the credit is claimed, the year the credit is claimed, and the period after the end of the credit year but before the due date – including extensions – for filing the return for the credit year.
- Other tax benefits The Retirement Savings Contributions Credit is in addition to other tax benefits which may result from the retirement contributions. For example, most workers at these income levels may deduct all or part of their contributions to a traditional IRA. Contributions to a regular 401(k) plan are not subject to income tax until withdrawn from the plan.
- Forms to use To claim the credit use Form 8880, Credit for Qualified Retirement Savings Contributions.