Filing a tax return can be very confusing and tedious, especially if you’re doing it for another person, like a parent or loved one. As you probably already know, the smallest mistake on a tax return can become a big headache. This is something you’ll want to avoid, of course, especially if you’re a caregiver who is preparing for tax season themselves. Here’s what you need to know about how to file a parent’s taxes.
Determine whether or not the senior needs to file
If you are stressing out about filing a tax return for your loved one, you may be relieved to find out that they don’t have to file a return. While this doesn’t apply to every senior, many will qualify. Seniors who are over the age of 65, unmarried, and made less than $14,700 in non-exempt income (excluding Social Security benefits) are generally not required to file a federal tax return. This income amount increases to $27,300 for those over 65 with a spouse under 65 and $28,700 for those who are over 65 with a spouse over 65.
However, if the total of half the senior’s Social Security benefit plus the adjusted gross income (AGI) and tax-exempt interest and dividends is over $25,000 (single filers) or $32,000 (married filing jointly), then a portion of their Social Security benefit is taxable. You can look at IRS Publication 554 or ask a trusted tax professional for more detailed information.
Assemble basic personal information
If your loved one is required to file a tax return, you’ll have to collect some basic personal information from them to complete their return. Some of the information that you’ll need to fill out the return include the individual’s
- Full name
- Address where they reside
- Date of birth
- Social security number
- Bank account number and routing number
- Previous year’s AGI if you are filing electronically
If you want to avoid waiting months for your tax return to process, you may want to file your return online since the IRS is backed up. Online returns usually take a few days to clear, whereas paper-filed returns can take months.
The personal details listed above are basic for filing. The one more challenging detail is the person’s previous year’s AGI, which you may need to hunt down. The previous year’s AGI serves as a validation mechanism should you choose to submit your returns online. It should be fairly easy to find though, as it’s line 11 on IRS form 1040.
Prepare any necessary documentation
After assembling the basic personal information needed to file a tax return, you’ll need to assemble the documents necessary to complete the tax return. Often, seniors receive income in a few ways, so you’ll have to look for any forms from 1099s or pension, social security, or retirement accounts.
A good rule of thumb is that your parent should receive a tax form from each source of income they have. These forms are typically delivered by mail but are often available online. If you’re unsure if the senior should receive a specific form, don’t be afraid to call the company where the account is held. You’re not the first to have this question, and you certainly won’t be the last. Almost every financial institution will have someone available to answer your tax form-related questions.
Remember that your loved one might not receive any documentation from a Roth 401k or Roth IRA. These types of accounts are entitled to tax-free growth, so in most cases, they won’t owe any taxes on distributions from these accounts.
If you’re not comfortable with preparing the return and can’t afford to hire a CPA, consider utilizing the IRS’s Volunteer Income Tax Assistance (VITA) and/or Tax Counseling for the Elderly (TCE) programs. They’re run by qualified, IRS-vetted volunteers and work free of charge. Click here for more information about these programs or locations near you.
Determine who is signing the tax return
Once you’ve prepared the return, the last thing you’ll have to do before sending it in is to sign it. If your loved one can sign their own return, they may do so; as long as you were not paid to prepare their tax return, you will not have to sign it. If you were paid to prepare the return, you must have a valid Preparer Tax Identification Number (PTIN) and sign the return at the bottom.
If your loved one is not capable of signing their own return, you may sign it for them — but there are a few things that need to be done before you can do that. First, if you haven’t already, you must obtain a power of attorney for your older relative and attach a copy of the executed POA and completed Forms 8453 and 2848 to the return when filing.
Does a senior have to file a tax return if they can be claimed as a dependent?
As with many matters involving the IRS, the answer isn’t as clear-cut as you might have hoped for. In most cases, your loved one will have to file a tax return regardless of whether or not they are a dependent if they exceed the income limitations mentioned at the beginning of the article. If their income doesn’t exceed those figures, you’re in luck — your loved one likely won’t have to file a return.