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Filing your taxes can be complicated, especially when you’re a caregiver for an older loved one. These tips can help you prepare now to file your tax return by the April deadline.

Tax season can be a stressful time of year, especially for caregivers. On top of providing much-needed care for a family member or loved one, you’ll have to coordinate the filing of your taxes and potentially your loved one’s taxes as well. This is a heavy lift for most people since filing your taxes can be stressful and confusing. In an effort to help alleviate some of this tax-related stress, we’ve put together a guide on the top five tips to prepare for tax season as a caregiver. 

Figure out whether or not your loved one qualifies as a dependent

Those who can claim their older parent or loved one as a dependent are typically eligible for additional tax breaks, so being able to do so is advantageous. Not everyone can claim their elderly loved ones as dependents on their tax returns, though. The IRS outlines criteria the situation needs to meet for the caregiver to claim that person as a dependent. Some common topics that the helpful FAQ page addresses are:

  • How a caregiver of an aging parent can file as head of household.
  • If the money that an aging parent gives to a caregiver to cover some household expenses is taxable to the caregiver.
  • How a caregiver of an aging parent can deduct the parent’s medical expenses on their tax return.

Be sure to check back each year to ensure that the criteria haven’t changed.

Prepare the necessary documentation

As we all know, preparing for tax season can present quite a few challenges. One of the toughest aspects is finding and preparing the right documentation. If your care recipient needs to file their taxes, this may also mean that you have to ensure all of the proper documentation is for both of you. Below is a short list of documents you’ll need to gather for both you and your loved one (if they are filing):

  • W-2’s 
  • 1099’s 
  • Investment Profit/Loss Statements
  • Receipts for tax-deductible expenses and donations

Be sure to consult with a tax professional to ensure you have all the proper documentation in order before filing your taxes. There might be other forms you need to provide, depending on the different types of accounts that you have.

Oftentimes, these documents are easy to find since most banks and employers offer them through their online portals. But it’s important to remember that not all of these forms will be available as soon as January 2023 rolls around. You may have to check periodically and wait for forms like W-2s and 1099s to become available. Usually, it takes a few weeks — even months — for statements like this to be generated, so make sure you’re patient and remember to check back for them.

Determine whether or not your loved one has to file

Unfortunately, not everything is cut and dry with the IRS, so some care recipients may still have to file taxes while in retirement. Typically, those who receive income from a traditional IRA/401(k), rental property, or other business/investment will still have to file a return. 

As you probably know, it’s important to know whether or not your care recipient must file taxes. If they are required to file but don’t, they could face serious consequences from the IRS.

Luckily, the IRS has an interactive tool on its website that helps you determine whether or not you and your care recipient need to file. If you have a tax professional file your taxes, you should probably run it by them as well to get a second opinion.

Read up on the latest caregiver deductions

The IRS tax code is an ever-changing piece of literature that is updated frequently. This means that just because something worked last year doesn’t necessarily mean it will work this year. So it’s important to stay up to date with the latest tax code changes pertaining to individuals and caregivers. To make staying up to date on caregiver-related changes to the tax code, we’ve put together a list of caregiver expenses that can be tax deductible. You can also check with a trusted tax professional or the IRS’s information on its website.

Get in touch with a tax professional

While you probably can file your own taxes, it might be a challenge if you have complex issues like being a caregiver and potentially an adult dependent. Filing your own taxes can take quite a bit of time, and doing so requires great attention to detail. That’s why handling tax matters is often best left to the professionals. Get in touch with a great CPA today, that way, you won’t be rushing to find one next year as the filing deadline creeps up on you.

Although a great CPA may cost a bit more than tax filing software, having a CPA handle your taxes is oftentimes a great investment. A great CPA can find tax deductions and credits you didn’t realize you were eligible for. Not to mention, they can also help you with tax planning throughout the year. After all, having a solid, year-round tax strategy will help you save even more money on your tax bill.

Takeaway

Although you file your taxes every year, it might feel like you’re learning to prepare for tax season all over again each time. When you are a caregiver for a senior loved one, the job becomes more complex. When you take time now to determine whether your loved one has to file at all, get all the correct paperwork in order, learn what deductions you can take, and get in touch with a trusted tax professional, you can prepare for tax season to run more smoothly once the April 18 deadline approaches.