adonis hunter via flickr

We’ve seen some good coverage of tips on taxes for seniors and retirees lately. We’ve picked a number of good ones that cover a range of topics. Some of them address filings for this year (2009) and some have to do with strategies for 2009 and beyond. If you have tax questions you need help with, consider the AARP Tax-Aide program that we covered in an earlier post: Know a Senior That Needs Help With Tax Preparation?

One-year break on minimum distribution

Legislation passed by Congress last year temporarily waives the normally large penalty for failing to take money out of their IRAs, 401(k)s, 403(b)s and similar plans—though not defined-benefit plans. The penalty is usually 50% of the amount that should have been taken out. Both Boston.com and Freep.com have articles covering this one-year break:
Retirees can reap some tax savings in down year – Boston.com
Deal affects IRA, 401(k) withdrawal | Freep.com | Detroit Free Press

The Smart Money 2009 Tax Guide

The Smart Money 2009 Tax Guide (PDF) covers more than just retirees, but there is a section that is specifically focused on retirement (page 17) and covers it more thoroughly than a newspaper can. The three topics in the retirement section are as follows:

• Mixed News for Senior IRA Holders – Covers the law that was passed at the end of 2008 suspending the minimum required distribution from retirement plans. The above item covers this too, but the Smart Money piece is much more detailed.
• Tax Tips: Seniors, Don’t Forget April 1 – This item is for those who have turned 70 1/2 years old in 2008 and will have to take mandatory disbursements from traditional IRAs.
• How to Deduct IRA Losses – Given the precipitous fall of the stock market, this is something to consider. According to the article, it’s not likely that you’ll get the write off on a traditional IRA, but it’s somewhat more likely that you’ll get one from a Roth IRA.

Tax Tips for Seniors and Caregivers

A Place for Mom has a post from 2007 that covers both sides of the equation: seniors and their caregivers. We wish it was newer, but we think it gives good information to consider. At a high level, the tax topics that they cover include:

• 7.5% rule – If medical expenses exceed 7.5% of your adjusted gross income, then you may be able to deduct them.
• Dependency deduction – If you’re substantially supporting a relative, you may be able to count them as a dependent.
• Multiple support agreement – If a group of people are sharing costs for a qualifying relative, a multiple support declaration (IRS Form 2120) can be filed to grant one family member the exemption.
• Long-term care services – Long-term care medical expenses—including diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative, and maintenance and personal care services—are deductible if the services are required by a chronically ill individual and a licensed health care practitioner prescribes the care.
• Long-term care insurance – Senior citizens and caregivers should be aware that premiums paid for qualified long-term care insurance contracts are also deductible medical expenses.

Can software make tax time less taxing?

Tax software can make a time-consuming job and make it quicker and less stressful. While those with more complicated tax returns may want to consider seeing a professional, if you’re planning on preparing your taxes yourself, tax software is a great way to reduce the chance of errors. The AARP Bulletin has a good article on the ins and outs of using tax software.

A couple of cautions:

• Everyone’s situation is different and tax law is complicated, so be thorough in your research and if you’re not 100% confident, check with a tax professional.
• Be careful that the info you find is current. In the process of conducting the research for this post, I found a number of articles/posts that weren’t dated and later found them to be a number of years old.

adonis hunter via flickr

The Internal Revenue Service’s (IRS) website provides three tips for senior citizens for filing their taxes.

Standard Deduction – If you and your spouse are 65 years of age or older and you do not itemize your deductions, you can get a higher standard deduction amount.  ”You can get an even higher standard deductions amount if either you or your spouse is blind.  (See Form 1040 and Form 1040A instruction.)”

Taxable Amount of Your Social Security – “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 1040A.”

Elderly or Disabled Credit – “You must file using Form 1040 or Form 1040A to receive Credit for the Elderly and Disabled.”

Please visit the IRS website for further details on each of these tax tips, for additional information on who is eligible for these tax credits, and how to calculate the credit.

Please also keep in mind that the IRS/AARP provides free tax assistance to Senior Citizens throughout the United States (See February 12, 2009 post by A White).

Tax-Aide offers online assistance, where you can submit a question online, but it might be a good idea to check the Frequently asked questions (FAQ) first.

And something we really like is that you can find one the of the 7,000 local Tax-Aide sites here. We’ve also put a link to it on our State & Local Resources page.

You can also volunteer to the Tax-Aide program. Some positions don’t appear to require prior tax preparation experience. You might even be able to lessen some of your tax-time angst.

Tax-Aide is part of the bigger Internal Revenue Service’s ‘Tax Counseling for the Elderly’ (TCE) program. The TCE Program provides free tax help to people aged 60 and older.  Trained volunteers from non-profit organizations provide free tax counseling and basic income tax return preparation for senior citizens.  Volunteers who provide tax counseling are often retired individuals associated with non-profit organizations that receive grants from the IRS.

If you don’t want to use the Web to find tax help, you can contact the TCE program at 800-829-1040.  To locate the nearest AARP Tax-Aide site by phone, call 888-227-7669.

There was a brief moment a few years ago, when Terri Schiavo was a political football, that a lot of people thought about it, but then…

Okay, so most of us are terrible procrastinators, especially when it comes to making long-term decisions. Wayne Gretzky hits us with, “Procrastination is one of the most common and deadliest of diseases and its toll on success and happiness is heavy.” Ouch!

But this one is easier than it sounds

People who teach and write about time management say that one of the best ways to beat procrastination is to break tasks down into easy to accomplish steps. If you put “advance directive” on your to-do list today, when do you think it would get done? It probably wouldn’t.

So this post isn’t so much about advance directives as it is about taking a single step: print out the advance directive form for your state.

All you have to do is go to the American Hospital Association’s site called Put It In Writing where they have a link to a page with forms for all 50 states. Or, you can go directly to the 50 states page, and print out a copy or two from your state. Easy so far.

When you’re done with that, add this to your to-do list: Read and fill in the form.

That’s about it. Once you’ve done that, here are a few additional, easy to accomplish steps:

• Get your witness and advocate signatures as needed
• Put the original in a safe place where someone can find it–not a safe deposit box
• Give photocopies to your advocate/alternate and anyone else that might become involved in your health care
• Discuss it with them

The article covers some basics like calculating the value of your estate, how to help your heirs stay out of probate, avoid taxes and the like. It’s a good article, but the part that I liked the best was the checklist of six things every family needs:

• A will
• A health-care proxy
• A living will
• A durable power of attorney
• Life insurance
• Disability insurance

If money matters, or end-of-life discussions, are difficult to initiate between you and your parents, one way to introduce the topic is to discuss what you’ve done, or what you might do.

How many of these do you have?

Flickr by Davef3138

Family first!  In 1993, the United States enacted a labor law, entitled, the “Family and Medical Leave Act” (FMLA) in order to allow employees to take an unpaid leave in order to care for a new child or a seriously ill family member.

The U.S. Department of Labor’s Employee Standards Administration’s U.S. Wage and Hour Division’s (WHD) website provides an overview of the Family and Medical Leave Act.

It explains, in detail:

-       Who is eligible for the leave,

-       Which employers are covered by the act,

-       What an employee is entitled to under the FMLA,

-       And additional details on the act

Access their site for an outline of key components of the Act.

Please note, we recommend that you seek either council from your company’s human resources department and/or an attorney to determine whether you qualify for the leave.  There are also state (e.g., California) differences that you should become aware of prior to applying for your leave of absence.