Taxes
As it has been said, nothing is certain but death and taxes. Federal income tax law is complicated and always changing. You need to be sure your tax information is current, or you could face penalties for filing incorrectly. And do not forget that the majority of states also have state income taxes that you need to pay.
TIP: Contact your local IRS Taxpayer Assistance Center for the most detailed and up-to-date information. You can locate the nearest location by looking in your yellow pages under the federal government pages, by calling 800.829.1040 or by visiting www.irs.gov.
TIP: The Tax Counseling for the Elderly (TCE) Program offers free tax help to individuals who are age 60 or older. As part of this program, AARP offers tax-counseling programs at more than 9,000 sites nationwide during the filing season. Trained AARP volunteers help people of low to middle income with special attention to those ages 60 and older. For more information on AARP's Tax-Aide Program or for the location of their sites, call 888.227.7669 or visit www.aarp.org. To find your nearest TCE location, call the IRS at 800.829.1040.
Are my Social Security benefits taxable?
It depends on whether your income is greater than a threshold level. The IRS Form 1040 includes instructions on how to calculate whether your Social Security benefits are subject to the federal income tax.
I just retired and received my first pension benefit this month. Do I have to pay taxes on this benefit?
Pension or annuity payments received as retirement benefits may be taxable-fully or partially-in the year you receive them. Your pension distributions are taxed depending on whether they are periodic payments, such as an annuity, that are paid regularly over several years or nonperiodic payments.
Will I be taxed on withdrawals from my Individual Retirement Account?
Traditional IRA distributions are generally taxable in the year you receive them. Plus, you must include on your tax return-and will be taxed on-any distributions made to you from a traditional IRA before age 59½. You will also incur a penalty tax on early distributions unless they meet specific exceptions.
What are some of the exemptions available to seniors?
There are numerous exemptions or credits that may help lighten your taxes:
- Personal exemption. If you are not eligible to be claimed as a dependent by someone else, you are eligible to file a personal exemption for yourself.
- Dependents. You may have additional exemptions, depending on whether you have other dependents as defined by the IRS.
- Federal income tax credit. You may also qualify for a tax credit if your income does not exceed a threshold limit, you are disabled and over 65.
- Earned income credit. The IRS allows an earned income credit if you work and you have a child under a certain age or who is a student or disabled.
- Standard deduction for age and blindness. You can claim a second standard deduction if you do not file an itemized tax return and you are over 65 years old or blind.
- Medical expenses. Some medical expenses may be deducted if they total more than a certain percentage of your adjusted gross income.
TIP: It is best to contact your local IRS if you think you may qualify for a tax exemption or credit. The IRS can explain how the exemption or credit applies to your situation.
Property taxes in my neighborhood are skyrocketing along with all the new construction. Is there any relief for an older person?
Many states offer a property tax exemption to seniors over a specific age or if you are disabled. Renters may also qualify for an exemption or reduction in their rent payments. Contact your state's department of revenue for more information.
I heard that the federal estate tax has been done away with. Is that true?
Not yet. While there is always talk about ending the federal estate tax, it is not gone yet. The estate and gift tax exemption amount has steadily increased since 1998 and will top out at $1 million in 2006.
TIP: As with all tax issues, be sure to consult with your local IRS office before filling out your tax return. Changes to the tax laws are made continuously.
My eyesight is not what it used to be. Does the IRS have forms in large print?
Yes, you can order large-print tax forms from the IRS. You can use these forms to help you figure your taxes, but you will need to file your taxes on a regular form. Call 800.829.3676.