As a daily money manager, January and February are dedicated to gathering and organizing tax documents for my clients. So if you’re helping a senior in your life prep for tax season, here’s what you need to know.
Watch the Mail
During January and February, important tax-related documents will arrive in the mail. While you may be able to set mail aside to deal with later during most of the year, the first two months of the year, you need to watch the mailbox for items like:
- W-2 shows employment income if you are still working
- 1099-NEC stands for non-employee compensation paid to independent contractors
- 1099-INT documents interest received from a financial institution
- 1099-B reports gains and losses from stocks, bonds, and other securities sold through a broker
- 1099-R shows distributions made from pensions, annuities, IRAs, and other retirement plans
Some envelopes may be marked “Important Tax Documents,” but not all of them. Also, there may be notices from banking institutions that tax documents are available to download in the mail.
Get Organized
As all the tax documents start coming in, you need a system to keep track of everything. Have both a paper file of tax documents that arrive in the mail and a digital file for tax documents you download. These files can easily be shared with an accountant if taxes are being done by a professional.
Know the Math Basics
It can feel mind-boggling looking at tax forms and trying to figure it all out. There are two basic numbers you should know. First, the standard deduction. For tax year 2023 (filed in 2024), it’s $13,850 for single filers and $27,700for joint filers. (If you are 65 or older, the standard deduction is $1,850 higher per person for married couples filing jointly; so if you and your spouse are both 65 or older, the standard deduction is $3,000 more. If your filing status is single and you’re 65 or older, you get an additional $1,850 – head of household- for your standard deduction.)
Knowing this can save you the time of itemizing everything. If you’re not sure, speak with a tax professional.
The other number you’ll need to know is your cost basis for any stocks, bonds, or securities you sold during the tax year. You will also need to report the sale of a home, but depending on the purchase price and improvements made, you may or may not be subject to capital gains tax.
- January Is Time to Get Organized
Also, Know What Documents You Need to Ignore
Items like monthly bank or brokerage statements aren’t needed because you’ll get a 1099-B or 1099-R*. Likewise, if you’ve made contributions to an IRA or SEP, documentation is not required. A CPA only needs to know youhave contributed.
Find Missing Items
In some cases, you’ll need to be proactive to get your tax documentation. For example, if you received unemployment, you may need to go online and print the 1099-G. Also, if you’ve contributed more than $250 to one non-profit, you will need documentation from them.
Check Your Stimulus Payment
Whether you received an Economic Impact Payment or not, you may be entitled to more. Also, failing to report the correct amount may delay the processing of your tax return.
Review Your Return Before Filing
It’s okay to hire a professional or use tax prep software if you feel overwhelmed. However, it’s still your tax return, and you’re still responsible for what’s in it. So be sure to review it carefully and ask the tax prep professional if you have any questions or concerns before filing it.
Beat the Scammers
Tax scammers are already plotting. One tactic is to file a return using your social security number. Fortunately, filing early takes away their opportunity to do that. Learn more about tax scammers and what to do about them.
What area of tax prep do you struggle with the most?
*Always speak to your accountant. Most CPAs send an annual tax organizer and questionnaire and request documentation based on your information from the previous year(s). If you don’t have an accountant, there are excellent resources for seniors, veterans, and those with low or moderate incomes. You can find out more information here about the IRS program and the AARP Foundation Tax-Aide.
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FAQs
TCE is an AARP Tax-Aide Program, primarily for individuals 60 years of age or older. They have counselors who specialize in questions about pensions and retirement-related issues that are unique to seniors. For an AARP TCE site near you, see Tax-Aide Program, or call the National AARP office at 1-888-AARP-NOW.
At what age is social security no longer taxed? ›
Social Security tax FAQs
Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.
At what age do seniors stop paying federal taxes? ›
At What Age Can You Stop Filing Taxes? Taxes aren't determined by age, so you will never age out of paying taxes. Basically, if you're 65 or older, you have to file a return for tax year 2023 (which is due in 2024) if your gross income is $15,700 or higher.
What is the best free tax program for seniors? ›
Many seniors and retirees can file their taxes for free with IRS Free File at IRS.gov/freefile. The program offers online tax preparation software for taxpayers with adjusted gross income (AGI) of $79,000 or less in 2023. With IRS Free File, leading tax software providers make their online products available for free.
How much can a 70 year old earn without paying taxes? ›
If you are at least 65, unmarried, and receive $15,700 or more in nonexempt income in addition to your Social Security benefits, you typically need to file a federal income tax return (tax year 2023).
Do seniors over 70 need to do federal tax returns every year? ›
If Social Security is your sole source of income, then you don't need to file a tax return. However, if you have other income, you may be required to file a tax return depending on the amount of other income.
What is the extra standard deduction for seniors over 65? ›
How much is the additional standard deduction? For tax year 2023, the additional standard deduction amounts for taxpayers who are 65 and older or blind are: $1,850 for single or head of household.
Can I get a tax refund if my only income is Social Security? ›
You would not be required to file a tax return. But you might want to file a return, because even though you are not required to pay taxes on your Social Security, you may be able to get a refund of any money withheld from your paycheck for taxes.
How can senior citizens avoid taxes? ›
Seniors can earn more income than younger workers before submitting a tax return. People age 65 and older can earn a gross income of up to $15,700 before they are required to file a 2023 tax return, which is $1,850 more than younger workers.
How much can I make on Social Security and not file taxes? ›
Unless your combined income for 2024 is less than $25,000 (less than $32,000 for married couples filing jointly), a percentage of your Social Security payments will be subject to income tax.
For the 2022 tax year, seniors filing single or married filing separately get a standard deduction of $14,700. For those who are married and filing jointly, the standard deduction for 65 and older is $25,900.
Is there a special 1040 for seniors? ›
You have the option of using Form 1040-SR, the U.S. Tax Return for Seniors, rather than the standard Form 1040 when you file your taxes if you're 65 or older. It's virtually identical to Form 1040 except that it has larger type and gives greater prominence to specific benefits for taxpayers over age 65.
Does the IRS go after senior citizens? ›
Although it is rarely done, the IRS can garnish 15% of a senior's social security for past due income taxes. The IRS will almost never garnish pensions and other retirement income. Garnishment of 15% of social security will never happen without the senior being first notified.
At what age is Social Security no longer taxable? ›
Yes, Social Security is taxed federally after the age of 70. If you get a Social Security check, it will always be part of your taxable income, regardless of your age. There is some variation at the state level, though, so make sure to check the laws for the state where you live.
Does Social Security count as income? ›
You report the taxable portion of your social security benefits on line 6b of Form 1040 or Form 1040-SR. Your benefits may be taxable if the total of (1) one-half of your benefits, plus (2) all of your other income, including tax-exempt interest, is greater than the base amount for your filing status.
What age are you to be from tax exempt with Social Security? ›
Taxation by the Internal Revenue Service (IRS) doesn't depend on your age, or when you claim benefits. Taxation depends on the amount of additional taxable income you receive.
At what point in the year do you stop paying Social Security tax? ›
The Bottom Line. When do you stop paying Social Security tax? The answer is almost always "never" as long as you're employed but there are exceptions. Consider consulting with a tax professional if you think any of these situations or exceptions might apply to you.
At what age can I earn unlimited income while on Social Security? ›
How much can you earn and still get benefits? later, then your full retirement age for retirement insurance benefits is 67. If you work, and are at full retirement age or older, you may keep all of your benefits, no matter how much you earn.
Do senior citizens have to pay taxes on their Social Security? ›
About 40% of people who get Social Security must pay federal income taxes on their benefits. This usually happens if you have other substantial income in addition to your benefits.
