Tax Time Savings and Safety Tips for Seniors and Family Caregivers

Two things are unavoidable for us all.

Just one of them happens more than once, though.

Yes, it is tax time again!

Family caregivers and their senior loved ones all deserve the opportunity to have their taxes prepared in an efficient, accurate, timely and stress-free manner.

Caregivers can use all the financial help they can get when caring for older adults and want their tax return to be sure to include every benefit it can.

Unfortunately, caregivers need to be aware, and sometimes in charge, when it comes to getting the right person to complete senior loved ones’ taxes. Nothing ever comes easy it seems, especially taxes.

Tax Preparers

More than half of us rely on someone to prepare our taxes for a fee.

We give them all our personal and financial information in confidence, hoping they will help us pay only what we owe and ensure we get back all that we deserve, without fear of errors and audits.

The reality is that errors and purposeful fraud are not uncommon.

Falsification of eligible deductions, which increases the refund amount just to make the customer happy and improve word of mouth for their service, is one factor that leads to fraud.

Simple data entry errors, especially when speed is expected, is one way our returns could be submitted incorrectly.

Tips to Protect Caregivers and Seniors

There have been efforts by advocates to put regulations in place so that training and competency of preparers would be required to reduce errors, but nothing has yet been passed.

Until there are more safeguards in place for consumers, here are some tips for you when getting your taxes prepared.

  1. Be aware of the qualifications of the person who will prepare your taxes, even if they are employed by a large company. There are no minimum education or training standards for preparers, so errors, omissions or even fraud occurs. Ask what their training entails – does it include basic skills and ongoing education? Tax preparers are often licensed as certified public accountants or credentialed by the IRS as enrolled agents.
  2. You are ultimately responsible for any errors or problems with your return and could face an audit, fines or criminal proceedings. Your tax preparer is required by law to sign your return but it is your responsibility for its accuracy.
  3. Try to get an estimate of the cost of preparation based on your needs. Because it is unregulated, comparison shopping for the best rate can be difficult. You may find a great deal of difference in the cost of tax preparation. Can they give you a printed disclosure of their fees?
  4. Beware of additional up-selling of products you don’t need. Some tax preparers may try to sell you other ‘products,’ such as refund anticipation checks (RAC) or loans (RAL). This added expense may sound hard to refuse but it is not needed.
  5. Look for free tax preparation assistance for seniors. Volunteer Income Tax Assistance (VITA) and other tax help are available at 1-800-906-9887. The IRS also offers a free filing program for qualified taxpayers that allows for free online filing. Tax Counseling for the Elderly (TCE) is another program to seek out by calling 1-888-227-7669.
  6. Your senior can add you, their family caregiver, as a third party designee. This allows the IRS to discuss the return with you, including directing questions that might arise during preparation or after your taxes are filed.
  7. Determine if your senior should file a standard deduction or itemized deduction return. Remember to claim deductions for which they are eligible, including medical expenses or large charitable contributions if itemizing.
  8. If a senior loved one died during the tax year, you may need to file a tax form for them as their personal representative.
  9. Some income is not taxable, such as government benefits for energy, and nutrition; Veteran’s benefits; reimbursement from select volunteer service; and reverse mortgages. Because reverse mortgages are considered loan advances and not income, the amount your senior receives isn’t taxable. Check your senior’s documents to be sure it is a loan.

Tax Savings for Seniors

There are some valid tax credits that seniors and family caregivers should investigate, they may benefit you when filing your return this year.

You may want to review the IRS publication 554, which details tax information for seniors.

  • If your senior was disabled and receives disability income they may qualify for a credit.
  • If your senior is 65 or older, he or she can deduct the part of their medical and dental expenses that exceed 7.5% (10% for those under 65) of adjusted gross income according to IRS.
  • If your senior improved their home for the purpose of medical care, these costs can be itemized.
  • Nursing care in the home (not household chores) can be included in medical cost deductions.
  • You can include the cost of long term care insurance and long term care services received during the year in your senior’s medical deductions.
  • Medicare Part B and prescription coverage under part D plans are also deductible expenses.
  • There are more. For a complete list, Table 4.1 in IRS publication 554 details what is and isn’t included for medical and dental deductions.

Are They Required to File?

No matter you or your senior loved one’s age or employment status, an income tax return must be filed if you meet the requirements for gross income levels. There is a chart available to guide you on the IRS publication 554, Table 1-1.

You might find it a good idea to contact a certified public accountant (CPA) or elder law attorney to discuss your senior’s tax needs, especially when issues of retirement income, home sale, IRA distribution or other more complex matters may apply to their return.

Protecting their financial assets from fraud and incompetency is one of the many roles caregivers play to help the seniors they love!