Tax Return a 91 Year Old Woman

I am about to be finagled into preparing a tax return. The last time I prepared a tax return was for Susan shortly after we met as part of the confidence game I was running on her to decieve her into thinking I was a good deal. Now she wants me to prepare her 91 year old mother's 2007 tax return.

The stuff will not be here until Saturday. But all she has is SS, a Federal Government pension, and dividends. She retired about 20-25 years ago. What should I know about tax breaks for people her age?

Dick

Reply to
Dick Adams
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Extra amount (about $1K) added to standard deduction in 2007 for those born before 1943. That's it.

-Mark Bole

Reply to
Mark Bole

You're kidding, right?

I know you know about the 65+ deduction.

I was going to suggest that you get started on accumulating the medical deduction info.

Also set up web access at SS

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and whoever the pension provider is, for easy access to the 1099s or equivalents. That way, if one gets misplaced, you are ready.

Consider moving any stocks held in certificate form to a broker account. That won't help this year, but will reduce the number of

1099s next year, and eliminate handling those dividend checks.

If there are taxes expected to be due after deductions, consider taking tax loss on stocks. If she paid $40 thirty years ago for a stock worth $4 now, take the tax loss if there will actually be taxes due.

Reply to
DF2

The increased standard deduction has already been mentioned.

There is a Retirement Income Credit (Schedule R), but I've never seen anyone who qualifies for it. Check it out anyway.

I don't know when they did away with the "3 year rule" on recovering pension contributions. Take a look at her 2006 return to see if her pension is fully taxable or she's still recovering her after-tax contributions.

The biggie is the stimulus credit. It may be too late to get the advance payment based on the 2007 return, so make sure she files a 2008 return and claims the credit if she doesn't get an advance payment.

Reply to
Phil Marti

How could I have forgetten about that? ;-) Actually, I did have a client a few years back who did get this credit, but the amount was nothing to get excited about.

-Mark Bole

Reply to
Mark Bole

(snipped....

If she's been retired at least 20 years, the old 3 year rule probably applied back then, and most probably the whole pension is taxable. If not, odds are she's already recovered her basis so still all taxable.

ChEAr$, Harlan

Reply to
Harlan Lunsford

If she files Single and has at least $5,000 of social security then forget schedule R.

Reply to
Arthur Kamlet

The instructor in a class I took a few years ago said "if your client qualifies for this credit, go back and look for what you did wrong in the return."

The income limits have not been adjusted for inflation since

1983. Assuming she is not married, she can only get the credit if her AGI is less than $17,500 and nontaxable Social Security plus nontaxable federal pensions is less than $5,000. (Nontaxable federal pensions means pensions that are totally excluded from income by law, not the cost-recovery portion of a taxable pension.) The credit is not refundable.

Officially it's called the Credit for the Elderly or the Disabled.

Bob Sandler

Reply to
Bob Sandler

If she's in California then consider the renters credit (a whopping $60 a year), and the homeowner/renter assistance.

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I'm not aware of any California credits for the elderly.

If she's a dependent of her daughter, then you might be able to do some magic on the daughter's return.

Reply to
removeps-groups

There's a Calif. Senior Head of Household credit which IMO is about as rare as the federal Schedule R credit.

The CA Homeowner/Renter assistance (not related to income tax) is not available this year anyway, due to no funding.

Dick is on the East Coast, so I suspect none of this applies anyway.

-Mark Bole

Reply to
Mark Bole

Be careful about the taxability of the pension. If she retired with a FERS pension, then the usual rules we know today apply. However, a CSRS pension may have different tax issues. CSRS eligibility was phased out in the

1980s.
Reply to
D. Stussy

Well, Dick, you've really opened a can of worms here. Now Susan will want you to go back and review the returns from the previous open years also!

I wonder if there will be a late filing penalty for 2007?

-Mark Bole

Reply to
Mark Bole

It gets worse. I'm just west of Ballmer (Baltimore - the City that Slurs) and my M-I-L is in Chicago with a combined State and City sales tax of 12.5% Since my M-I-L owns a condo mortgage-free, it's unlikely she needs a Schedule A. So is there a way to ballpark sales-tax paid in case it exceeds her property taxes?

Dick

Reply to
Dick Adams

Susan just told me the last year her mother filed tax returns was 2005. So it's two returns that need to be done! Such a deal! Maybe I can pawn this off on my infamous brother Michael. ;)

Dick

Reply to
Dick Adams

Use the worksheet and tables in the Schedule A instructions. In the 2007 edition the worksheet is on page A-4, the instructions for it are on pages A-3 through A-6, and the tables are on pages A-11 through A-13.

Bob Sandler

Reply to
Bob Sandler

Yes, you can find a table in the instructions for form 1040 schedule A that can be used to generate the state and local sales tax to use.

But ....

The choice is not between sales tax and property tax.

It's between sales tax and state and local income tax.

And the first $500/taxpayer paid in property tax can be used to increase standard deduction even if schedule A is not filed.

And if she has any IRAs with RMDs to take in 2008 and 2009, she can direct the IRA custodian to send any part of the RMD and more to her favorite charities (well, within limits - they cannot be self directed and tere's a high maximum per year) and while there won't be a schdule A deduction, there won't be IRA ordinary income for the donation either.

Reply to
Arthur Kamlet

Oops, I just reread that question a little more carefully. It doesn't matter whether sales tax is more or less than property tax. She can deduct the property tax in any case. The trade-off is between sales tax and state and local income taxes. She can deduct one or the other, but not both.

Bob Sandler

Reply to
Bob Sandler

It's an option to use sales tax vs. state *income* tax, not property tax. Real and personal property tax based on value is always deductible if one itemizes.

-Mark Bole

Reply to
Mark Bole

That's for 2008, not 2007.

-Mark Bole

Reply to
Mark Bole

That's only for 2008. Dick seems to be dealing with 2006 and

2007 right now (though I'm sure he'll get roped into doing 2008, too).

Bob Sandler

Reply to
Bob Sandler

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