It’s good to be aware of special situations that tend to pop up more as we get older. The TCE program (Tax Counseling for Elders) offers free service to individuals 60 and older through the IRS.
Here are some common situations that the elderly face when paying taxes and some helpful answers and advice.
If I started receiving Social Security this year – will it be taxable?
Depending on any other income and your filing status, some of your benefits may be taxed. Social security only becomes taxable when half of your benefits are added to the rest of your gross income and it exceeds a certain amount. If you are married filing jointly, the amount is $32,000. For single taxpayers, it’s $25,000.
Are my company pension benefits taxable?
Some pensions are partially taxable, but most are fully taxable.
If I received a lump-sum Social Security benefit from several prior years, what do I need to do on my tax return?
You must report the entire lump-sum the year that you receive it. Normally you would figure the taxable part of your total benefits from that year. You can also take the income from the other years from which you are receiving a benefit and separately calculate each year’s benefit. This may lower your taxable benefits.
See IRS Publication 915 for more information and worksheets if you find yourself in this situation.
Are there consequences for rolling over a 401(k) into an IRA?
You can achieve a tax-free rollover in one of two ways. Arranging for a trustee to trustee transfer is your best bet. This way, there is no tax liability and no amount will be withheld for income taxes. The other method is to get a check for the rollover amount and to deposit the gross amount into a traditional IRA.
As you file your taxes, you’ll likely need information about your Medicare coverage. If you have any questions or need assistance with your healthcare, contact SeniorChoices NW in Wilsonville, Oregon.