Tax time can be a good time to talk with your parents about their money. Many people dread having to fill out their tax returns. So if you offer to help your parents with their return, everyone can benefit. This article talks about tax filing for parents and caregivers this 2023
You’ll find out about their money, which you may need if you have to take care of them as they get older. And your parents will get help with something that isn’t fun to do with money.
What happens if you have to fill out a parent’s tax return because he or she can’t anymore because of dementia or something similar? It’s one thing to help Mom or Dad gather documents and look over their return with a second pair of eyes.
If you are your parent’s power of attorney and have to file a tax return for them because they are no longer able to do so, the process can be very different.
To avoid making mistakes, it’s important to know how things work. If you help your parent with money, here’s what you need to know about tax filing for parents and caregivers.
Tax filing for parents and caregivers
Before you go through all the trouble of tax filing for parents and caregivers, you should first find out if your parent makes enough money to qualify. Sharif Muhammad, the owner of Unlimited Financial Services and a certified public accountant, says that most seniors don’t make enough money to need to file a tax return.
The IRS says that if your parent is 65 or older and made less than $14,250 in 2021, he or she does not have to file a return.
If your parent is younger than 65 and made less than $12,550 in 2021, he or she doesn’t have tax filing for parents and caregivers.
Gross income is all of the money you make that isn’t tax-free.
Do not count Social Security benefits when figuring out gross income unless your parent is married but filing separately or if half of his or her Social Security benefits plus other gross income is more than $25,000. You should also know that long-term care insurance benefits are often not counted as income.
Use the tool at IRS.gov called “Do I Need to File a Tax Return?” to find out tax filing for parents and caregivers. Tax Guide for Seniors (IRS Publication 554) also has information about how to file.
Muhammad says to keep in mind that if your parent has a lot of medical bills, including those for long-term care, those bills might cancel out enough of their income so that Mom or Dad doesn’t have to file. Tax filing for parents and caregivers can deduct medical costs that are more than 7.5% of his or her adjusted gross income.
What you need to know about tax filing for parents and caregivers.
If your parent needs to file a tax return but is no longer able to do so, you’ll need the following information to do it yourself or have a tax professional do it.
- The Social Security number of your parents
- A copy of your parents’ tax return from the previous year. You can get a transcript of their tax return at IRS.gov/Transcripts.
- Statements of income and earnings, like a 1099-R for pension income and an SSA-1099 for Social Security benefits
- Statements from banks about their interest and dividends
- You need your parent’s bank’s routeing number and account number for direct deposit of a refund.
- The last day to file tax returns for the year 2021 is April 18, 2022.