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Useful Tax Tips for Adult Children of Seniors

While preparing taxes are a challenge for many, the process can be even more stressful for people caring for aging parents or other relatives. Parsons House Preston Hollow, an assisted living and memory care community, knows how ‘taxing’ this season can be for those of us responsible for elderly family members and is offering tips to the Dallas community to help ease the process – and take advantage of tax benefits you may be eligible for.

“If you are a caregiver for a senior loved one, discussing money matters can be a challenging part of your relationship,” said Cynthia Filpansick, Executive Director of Parsons House Preston Hollow. “For some families a sit-down talk is possible, while for others, a series of more subtle conversations can help keep taxes and other financial matters on track – and even be an enjoyable part of spending time together.” A little bit of help goes a long way to making the tax filing process less stressful. Before you start your elderly relative’s taxes, consider these tips:

Don’t let taxes stress you.  Taxes should not be a source of stress.  Consider having your own and your elderly relative’s returns professionally prepared.  If you can’t afford to pay someone, you have a number of options. There are volunteer groups who prepare and file tax returns for free for qualifying taxpayers and seniors – two popular services are even organized through the IRS: the Volunteer Income Tax Assistance (VITA) program and the Tax Counseling for the Elderly (TCE) program. To find out if you or your elderly relative qualify, or to locate a program near you, call the (800) 829-1040 or visit the IRS web page about free tax return preparation (https://www.irs.gov/individuals/article/0,,id=107626,00.html).  The AARP also offers free help: to locate the nearest AARP Tax-Aide site, call (888) 227-7669 or visit www.aarp.org.

Understand the process. Most tax professionals have access to e-filing which will speed the filing process along. You should understand that in most cases, these services should not cost you more money:  ask to see a fee schedule in advance.  If you choose the direct deposit option, you will usually get your refund within two weeks.  Beware of “refund anticipation loans.”  Know the facts and don’t be misled into believing that you have to pay extra to receive your refund quickly.

You may be eligible for a tax deduction if you are supporting your elderly relative. Claiming your senior relative as a dependent: Your relative doesn’t have to live with you to qualify as a dependent, as long as she or he meets the “income test” and you provide more than half her/his financial support:

-Your relative’s 2010 income was less than $3,650, not including income such as certain Social Security, tax-free investment income, or disability payments. (In some situations, medical expenses may be deducted if you are providing more than half their financial support – even if their income is higher than $3,650.)

-You provided more than half a relative’s costs for food, housing, medical care, transportation and other necessities.

-Your elderly relative must be a citizen or resident of the U.S., or a resident of Canada or Mexico.

When siblings are supporting an elder together: If your parent receives support from several family members or adult children, only one sibling can claim the tax break each year, but you may also rotate from year to year, depending on your situation.

-If your relative is living with you, a percentage of your mortgage, utilities and other expenses may be included in calculating how much you contribute to her/his support.

-If an elder is living with you and you’ve made construction modifications to your home, such as adding a wheel chair ramp or bathtub grab bars, those expenses may be deductible as medical expenses, given that their main purpose is for medical benefits.

-If you are paying for your parent’s care in an independent or assisted living community because your parent doesn’t have the resources to pay, you are entitled to claim the expense.

Other tax breaks:

Credit for Dependent Care Expenses: If you do not directly care for your elderly relative but pay for someone else to take care of him or her, you most likely qualify for the Child and Dependent Care Credit.

Be aware of tax laws: You should be current on all of the deductions available to you and to your loved one. Other tax advantages and exemptions may be available to you. It is always a good idea to consult with an accountant or a tax professional versed in disability-related tax law before finalizing your taxes.

Useful IRS worksheets/forms :

o   IRS Form 2120 “Multiple Support Declaration”

o   IRS Publication 501 (includes worksheet) “Exemptions, Standard Deduction, and Filing Information”

o   IRS publication 502 “Medical and Dental Expenses”

o   IRS publication 503 “Child and Dependent Care Expenses”

Remember, all taxpayers should discuss the applicability of the tax laws to their situation with the IRS or a tax preparation professional.

Sources: www.irs.gov and Parsons House Preston Hollow, www.parsonshouseprestonhollow.com

Parsons House Preston Hollow does not provide legal or tax advice. Parsons House Preston Hollow publishes a free quarterly newsletter focusing on advice and tips for adult children of seniors. To subscribe, send an email to [email protected].

Parsons House Preston Hollow promotes maximum independence and dignity for each resident, encouraging the involvement of family, friends and physicians.  For more information or to subscribe to an informative free newsletter with helpful advice and news about senior and caregiver topics, please call (214) 357-7900, or visit www.parsonshouseprestonhollow.com.

Posted by Parsons House Preston Hollow Mar 10, 2011 6:06 PM

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