How to File a Final Tax Return for Decedents

a widow filing taxes for her late husband

The last thing that anybody wants to think about when they lose a loved one is filing their taxes. Unfortunately, if the deceased were normally required to file, then someone would be required to file a final tax return on their behalf.

In many of these situations, the decedent may be leaving a spouse behind that is unaware of how the decedent handled their taxes. In other cases when there is not a spouse or the spouse is unable to handle the situation, the courts or the will of the decedent will appoint an executor. This person would then be responsible to file the final return or in some cases multiple returns if some had not been filed. 

In this article, we will discuss when a decedent is required to file a tax return and what forms must be filed. We will also talk about some of the credits and exemptions that can be utilized on estate returns when those are required.

 

When Is a Decedent Tax Return Filing Required?

The first step for either the spouse or executor would be figuring out what needs to be filed. The requirements to file for a decedent are the same as for a normal tax year. The decedent would be required to file if they make more than the standard deduction for that year. 

The standard deduction changes every year but for the 2020 tax year, you most likely must file if income was above $12,400 or $24,800 for those married filed jointly. This includes all money, goods, and property the deceased received from a job, pension, investments, disability payments, IRA’s, and retirement plans. For people with larger incomes, a decedent’s social security may also be taxable. 

The final tax return of an individual should only cover income received up to the date of death. Income received after that, such as income received from the sale of assets sold after the date of death may have to be reported on a separate return for the deceased person’s estate or trust.  If the decedent has income below the threshold, then they are not required to file but be sure to look at credits and withholdings to see if any refund would be due.

It is also especially important to make sure that tax returns for the previous years have been filed. If the decedent has not done so and has requirements, you may also have to file individual income tax returns for the years preceding the death. In such cases, you can hire a tax professional and they can do a Tax Investigation. This is when either an Enrolled Agent, CPA, or Tax Attorney can contact the IRS on behalf of the decedent and do a full compliance check and request the master tax file. If you are trying to sort this out on your own, you can also obtain verification of non-filing and certain income documents of the decedent from the IRS using IRS Form 4506-T which is called the Request for Transcript of Tax Return.

 

How Do You File a Decedent’s Final Tax Return?

The final tax return would be for the year of death beginning January 1st until the date of death and whatever income was received during that time up to the date of death. The filing must be done by the due date of April 15th. If this deadline cannot be met then the same extension of six months is allowed. This extension only changes the due date of the filing. If taxes are owed, they are still due by April 15th. The same 1040 tax form is used for filing and the person’s income is still taxed just as if the person was alive. The same tax rates apply and they can claim the same deductions and credits as normal.

The difference from a normal tax filing is that the word “Deceased” must be written across the top of the 1040 form along with the person’s name and date of death. If the court has appointed a personal representative, that person must sign the return. If it is a joint return, the surviving spouse must sign it. If the court has not appointed a personal representative, the surviving spouse would need to sign the return and write in the signature area “Filing as the surviving spouse”. 

If the court has not appointed a personal representative and there is no surviving spouse, the person in charge of the decedent’s property must file and sign the return as the personal representative. If you are signing the tax return and are not the surviving spouse, you would have to attach the IRS Form 56 and attach it to the 1040 form. This form is used to notify the IRS of the creation or termination of a fiduciary relationship. Also, you must attach to the 1040 form a copy of the certificate that shows the official appointment as executor and a copy of the death certificate.

If the decedent was married at the time of death, the decedent and surviving spouse are considered married for the whole year for filing status purposes. A surviving spouse who does not remarry before the end of the tax year in which the decedent died may file a joint return with the decedent. The return can include the full standard deduction based on the filing status of the decedent. If the surviving spouse remarries during the year, they must file apart from the decedent. The decedent must file separately but the surviving spouse can file a joint return with the new spouse.

 

What If the Decedent Owes Taxes or Is Owed a Refund?

If there are taxes owed after filing, then they must be paid prior to distributing one’s estate. This can be done with a payment by check, debit card, credit card, or electronic funds transfer. 

If the decedent is owed a refund and has a surviving spouse, then the spouse can claim the refund. If the taxes are being filed by an executor, the executor may claim the refund using IRS Form 1310.

 

Can You Take Deductions and Credits for a Decedent?

When it comes to filing the final return, the same rules apply when it comes to deductions and credits. The full standard deduction may be claimed if deductions are not itemized.  Medical expenses that were paid before the decedent’s death are deductible, subject to limits on the final income tax return if deductions are itemized. This includes expenses for the decedent as well as for the decedent’s spouse and dependents.

Medical expenses that were not paid before death are liabilities of the estate and appear on the federal estate tax return, IRS Form 706. If the estate pays medical expenses for the decedent during the one-year period beginning with the day after death, the executor may elect to treat all or part of the expenses as paid by the decedent at the time the decedent incurred them. An executor making this election may claim all or part of the expenses on the decedent’s income tax return as an itemized deduction rather than on the federal tax return.

A decedent’s net operating loss deduction from a prior year and any capital losses including capital loss carryovers can be deducted only on the decedent’s final income tax return. An unused net operating loss or capital loss is not deductible on the estate’s income tax return. The individual filing a decedent’s tax return may claim any tax credits that applied to the decedent before death on the decedent’s final income tax return. Certain credits like the Earned Income Tax Credit and the Child Tax Credit would still apply even though the return covers a period of fewer than 12 months.

 

If the Decedent Died During Military Action

If the decedent is a member of the US Armed Forces at the time of death and dies from wounds or injury incurred while a member of the US Armed Forces due to a terrorist or military action, the decedent may qualify for forgiveness of his or her tax debt. The forgiveness applies to the tax year the death occurred and any earlier tax year in the period beginning with the year before the year in which the wounds or injury occurred. The beneficiary or trustee of the estate of a deceased service member does not have to pay taxes on any amount received that would have been included in the deceased member’s gross income for the year of death.

 

Getting Help

In conclusion, it is an emotional time when losing a loved one, and dealing with their tax situation can be challenging. I always recommend seeking the help of a true tax professional. An Enrolled Agent or a CPA has the knowledge and licensing to properly advise you and assist you in the final filing for the decedent. 

If you are still trying to navigate this on your own and need more information, please check out the IRS Publication 559. This publication is designed to help those in charge of the property of an individual who has died.

 

Foreign-Earned Income Taxation

This is a question that comes up a lot with clients that work outside of the country either during portions of the year or are full-time residents of other countries. Estimates suggest that there are around 8 million US citizens living in other countries around the world. 

Some American citizens are there for employment and financial reasons, others are retired, while some may be born in these foreign countries, but they are the children of US citizens.  All these people are most likely required to file a US tax return every year.

The United States tax system is incredibly unique in that it is a citizenship-based tax system. With this system, it does not matter where in the world you live, if you are a US citizen you are required to file taxes by June 15th of each year. There are tax treaties in place with some countries so many citizens living abroad file their taxes and owe nothing. 

Whether you owe taxes or not all US citizens are required to file their tax returns if they have earned income over the minimum thresholds. With others that are living in foreign countries, they find themselves in a situation of double taxation. This is when you must pay taxes in the US because of your citizenship, and you are also required to pay taxes in the country where they are living. 

 

Foreign Earned Income Exclusion

This article will discuss a remedy to the possibility of double taxation. A lot of these taxpayers may qualify for the Foreign Earned Income Exclusion.  This is where a portion of your foreign earned income can be excluded from US taxation.

In 2020 the allowable exclusion cannot be more than the smaller of the following:

  • $107,600 for Single filers or if Married Filing Jointly it can be $107,600 for each spouse if they both qualify and meet the requirements.
  • Foreign earned income for the tax year minus the amount of foreign housing exclusion or housing deduction if taken.

 

How Do I Qualify?

This exclusion is the most common and widely used tax benefit for US citizens living abroad.  It allows Americans to exclude all or a portion of their foreign earned income from their US taxes. With such great benefit, this is not a blanket exclusion for all foreign earned income. There are some specific qualifiers that you must meet. 

The requirements to file minimum income thresholds are the same as for US residents. For Tax year 2020 the thresholds for total yearly income as laid out below as seen on the American Citizens Abroad website.

Minimum Income Requirements for Filing Foreign Earned Income

Marital StatusUnder 6565 or Older
 You are single (unmarried) $12,400 $14,050
You are married filing jointly $24,800 $27,400 (both over 65)
 You are married filing separately $5 $5
 You are filing as “Head of household” $18,650 $20,300
 You are a widow or widower $24,800 $26,100

 

Foreign earned income means wages, salaries, professional fees, or other amounts paid to you for personal services rendered by you. It does not include amounts received for personal services provided to a corporation that represent a distribution of earnings and profits rather than reasonable compensation. 

A qualifying individual may claim the foreign earned income exclusion on foreign earned self-employment income. The excluded amount will reduce your regular income tax but will not reduce your self-employment tax.

There are some forms of income that do not qualify for the exclusion such as:

  • Pay received as a military or civilian employee of the US government or any of its agencies.
  • Pay for services conducted in international water or airspace (not a foreign country)
  • Payments received after the end of the tax year following the year in which the services that earned the income were performed.
  • Pay otherwise excludable from income, such as the value of meals and lodging furnished for the convenience of your employer on the premises.
  • Pension or annuity payments including social security benefits

To claim the foreign earned income exclusion a taxpayer must meet all three of the following requirements:

  1. Their tax home must be in a foreign country. A tax home is a place where a taxpayer permanently or indefinitely engages to work as an employee or self-employed individual. A tax home is not in a foreign country for any period in which a taxpayer’s abode is in the United States. An abode is one’s home, habitation, residence, domicile, or place of dwelling.
  2. The Taxpayer must have foreign earned income.
  3. The Taxpayer must meet either the Bona Fide Residence Test or the Physical Presence Test.

Bona Fide Resident Test

A taxpayer does not automatically acquire bone fide resident’s status merely by living in a foreign country for one year. The length of the stay and nature of the job are additional factors that determine whether a taxpayer meets the test. 

A taxpayer who travels to a foreign country to work on a particular construction job for a specified period of time ordinarily is not a bona fide resident of that country even if working there for more than one tax year.

To be a bona fide resident a taxpayer must be:

A US citizen who is a resident of a freeing country or country for an uninterrupted period that includes an entire tax year.

or

A US resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or country for an uninterrupted period that includes an entire tax year.

Physical Presence Test

A US citizen or a US resident alien physically present in a foreign country or country for at least 330 full days during any period of 12 consecutive months. 

The physical presence test is based only on how long the taxpayer is in a foreign country. The test does not depend on the kind of residence established, intentions about returning, or the nature and purpose of the stay abroad.

 

How to File for the Foreign Earned Income Exclusion?

If you qualify for the foreign earned income exclusion, then you must submit a Form 2555 with your Form 1040 or 1040x. Do not submit this form by itself. Form 2555 shows how you qualify for the bona fide residence test or the physical presence test, how much of your foreign earned income is excluded and how to figure out the amount of your allowable foreign housing exclusion or deduction. 

If you and your spouse both qualify to claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you and your spouse must file separate 2555 Forms to claim these benefits.

 

What if I do not qualify for the Foreign Earned Income Exclusion?

If you do not meet these requirements for the exclusion, it is not the end of the road. It does not mean you will have to pay tax on all your income. 

Another option is the Foreign Tax Credit. The foreign tax credit is a non-refundable tax credit for income taxes paid to a foreign government because of foreign income tax withholdings. The foreign tax credit is available to anyone who either works in a foreign country or has investment income from a foreign source. Generally, only income, war profits, and excess profit taxes qualify for this credit. You can not claim the foreign tax credit on the same income.

Another option for a US citizen living abroad is the Foreign Housing Exclusion. This deduction was created by the IRS to offset the expenses that go hand in hand with living overseas, this exclusion decreases a taxpayer’s tax liability by allowing certain housing expenses to be deducted from taxable income. This exclusion can be used if your housing costs were over 16% of the FEIE amount for that year. If you live in a city that is identified by the IRS as ultra-high cost, you may be able to use an additional amount for the foreign housing exclusion.

In conclusion, if you had not realized that as a citizen you are still required to file a Federal Tax Return it is not too late to take advantage of the exclusion if you qualify. To take this exclusion you generally must file within one year of the due date of your return or by amending a timely filed return. However, if the IRS has not discovered your failure to file or if you owe no tax after taking the exclusion you may still be able to exclude your foreign earned income from your US taxes. 

As we have recommended in many other articles, any time you are dealing with these more complex filings it is smart to hire a true tax professional who has the education and licensing to take advantage of everything within tax law that can save you money. In a situation like this, an Enrolled Agent or a CPA is a trusted source that you can turn to.

 

Taxable Income: What You Should Report to the IRS

man reporting his earned income on his tax return

A quite common question that I hear a lot of is “Do I have to file taxes on my income?”. This question comes from a lot of different types of people. The confusion comes because some income is taxable, and some income is not. Also, for low-income earners there are minimum filing requirements. This can get even more confusing because these numbers change based on one’s filing status, age and the type of income received. 

A good example of a type of income with different minimum standards for filing is Social Security income. We will further explain this later in the article, but we will start by discussing these minimum filing requirements and explaining how they change with your filing status. After that we will go through the common types of income that are taxable and then the common nontaxable sources of income. 

This information is especially important and can save you a lot of money and hassle in terms of dealing with the IRS. The most highly detected error by the IRS on a tax return is unreported income.

 

What Is Taxable Income?

The IRS says income can be in the form of money property or services you receive in the tax year. The two basic forms of income are earned and unearned. Most income that you receive is fully taxable and must be reported on your federal income tax return unless it is specifically excluded by law.  

Earned income includes money received from an employer in exchange for work or money you make working for yourself. Unearned income includes money that you did not directly work for such as interest or dividends, Social Security payments or alimony.

 

Minimum Income Requirements

The minimum income requirements differ based on how you plan to file. There are five different status’ that you can use to file. They are single, married filing jointly, qualifying widower, married filing separately and head of household.  If you earn up to or less than the minimum income as determined by your filing status, you are not required to file a tax return.

Single filers are taxpayers who file their federal income tax return with the IRS under the filing status of “single”. This filing status is used by a taxpayer who is unmarried and does not qualify for any other filing status.

  • Single under age 65: $12,400
  • Single and 65 or older: $14,050 

 

Married filing jointly refers to a filing status for married couples that have wed before the end of the tax year. When filing taxes under married filing jointly status a married couple can record their respective incomes, deductions credits, and exemptions on the same tax return.

  • Married filing jointly, both spouses under 65: $24,800
  • Married filing jointly, one spouse age 65 or older: $26,100
  • Married filing jointly, both spouses 65 or older: $27,400

 

Married filing separately is a tax status used by married couples who choose to record their incomes, exemptions, and deductions on separate tax returns. Although some couples might benefit from filing separately, they may not be able to take advantage of certain tax benefits.

  • Married filing separately, any age: $5 

 

Head of household is generally an unmarried taxpayer who has dependents and paid for more than half the costs of the home. This filing status commonly includes single parents and divorced or legally separated parents by the last day of the year with custody.

  • Head of household under age 65: $18,650
  • Head of household age 65 or older: $20,300 

 

Qualifying widow is a filing status that allows you to retain the benefits of the married filing jointly status for two years after the year of your spouse’s death. You must have a dependent child to file as a qualifying widow or widower.

  • Qualifying widow(er) under the age of 65: $24,800
  • Qualifying widow(er) age 65 or older: $26,100

 

What Types of Income Are Taxable?

To figure out where you fall in terms of the above minimum requirements once you have figured out your filing status you would next need to calculate your taxable income. Remember taxable income can be earned and unearned income. Below I will break down each category of taxable income.

  • W-2 Wage or Salary or Independent Contractor
  • Alimony received if divorce decree was made on or before 12/31/2018
  • Bartering Income
  • Canceled or Forgiven Debt
  • Gambling
  • Pension and Annuity Income
  • Retirement Plan Income
  • Social Security Benefits if you had additional income on top of social security, this can become taxable. I will further discuss this later in this article.
  • Tips and Gratuities
  • Unemployment benefits
  • Awards
  • Back Pay
  • Bonus Benefits
  • Business Income
  • Capital Gains
  • Clergy Pay
  • Commissions
  • Disability Benefits
  • Dividends
  • Interest
  • IRA or 401k Distributions

 

What Types of Income Are Nontaxable?

As most income is taxable there are a few exceptions. This is very important to know. As important as it is to make sure that all taxable income is reported so you do not raise red flags with the IRS it is also important to know what income does not have to be reported. The last thing that you would want to do is pay taxes on income that you did not have to. Not to mention the more income reported the higher tax bracket you put yourself at.

Some examples of nontaxable income are:

  • Workers Comp Benefits
  • Child support
  • Life Insurance Proceeds
  • Social Security Benefits (Can be non-taxable based on if you have additional income and how much)
  • Capital Gains on the sale of primary home
  • Money received as a gift or inherited assets, go fund me accounts or other personal fundraising sites
  • Canceled debts intended as a gift
  • Scholarships or fellowship grants
  • Foster care payments
  • Federal Income Tax Refund
  • Money Rolled over from one retirement account to another

 

Are Social Security Benefits Taxed?

There is a lot of confusion when it comes to when social security benefits are taxable and when they are not. A lot of people believe that social security is 100% not taxable. This is not true. If a taxpayer receives additional income, then a portion of the social security can become taxable. 

The next confusing part of this equation is it is not straight based on the full amount of income that you have. To figure out if or what amount of your social security benefits become taxable with the additional income you must first figure out your provisional income. 

Provisional income is determined by taking one-half of your social security benefits and all other income you receive. This does include tax-exempt interest. The percentage of benefits a taxpayer includes in income is limited to zero when below the minimum base amount, 50% when provisional income is in between the lower base amount and the upper base amount, and 85 % when provisional income is above the upper base amount.

 

Filing Status50% Lower Base85% Upper Base
Single$25,000$34,000
Head of Household$25,000$34,000
Qualifying Widow(er)$25,000$34,000
Married Filing Separately$25,000$34,000
Married Filing Jointly$32,000$44,000

 

All this income must be reported on your Form 1040 every year. It is especially important that not only all the income is reported on this form but also it is put in the right spots. You need to include W-2 income, taxable interest, and ordinary dividends on the 1040. 

Schedule 1 allows you to report other types of income such as alimony, unemployment, and business income. Schedule 1 also allows you to make adjustments to income such as contributions to health and savings accounts, contributions to a traditional IRA, interest paid on student loans, alimony paid if the divorce decree is before 2019, and more. 

For more information on where income goes on the 1040 form, visit the 1040 form page on the IRS website. 

In conclusion the more different types of income that you have the more complex the tax filing becomes. Obviously, the more sources of income that you have the more money you are making so don’t stop making money to make your tax filing easier. 

When you have multiple sources of income I would highly recommend hiring a true tax professional, a CPA or Enrolled Agent, that has the knowledge of tax law to assist you in your filing. Not only will they save you money in keeping that income down as low as legally possible but they can make sure not to set you up with the possibility of an examination or audit with the IRS because they can make sure things are done correctly.

 

Filing Taxes: Is It Necessary?

older couple filing taxes

Filing taxes can be burdensome, especially considering the complexity of filing a tax return. With tax laws changing almost overnight sometimes, it goes without saying that taxpayers often find themselves midst a tax storm that they do not know how to handle. 

Questions like ‘Do I need to file taxes if I collect Social Security?” “What about the case when I get Disability benefits?” “Do I file a tax return if I am retired?” are very common. Hopefully, this guide will help you figure some basics out and answer commonly asked questions about filing taxes. 

 

Do I Have To File Taxes If I Collect Social Security?

In general, individuals must file taxes if (1) they are unmarried, (2) their gross income is at least $14,050 or (3) are below 65 years of age. However, those that live exclusively on Social Security benefits have no gross income, which means that they do not have to file a federal income tax return. Also, you do not need to include your Social Security benefits in your gross income if your only source of income is your Social Security benefits. 

Things change if you earn additional, not tax-exempt income. In this case, you need to determine whether your annual gross income exceeds the $14,050 threshold. Beginning in 2018, tax exemptions are no longer considered part of your taxable income. So, you must use only your standard deduction. For the 2020 tax year, your Social Security benefits are regarded as gross income if:

  • You are married and file a separate tax return with your spouse. In this case, 85% of your Social Security benefits are regarded as gross income, which means that you may need to file a tax return. 
  • You are married filing jointly, and the sum of 50% of your Social Security plus any tax-exempt interest and other income is higher than $32,000. 
  • Half your Social Security plus other income is higher than $25,000, irrespective of your filing status. 

Note: For senior citizens (over 65 years of age) collecting Social Security benefits, the law is more gentle and flexible as it enables them to reduce the tax amount they must pay on their taxable income. As long as their income is not high (not including Social Security funds), they can lower their tax bill on a dollar-for-dollar basis using a special tax credit called Credit for the elderly or disabled (aka Schedule R).

 

Do I Have To File Taxes If I Did Not Work? 

In general, unemployment checks from the state are taxable. So, it depends on the collected unemployment. The current tax law wants individuals collecting or earning at least $8,000 to file taxes. Another important aspect to consider before answering this question is whether tax was withheld on the unemployment check payment or not. 

It should be noted that unemployment benefits are not free money. In fact, you need to take proper measures today to avoid unwanted surprises in the future when you receive your tax bills the following year. This is because unemployment money is taxable income. So, although you don’t need to pay Medicare or Social Security taxes, you will need to pay state and federal taxes in some jurisdictions while receiving unemployment benefits. 

Of course, some states, such as Virginia, Pennsylvania, Oregon, New Jersey, Montana, or California, waive this particular type of income. This means that if you live in any of these states, your unemployment benefits are tax-free. On the other hand, seven states (so far) do not impose any state income taxes. These include Washington, Texas, South Dakota, Nevada, Florida, and Alaska. 

Tip: The best course of action is to have taxes withheld from your unemployment benefits check, especially if you have earned income this year. The same applies to when you expect to be employed or hired again shortly, which will put you in a higher tax bracket. This, in turn, may make you ineligible for as many credits to offset your earnings. 

How to request the withholding:

  • Fill out form W-4V either online or via the benefits portal (depends on your state).  The Labor Department mentions that you can withhold a flat federal tax rate of 10% of the paid benefits from every payment. 
  • Request a W-4V from your state’s unemployment office if you are already collecting unemployment and then change your withholding. 
  • Take the money out of your checking account, and put it in a little envelope, or put it in a savings account. 

A key factor to bear in mind is your earned income tax credit (EITC) if you are currently unemployed and are worried about how this kind of money will affect your taxes. Depending on your income and whether you have any dependents (and how many), the EITC can provide you  between $538 and $6,660 in tax credits. Those eligible for it can use the tax credit to offset the amount they owe on their tax bill. The 2020 EITC income limit is $15,820 for single individuals or married couples with no children and $21,710 for married couples that file jointly. 

 

Do I Have To File Taxes If I’m Retired?

In short, yes. Your retirement taxes are determined by how much retirement income you draw every year and the sources of your retirement income. And, the kind of money you need to live on is directly related to your taxes. This may sound a paradox, but, in reality, the government never collects taxes on your Social Security money during your working years. The logic is that it simply holds onto it for you. Let’s look into an example to make things a bit clearer:

Suppose you get paid $5,000 every month as an employee. Your employer withholds the 6.2% Social Security tax rate (so, around $310) from your pay every month while contributing that 6.2% on your behalf to the federal government. They pay no tax on that sum, though. Then, when you turn 62 or older, the government gives back the money that went toward Social Security when you file a Social Security retirement benefits claim. Until that moment, nobody has paid taxes for that money.

So, will you owe taxes on your Social Security benefits in the end, and how much? According to the Social Security Administration, one in every four retirees will be called to pay income taxes on their Social Security benefits. For more details, check out the table below: 

Combined* IncomeIndividual ReturnMarried, Separate ReturnMarried, Joint Return
$0-$24,999No tax
$25,000-$34,000Up to 50% of Social Security may be taxable
> $34,000Up to 85% of Social Security may be taxable
$0-$31,999No tax
$32,000-$44,000Up to 50% of Social Security may be taxable
> $44,000Up to 85% of Social Security may be taxable
$0+Up to 85% of Social Security may be taxable

 

* This refers to half of your Social Security benefits, your nontaxable income, and your adjusted gross interest income, which is your total income minus income adjustments. Adjustments to gross income can be contributions to self-employment retirement plans, alimony paid, student loan interest deduction, and more.

Tip: To avoid paying taxes when you are a retiree, take note of the income you receive. If it is low enough, you won’t get taxed for it. Check the tax bracket into which your taxable income falls after calculating your earned and unearned taxable income. This will help determine whether you will need to pay income taxes or not. Your retirement tax bracket determines the exact way your taxable income is determined when you are in your working/productive years. As soon as you add up your taxable income sources, subtract your itemized or standard deduction, and apply any tax credits you may qualify for. Then form 1040SR or 1040. 

Below is a table showing the standard deduction for taxpayers over 65 years of age for the 2020 tax year. 

Filing StatusStandard DeductionSenior BonusTotal Deduction
Head of household$18,650$1,650$20,300
Married filing jointly $24,800$1,300 per senior spouse$26,100 
Married filing separately$12,400$1,300$13,700
Single$12,400$1,650$14,050

 

 

Do I Have To File Taxes If I Collect Disability? 

Again, it depends on the income you receive and whether your spouse also gets an income (or not). If you are single and your Social Security Disability benefits are your sole income source, you don’t need to file taxes. For total incomes that exceed $25,000, it is paramount (and required by law) to file a federal tax return as an individual. The same applies to joint filers if their total combined income is more than $32,000. 

However, note that you will NOT be asked to pay taxes on the entire sum you receive from Social Security Disability if you fall within any of the brackets mentioned above. You usually need to file a federal tax return in the following situations:

    • You earn between $25,000-$34,000 as an individual – You might pay income tax on 50% of the sum you received from the Social Security Administration. 
    • You earn >$34,000 as an individual – You will probably need to pay taxes up to 85% of your SSD (Social Security Disability) benefits. 
    • You file jointly with your spouse and have a combined income between $32,000-$44,000 – You might have to pay taxes on 50% of your SSD benefits. The sum goes up to 85% of your SSD benefits if your income is over $44,000 (always referring to your combined sum). 
  • You also have a pension.
  • You collect short-term disability that is being provided by your employer. 

In general, though, if you have paid for your own disability policy, you won’t need to file a tax return. 

 

Do I Have To File Taxes On A Summer Job?

The majority of taxpayers are allowed to earn a specific amount of income every year without having to file a federal tax return or pay taxes. But, if you are obliged by law to file a tax return, it is critical that you have your earned income reported by your summer employer on a W-2. 

Full-time students may not need to file a return if they work for just a couple of months in the summertime. Nevertheless, if you qualify for a tax refund for taxes withheld from your paychecks, it is advised to file a return so you can claim that refund. Take note that if you show as a dependent on your parents’ tax return, though, you will have to file a tax return if you received more than $1,100 of unearned income (i.e., dividends and other non-employment income), irrespective of other earnings you may have. The same applies if your total earnings are higher than the standard deduction set for dependents.

 

Do I Have To File Taxes If I’m Married But Don’t Work?

You can choose to file separately or jointly on your income tax returns, with the first option being the most beneficial for you, most of the time, at least. This is because the IRS provides larger standard deductions to joint filers every year, which enables them to deduct more money from their income than those filing separately. For example, married couples filing jointly receive a $24,800 deduction while those filing separately only receive a standard deduction of $12,400. 

Plus, you are eligible for more tax credits, such as the Earned Income Tax Credit and the Child and Dependent Care Tax Credit. On top of that, joint filers earn a larger amount of income due to the higher income threshold for specific deductions and taxes while they may also qualify for certain tax breaks. 

There are, of course, some rare cases when filing separately is more preferred than filing jointly. You can contact us and give us the details of your case. Our tax relief professionals will then suggest the filing status that gives you the biggest tax savings.