Being part of the blogging world has allowed me to "meet" so many smart people in fields that I have no clue about. As a Canadian, I have no idea how the US tax system works. So, I did what any smart blogger would do - I asked an expert to help me out.

Please welcome Kelly Phillips Erb, as she tells you about 10 tax tips for seniors.

Ten Tax Tips for Seniors

As you get older, you’d think that things would get easier.  Unfortunately, one area that doesn’t get any easier is filing your taxes.  But that doesn’t mean that you should put up the white flag or worse, stop filing. 

To make this tax season a breeze, consider these tips:

1.    If in doubt, file.  You may qualify for refundable credits such as the earned income tax credit (EITC) or the recovery rebate credit (RRC).  Don’t assume that a zero tax liability is the end of the story:  you might be entitled to additional cash in your pocket as a result of a refundable credit.  You won’t know unless you file.

2.    Read the fine print.  Don’t just check the standard deduction box.  If you file using the standard deduction, remember that you are entitled to a higher deduction if you and/or your spouse are 65 years old or older.  If you and/or spouse is blind, you are entitled to an even higher deduction.

3.    Social Security may be taxable - but not always.  To figure whether your Social Security income is taxable, you must determine whether your “base amount” exceeds the limits for your filing status.  The limits are:  $25,000 for single, head of household, or qualifying widow(er); $25,000 for married filing separately if you lived apart from your spouse in 2008; $32,000 for married filing jointly and $0 for married filing separately when you lived with your spouse during 2008.  Figure your base amount by adding 1/2 of your Social Security income to your taxable income and tax-exempt interest income.

4.    Don’t get shorted.  You may qualify for the Credit for the Elderly or Disabled if you and/or your spouse are at least 65 years or are considered permanently and totally disabled.  You must meet certain income qualifications found by completing a “long form” (form 1040 or 1040A).  You won’t find the credit on the “short form” (form 1040-EZ) so if you think you may qualify, make sure you use the correct form.

5.    Ask questions every year.  The Tax Code is constantly changing.  Don’t assume that changes don’t affect you.  In fact, many recent tweaks to the Code involve retirement accounts.  For example, in 2009, you won’t be subject to a penalty if you choose to leave your money in your retirement account and not take the required minimum distribution (RMD). This is NOT applicable to 2008, 2010, or any other year - just 2009. 

6.    More medical expenses may mean more deductions.  Medical expenses, including Medicare insurance payments withheld from your Social Security check, are deductible.  If you itemize, make sure that you include all of your medical expenses on your tax return.  Since medical expenses are subject to a tax “floor” (meaning that you can only deduct those expenses in excess of 7.5% of your adjusted gross income (AGI)), it is often tricky for many taxpayers to qualify.  However, this is where reduced or tax exempt income comes in handy:  your “floor” is lower.  Bring your receipts, including those for transportation to and from appointments (yes, parking counts!) and copays for visits and medications, to your tax preparer and run the numbers.  For a list of deductions to consider, check out this blog post on taxgirl.com .

7.    Save receipts for charitable donations.  Due to recent changes in the law, all donations of cash or cash equivalent must be supported by documentation.  Make sure that you get receipts for all of your donations.  Consider writing checks even for small amounts, such as the offering plate at church, so that you have all of your information in one place.

8.    Don’t forget about state and local tax breaks.  Many states, such as my home state of Pennsylvania, offer tax credits, tax breaks, property tax and rental rebates and tax freezes for seniors.  You generally don’t qualify unless you file, so don’t miss out.

9.    Don’t stress out about it.  Taxes should not be a source of stress.  Consider having your return professionally prepared.  If you can’t afford to pay someone, you have a number of options. There are many groups that volunteer to do returns for free for qualifying taxpayers and seniors - some of these are even organized through the IRS. The IRS maintains two great services: the volunteer income tax assistance (VITA) program and the tax counseling for the elderly (TCE) program. To find out if you qualify, or to locate a program near you, call the IRS at 1.800.829.1040.  The AARP also offers free help: to locate the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit the AARP web site .

10. Understand the process.  Most tax professionals have access to e-filing which will speed the filing process along.  Don’t be afraid of e-filing or direct deposit.  You should understand, however, that in most cases, these services should not cost you more money:  ask to see a fee schedule in advance.  You should also be aware that with direct deposit you will usually get your refund within 2 weeks.  Most of those refund anticipation loans are an expensive proposition.  Know the facts and don’t be mislead into believing that you will have to wait several weeks or months to get your refund without additional services.   

You can survive tax season.   If something doesn’t sound right, ask questions.  A good tax preparer - and that includes those that are volunteers - will listen to your concerns and will explain your return to you.  If all else fails, call the IRS (1.800.829.1040).  The IRS works for you - even if it doesn’t always feel like it.  They should be able to point you in the right direction.

Kelly Phillips Erb is a founding shareholder of The Erb Law Firm, PC, in Philadelphia, PA, where she focuses on tax law.  Kelly authors the popular tax blog, taxgirl.com, recently cited as one of the top 100 legal blogs by the ABA Journal. 

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