Transitioning from loved one to a caregiver can be a stressful and often financially difficult task to take on. Luckily, there are numerous ways to save money when you claim your loved one on your tax return. If you’re the primary caregiver, your senior now becomes a dependent meaning that they depend on you to live comfortably. Since they’re dependent on you, the government will give you tax breaks and other benefits to make your life a lot easier. Here are a few tax tips for caregivers that will help you out in the future. While we hope these tax tips help you get the money you deserve, we understand that each caregiving situation is different and highly recommend that you speak with a licensed tax Accountant to ensure you receive the best tax information and guidance available.
6 Tax Tips For Caregivers
1. Prepare As Early As You Can
One of the biggest mistakes many caregivers make is waiting too long to get their assets organized. Tax season can creep up on you, so it’s important to be prepared when the time comes. Assemble income information including W-2s, 1099s, K-1, year-end brokerage and bank statements. If you are assisting a loved one who has dementia, use the prior year’s return as a checklist to make sure you are not missing important information. Receipts from medical expenses, property tax, and any other taxes or business expenses should also be covered.
2. Take Advantage of Free Help
The IRS offers recorded messages on 150 tax topics at Teletax Service, 1-800-829-4477. Tax forms and publications can be obtained at 1-800-TAX-FORM. The IRS staffs a tax helpline at 1-800-829-1040 and has a website at www.irs.gov. There are also numerous free services around the area that will help you file your taxes at a discounted price and look for deductibles you may have missed.
3. Claim a Dependent Deduction If You Can
If you provide of half of your senior’s support, then you will be able to claim your loved one as a dependent. This way you can get some financial help for not only caring for yourself but your senior as well. If more than one family member is playing the caregiver role, you might be able to allocate the deduction among all caregivers.
4. Check Estimated Taxes
Changes in your income or deductions during the year can affect your estimated tax payments. Check to see if your estimated payments are appropriate for your current situation. If your estimated payments are too low, you may incur penalties for underpayment. There are numerous websites that will allow you to get an estimate on tax payments. Make sure to keep track of any large sums of money you have gained from inheritance or the pension of your loved one. These can affect the amount of money you pay at the end of the year.
5. Don’t Procrastinate
It’s easy to put off organizing and filing your taxes until the very last minute, but we’re here to tell you that the sooner you file them, the better the outcome will be. Make sure to organize all your filings and get the earliest possible date. That way, if you forget documents or notice a discrepancy, you can quickly correct the mistake before the deadline has passed.
6. Take the Minimum Required Distributions
If you are at least age 70 ½, make sure to take required minimum distribution from IRAs, TSAs, 401ks; profit sharing or other qualified retirement plans. Failure to do so can result in a 50% penalty. Make sure your loved one is aware of this penalty and if they’re eligible, make sure to take the minimum required distributions.
These are just a few tax tips for caregivers that can help you and your senior live easier after tax season. It’s important to stay on top of your expenses and to save the receipts and bills for everything. Medical expenses and other bills can quickly pile up, so make sure to record all of these so you can get the proper care for your loved one.
