So I’m doing mom’s taxes this year. Largely because my father passed away this year, and partly because paperwork of any kind makes mommy wonky.
Of course, in addition to my having to do my parents’ taxes at all, my father’s death raises a couple other potential complications.
How do I file my mother’s/parents’ taxes? I’m guessing as married, since they were for the majority of 2001.
Are there any other tax loopholes/traps/stuff that I should be on the lookout for?
I should probably mention that with the possible exception of the apartment my mother uses as her primary residence (and possibly not even that; it’s late and my recollection is spotty at best), pretty much all my father’s monetary assets were in joint accounts, so I don’t think it would count as income in the inheritance sense. His life insurance policies, on the other hand, probably do (though in the good news/bad news category, this wouldn’t account for too much income anyway).
She can file as married this year, but next year she will file as single, unless there are still minors, or disabled adults she is responsible for.
In the final year, medical expenses are often quite high. They are deductible from income to the extent that they exceed 7.5% of their Adjusted Gross Income (the number on the bottom of the first page) usually they don’t get high enough, but it may be good to check this year.
I strongly suggest that you buy a tax program to do them. I like TurboTax, but there are a lot out there. The cost would be about $30.00. Try filing both as married filing jointly and also as married filing singly (easy with a computer program). It usually doesn’t help to file singly, but a situation such as the death of a spouse sometimes skews the income/deductions enough. It also avoids any math errors, and you can also do your own taxes too.
Inheritance taxes are a whole different ballgame. Any insurance on your father that was owned by him, any 401(k) or IRA plans, and separate bank/stock accounts, plus 1/2 the value of any bank accounts or their home owned jointly is included in your father’s taxable estate. If the value of your father and mother’s combined estates is over about $1,000,000, you should talk to someone about estate tax planning. IAAL, but I obviously don’t know anything about your particular situation.
Abe, I’m planning on using the same tax filing software I used last year (which, IIRC, was the online version of TurboTax or something; should I buy the actual boxed version this year?), so I don’t foresee any real difficulty.
Regarding medical expenses, I’m guessing that that’s expenses not covered by insurance, correct? If so, between medicare and my dad’s state insurance (he was a state employee for quite a long time), I think all we paid were nominal fees for drugs, so that shouldn’t be an issue.
Now cringe for inheritance tax. My father’s taxable estate, according to the formula in your last post, should be ~$250k at best*. From the sound of it, inheritance tax is something that is filed separately from one’s income taxes, correct? If so, what form(s) would I need and what’s the time frame on it?
Thanks again.
*I should probably note that this is all stuff that my mom became the possessor of as a result of the accounts being joint and not because my father had an estate or even a will. (He was a great man, just not one to dwell on his own mortality.)
I know some of the general answers, but I would seriously urge that you go to a tax professional. There are lots of hidden issues that you may be affected by, and there also may be a number of tax planning opportunities.
In a case like this, I would suspect that there is a good chance that the potential tax savings would offset the extra cost of an experienced accountant or other professional.
OOC, how much does a tax professional cost? H&R Block’s online tax pros cost ~$80, but if there really is something to be gained by having a pro do it, I’m guessing that a tax info questionaire isn’t going to give quite a large enough picture.
That being said, what kinds of benefits would my mom be privy to? Not to be overly cynical or miserly, but our family finances aren’t overwhelmingly secure right now, and I’d like to know if there are any real, potential benefits to be had. (Besides, of course, avoiding the possibility of my somehow grossly fubaring our taxes.)