Ask The Experts: Tax Prep

[AARPLynne]

Thanks for joining us! AARP Foundation staff and volunteers from the Foundation’s Tax-Aide program are here to answer your questions about this year’s tax season and filing your return.

Please note:  If your inquiry is about requesting service by appointment only, please visit the AARP Foundation website: www.aarpfoundation.org/taxaide.

Post a reply below for a chance to have your questions answered.

[PatriciaG546575]

Hello, I was scheduled for AARP to do my taxes at the local library last March when everything was suddenly canceled due to the COVID virus. The previous year when AARP Tax Aide did my taxes, they said no need to file when only low Social Security income. So I never filed last year. I now realize this resulted in no stimulus checks since they based it on 2018 tax return when I had a 401k distribution. Your recommendation please on how to proceed. Thank you. 

[TaxAideExpert]

@PatriciaG546575 ,

You will need to file a 2020 tax return and claim the Recovery Rebate Credit.  The Economic Impact Payments (stimulus) were advance payments of this credit, which is claimed on line 30 of Form 1040 (or Form 1040-SR if you are age 65 or older and choose to use this form instead).  Use the worksheet on page 58 of the Form 1040 instruction booklet to calculate the credit amount.

The Recovery Rebate Credit is a refundable credit, so if your only income was Social Security in 2020, you should receive a refund of the maximum credit amount ($1,800) if you did not receive any Economic Impact Payments previously.

[LindaP22979]

How do I notify the IRS that my husband passed away in 2020?

[TaxAideExpert]

@Linda -

We're sorry for your loss. When you file your 2020 tax return, you may file as married filing jointly. List yourself as the taxpayer and your late husband as the spouse. This return should show your spouse's 2020 income before death and your income for all of 2020. Enter “Filing as surviving spouse” in the area where you sign the return. Also enter “Deceased,” the deceased taxpayer's name, and the date of death across the top of the return.

[jh12438763]

Is there any way to deduct the local income tax on box 19 on W-2 from the standard deduction form1040 since it actually the SDI in California?  

[TaxAideExpert]

@jh12438763 

We are not experts on tax law for all states but will assume that SDI is state disability insurance. If so, you can include this as an itemized deduction on Schedule A along with other state taxes - it has no impact on your standard deduction. Itemizing deductions is an advantage only if your total itemized deductions are greater than your Standard Deduction for your filing status and age. Common itemized deductions are: qualified medical expenses that exceed 7.5% of your adjusted gross income, property taxes, state/local income taxes paid, mortgage interest, and charitable contributions. Note that the deduction for state and local income, sales, SDI and/or property tax is capped at $10,000.

To find out more about Itemized Deductions, go to: https://www.irs.gov/taxtopics/tc500. You will find an index of Tax Topics on types of itemized deductions. Click on the topic number for full details on each.

[AARPLynne]

Please note:  If your inquiry is about requesting service by appointment only, please visit the AARP Foundation website: www.aarpfoundation.org/taxaide.

[calady53]

If a person is under 70 1/2 but only has income from their SS or pension and interest, does that mean they can no longer invest in a roth IRA? 

[TaxAideExpert]

Only earned income can be invested into a Roth IRA, or any IRA. SS and regular pensions and interest are not considered earned income. Disability pensions may qualify if you are younger than the minimum retirement age. 

Your option is to convert an existing IRA into a Roth IRA. This would require paying taxes on the sums that were converted. There are restrictions about when you can withdraw your Roth funds, so funds that you may need within five years should not be part of a Roth Conversion. 

[TaxAideExpert]

@calady53 ,

There is actually no age limit on making contributions to a Roth IRA, but you DO need to have taxable compensation from a job or self-employment to make a contribution.  So if you only have income from Social Security, pensions, or investments, you do not have the required taxable compensation and would not qualify to contribute to a Roth IRA.