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.

[StephenB62394]

two questions
1.  I read there are free tax software available.  One highly recommended by a business magazine was first tax or free tax.  I don't quite remember.
2.  is AARP foundation performing tax preparation this year and if I have a K-1 form am I eligible?

[TaxAideExpert]

@StephenB62394 ,

IRS Free File has software available at no cost for return preparation and electronic filing if you meet the income requirements (which may vary by vendor). 

K-1 forms may or may not be within the scope of our service, depending on their content.  Generally, only entries related to interest, dividends, and capital gains/losses would be in scope.

Tax-Aide is offering a variety of services this year.  Please see our main Tax-Aide page for information.

[RobertT504470]

Hello, can I begin to claim my mom as a dependent on tax filing? She receives SS and small pension, has some investments.

What is eligibility? Thank you

[TaxAideExpert]

@RoberT504470,

Generally, to claim your mother as your dependent, you must provide more than half of her total support and she must have less than $4,300 of gross income (not including Social Security) for 2020.  You can use the worksheet on page 15 of IRS Publication 501

 to determine your mother's total support and what percentage you provide.  Then you can use the IRS Interactive Tax Assistant for determining whom you can claim as your dependent to confirm whether or not you can claim her.

[zippel]

I have a question about the Miscellaneous Deduction for investment expenses. Does the IRS require that these investment expenses (like for my IRA) be paid directly from a bank account or is it acceptable to use the expenses line item from my end of the year IRA statement to supporting evidence for this deduction. While I don't itemize for for Federal, I do end up itemizing for my state taxes (thank you NY) and this became a question during an audit last year. I have read the IRS publication 529 and did not see any requirements on how this needed to be paid. Thank you. 

[TaxAideExpert]

@zippel ,

As you probably know, the federal deduction of miscellaneous itemized deductions that are subject to 2% of adjusted gross income (which includes investment expenses) has been suspended for tax years 2018 through 2025.  Some states continue to allow these types of deductions, however.

Our volunteer training does not cover what the substantiation requirements are for these types of deductions.  However, with respect to IRA fees, we can tell you that those fees are NOT deductible if they are simply paid directly from your IRA holdings.  You would have to pay those fees directly to the IRA custodian using non-IRA funds to include this expense with other investment expenses.  This is because fees paid directly from your IRA account are not treated as distributions and therefore are not taxed, and you cannot claim a second tax benefit by trying to deduct the expense paid.

[ruralman]

Hello! My 2019 Federal 1040 was filed using tax software that
unfortunately omitted a required annual information form (Form 8621 -
Information Return by a Shareholder of a Passive Foreign Investment
Company or Qualified Electing Fund). The omission did not change final
tax due / refund but the form is required annually anyway. Do I need to
file a complete Amended Return or can I just send a completed 2019 Form
8621 alone to the IRS? Thanks.

[TaxAideExpert]

@ruralman ,

Unfortunately, we don't have any volunteer training regarding Form 8621, so we are unable to answer your question.  We suggest you download the instructions for the 2019 form to see if you can find your answer there.

[DesireeO365538]

Hi, my spouse and I are claiming our college student son as a dependent.  He is 22 years old.  He is filing his own tax return with part-time wages & unemployment and marking it as being claimed as a dependent.  I have 2 questions. 1) Can he claim the 2020 stimulus payments as credits on his return?  2) Can he deduct the above the line $300 charitable contribution on his return?  Thank you for your time.

[DesireeO365538]

Hi, I appreciate your answers to my questions on 3/6/21!  Thank you!  I have one more question in light of your answer.  Someone told me that if we did NOT claim my son as a dependent on our tax return that my son can claim the 2020 stimulus payments as a credit on his return, but when I look at the IRS instructions, it says if a child "can" be a dependent they can't claim the stimulus credit. My son did NOT cover his expenses in 2020 as we paid for his college, housing etc. Even though we don't claim him on our return, does the fact that he is still quote "a dependent" disqualify him from claiming the stimulus credit?  Thank you.

[TaxAideExpert]

Hi @DesireeO365538 

You are correct that if you CAN claim your son as a dependent (and it appears you can), he is not eligible for the 2020 Recovery Rebate Credit even if you do not claim him. Unfortunately, there are many who want to "unclaim" a dependent to get the credit and don't seem to realize that they are then filing a fraudulent return. 

[GailL1]

@DesireeO365538 

Just as a heads-up for 2021 Tax Year - if the NEW (2021) American Rescue Act passes in its current form - it will change the status of adult dependents getting an EIP (Economic income payment, i.e. covid stimulus) - this will be a change from the 2020 Tax Year stimulus payments as @TaxAideExpert provided.

[TaxAideExpert]

You are correct that if the American Rescue Plan Act passes with the current provisions, then dependents will be eligible for $1,400 each assuming other conditions are met. The reconciliation for this will be on the 2021 tax return filed next year. 

[TaxAideExpert]

Yes, the language regarding the Recovery Rebate Credit says that if someone CAN be claimed as a dependent, they are not eligible for the credit.  Since your son can be claimed as your dependent, he is not eligible for the Recovery Rebate Credit, even if you choose not to claim him.  

[TaxAideExpert]

Hello, @DesireeO365538 ,

1) No.  Dependents are not eligible to claim the 2020 Recovery Rebate Credit for which the Economic Impact Payments (stimulus) were advance payments.

2) Your son can claim the amount of any monetary contributions he made to qualified charitable organizations, up to the maximum of $300.  This includes payments made by cash, check or credit card.  Donations of goods do not qualify for this above-the-line deduction.

[Spring660]

Hi,

I received a 1099-R from my LTC insurance. Box 1 and 8 have the same amt. Box 2a = $0. Box 7 = W. Do I need to report this 1099-R? Thank you!

[TaxAideExpert]

The 1099-R is reporting the charges or payments for your LTC contracts. It must be reported, but the income is not taxable. Box 2a is the taxable income which is $0. If you are itemizing you should reduce your MAGI (Modified Adjusted Gross Income) by the amount in Box 1 when calculating your sales tax deduction.

[LauraP655369]

Last tax year the IRS waived the penalty for not taking the RMD from an IRA.  Are they going to do that for this tax year?

[TaxAideExpert]

Laura,

There is no indication that IRS will not Required Mandatory Distributions (RMD) in 2021. Of course tax law changes are expected before the end of the year, but as of today RMD will be required in 2021.

[2Papa]

Ah, I think it is Required Minimum Distributions.

[GailL1]

@2Papa 

You are right but perhaps we should re-title then to:

Required Mandatory Minimum Distributions since that is what they are -

😁

[TaxAideExpert]

Gail,

Thanks for the correction........and the humor. Minimum is correct.

[2Papa]

@gail1.      Well, actually "required" and "mandatory" are synonymous.

[RitaD432528]

I moved from a home after a divorce in 2012. The home was bought under first time home buyer program in 2008. Would I still have to pay the money back? This is from form 5405.

[TaxAideExpert]

Rita, 

Generally you have to repay the credit. Without know more about the specifics of your situation it is hard to give you an absolute answer. I suggest that you complete the Interactive Tax Assistant on the topic found on the IRS website:

Do I Need to Repay the First-Time Homebuyer Credit? | Internal Revenue Service

If you have a specific question after using the link above. We would be happy and try to answer you.

[bb6734]

Is this the correct place to ask questions about filing my 2020 taxes?

[TaxAideExpert]

Yes it is. Feel free to ask any questions you have.

[Lifeisgood68]

How do I get to ask my tax question.

[TaxAideExpert]

Just ask it the same way you asked this question. We are here to answer them.

[a697212s]

My Mom passed away on 12/08/20. She has not owed any taxes for years, but we filed federal and state taxes so that she could get the homestead credit from Wisconsin. Her home was sold before she passed and her home therefore is no longer eligible for this credit. I read in an AARP Newsletter that I, as her POA, need to file a federal 1040. Her estate attorney said that he did not think so because her income was so low. I want to double check. SSA-1099 = $12,180 and 1099R= $2,994. This was her total income for 2020.