Late yesterday, after much congressional protest, the administration reversed course and announced that tax filing will not be required for Social Security recipients to receive their stimulus payments.
It is not clear if this course reversal applies to those on Veteran’s Benefits and SSI, but it would be surprising if it did not. We will keep you posted.
Pursuant to the CARES ACT (Coronavirus Aid, Relief, and Economic Security Act), individuals with income up to $75,000 for a single person or $150,000 for married and filing jointly are eligible to receive $1,200 for a single person or $2,400 for a married couple filing jointly. An additional $500 per qualifying dependent child under the age of 17 will also be provided to families.
For individuals who filed federal income tax returns in 2018 or 2019, you do not need to take any further action at this point. You will either receive the stimulus via direct deposit based on the information the IRS has on file or you will receive a physical check in the weeks to come.
More than 20 million taxpayers over the age of 65 do not file a federal income tax return each year – likely because their only source of income is Social Security benefits. For persons who may not have filed a 2018 or 2019 tax return, there does not appear to be clear directions at this time on how to ensure that they receive the stimulus. According to the CARES Act the filing of a tax return should not be necessary, and the payment could be direct deposited along with monthly benefit payments. However the IRS has issued a notice that appears contrary to the actual CARES Act indicating that seniors on Social Security will need to file a simple tax return (which has not been made available at the end of March). There is also discussion of a web based portal at the Treasury Department through which people could enter their information (this has yet to be designed or implemented).
Regardless of the mechanism which will be used for “non-filers” the IRS will have to have the Social Security numbers of all parties to include any dependent children in order to generate the stimulus payment as well as information on bank accounts for direct deposit.
At this point, if you did not file in 2018 or 2019 you may want to file a return either by hard copy or e-file. If you do not want to file the tax return for 2018 or 2019 you have the option to wait and see what action will be required of you. The stimulus payment is available through 2020, and tax payments for 2019 have been delayed until July, so you do not have to rush to file a tax return.
Be advised that the receipt of the stimulus payment will not be treated as a resource for one year and will not affect eligibility for federal means tested programs such as Medicaid, SSI or SNAP.
We will stay on top of this issue and continue to provide information as it develops in an effort to assure that all eligible seniors obtain their stimulus payments.
Our January 2018 Newsletter, Bookmarks, has been published , and you can view it online at the link provided. Several articles are included covering Medicare, Medicaid, nursing home resident dumping, and the new tax law. Let us know if you want to be added to the email list.
Taxpayers with long-term care insurance policies can deduct some of their premiums from their income. Whether you can use the deduction requires comparing your medical expenses to your income in a complicated formula.
Premiums for qualified long-term care insurance policies are tax deductible to the extent that they, along with other unreimbursed medical expenses (including Medicare premiums), exceed 10 percent of the insured’s adjusted gross income. In tax year 2016, taxpayers 65 and older only need medical expenses to exceed 7.5 percent of their income, but in 2017, taxpayers 65 and older will have the same 10 percent rule as everyone else.
The amount of long-term care insurance premium that is deductible is based on the taxpayer’s age and changes each year. For the 2016 tax year, taxpayers who are 40 or younger can deduct only $390 a year, taxpayers between 40 and 50 can deduct $730, taxpayers between 50 and 60 can deduct $1460, taxpayers between 60 and 70 can deduct $3,900, and taxpayers who are 70 or older can deduct up to $4,870 in premiums.
What this means is that taxpayers must total all of their medical expenses and compare them to their income. For example, suppose 64-year-old Frank has an adjusted gross income of $30,000 and long-term care premiums totaling $5,000 as well $1,000 in other medical expenses. Ten percent of $30,000 is $3,000. Frank can only deduct any medical expenses that exceed $3,000. The 2016 limit for deducting long-term care premiums is $3,900. That means Frank can only count $3,900 of his long-term care premiums. If he adds the $3,900 in long-term care premiums to the $1,000 in other expenses his total medical expenses are $4,900. He can deduct $1,900 in medical expenses from his income.
If Frank is 70 in 2016, the calculation changes because his medical expenses only need to exceed 7.5 percent of his income, which would be $2,250. The amount of premiums he can deduct is also increased because of his age–he can deduct up to $4,870 in premiums. Subtracting the income limit from his medical expenses ($4,870 in long-term care premiums and $1,000 in other expenses), Frank can deduct $3,620 in medical expenses from his income. In 2017, Frank will only be able to deduct medical expenses that exceeded 10 percent of his income, so the amount he can deduct will go down.
Jan Neal Law Firm, LLC 