Do my parents "need" to do their taxes?

Submitted by Zerole00 t3_zz89y8 in personalfinance

Title sounds ridiculous I know, but please here me out.

Background: Parents and I were born in another Vietnam, came to the USA as refugees, all became US citizens (I don't believe any of us hold Vietnamese citizenship anymore). Parents are in their late 80s and retired about 15 years ago and 5 years ago they moved back to Vietnam (I think they have 5 or 10-year visas to stay there). I had their mail forwarded to me for a while but they never changed their permanent addresses or anything (though I still get some important mail for them like from the SSA).

Separately, they get about $500-700 each in social security benefits and $100-200 each in pension benefits a month (deposited into a joint checking account which I have access to and send money to them via Western Union at their request). Since they moved they haven't done their taxes (so about 2016). They have no assets whatsoever aside from what's in that checking account or other sources of income other than their social security and pension (from the same employer). I also have Power of Attorney for both of them (lawyer drafted some documents and we got it signed and notarized at a US embassy).

Given their situation, do they "need" to do their taxes? I'd have to do it for them and I'd have to track down documentation from the SSA and pension program to do so I believe. I actually asked a tax professional at LibertyTax about this while I was settling a small error on my own taxes, and given their situation he didn't think it was necessary or worth it. Basically at their income level they wouldn't owe any money and it'd cost more just to do so.

What should I do?

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BouncyEgg t1_j2a2o6s wrote

Probably not at the Federal level as their income is low enough to not meet reporting criteria.

You can go through this tool on the IRS website:

Generally, it's advised to file even if you do not have a filing requirement. This helps prevent someone else filing a fraudulent tax return under you. Or if someone does file fraudulently, you'd be alerted sooner (rather than discovering it several years later and having to deal with multiple years of fraudulent tax returns).

> I actually asked a tax professional at LibertyTax ... it'd cost more just to do so.

Just be aware that big box shops (like LibertyTax, H&R Block, Jackson Hewett, etc) do not generally have the best reputation. It's primarily because many of their "tax professionals" are receive a cursory education consisting of a few weeks.

A true tax professional carries a CPA or EA certification. Generally this is the qualification you should be seeking when looking for a real professional. Generally, seeking out an independent CPA/EA in your area would be advised over the big box shops.

But anyways, if you're interested in a DIY approach, there are free options out there (or at least very cheap).

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Zerole00 OP t1_j2a3g1j wrote

>Just be aware that big box shops (like LibertyTax, H&R Block, Jackson Hewett, etc) do not generally have the best reputation. It's primarily because many of their "tax professionals" are receive a cursory education consisting of a few weeks.

Thanks, yeah I just went to him to fix my own tax situation since I had to do a correction and didn't want to do all the calculations manually (I normally file with FreeTaxUSA or Credit Karma but I couldn't do corrections with them). Figured I'd just ask him while I was there.

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biondablonde t1_j2a2ecw wrote

Is tax being withheld from their pensions and SS? If so, it may be worth filing to get that money back. At their income level they will be eligible to Efile for free - no need to pay an accountant or tax preparer for such a simple return.

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Zerole00 OP t1_j2a6rrw wrote

I'm not seeing any deductions for my mom in the benefits statement I got in the mail:

-Medicare Medical Insurance

-Medicare Prescription Drug Plan

-US Fed tax withholding

-Voluntary Fed tax witholding

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biondablonde t1_j2ai9z5 wrote

If you're seeing zeros by the Fed tax withholding lines, then probably no withholding on those SS payments. Do you have (or can you get) statements for their pensions?

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pancak3d t1_j2a2vc3 wrote

Based on the income here they probably don't meet the requirement to file, the income cutoff is $28,700 for married and >65. The reason is simply that the standard deduction would bring their tax liability to zero.

It could be advantageous to file to get taxes back which are being withheld.

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tdloader t1_j2a2dhq wrote

my wife and i dont pay taxes because of her age and the amount of money she makes, but before you do that go to a free tax consultant and ask; we have a group of them every year around tax time at the local mini mall here so look them up on line and see if you have one near you. i hope this helps ;-)

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NoFilterNoLimits t1_j2a45a9 wrote

Double check with SSA but the default is to not withhold taxes from that, so in most cases they do not need to file and would get nothing back

But, it’s always easy to answer the questions on FreeTaxUSA and see what the actual return would be. It costs nothing but a little time

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Zerole00 OP t1_j2a5ha1 wrote

Yeah I would have done it from the start if I had been receiving their tax forms but they never sent them to me and there are some barriers with me creating online SSA accounts for them (see my other post). My parents do not know how to use a computer.

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vynm2 t1_j2cbqk2 wrote

A couple things:

  1. since you're talking about them not filing since around 2016, you'll need to check the filing thresholds for each year and compare their income to those thresholds to determine if they should have been filing. (You can find these in the 1040 instructions for each year. For 2018-2021, they're probably fine if they only had SS and minimal other income because the standard deduction increased substantially in 2018 and has been increasing since then.
  2. They may want to file 2020 and 2021 tax returns if they didn't get the stimulus checks. Most SS recipients did, though, so this may not be necessary.
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