Doing Taxes for Seniors

[friar1610]

I have been volunteering about 20 hours a week for the past month doing income taxes for (mostly) seniors in a relatively HCOL area in MA. This is part of a nationwide program the main thrust of which is saving seniors with relatively simple tax situations a few bucks in tax prep fees. This is the first year I’ve done this.

A few observations:
- I’m really surprised how many clients (of both genders) are either widowed or divorced.
- I’m surprised how many people/couples live on $20K - $40K per year.
- I’m surprised how few people have substantial savings and/or investments (based on their 1099-DIVs/INTs.)
- I’m surprised, even among people in their late 60’s - mid 70’s, how modest their pensions are.
- Home values seem to be in the $300’s for those who own. These would be small, older Capes and ranches that they’ve probably lived in forever.
- Charitable donations are lower than I would have expected.
- SS comprises the majority of income for most people.
- Surprisingly few of the men are veterans.
- The most pressing question isn’t “how much are my taxes?” It’s “Do I get a refund and if so how much?”
- All are very appreciative of this service.

I certainly don’t pretend that this small slice of the older population is representative of that demographic as a whole. And the high rollers who have CPAs would present a different profile, I’m sure. But I’ve found it quite interesting to get this view of so many salt-of-the-earth type people who are seemingly enjoying modest but happy retirements without worrying about a lot of things we on this site and those of us on Bogleheads discuss to death. It’s been a privilege to save them a few hundred bucks getting their taxes done.

 

[Sunset]

I do some really old seniors tax returns as well, age 80+ (my sample is very small as is just relatives).

Some tricked by their friendly bank, to use the banking finance associate to buy an annuity and stick their few $100K into to not pay taxes, so it does not show on tax returns, while it earns piddly 1% net for a decade.

One senior is actually brilliant, he trickled IRA money into his ROTH over decades, so now he looks like he has zero savings as nothing is taxable.

Other's have way too much money sitting in a bank (b&m) savings account, earning 0% , so not showing as a taxable entry.

All are alone....

All mainly live off SS, in their paid off house.

 

[SecondCor521]

I do the AARP Foundation Tax Aide program, which is primarily intended for seniors but accepts anyone whose return is within our scope (which is surprisingly broad although this year we're not doing any Schedule Cs).

OP's findings generally match with what I see.

In addition I see:

- Lots of people who seem basically normal on the surface but after five or ten minutes of talking clearly have some moderate personality/intelligence deficiency.

- Lots of people who have "friendly" brokers who put them in a mix of 10-20 active funds / annuities / etc. More people this year are having their money moved around - I've seen a number of "total distribution" boxes checked on 1099-R. I assume this is to generate fees but can't be 100% certain. Very few have the majority of their dividends as qualified.

- Lots of people with lots of ordinary bank interest. Like $800 on a 1099-INT from a local credit union, which means they have a lot of money but it's all in CDs or ordinary savings.

- Lots of non-taxable or minimally taxable SS, so taxable income is in the $20K to $40K range.

- I do see some people who have four or five pensions between the two of them. These people tend to be on the ball, organized with their money, understand taxes more than most, and seem more financially stable than most of our clients (tend to own rather than rent, long term marriages, less personality deficiencies, etc.).

 

[VanWinkle]

AARP tax aide here as well. I agree with most of the observations of the OP.
I would add that I am amazed at how many widows are living on less than 20,000 per year in their own home. They seem happy for the most part and consider themselves lucky to have the assets on their tax return.

I am also amazed at how many have modest gambling winnings to go along with their very low income. Seems they really can't afford to gamble to me.

I also note that assets are low and most have a financial advisor helping them keep their costs high and growth to a minimum.

It is difficult to keep my mouth shut when I see returns last year in the 2-3% range with stock funds being churned on a regular basis.

We are doing schedule C this year in my area.

VW

 

[Jerry1]

It is difficult to keep my mouth shut when I see returns last year in the 2-3% range with stock funds being churned on a regular basis.

I’m sure it’s not allowed to give advice, but is it possible to give them a suggestion of a book to read or something that would point them in a better direction? I bet it is extremely hard not to say something.

 

[38Chevy454]

Just want to say a measure of thanks to all of you who volunteer time and help the low income seniors with their taxes. It really does seem sad that a basic tax return is a couple hundred dollars expense, when it is so relatively simple to fill out. $200 is a substantial cost to the low income crowd.

I think some common themes here are:
1. Own their house, so housing costs are much less than renting or mortgage expense.
2. Lack of financial awareness and not maximizing the potential returns on the investments. Combine with FAs that are not in the client best interest.
3. They are probably the last generation that will have pensions as a more common income source in retirement.

 

[Sunset]

AARP tax aide here as well. I agree with most of the observations of the OP.....

I am also amazed at how many have modest gambling winnings to go along with their very low income. Seems they really can't afford to gamble to me.
....
VW

I wonder if these people with gambling winnings are only claiming the winnings, and not the offsetting losses.

I could be totally wrong, as I only gamble in the stock market

It would seem to me, a casino only sends a person a statement when they win. So they have gambling income to show, since many do it for fun, they probably don't track their losses

 

[cathy63]

My group has been back in business for three weeks -- late start due to Covid restrictions, then we had to work outdoors until cases got low enough a few days ago, and we got canceled by rain for a few days -- so it's been a rough start. Most other sites in our area aren't open, so we typically have twice as many people as we can possibly help standing in line when we arrive. It's hard to send them away.

I do the AARP Foundation Tax Aide program, which is primarily intended for seniors but accepts anyone whose return is within our scope (which is surprisingly broad although this year we're not doing any Schedule Cs)...

Is there a local reason why you guys aren't doing Schedule C's? We don't see them often, but we do them if they're in scope.

I wonder if these people with gambling winnings are only claiming the winnings, and not the offsetting losses.

I could be totally wrong, as I only gamble in the stock market

It would seem to me, a casino only sends a person a statement when they win. So they have gambling income to show, since many do it for fun, they probably don't track their losses

Losses are only deductible on Schedule A and very few of our clients can itemize. I always ask about them if I see lottery or casino winnings, but it doesn't help many people.

The thing I'm seeing a lot this year is people who don't have a filing requirement but want to file anyway. Some think that they can get the next stimulus by direct deposit instead of debit card if they file a $0 return (they can't). Others just think they "should" file because they always have. We try to kindly explain that if we do their returns, we're turning away someone else who really does have to file, but some just have a hard time letting go.

 

[Souschef]

I also volunteered as an AARP tax aide. It was very rewarding to help people free of charge.

 

[scrabbler1]

While I'm not a tax aide for seniors in general, I did my 90-year-old dad's taxes for 2020. I was going to do them for 2019 but that year's taxes had a few too many wrinkles for me to figure out on short notice last June and into early July. So he had his paid preparer do them.

After studying his 2019 returns, I was able to figure out the wrinkles which would continue into 2020. However, one thing made it really easy to do his taxes for 2020 - no RMD. This reduced his taxable income to zero, which of course reduced his taxes due to zero. This was true for both his federal and state returns. No checks to mail out, no refunds to claim.

His 2021 federal return will have the RMD back, and that will result in a small tax liability. I will have to make sure his itemized deduction will not exceed his standard deduction (this did not happen in 2019 for his federal return). Our state doesn't tax his RMD so he will continue with the double-zero on the state side. I have arranged with his FA to withhold an appropriate amount from the RMD which will slightly exceed his anticipated tax liability so he won't have to pay anything; I'll roll over the small refund into the next year.

And I save him about $150 or so from the paid preparer fees. He can buy me a dinner and we'll call it even!

 

[VanWinkle]

I’m sure it’s not allowed to give advice, but is it possible to give them a suggestion of a book to read or something that would point them in a better direction? I bet it is extremely hard not to say something.

I almost have to gag myself to keep from saying something about how
to invest and get at least the market return.

 

[REWahoo]

I almost have to gag myself to keep from saying something about how
to invest and get at least the market return.

I did the volunteer tax prep for seniors gig for a year and feel your pain. I so wanted to help the folks who were obviously being taken advantage of but, aside from being told not to do so by Adolph Hitler and Frau Blucher (the two who ran the local program), I realized:

1. Few, if any, would listen to investment advice from some old guy doing their tax return who they didn't really know.
2. Most of them would need assistance/support to pry their investments out of the clutches of an FA who almost certainly saw them as easy money and had become their trusted friend. How many had someone to help make this happen?
3. Chances are anything I said about how their "FA friend" was not taking good care of their investments would only upset them and not result in any positive change to their financial health.

 

[frayne]

I also volunteered as an AARP tax aide. It was very rewarding to help people free of charge.

+1 and most if not all were very appreciative of the service. If I saw something that I thought was suspect, I'd mention they needed to have someone else check on their investments. Most if not all of the abuse was little old ladies get their investments churned.

 

[SecondCor521]

Is there a local reason why you guys aren't doing Schedule C's? We don't see them often, but we do them if they're in scope.

Our local leadership (state leader I think? Maybe just the regional leader) decided that we were not trained well enough on all of the coronavirus-related tax changes that affected Schedule C's and that they would rather we not do any schedule C's than potentially prepare an inaccurate return.

The lack of training, in turn, was because we did not have any in-person training classes in December/January like we normally would have.

It wasn't stated, but the thought may also have been that we were going to have a much lower capacity to help this year and the demand would be higher this year, so we might as well choose to restrict our help to those without Schedule C's. It has turned out to be true that our throughput is lower and we do have more demand than supply. Although I think we've generally had more demand than supply, but this is only my second year.

There was nothing specific about my region that led to this - it's not like my state has any sort of special Schedule C situations or rule. It's just general coronavirus-related impacts.

 

[friar1610]

OP here. Lotsa good comments/experiences that resonate with me. On the 1099 INT/DIV side, I see a LOT from Fidelity. I’m in MA so that makes sense. I’ve yet to see anything from Vanguard (except on my own return). Like many of you, I cringe when I see annuity distributions from insurance companies and wonder what kind of crappy, expensive contract these poor folks were sold. Maybe they went into them with their eyes wide open and bought SPIAs but who knows?

At our location we have very strict COVID controls, so the intake is done by one person, the return by another, the quality review by a third and finally another for the debrief/signing. Therefore, as a preparer, I’ve had very little direct contact with the clients themselves. So I’ve not had the temptation to give advice directly - probably would have been fired by now if I could.

 

[Philliefan33]

Another AARP TaxAide volunteer here. We are operating with the scanning model, and as one of the few fully-vaccinated volunteers I feel obligated to be one of the people onsite for scanning/ printing. I scan three days/week (two at one site, one at another site) and I’m glad it’s almost over. DH works on returns at home (using the scanned documents) and I have been doing quality reviews for him and a few others.

I am the Training Coordinator for our district. The state coordinator started having Google Meets last June to come up with a plan for remote training for our volunteers. It’s been a long slog, with a lot of effort put in by all of the volunteers to help relatively few taxpayers. Despite the extension of the federal filing deadline, our site is not staying open past our originally schedule closing date. We are all tired.

Most years this is a very rewarding volunteer activity. Maybe not so much this year.

 

[friar1610]

Another AARP TaxAide volunteer here. We are operating with the scanning model, and as one of the few fully-vaccinated volunteers I feel obligated to be one of the people onsite for scanning/ printing. I scan three days/week (two at one site, one at another site) and I’m glad it’s almost over. DH works on returns at home (using the scanned documents) and I have been doing quality reviews for him and a few others.

I am the Training Coordinator for our district. The state coordinator started having Google Meets last June to come up with a plan for remote training for our volunteers. It’s been a long slog, with a lot of effort put in by all of the volunteers to help relatively few taxpayers. Despite the extension of the federal filing deadline, our site is not staying open past our originally schedule closing date. We are all tired.

Most years this is a very rewarding volunteer activity. Maybe not so much this year.

OP here. Well, we finished up this week and I turned my Chromebook lap top and 21” monitor in this morning. Our model was very much like that described above.

A few final reflections on the experience:

- Don’t think I ever got the ergonomics of working with both a laptop and a separate big screen correct. (Had the fill-in forms on the laptop and the clients’ source docs on the monitor.) I’ve had a stiff neck for about 2 months, presumably from moving my head back and forth. Tried a few variations in positioning both me and the hardware, but nothing seemed to help.

- As someone who has volunteered a lot in retirement, I found this more intense than anything I’ve done before - actually a lot like a j*b. Two-six hour days at the site plus 10 or so hours working from home per week was, in retrospect, a little more than I bargained for. (But most other volunteers did at least that.)

- I looked forward to getting returns that were more than the run-of-the-mill senior profile. A few consecutive SS and small pension income and no investments could get boring.

- Overall, a very good experience. Will I do it next year? Don’t know yet. If I do I’ll have to find some exercises to start training my neck muscles starting a month or two in advance. And convince my wife that making a brown bag lunch for me twice a week really is an enjoyable experience. But for a time of year when the weather in New England can be awful at worst and more often dreary than warm at best, it’s an excellent activity to keep busy, use a bit of my (dwindling) brainpower and help other people who have better things to do with their money than give it to a store-front tax preparer.

 

[Souschef]

I also used to do taxes for seniors for a number of years. It got to a point where I was unwilling to spend 3 full days going over what we had to do.

I admire all the present volunteers working under the difficult situation that the virus has caused.
So now I just do mine and our son's on TT.