Wednesday, April 9, 2014

You Are NOT Immortal: Death and Taxes

The first year that I volunteered for AARP Tax-Aide, I got all of the clients with Railroad Retirement Statements instead of Social Security. This year I seem to be getting all the widows.

Unfortunately, there are men who act as if they're immortal and their wives will never need to know how to file a tax return (or even use an ATM card). And men tend to die more quickly than women--I can think of three right off the top of my head in the "dead before they hit the ground" category. Then the widows land in front of me: grieving, stressed out, and clueless. I spent a good deal of time one morning telling a woman that she is not stupid for not knowing things her husband never told her. (I refrained from expressing my opinion of her husband's intelligence.)

There are things that your wife (or husband, if you have a marriage where the wife handles the finances) really needs to know. You are not immortal. Even without a sudden fatal heart attack, there are always traffic accidents and other ways in which to die "suddenly and unprepared." Having had one parent die instantly with no warning ("he can't be dead; I was talking to him this morning!") and the other die after a nine-year struggle with cancer, I can say from personal experience that sudden death is much harder on the survivors. And decisions--or non-decisions--made beforehand can make it even worse.

This year I have seen widows who didn't even know that they needed their social security number (as well as their late husband's) to file a tax return. Death, incidentally, is the exception to the "your marital status on December 31 is your marital status for the tax year" rule. If your spouse dies during the year, your filing status is still "married filing joint" for that year. This means that you need to take both your social security cards as well as documentation of any income earned by either of you during the year. This means W-2s if either of you had a job, Form SSA-1099 if you got Social Security payments, Forms 1099-R for any IRA or pension distributions, bank and brokerage statements (1099-INT, 1099-DIV, 1099-OID, 1099-B, 1099-MISC, and/or an year-end brokerage statement that replaces all of these forms), Form W-2G if you gamble for recreation (and if you must do that, be sure to have the casino or whatever withhold taxes from your winnings--see my blog entry from 2012 about gambling). You should also bring the tax return from the previous year, especially if you have a long-term capital loss carryover--and if you don't know what this is, you really need to bring the tax return. If you want direct deposit of your refund bring a check, not a deposit slip, from the account you want the money put into. (Deposit slips have different routing numbers than checks, which is one of the many odd little details that make no sense, so it has to be a check.) If you itemize deductions, you need things like mortgage interest statements, property tax bills, records of charitable contributions, and medical bills, although medical expenses must be both unreimbursed and greater than at least 7.5% of your adjusted gross income in order to be deductible.

If in doubt, bring the paperwork. It's better to have things the tax preparer doesn't need than to be missing something they must have. One woman brought in birth certificates for both spouses, their marriage record, and their naturalization papers. I didn't need those particular documents, but she certainly had everything I did need.

But really, your finances and taxes are something best discussed with your spouse while you're still alive. Just do it.