Tax Filing Question

[TwiceHorn 31539]

On occasion, the idiocy of my mother in law astounds me.  She was a VP (one of the more honorary titles, operations not lending or finance) of a major bank.

She has been retired for about 10 years and completely mismanaged her 401k, making withdrawals to help my SIL and her complete deadbeat of a husband keep their house, which of course failed.

Anyway, after that debacle, paying her property taxes became an issue, so she found out she could defer them and did so.  Fine.

Well come to find out, she hasn't filed an income tax return for something like five years because she didn't think she had to file income tax now that her property tax was deferred. WTF?  WTFF? Da fuq???

She lives off social security, about $500/month in a pension, and a tiny amount of interest/capital gains on an investment account.

I very seriously doubt she owed any taxes during that time.

Should she file a tax return this year and consider filing them for the last five or whatever?  Or blow it off?  She probably won't live but five more years or so.

Edited March 26, 2019 by TwiceHorn

[Spur08 382]

Man, I don't know the answer to this but I'm dealing w a similar idiocy. (No derail) My recently forced retired dad is making some of the dumbest decisions I've ever seen him make in my life (an otherwise very reasonable man throughout my life). I don't know of it's dementia, medications, stress, some mixture of the precious, or something else. It's incredible frustrating to watch him make the same mistakes for the past 3 months. His drinking has increased to the point where my mom is this close to walking out on him after 40 something years.

[TwiceHorn 31539]

Sorry, man.  Getting old aint for sissies.  Either the old folks or the ones around them.

This might be something @Brew could help with.

[Brew 3049]

If you are under the standard deduction and personal exemption amounts in income, you don’t have to file a return if there was no withholding on any documents. A lot of olds on SS don’t file.

[TwiceHorn 31539]

14 minutes ago, Brew said:

If you are under the standard deduction and personal exemption amounts in income, you don’t have to file a return if there was no withholding on any documents. A lot of olds on SS don’t file.

It was not, but she would not be above 50% SSI taxation and so owes no tax during the relevant periods.

It would be a minor pain in the ass to file those returns/collect those records.

What, if any, penalties are there for failing to file a return when there's no taxable income?

And would filing one now create more of a problem than just blowing it off for the rest of her life.

Edited March 26, 2019 by TwiceHorn

[Lobwedgephil 1139]

She probably should just to be safe as you said she's been making withdrawals. But I can't imagine it would make a material difference, but she is creating taxable events. 

[TwiceHorn 31539]

No she hasn't been making withdrawals from her 401k.  She blew her 401k, which led to her deferring property taxes because poor.  Which led to the staggering conclusion that she didn't need to file tax returns.

She's been living off the same income for her entire retirement and she filed tax returns.  So the "I'm not earning income" reason doesn't apply.

Not only did she withdraw the bulk of her 401k to support SIL and grandchildren, she didn't know each withdrawal was income, so had to liquidate the damn thing to pay the taxes she owed.

Then came deferral of property taxes.  Then the no-return notion.

Flabbergasting.  Some of it, I have to think, is some type of senility.  She has always been fucking awful with money.  FIL divorced her because of it.

Wife isn't great with money or financially sophisticated, at least until we got married.  But I have gained some insight on how poors (neither of her parents are poor poor) get that way out of pure ignorance and example set by parents.

Edited March 26, 2019 by TwiceHorn

[Lobwedgephil 1139]

So she owes property taxes not income taxes? Entirely different ballgame that I am not very familiar with. Good luck, hope others can help out. 

[TwiceHorn 31539]

No no she doesn't owe either. When she deferred property taxes, she stopped filing tax returns. 

 

In Texas once you are over 65 you can defer payment of property taxes, which will become a lien on the property. 

 

If she owed taxes I'd say she needs to get right with the IRS but I don't believe she does. 

Edited March 26, 2019 by TwiceHorn

[Lobwedgephil 1139]

39 minutes ago, TwiceHorn said:

No no she doesn't owe either. When she deferred property taxes, she stopped filing tax returns. 

  

In Texas once you are over 65 you can defer payment of property taxes, which will become a lien on the property. 

  

If she owed taxes I'd say she needs to get right with the IRS but I don't believe she does. 

But what does she owe in property taxes? You can cap them at 65, but you still have to pay them. 

[Kennythetiger 9471]

I'd go ahead and do what you can to file those returns.  Might be easier while she's alive than after she's dead and you and your wife are trying to clean up her paperwork shit.  If she's receiving small dividends and a small pension, those companies will have been sending 1099s to her.  If you can't find those from past years, go to irs.gov and search for something called a "wage and income transcript", or something similar.  I'm too lazy to look up the exact name, but I have older clients who lose their stuff from time to time, and the IRS will re-create their taxable income for you if you file a request.  It's a copy of the 1099s from social security, her investments, and her pension.  You can request these for several years back.

 Like you have already figured out, most likely she will owe no tax, but it might be easier to do this now than deal with it after she's dead and something unexpected pops up.

Edit- not as lazy as I thought- here's a link:  https://www.irs.gov/individuals/tax-return-transcript-types-and-ways-to-order-them

Edited March 26, 2019 by Kennythetiger

[Brew 3049]

7 hours ago, TwiceHorn said:

It was not, but she would not be above 50% SSI taxation and so owes no tax during the relevant periods.

It would be a minor pain in the ass to file those returns/collect those records.

What, if any, penalties are there for failing to file a return when there's no taxable income?

And would filing one now create more of a problem than just blowing it off for the rest of her life.

If she owes no tax based on your calculations, there is no requirement to file. You are only required to file if you have tax calculated. There is also no penalty if you file and she doesn’t owe anything. All penalties are based on income tax due.

[Brew 3049]

For quick math if she is getting $6000 a year on the pension and $1000 in other income, her social security benefits would have to exceed $36000 based on today’s numbers for any of those benefits to be taxable. If they don’t exceed that in any of the years you are looking at and the other income is consistent, you don’t have to file anything and can just leave it. Again, there is no requirement to file a tax return if your taxable income is below the deductions give . If the IRS calculated that she owed anything on the older years, she likely would have received a notice by now.

I get people every year that I advise to stop filing unless something changes.

[Jerry Callo 8731]

If you or your wife is to be executor of her estate, I'd clear up whatever needs to be cleared up now.  Otherwise, la dee da.

[Apep 645]

4 hours ago, Brew said:

For quick math if she is getting $6000 a year on the pension and $1000 in other income, her social security benefits would have to exceed $36000 based on today’s numbers for any of those benefits to be taxable. If they don’t exceed that in any of the years you are looking at and the other income is consistent, you don’t have to file anything and can just leave it. Again, there is no requirement to file a tax return if your taxable income is below the deductions give . If the IRS calculated that she owed anything on the older years, she likely would have received a notice by now.

I get people every year that I advise to stop filing unless something changes.

She should have received a notice by now is a key point. If her finances are so disorganized, there is no real way to tell what is going on without pulling her IRS transcript. If she won't owe, it might be better to extend 2018 and then hire someone after April 15th to look at her transcript and file her 2018 taxes.

[TwiceHorn 31539]

Stuff isn't that disorganized, it's pretty simple.  She gets a 1099 from SSA (or whatever they call the equivalent), from the bank for her little pension, and from the investment.  All totaling up to not much money, ie less than the 36K Brew mentions.

Without the tax transcript, it would be something of a pain to dig all those up.

She won't leave any estate to speak of, so that's not really an issue.

[TwiceHorn 31539]

Thanks all.  The IRS has been getting hit with various 1099s for all this time and has yet to peep, so I am thinking she's ok and that filing now might create more of a shitstorm.

[luke duke 6414]

You should let her move in with you.

[Kennythetiger 9471]

I agree