How to Face The Income Tax Issues
The loss of a loved one may leave you facing overwhelming responsibilities, especially those that can’t and won’t go away. High on that list: income taxes.
The death of your spouse or a family member can leave you facing many duties you must attend to, from making final arrangements to just trying to cope with everyday living. And the thing furthest from your mind at this already emotional time is probably dealing with income taxes.
On the seemingly endless list of tasks that require your attention, income taxes should be near the top because they aren’t going to go away. Now, the Internal Revenue Service and your state taxing authorities are not the heartless ogres they’re often made out to be. They will be sympathetic to your situation — for a while. But eventually they expect to be paid what is due and it’s your job to make sure that happens.
You are prepared for the tax collector
If you already managed the income taxes in your household before the loss of your loved one, then you already know what needs to be done and when. It may just take a bit more effort to focus on that task, and perhaps having someone like another family member help you could benefit you greatly at this trying time.
Starting the tax preparation process earlier than you may have in the past can be beneficial. It can provide you more time should your grieving — a natural and necessary part of the healing process — interfere with your concentration.
You’ll also want to keep in mind that your loved one’s death will undoubtedly have an impact on how your income taxes are prepared. Having that extra time will enable you, a family member, friend, or tax professional to complete the necessary forms correctly. Because during an already stressing time the last thing you want is a notice from the IRS that your return was done incorrectly.
You are not prepared for the tax collector
If the person you have lost was the one who took care of doing the taxes, then you are faced with a more challenging task. What information do you need? Where is it located? What are the deadlines? How can you possibly get it all done correctly and on time?
First, take a deep breath. There is plenty of help available, including that from taxing authorities although during tax season their resources are going to be stretched and they may be difficult to reach.
A good way to start is to locate your tax returns from the previous year. Likely those forms are put away in your loved one’s files. Or, they may be in electronic form and stored in a computer.
Once you have those forms, review them to see what information the government is looking for. This will include your sources of income, and any deductions your household may qualify for. If your loved file used the simpler “EZ Short Form,” the paperwork you need to file your taxes will be minimal.
Also attached to the previous year’s tax forms may be documents from banks, stock brokerage firms and the like that indicate how much income you had. Most of these documents start showing up in your mailbox shortly after the winter holiday season and will continue to do so through January and February, so keep your eye open for important-looking envelopes to arrive.
By the end of February all your necessary tax information should have shown up. If something appears missing check the previous year’s documents to see if there is a phone number you can call. Or go on-line, find that company’s website and look for contact information there.
For banks and financial institutions their customer service center phone numbers are usually prominently displayed. If you own stocks and bonds or mutual funds that paid you dividends in the form of checks or direct deposits to your bank account, go to those companies’ websites and look for a link labeled “investor relations” or something similar.
With your account numbers and other information in hand when you call, a representative should be able to send you either a replacement tax information document in the mail or e-mail you an electronic form.
Getting your taxes prepared and filed
Not only are income taxes inescapable, the tax laws change every year without fail. Rules are modified. Deductions come and go, or increase or decline. So it’s easy to get confused and make errors. That’s why during this already incredibly stressing time during which you must deal with the death of your loved one, it makes sense to reach out for help from others.
That help can come in the form of a family member or friend, community service and outreach groups, and professionals.
If you approach a family member or friend, it’s critical that they know how to prepare a tax return correctly so that you pay neither too much nor too little tax. If they’ve had difficulties in the past with their own tax returns, then they’re probably not your best bet.
In many cities accounting, bookkeeping, and tax professional associations offer free help at tax time. Public notices of these free services sometime appear in the newspaper or on the radio or TV. Check the Internet or local city directory to see if such groups are active in your region. Another place to check is your public library, as non-profit and volunteer organizations often provide free tax services there as well.
Not surprisingly, the IRS and many state tax agencies have help lines you can call although they will be extremely busy during the tax season.
And finally, there are many professional tax preparers who stand ready to help you. These range from independent practitioners and small tax offices, to nationwide firms that advertise heavily on TV and in publications, and who set up temporary offices in large retailer locations.
Whoever you choose, first and foremost make sure they are trustworthy, as you will be giving them access to your highly sensitive financial information.
NOTE: Another option you might consider is tax preparation software. All tax software publishers are required by federal law to provide free tax preparation services for your Federal income taxes (usually for simple “EZ” returns). Most of these companies earn their money when you use their software for more complicated “Long Form 1040-A” returns, and when you transfer information from your federal return to your state return, and that’s fair. Be aware that you are not required to use their state tax preparation services, and that recently the same publishers have begun offering free “EZ” state tax filing.
It’s important to remember that even though you have lost the love of your life, the requirement to file income tax returns remains. So give yourself plenty of time to research which route you’d like to take and get the process underway.