Wednesday, May 4, 2016


I need to know the date of birth of all my 1040 clients, as well as that of their spouses and dependent children.

Why?  It is not that I am nosey.  And I do not send out birthday cards to all my clients.  There are several federal and state tax benefits and applications that take effect, or disappear, at certain ages.

Perhaps the most well-known age-based tax benefit is the additional Standard Deduction amount that is allowed for a person who is age 65 or older at the end of the year.  This additional Standard Deduction amount also applies to a taxpayer who is legally blind.  For 2016 the additional Standard Deduction amount for the age 65 or older or blind is $1,250 for married individuals and $1,550 for Single and Head of Household.

Back in “the day” a person turning age 65 would get an additional personal exemption, currently $4,050 for 2016 returns.  But this was changed to an additional Standard Deduction, effective with 1987 returns, via the famous Tax Reform Act of 1986.

One day back in the late 1980s, when I was still working occasionally with my mentor James P Gill at his storefront office in Jersey City during the tax season, while in the course of preparing the return for a woman Jim happened to say-

“Now be sure to tell us when you reach age 65.”

The client blushed, chuckled, and told Jim –

“I’m 70.”

The very next morning we hung a sign in the waiting area of the office that read “PLEASE TELL US WHEN YOU ARE AGE 65”.

Some states, including NJ, still provide an additional personal exemption for a person age 65 or legally blind.

You can take a distribution from a retirement account - like an IRA, SEP, or 401(k) plan – without having to pay a 10% penalty once you reach age 59½.  And some distributions from a qualified retirement plan (not an IRA) are penalty free once you reach age 55 or age 50.  In these cases the actual date of birth, and not just the year, are important.

If you are age 65 or older the AGI exclusion for medical expenses on Schedule A is 7.5 percent. This applies on a joint return even if only one spouse has reached 65. For those under 65, medical expenses are deductible only if they exceed 10 percent of AGI.  This applies for tax years through 2016 only.  For 2017 the 10% exclusion applies to all taxpayers.

It is important to know the date of birth of dependent children because –

ü  You can claim a exemption for a dependent child under age 19 at the end of the year, or under age 24 at the end of the year and a full-time student during any part of 5 months during the year, regardless of the amount of the dependent’s income.

ü  The Credit for Child and Dependent Care Expenses, and the pre-tax treatment of Child Care FSA payments, apply only to a dependent under age 13.  Here the actual date of birth is important, as the credit or exemption can be claimed on expenses incurred prior to the child’s 13th birthday.

ü  The Child Tax Credit applies to dependent children under age 17 at the end of the year.

States also have certain age-based tax contingencies.  A NJ taxpayer who was 62 or older on the last day of the tax year may be able to claim a Pension Exclusion or Other Retirement Income Exclusion on the state return.  NY has an age-based “Pension and annuity income exclusion”.  NJ allows an additional personal exemption for a dependent child under age 22 at the end of the year who is a full-time student at “an accredited college or postsecondary institution”.  NJ requires that you enter the year of birth for all dependents on the NJ-1040, and NY requires the actual date of birth for all dependents.

The date of birth is also necessary to access needed state information online.  NJ asks for one’s date of birth to submit a return directly to the NJ Division of Taxation online, without using tax preparation software or a third-party, via the NJWebFile system, to download a Form 1099-G for state income tax refunds, to find out the amount of the NJ Homestead Benefit issued to a qualified homeowner, and to access a record of estimated tax payments.

So be sure that your tax professional knows your date of birth, the date of birth of your spouse, and the dates of birth of all of your dependents.


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