Thursday, May 23, 2019


Last November I turned 65.  A milestone, and significant for many reasons.  I can now get a senior discount at stores, movies theatres and restaurants. 

Mark Twain told us, “Age is an issue of mind over matter. If you don't mind, it doesn't matter.”  However, when it comes to taxes age does matter.

I ask for the date of birth of all my 1040 clients, as well as that of their spouses and dependent children.  Why?  Not because 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 specific ages.

+ Taxpayers age 65 or older receive an increased Standard Deduction

+ 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.

I remember when a person turning age 65 would get an additional personal exemption, something that no longer exists under the GOP Tax Act.  (FYI, some states, including NJ, still provide an additional personal exemption for a person age 65 or legally blind).

One day back in the late 1980's, 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, giggled, 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”.

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

+ To be considered your “qualifying child”, and qualify as a dependent for several additional tax benefits, the “child” must be 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.

+ 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, too, 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.

+ The Child Tax Credit applies to dependent children under age 17 at the end of the year, and the new Other Dependent Credit applies to dependent children age 17 and older.

+ The "Kiddie Tax" on "unearned income" applies if your child is under age 19, or under age 24 and a full-time student, the same rules for a "qualifying child".  

States also have certain age-based tax benefits.  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.  And 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 post-secondary institution”.  NY has an age-based “Pension and annuity income exclusion”.   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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