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Year after year, as tax season approaches, many senior citizens who have come to me for estate planning purposes tell me they do not need to file a tax return because they do not make enough money at their part-time jobs.  However, I oftentimes urge them to file a tax return for various reasons.

The most important reason is to get money back from the IRS.  Think about a typical part-time job.  Consider this example.  A person may work fifteen hours per week for not much more than minimum wage.  Minimum wage in Illinois in 2007 was $7.50 per hour.  For a person who works 15 hours per week for 50 weeks (assume you take a couple of weeks for vacation), that is $5,625.00 in earned income for the year.

For 2007, a single person who is over the age of 65 does not need to file a tax return if they made less than $10,050.00.  However, did the employer withhold taxes from the paycheck?

If so, filing a tax return will allow you to get back the taxes that were withheld by your employer.  This is money in your pocket.

If you owe no taxes in 2007, you should speak with your employer about changing your withholding for 2008 because an employer does not need to withhold taxes if you had no tax liability in the previous year and you do not expect to have any tax liability in 2008.

Another reason to file a tax return may be to obtain an “Elderly Tax Credit”.  Although this credit is likely very small, it gives individuals over the age of 65 a tax credit simply for being your age.  This tax credit is reduced by Social Security and a percentage of your adjusted gross income (i.e, adding together wages, interest, pensions, etc. minus certain above-the-line deductions).  Therefore, the larger your Social Security and income, the less your tax credit will be.

Finally, another reason to consider filing a tax return is simply to have a record of your earnings.  There are times that you may need to demonstrate your past income to obtain certain income-based governmental benefits like Medicaid.  The tax return provides clear proof of past income because you have filed the tax return with the IRS under penalties of perjury.  The tax return is the easiest way to re-create your income history.

Therefore, do not dismiss the idea of filing a tax return until you have considered your situation carefully.  Just because you do not have to file a return does not mean that it would not be to your benefit.