Taxes Season 3

This was my third season as an AARP volunteer tax aide…and my third post about my experiences. I volunteer two days a week from February 1 to tax day at two different senior centers which draw from different socioeconomic strata: one is definitely middle class; the other has many clients living on very little.

I began the season wondering how the Big Beautiful Bill would impact our clients. Since most are over 65, I expected the new $6000 senior deduction to have a big, across-the-board impact. Many came in asking about it: They had either heard about the “$6000 deduction” or “no tax on Social Security.”  The impact was not as much as I expected. I quickly realized that the income of many clients is so low that they are already paying little or no taxes… another deduction doesn’t matter.

I did see the advantage of a flat deduction versus eliminating tax on Social Security. We have government or railroad pensioners who receive other government retirement, but no Social Security. They were able to benefit. With the phase-out for higher incomes, the BBB hit its target: my middle-income seniors were the beneficiaries.

Since we see few working people, I only saw few examples of “no tax on tips” or “no tax on overtime.”  I had one young married couple where she was a waitress, he was a firefighter, and they had a new baby in 2025. They hit the trifecta: her tips were excluded, as was his overtime. And, the baby was eligible for a $1000 deposit into a Trump account.

The new emphasis by the IRS to eliminate paper checks caused some consternation. We have clients who do not trust the IRS to have their banking information. We try to explain that if they receive Social Security, the government already has their bank info and that electronic filing and electronic deposit/debit are far safer than the US mail. One lady wanted to mail her return so her information would not be compromised if the IRS database was hacked. Eventually she came around when we said that the moment the IRS got her paper return, they would digitize it.

Still some filers insisted we file requesting a paper refund check. One 80-something lady came back a week later with a letter from the IRS which seemed to say she had to establish an on-line account and enter her bank information to receive her $700 refund. Suddenly she was ready to give us her banking info. However, once we file, there is no going back to change to the direct deposit option. Of course, to set up an online account you need an email address and a smart phone with which to verify your identity, neither of which she had. Much searching of the IRS website yielded the tidbit that if you ignore the letter and wait a couple months, they will eventually send you a paper check.

I continue to be shocked at the lack of interest or other investment income among the over 65 crowd. They all have Social Security and most also have pensions and/or IRAs. Many have annuities. But very few have investment income…not even interest from a bank. My conclusion is they are living check to check with no emergency fund. In some cases, the sum of their monthly payments is certainly enough to live on. But in many cases, I wonder how they get by.

I had to wonder about choices. One 70 year old woman handed me three 1099-G statements from a local casino for slot machine winnings. She also had a 12 month summary showing net losses at that casino of $15,000. The $15K was not deductible because she didn’t itemize. The winnings were taxable and resulted in her owing $700. She was still making payments to the IRS on last year’s taxes and her plan to was call the IRS to add the $700 to the balance. She was still working but said she wanted to retire. I tried to explain that playing the slots wasn’t helping.

I did taxes for two young Hispanic brothers, both immigrants but now US citizens, who share an apartment. The older brother is a college graduate working as a buyer, making around $50,000. His younger brother not only works full time making around $32,000 but also goes to college full time. A week later, I had another Hispanic man with a resident alien card. He graduated from college in 2025 and was working part time in a computer department while doing part time gig work through an agency that sends him all over the state doing computer repair work. Now that he has graduated, he wants either a full-time position or to possibly start his own computer repair business. All three guys were clean cut, polite, personable and clearly hard working. I’m trying to figure out how people like them are a detriment to our American society.

The case I struggled with most was an 80-something man who clearly had a good job in his working years which gave him investments and a solid pension on top of Social Security. During our conversation he shared that he had been battling cancer for eight years and was now on immunotherapy which was shrinking his cancer. He gave me a piece of loose-leaf paper where he had gone through his checkbook for 2025 and wrote down checks totaling $23,000 which he had given to a 70 something woman to help her with her expenses. He wanted to know if he could claim her as a dependent. Since she is not a relative and does not live with him, the answer is no, which was a disappointment to him. He said he did not realize how much he had given her until he ran this total. In 2025, he sold some of his investments to free up money to give her. And, 2025 was not the first year for this gifting.

He was clearly conflicted. On the one hand, he felt he was well set and she was in need. On the other hand, he seemed to be feeling trapped. He had shared what he was doing during one of his hospital visits for his cancer treatments. The social worker called the sheriff who paid him a visit. The sheriff asked if this was “romantic,” which he denied. And then the sheriff made sure he was aware that he did not have to give her money. I asked some questions trying to ferret out if this was a scam or a situation of elder abuse. It did not seem to be either: Yes, the woman could be taking advantage. And, his money made it less necessary for her to seek other solutions or resources. But, he knew the woman and her situation and was giving the money voluntarily. I talked to him about setting limits, which he said he has tried to do, but he had not been able to stick to those limits. I’ve thought a lot about him since that day and wish I had more to offer him.

I readily repeat my observation from prior years: this is challenging and sometimes frustrating work. It is also interesting and rewarding. The reward is how thankful the clients are and how much money I know we are saving people who have little.