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THE IRS OWES RETIREES $4,800 AFTER AGE 65 — 5 Refunds Most Seniors Never Claim
Kevin Retires
Overview
This video details five specific refunds that retirees over 65 often overlook, totaling thousands of dollars. These include a new senior bonus deduction, property tax relief, state income tax exemptions on retirement income, waivers for estimated tax penalties, and adjustments to Medicare premiums. The presenter emphasizes that these are not loopholes but legitimate government programs that require proactive application, and failing to claim them results in overpayment. The video uses a case study of 'Helen' to illustrate how these refunds can be claimed, leading to significant financial recovery and ongoing annual savings.
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Chapters
- Government holds unclaimed money due to overpaid taxes and unapplied benefits.
- These refunds require active steps like filing forms or making calls; inaction means the government keeps the money.
- The video will cover five specific refunds for retirees over 65, detailing amounts, forms, and contact information.
- A hypothetical retiree, Helen, could be owed $4,832, with most seniors qualifying for at least three refunds.
Understanding that unclaimed money exists and requires action is the first step to recovering potentially significant funds that can improve a retiree's financial well-being.
The case of Helen, a 67-year-old retiree, who is unaware that the government owes her $4,832.
- A new federal deduction of $6,000 for single filers (or $12,000 for married couples) over 65 was introduced in 2025.
- This deduction is in addition to the standard and existing senior deductions, with income limits of $75,000 (single) and $150,000 (married).
- It is often missed because tax software and preparers may not have been updated, or the information was buried in legislation.
- To claim it, retirees must file an amended federal return (Form 1040-X) within three years of the original filing deadline.
This new deduction can significantly reduce federal tax liability, and missing it due to lack of awareness or outdated software can lead to an immediate overpayment of taxes.
Helen's tax preparer missed the $6,000 senior bonus deduction on her 2025 return, causing her to overpay $720 in federal taxes.
- Most states offer property tax relief for senior homeowners through programs like homestead exemptions, freezes, or rebates.
- These programs reduce property tax by lowering assessed value, capping the bill, or providing direct rebates.
- Eligibility and benefits vary widely by state and county, and almost always require a specific application.
- Retirees often miss out because they are unaware of these programs or fail to apply.
Property taxes can be a substantial ongoing expense for homeowners, and failing to claim available senior exemptions can lead to unnecessarily high housing costs.
Helen, in Pennsylvania, was eligible for a $380 annual property tax rebate but never applied, missing out on $760 over two years.
- Many states exempt retirement income (pensions, IRA/401k withdrawals, Social Security) from state income tax, often with no age or income limits beyond retirement age.
- Tax preparers, especially those handling multi-state returns, may overlook these state-specific exclusions.
- This results in retirees paying state income tax on income that is legally tax-free in their state.
- Amended state tax returns can be filed to recover these overpayments, typically for the last two to three years.
Paying state income tax on income that is legally exempt can be a significant and frustrating overpayment, especially if it has occurred for multiple years.
Helen paid $982 annually in Pennsylvania state income tax on her pension and IRA withdrawals, totaling $1,964 over two years, because the retirement income exclusion was not applied.
- Retirees often face underpayment penalties because withholding from Social Security, pensions, and IRA distributions may not cover their total tax liability.
- The IRS offers a waiver for underpayment penalties for taxpayers aged 62 or older who retired in the current or preceding tax year and had reasonable cause.
- This waiver is requested by filing Form 2210 and checking the appropriate box, but it is rarely communicated to retirees.
- Amended returns can be filed to claim this waiver retroactively if the penalty was already paid.
Unexpected penalties can add to the financial burden of transitioning into retirement, and a readily available waiver often goes unclaimed due to lack of awareness.
Helen was charged a $240 penalty for underpayment in her first year of retirement, which could have been waived by filing Form 2210.
- Medicare bases premium surcharges (IRMAA) on income from two years prior.
- Retirees who recently left high-paying jobs may be paying IRMAA based on their pre-retirement income, even if their current income is much lower.
- Form SSA-44 allows retirees to request that Medicare use a more recent income figure due to a life-changing event like retirement.
- This can eliminate the surcharge immediately, preventing overpayment for 1-2 years while Medicare's automatic recalculation catches up.
This surcharge can significantly increase monthly Medicare costs for recent retirees, and proactively correcting it can save substantial amounts during the transition period.
Helen, having retired from a high-paying nursing job, was paying an extra $95.70 per month in Medicare premiums based on her old salary; filing Form SSA-44 could eliminate this surcharge.
- The video outlines five specific actions retirees should take this week to investigate and claim these refunds.
- These actions involve contacting tax preparers, county assessors, state revenue departments, the Social Security Administration, and IRA custodians.
- Claiming these refunds not only provides a lump sum but also creates ongoing annual savings.
- The system relies on individuals to discover and apply for benefits, highlighting the importance of proactive research and action.
Taking immediate, concrete steps empowers retirees to reclaim their money and secure greater financial stability throughout their retirement.
Helen made five phone calls over one week to initiate claims for all five refunds, recovering $4,832 and setting up over $3,000 in annual savings.
Key takeaways
- Retirees over 65 are often entitled to significant unclaimed refunds from federal, state, and local governments.
- These refunds require proactive steps; inaction means forfeiting money that should be yours.
- New legislation, like the senior bonus deduction, can be easily missed if tax preparers and software are not updated.
- Senior property tax relief and state-level retirement income exclusions are common but require specific applications or awareness.
- The IRS offers penalty waivers for underpayment in retirement transitions, and Medicare allows adjustments for income changes via Form SSA-44.
- Claiming these refunds can provide both a substantial one-time recovery and ongoing annual financial savings.
- Proactive communication with tax professionals and relevant government agencies is crucial for maximizing retirement benefits.
Key terms
Senior Bonus DeductionProperty Tax ReliefHomestead ExemptionCircuit Breaker TaxRetirement Income ExclusionEstimated Tax PenaltyUnderpayment WaiverIRMAA (Income-Related Monthly Adjustment Amount)Form 1040-X (Amended Return)Form SSA-44
Test your understanding
- What is the purpose of the Senior Bonus Deduction, and how can a retiree claim it if it was missed on their initial tax return?
- How do state property tax relief programs typically work, and why is it important to contact the county assessor's office?
- Why might a retiree be paying state income tax on their pension or IRA withdrawals, and what steps can be taken to correct this?
- Under what circumstances can an estimated tax penalty be waived by the IRS, and what form is used to request this waiver?
- How does Medicare determine IRMAA, and what specific life-changing events allow a retiree to request an income adjustment?