Don’t think you can avoid paying tax on income from business activities just because “you’re getting old” and are semi-retired. There’s no exemption from taxation based on age.
New case: A taxpayer failed to file tax returns for the years 1999 through 2005. Reason: He believed that he didn’t have to pay taxes anymore after reaching age 72. However, the taxpayer had income from Social Security and bricklaying activities. The IRS prepared substitute returns based on this income without any deductions.
At least the taxpayer was able to produce copies of Forms W-3 for the years 2002 through 2005. He reported expenses for the years 1999 through 2003, but could not substantiate them because his children had cleaned up his home when he was seriously ill.
In the end, the Tax Court allowed a deduction for the allowable expenses documented for 2004 and 2005 and an estimated amount of the other expenses spanning the years from 1999 through 2003. But the court still stuck the taxpayer with “failure-to-file” and “failure-to-pay” tax penalties. (West, TC Memo 2011-272)
Moral of the story: No matter how old you are, you can’t simply stop paying taxes if you still have income from taxable sources.
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