Important Information!

I am not a tax professional. I am not offering any advice of any kind about the preparation or filing of taxes for you or your loved one. This blog is strictly opinion-based, and should not be interpreted by anyone as legal or professional assistance of any kind.

Yes, You’re In Charge Of This, Too…

But, yeah, you’re in charge of this, too, now. Congratulations.

That was, indeed, sarcasm, my friend. The fact of the matter is that millions of Americans every year dread the idea of completing their own Income Tax Returns, often delaying the process until the deadline in April. Now, in addition to your own, you are responsible for the tax filing legalities of your loved one. So, congratulations.

Just like every other element of The Job, preparing for, and completing, their tax return for this year will depend almost entirely on your planning and consideration. This is not something that you can leave until the deadline is upon us, nor is it something that can be considered a team sport. You are responsible for the government receiving the tax information for one of its citizens—regardless of the mental or physical health of said citizen. 

I don’t think my almost 94-year-old mother should have to pay anything additional in taxes. She’s paid for almost eight decades, and deserves a break. But, like so much of the caregiving experience, it’s not up to me. And it’s not up to you.

Let’s get this odious task done properly, and early, this year.

First-Timer Frustrations

If you are a regular reader of the blog, I’m sure there were times when you rolled your eyes and thought, “Damn, Pat, you’re so lucky”. Maybe it is the financial burden Pop took off my shoulders, or the incredible Sweet Husband I’ve got, but at some point, I’m guessing you thought I have no reason to complain.

You’re right. And here, my friend, is another example.

I’ve been taking care of my parents’ tax returns for decades now, so I managed the situation through the death of my Pop, and as the dementia became worse for Mom. I’ve had the good fortune to follow their financial history and their ongoing tax burdens. This isn’t my first rodeo.

If this is the first year you will assume this responsibility, please start today. There are a wide variety of documents you will need, an incredible depth of knowledge about their finance will be required, and you’ll probably need some advice or help along the way.

This cannot be done in a weekend. Do not wait until April to start this process. 

Gathering Information

If you look at any cartoon, television show or movie, you see people surrounded by piles of documents attempting to complete their income taxes. Maybe that’s you, too, every year when tax time comes around. Now think about doing it for someone who, mentally, has checked out of their life. Oh boy…

First year is hard

Even the first few years of taking care of my parents’ taxes was problematic. Documents were going to their house in Florida, while other things were coming to my house in Nevada. They had changed banks, which increased the paperwork, and had bought and sold investments along the way. Particularly if your loved one moved into your house or a facility during the tax year, you need to make sure you access all of the documentation. 

It should all come to your house

As you slog through all of the documents, take the time to change the address to reflect your house. Even if your parents are going to continue living on their own for now, it is much better for you to get the paperwork necessary directly to your house. My Uncle John, for example, lost multiple important documents during the early stages of dementia. We think he just threw them away, but we will never know. It made his taxes for those years very difficult to complete thoroughly.

Why isn’t it online?

Because they’re old, Boo Boo. My parents had absolutely nothing online when I took over. Every single thing they had came to one house or another in good old paper form. While it made it easy to navigate while I completed their taxes, it was very stressful making sure I had everything I needed. The automating of their financial life took me years, only being finished after Pop’s death, since he had a deep distrust of the internet. I could write a novel about the fight to open an online high-yield savings account!

Keep it separate from yours

My parents moved into my house. They maintained a separate house in Florida, but they spent more than half the year at my house, ultimately selling the Florida house. It would have been very easy to muddle our finances, and make completing separate income taxes quite difficult. Another thing for you to consider if your loved one is relocating into your home is the need to keep all of the financial and legal documents separated so there are no problems when taxes become due. This was also extremely helpful in explaining our situation to my siblings. Do not commingle funds—it’s a recipe for disaster on several fronts.

Find previous tax returns

The very best thing I had access to when I took over my parents tax preparation were the previous seven years of tax returns. Even better, I still had access to their tax professional in Florida, and several phone calls with her made the first year or two much simpler for me to manage. It was worth a few hours of paid consultation for me to be sure I was doing a good job with my parents taxes. While legally you should maintain tax returns for seven years, this often doesn’t happen. Do your best to get your hands on any previous tax returns, and call whoever prepared their most recent taxes—it’s worth your time and a few dollars. 

Do they need a tax professional?

I have no idea. If you have no idea, then I think you probably need some professional assistance with the process. While hiring a professional can be costly, it would pale in comparison to an expensive audit because you tried to save a few bucks. If you aren’t comfortable with your own taxes, there is no way you will be comfortable doing theirs. Call the pros.

Where do I start?

So, you’re going to do their taxes yourself, huh? You were able to read everything up to now, and still think you can manage this difficult, legally-binding task yourself?

Okay. I’m with you—I do them myself, too. 

You’ve taken the important first steps: Starting early, and deciding to complete this job yourself. Now is not the time for you to relax and put things aside. It’s time for action! 

First, talk to your loved one. If this is the first year you are doing their taxes, they may have had other plans for filing taxes. Perhaps they have always used the same tax firm, or they think they can still do it themselves. In my case, the first few years I did their taxes with Pop sitting next to me. He was quite overwhelmed with the process of online software, and didn’t completely understand what I was doing, so sitting with me gave him a considerably higher level of understanding and belief that I knew what I was doing. If your loved one is like my mother, and the dementia has robbed her of much of her mental capacity, they may not even care about taxes anymore. If that is the case, it’s an easy sell, but you won’t have them to give you answers or help you if necessary.

There’s always a positive and a negative to consider, isn’t there?

Is this even legal?

Great question, Boo Boo!

The legality of you taking over preparation of their tax returns goes back to our ongoing topic: The paperwork…

While you may have the Power of Attorney we have talked about endlessly, that doesn’t necessarily mean you are legally able to prepare and file their income taxes. If your loved one lacks the mental capacity due to illness or accident, there is something you must do in advance. It is the Internal Revenue Service, after all, so they have a form for this!

You will need to fill out IRS Form 2848 at the time you complete your parent’s Form 1040. The funny thing is that since you already have Power of Attorney, you can sign the Form 2848 yourself, which—in my opinion—makes it ridiculous. But I don’t make the rules.

Write this down or click the link: Form 2848. It’s only required one time, but it is required. Start there.

Until Next Week…

Looking ahead to part two of this important blog, we will talk about the specifics, and the long-view necessary, to fill out your loved one’s Income Tax Return.

In preparation for next week, and with tax season upon us, please spend a little time finding and organizing as much of your loved one’s paperwork as you can.  Now is the time to create online accounts if you haven’t already for all of their investments and particularly their banking information. Go through the mail with a fine-tooth comb to find all of the documents you need to complete the process, and create files to keep their information apart from yours.

Until then, I’ll be doing the same thing. I’m hoping to file early this month for both me and Mom. 

THANK YOU FOR READING THIS FAR!!!

Wow! You made it! Thank you for reading about tax time for the elderly!

Hey, since you’re here! You may as well check out part 1 of death vigils, here, or if you’ve read that, check out part 2, here! Or maybe you want to hear more about Pop, here. Or, check out our other topics here! Either way, I appreciate you!

Please leave a COMMENT about any tips you may have!! Or comment with YOUR story! Any dementia stories? Let me know!

Please, feel free to contact me or leave a COMMENT with anything you would like to hear more about! Or reach out with any unrelated questions, comments, concerns, or random outbursts of excitement by clicking here.

Oh! And don’t forget to check out my video series by CLICKING HERE!!!

Resources

https://www.thebalancemoney.com/how-to-file-tax-returns-for-an-incapacitated-parent-6281213

https://www.irs.gov/individuals/seniors-retirees

https://getcarefull.com/articles/how-to-file-a-tax-return-for-a-parent