My father is 92 and lives in a nursing home. He has not paid taxes in several years, stating someone told him he does not have to file taxes. He still has a home in the community and some assets he wants leave to a disabled son, but I am worried that it will not possible in the future. Is there anything I can do for him?
A tax attorney helped a family member of mine, who had gone 10+ years of not filling. They will work with people, and as far as I know, my relative paid a very small percentage of what he owed; consult a tax attorney.
If there are no liens on the assets that he wishes to leave, he could possibly gift part or all to his son; depending upon the assets value.
Best of luck, and you all stay safe.
From the TurboTax website regarding Seniors filing a tax return:
"For tax year 2020, you will need to file a return if:
-you are unmarried,
-at least 65 years of age, and
-your gross income is $14,050 or more
However, if you live on Social Security benefits alone, you don't include this in gross income. If this is the only income you receive, then your gross income equals zero, and you don't have to file a federal income tax return."
"He has not paid taxes in several years, stating someone told him he does not have to file taxes."
Is this just a confused statement from him or just written incorrectly?
It is quite possible that he HASN'T paid taxes in years, my mother did not pay taxes the four years she lived in MC.
So was he only saying he hasn't paid taxes, which could be legit, or does he really mean he doesn't file? No mention of dementia, but if he's early stage, it can result in confused statements like this.
As noted in my other comment, if he has someone managing his finances (hopefully they have POA), run it by them. If tax forms have been filed, but he had paid no taxes, it could be just fine!
Also, if he has sufficient assets to pay for his NH for many years to come, it might be wise to transfer ownership of the home now. It can be done via a will, but that can take time to work through probate. Transfer now might be better, esp if he has at least enough to cover the 5 years of lookback by Medicaid. He should hang on to the other assets, just in case he needs it. Let those go via the will (he has one, right? If not, the money may not go where he prefers it to go!)
Does someone have POA for him? Who manages his income and assets? Is the NH private pay? Who pays the utils, taxes, maintenance, ins, etc for the home he owns?
IF he's private pay in the NH, most likely he won't owe any taxes, but I believe he'd STILL be required to file. He would have quite a sizable income to be able to afford NH costs! Granted, he likely wouldn't owe anything, but they would still require filing. They get reports from the income sources, but they don't see the deductions, so they would expect tax payments. Filing with deductions can reduce or eliminate tax, but it still has to be filed.
Once in MC, I took her and trust taxes to an Enrolled Agent (they have high IRS standards to meet to stay Enrolled, but don't charge any more than another tax person.) Because I needed help with the trust taxes, and trust funds went into her account to offset the facility cost and all other expenses, it was best to let him do it all. It was outside my comfort zone.
At the time I took taxes to him, there were still taxes withheld. The first year in MC, which is fully deductible (NH should be as well), she had no tax status. I still have to file her taxes. I used the special W4 to stop the deductions and she pays no tax. AL doesn't qualify for the deduction, only some medical needs, but not room and board. There was a small tax from the state when we sold her condo, but that was it. However, a return still needs to be filed, even if she doesn't pay.
Whoever is managing his finances should be taking care of this. It isn't likely all the paperwork for income, taxes and banking is going to/being stored in a NH. If the house isn't properly cared for, it could deteriorate, OR if the property taxes are not kept up to date, the town could take it.
If he has no POA, who is paying the facility? Who is managing his income? IF he's doing it himself, and is still considered competent, try to get him to assign a POA ASAP! Then someone will have to dig up the paperwork for all sources of income, bank statements, medical costs, RE tax bills and current tax status for the home.
Is someone living in the home and taking care of it? Is the insurance up to date? Are the utilities being paid? Is someone doing maintenance and yard care?
If no one is living there, first concern is insurance. Most regular ins policies DO NOT cover unoccupied homes. You have to get special coverage. It'd be better to ensure the regular ins is paid up AND have someone live there, such as the person he wishes to leave it to.
If the utils aren't being paid, they will get shut off. IF it gets cold, the pipes could burst. IF it gets hot, mold could destroy it if there's no A/C.
Need more input - while you search for all the paperwork you need and get that going, do let us know if the place is "paid up" and someone resides in it/takes care of it. If so, disregard all the above warnings, just work on the tax questions.
A decent preparer could review what you have. An Enrolled Agent could probably smooth the way if he does end up having to file late. I'd avoid places like H&R - my mother forgot I was doing hers, and took it there. Boy, did THEY mess it up! Left off the pension, which was the largest part of her income, and put in for almost 6k refund! I was working on it over the year to get it set (she didn't update the W4 when dad passed, so she owed AND had to pay a penalty.) I made them refile, mom had to send the money back and got another penalty.
If it looks like he owes for last year, call the IRS for help. They can tell you based on his income, type of asset income(s), if this will be complex. That’s when I’d call a CPA.
If not complex, but he owes, go to a free senior tax center for help to complete 2020. Use that as a model for the previous years.
The IRS is quite fair if he owes for a few years. There’s not much to worry about. Good luck!
More than likely, if he hasn't received a letter yet, he probably owes nothing or very little.
Found this info: Penalty Truth: After three years, you can no longer claim a tax refund for that year (but you may still file a tax return). However, if you owe taxes, you'll need to file your return as soon as possible as well as owe back taxes and penalties.> late filing penalties for each month your return is not filed.
Just take care of it. Go to a tax preparer and they can help you get it all caught up. You might call a few first to see how much they charge per past year. That's what I did for someone and happened upon a tax preparer who did it for $50 per year. Actually, the guy I helped ended up owing very little money because the refunds he had coming helped to offset the amount owed. He was worried he'd owe more than he could pay off quickly. I kept telling him, if he owed a lot, they would have already been looking for him.
On a side note, if your Dad is leaving something to someone make sure the beneficiaries are clear and anything that has a second living person on it, for example if you are on his bank account make sure the beneficiary states sole rights of survivorship.
Hope that helps.
Definitely contact a professional for peace of mind for yourself.
I suggest you speak to an attorney about your father's exact circumstances, as well as for state and local rules.
The question is what is his income - if it is less than the standard deduction (including the age deduction), then no he doesn't have to file. Listed in Instruction for Form 1040 and in Publication 17.
The other question: Has your father been contacted by the IRS. If you father has significant income and hasn't filed, the IRS will contact saying they haven't received his tax returns and to please file. If he doesn't file the IRS will file for him and send him a tax bill. If he doesn't respond to that, then the IRS will start collection procedures and even file a lien.
If his income is more than the age related standard deduction he may still not owe taxes but should probably have filed - (he can deduct his nursing home payments as medical deduction plus any other medical deductions including any health insurance premiums and medications less what may have been paid by his insurance). May want to consult a tax preparer or CPA depending on the complexity of his situation.
Lucky, lucky me. I got to go through 14 enromous piles of papers to find the stuff the acct needed. I literally drowned him in paperwork.
I do our taxes, but I have for 40+ years and we don't own a business. It did take this poor guy a few months and in the end dad actually got a very small refund.
Since he left a moderately large estate, we expected to have to pay, but didn't. It was a pain to deal with, but it did force me to deal with shutting down all the accts dad had.
My dad did not have to file returns based on his SS and some interest earned on a property that he sold on terms. He didn't earn enough to make his SS taxable. This was determined through a CPA. I recommend that you check IRS.gov and then speak with a tax professional to make sure you understand what needs to be done. Especially if you are looking for an inheritance, you want to know what he needs to do but, if he is on Medicaid they should be paid back from his assets before he leaves anything to his children.
Obviously a child born with disabilities is an entirely different issue and I would assume that provisions were made many years ago.
He may have been told by IRS he no longer had to file. Taxes are based on yearly income not what he has stashed away unless he gets a lot of interest on his savings.
My Mom and MIL, both widows, with their SS and small pension didn't bring in much more than 20k a year each. They paid no taxes because most of their income was Social Security and SS is not taxable unless you have other income and that income has to go over a certain threshold before u need to pay taxes.
If your disabled son is on Social Security Disability with Medicare and Medicaid, your Dad giving him any money will effect his benefits. Maybe not SSD and Medicare but could effect his Medicaid. I had to put my nephews money he received from his Moms insurance into a Special Needs Trust before I could get him help. I would check this out before I allowed Dad to give him money.
The next would be if Dad will need Medicaid to pay for his care in the next 5 years. In that time he can not give any of his money away. It needs to be used for his care. The house is an exempt asset but his SS and any pension he receives will be used to offset the cost of his care with Medicaid paying their share. So, might as well sell the house for his care if no one is willing to pay taxes, utilities and upkeep. And it has to sell for Market Value. And if not sold, when Dad passes a Medicaid lean will be placed on the house. Then the house will need to be sold to satisfy the lean. There are rules concerning someone living in the house or renting the house.
Without any change in a home it should not impact taxes very much at all other than writeoffs for repairs on any income property, and whatever.
You should also make certain Dad has a will stipulating he is leaving his home to his son, with an executor appointed, and I would see an elder law attorney (Dad's assets pay if you are POA) to see about giving home to disabled child, as this prevents some medicaid clawback often enough.
So basically you are looking at questions that need answers of experts in the field.