We have been caring for my mom for the past 3 years in our home. My dad has paid me some money for this. We have always
paid our state and federal taxes on this income. Recently, our "local government" sent us a letter saying we are a "business" and must pay back taxes and penalties for our income from my mom's care. We had no idea we were a "business". Can they do that?
See Schedule C on the IRS.Gov website, or better yet, purchase TurboTax Deluxe and follow the prompts on elderly care or care of a dependent.
But really, shouldn't the government on all levels be doing absolutely everything it can to encourage keeping elders and handicapped persons in the community? If there are family members willing to be caregivers and keep someone out of the long term care facilities, they certainly should not face tax penalties for doing it!
Do what you have to do to stay out of trouble, but this sure pushes my hot button about the "family values" politicians yammer about.
The IRS is very reasonable to work with. There may be some extra taxes and penalties, but you can work things out with them. Good luck.
Carol