My father has lived with me for 17 years because of his bipolar disorder and my brother has been his legal guardian for even longer than that. We have always been paid a room and board compensation which I never reported as income since it was to pay for Dad's living expenses, which included the cost of us getting a bigger house so he could live with our family of 6. If our actual costs were less than what we received, I reasoned that the $14,000 gift limit would more than cover us since the total we received was right around that amount (we can receive a gift from family tax-free up to $14,000). But now my Dad has dementia and I had to quit work to care for him. The guardianship gave me more money to compensate me. As for reporting the income on my taxes, I would like to take the amount I receive for both (salary plus room and board), deduct actual room and board expenses and subtract the new $15,000 tax-free gift limit from the amount and pay taxes on the remainder. Can I do that? We have never claimed Dad as a dependent on our taxes since he doesn't meet the criteria for that.
I'm pretty sure they are different taxable events. & I’m guessing that you have not been in the past including any of this $ in your joint taxes? Would that be accurate?
Has brother (dads guardian) been including the $ gifted in any of his reporting to the court under guardianship requirements? It’s been 17 years of guardianship, right? Did reporting fall off the courts radar over time? If it would be accurate to say your bro has been somewhat casual in his guardianship & it’s required fiduciary duty, please pls pls both of you find an attorney to go through this mess and soon.
Something is going to trigger a tipping point in accountability on your father finances and it will be beyond a hot mess to get through. Could be SSA, maybe Medicaid, maybe a past due bill, or a review of old guardianship cases in a courthouse review that opens Pandora’s box. You want to proactively get ahead of this and do what you can to control the narrative. Really find an attorney & soon.
If atty does not have other pros he’s affiliated with…. a CPA, a tax attorney…. Then ask guardianship atty to do a referral. In my not an attorney viewpoint but on this forum a long time your not getting on this right now in 2022 and doing a reset is going to snowball into huge costly issues the rest of this decade. The reason why is that at some point dad will run out of $ and his care needs will run beyond what you can do at home… so it’s Hello! Medicaid! application as he’ll likely need a facility and all the $ from him to you on the surface looks like gifting which Medicaid can penalize against. The IRS old annual 14K (16K now) tax free now gifting is just that…. for IRS regulations and your tax filings. NOT MEDICAID! Medicaid does not recognize any annual gifting allowances and will penalize the applicants.
Medicaid can go back at least 5 years in a financial disclosure. So if dad applied in 2023; that’s $ back to 2018. If he gave you the IRS max each year 14k & 16k for 2022 that’s $ 72K gifting penalty. If your states Medicaid daily room&board reimbursement to a facility is $175 a day, that could be a gifting penalty of 411 days. 411 Days or almost 14 months. What makes the penalty even more difficult is that in order to apply for LTC Medicaid elder will already be in a facility and accruing room& board charges. Should penalty be found, the applicant, their POA and facility r all notified. Facility will fully expect to be paid for his stay from Day 1 by him or whomever in his family they can bill against. And does not have to bill at the lower Medicaid day rate but at full tilt $$$ private pay rates. Should you say I’m going to ignore it and let him be the responsibility of the facility, that can get ugly as they can contact APS. APS contacts the court to have his guardianship revoked from your brother and a new guardian appointed by the court. The new guy can go after brother and you for “self dealing” “enrichment” at the expense of a vulnerable adult. Can get ugly. If I was your bro, I’d be very concerned as to annual gifting and as to just how you are spending dads $ & how all is getting it dispersed as it’s on me as I’m the guardian who a judge will haul before his court. What is brothers take on how $ is being spent? Both of y’all need to go over all this with an attorney.
IMO on the “I had to quit work to take care of him (dad)”; you did not have to quit. You chose to leave your job & stay at home. Should you try this reasoning, well, imo not gonna fly…. You have others in your household, no way you can say 100% of your time to CG your dad. Painting yourself as a martyr works only if your seeking canonization as St. LynnieB at the Vatican.
You have a lot of your plate….. 4 kids still as dependents, right?
Has dad given $ to grandkids? Gonna look like gifting.
Really ime once gifting is suspected, it’s a red flag to review a Medicaid application & in detail. Stuff flat surfaces…
If dads $ to you has been unreported income and you & hubs have done FAFSA for kids college fin aid, could be an issue with FAFSA / college fin aid office. Ours graduated in ‘19 and one of his friends behind him had their custodial/ divorced parent get a settlement their junior year and poof need based fin aid for went away.. it was a hot mess atop all the Covid stuff… the $ could have gone into a Trust and not been an issue… but nobody thought it through. It’s things like this that a good experienced atty can give you options on. And yes kid finally graduated last Dec. My point is $ from dad to you changes not just yours but your household’s situation, it’s not a DIY to deal with.
Please pls don’t put this off.