I have a financial question about taxes. Can I claim this on my tax return?
Hi everyone,
I am looking for an answer to a tax question. My Mother who has been living with me since December of 2020 is on SS widow benefits and has been since my Father past away in 2009. She is under the tax bracket where she does not file taxes any longer and has not since 2009. She sold her home last July and we opened a joint savings account with the proceeds from the sale of her home for safe keeping and to have for her long term care. Since my Mother does not file taxes and has earned interest on the money which needs to be reported and claimed on a tax return. Can I just claim that on my tax return when I do my taxes, since it's a joint account? I would think that as long as the government is getting their money it should not matter as long as the taxes are being paid on any interest earned. Thanks!
The sale of the home will generate a Form 1099-S. This income is reportable on a return if it's greater than the filing requirement income over $14,250. The sale may not be taxable, but, it is reportable. Also, because of the pandemic payouts, it may be beneficial to file a return for your mother, https://www.irs.gov/about-irs/filing-a-2020-tax-return-even-if-you-dont-have-to-could-put-money-in-your-pocket
VITA/TCE are programs sponsored by the IRS that provide free tax services for taxpayers. The volunteers are certified and are a wonderful resource. TCE is generally supported by AARP; TCE specializes in tax issues of the elderly. To find additional information and a site near you, go to https://www.irs.gov/individuals/free-tax-return-preparation-for-qualifying-taxpayers
The best is for both of you to go to an AARP tax aid site they can help you with the taxes both of you. And its free. Free e-filings of both federal and state.
Please know that Alva is not trying to make you feel stupid. Information on the proper process should be readily available, but it is not.
She is pointing out that you and your mother have created a situation that could and likely will bite you hard in the backside. You did not do so out of stupidity, but because you and your Mum do not know the ramifications of co-mingling funds.
Now you are saying she is no longer competent to make decisions, which opens a whole new set of problems as she did not assign POA when she was competent.
You are not the first, nor the last to get yourself into a situation that will have significant ramifications down the road, especially as you said Mum also paid to have an addition built on your home.
What can happen? Medicaid has a 5 year look back period. If Mum needs Medicaid services, they will look at all her financial transactions for the previous 5 years. If they flag any of them, such as funds being put in to a joint account, additions being build ona house she does not own, there will be a spend down period, where they do not cover the costs of service.
If you could turn back time, Mum should have assigned your POA over finances and healthcare when Dad died. The funds from the sale of the house should be in an account in her name only that you can write cheques off of as POA. You could limit her access to the funds to limit her ability to gamble.
So what do you do now? Document everything, every penny into and out of the joint account. Find out from your State's Medicaid Office their guidelines and ask how to fix this situation. Talk to a CPA Tax Specialist about Mum's taxes and the interest. Talk to an Eldercare Attorney about next steps. You may have to apply for guardianship.
She said as we were going to and then said it was decided against.
The money is being held safely for mom's long term care needs.
You need to get yourself right now to a GOOD CPA and find out what to do herre. This should NOT be a joint account. These are your Mother's assets. You are lacking in a lot of information that could have SERIOUS LEGAL and FINANCIAL repercussions for both YOU and you Mom.
My dad sold a property and we set it up for him to finance the balance. He didn't have to claim the interest income because it didn't put him over a certain additional income bracket.
You can have a joint account, you just don't want to co-mingle your money with moms. That's when it becomes an issue for Medicaid. Your assets won't be counted on the application.
If you are concerned about this, you can get the application and review it and get everything clarified and set up according to the application.
If mom isn't able to understand what a DPOA and DMCPOA are in the moment of signing, your only other option is guardianship, mom's money would pay for this. However, a doctor that says she needs more care, facility care, carries a lot of weight for moving someone into a facility.
If her symptoms are new, she should be checked for a UTI. They can make dementia symptoms way worse.
Best of luck getting this sorted.
Good luck on this journey
If all your Mom receives is SS, I doubt the interest on that account will take Mom over the 14,250 listed below. There is no need to file. My Mom received 1500 a month in SS and 200 a month in pension. She did not have to file because that pension did not take her over the 14k listed nor did any interest she incurred.
"If you are at least 65, unmarried, and receive $14,250 or more in non-exempt income in addition to your Social Security benefits, you typically must file a federal income tax return (tax year 2021).
• Regardless of your filing status, if the sum of half your Social Security plus your adjusted gross income plus your tax-exempt interest and dividends exceeds $25,000 (or $32,000 if you are married filing jointly), then a portion of your Social Security benefits are included in gross income."