We have care agreement setup for father who lives with us. Do we have to pay taxes (SSI/Med) on that money since we are family? Ohio resident.

To the OP:
we’ve had trouble finding answers from the pros…there are accountants who fill out forms, and then there are expert-type accountants who have specialized knowledge. You need the later. Your attorney seems good.

i read it as you’re **not in the business of providing caregiving**, so this is 1099-MISC (miscellaneous) income to you, if the form is even generated - not sure if the fiduciary will create it, but as they’re keeping the books with Medicaid possibly down the road,they might. I believe that’s what Burnt and your attorney are talking about..If you wish to read on your own, start here: https://www.irs.gov/businesses/small-businesses-self-employed/family-caregivers-and-self-employment-tax

also, in my experience :) sometimes we ask what seems to be a simple question, and the real answer is “it depends”. I’ve seen that Pros don’t like to give pat answers because i might be the exception. (In your case, your income level may matter, who and how the income is reported (W2 or 1099 or neither), etc.)

Best wishes.

Sportster,
I agree with your attorney, but if you don't trust his advice do get it in writing. THEN if you get in any trouble with the IRS now or later you will take in the advice you were given. While you might then owe some back money, you would be forgiven the interest I do believe given how hard you have attempted to do this correctly.
You can also call the IRS (expect a long wait online and expect someone working from home who will put you off with research and a reply by letter about 3 months out, but they WILL reply).

If you have a lawyer and a CPA charging hundreds an hour unable to answer your question or agree on the tax implications here, what makes you think a forum of internet lay people can? And if we do, that our answers are valid in the eyes of the IRS ??? I'm quite sure they view "family" the same way they view non-family, too......as tax-payers.

I'd look for new "professionals" if I were you.

$$CPAs and lawyers have incredible experience and years of education. You have to think of it in the big picture that $350 for one hour of advice to file all of your taxes correctly is probably gonna be a lot less then what you would pay if you got audited.

Sportster04: Locate a knowledgeable CPA.

Ohio CPA here. If he is paying you for services, then, yes, that is personal taxable income to you. If he is merely paying his share of utilities, etc. that is not income. It would be better if he could just write a check directly to the utility companies to pay his share.

Confer with Elder Law Attorney. Tax advisors might help, but Elder Law Attorney may have additional advice, directions that may be helpful.

Not sure if this is answering your question but I will put out there what we do. My father lives in our home 24/7 less the time he spends at his day club for Dementia clients. All my Dads funds are handled through a fiduciary because we had a problem with a sibling elder abuse prior to this that is why he is living with us. So my Dad pays our PG and E bill and all the groceries for our household which is him, my husband and I. He has a car that I use to drive him to his day club, doctors appointments and all the outings we go on.We only have trucks to hard for him to get into. His fiduciary gave me a credit card for the food and he has one for his personal items ie: medication, personal items, gas, oil changes etc with set limits. The fiduciary pays insurance and registration on his car from his checking account. If we need anything else that might be over and above for example we needed tires recently I told her and she made sure there was enough on card to cover expense. We live in California and the law here is you can't really get paid to take care of your parents because it should be your duty. He's lived with us going on 2 1/2 years and we did not start that system until 6 months after his residency here. It had been costing us all the time and extra expenses of an additional person that needed extra heat, and extra electricity extra food not to mention the 24/7 care that he needs along with all the medication dispenser and doctors appointment. If I were able to get paid for all the services we provide then I would have to claim it on my taxes. Even with my Dad paying for what he does it does not even come close to what he would have to pay monthly for just room and board at a facility that would not include all the extras.
So if your worried about having to claim it as income maybe you can have an arrangement like we have.

I agree with the people who say that reimbursement for care is not income. Your father-in-law could pay a portion of utilities, food and other items that can be divided. He can also pay for his own health products, van transport if needed (I would think you could get reimbursed for wear and tear and gas if you drive him to appointments etc.), clothing, and anything else you buy for him that is not a gift. If he also pays rent, that seems to be the only thing that should be considered income.

Does he also pay for physical caregiving (bathing, dressing, feeding, pills, etc.)? That can be income as well and may be financially beneficial to you even if taxed. When my dad was living in my house, a company approached me and said I could be paid by them (I don't know if I would have been an employee or on contract) to provide caregiving to him.

I disagree with the people who say you shouldn't be asking questions here (and to the person who mentioned surgery, I would totally talk to regular people about an upcoming surgery; people who have been through the experience could give you good info you can take to the doctor). I like to be prepared when I go to a professional, especially something dealing with money since I know little about financial subjects), especially one who charges $300-plus an hour. That could add up fast if you have no input going in. You just shouldn't make assumptions based ONLY on lay people's perspectives and experiences, wise as they may be. Best wishes with your father-in-law and the financial situation.

Sport, a rental agreement makes rent from dad taxable income. Share of costs does not. You have 2 issues that need clarification from the pros.

I really believe you would be best served, at dads expense, to get your attorney and CPA in the same room. Let them teach each other and you take great notes or record the entire meeting. This is a great example of why we are willing to pay professionals big bucks, they should know and be willing to share to ensure that your best interests are covered. Legally, of course.

I would like to thank all of you who have responded!

I guess I was looking for people who may have gone through this and could share their results. I know the real answer is going to come from a knowledagble CPA on these types of matters as our old CPA was clueless!

We do have a "Rent Agreement" set up as well as we sold his home. Both the rental and care agreements were done as we expect him to have to go to a care facility and are trying to save some of the little nest egg that he built up.

If you have an actual signed care agreement done up with a family member living in your home, I would still love to hear how YOU are dealing with the income.

Thanks all!

You will follow the advice of a good CPA.
This gets complicated and isn't DIY material.

Much depends on how a contract is written and where it is written. State's rules differ. And there is a difference between "payment for care" and "reimbursement". And a difference between "shared living expenses " say for mortgage, bills, costs of needed renovations, and etc. and "payment for care" which is taxable and reportable as income.

We are just caregivers. You don't need the opinions of caregivers on a Forum on this stuff. When you need surgery you don't go to a Forum and when you need tax advice you shouldn't either. Speak with the CPA and show your contract for care.

Are you caring for FIL in your home? Maybe it should be set up as room and board. That way its just contributing to the household. Paying his share.

You are asking lay people to answer a very complicated question that you have a lawyer and a CPA not agreeing on. Maybe the CPA is not familiar with Caregiver IRS law. So find one who is. I go with the lawyer.

And yes, child support is not taxable but I am sure I had to put it on my taxes when I was receiving it.

What I am saying is pay the attorney and CPA to work together to get the facts of your specific situation sorted out.

If you do that this year, then it will be established how it is done. Obviously, tax laws change year to year but, for a licensed professional these changes are easy to track, so your CPA should be able to follow and notify you if anything changes in a substantial way. (Heads up, things will be changing and none of us are going to like it but, that's next years worry.)

Personally, I would have a meeting in my attorneys office with my CPA present and get this sorted out. Bring ALL of your tax documents, as though you were preparing your returns, and ask both parties, in writing, what else they need you to bring to get this dealt with.

UGH!! Professionals with their billable hours seem to make things harder than need be.

So, are you saying to have his lawyer do the tax return for this upcoming year and then do it ourselves afterwards??

The lawyer did send this link to our CPA: Family Caregivers and Self-Employment Tax | Internal Revenue Service (irs.gov) see less

Looks like the link isn't working.

Yes, we know this is Not a gift and don't want it to be so due to Medicaid issues.

The lawyer who did all of our documents is known for dealing with Estate law, Medicaid and trying to keep as much money out of their hands. They said we do Not pay taxes on it and if we wanted to use his firm to do taxes they charge $350/hr which is one reason why I'd like to use a different CPA.

I would think that they (lawyer) had done this for multiple clients and if it were taxable someone would have gotten in trouble with the IRS for Not doing so. Our CPA doesn't know the answer so he asked us to find a new one if we wanted to Not have taxes taken out.

Thanks

Your CPA would know what the rules and regulations are for income. I would listen to them.

Just so you know, yes, 1040 income is taxable and that means SS/Medicare 15.3% is payable by you, (unless you exceed the 160k FICA taxable income cap) one benefit is that the 7.65% that is employer match is 100% deductible. So you aren't really getting hit with that extra tax.

Unfortunately, many attorneys forget or don't know to inform clients that income is taxable and what your overall financial situation is will dictate what that means exactly.

If this throws you into a difficult situation, it is time to modify the compensation agreement to make it work for you.

You don't list the money as a gift because it's not a gift. It is payment for caregiving services.
In some states it is not considered income and not taxed either (up to a certain amount).

Your best bet would probably be to speak to an accountant and visit the tax department in city hall where you all live. If they cannot answer your question about whether or not this is taxable income, they will certainly be able to put ypu in touch with the people in the state who can.

MeDolly, did you receive money from a family member as well? Can you elaborate on your situation?
I know it needs to be listed as "Other Income" but the IRS publications get muddy when they talk about family members and if you are considered a employee or contractor.

Yes, this is taxed.

You need to declare it as income. And pay income tax.

I would read the relevant IRS bulletin of self-employment taxes.