Over the years, I’ve had many clients I’ve never spoken to. Rather than interacting with them directly, I instead work with their children, spouses, neighbors, etc. who have the task of making decisions on their behalf. Typically, this person has a legal appointment, such as Financial Power of Attorney.

If this is you, then know that I know this can be hard. I see you. I hear you. What you’re doing is a labor of love, to be sure. While I can’t make this role easier, I can provide some insights I’ve gained over the years that may make the tax side of things more approachable.

Whether you’re helping your sibling, your parent, a dear friend, etc., their financial and tax situation may look very different from yours. Dealing with someone else’s money might make you feel uneasy. Not everyone feels this way, but I’ve worked with a lot of folks who do. If this is you, I advise working with a tax professional even if you don’t do so for your own taxes. It’s what we’re here for and we’re happy to help. If you already have a good relationship with a tax advisor, see if they’re able to help.

When you’re helping someone whose mental or physical health is declining, they often try to retain as much independence as they can and continue to do as much for themselves as they can. This may include continuing to handle their taxes themselves – whether this is using an online tax preparation platform or interacting with their tax advisor. This can be problematic for several reasons that I’ve observed:

    • Technology. As our world continues to use paper and in-person meetings less and less, the traditional approach to tax preparation isn’t always an option these days. Mom simply may not know how to retrieve and send tax documents electronically.
    • Documentation. The person who used to keep truly immaculate financial records often becomes unable to do so at some point. This means confusion for you and possible agitation for them.
    • Communication. Taxes are already complicated enough. It is frequently frustrating and confusing for folks to engage in tax-related conversations after experiencing cognitive decline.

The most straightforward approach is for you to be 100% in control of their tax situation as quickly as possible. This is tough, though, because you have to weigh this against the value your spouse, parent, etc. receives from remaining involved.

If you don’t know their tax history, you definitely want clarity here. Make sure there are no outstanding taxes owed to the IRS, states, etc. You also want to check for potential tax overpayments that could generate a refund. If you’re starting from scratch, my best advice is to contact the IRS for a compliance check and obtain tax transcripts which are a written log of activity on a taxpayer’s account. This is something you can do yourself with a valid tax power of attorney or you can engage a tax professional to do this for you.

Declining health often comes with increased out of pocket medical costs such as in-home care, care community, etc. There may be tax benefits related to these increased medical costs. Discuss with your tax advisor.

If different, use your address, not theirs, for tax filings. You will want to be the first one to be alerted by the IRS or other taxing authority about any matters that require prompt attention. If you are not in the same state as the person you’re taking care of, your own state may contact you for tax filings for your parent, etc. simply due to the address on the federal tax return. Discuss this with your tax advisor, but don’t be overly concerned about it.

Taking on the responsibility of helping someone with their taxes can be stressful, but I hope these insights make the process a bit easier for you. If you are looking for a more in-depth discussion about your, or someone else’s, tax situation, feel free to reach out to me.