IRS and dementia patients?

[Spock]

History: March 2020 my brother and I had to take our Dad to court to get him declared mentally incompetent and get a conservator+guardian appointed. He'd been declining for years. He had even recognized it himself and had me named POA, co-trustee, made me joint on his accounts, etc.



The big problem arose when he hired a home health aide that was on the state Adult Protective Services registry for having exploiting a previous client. Dad "forgot" that he had put me in charge of the rental properties and then tried to give one of the rental houses to the HHA (she was also the tenant in the rental house). I could go on but this post is already too long.


While a 3rd party conservator was only in place for just under a year, they made an absolute mess of the 2020 accounting and we now have to go through lawyers to ask any clarification questions.


While probably simple to most here, his estate is more complicated than most with 4 rental properties in 2 states, 4 small pensions, 1 IRA,SS, a little interest income, and massive "charitable" deductions... (he was getting 2 inches of junk mail solicitations A DAY and responding to ALL of it.)


Since the court order was right at the start of the covid panic, doing ANYTHING was incredibly slow (still is). It took until August 2020 to get court docs, insurance bonds, etc in place that the banks would recognize.


In that time, Dad fired his long time CPA/tax preparer, rental property manager, insurance agent, estate lawyer, etc. and hired replacements dictated by his HHA. He had his 2019 taxes "prepared" by some walking store front idiot.



Since I had sort of taken over most of his finances prior to the court case, I had access to most of the 2019 info. But it still took me 5 solid weeks of sorting expenses working with a new CPA/tax preparer to file an amended 2019 return in July this year.


It took August and Sept to piece together a 2020 tax return that wasn't filed until last month.



Today: I've spent the last couple of weeks sorting through the remaining pile boxes of whatever financial records remain trying to sort rental, medical, legal expenses by tax year going back as far as 2014 (7 years).



If the IRS were to audit pretty much any year, its pretty obvious there isn't sufficient documentation remaining to defend a tax return.


About all I would be able do is plop the boxes of what's left in front of the auditor, throw my hands up and say "I did the best i could with what I had to work with".


I don't see any aggressive accounting/deductions or that there are gross errors in the pre-2019 returns. If anything he missed a $2500 medical deduction for hearing aids back in 2014. But should the IRS question any of it I would be hard pressed to retrieve receipts/justification for a given tax return.



Dad's dementia is impacting his "executive functions" and he would not be of any help in remembering where anything is filed. He can't even balance a checkbook anymore.

Questions:
Does the IRS generally give dementia patients (and the people trying to represent them) any slack when it comes to defending an audit?
I realize its not documented policy and it depends on the individual auditor, but I would think that there would be some leniency for cases where a dementia patient can't contribute to the defense any more.


Or do conservators generally just bend over letting the IRS have their way and then pay whatever the IRS demands? (it would probably be cheaper).

Is anybody here a conservator for a ward that has been audited for a year prior to the conservatorship?

 

[Sunset]

Wow... what a mess for you to try to figure out.

My view is the IRS workers are humans, and may give a little slack once they know the situation.

Most importantly, is you probably won't have an audit, so worrying too much is really a waste of time.
You have done your best effort, so if they question something (first step before even starting an audit), just answer it as completely as you can while explaining the situation. Including how your dad was a victim of a crime (just because the criminal might not have been convicted this time, doesn't negate the crime you caught).

Bottom line, is probably won't have an audit, and you can only do your best at the time if it happens.

Remember, they will mail you letters, if they have questions, ignore the scam IRS phone calls.

 

[RetiredHappy]

On the first part of your post, it reinforces what I tell everyone - do NOT hire a home care aide privately. Always go with an agency who employs the home care aides.

 

[ivinsfan]

This sucks big time for you. Don't worry about all the way back to 2014. That's the stone age to IRS.


Watch your Dad mail and if they send a letter for anything recent answer only what they ask for in the letter.


For your own peace of mind, get a number in your head that worth time and hassle to you. Say Xthousand dollars, under that number if they ask for money just pay it. Over that number you can decide how much effort to put into it. The chances that your Dad would get a line by line audit are pretty much slim to none. Particularly during Covid times.


For example I have a friend that hasn't filed his taxes since at least 2016 and he just gets an occasional letter saying where are your tax returns. He has gotten lots of IRA money during that time complete with 1099s.

 

[Spock]

On the first part of your post, it reinforces what I tell everyone - do NOT hire a home care aide privately. Always go with an agency who employs the home care aides.

This one was hired privately, but was freelancing while also an employee of Bayada. There is no requirement for the agencies to screen employees for past misconduct even though a state registry exists.
It's also common for HHA's to encourage their agency clients to convert them to direct hires to allow the HHA to keep more of the $.

As part of this situation, Dad explicitly refused to use Bayada (and thus claim against his LTC policy) because she would earn less $.


The worst part of the system is the courts give a dementia patient a say in their own affairs. Since Dad isn't naked in the court room barking at the moon (he presents well), the court let Dad toss 20 years of estate/trust planning and let him choose his own conservator. Since Dad's mad at us for stopping the house gift to the HHA, the courts used his new lawyers 3rd party conservator and made them sole successor trustee of the trust.


I understand the need for not rushing in to taking somebodies rights away from them. But if the court agrees the person is not capable of making their own decisions and makes them a ward, why give the same patient a say in who makes the decisions for them? He's spent 15% of his assets in the last 18 months on legal and conservator fees that his estate plan was supposed to avoid.

 

[ivinsfan]

This one was hired privately, but was freelancing while also an employee of Bayada. There is no requirement for the agencies to screen employees for past misconduct even though a state registry exists.
It's also common for HHA's to encourage their agency clients to convert them to direct hires to allow the HHA to keep more of the $.

As part of this situation, Dad explicitly refused to use Bayada (and thus claim against his LTC policy) because she would earn less $.


The worst part of the system is the courts give a dementia patient a say in their own affairs. Since Dad isn't naked in the court room barking at the moon (he presents well), the court let Dad toss 20 years of estate/trust planning and let him choose his own conservator. Since Dad's mad at us for stopping the house gift to the HHA, the courts used his new lawyers 3rd party conservator and made them sole successor trustee of the trust.


I understand the need for not rushing in to taking somebodies rights away from them. But if the court agrees the person is not capable of making their own decisions and makes them a ward, why give the same patient a say in who makes the decisions for them? He's spent 15% of his assets in the last 18 months on legal and conservator fees that his estate plan was supposed to avoid.

I hear you and victim blaming (as in telling you the wrong aide was hired) is pointless and not very kind. All kinds of people from all walks of life rip people off without a second thought.



It's complicated... taking one day at a time can help. Looking ahead can just make things worse. My thoughts are will you, because dementia just is a horrible thing.

 

[TrvlBug]

On the first part of your post, it reinforces what I tell everyone - do NOT hire a home care aide privately. Always go with an agency who employs the home care aides.

No guarantees there. They also have to be watched like a hawk. The advantage is you just call the agency, they pull the party, supposedly fire them and send someone else. Ask me how I know.

 

[RetiredHappy]

I hear you and victim blaming (as in telling you the wrong aide was hired) is pointless and not very kind.

How so in being unkind? OP was never blamed. The issue was with the father who has dementia with problem of judgment. Good agencies run FBI background checks and drug screening. It is not clear if this agency did both. The issue explained by OP was that while this aide was through an agency, the father proceeded to hire the same aide privately.

When we ran an agency, we had aides and clients sign an indemnity damages form for hiring the aides away from the agency, elder financial abuse, and private hire issues, including liabilities, and not paying employment taxes by clients in private hire situations. Home care aides are never independent contractors based on federal independent contractor laws.

 

[ivinsfan]

How so in being unkind? OP was never blamed. The issue was with the father who has dementia with problem of judgment. Good agencies run FBI background checks and drug screening. It is not clear if this agency did both. The issue explained by OP was that while this aide was through an agency, the father proceeded to hire the same aide privately.

When we ran an agency, we had aides and clients sign an indemnity damages form for hiring the aides away from the agency, elder financial abuse, and private hire issues, including liabilities, and not paying employment taxes by clients in private hire situations. Home care aides are never independent contractors based on federal independent contractor laws.

I've seen cases where family members stole from other family members. Even the best vetting system lets bad apples slip through the cracks. Even following your advice might not have protected Dad. It's sad that people can pose as caregivers to scam people.


But as aside what difference would it make if the caretaker was through your agency or freelancing? It's the same person.


In your case did you indemnify or make whole anyone who got scammed by one of your workers? I don't know how that works. This could be valuable information to someone looking for a caretaker.

 

[RetiredHappy]

I've seen cases where family members stole from other family members. Even the best vetting system lets bad apples slip through the cracks. Even following your advice might not have protected Dad. It's sad that people can pose as caregivers to scam people.


But as aside what difference would it make if the caretaker was through your agency or freelancing? It's the same person.


In your case did you indemnify or make whole anyone who got scammed by one of your workers? I don't know how that works. This could be valuable information to someone looking for a caretaker.

Yes, bad apples do make it through the system despite all possible checks that are applied.

Regarding the last question, we had a very "sweet" male caregiver scam an elderly client out of $10k for a private loan. He never paid it back. After validating with other caregivers that it was real, we wrote her a check of $10k despite her refusal to file a police report. He confirmed it when we confronted him. We fired him for cause. Despite all these, he got unemployment claim approved despite our appeal to EDD. The worst part was that he retained clean background since the client refused to file a police report.

 

[street]

WOW! That sounds like a full time job to get the ship righted.

 

[ivinsfan]

Yes, bad apples do make it through the system despite all possible checks that were applied.

Regarding the last question, we had a very "sweet" male caregiver scammed an elderly client out of $10k for a private loan. He never paid it back. After validating with other caregivers that it was real, we wrote her a check of $10k despite her refusal to file a police report. He confirmed it when we confronted him. We fired him for cause. Despite all these, he got unemployment claim approved despite our appeal to EDD. The worst part was that he retained clean background since the client refused to file a police report.

Good for you for doing that, but your last sentence pretty much validates everything I said. The issue is she lent him the money welshing on a debt happens all the time. How depressing..

 

[Walt34]

Regarding the last question, we had a very "sweet" male caregiver scam an elderly client out of $10k for a private loan. He never paid it back. After validating with other caregivers that it was real, we wrote her a check of $10k despite her refusal to file a police report. He confirmed it when we confronted him. We fired him for cause. Despite all these, he got unemployment claim approved despite our appeal to EDD. The worst part was that he retained clean background since the client refused to file a police report.

Even then, depending on the law in your state it may not have been possible to prosecute criminally. She did in fact write the check as a loan, and unless the law in MD has changed since I retired failure to repay, or even flat out refusal to repay a loan is a civil matter, not a criminal one.

The only way that could be made a criminal case is that the state would have to be able to prove that from the outset he never intended to repay the loan and sought it intending to defraud the lender. This is quite properly a very high bar to clear.

 

[RetiredHappy]

Even then, depending on the law in your state it may not have been possible to prosecute criminally. She did in fact write the check as a loan, and unless the law in MD has changed since I retired failure to repay, or even flat out refusal to repay a loan is a civil matter, not a criminal one.

The only way that could be made a criminal case is that the state would have to be able to prove that from the outset he never intended to repay the loan and sought it intending to defraud the lender. This is quite properly a very high bar to clear.

Elder abuse includes financial exploitation. It applies to a victim over the age of 65 or someone who is disabled. This would have become a criminal case simply because of elder abuse law.