HELP- Financially incompetent 50 year old relative in massive IRS trouble

[A854321]

I am trying to cope with the meltdown of a 50 year old financially incompetent brother who is now in massive IRS trouble, to the extent of wage garnishment and threatening second-notice 668-C letters to prior employers. He owes more than $35K to the IRS because he didn't believe he had to pay taxes as an independent contractor. He has never retained the services of an accountant or attorney, and I am just now finding out because one of his former employers called me. From the demand letter, it looks like he has 5 DAYS to pay the IRS.

My brother is extremely secretive about any finances, but we know he has massive credit card debt because collection agencies call him at all hours. I would guess he has credit card debts of about $70K. I also think he has been involved in several very bad "investments" with people who make themselves out as friends. When confronted about any issue like this, he lies and says it has been taken care of.

He has lived in a series of rented houses, but has landed in the lap of my ailing, widowed 80 year old mother because he has run out of places to run.

My first issue is to get him to a tax accountant to set up a dialog with the IRS, and avoid an arrest for felony tax evasion.

Now what? Our small family is massively stressed over this. We live all over the country, so he can't just come live with one of us. He has a degree and his resume appears solid, but it is now evident that he has been passed from job to job because of incompetence.

Now what? Is there such a thing as a financial guardianship for a 50 year old who superficially appears to be competent, but is in massive denial? Help.

[2B]

I think your biggest problem is making sure your mother doesn't destroy her own finances getting her son out of his problem.

Bottom line, you can't take over being responsible for another adult. I don't recommend you even try. You really won't be doing him any favors by writing him a $100,000 check. Odds are he won't pay off his debts anyway.

Here are some thoughts if your brother wants to listen to anyone.

I don't think the IRS will prosecute for $35K; but unless something is done, the fees and penalties will get it up enough where they will. The best thing to do is to pay them off ASAP even if he has to get a loan from somewhere else (not family members). If he can't get a loan, he needs to get an accountant or lawyer to negotiate a payment plan and possibly a reduction.

He needs remedial financial help. The best "all inclusive" program I've seen is Dave Ramsey. If he will face reality, buy him a copy of Ramsey's Total Money Makeover and workbook. I think that the nominal $30 is the most I'd "invest" in your brother's financial recovery.

He's not fallen into "bad luck" or anything but his own stupidity. Until he's willing to face his problems, he won't get better. The more trouble he gets into the sooner he'll face it.

[A854321]

2B- Yes- the short-term scenario is not to aggravate my mother's health or finances. We all want him to be responsible for this and are not willing to pay off any of his debts.

But I think he is mentally challenged in some arena that deals with finances and honesty. Stupid, but devious, so he acknowledges there is a problem, but seeks no help from anyone and seeks to conceal the truth.

I think he is probably too far gone to get advice from a book. I just wonder if there is such a thing as a financial guardianship that can be applied here.

[Gotadimple]

Quote:

Originally Posted by A854321 2B- Yes- the short-term scenario is not to aggravate my mother's health or finances. We all want him to be responsible for this and are not willing to pay off any of his debts. But I think he is mentally challenged in some arena that deals with finances and honesty. Stupid, but devious, so he acknowledges there is a problem, but seeks no help from anyone and seeks to conceal the truth. I think he is probably too far gone to get advice from a book. I just wonder if there is such a thing as a financial guardianship that can be applied here.

Why? You'll only remove the temptation and he will do it again. My brother is the same way when it comes to money. It's a sickness, he has to spend it -- even if he doesn't have it. Helping him doesn't resolve the problem that he doesn't want to admit to. And he will continue to do what he has done in the past -- unless he wants to make a change.

[eridanus]

Quote:

Originally Posted by A854321 My brother is extremely secretive about any finances, but we know he has massive credit card debt because collection agencies call him at all hours. I would guess he has credit card debts of about $70K.

Send him cut-and-paste cease-and-desist letters. He can go down to the PO and mail them certified-return receipt so that the creditors stop bothering him (and, now, your mom too).

If he's any bit clever, and he may not be, he can let the calls continue for a while until one of the debt agencies screws up and violates the FCRA/FDCPA. That's an easy court win in small claims court.

[2B]

Quote:

Originally Posted by A854321 I think he is probably too far gone to get advice from a book. I just wonder if there is such a thing as a financial guardianship that can be applied here.

I'm not an attorney and have no knowledge of the laws of your unnamed state. I had briefly looked into it for an elderly individual in Texas. That is the basis for the following comments.

Not very likely.

You will have to have him declared "incompetent" in a local probate court. That will require psychologists/psychiatrists testifying that your brother is not able to manage his own affairs by the legal definition of your state. Your brother would have an attorney appointed to protect his rights and probably produce experts saying that your brother is fine.

From what I'm hearing from you, he's just inept. It's a big leap from inept to legally incompetent.

The whole process will cost well over $30,000 with a very slim chance of getting approved. If your brother "volunteers" to go into a guardianship, I suspect that after his bills are paid off (by you?) he'll say he was coerced into signing and then you're back to the prior example.

Where's Martha when we need her?

[Martha]

Cross posting with you.

You asked about a guardianship. Every state has different laws on what must be shown to get a financial guardian or conservator appointed. It is not an easy thing to do, people are presumed to be competent even if they make terrible decisions. Odds are you would have to show serious mental illness or developmental disability as well as the inability to manage finances. You would have to talk to a lawyer in your jurisdiction to see what is required.

[Lsbcal]

Probably the best thing to do is to have him solve his own problems. You might want to check out Al-Anon. Generally they are set up to help the family of achoholics and drug addicted but this seems to be a somewhat related scenario where an adult is not taking responsibility for himself. Their material may or may not give you peace of mind while your brother is working this out. Or if you are religious there is always that route.

I would imagine if you must try to help him financially then try to get him to deal with his creditors through the bankruptcy courts. Later you can step in to give him a little money to get back on his feet. He probably has to hit bottom.

You and your mother should try to decide if she is really helping him by her actions and also how much stress she can take. Is he treating your mother with respect? Is he doing chores around the house to earn his rent or is the room (and board?) provided with no strings attached? Is there perhaps an underlying problem which you cannot be aware of like alchohol or drugs?

I'm sorry to hear you have to suffer so much for another person's poor behavior patterns. It's easy for us to all sit back and offer advice but I know the emotional toll is very heavy for you and we cannot emotionally feel that. Hope something I've written hear may help.

[DRiP Guy]

A trip to the pokey might be just the governmentally administered tough love he needs to wise up.

Just IMHO.

[Coach]

A8, I'm sorry to hear about the mess your brother has gotten himself into. I agree with previous posters -- I think you need to worry about your Mom and do what you can to see that she doesn't get drawn into serious problems herself.

Your heart is in the right place, but I'd give up on the idea of a guardianship. I don't know what would be worse -- getting one, or trying to get one and failing.

Coach

[Texas Proud]

Your brother is old enough to know what he did.... and he got himself in this trouble so he should get out of it... this is 'tough love', but it is the right thing to do...


I know a family who has an older sister who has money problems also... she does keep her job, but spends money like she made twice as much.. she has lost homes, been kicked out of rental places... used up her retirement account... everything that you could do wrong she did.... once I talked to her mother and she said "I would give her money if I think it would help, but it would be throwing money down the hole"... that is my opinion also...

The IRS will get their money, but I doubt he will go to jail... but he can declare bankruptcy if he really is tapped out...

But, don't get tangled up in his financial mess or you will be sinking along with him...

[Martha]

Give him the name of a lawyer who knows about both tax problems and bankruptcy. Maybe he can get rid of the credit card debt and work a payment plan out for the taxes.

Only these income taxes can be discharged without payment in full in a chapter 7 or 13 bankruptcy:

1. The due date for filing a tax return is at least three years ago.
2. The tax return was filed at least two years ago.
3. The tax assessment is at least 240 days old.
4. The tax return was not fraudulent.
5. The taxpayer is not guilty of tax evasion.

If he has tax liens filed against any of his property, those are hard to make go away.

Taxes incurred in a business are also much tougher to address in a bankruptcy and it is about impossible to avoid paying withholding taxes, like FICA, in full. Penalties and interest get complicated.

The IRS can take just about anything to satisfy tax debt, if they chose. The exemptions are minimal.

[AltaRed]

IMO, this behaviour has gone on his full adult life and he will not change until he hits bottom, e.g. bankrupt and homeless. It is tough love, but the only way I know of break 30+ years of denial.

What you have not said is what your mother's views are on this matter.... other than being stressed and worried. I would spend my energy and effort on protecting your mother's health and finances to the best of your ability.

[SecondCor521]

Ditto what all the rest said. Protect yourself. Protect your mother. Provide room and board if you can. Hope and pray he bottoms out.

2Cor521

[A854321]

Here is some more information I found out:

He has federal tax liens and state (California) tax liens filed in 2004 and 2000.

His state tax delinquency was $19000 in 2000.

He owes more than $48K on credit card debt, which is in several collection and recovery accounts which are active until at least 2009.

Mom doesn't (yet) know the specifics of all of this. I think she is very conflicted about Brother. She has always considered him "challenged" but let him go his own way. He currently pays no rent, pays nothing towards food, does no regular household chores. He will occasionally repair something, but not well and not promptly to her satisfaction. She has lied to us before about him paying "rent" and grocery money. She has been having a difficult time as a widow, with bad night terrors, so it is comforting for her to have someone in the house. The running joke has been that she would have to sell her house to get rid of him. But it's a great place for her alone, and is very pleasant and easy for her to live in. She would be very traumatized having to move. Unfortunately, she lives in Orange County which is smack in the middle of rapidly declining home sales, lots of competition, and declining prices.

I agree with the tough love approach. He is a lieing deadbeat, in my opinion, who gets by on being "very nice". He was earning in excess of 70K for many years, and we have no idea where it went. His car is a piece of garbage. He has no real estate. He surrendered his IRA of about $20K to invest in a friends business. Which, of course, was a disaster. I really don't think drugs are at all involved, although he can sure drink when someone else is paying the bill.

Tonight I will make a conference call to Mom and Bro, spilling the beans on this miserable situation, and giving them the name of a tax attorney to call ASAP. If he fails to follow through, I'm about ready to call the IRS and tell them where they can find him.

Is that a reasonable idea?

[A854321]

Perhaps this will also prompt those of you who are parents to give their children a good grounding in the basics of being a financially responsible adult. And to ask probing questions when something doesn't smell rightl

[2B]

Quote:

Originally Posted by A854321 Perhaps this will also prompt those of you who are parents to give their children a good grounding in the basics of being a financially responsible adult. And to ask probing questions when something doesn't smell rightl

I have three kids. Two are with it and will be FI at a younger age than I was. The third thinks all of the world goods she desires comes down magically from heaven. I'm waiting for her "big problem" to emerge. I tell DW it's coming. If we bail her out, the next one will just have more zeros. I keep saying the first crash needs to be all on her so she learns.

[LeatherneckPA]

A8, I'm afraid I have to agree with everyone else. Protect your mother, at all costs. Let your brother sink or swim as he manages. The hardest, albeit best, words I have ever told my DD were, "Hey, not my problem."

I come from a very different "reality" than anyone else here. I've spent 25 years supervising the absolute dregs of society. I have no patience for bleeding heart liberals who preach "rehabilitation" but have never worked a single day with these convicts. You're wondering what this has to do with your brother. Well, the simple reality is that there is no such thing as rehabilitation unless the individaul makes a concious decision to do it himself. Nobody, no matter how well intentioned, can do it for them. And as much as you would like to intervene and rescue your brother, all you will do is postpone the inevitable. Until he accepts responsibility for himself and his actions all you would be doing is sticking a finger in the dike. Meanwhile, he's pumping more water in behind the dike.

[bosco]

I don't mean to be alarmist, but a couple of things in your post raised some red flags.

It sounds like you are trying to protect your mother from the full brunt of the truth and the trauma. But then you indicate that he lives with her, and she has lied to you about his contributions (or lack thereof) before.

Are you certain you know the full truth about what your mom knows and what she is willing to do or has done? I am concerned that you brother is already "working" your mom in ways unknown to you.

Please do all you can to make sure your mother goes through this unscathed (I know you don't need me to tell you this). But some of the facts you've posted seem very familiar based on some things that happened in my extended family....

[AltaRed]

I agree a lot could already be going on. I think the only way would be for the OP to advise his mother to talk to her lawyer for an independent discussion about protecting her assets. Her refusal to do so may indicate there are already problems.

Beyond that, there is not much more that can be done since the OP proabably cannot approach his mother's lawyer independently.... unless they are already close friends.