Be Your Own Bookkeeper When Caring for Elderly Parents

There was no contract, no invoice, and no evidence the family agreed to pay him anything. Sure, Anthony gave round-the-clock care. The family would have hired round-the-clock nurses if he hadn’t been there.

If you find yourself taking on the responsibility of a caretaker to your elderly parents, are you documenting your efforts? If you are giving time and money for the care of loved ones and would like to take tax deductions for your efforts, you ought to make sure you brush up on your bookkeeping skills. Otherwise, when it comes to tax time, you may be out of luck (and money).

The case of Estate of Olivo v. Commissioner is most instructive.

Forbes examined the Olivo case in an article titled “Mother's Day? Son Claims $1.2M Tax Write-Off For Helping Mom.” From the title of the article, it is clear that the son may have been a bit generous in his claim. To make matters even more interesting, the son was a tax attorney.

Background: Anthony Olivo was the son/tax attorney. He took nearly ten years away from his law practice to care for his parents. Accordingly, Anthony lost his law practice income. However, he did collect fees from his parents for managing their estates. When Anthony’s mother died, he sought to deduct $44,200 in administrator’s fees, $55,000 in accountant’s and attorney’s fees, and a whopping $1,240,000 for a near-decade’s worth of lost wages (he did manage his own firm, after all).

The IRS raised an eyebrow, and then raised it further when they took a look at his documentation of all of these fees and amounts. Problem: there was no contract, no invoice, and no evidence. Not good.

Even when Anthony was handling the estate and filing the tax return he didn’t keep track of his time and just estimated. Also, not good.

In reality, not everything claimed may have been deductible. Nevertheless, the lack of recordkeeping killed any chance for success.

If you and your loved ones are entering a period of caregiving, then a little forethought and planning can go a long way. In the end, a little recordkeeping can be the deciding factor in making your claim.

To speak with an estate planning attorney, visit www.elderlawannarbor.com.

Reference: Forbes (May 8, 2013) “Mother's Day? Son Claims $1.2M Tax Write-Off For Helping Mom”