I just found out Dad, who has dementia, hasn't filed for taxes in over 10 years! What next?

2 answers | Last updated: Sep 13, 2016
Evergreen17 asked...

My father was diagnosed with dementia last August, and after I received letters from two doctors stating that Dad was unable to make sound decisions about his finances and legal matters, I became his power of attorney. (Thank goodness, my mother, now deceased, had the durable POA and a will made out before things went bad for both of them.) I have been sorting through his financial accounts and other related documents and noticed he didn't have copies of his most recent tax returns. That's when I found out he hadn't filed for his federal and state income taxes since 1996! I asked Dad why he hadn't: he said my brother had told him he didn't have to because the only income they were receiving was Social Security, which was not true. Dad and Mom (who died last summer) were also receiving monthly checks from an annuity they had started years ago, as well as money from their IRA and pension from both their former companies. I've hired an accountant to help me sort things out and fill out Dad's tax forms for 2012, but I'm concerned that 1) as POA I'll be held liable for Dad's mistake, and 2) Dad will lose most if not all of his savings to the IRS and the state tax board. I should add, I was living out of state until three years ago and had no idea things were so bad with my parents. My sister and brother, who both live within a two-hour drive of our parents, basically neglected them and allowed their home to turn into a trash heap. When I confronted my sibs, they said I was making too big a deal out of our parents' situation and thought Mom and Dad were "just fine." Obviously that wasn't the case. What should I do?

Expert Answers

Carolyn Rosenblatt, R.N. and Attorney is the author of author of The Boomer's Guide to Aging Parents. She has over 40 years of combined experience in her two professions. As a nurse, she has extensive experience with geriatrics, chronic illness, pain management, dementias, disability, family dynamics, and death and dying. As a trial attorney, she advocated for for the rights of injured individuals and neglected elders. She is also co-founder of AgingParents.com.

You describe that your dad hasn't paid taxes for 10 years. It is important that you see a tax attorney as soon as possible. If you search for one who is familiar with elder issues, you will be better off. No matter what the potential liability, a competent attorney can negotiate with the IRS and state Franchise Tax Board and work out a deal. Your father is not excused from the obligation to pay taxes because of dementia, but the actual amount of tax due may be less than you fear, particularly if he is low income, The attorney can work at getting all penalties and interest waived.
Being durable power of attorney is a serious job and you need to understand the extent of your duties in that role, which are of course, more than seeing to it that dad's back taxes are paid. Seek the legal advice you need, don't hesitate to pay for it, and take it to heart. If you do not know a competent tax attorney, seek a referral from your County Bar Association. Most have a lawyer referral service. You can also ask any other attorney you know and trust for a referral. As many attorneys specialize in a particular area of law and don't do everything, attorneys can be a good source for finding other attorneys in other specialty areas. Some states certify specialists in areas of legal practice. Tax law is one of them. Ask any potential attorney if he or she is a certified specialist. It is not a guarantee of competency but it can be an indicator of special skills.

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Community Answers

Denis clifford answered...

Legally, you are what is called your father's "agent" or "attorney in fact" under his DPA. As his agent, you are NOT responsible to any of his debts, including tax obligations.

I concur that you should seek the assistance of a tax attorney. If you don't know one, you could ask the accountant you are working with the recommend one or more.

Sadly, through Caring.com I have learned of many situations where some family members are irresponsible, or worse, with aging parents and the parents' durable powers of attorney. Realistically, there is probably little or nothing you can do regarding your sister and brother, beyond telling them (again) that Mom and Dad are not "just fine."