Can Mom gift dollars to son to care for her?

[SensibleandHourly]

HI everyone, 

Nothing like a last-minute client today. 

So, customer quit his job last year to take are of elderly mother with onset dementia. He claims that Mom wanted him to take 1k/week to replace his income and he does have a POA for financial and medical. They want me to do Mom's taxes, and everything seemed very above board and transparent. I met Mom, and customer's spouse. My question is, can this customer gift himself and his spouse 17k from Mom, or is it better to claim these dollars as income? She moved into their home full-time last May, so Mom's assets have paid the customer approximately 28k for 2023. 

Thank you!! 

 It's almost the 15th, 

Dawn 

[dkh]

Are they saying it's a gift ? 

[sjrcpa]

Does his POA permit making gifts?

[qbteachmt]

"My question is, can this customer gift himself and his spouse 17k from Mom, or is it better to claim these dollars as income?"

With a full powers POA, he can just take it all. But, the gift limit (to each) is not going to cover "take 1k/week" and they are losing out on Social Security credits, if that matters. So, what about that shortfall?

"They want me to do Mom's taxes"

You could look into Mom having hired "household help."

"She moved into their home full-time last May, so Mom's assets have paid the customer approximately 28k for 2023."

And is she a dependent for them, or covering her own costs? She would contribute to the general costs to run the household (utilities, food, etc) and her lodging and personal effects (clothes, etc) as well as any personal direct costs (medical, etc). Are they doing Both? Charging her rent, room and board, personal maintenance, and also "wages?"

[SensibleandHourly]

Good morning, 

These are great questions. No, she is past the point of being able to say it is a gift. And I will double-check the POA language to verify that gifts are allowed. My understanding is the dollars were to compensate him for his time in taking care of her, since he is now unemployed. She does not contribute to the household per se. They are not charging her rent, but she does pay her own medical and personal costs. I can see I need to ask more questions. 😉 

[sjrcpa]

"the dollars were to compensate him for his time in taking care of her"

That's not a gift.

[sjrcpa]

Also, I don't think it flies well when people not of sound mind are making "gifts".

[BobKamman]

What's missing from this discussion is whether there are any siblings and, if so, how they feel about it.  

Withdrawals from the Bank of Mom are clearly not gifts, but the issue for you is whether they are some form of taxable compensation.  Some of it appears to be sharing of household expenses.  The rest of it falls into a gray area of family transactions that are overlooked most of the time. 

[SensibleandHourly]

Agree with the consensus that gifts are problematic. And, yes, there are siblings who are not recognized on the either POA and may question everything!!! 

Which is why I reached out to the community for a variety of perspectives on this one. 😉 

[SensibleandHourly]

And if it is determined that the best strategy is to simply claim the income that he 'earned' from Mom, does she provide a 1099? 

[Skylane]

If you’re preparing Moms income tax; her gifts, payments, rent, and living expense or contributions to household expenses don’t  really matter…. 

Arms length End of life caregiving/nursing home etc. expenses can be 3-4 times as much …… more importantly moms in a place she is probably most comfortable and surrounded with family….Bobs right about sibblings or other heirs…. They should be on board with whatever arrangement but that’s not really your concern….

worst case is file an extension 

[SensibleandHourly]

REALLY good points, and definitely filing an extension. 😉 

[qbteachmt]

"does she provide a 1099?"

W2.

https://www.irs.gov/forms-pubs/about-schedule-h-form-1040

https://www.irs.gov/businesses/small-businesses-self-employed/hiring-household-employees

https://www.irs.gov/taxtopics/tc756

"Social Security tax and Medicare tax, commonly referred to as FICA tax, applies to both employees and employers, each paying 7.65% of wages. An employer is generally required to withhold the household employee's share of FICA tax from wages. If you pay cash wages of $2,700 or more for 2024 (this threshold can change from year to year) to any one household employee, you generally must withhold 6.2% for Social Security tax and 1.45% for Medicare tax (for a total of 7.65%) from all cash wages you pay to that employee, unless you prefer to pay your employee's share of Social Security and Medicare taxes from your own funds. You must also pay your share of Social Security and Medicare taxes, which is also 7.65% of cash wages. Cash wages include wages you pay by check, money order, etc."

[BobKamman]

Mom is not operating a business, so no 1099.  Son is providing a service in his home, not her home, so no W-2.  Operators of adult care homes -- in this neck of the woods, most of the best ones are Romanian immigrants -- don't get a W-2 from each of their patients.