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EIN Business For ElderCare

Following legal advice, I opened an EIN in 2017 for the purpose of caring for my 87 year old widowed mother who was diagnosed with dementia.  I paid legal fees to open the EIN.  I hired a home aid as a legal employee of the the EIN business.  I retained a home-aide management company to handle all the employee taxes and paperwork.  The EIN business is in my name and does not generate income.   The home aid was employed for 5 months before my family decided to move my mom to an Assisted Living Facility in Fla near to a sibling.  Since Aug of 2017, I have been covering almost all of the $5.5k monthly cost of the ALF until my mother's property can be sold.  Her modest $2.2k monthly income from SS & a pension is currently going towards her monthly CO-OP maintenance and other expenses.  I am using Turbox Tax for Home and Business.  I plan to file as Head of House and list mom as my dependent.  Is it necessary for me to file HOH, when I plan to list Mom's ALF and related expenses as business losses?  Also, what exact expenses can I file as a loss? The Home Agency Fees? The ALF monthly cost? I would appreciate your help.  Thanks.

1 Comment
TurboTax Specialist

EIN Business For ElderCare

First, please accept our condolensces for your mother's situation.


Are you thinking to file a Schedule C as a business whose purpose is to care for your mother? That is not a trade or business in the eyes of the IRS. The IRS says "The term trade or business generally includes any activity carried on for the production of income f..."


Since caring for your mother is not done for a profit motive, it is not considered a business, and you will not be able to take any business expenses.


Getting the EIN was a requirement to correctly file taxes for a household employee (you use Schedule H for this and file it separately or attached to your 1040). It does not means that you necessarily have a business.


Having said that, some or all of the expenses may be available to take on Schedule A (Itemized Deductions) if you claim your mother as a dependent. Please review IRS Publication 502 for which expenses may be deductible.


As for your filing status, you may be able to claim HOH status if you can claim your mother as a dependent. Note the "Special rule for parent" beginning at the bottom of page 23 in IRS Publication 17. This will gain you not only your mother's exemption but also a lower tax rate.

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