How do I file taxes on money my dad pays me for his care? He has dementia, so I quit my job and got ACA insurance. So how do I file my taxes with no W2 or taxes taken out

[Critter-3]

You are self employed...report it on the Sch C. 

[Opus 17]

This is a bit complicated.  I don't think "you are self-employed" is correct or sufficient.  Unfortunately, I don't know enough of the details of this situation.

First, if you are working in your father's home according to his schedule, you are his household employee, and he is required to issue a W-2 if he pays you more than $2200.  (I realize that if he has dementia, it may be the case that you have power of attorney--or should--and you may be doing his taxes.  Even so, "he"--or whoever does his taxes--issues a W-2 for a household employee.). He does not have to withhold or pay household employee tax because you are family, but he still issues the W-2.  Then you file normally with the W-2.  This is true if your duties and schedule are in his home and according to his needs, whether or not you also live in the home. 

https://www.irs.gov/newsroom/tax-situations-when-taking-care-of-a-family-member

Second, there are some programs that will pay a child (or other family member) to take care of a relative in their home rather than moving them to a nursing home (since home care is much cheaper).  Under those situations, the caregiver's income may be tax-free.  I don't know the rules about what kind of care is eligible for this, it may depend on the state, and whether the state is involved in providing care.  (In other words, when a parent needs financial help to pay for an aide, or else they would have to go into a much more expensive facility.)

https://www.thetaxadviser.com/issues/2016/nov/payments-under-state-in-home-supportive-care-programs-...

https://www.irs.gov/individuals/certain-medicaid-waiver-payments-may-be-excludable-from-income

If your father is financially able to pay you a salary without government help, you might not qualify for this exclusion.  I would start by talking to a social worker or other expert on elder law and medical issues.

At the very least, you are probably his household employee. 

And you definitely need to speak to an elder law specialty firm to discuss taxes, power of attorney, asset protection, and other issues that arise when a parent has dementia. 

[riamac2]

THANK YOU

I never thought about asset protection. Even though i haven't found any sign of a life insurance i think i still need to look into it

[Opus 17]

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@riamac2 wrote:

THANK YOU

I never thought about asset protection. Even though i haven't found any sign of a life insurance i think i still need to look into it

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My mother recently passed from Alzheimers and my Dad and my brother and I were involved in some of their financial planning.  Putting it very briefly, if your father requires nursing home care and can't afford to pay privately, Medicaid will only step in when he is "poor".  If he is single (divorced, widowed), then "poor" can mean he gets to keep $3000 and a car, but everything else has to be sold and used to pay for his medical care until it is used up--house, investments, etc.  There is some protection for a traditional IRA but not a Roth IRA.  Whatever you expect to inherit at the end of your Dad's journey might not be there.  There are ways of protecting his assets that a specialist attorney can help you with.

You also need a durable power of attorney and probably a medical power of attorney or advance directive.  He can't give you a power of attorney unless he is still mentally competent, so this is something that needs to be done before the dementia progresses too far.   If he is no longer competent to make decisions, then you can't legally do anything for him (like using his checking account to pay his household bills or your salary) unless you go to court and get a court order (something like a conservatorship).

So planning ahead is really important.  And you really need an expert. Good luck.