We have a long term health care insurance policy for my mom that pays a small amount ($37.50 per day) for care by a family member in home. My brother has been providing this care for the past several years including 2020 and has no other job or taxable income outside of the care he is providing my mom. The insurance company pays the policy benefit out to my mom directly, totaling $13,687,60 per year (this is the first year they have paid on the policy). We want to pass this on to my brother and keep things as simple as possible for him and my mom's tax filings. Technically, I think we could simply say my mom is gifting him the $13,687.50 and this should have no tax implications for either as it is under the yearly maximum gifting allowed by the IRS, correct?
However, since my brother has no income as taking care of our mom is a 24 / 7 / 365 job, I was thinking of structuring it as a gift of $11,837.50 and income of $1,850. By showing the income of $1,850, he can then file a tax return and qualify for the $1,800 total of the two stimulus payments that he missed out on for 2020, as he had no income for several years taking care of our mom. Additionally, as I understand it, this would be under the IRS limit of $1,900 that my mom could pay him for care before having to worry about social security withholdings, etc. My question is, am I going about this the right way to keep both my mom's and brother's income tax filing as simple and straightforward as possible, while still being legal and maximizing benefits for my brother?
If my above thoughts are correct, in TurboTax, I was putting the $1,850 in the miscellaneous income section in the "income not reported on a form W2 or form 1099", specifically in the "wages earned as a household employee" section. Would this be the correct / best place to put this? Thanks, David
