Today TaxMama® hears from Darlene in the TaxQuips Forum with this question. “A couple has filed married filing separately for at least 4 years. About 3 years ago he went into a nursing home. She continue to file married filing separately, preparing his return for him also. The nursing home took just about all his income to pay for his long-term care expenses. He died last year. He accrued outstanding balances each year with the IRS because not enough taxes were withheld from his retirement income. Is the surviving spouse that has been filing separate for years responsible for his tax debt?”
Dear Darlene,
That’s a good question. And this issue will be more and more common as the Baby Boomer generation reaches senior citizenship and terminal disability.
By filing separate tax returns, you’re right, the wife is not liable for his taxes. BUT, his estate IS. The taxes don’t just go away.
If his estate owns any assets, like half the house, any bank accounts or securities, etc., then his share of those assets needs to be used to pay his taxes – before anything is distributed to heirs. This is why, at the beginning stages of terminal illnesses, forms of dementia, and such, it’s time to do some estate planning. It’s important to get all assets out of that person’s ownership.
The other issue I see here (think like the IRS and follow the money) is that the wife was in control of his retirement and his assets. She deliberately avoided having withholding taken, thinking that she can get around the taxes. As the conservator or executor for her husband, she may be held personally liable for those taxes he didn’t pay all those years.
It’s important to work with an estate tax attorney when your clients reach this stage of life.
It’s also important to understand how to prepare tax returns for such people. You see, it’s not clear to me why there was any tax due at all. After all, you say all his money went towards paying for the nursing home. ALL of the base monthly fees are deductible as medical expenses. You may want to amend those last tax returns and wipe out the taxes. Right away.
And remember, you can find answers to all kinds of questions about death and taxes, and other tax issues, free. Where? Where else? At www.TaxMama.com.
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