I’ve received emails from accountants on how to craft responses to questions from clients. I’ve edited and condensed the questions for clarity and brevity.
Q. My elderly father came to live with us after his retirement, and we take a dependency exemption for him. But we also have to pay someone to stay with him while we are at our jobs. Do those payments entitle us to claim a credit for dependent care expenses?
A. Only if he’s disabled, which means a person who suffers from physical or mental disabilities that prevent him from dressing or feeding himself or tending to his personal hygiene without the help of someone else, or if he needs constant attention to prevent him from injuring himself or others.
To illustrate, your father otherwise enjoys good health. But he’s disabled if an injury, whether permanent or temporary, confines him to bed or to a wheelchair. Similarly, he’s disabled if he has suicidal or other dangerous tendencies that may require another person to attend him constantly.
If you claim a credit for care of a disabled person, you don’t have to submit proof of disability with your Form 1040. But to safeguard your credit, should the IRS ask questions, it’s wise to get a certification from the attending physician regarding the nature and duration of the disability.
Q. My income soared because of an unusually large bonus. What’s the form I should use to take advantage of income averaging?
A. Calculate your taxes the same as anyone else. A 1986 law change abolished averaging for nearly everybody, though there’s a limited exception for farmers.
Q. My husband died. Do I have to declare the proceeds of his life insurance as “other income” on line 21 of Form 1040?
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About Julian Block
Attorney and author Julian Block is frequently quoted in the New York Times, Wall Street Journal, and the Washington Post. He has been cited as “a leading tax professional” (New York Times), an “accomplished writer on taxes” (Wall Street Journal), and “an authority on tax planning” (Financial Planning magazine). More information about his books can be found at julianblocktaxexpert.com.