Filing Status-one in nursing home

[gboykin]

Here is something interesting that we have just encountered. Married couple not required to file. Husband has small military retirement, and both have SS. NC sent Husband a letter for 2008 based on information obtained from IRS (retirement and SS income), and since he didn't file his return, they filed one for him as single with the full retirement taxable. Their income is under the threshold for having to file a Federal return. So we had to file a Federal return for them as joint in order to correct the NC return. Looks like the states are grasping at all angles trying to get tax from turnips. In any event, even if he filed as single, his military retirement pay is not taxable to NC, so there would still be no state tax.

[DaveO]

I had a fellow come in a while back. He was in his mid 70's and was thinking about selling a building and equipment he owned to a client of mine. He was concerned about possible tax issues on the sale of the building. When I asked him to bring in recent returns he said he hadn't filed for years and lived off his SS income. He then mentions his wife still works since she is quite a bit younger and files seperate. I tried to get him to clarify if it was MFS but he was fuzzy on the difference so she may be filing single. I explained the 85% taxation on his SS benefits but that was completely beyond his grasp. He had got a couple of non-filer notices years before but never responded to them. He decided not to do anything at present and I hope he loses my number before he decides to sell anything.

[gkaiseril]

I would construe that as living apart.

See page 22 of IRS Pub 17:

"Considered married.

"You are considered married for the whole year if on the last day of your tax year you and your spouse meet any one of the following tests.

"3. You are married and living apart, but not legally separated under a decree of divorce or separate maintenance."

Also, see page 33 of IRS Pub 17:

"Temporary absences

"If the person is placed in a nursing home for an indefinite period of time to receive constant medical care, the absence may be considered temporary."

So I believe there are 2 places where an IRS publication indicates that being apart does not force the MFS status.

You are also free to use MFS and lose the benefits of MFJ.

[gkaiseril]

But if MFS status and they didn't live together in last six months of the year, 85% of Social security is still taxable?

See page 33 of IRS Pub 17;

"Temporary absences

"If the person is placed in a nursing home for an indefinite period of time to receive constant medical care, the absence may be considered temporary."

The IRS is not as cold hearted as you might want to believe.

[JohnH]

One of those situations where you diplomatically say as you walk them to the door:

"You know, I'm running kinda low on those business cards. Do you mind giving that one back to me on your way out? "

[JohnH]

Yes, overall they're fairly kind about these things. They even set the medical deduction threshhold down there at a low 7.5% of AGI, simply because they know you're going to blow that thing completely out of the water with just very short stay in a nursing home. Gotta hand it to them - they're all heart.

[gkaiseril]

The IRS does not control nursing homes, doctors, nurses, pharmacist, or politicians. But it appears they are more generous than some on this point.