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Tax Returns for Sick or Disabled Person

It is not uncommon for an elder lawyer to have sick or disabled clients.  Yet these clients often need to file income tax returns.  Who can sign a tax return if the client cannot? For a joint income tax return, the filing (well) spouse can sign for the disabled spouse by simply signing the disabled spouse’s name and adding...

Husband (or Wife)” and attaching to the return a statement explaining why the disabled spouse did not sign.  For individual returns, the return must be filed and signed by a duly authorized agent, such as a guardian or attorney-in-fact under a durable power of attorney. 


Trap One

The practitioner representing an incapacitated client should never alone rely on a Form 2848, Power of Attorney and Declaration of Representative, signed while the taxpayer client had capacity.  Such a power of attorney, because it is not durable, is revoked upon the taxpayer’s incapacity.  Halper v. Commissioner, 73 T.C.M. (CCH) 1897 (1997).


Trap Two

The statute of limitations on the assessment of additional tax does not begin to run on a return filed without a signature or on a return signed by another who is without authority. Richardson v. Commissioner, 72 T.C. 818 (1979) (unsigned return); Elliott v. Commissioner, 113 T.C. 125 (1999) (signature of person without authority).
What about filing for an income tax refund?  As a reminder, refund claims must normally be filed within three years following the filing of the return or two years after payment of the tax, if later. I.R.C. § 6511.


Tip One

When assuming representation for an incapacitated person, the practitioner should check to see if all tax returns have been timely filed.  The practitioner should also determine whether the taxpayer client might be entitled to any refunds.
But what if the taxpayer client is incapacitated?  If the refund deadline is missed, the practitioner should determine whether the limitations period has been tolled on account of the taxpayer’s disability.  The limitations period on refund claims is suspended during any period in which the taxpayer is unable to manage the taxpayer’s financial affairs by reason of a medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for at lease one year.  However, no suspension of the statute of limitations occurs if the taxpayer’s spouse or other person, such as a guardian or agent under a durable power of attorney, is authorized to act on the taxpayer’s behalf with respect to financial matters.  I.R.C § 6511(h)(2)(b).

Tip Two

When requesting a suspension of the limitations period on account of disability, a statement of a physical certifying that the taxpayer had the requisite disability must be submitted. In addition, the person filing the claim for refund or credit must certify that, during the period of disability, no one was authorized to act on the taxpayer’s behalf.  Rev. Proc. 99-21.  Obtaining tax counsel assistance is advisable.