Last year Rhonda had a problem. Her father, Steve, who moved to Florida three years earlier, seemed to be deteriorating rapidly. She especially noticed a change in his executive functioning. These are the “mental processes that enable us to plan, focus attention, remember instructions, and juggle multiple tasks successfully”.1
Addressing Signs of a Cognitive Problem
Bills were being paid late, doctors’ appointments were missed and her usually dapper dad often appeared unkempt. She hired a home health care agency and Aging Life Care professional to help administer her father’s home health care needs. However, she decided to take care of Steve’s finances. After all, she handled her family’s money with little effort.
Tax Return Season #1
Things seemed to be going well but then tax time came. Rhonda needed to collect her dad’s many tax documents including:
- Form SSA-1099 – Social Security Benefit Statement – ssa.gov
- Form 1099-R – Income statement for pensions, annuities, retirement plans or IRAs
- Form 1098 – Mortgage Interest Statement
- Form 1099-LTC – Reports long-term care benefits
- Form 1099-INT – Reports interest income of all types of investment
- Form 1099-DIV – Reports dividends and distributions from any type of investment SSA-1099
Due to her busy work schedule, she didn’t have time to visit her father in January or February. When Rhonda did go to Florida in March many of the documents Steve’s accountant was looking for were not in the large pile of mail the aide had saved.
In addition, the accountant wanted to know what Steve’s specific medical costs were, including doctors, medicine, home health care aides, even travel costs getting to and from medical appointments. These were all tax deductible and could lead to thousands of dollars in tax refunds. Unfortunately, Rhonda did not have the bandwidth to calculate accurate expenses and provided rough estimates to the accountant. She knew she was leaving “money on the table” and was not happy about it.
Planning Ahead for Next Year
Rhonda was determined not to let this happen again. Her father’s care manager saw how she struggled to have Steve’s taxes prepared the previous year and suggested that she work with a Daily Money Manager (DMM). She had other clients that worked with DMMs and was happy to refer her favorite, Barbara, to Rhonda.
Working With a Daily Money Manager
From the moment Rhonda met Barbara, she felt a wave of relief and knew that next year’s tax experience would be different. The first suggestion Barbara made was to use a Personal Finance Software program to track Steve’s income and expenses. This would allow for the creation of a report that would detail all the expenses for the year that the accountant could use to maximize tax deductions. Barbara also proposed doing this every month so they wouldn’t be caught by surprise at the end of the year.
The software was able to access Rhonda’s father’s banking and credit card data via his online accounts. Each month Barbara downloaded and categorized the transactions and reconciled the accounts against the monthly statements. She produced a monthly report detailing the income and spending. There were two immediate payoffs to this:
- Rhonda saw some monthly debits for services her father no longer needed and happily canceled them.
- The report enabled Rhonda to get a firm understanding of Steve’s income and expenses allowing her to calculate how long his assets would last.
Barbara recommended that she come to visit once or twice a month to review the mail. She arranged with the aides to make sure all mail was put in a specific box that was in a secure spot. While many of the bills were put on paperless delivery many important documents and announcements are still sent in the mail. Rhonda knew this would come in handy in January and February when those critical 1099s and other tax-related items are mailed.
Tax Season #2 Experience
Happily, in March, when it came time to provide Steve’s accountant with his tax information Rhonda was able to create a PDF report with the years expenses. In addition, all of the relevant tax documentation had been scanned and organized by Barbara and was easily emailed to the accountant with the expenses. Just as Rhonda expected, hiring a Daily Money Manager provided her with the peace of mind that she needed.
1Center on the Developing Child. Harvard University
Peter Gordon is a Certified Daily Money Manager, Certified Senior Advisor, and President of New York Financial Organizers, Inc. in New York City.