I work with several financial planners. One called recently with an unusual question. He had met with a new client and discovered the man hadn’t filed his tax returns in 6 years even though he owns property and collects rental income. An interesting wrinkle (no pun intended!) was that the man happens to be 103 years old. The planner wondered: should this man be filing tax returns?
Technically, rental income needs to be reported and tax returns should be filed for that purpose. Without seeing any numbers, I can’t speculate as to whether any taxes would be due. Nor can I predict whether filing a current year tax return would alert the IRS or Massachusetts Department of Revenue to seek tax returns for the prior years in which he did not file. Then there’s the practical side: if the man chooses not to file tax returns, given his life expectancy, it is likely that he will die before the taxing authorities catch up to him.
Sometimes the answer to a simple tax question can be complicated. It is my job to explain the issues and help the taxpayer decide on a course of action that is right for him as well as the government. After all, choosing to ignore his tax filing obligations can have ramifications for the man’s heirs in this scenario.
As I always tell my clients, call me before you take action on what appears to be a simple question.