How to cancel a credit card for a parent with dementia

Dear Liz: My mother has two credit cards that have been inactive for a year and a half due to being in an assisted living facility. He lives with dementia and is no longer able to make decisions (personal or financial) on his own. Can I or can I even cancel this card or do I have to wait until he passes and send the death certificate to the bank?

answer: Theoretically you can close the account for him if you have a legal document known as a financial power of attorney. This document is designed to help you take over the finances of someone who is incapacitated. Unfortunately, banks and credit card issuers sometimes refuse to honor powers of attorney despite legal requirements that they do so. You may need to hire a lawyer to force them to accept your authority. You can get referrals to experienced attorneys from National Academy of Elder Law Attorneys and American Bar Assn.

If you do not have these documents and your mother is insane, you may need to go to court to become a conservator to make financial decisions for her. It can be an expensive process.

But there may be a simple solution. Some credit cards have an “off” switch that prevents anyone from accessing the account. If the card has this feature and you can access the account online, you can effectively deactivate the account even if you can’t officially close it.

Offsetting home sales tax

Dear Liz: We recently sold a house and have to pay taxes on the proceeds. I’m wondering if we can take some of the proceeds and put them into a 401(k) account, and pay taxes on them later?

answer: You can not do this directly, since 401(k) contributions are made through fingerprint deductions. If you haven’t maxed out your retirement contributions, however, you can increase your contribution rate to offset some of the taxable income you made when you sold the house. Some employers allow you to contribute 100% of your salary, up to the IRS contribution limit. In 2022, the limit is $20,500 for people under 50 and $27,000 for people 50 and older.

You can also contribute $6,000 to an IRA (or $7,000 if you’re 50 and older), but your ability to deduct contributions depends on your income if you’re covered by a workplace plan such as a 401(k). If you are married filing jointly and have a workplace plan, your ability to deduct a phase-out IRA contribution with adjusted gross income is changed from $109,000 to $129,000.

Remember that you can exempt up to $250,000 of home sale gains (or $500,000 for a couple) if you have owned and lived in the property as your main residence for at least two of the last five years. You may also be able to reduce the taxable gain if you keep good records of qualifying home improvements. For more information, see IRS Publication 523, Selling Your Home.

Don’t forget ‘Where’s My Return?’

Dear Liz: My CPA left out some income when my electronic filing went back at the end of March. The CPA filed the return corrected a few days later. I owe $10,895 and have not received my refund. What happened to the 21-day refund period for e-filing? I can’t get through to the IRS on the phone. The state refunded my money in just eight days.

answer: The IRS attempts to process refunds within three weeks when taxpayers file electronically and use direct deposit. But that timeframe goes out the window if there is any problem, especially in recent years.

The IRS is still dealing with a massive backlog triggered by the pandemic. The agency has struggled with antiquated computer systems and a depleted workforce due to years of shortages. Then the processing center was closed by lockdowns, followed by congressional orders to distribute hundreds of millions of payments (three economic relief payments, followed by six months of advanced child tax credit payments).

You can use “Where’s My Return?” equipment on the IRS site to track the status of your refund, but unfortunately there is not much you can do to hurry things along.

Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions can be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form. askliweston.com.

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