Catching up US filings for a relative who has lost capacity

Does losing mental capacity end the US filing duty

No. A US citizen or green card holder stays liable to file whether or not they can manage their own affairs. The Form 1040 instructions speak directly to a court-appointed fiduciary acting for a mentally incompetent individual who has to file, which assumes the duty carries on. What changes is who signs, not whether a return is due.

The same applies to the parent's own information reports. If the parent's UK accounts together exceed $10,000 at any point in the year, FinCEN's rules on reporting foreign accounts (opens the official FinCEN page in a new tab) still call for an FBAR in the parent's name. FinCEN publishes guidance for a child who cannot file, saying a parent, guardian or other legally responsible person files and signs. It has published nothing equivalent for an adult who has lost capacity, so in practice the person holding legal authority over the money does the work.

What is the difference between an LPA and a deputyship

A lasting power of attorney is made by the person while they still have capacity and names attorneys they chose. A deputyship is an order of the Court of Protection, made after the person has lost capacity, usually because no suitable power exists.

GOV.UK lists two types of lasting power of attorney: health and welfare, and property and financial affairs. The person making it must be 18 or over and have mental capacity at the time, and it must be registered with the Office of the Public Guardian. A property and financial affairs power can be used as soon as it is registered, with the person's permission. GOV.UK notes that it is legally binding only in England and Wales.

A deputy is appointed by the Court of Protection where someone lacks capacity, for example because of dementia, and the court order sets out what the deputy can and cannot do. Scotland uses guardianship and Northern Ireland a controller instead, so families there should check which document they hold.

Who signs the US return when a deputy is appointed

The deputy does, in their own name, for the parent. The Form 1040 instructions tell a court-appointed conservator, guardian or other fiduciary for a mentally or physically incompetent individual to sign their own name for that individual and to file Form 56.

The Form 1040 instructions (opens the official IRS page in a new tab) are brief, and the Form 56 instructions fill in the rest. They list guardians and conservators among fiduciaries, and the IRS treats a fiduciary as if they were the taxpayer, with both the right and the duty to file returns and pay the tax. Form 56 has a guardianship box for someone a court of appropriate jurisdiction has appointed, and it goes to the service centre where the parent files.

The IRS does not say in terms whether an order of a court outside the United States counts. A Court of Protection deputyship is the closest fit we know of for that box. Where a deputy wants an adviser to deal with the IRS, the Form 2848 instructions (opens the official IRS page in a new tab) say the fiduciary signs the power of attorney on the taxpayer's behalf, because the fiduciary stands in the taxpayer's position.

Can an attorney under an LPA sign a parent's US return

Usually yes, but through Form 2848 rather than on the LPA alone. A UK power will not list the US tax forms and years the IRS asks for, so the attorney signs a Form 2848 for the parent under the IRS procedure for perfecting a power of attorney made outside its own forms, then signs the return under it.

Publication 947 says the IRS accepts another power of attorney only if it contains set information, including form numbers and years. Where it does not, and the person cannot sign a replacement, the attorney may sign Form 2848 for them if the original grants authority over federal tax matters, attaching a statement under penalty of perjury that the power is valid under its governing law.

The regulation the Form 2848 instructions cite lets an agent sign an income tax return only for disease or injury, continuous absence from the United States for a set period before the due date, or other good cause with IRS permission. A parent with dementia living in Britain may fit the first two. Line 5a of Form 2848 has a box for signing a return, with a statement naming the reason, and the power must be attached to the return. Publication 947 adds that a power generally ends on incapacity unless line 5a provides otherwise and the durable power meets the IRS requirements.

Publication 947 lets an individual represent a spouse, child, parent, brother or sister, so an adult child can name themselves under the family member designation. Our IRS representation service can act alongside them if questions come later.

Can someone else sign Form 14653 for a living taxpayer

The IRS has not said. The Streamlined procedures (opens the official IRS page in a new tab) are open to individual taxpayers, including estates of individual taxpayers, and Form 14653 has signature lines for the taxpayer, a spouse on a joint certification, a fiduciary for estates only, and a paid preparer. Nothing on the form addresses a deputy or attorney acting for a living person.

The Streamlined Foreign Offshore page (opens the official IRS page in a new tab) says an incomplete or otherwise deficient certification means the returns are processed in the normal way, without the procedure's terms. So there is no published rule to follow, and a risk that the IRS reads the gap against the family. Our approach is to make the authority visible: the deputy or attorney signs for the parent, states the capacity in which they sign, and encloses the order or the perfected Form 2848 with a short explanation.

The certification is made under penalty of perjury and asks for the specific reasons for the failures. Non-wilful conduct means negligence, inadvertence, mistake or a good faith misunderstanding of the law, and here it is described for someone who cannot now explain themselves. The signer writes from records and their own knowledge, says which is which, and does not supply a state of mind they cannot vouch for. Our post on writing the non-wilful certification covers the structure.

Where the certification cannot honestly be given, late returns can still go in outside Streamlined with a penalty relief request. The IRS reasonable cause page (opens the official IRS page in a new tab) lists serious illness of the taxpayer among possible reasons and asks for a doctor's letter with start and end dates. Our post on reasonable cause for late US forms explains that request.

• The years before any decline, and what the parent knew about US filing
• When symptoms began, with medical dates where records exist
• When the power was registered or the deputy appointed
• Which facts come from documents and which from family memory

How to file US taxes for incapacitated parent abroad

Work in a fixed order: confirm the authority, tell the IRS who is acting, settle the route, then prepare and sign. Preparing returns before the authority is settled risks signatures the IRS will not accept. The sequence below is the one we use for families in this position, whichever document they hold.

For a parent who has lived in Britain throughout, the Foreign route's test is usually met: no US abode and at least 330 full days outside the United States in at least one covered year. Our post on proving the non-residency test covers the evidence. The package goes on paper, and the instructions for Form 1040 require a handwritten signature on a paper return.

The signer's own reporting comes last. A US citizen holding a registered property and financial affairs power over a parent's UK accounts usually has signature authority for their own FBAR, and the same test applies to a deputy whose instructions the bank will follow. Our post on power of attorney over a parent's UK account explains how those accounts go on FinCEN Form 114.

• Confirm the LPA is registered, or the deputy order covers property and affairs
• Check the parent's US status, Social Security number and any past IRS letters
• File Form 56 as deputy, or a perfected Form 2848 as attorney
• Test the non-residency rule for each covered year
• Rebuild three years of returns and six years of FBARs from bank and pension records
• Sign by hand, attach the authority, then deal with the signer's own FBAR

How this works for a son holding his mother's LPA

Take a US citizen widow in her eighties, living in a care home in Surrey, with dementia diagnosed some years ago. Her son, a US citizen employed as an engineer in Reading, holds her registered property and financial affairs power. She stopped filing US returns soon after moving to England, long before her diagnosis.

The son confirms the power contains no restriction touching tax. His mother can no longer sign, so he signs a Form 2848 for her under the perfecting procedure with his statement that the power is valid under the law of England and Wales, names himself under the family member designation and ticks the line 5a box to sign returns, citing disease or injury.

Her adviser rebuilds three years of returns from her pension statements and bank interest, with each pension's treaty position reviewed by our US-UK pensions service. On Form 14653 the son signs on the taxpayer line as her attorney, encloses the Form 2848, and writes the narrative in two parts: the years when she managed her own money, and the years after diagnosis, supported by her GP's letter. He adds her accounts to his own FBAR from the year the power became usable.

Had there been no power, his sister would have applied to the Court of Protection to become deputy, then signed each return in her own name for their mother and filed Form 56. Our IRS streamlined filing service prepares packages of this kind, and the full sequence is in our guide for people behind on US taxes in the UK.