How To File a Tax Return When You Have No Income (And Why You Might Want To)

If your income is below the filing requirement, there is no need to file a federal tax return. But for some people, it still makes sense to file.

If your income is below the filing requirement, there is no need to file a federal tax return. But for some people, it still makes sense.

 

There are two main reasons for filing a US income tax return even if you don’t have any income to report.

 

1.  Identity theft, and
2.  Identity theft.

 

I realize it looks like I was repeating myself but I wasn‘t.  I’m talking about two different kinds of identity theft.  The first is related to an unauthorized person claiming your kids as dependents on their tax return.  The second involves someone claiming you, or impersonating you, on a tax return.

 

Let’s talk about your kids first.  Here’s a story I’ve heard several times:

 

“I’m on SSI and I support my daughter 100%.  We get nothing from her father but he claims her every year on his tax return and gets thousands of dollars in refund money.  I reported him to the IRS but I haven’t heard anything.  I tried to file a tax return but other tax company said I don’t have income so I can’t file.   Is there anything I can do to stop him from profiting on my child that he never sees?”

 

 

One way to deal with this issue is to report the tax fraud.  Here’s more information about how to do that:  http://robergtaxsolutions.com/2010/11/how-to-report-tax-fraud/.  But here’s the thing–the IRS will never tell you what happens.  You’ll never know if the fraud stops.  You might not have enough information to give to the IRS to stop the fraud.  But if you file a tax return and claim your child as a dependent–that messes up their computers and something is going to happen.   The IRS will have to deal with the issue.  You’ll need to be prepared to prove that your child lives with you to stop your ex from claiming your child, but hey–with no income, you’re not getting a refund.  You’ve got nothing to lose!

 

Here’s another story that I don’t hear as often, but I have had to deal with before:

 

I got a letter from the IRS saying that my tax return is wrong and that I shouldn’t have claimed those kids.  I don’t understand, I don’t have any kids and I never filed a tax return.  What’s going on?


 

 

Fraud isn’t limited to claiming kids that aren’t yours; the fraudsters will also use a non-filer’s identity to claim kids that aren’t theirs for huge refunds and then when the IRS investigates, some innocent person who never filed a return gets caught and gets fined.  It’s a nightmare to sort this all out.

 

So how do you protect yourself?  File a tax return.

 

Just because you don’t have any taxable income doesn’t mean you can’t file a tax return.  You won’t get any money back, but you can still file an information return just to let the IRS know that you’re out there.  Many software programs won’t process the return if you show no income, so you’ll want to plug $1 into the other income section on line 21 for the long form.

 

You can even file for free with no income from my website.  Just go to the “Do Your Own Taxes” tab at the top.  Of course, you can always go to the IRS.gov website and use their Free File Online instead.  The important thing is that you file a return and protect yourself.

2012 Refunds: What You Need to Know

Sloth

Photo by Thowra_uk at Flickr.com

So what’s with the sloth?  Refunds are going to be late this year.  If you’re charging up a storm for Christmas and expecting to pay off your credit cards with your tax refund in January, you may be in for a rough go of it.  Here’s what you need to know for this coming tax season:

 

  1. The first date that e-file will be open is January 22nd, that’s already a little later than usual.  Couple that with the fact that Congress is still messing around with 2012 tax issues and that could hold up the filing season even more.
  2. The IRS is no longer providing a refund schedule.  Instead, they are saying that most people can expect their refund within 21 days if they e-file, and longer if they mail in their return.  While there’s a possibility that some refunds will be faster, you can’t count on receiving any faster than 21 days.
  3. Most refunds are expected to arrive within 21 days, but some refunds can be expected to take 75 days.  That’s not a typo, I said seventy-five days.

 

How will I know if I should expect a 21 day or a 75 day refund? Basically, if you’ve ever had an issue with claiming a dependent, or if you’ve had an identity theft problem, you’re going to fall into the 75 day category.  Let’s say your ex claimed your daughter on his return last year and he shouldn’t have.  You fought it and won.  This year, he tries it again.  The IRS snags his return and it’s held up for 75 days.  And that’s a good thing, he’s cheating on his taxes and this time it won’t work.

 

Here’s the down side.  You go to file your taxes the right way, but the sneaky ex’s return is already in the system.  Now you’re automatically flagged and your return is also getting held for 75 days also.  So even though you’re the good person doing the right thing, your tax return can be delayed for up to 75 days because someone else illegally tries to claim your child.

 

So, be prepared for a late refund and plan accordingly.

Protecting Your Identity

Scary Identity Thief

Photo by David Goehring on Flickr.com

With your name, birth date, and social security number, I can ruin you.  Now I wouldn’t– I have laws to follow and a code of ethics too, but basically those are all the tools an identity thief needs to ruin your life.

Scary isn’t it?  And how easy is it to get that information?   Got a Facebook page?  There’s your name.  Did you post your birthday on it for all your friends?  That’s two.  The social security number is harder to get—or at least it should be.

Do you have a driver’s license that uses your social security number as the ID number?   Do you keep your social security card in your purse?  Both of those practices are extremely dangerous.

Why am I obsessing over identity theft in my tax blog?  It’s a really hot issue in taxes this year.  Fake tax returns reflecting huge refunds have risen exponentially, and the IRS is having a hard time fighting the phenomena.  I’ve written about children’s identities being stolen for tax returns before, but the issue of adult identities being stolen is what has really caused problems this past season.

Here’s the thing:  A fraudulent tax return gets filed in your name with a large refund.   You go to file your taxes, maybe you even owe, but you can’t file because your identity has already been claimed.  Next thing you know, you’re under criminal investigation for tax fraud.  Ugly, isn’t it?  You don’t want this to be you.

What can you do?   Prevention is the best.  Guard your social security number like your life depended upon it.  It does.  Take your birthday down from your Facebook page.   My apologies to everyone who’s sent me requests to sign up for the birthday club—sorry, I just won’t do it.

If you do get hit, be sure to report it right away.  Even if the police will do nothing about your case, you’ll have the fact of reporting it on file.  If you’ve been the victim of identity theft for tax purposes, you’ll need to fill out the IRS Identity Theft Affidavit, Form 14039.  Here’s a link to get it:  http://www.irs.gov/pub/irs-pdf/f14039.pdf.

Even if you haven’t been affected by tax identity theft, if your purse has been stolen and your social security number is at risk, you should contact the IRS before a problem comes up.  You can call this number for assistance:  1 800-908-4490.  That’s the IRS Identity Protection specialized Unit.  They can take steps in
advance to protect your account.

I worked on an identity theft case years ago, before it was a common problem.  It was a nightmare—because not only had the man’s identity been stolen, but the IRS was charging him with fines, penalties, and tax fraud for getting a huge tax refund for claiming some children that weren’t his.   It all started with an IRS letter asking him if Billy and Susie were his children.  He responded back saying , “No,”  he didn’t have any children at all.  He wasn’t thinking about identity theft, he was thinking that maybe an old girlfriend was trying to pin paternity on him for some kids that weren’t his.   He had no idea that it was the beginning of a tax problem that took over a year to solve.

He hadn’t filed a tax return for that year due to lack of work, so he was a good candidate for identity theft.  Once the IRS determined that the return as fraudulent, they weren’t looking for someone else—they went to my client who happened to have the name and social security number on the tax return.   Like I said, it was a nightmare.

So be careful.  Protect yourself and your social security number.  You’ll be glad you did.

Stolen Children

Imagine being a parent, raising a family, taking your kids to school, making their breakfast, tucking them into bed at night and basically doing all of the everyday kinds of things that parents do for their children.  Then you go to file your tax return and you are notified by the IRS that someone else has already claimed your children on their taxes.  How can this happen?
UPDATE:  Effective January 1, 2016 The IRS will now require Identity Theft protection PINs for dependent children who have been victims of identity theft.  Thank you!
I had always thought that cases like this were caused by divorced parents behaving badly, and to be quite honest many times that’s exactly what it is.  But after I did a post about what you should do if someone else claims your child, I started receiving numerous posts, e-mails and phone calls about how for some people, this happens to them year after year after year.
One form of recourse the IRS has is to ban a person from claiming the Earned Income Tax Credit for three to eleven years if the person fraudulently claimed a child on a tax return.  You would think that would solve the problem–except, as I’ve since discovered, it does nothing to stop true fraud.  Although the original guilty party may not be able to file an EIC claim at all–it doesn’t prevent him or her  from selling the child’s social security number on the black market to be used for fraudulent tax returns.
So who’s harmed by this fraud?  Well obviously, the parents of the children who’s identities are stolen, and the children themselves.  But also you!  According to the IRS, there is approximately $12 to $14 billion dollars of EIC Tax fraud every year.  $14 billion that’s coming out of your taxpaying pocket.
We’re talking about some serious fraud here.
In a normal case, the wrong parent claims a child, IRS notices go out, the issue is settled and the offending parent pays back the taxes while the rightful parent claim gets paid his or her refund.  While the system isn’t perfect, in theory it’s all good.
With a stolen child identity case, it’s genuine fraud.  The criminal steals the ID, creates a fake tax return–often under a fake identity, uses the child’s very real social security number to receive refundable tax credits, and then disappears off the radar before the IRS can catch him (or her.)  The IRS has to pay the real parent his tax refund–because it’s the rightful claim, but the money that went to the criminal is lost forever.
As an adult, if your identity is stolen and used in a phony tax scam, you can receive a PIN number to protect you for future tax filing.  Currently, there is no such protection for children.  And child IDs are extremely valuable to fraudsters–with a single child being worth thousands of dollars in federal refundable tax credits.
What can you do?  Please sign my petition to the Obama Administration to create a child identity theft protection PIN number for victims of child identity theft.  Basically I’m asking that anyone who has successfully defended a rightful claim for having their children on their tax return for two years in a row to be awarded a PIN number to be used in association with their child’s social security number in order to prevent fraudulent returns from being filed.
You can access the petition by clicking on this link:  White House petition  (Update, I removed the link and petition 10/10/2015, we got what we wanted.)
Why defend for two years instead of only once?  Divorced families often have conflicts over claiming a child and it’s fairly common to have an issue once in awhile.  Issuing a PIN after just one claim could wind up muddying the system worse than before.  If a family has defended the claim twice in a row– that’s a clearer indication of fraud and the need for protection is much more defined.
What happens if custody changes and the rightful parent is not the one with the PIN number?  If the parent with the PIN number doesn’t turn over the PIN along with the child’s custody, the new custodial parent will wind up paper filing their tax return and going through the same process of claiming their child as what happens currently.   The purpose of the PIN is to stop fraud, not completely end parental rights.  Please sign the petition today, and help stop child identity theft.
See also:  My Ex Claimed My Kid, Now What Do I Do?  http://robergtaxsolutions.com/2011/01/my-ex-claimed-my-kid-now-what-do-i-do/

My Ex Claimed My Kid: Now What Do I Do?

What to do if an ex spouse claims your chlid for taxes

It’s a hassle if someone else claims your child on their tax return, but that doesn’t mean you have to give up.

 

This happens to people all the time.  You go to electronically file your tax return and it gets rejected because someone else has already claimed your child.  What do you do?  I say fight back, and here’s how.

 

The first step to fighting back is to make sure that you’re in the right.  Ask yourself these questions:

 

1.  Are you the biological parent of the child?  Hint:  if your answer is “I’ve raised her like my own.”  You’re going to have trouble winning.  If you’re a grandparent, step parent, aunt or uncle; and the person who claimed the child is the actual parent, you don’t stand much of a chance.  (That said, some folks will have a credible case, but I’d suggest professional help here because it is tricky.)  To go this route you should be the real parent.

 

2.  Did the child live with you all year?  If not all year, for at least over half of the year?  If you had custody all year you have a much better shot of winning.  You absolutely must have had custody for over half of the year to even think of trying this.  If you’re on the border line, where your ex had the child for half the year and you had half, this might not be worth it.

 

3.  Is this good for your child?  Generally you’d think that having more money in the household would be good for your child, but if fighting with your ex could cause harm to your child, you might want to stop and think about it a bit.

 

Step two.  Once you’ve determined that you are in the right and that you are entitled to claim your child, then what you need to do is print out, sign and mail that rejected return to the IRS —keeping your child as your dependent on the tax return.  When you do this, the IRS has to take it in.  They have to look at it and it’s going to throw whoever claimed your child into an audit.  If an Earned Income Tax Credit is involved then those audit papers generally run 11 to 22 pages long.  (11 pages for a straight EIC audit, 22 for an EIC and head of household audit, they’re the same questions it’s just that 22 pages is more intimidating.)

 

Here’s the scary part, you’re going to get the same paperwork.  It is a little intimidating, but you’re expecting it.  Because you’re the custodial parent, that is your child lives with you, you can answer those questions with no problem.  People who shouldn’t be claiming your kids can’t answer the questions and that’s why you’ll win.  If your kids are in school, you’ll need a document from the school saying they attend and where they live.  If they’re too young for school, you can get a statement from the doctor’s office that you’re their parent and you pay their medical bills.  You’ll have the resources to prove that you’re the parent.

 

If you’re reading this and thinking, “I can’t prove I have custody of my kids,” then maybe you shouldn’t be filing for them.  You will have to provide some proof:  school records, doctor’s files, church documents, day care receipts, health insurance records, something professional.   Your Mom or a friend can’t vouch for you.

 

Once you’ve received the audit papers, completed them and sent them back, then it’s a waiting game.  Your ex (or whoever claimed your child) will have to complete the same paperwork.  The IRS will examine the papers and determine who had the proper right to claim your child.  But since it’s you, you will win.

 

The big downside to this is that it will take months to settle.  Months.  On the upside, once your ex has lost an audit case for claiming your child, it will be very difficult to ever try it again.  You’re not just solving a problem for one year, you’re preventing future problems as well.

 

What if you need the money now?  That’s the most common question.  Sorry, but that’s impossible.  What you’ve lost, you can’t get back without a fight.  If you have more than one child, and only one was claimed incorrectly, you could file now and at least get part of your refund, then file an amended return later.  I don’t recommend doing that, but I also understand sometimes you need the cash now.

 

If you try doing this as an amended return there are two consequences:  first, it will slow everything down even more.  You can’t file an amended return until your first return is completely processed.  An amended return will take about 16 weeks to run through the system before the whole audit process begins so you’re basically adding 4 to 5 months to the timeline for solving this issue.  Second, filing a return and amending to add a child reduces your credibility with the IRS.  Your documentation had better be rock solid because you will have no wiggle room for doubt if you submit an amended return to claim your child.

 

One more thing to consider before you go through with this.  Call your ex and talk it out.  I’m not crazy, hear me out.  You’ve read this far, you know that fighting is a big hassle.  Before you go into warrior mode, maybe you can negotiate a peace treaty.  What do you stand to gain from this?  What does your ex stand to gain?  It’s important that you file your returns legally, but with divorced or never married couples, you can split an exemption:  the custodial parent claims head of household and EIC, the non-custodial parent claims the child tax credit and the exemption.  It could be a good thing for both of you and for your child.  (Remember, what’s best for the child?)  Instead of going to war, you have your ex amend his/her return and you file your return right after the amendment is accepted.  It still is slow, but much faster than going through an audit.  And it’s a peaceful solution.  (Please, don’t even think of trying this if your ex is dangerous.  Safety first.)

 

Finding out that someone else has claimed your child for taxes can be shocking and financially devastating.  The assumption is usually that it’s the ex, but that’s not always the case.   When you file to claim your child, you will never be told who the other person is.  (Of course, if it’s your ex you’ll probably get an unfriendly phone call so you’ll know.)  It’s scary how often it’s not the ex, though.  Be sure to protect your child’s social security number.  Don’t keep the card in your purse.  Don’t share the social security number with anyone.  Your child needs your protection.  It’s hard enough being a kid, being a kid with a stolen identity is worse.

_______________________________________________________________________

Note:  Here are some links that might help:

EIC questions of any kind:  http://www.irs.gov/Individuals/Earned-Income-Tax-Credit-(EITC)-%E2%80%93–Use-the-EITC-Assistant-to-Find-Out-if-You-Should-Claim-it.

How to find free tax preparers:  http://www.irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers

How to find your local IRS office:  http://www.irs.gov/uac/Contact-Your-Local-IRS-Office-1

 

IRS Emails – It’s a Scam!

the IRS won't email you

Updated June 2016.

 

I originally posted this warning over 6 years ago – and the problem is:  it’s still going on!

 

I’ve been asked to help get the word out about IRS scams.  Right now appears to be a popular time for scammers to send phishing emails masquerading as the IRS.  One of the most popular scams involves telling you that there’s a problem with your refund and asking you for bank account information.  The emails look pretty convincing with the IRS logo and official sounding language.  Don’t be fooled!  The IRS will never ask you for your social security number or bank information in an email.  Never.

 

If you receive one of these emails, please forward it to phishing@irs.gov.  That way, the IRS security staff can examine it and take action.  Be sure to delete the email and whatever you do, do not click on any links or open any attachments.  Does it really help to forward the email?  I don’t know.   But the IRS won’t know about a scam if no one tells them so I recommend forwarding it.

 

In addition to the refund scam, another popular scam involves winning a lottery or contest where the email claims that the Department of the Treasury needs you to write a check for your tax withholding.   Not true.  “Withholding” means that the contest agency will hold back some of the money that you would have received for your prize to pay the government.  You should not have to write a check to receive your prize.  Ever.

 

And the phone call that says the IRS will file a lawsuit against you?  Yep, that’s another scam.  Here’s my video about that:  IRS scam video

 

If you’d like to read more about IRS scams, check out this link.  It tells about scams, how they work, and how to recognize them.  IRS Scams