There’s a big difference between accidentally claiming your child and criminal tax fraud.
I often hear the question, “Will I go to jail if I cheat on my taxes?” People see celebrities go to prison all the time, Richard Hatch, the guy who won a million dollars winning “Survivor”was been all over the news for awhile for tax evasion. He spent four years in prison. Note: if you win a million dollars on national television, it’s safe to assume that the IRS knows about it and is looking for it on your tax return. Other celebrity tax evaders include Wesley Snipes, Darryl Strawberry and Willie Nelson. (And the list goes on and on….)
But what about EIC fraud? What happens to you when you claim a child that’s not yours, or if you allow someone to claim your child when that person isn’t the parent? What’s the punishment there?
If the IRS examines your return and finds that you cannot claim EIC, the worst case scenario would be that they impose “civil fraud” penalties on your return. The penalty for civil fraud is 75% of your underpayment of income tax.
Say for example that you involved yourself in a scheme where you claimed children that didn’t belong to you over the course of three years. The difference between what you received as a tax refund averaged $5,000 more each year than if you didn’t illegally claim those children for a total of $15,000 in excess refund dollars. When the IRS catches up with you, they will demand their $15,000 plus another $11,250 for the penalty which would make your balance due $26,250. Add to that the interest you’d be charged and you see how costly this is.
What makes this even worse is that if you are charged with civil fraud the IRS can then turn the case over to the Criminal Investigation Division for prosecution. You could face both civil and criminal penalties at the same time—meaning they put your butt in jail, levy your bank account and put a lien on your house and any other property you own.
Most people who get caught for EIC fraud don’t have the money to pay back the tax owed, not to mention the added fines. And of course, the higher the dollar amount owed to the IRS, the higher the likelihood of criminal charges. So you really don’t want to hear the word “fraud” if the IRS comes calling.
But that’s the worst case scenario, fraud is pretty dangerous stuff, and they have to be able to build a case for it. One of the key points of fraud is that you knew you were doing it. I once spoke to a potential client over the phone, she had received an IRS letter and they were charging her penalties for fraud. As she explained her case, she kept insisting that “she didn’t know.” I thought there might be a case for her so I asked, “You mean you didn’t know it was wrong to claim someone else’s child?” She said, “No, I didn’t know I could get caught.” That’s not going to get you off of fraud charges. I gave her the name of an attorney—if there’s a possibility of criminal charges, you’ll want the tax attorney over the EA or CPA. (EAs and CPAs have client privilege for tax issues only, for criminal cases, only an attorney has privilege—meaning what you tell them, they can’t tell on you.)
In most cases though, a much more likely scenario is an accuracy related penalty—that would be 20% of the under-reporting. Let’s say you live with your girlfriend, she has a kid, she said you could claim the kid; you don’t know it’s illegal but you get caught. You’ll have to pay back the EIC plus the accuracy related penalty. If the EIC difference was $5000, then you’d add another $1250 making the balance due $6,250. The IRS would add interest to that as well.
Generally, if you lose an EIC audit, you’ll also be banned from claiming EIC for somewhere between 2 and 10 years depending upon the severity of the case. That’s probably the worst penalty for most people. Many of the people who get in trouble for EIC generally are able to claim EIC in other years. Being banned from EIC for 10 years can cost a person over $50,000. That’s a lot of money.
Accuracy penalties usually involve amounts of over $5,000. If your EIC under-reporting is less than that, you’re more likely to pay “late payment” penalties which are equal to ½ of one percent per month. For example, you file your return in February of 2008, in March of 2010 they catch up with you. This means that the penalties have been adding up for 24 months, you’ll pay 12% for the penalty, plus the interest owed. Let’s say you only got an extra $1000 for falsely claiming EIC, you’d have to pay back $1,120 plus interest of course. The IRS will always get their interest payment.
But what if it’s not my fault? That’s a very common question. What if it really isn’t your fault? What happens if you went to a preparer that didn’t know any better and claimed EIC for you when she shouldn’t have. Or worse, you had a crooked preparer. (These things really do happen.)
You’ll have to report the preparer. There are serious fines and penalties for tax preparers associated with EIC negligence and fraud. The smallest, yet the easiest to prove, is the EIC due diligence paperwork. For every tax return that has EIC on it, a paid preparer must have a form 8867. Here’s a link to see what it looks like: http://www.irs.gov/pub/irs-pdf/f8867.pdf
The link is to the official IRS form. In my office, my computer software actually uses the same form but I’m required to sign it and have my client sign it as well basically stating that everything on the EIC form is true. Here’s the thing—the IRS can call up any tax office at any time and say, “Hey, we’re coming to audit your 8867 EIC forms.” As the owner of a tax business, I have to be able to pull them all and have them ready for inspection. If I don’t have an 8867 form for every EIC tax return I prepare, its $100 for each one I’m missing. Guess what, I’m not going to be missing any of those forms. I can’t afford it and I don’t prepare that many EIC returns. You can bet that an office with lots of EIC returns has itself covered in the forms department.
So here’s where I’m going with this, if your preparer really is crooked, do report him to the IRS, it’s the right thing to do. But if you lied to your preparer about your relationship to the child you claimed or some other EIC offense, and the IRS goes to the preparer’s office and pulls the 8867 forms, and they find a signed affidavit with your signature saying that you are the actual parent of the child—now you’ve just proved that you committed a fraud. That’s the last thing you want to do. Remember, a plain error costs a lot less than fraud and there’s no jail time involved.
So what should I do if I receive an EIC audit letter? If you have the rightful claim to EIC, fight it. If you’re not sure, maybe you do, maybe you don’t—seek professional help. I’ve seen innocent people lose EIC audits because they didn’t know the rules. Don’t take chances, it’s too costly. If you know for a fact that you should not have claimed a child, pay up and get it over with as quickly as possible. It won’t be easy, but in the long run it will be better for you.
If you know that you’ve illegally claimed EIC, don’t wait for the IRS to come after you. File an amended return and pay the tax. You’ll definitely have to pay interest, but by filing an amended return and paying before you get an IRS letter, you have a very good chance of avoiding the penalties. You’ll probably sleep better too.
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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
I just got audit for 2010 taxes. I had a tax preparer who added things on there that I was not aware of. Never received a copy of my 2010 taxes until a few days ago. For example school credit for me, when I wasn’t in school. I did have a childcare business but tax preparer added extra money I received from parents. And I also seen amount of money the tax preparer paid themself, which was close to $500 and I remember I was told it was about $200. How should I go about this audit when I was not aware of information?
Thank you so very much! Yes, it was a very BIG lesson to me! Of course, he denying everything and putting the blame on me, BUT NOW I CAN REST EASY!!! Thank you again!
Hi Upset,
I can see how you’d be upset about the situation. You realize that your ex couldn’t claim those kids and now he want’s you to suffer for it.
This biggest danger for you is–is your ex’s name on your bank account? I’m guessing not, but if it is–then you’ve got a problem because the IRS can levy your bank account to get the back tax money he owes. So your first item of business is to take him off of your bank account if he’s on there.
So other than that–although technically you could be called out on this–your name is not on his tax return. What many people don’t realize is that your tax return is a legal document–when you sign the tax return, you’re basically saying that what you are reporting on the tax return is true–under penalty of perjury. You didn’t sign that return–he did. He, knowingly signed the tax return, claiming children that he should not have claimed–not you.
The fact the the money went into your bank account is a bit of a problem–“No, no, bad girl! Don’t do that again!”
That said–and I’m not making this up–the IRS agent I spoke with laughed–seriously she laughed, about what an idiot he was to have his tax refund deposited into you bank account. You see, from her side, she sees that all the time–and then the girlfriend steals the money and there’s nothing the IRS can do about it.
Now, the way I’m reading this–you didn’t steal the money–you gave it back–but the point is, the IRS isn’t even going after the girlfriends that steal the money so you’re not going to be on their radar.
Now you’re not on the IRS radar–but I suppose he may try to use some local legal thing–but the bottom line is he can’t prove anything.
I think you dodged a bullet on this one. But do be careful in the future. Having something like this happen once–you’ve got credibility on your side. If something like that were to happen again–that would create suspicion and could land you in trouble.
So, consider this a lesson learned, and now rest easy.
My ex boyfriend claimed my grandchildren on his taxes, including the EIC credit. I was unsure that he could, but he said since we lived together and he helped support them, he could do it. I have claimed them for the last two years because I had temporary custody. He filed online and had the check deposited into my account since he did not have one. (He also said since the IRS did not reject his return that this meant that his tax return was legit.) We broke up a couple of months ago and he just informed me that he is being audited due to the EIC and was told that he had to pay back the refund. He is saying that I am also responsible for this, even tho my name was not on the tax return. I filed my own. I have not been contacted by the IRS. My question is am I responsible? Can I get in trouble also? In hindsight, I realized how ignorant I was about accepting his explanation. I am very worried and would like to know how to handle this situation. Thank you!
Thank yoy so much for your help!
Hi Cheryl,
To amend, you want to use form 1040X. You should be able to do it online, but I know that sometimes people have trouble with that. If you call the H&R Block 800 number, they should be able to walk you through it.
Generally–you’ll go to the 1040X form and click “auto fill” that will get you started. Remember, you’ll have to amend your state return also. Make sure you print out your original before you start so that you’ve got it.
Usually with the 1040X you’ll have to manually enter that you’ve removed the dependents–but I’m not familiar with the Block online form–it may be automatic when you delete the boys so just look at the form to make sure it shows up.
After you’ve done your “prefill” you’ll go back and remove your nephews as dependents on the tax return. The program should automatically fill in the correct numbers.
In the explanation box you will say: original return included 2 dependents that have been removed, affecting EIC, child tax credit, exemptions, and head of household status.
You will have to print the return and mail it in. You can’t efile an amended return.
If you still have dependents–then you’re still head of household. Send with the 1040X the corrected 1040, and–if you have them, a new EIC schedule, child tax credit worksheet, etc. If the nephews are the only kids you’ve claimed, you won’t have any of those schedules to attach.
Do tell the IRS that you are amending the return when you respond to the letter. Good luck.
(And don’t be afraid to ask Block for help when you’re filling out the X. It’s their program, you paid for the service, they’re supposed to help you.)
Thank you for your quick response, i really appreciate it. I filed online through H&R Block, how do i go about amending the tax form? Do i need to let the IRS know I’ve amended when responding to their letter?
Hi Cheryl,
Yes, I would amend. Make sure you do it within the 30 days. They’re asking you to provide the documentation your nephews lived with you–well if they didn’t then you don’t have the documentation so—-amending makes the most sense.
You also asked about your 2010 tax return–so the question is, could you claim the boys legally that year? It seems like no one has questioned that, so maybe your circumstances were different. If you really were not legally able to claim the boys, then you really should amend that return as well. Yes, it will cost you, but by fixing it now it will reduce your penalties and interest. Of course, if you were legally allowed to claim the boys and there’s no one who is challenging it–then you won’t need to.
My situation is like Efe who posted on 4/15/12… I just recieved the audit letter for eic, head of household and dependent.. Can i ammend my taxes still even though i got the audit letter asking me to provide documentation w/n 30 days? I also claimed my same nephews in 2010, the audit is for 2011, please any help is appreciated.
Yes Amy,
They can take your refund that would be for your kid’s EIC for your old tax debt. Sorry.
so they can take my earned income credit thats for child too???
@Amy,
Yes the IRS will take your refund as long as you owe money. If your husband owed the money from before you were married, you might be able to file something called an “injured spouse” form, and you might get to keep some of your refund. If you were already married when the debt came up, then that won’t help you.
Hi Angela,
Wow. That’s pretty amazing. I’m sorry. My gut reaction is that you should just amend your tax returns and take your child support off. But I’m guessing that there’s more to the story than that. Am I right?
Is it possible that by claiming your child support as income that you qualified for an Earned Income Credit? So maybe you weren’t scamming for food stamps but you were scamming the IRS? I apologize if I’m wrong about that, but if that’s not the case, then why don’t you just amend your tax returns?
I realize that I’m getting back to you too late, sorry. I hope your trial went well for you. It’s hard making ends meet and feeding 5 boys isn’t easy. (I’ve only got one–I’m amazed at how much he can eat.)
But you tell an important story, the IRS and the local social service agencies do share information–so it’s important to make sure that your tax return reflects what’s in your food stamp/welfare/section 8 or whatever files.
Thanks for sharing.
if u owe taxes an ur in payment plan will ur taxes be taken for the following years till the debt is paid an if they will be can they take what taxes u will get for ur children or will they just take what is the part for the person oweing the tax debt ???
Hello. I have a question. Not exactly a tax credit question. I am a single mom with 5 boys at home. I work from home and make very little income. The bulk of my income has been child support. When I do my taxes, I claim ALL the money I have made for the year. Including child support since this is our means of living. We also get food stamps.
Last year i found out I was under investigation for food stamp fraud because on my tax return I have listed a much higher amount than what I report to them. I explained to them why that amount is different but they are saying that I committed food stamp fraud and we have trial coming up on Monday. They are charging me with 7 felon count (1 for each time I had a review and they say I did not not report income). They say I owe them over $13,000.
I have an attorney but I cannot even afford to pay him the money I owe him so far. This year, I did do my tax return and i only claimed my actual income and not my child support. I have never lied to anyone in order to gain food stamps. i have been completey honest with them and showed them proff of all my earnings. My mistake was claiming child support in my total income amount on my tax returns.
Now I am facing jail time unless i take a plea. I do not want to take a plea because I did not commit food stamp fraud. Also, I will have to plea guilty to felon charges and I will be a felon from that point on.. i will also be on probation for 10 years in which I cannot even afford to pay the $40/month for probation, and most important, what kind of example am I to my children if their mom is a felon on probation?
But if I do not take a plea, the DA has made it clear he will ask I go to jail in which then I will face losing my children…..
All this because I filed my taxes wrong?
Hi Christina,
If you want to report someone for tax fraud, read this post: http://robergtaxsolutions.com/2010/11/how-to-report-tax-fraud/
That gives you the instructions.
There are two really important things to know about reporting tax fraud:
1. You will never know what happens. Because of the confidentiality issue, the IRS will never tell you what happened to your report. Unless this guy is kind of famous–it won’t make it to the newspapers or anything.
2. The other important thing to ask is–did you ever benefit from the tax fraud? I’m assuming the answer is no, but if I didn’t warn you about that and you were reporting an ex-boyfriend or something who had at one time spent the fraud money on you–well then you’re an accessory so you’d really want to think twice about it before reporting.
Now to be honest, the IRS would love to get its hands on someone who’s been claiming fake kids for several years so if you can nail him, do it. It’s just you’ll never get the satisfaction of knowing you got him. I just thought you should know.
i know somebody who was doing his taxes for a period between 2 to 15 years claiming children that never existed getting ss numbers from other kids and claiming them as his, and used to received between 5 to 7 thousand for refunds. could he be in trouble if i report him i know his info, ss# address the time he did this his address etc.
Thanks for your input. I was thinking the same thing but just wanteda 2nd opinion before I gave that same advice.
Hi Lashea,
That’s a good question. I’m not sure, but you asked this on an EIC page, and that makes me think that the IRS may want to talk to the preparer about due diligence. Realize that I’m just guessing here, but that’s the first thing that comes to mind.
So let’s say a taxpayer gets audited, loses the audit and agrees to pay the charges. You’d think that would be a done deal. But the situation you mention makes it sound like the IRS isn’t satisfied. They may be thinking that the preparer should have asked some more questions before filing a faulty return.
I’m not sure if you mean the preparer must bring all of her clients files or just all of the taxpayers files. I would think the IRS would go to the preparer’s office if they were checking out all of the EIC returns for due diligence. But the the taxpayer’s case is closed, why would they have the preparer bring all of the taxpayers files into the IRS office? That would imply “case closed and over.”
You’ve got me stumped there. I would have the tax preparer call the IRS agent and ask, “What exactly do you want? What exactly are you looking for so that I might best be prepared for this meeting?” Those aren’t unreasonable questions. Especially if you don’t know if the meeting is about the taxpayer or the tax preparer.
I would not just skip a meeting that the IRS invited me to. Seems to me that would be inviting trouble. In the mean time–I’d be checking to make sure that I’ve got all my 8867 forms signed and on file–I could be wrong, but I just have a feeling it’s a due diligence kind of thing, not being familiar with the case.
Sorry I don’t have a better answer for you.
Hi, My question is. What happens if the Irs completes an audit and does not allow any of the tax payers expenses and the tax payer agrees with the changes and accepts the tax debt, but does not sign an affidavit against the tax preparer because it was not the preparers fault, and the irs agent still calls the tax preparer in the office to bring all the files? What is the reason and what will happen if the tax preparer does not go to the irs office since the agreement was signed and the tax payer has accepted the offer? I hope I made sense. Just trying to figure out what is the reason or agenda the irs agent has for the tax preparer? please advise!
Hey Teresa,
I’m sorry about your mom.
About your taxes, here’s the most important thing to remember. Your step father didn’t commit fraud or do anything wrong at all. As you step father–he is your kids’ grand father and has a legal right to claim them when they live with him. So–under the law–you’re good.
What your problem is is the proof. Since both the school and the nurse knew about your situation–ask them to write a letter on the scholl or doctor’s letter head explaining that you did live with your stepfather from the dates you mentioned. The school let the kids stay there because your family was undergoing a hardship. That’s not that unusual.
Hopefully that should take care of it. Good luck.
I am having IRS trouble. My step father claimed my kids and the EIC. We moved in with him in March to help with my mother. She passed away in June and we stayed with him until Feb. of this year. I did not work, and the father is not in the picture. He has claimed them before when we lived with him but they denied it this time and we have to have proof. However, I did not change address with the school or Doctor. I did not plan to stay there forever. The school knew we were there and so did the nurse at the Doc office but nothing official. How can I do this. He really needed this credit to try and compensate for what he spent while we were with him……
Thanks
Hi Steffanie,
It’s hard when you suspect something but you’re not sure. But you don’t want this to come back and hurt you–and this is really important because it could. The whole identity theft thing is scary.
I’m guessing you don’t file a tax return at all because you’re currently not working and not required to file and wouldn’t get anything back even if you did. That makes you a good target for identity theft because someone knows you’re not filing.
But your problem is–what happens if your kids show up on someone else’s tax return while you’re receiving state benefits? There’s a lot of sharing between agencies these days and you don’t want to get cut off. (Especially if that’s your only source of income right now.)
I would talk to your social worker first–lay it out there like you did in the post. “I think someone my have stolen my kids’ identities for tax fraud. I can’t prove it–but I suspect it. Is there anything I should do?” That gives them a heads up in case tax documents do show up.
Now, if the person stole your identity–there’s a whole set of procedures–but there’s nothing right now if your kids IDs are stolen. You could file a “no income” return. Basically, you file showing no income and put your kids down as dependents. All of them. This just lets the IRS know that there are children that should be associated with your name.
Now, you can do this online. You can do it free at http://www.irs.gov. The thing is–if someone claimed any of your children, your tax return will get rejected–and bingo, you’ll know. From there, you can decide how to handle it. You can paper file your return–just letting the IRS know who the kids belong to.
Remember–you don’t know for sure if your relative did anything–you just suspect. You don’t have to confront her or say anything. Just let the IRS do their thing.
Hello, what happens if you have reason to believe a relative might have claimed your children for EIC but not sure for what year(s) or which children?
Ex: I lived w/my mother 4 yrs. ago or so @ that time she was legally able for EIC we lived there almost a year & I knew. I have not been employed for 5 yrs. & homeless twice, this person I’m suspecting does in-home service for my grandmother. However recent conversations & activities by this person has my attention that she may have filed behind my back thinking I would not suspect or think she would do this?
Most importantly I have 4 children under 18 yrs. & receive medical & food from Human Services Agency & I don’t want anything to jeopardize my standing with them nor with IRS, for a FEDERAL charge is serious & I know that convincing my innocence may not be easy since she is related. Non the less IT IS FRAUD & NOT RIGHT regardless & money (if she received) she was not entitled to, money IRS could have kept?!
Sorry for this, I appreciate your time reading this & hope to hear from you soon.
Sincerely, Steffanie
Hi Leena,
You need to read this: http://robergtaxsolutions.com/2012/01/can-my-boyfriend-claim-my-child-by-a-different-father-on-his-tax-return-for-the-earned-income-credit/
It is not legal for the ex’s boyfriend to claim those kids for EIC.
It’s going to be a little harder to prove the case about the brother, although if he’s not supporting those kids he shouldn’t be claiming EIC either.
That said, your boyfriend, since he doesn’t live with the kids cannot claim EIC. Depending upon his divorce decree or separation agreement–if he’s got one, he may be able to claim the exemption on his children. But there are lots of rules about that too. This might help you: http://robergtaxsolutions.com/2012/01/court-ordered-exemptions-and-the-irs/
The best way to fight this is if your boyfriend is allowed to file for an exemption for those children, because that will cause an audit and those guys who can’t claim them will lose. If your boyfriend is not allowed to claim the kids, he can file a fraud report. Here’s a link to that form: http://www.irs.gov/pub/irs-pdf/f3949a.pdf
The catch is, because of confidentiality laws, he’ll never know what the IRS does about it or if those guys ever get caught. (Unless of course one of his ex’s calls him up and yells at him for reporting it.) Good luck.
Hello, I got a few questions. My boyfriend pays child support for his kids and his ex’s boyfriend filed EIC for them. she claims it’s legal cause they all live together. Is this true? My boyfriend also has kids with someone else and that ex’s brother claimed the kids for EIC. They live in a 2 family house. The brother lives on the 1st floor and she lives on the 2nd floor. He does not support the kids. Can he legally claim any tax refund on those kids? What should my boyfriend do? Any help or info is appreciated…. Thanks
Hey Carolina,
Hold you head up and just do what has to be done. Don’t let fear or embarrassment get the best of you. You’re a good person, you just made a mistake, that’s all.
About the money–why you owe them more than you received. There are a couple of possibilities–but most likely you’re getting hit with penalties for late payment of taxes. Also, it’s possible that you could have owed originally when you filed with the kids so there’s always that as well. But my best guess is that they hitting you with late payment penalties.
When you go to Block and have them amend your return, see what you really owe before the penalties are added in. If you can scrape up that much money, then try calling the IRS as requesting a “penalty abatement”. Your argument is that 1. it was an honest mistake, and 2. you’ve never had a problem on your taxes before (I’m assuming you haven’t) and since it was the first (and will be the only) time it’s ever happened, you’re requesting an abatement of the penalty. The IRS might say no, but if you don’t ask, you don’t get.
If you can’t pay up what you owe, set up a monthly payment agreement and never be late or miss a payment. When you’re close to paying off the debt–then call and ask for the penalty abatement. You don’t want to ask at the beginning because then they can hit you with more penalties while you’re paying so wait until you’re almost done.
Good luck.
Thank you for your honest response!
You are correct I have been talking to the IRS about it and they told me to go back to my tax preparer and see how they can fix or help the situation. I always confuse the meaning of nieces and nephew with cousins! I remember I told the Tax preparer it was my dad’s sister so that she could correct me if I was wrong but now that I relook at the tax forms I received, She put my dad’s sister down as my sister! Therefore put them down as my niece and nephew and I feel like it’s my fault for not paying attention before I signed the paperwork. I have an appointment to talk to the woman who prepared my tax forms Wednesday since the office is only open Wednesdays. My aunt said she willing to help me get out of this but I just don’t want to deal with it. I feel like a criminal when I’m not. I still don’t understand why I would have to pay $3900 when I only received $2700? And I was supposed to receive $7700 there was still $5000 frozen? If I Amend my return to take my cousins off, will I still have to pay that whole amount they want or will it at least go down? I really don’t want any more money just want to settle this and be done. I appreciate you being honest with me. I’m going probably hear this again when I talk to H&R Block when I tell them! It makes me nervous since im such a shy person but i’ also an honest person. Thank you very much for your help!
Hi Carolina,
The bottom line here is that you claimed your cousins as your niece and nephew and you took an earned income credit and you can’t do that. You know that now of course, but that’s a big NO! I’m surprised that H&R Block would have made a mistake like that. Not to doubt you, because they can make mistakes too, it’s just that as a company, they’re pretty by the book about EIC due diligence rules. Here’s the thing–if H&R Block did your return, they had to do the due diligence paperwork and it got sent in with your tax return. You should have been asked a lot of questions. Here’s a copy of the form: http://www.irs.gov/pub/irs-pdf/f8867.pdf
I’m prettty sure that your tax preparer will not tell the IRS that she made a mistake on this one. If a preparer screws up on this, the penalty is $500. In my office, I have my EIC clients read the printed out statement and they sign it too–for my protection. I’m guessing that Block has some sort of policy in place to protect their preparers as well.
Also, the law is just not with you on this. In the end, you are resonsible for everything that your tax return says. When you signed the return, if you didn’t look and notice that your cousins were listed as a neice and nephew–well the law puts the fault on you.
I’m sorry, I’m sounding so harsh, it’s just that’s the way it is.
Now, this is what you do. Don’t worry about your job writing a letter to prove where you live–that’s all irrelevant. Your gut reaction to just take the kids off your tax return is the right one. And you should have H&R Block do that for you. If you can persuade the district manager that the preparer made a mistake, they’ll do it for free and maybe pay the penalties if you can prove the preparer made a mistake. (The won’t pay the tax, even if you bought one of those Peace of Mind agreements–the POA things never cover EIC.)
You’re going to have to pay the tax. You don’t have the money, but it’s a small enough amount that they’ll be willing to work out a payment agreement. You can probably do that yourself with them over the phone.
Now one fair warning: it sounds like you made an honest mistake and didn’t realize what you were doing. But you’re going to be treated like a criminal–it’s one of the most common EIC fraud scams–claiming a kid as a neice or nephew when you can’t. So people at the IRS and even H&R Block might not be as “friendly?” as you might expect when you call them about this. They’ve both heard this story about a thousand times and the people were lying–so be prepared for a little attitude. You’re almost better off just saying, “I claimed my cousins and neices and shouldn’t have so now I need to amend my return.” You’ll save yourself a whole lot of time.
i forgot to mention, I did live the whole year at my aunts house and paid half of the rent and bills while I found a place of my own. But everything was in her name, therfore I have nothing in my name.Therefore she asked me to put them as dependents or claiming them. I had the landlord write a letter stating that I paid half the rent along with my aunt, she received childsupport. I asked my job to write me a letter that proved my address throughout the year at my aunts house. & I had my cousins get a letter from their school stating their address for the year 2011. I mailed it all into the IRS My aunt is willing to help to get me out of this situation. But I am curious as to what could happen to me. Could the taxpreparer explain that it was her fault well as well as mine for not rereading the paperwork.
What If I just wanted to not claim them anymore:/ and just do myself? Which will probably be a big process to go through but Whatever it takes for me not to get in trouble.
Hello,
I just received a letter from the IRS stating that I owe $3900 and I only received $2700 which was the partial amount of what I was suppose to get back. The form explained that I claimed my niece and nephew and they are actually my cousins.The tax preparer had asked me if I was my aunts niece and I had said yes, therefore I assumed she had put them as dependents but I searched for my tax packet and she put them as my niece and nephew and my aunt as my sister!! I filed my taxes at H&R Block and I am very worried/scared. This is my second year doing taxes. I will be going in to talk to the tax preparer. But I am scared, I dont have that kind of money. What could happen to me? I didint do anything wrong but I should have looked over my paperwork!! Any advice! I appreciate it thank you!
Hi Mila,
Your brother is a victim of identity theft. While I doubt that the police will do anything–it’s probably a good idea to report it anyway just so that he’s got some documentation of reporting the crime.
Now, what he has to do is report it to the IRS. He’s going to want to fill out the identity theft affidavit: http://www.irs.gov/pub/irs-pdf/f14039.pdf
I’m going to be completely honest with you–the IRS identity theft division has had some problems and is not the “be all end all” solution that you might want it to be. But right now, it’s all you’ve got to work with.
Now here’s another potential issue–his ex girlfriend got $8000 using his identity–it’s quite possible that the other parts of the return are also fraud–and your brother could be charged with the fraud. So it’s really important that he report the fraud to the IRS before the IRS sends him a nasty letter accusing him of fraud.
Your brother’s advantage is that he knows who did this to him. That’s half the battle. Please have him report the fraud to the IRS though. It’s really important that he protect himself in this.
I have a question… My brother’s ex girlfriend filed taxes without his knowledge using his ssn and got a large return, and told him after the fact. He is not sure what the next step will be. Do you have any advice that I can give him? Should he inform the police even through he doesn’t have any documentation that she has done this? Thank you in advance for any help that you can give.
Hi Katrina,
I’ve got a math issue here that’s not working. You say there are 4 kids in the house and you claimed 3. Why not 4? So that’s the biggie right there.
But–here’s the other one, Katrina–you mention your wife’s sister. I’m guessing that your wife is writing the post for you, so that’s how I’m writing my response–that you’re a heterosexual couple. If you’re a gay couple, the answer will be different (because the IRS doesn’t acknowledge gay marriage.)
Okay–first and most important–you cannot claim your brother’s girlfriend’s son as your nephew. No EIC for him. If he lived with you for the entire year–it’s possible that you might be able to claim him as a dependent–but I’d bet you a nickel (okay, I’d bet a whole lot more than that) the it’s that particular child that’s messing up your return. Your best bet is probably to amend your return and take him off.
You should be find claiming your own son. And you are also fine claiming your sister’s daughter (as long as your sister is not claiming her). Since you are the only income earner in the household–income issues should not be a factor.
Since you can’t possibly claim the girlsfriend’s nephew–I’d amend the return right away. Pay back the money, and I’d suspect that all the other nonsense will go away. That said, it’s possible that someone’s ex has tried claiming the other kids so you may need to be getting ducks in a row. Does your letter specifically mention the other two children as requiring documentation? I’m assuming that you’ve got access to those records so I wouldn’t be too worried about that. I’m guessing that thoses kids lived with you for at least 6 months of the year. If so, you should be good in that regards.
If those children haven’t lived with you for more than 6 months of the year, then you’re going to have trouble with that. Here are the IRS rules about qualifying children for EIC: http://www.irs.gov/individuals/article/0,,id=218779,00.html
That’s a good resource for anyone thinking about claiming a child for EIC on their tax return. Good luck.
Hello, i just have a few questions and concerns, this tax season was my first year that ive ever done taxes and i done them myself online without knowing a single thing but by following the guidelines provided. I have my own place and my wifes sister lives with us and my twin brother, his girlfriend and her son live in my home. im the only income out of 5 adults and 4 kids in my home 3 not being mine, i claimed my wifes sisters daughter, my son, and my brothers girlfriends son. i just reently reieved a letter from the IRS stating i was being audited. this is a scary sitution. they want me to provide docunents, and honestly i just read up on EIC andclaiming a dependent i didnt know anything about it, needless to say the only documents i have for my brothers girlfriends son in a shool letter that i can have them type up. i havwe no copy of birth certificates or ss cardd and i claimed him as my nephew, since ive already recieved a notice in the mail by the IRS should i file an admend return on my taxes and mail in the other documents provided or should i mail in whaT i have now and wait for a reply from the IRS.
Hi Lisa,
First, before you write the penalty abatement letter–try calling and asking for a penalty abatement. If this is the first time you’ve ever gotten an IRS penalty, you can often get a “first offense” abatement over the phone. It doesn’t always work, but it’s worth a try.
If that fails, then write the letter. Explain what happened and how it was an accident. I’d call first though because it’s so much easier and faster over the phone if they will agree to it. The first agent probably didn’t offer it because you didn’t ask (I know, you didn’t know to ask–it’s kind of like a game.) Good luck.
Hi Joe,
Congratulations on your new daughter! I would file the amended return immediately and either remove your son (he is your son for all intents and purposes except for the IRS) or reduce his status to only claiming the exemption.
But here’s my issue: what kicked the return out? Who claimed him? Is there a dad out there somewhere? If the boy lives with you, and you’re the only father he knows–where’s the other claim coming from? You might want to do a little digging. You can’t claim EIC–but it sounds to me like you have a legitimate claim to the exemption–unless there is a divorce decree or something giving the exemption to the ex. You should check into that first. But then I’d go ahead an amend your return, it’s the right thing to do.
Hi John,
I don’t believe you’re going to jail, but you are going to owe some money. First, you cannot claim your fiance’s nephew at all. Done deal.
Now, about your daughter. Is your fiance’ the daughter’s mother? Because if she is, and she claimed your daughter, the best thing for you two to do is to figure out your tax situation together and file what’s best for the two of you.
You see, my first question here is: who claimed those kids? The nephew is easy–you can’t claim him at all–either it was your fiance’ or the child’s birth parents. But your daughter? Who would claim your daughter besides you? The only realistic answer is the mother. If the mother is your fiance’ and you two are living together–then you two need to get your act together. (I recommend sorting out money issues before you get married!)
I think the best way to resolve your problem is you both go to your local tax office and amend your returns. You’re getting married–you’re a team. Work it out so that you two do what’s best for the four of you as a family. Once you do that–then the other issues go away. (But you can’t claim the nephew under any circumstances.)
Hey Stephanie,
Claiming single instead of married is bad–but might not be that bad. If you claimed head of household–well that could be a problem if you lived together–but not if you lived apart.
I’m guessing you found out you should have been filing as married and it turns out badly for you. The big question is–did you discover your mistake or did the IRS discover the mistake first?
If you discovered the mistake–and you fix it before they do–well then you’re covered. If they’re coming at you–that’s not so good. (I’m pretty doubtful about jail–unless you’re a rap artist or movie star, that’s pretty rare.)
But before you go filing new tax returns–I’d go see a professional to see just how bad the problem is. (It might not be nearly so bad as you think.)
One thing–if you do owe a lot of money–you can still make a payment arrangement with the IRS for up to $50,000 of tax debt. I really hope you don’t owe that much. If you do, there are still things you can do, but I’m hoping you don’t owe that much.
You mentioned 10 years of returns–generally, the IRS closes the books on returns that are over 7 years old. (Unless there’s serious underreporting–or you never reported-then they can keep your file open for as long as they like.) Also, if you filed as single–you could possibly switch to “married filing separate” which is not as good as single, but not too much worse. So this might not be so bad for you.
I hope that helps ease your mind a little though.
H its Me again , ( Wed, 14th Mar 2012 ) Everything has turned out good so far but for my mistake i have to pay a penalty of 1696.80 . and an interest of 13.80, the question that i have now is how can i write a penalty relief letter? the lady i spoke with about my amended return from the IRS, told me that i can write a penalty relief letter saying something that i did my taxes on my own computer with the software and that i typed in the numbers and that i didn’t know that i was actually sending it yet, and that when i realized it was too late?? and that they might consider my letter, for taking off the penalty and only paying the interest?? is that true? and if ye how would i write it??
Hi, I filed my return right before the deadline expired. I had a new baby girl with my girlfriend in 2011 and we also have a 10 year old son that is from another relationship of hers. His mom and I are not married yet and I raise him as my son and take care of him, but on his birth certificate I am not listed as the father. I have not filed taxes for at least the last 3 years due to not being employeed and didn’t realize the laws had changed for the EIC. I see from all your other posts that you recommend to file an ammended return immediately. I e-filed on H&R Block and it showed my return was accepted, however when I checked later to try and find out the date I would receive the direct deposit I noticed that now the status is being reviewed and that I would receive a notice requesting additional information from the IRS. I now know that I should have listed him as other regardless of the fact that I am his only father, but wondered what you would suggest about filing an ammended return? Should I wait and see what the IRS sends to me and fill it out with my new found knowledge and errors or see a tax professional now and send in an ammended return as opposed to waiting for the letter. From other reading it seems like it takes several weeks to receive the paper work and could delay the refund several months. Any advice you could give will be greatly appreciated.
Thanks,
Joe A.
Hello i have a very important question. I filed my taxes and claimed my daughter and my fiances newphew which i was living with for 9 months in 2011. I also claimed head of household. It says i am being audited for all 3. I live with my fiance and my daughter but i am not on the lease my daughter is 10 months old. All the bills are in my fiances name but i do pay them all but i have no proof is there anything i can do. Also when i lived with my fiance and her aunt for 9 months i paid over half of the income for her nephew but i also have no proof that i did. I am not on the lease where i live now and i have no reciepts or other documents showing i live there or pay for her income other than my mail being sent there i have no documents but she is my daughter and i pay for all of her things because my fiance doesnt have a job. What is going to happen if i cannot prove this? Or can you tell me how i could prove this maybe getting noterized documents to send to the irs? please help me i dont want to go to jail as i dont believe i did anything wrong i just dont have documentation ……
What kind of trouble will you get into if you have been claiming single instead of married for ten years? If you make every attempt to make it right before they catch you will they still put you in jail? Will they still let you make payments on large amounts?
Hey efe,
My best advice–fess up. Amend your return, take those kids off, pay the bill and be done with it.
hi i claimed 2 dependents on my return that were not eligible,i mean they are related to me but did not live with me in 2011,i did claim they did live with me last yr for 7 minths.i just got a letter from the irs saying i was been audieted and i need to send documents supporting eic and dependency,what do i do
Hi Rosalinda,
If you live with your husband, you cannot file as head of household–you can only do that if you are living apart for the last six months of the year. You should file married filing jointly. You will not get EIC because he has an ITIN.
But–and this is important–if your husband becomes a legal immigrant and gets a social security number, you can later amend your returns using his social security number and claim the EIC.
I’m not an attorney so I can’t tell you if you would have trouble with immigration if you falsified your tax return–but common sense tells me that if you’re trying to get your husband legal status–it would be unwise to file a fraudulent tax return.
I really think the smart thing for you to do is file your tax return honestly.
My husband is an illegal immigrant and I am currently petitioning him to become a residence. We have three children and I know if I file a joint return with his ITIN number, we get no EIC. Can I file head of household with two children because I am the sole provider in the home? In addition, can he file a separate return with the other child? Additionally, where there be immigration issues if I decide to go that route?
@ Melissa Johnson–
the amended return was in and it will be marked as received before the 15th of April so it should be counted like the original return. So yes, you’re correct.
@Melissa the grandmother–
I don’t think you did anything wrong. Your problem is in proving your case, but you should be okay. One question would be–what about your daughter–did she have any income? If she did, and she’s the one who claimed your grandchild–well then you have a problem there. If the person claiming the child is her ex–who didn’t live with you and didn’t care for the child–well then you’re good. You’ve got people who will vouch for you. That’s important and it will help. Good luck.
so i just went with my friend to amend her tax return her tax person said it will take awhile for the process to complete so my question is as long she amended before the deadline that this will be her orignal return correct or no?