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 have two stepkids that i have been havimfg for the last two years, there mother and dad are divorced and we are married now but in the divorce decree it says dad cant claim them so i was going to cause the live with us but there mom already claim them so what can we do if any can be done to fix it.
Hello, I need help
I started working at the end of 2011 & did not do taxes because havent worked long. I claimed 3 people without understanding the question. Now I been trying to change it after I found out what I put a 3 for,
My girlfriend says I will owe. Mom says It won’t matter since its a mistake. I support myself only. Im an idiot.
Do you know what could happen since i didnt know?
Also I havent gotten any paperwork from irs so you know this will be first time wanting tax refund
So my husband’s ex has sole custody of his daughter. She doesn’t work, my husband does. Yet every year she lets her Dad (daughter’s Grandfather) claim her. She lives with her parents but shouldn’t my husband be allowed to claim her (even if he only has her every other weekend) over the Grandfather? He pays her child support and that equates to half of her support because the mother doesn’t make anything. Do we claim the child or do we allow the Grandfather to continue claiming the child?
Thanks for the help!
Hi Missk,
Don’t claim your nephew, it’s tax fraud. You know that and you want to do the right thing–don’t claim your nephew.
Now, there’s something that your brother doesn’t know. He can claim his fourth child! He won’t get any EIC for the fourth child, but he will get a child tax credit and that’s worth $1000!
So, here’s the thing, not only will you feel good about yourself because you don’t want to commit fraud (which is not only a good moral thing, it’s also just plain old smart), but you can also be a hero by showing your brother how to get another $1000!
Hello,
I have a question regarding claiming a dependent. I am a single woman with no dependents. My older brother has four kids, but they’re only able to claim three and get the child credits. My brother asked me if I want to claim their fourth kid so I’ll get something back. I’ll be honest here. I do not support my nephews. I only buy them clothes for their birthdays and Christmas only. I occasionally take them to the movies or buy them McDonalds once every week. I do not support them financially at all. They do not live with me. They used to live next door to us, but have moved since the last few months of 2012. They now live a few blocks from me. I want to know if I can claim the nephew.
Should I claim him? If I do claim them, is this consider a tax fraud? My conscious tells me to do the right thing and that is not claim my nephew because that would be cheating the IRS. I have a really bad feeling and most likely I will not claim, but I just want some more insight into this and I want to know I’m doing the right thing by not claiming the kid. I know so many people take advantage of this, but I don’t want to be one of those people. I don’t want to go with the flow just because everyone is doing it. I want to do the right thing. Please advise me. Thank you.
Hi Mary,
This is the 8862 form here: http://www.irs.gov/pub/irs-pdf/f8862.pdf
Your return will be delayed. You’re going to wait about 75 days to get your refudn–if you get your refund.
Bottom line–you lost an EIC investigation. You’re going to have problems.
Ashley,
do not let your boyfriend claim your child for EIC on his taxes. It is illegal. Don’t do it. 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/
If you love him–don’t let him get into trouble.
Hi Scared,
You’re right that it will take about 6 – 8 weeks for them to process the 1040X. What you should do is call the number that’s on the letter you received. Explain the situation, tell them you’re going to submit a 1040X and when you’ll have it to them by. They’ll instruct you about where it needs to be sent.
But more importantly, they’ll know that you’re on top of it and doing something. that’s good.
About the tax clinic–yes, I recommend getting representation. When you speak with a professional, it’s against the law for us to “tattle” on you, so be honest. You’ll get the best information by giving good information. Example: I had a client lie to me about a bank account–thinking that if I didn’t know, the IRS wouldn’t find out. Instead, the IRS found out and since he lied–assumed all was bad. The thing was–there was nothing wrong with this bank account except for the lying about it, which made everything else he said seem like a lie.
Use an enrolled agent–we have “privilege” up until the case becomes criminal. If you ever hear the IRS use the term “criminal” for you, then get an attorney, otherwise you’re okay. (And I don’t think you’re criminal–just letting you know when you would need to worry.)
Hey I have a question. In 2011 I filed taxes. I had just had my daughter in november 2010. I didnt get my taxes because they said my eic was being investigated. So a whole year went by before I could get any info, and when I did it was a letter from irs saying they denied my eic, sent me the remainder of my refund and told me in order to get the eic i had to send a bunch of paperwork(leases, medical records etc) I didnt bother with it, but they also said from now on I would have to file a 8862(i think that was it, whatever form it is for eic) So my question is, is this going to slow my refund up this year, and also what do I need to file ths form? Birth certificates, school records, ss card? Oh, btw…I have 3 children…
Hello, here’s the deal. My Boyfriend has lived with me since March 3rd of last year. I have a 10 year old Daughter, I haven’t worked this last year, and my Daughters Father doesn’t claim her on his taxes, he doesn’t pay child support or anything like that.
Anytime since my boy friend has lived with me, anything she has needed for school, or anything period he would get for her.
He get’s food stamps, and I also get food stamps.
But he don’t pay rent or bills or anything here. Just mainly does for my Daughter.
Would he be able to claim EIC, for my Daughter if I let him? And would that interfere with food stamps, or anything to do with the state?
Thank’s a lot…
Ashley
One more thing, sorry for the multiple posts, but would it be a good idea to seek representation from a tax clinic with my situation? How candid can I be about what I did without further incriminating myself? I don’t want to have to get an attorney until it (hopefully never) comes to it.
Thank you for that, it eases my mind a bit but can I send the 1040x forms with the audit papers or should I send them separately? I ask because I’ve read that it takes 6-8 weeks to accept the 1040x.
Hi Scared,
Here’s the thing, if you’re in a real audit, you don’t file a 1040X. If it’s just a “paper audit” where they send you a letter asking you about it, then file the 1040X.
If you’re supposed to meet with an IRS agent–that kind of sit down audit, then just go right ahead and explain the situation. Yes, you shouldn’t have claimed the kids etc. And move on from there.
Since you know you can prove the HOH claim about your mom–that’s good, the pain won’t be quite so bad.
You probably won’t qualify for an abatement of penalties. Ask for it anyway–because if you don’t ask, you don’t get, but you’ll probably lose since it’s 2 years and not only one.
Then try to pay it back as quickly as possible. You can set up an installment agreement. Take what you owe, divide by 72 and that’s the lowest amount they’ll take per month. Pay more per if you can, to get rid of the debt. If you can’t make the minumum payment, you can probably negotiate a lower amount, but it will require sending the IRS documents like your bank statements and stuff.
Hi I am 24 years young and in big trouble with an audit. For 2 tax returns I claimed another person’s child as a “niece” dependent along with my mother as head of household, under the suggestion of a co-worker. It sounded like a good idea at the time, thinking it would be ok. I didn’t know then that it was wrong and illegal. I no longer am in contact with them to tell them what happened. I received a letter just a few weeks ago for an audit, and now I’m scared to death. I don’t need to be told how wrong I was because I know that already and hope others reading this take my lesson as an important one. But what should I do to make it through with the least amount of suffering? Should I immediately send 1040x forms even during the audit? Should I admit that I made a mistake? I just want to avoid criminal charges and such. I’m ok with paying stuff back, but what’s the best way to handle all of this, and who should I turn to to help reduce the pain even a little? I can prove the HOH claim with my mother as a dependant, but obviously not the EIC or child credit. Any advice would be nice please!
Hi Elizabeth,
You might be able to claim your neice’s daughter, but remember, if your neice claims her, you lose, so you will have to have her permission to do so. Here’s a link to the IRS website about claiming EIC. go through the questionairres and answer the questions honestly to determine if you’ll be allowed to claim your great neice. Here’s the link: http://www.irs.gov/Individuals/Earned-Income-Tax-Credit-(EITC)-––Use-the-EITC-Assistant-to-Find-Out-if-You-Should-Claim-it.
My niece and her husband split up in june, her and her daughter have been living with me and my son since then. My question is can I file them on my tax return along with my son who is in college? The childs father hasn’t worked any this year. My niece has worked a part time job, but hasn’t made but 2,700 dollars, and is recovering from cancer.
thanks
Hi Tara,
It’s not illegal for the child’s grandmother to claim the child, but she’s not going to win this one. The legal right goes with your sister–even if she doesn’t get a refund, she still is the parent. And, the child has been with her the most time.
Normally I would recommend talking it over with the grandmother, but since it’s an abusive relationship, I say no. Have her file her taxes, claim her child, and when/if the audit papers come–be prepared to fight, but she’ll win.
Hi Ana,
If you really want to report your ex for fraud, here’s a link with information on how to do it: http://robergtaxsolutions.com/2010/11/how-to-report-tax-fraud/
But, you won’t know what happens to him. The IRS won’t tell you what happens. If you want the satisfaction of seeing him suffer–you won’t get it. But, sometimes, just filling out the paperwork helps make you feel better.
Dustin,
The answer is Maybe. The big question here is, “Where are the children’s parents? Why aren’t the parent’s claiming the children?”
So, here’s what you’re going to do. Go to the IRS website and answer the questions honestly about the children. Here’s the website: http://apps.irs.gov/app/eitc2011/SetLanguage.do?lang=en
You’ll want to click on the part, “Is my child a qualifying child?”
This is important–answer the questions honestly. Don’t change your answers to make it say what you want or you could be in a world of hurt.
It’s possible that you can claim the children and even your mother, but dot your eyes and cross your t’s and make sure that you really are entitled to do so. I suspect that even if you are in the right, that you could have trouble, so make sure you’ve got your behind covered. Good luck.
My sister has a 17 month old son. From Jan to Aug she lived with her boyfriend in his mothers house. My sister did not work. Neither did the father.
My sister left that home in August from an abusive relationship and has lived with our mother from Aug to present. My sister called me yesterday stating that she got an email from the ex boyfriend That his mother (the paternal grandmother) plans to claim her child on her tax return. My sister has not agreed to this, my sister plans on claiming him as he is her child. She has legal sole custody of the child. My sister will not get a refund because she did not work any place but it will just make her not owe any money, jut filing taxes with her and her son. Is it illegal for the grandmother to claim the child in her taxes?
I got a question my ex claim my aunt son for three yrs already n he claim my dauther too my aunt kid is in mexico since he got born n my ex put him in his income tax I wana report him cuz I don’t want him to keep doin that I just wana knoe wat r gona be the consecuenses?
Hi Gregory,
Okay, so your wife did the wrong thing and that’s bad. The problem is–she’s your wife so–do you really want to report her? I mean, she’s your wife.
So–how have you been filing your tax returns? It seems to me that if you’re separated–you’re filing as married filing separately. If you did, that’s a good thing, because it provides you with a level of protection. If you didn’t, anything she did could be linked back to you.
Look, I can’t tell you how to run your love life. But I am going to tell you to keep your money separated from her. You should never file jointly with someone that you know has been cheating on her taxes, it could come back to bite you in the behind something awful.
Good Day. Quick question, but a little complicated.
I (22 – full time worker – uncle to children) live with my mother and her three grandchildren. I support us all, but she gets food stamps. Can I claim them all on my return?
Angie,
She can claim your son as a qualifying child – assuming all the other test for qualifying child are met – age, member of household, and support.
hi there, i have a child from a previous marriage and my husband and i have both been unemployed this year and his aunt has been living with us, can she claim my son? as he is her step great nephew?
Nancy,
I am not allowed to give legal advice (Though sometimes I would like to 😀 ). And to say that I am some sort of a “tax lawyer” is a farfetched assumption. But It seems to me like your friend (well, ex-friend) or acquaintance wanted you to claim her children to maximize the Earned Income Tax Credit and various other credits. If she doesn’t work or works very little, then you can probably guess that’s why she was doing what she was doing.
I do not think the IRS is going to buy that you didn’t know claiming other people’s children on your tax return is fraudulent. After all, they have made instructions galore to hinder this but it does still happen. In my opinion, I do not think she would be wise pressing charges since she enticed you to do this (by giving you social security cards and what not) and she is just as guilty, if not more guilty than you I guess by means of entrapment.
Hi! I filed someone else’s children on my tax return & I honestly didn’t know It was illegal. She reassured me it was ok if she gave me permission, & I foolishly went along with it. Well I never received money for it because they need verification that I was the parent. Obviously I couldn’t provide that. So now she has been convinced that I had received a check & was holding out on her but I never did because I couldn’t provide the needed documents. I have made arrangements with the IRS to make payments & I have been. Now that I have expressed to her I no longer want her apart of my life, she has said she’s going to press charges. Can she do that? I wouldn’t have had access to her children’s SSN if she had never given them to me. What can I do & how can I prove my innocence if she really does take me to court? And am I allowed to still file federal taxes, tho I’m sure they just keep whatever I would’ve received anyway. Thank you in advance
My spouse and I seem to separate each year. She usually leaves when I go to work and takes whatever she wants. I bought a house after we got back together in the spring of 2012. In cleaning up I ran across a tax return copy indicating my wife had filed a tax return for 2011 and claimed her 26 year old son (not disabled) and a nephew that I know is another person’s child. She got over 5,000 back. I suspected she had been doing this, but, now I have the proof. I don’t want her to drag me into problems with the IRS, but, I know she did it intentionally. I questioned her about the large sums of money she always had in the early spring. We are just about to get separated again for about the 8th of 9th time. What can I do to ease my separation. I have worked the same job for almost 25 years and have been married to her since 2003.
Hi Unknown,
You already fixed everything and you’re making payments. You’re doing the right thing. And the IRS agent who said that those things go out automatically was telling the truth. It’s amazing what kinds of letters go out and scare the pants off of people.
You already amended, you’ve been making your payments, you’re doing the right thing. You’re not going to jail.
What’s even more important is that you corrected your return before April 15th, so the “bad” return shouldn’t even be on your record.
It takes the IRS a little time to get things straightened out, but you’re all good. Just keep making your payments on time. You’re okay! 🙂
Hi Anyone,
I have a hard time understanding why you wouldn’t claim your money. But–usually the IRS doesn’t complain about you leaving money on the table. Now, there may be a situation where the IRS thinks that the extra $100 would bring them money and they’ll send you one of those “hello there, please pay us” letters. If you get one of those, then you’ll want to go ahead and file the amendment anyway.
So–if you’re getting money back, you probably don’t need to file your federal amendment–but how is the state affected? Sometimes, you might get money back from the IRS but still owe the state. In that case, you’ll need to file both. Sorry.
Hello,
I filed my 2011 taxes in feb of this year, I claimed my two cousins who do not live with me, (my aunt who does not have custody of them because they are adopted told me I could since she was seeing them still & I was giving her money so she could buy them things since she does not work. I relieved my return & it gave her some of it. In march she tells me that the foster mother tried to claim them and it was denied. I went to H&R block and amended my return removing both children off my return. I was told if I amended before April I would be fine. I contacted the IRS and set up a monthly installment. I’m currently paying them now! Two weeks ago I received a letter saying the children I claimed were claimed by someone else and if I did not qualify to amend my return. I started freaking out & I called the IRS and they rd me its an automated letter that the computer sends out in December & to continue making my payments. I don’t wanna go to jail I’m not a bad person. Can I still get introuble for this? Please help!!! Since then I haven’t recieved any other notices. I even called IrS three times & they all told me my taxes were amended and to make my payments.
I claimed my taxes last year and I didn’t add my w2 form – it was only in the $100 range. However, when I make the amendment changes, Turbo Tax says that I’m entitled to $21 extra dollars that they IRS will send me. In this case, since I’m RECEIVING MONEY and NOT OWING money, can I just skip the amendment process and not get the $21 dollars? I really don’t feel like printing all these documents and sending them off for $21 extra dollars. Please let me know, thank you!
Nezz,
Thank you for showing due diligence in this situation. Even though you may or may not be in touch with the law on this issue, it is refreshing to see that you want to do the right thing legally.
You will not be able to claim them as qualifying children because cousins do not count as qualifying children. Also, you also cannot claim them as your qualifying relatives either because you did not provide over half of their support.
Not only are you are better off NOT doing it, but it is against the law. Thank you so much for asking.
Hi, my uncle asked me if I would like to claim his two daughters this year in my taxes but I do not know if I want to do it because I’m afraid I can get in trouble. They have been claimed before by someone else who was not their father either. They have my last name but I’m 20 years old and they are 6 years old and 10 years old so I know I can’t say they are my daughters. They do not live with me and I do not support them at all. Will I be able to claim them as my cousins that they are and not get in trouble or am I better off not doing it. The reason why he does not claim is because he gets paid cash so has no record of any income and I’m not sure why the other person who was the girls uncle stopped claiming them but hope you can help me decide
Hi Sharra,
Your friend could potentially have a problem. You see, EIC is only for people who actually live with and support children. So if somebody told on her, or worse, the mother decided to claim the child herself, then your friend could get caught and have to pay back all the EIC that she’s gotten over the last several years. (Plus penalties and interest.)
I am required by law to tell you that she should go back and file amended returns for all the years that she claimed her neice illegally. And pay back the taxes. That’s the law.
She might also want to get a second opinion. (Let’s face it, what I just recommended is going to cost her thousand’s of dollars.I’m guessing that she doesn’t have that kind of money lying around.)
I recommend meeting with an enrolled agent in person for a face to face discussion of the situation. There may be circumstances there that I’m unaware of so that the situation might not be as bad as it sounds. This link will help you find an enrolled agent near you: https://portal.naeacentral.org/webportal/buyersguide/professionalsearch.aspx
Hi, I got a question for friend of mine, she has been claiming her neice since 2004, no one else has ever claimed her. but her neice was not living with her, she was living with the mother. she just stop claimng her last year when her brother was release from jail but the only reason she was claiming the child was to help the mom ( not that it mattered) she wants to know if she can still get in trouble now? even though she is no longer claiming her or if someone else starts to claim her.
Hi Denise,
I doubt that the amendment will hold up your return, but be aware that tax refunds will probably be delayed this coming tax season. The IRS says that you should expenct your refunds to take 21 days, but if there’s been problems with who is claiming who–then refunds could take 75 days.
Bottom line though, go ahead and file your 2012 return, but do get the 2011 taken care of as quickly as possible.
Here’s a tip: how did the tax preparer over report your daughter’s income? She can get something from the IRS called a wage and income transcript. That will show exactly how much income she made for the year (or at least what was reported to the IRS.) You can’t get it, only your daughter can ask for it. The wage and income transcript shows you the numbers the IRS has to work with.
Once you get that, she can take that, along with her old tax return, and probably get the IRS to help her with her amendment for free. That way you’re not waiting around for the tax preparer.
My daughter had someone fill out her taxes last year. Well they reported too much earnings for my daughter, and now they want return her call to have it amended so that she can get it strait. I am filing her this year beause she and my grand-daughter lived with me, and I provided their necessities. Will this amendment hold up my tax return?
Hi Alex,
I’m sorry that you were misled by your tax preparer. Since you know that your taxes were wrong, your best be is to just explain that to the IRS. You’ll have to pay the back taxes, but there’s no use dragging it out.
Your preparer’s computer software program should have automatically kicked out the EIC credit when she wrote “cousin” in for your relative. Did she do the return by hand? (I was just curious, you don’t really have to answer that.)
What you should do is request “an abatement of the penalties for a first time offense”. That means you’re asking them to not charge you the penaties that they normally charge in a case like this. You did not intend to do wrong, you were misled by your preparer, and you are working immediately to make it right now that you know there was a mistake.
I can’t guarantee the IRS will grant it, but if you don’t ask — you don’t get. Those penalties are pretty stiff so getting the IRS to abate them is definitely a good thing. Good luck.
I just got an audit letter from the IRS, I just found out that I couldnt claim my cousins kids even though I support them. I did my taxes for the first time last year. Here’s my problem, I asked my tax person if I could claim them and she said “if she’s your blood cousin, then you can claim them” I went on and claimed them with the understanding that this was okay. What do I do now? I unknowingly commited fraud and need help. Do I just go to the irs office and explain this?
Hi Sue,
You’re absolutely corrrect, you do not receive the child tax credit when your children turn 17. Here’s a link to the IRS interactive questionaire to determine if you are eligible for a child tax credit: http://apps.irs.gov/app/ita/app/investigate.action?screenId=s2%40TLC_ChildTaxCredit_Development_Screens_CTCLanding_xint&ts=1354933867728&ita=Child_Tax_Credit&factId=Child_Tax_Credit&entity=global&screenEntityInstanceName=global&itascreenid=Am+I+Eligible+for+the+Child+Tax+Credit%3F-s2%40TLC_ChildTaxCredit_Development_Screens_CTCLanding_xint&screenEntity=global&entityInstanceName=global
Okay, that’s got to be the longest url in the world.
Anyway, I have no idea how he gets away with it. If you e-file with the wrong birthday, your tax return gets rejected. Maybe he paper filed–but eventually you’d think they’d catch on. I don’t know what to tell you. The child tax credit ends at 17. How your brother-in-law managed getting it is beyond me.
Hi,
I’m in a disagreement with my sister’s husband about the Child Tax Credit. I was mildly complaining about how my son won’t qualify this year because he turned 17 during the summer. My bro- in law looked at me like I was nuts and insisted kids qualify until they are 18 (I know this isn’t correct) and he’s taken the credit for two of his 3 kids after they turned 17. How on earth could he have received the credit?
Doesn’t the IRS check the birthdates of those listed?
Thnks.
Hi Ann,
Here’s my link about how to report tax fraud: http://robergtaxsolutions.com/2010/11/how-to-report-tax-fraud/
But it sounds like this guy is already being investigated so you don’t need to bother.
As far as people selling their kids, well the IRS is on to them and now folks we be required to prove the kids live with them when they go to a tax office. Tax preparers like me would have to pay a $500 fine if we don’t check things out.
Here’s some more information about what’s new with EIC: http://robergtaxsolutions.com/2012/11/what%e2%80%99s-new-with-the-earned-income-tax-credit-you-need-to-know-this/
I know someone who does not work and have their brother who does not live n the house at all claim the children to get the EIC and they split it. The mother of the children live at home with her mother(the children kids grandmother) who supports the household. In order to claim any children don’t you have to reside inthe home for at least 6 months and be able to show some proof that he was taking care of those children? Can i report these people for tax fraud. The brother has not lived in the same household for about 2-3 years but he is using that address as his mailing address. I am so tired of seeing lazy people who don’t want to work sell their kids to make money that does not belong to them. What would be the steps to take to report them and what type of information would i need. Oh and this past year he was audited because he did not have proof to show that he supported these kids. The grandmother claims to make too much money to file the kids on her taxes and that’s some of the reason sister sells the kids to the brother. What type of penalty would they face if reported? Any advice would be helpful. Thanks.
Hi David,
In your case I would definitely just amend and say, “Hey, here’s what happened.” I would also report the tax lady–that’s major fraud. I’ve heard some really bizzare stories about cases like yours. I don’t know if this happened to you, but some tax preparers have had clients sign one return, and then turn around and file something completly different–they pocket the extra money and the taxpayer is none the wiser. You should did through your paperwork and make sure of what happened.
Does amending your return admit guilt? I don’t buy that argument. Amending your return means that the return that was filed was wrong in the first place. That’s different. And, let’s be real, that return of yours was wrong.
Good luck. I hope things turn out well for you. I bet you’ll be extra careful to read everything that on your tax return from now on! (People who get burned are always the most careful.)
Thanks! The reason I’m asking is because the woman who prepared my taxes listed me as the head of household and also added her brother as my dependant which is false. I wasn’t aware of this until after she submitted and I recieved a large refund as a return. When I confronted her about the situation and amend it but told me it would be an admission of guilt. I have attempted to contact her and she doesn’t return my phone calls. Its come to my attention recently that she has submitted fraudulent returns in the past and this is not a one time event.
@David again,
Actually, if you’re going through an audit, you should have professional representation. Your revenue agent is highly motivated to have you pay additional tax. Yes, they’re supposed to be completely honest–but, you should have representation.
Hi David,
That’s a good question. It depends upon where you are in the process. You should speak with the revenue agent working your case.
Is it too late to amend an audited return!
Hi Alexander,
I wouldn’t be worried about jail. You’ve settled up with the IRS. You’ve got a payment plan and you’re all good.
I’m sorry that you were misled by your tax person. You’re right about when you were a kid, it used to be that your mother’s boyfriend could have claimed you if he was supporting you. The law changed a few years back. Tax professionals get trained in the laws, your preparer should have known better.
That said, I hope you still got to claim your girlfriend–if she lived with you for the full year and you supported her and her income was under $3600–you should have been able to claim her.
You might have been able to claim her child as a dependent as well (but not for EIC or the child tax credit), but I’m guessing the birth father did so you’d lose that battle. Sorry.