Category: Earned Income Credit

Posted on by Jan Roberg

Can I Claim My Friend’s Child on My Taxes?

 

Mom with little girl reading book in sofa

Even if you feel like they’re your kids, do not claim children that do not belong to you on your tax return for EIC.

 

I cannot tell you how many times I’ve heard this scenario:

My friend has 2 kids but she didn’t work last year.  She wants me to claim them for her on my taxes and we’re going to split the money.  Should I do it?

The answer is, NO!  Absolutely not!  It’s tax fraud.  Those children are not yours so claiming them on your tax return is illegal.

But she says we won’t get caught!  

Oh sure, you might not get caught right away, but someone might disapprove of what you’re up to and tell.  For example, let’s say the children’s father finds out and he reports you.  He could make a real problem for you.

The father is out of the picture, he’ll never tell.

Okay, then what happens when she decides that you didn’t give her enough of the refund?  I’ve seen it happen hundreds of times.  The friend claims the kids, the child’s mother gets upset over something and then turns the friend into the IRS for fraud.  Seriously, it happens all the time.  I’m not joking.

My friend’s not like that, we’re like sisters!

You’re like sisters until the child’s father comes back into her life.  Or that new boyfriend decides that he wants some of that tax money.  Or she thinks you cheated her.

Good friends stay good friends when money isn’t in the way.  If there is a problem, and there will be a problem, you will be the one who has committed fraud, not her.  You will be the one who has to pay back the tax, not her.  You will be the one in trouble with the IRS, not her.  Are you listening?  All of the risk is on you.

A good friend won’t ask you to cheat on your taxes.  Sure you’ve probably seen people do it and get away with it.  We’ve all seen people game the system one way or another.  But that doesn’t make it right.  And it doesn’t mean they won’t get caught either.

If I don’t do it, someone else will.  

Probably.  But at least it won’t be you.  You’ll have a clear conscience and you’ll be able to sleep at night.

If you want to know who can legally claim a child for EITC, use the IRS EITC assistant.  When you go to the link, answer all of the questions honestly.      EITC Assistant

It’s a really good tool and will tell you who you can and cannot claim.  It asks very specific questions about your relationship with the dependent you are claiming.  Here’s a clue:  “foster child” means a child that has been placed in your home by the court.  You can’t just call a child your “foster child” because you spend a lot of time with them.  And niece and nephew mean the child of your brother or sister, not the child of your friend.  If you don’t pass the test using the EITC assistant, then do not try to claim EIC on those children.  It’s that simple.

Will your friend be mad at you for turning her down?  Probably yes.  If she’s a real friend, she’ll get over it.  If she’s not a real friend, then you made a real good decision by turning her down didn’t you?

Posted on by Jan Roberg

Tax Tips for Single Parents

Kids can be a real advantage on your tax return

Having a baby really changes your taxes. Make sure you know the rules.

 

Updated November 15, 2018

Welcome to the world of parenthood.  Raising kids is hard enough with help but it’s even harder when you’re alone.  Here are some tips to help you navigate the changes that will happen to your tax return, because you deserve a little help once in awhile.

 

Claiming your baby for the child tax credit:  If you are earning income, then you’re going to want to file a tax return and claim your baby for the child tax credit.  I sometimes hear women say they didn’t claim their children because the child was born in December and they read the child is supposed to live with you for 7 months.  In the year of birth, you claim the child even if she was born on December 31st.  Let’s be honest.  If you’ve jut gone through a pregnancy, that child has been living with you for more than 7 months anyway.  Claim your baby!  We’ll talk a little more about possibly letting someone else claim the baby, but unless there are special circumstances, plan on it being you.

 

Changing your filing status:  If you’re on your own and supporting yourself, then once your baby is born you will change your filing status from Single to Head of Household.  It gets a little more complicated if you are living with your parents, the baby’s father or someone else.  The issue becomes, who is providing most of the support for the child?  If you’re using computer software, there are all sorts of questions you can ask to determine how much support is provided to the baby and by whom.  But here’s a quick and easy technique that’s pretty helpful.  If you prepare the tax return with Head of Household status, and then switch it to Single status and the refund amount is exactly the same, then claim Single as your filing status.  If your income is so low that your refund won’t change then you really don’t need Head of Household status.  The IRS often audits returns claiming HH status when the income is too low.   They never audit Single for the income being low.  Why not just avoid a headache that you don’t need? The Earned Income Credit amount is the same for Single as for Head of Household filers.

 

What about letting someone else claim the baby?  If you are living with the baby’s father and it would benefit you to have the child on his tax return instead of yours, then that’s fine.  If you are living with your parents and they are supporting you and the baby, you can let your parents claim the child.  Your parents would have to make more money than you do to be able to do this though.

 

Letting anyone outside of you, the father, or a grandparent claim your child on a tax return has the potential to get you into trouble and even land you in jail for tax fraud.  There are a few situations where it can be done, but for that you should go see a professional.  A new boyfriend who is not the baby’s father can NEVER claim your child for EIC. NEVER!  The rules regarding dependents change often.  Things that were allowed a few years ago aren’t allowed now.  Sometimes well meaning friends and relatives can give you bad advice which could get you into big trouble.  Protect yourself.

 

The Earned Income Credit:  Many single moms, especially when they’re just starting out, qualify for the Earned Income Tax Credit.  It’s a refundable credit, that means you get the money even if you didn’t pay any tax into the system.  EIC is a big deal and can make a huge difference on your refund.  That’s why people may want to try and claim your baby for you.  There’s billions of dollars a year of EIC fraud.  That’s also why you need to be careful, the IRS is very aggressive about pursuing EIC fraud.  Don’t let anyone else claim your child.

 

Protect your child’s social security card like it was gold.  It’s that valuable.  Infant identity theft happens all the time.  You won’t know it’s happened until you file your tax return and it gets rejected because someone else has claimed your child.  Do not carry the card around in your purse or wallet.  Store it someplace safe.

 

Congratulations on your new baby!

 

 

 

Posted on by Jan Roberg

Why Is My Tax Preparer Asking Me Such Nosy Questions?

With all the questions the IRS requires tax preparers to ask, getting your taxes done can seem more like an interrogation than tax prep.

With all the questions the IRS requires tax preparers to ask, getting your taxes done can seem more like an interrogation than tax prep.

 

I took a phone call from a fellow awhile back who was absolutely furious about some of the questions his tax preparer had asked him.  The preparer had asked a whole bunch of questions about his kids and even asked to see their report card from school.  He said, “My daughters are 4 and 2 years old.  They don’t even go to school yet!”

 

So what’s going on here?

 

It’s all related to an IRS form—# 8867.  Form 8867 has to be filled out and sent in with every tax return that has the Earned Income Tax Credit.  Now, this form has been around for awhile, but it used to be that a tax preparer was just supposed to ask some questions and you’d keep that information to yourself.  Now, the IRS expects you to send the form in with the tax return.  If a tax preparer doesn’t complete the form and send it in with an EIC return—the IRS charges a $500 penalty to the tax preparer.

 

 

That’s $500 per return.  You miss too many of those and you could be out of business.    For most preparers, that’s more than what we charge to prepare an EIC return.

 

Now if you prepare your own tax return, you don’t have to worry about form 8867, it’s only for paid tax preparers.  But if you have your taxes done at H&R Block, or Jackson Hewitt, or even me—that form must be completed, and signed, and sent with your tax return.  (If your tax return is e-filed, we are required to keep the signed copy in our files.)

 

And the form seems to ask for more and more information every year.  Now there’s a whole section about documents:  documents to prove your kids live with you, documents to prove a disability, and documents to prove self-employment income.   Tax preparers are now expected to look at a taxpayer’s documents to verify the information on an EIC tax return.  School records, like report cards, are usually the easiest thing to use for documentation.  Of course, report cards aren’t very helpful when your children aren’t in school yet.  No documents, no form 8867.  No form 8867, no tax return.  No tax return, no refund.

 

It’s like the IRS is trying to turn regular tax preparers into the EIC police.  It’s not a job we asked for, but it’s a regulation that we’re required to enforce.  The penalties are so stiff that we’ll all be out of work if we don’t go along.

 

So remember, if you tax preparer asks to see your child’s report card, he doesn’t care if your son got a D in math or is a straight A student;  he’s just trying to help you get your refund.

Posted on by Jan Roberg

Common Law Marriage and Your Tax Return

The married couple

Photo by Carrie Phisher on Flickr.com.

I often get contacted by people who are facing an audit based upon their “family relationship.” The IRS will send an inquiry about a person’s relationship to a child in an EIC claim and the person being audited will say that he or she is “common law” married to the child’s birth parent.

Here’s the thing: the rules for common law marriage are very specific. I know that a lot of people seem to think that a couple is common law married if they live together for seven years. That’s just not true. (I used to believe that too, it’s something I was told when I was a kid.)

But in reality, there are only certain states that recognize common law marriage. If a couple is deemed common law married in one of those states and then move to a non-common law marriage state, the new state still has to recognize the marriage.

In most common law states, you can’t just say you’re married, you have to “hold yourself out to be married”. For example: you call yourselves husband and wife, you file joint income tax returns, you use the same last name.

If you have a common law marriage, and you end your relationship, then you must get a divorce even though you never had a wedding.

If you’re going to argue to the IRS that you have a common law marriage, you need to know the facts. First, you need to know which states recognize common law marriage in the first place:

  • Alabama
  • Colorado
  • District of Columbia
  • Georgia (if created before January 1, 1997)
  • Idaho (if created before January 1, 1996)
  • Iowa
  • Kansas
  • Montana
  • New Hampshire (but only for inheritance purposes, this won’t work on your tax return)
  • New Mexico
  • Ohio (if created before October 10, 1991)
  • Oklahoma (but there’s conflict in the courts, marriages created before November 1, 1998 are recognized, common law marriages after that date may not be recognized)
  • Pennsylavania (if created before January 1, 2005)
  • Rhode Island
  • South Carolina
  • Texas
  • Utah

If you live in one of these common law states, you will need to check with your state to find out the rules that make you qualify as married. This link gives you an outline of some of the state requirements. http://www.uscis.gov/ilink/docView/AFM/HTML/AFM/0-0-0-1/0-0-0-26573/0-0-0-30679.html

Common law marriage is not to be taken lightly; it’s marriage. Before you use the common law marriage argument with the IRS, make sure you’re serioius about being married.

Posted on by Jan Roberg

***Roberg Tax Solutions EITC Special Offer***

 

EITC Special (February 2013)
__________________________________________________

Roberg Tax Solutions is offering a limited time, special deal on tax returns with an Earned Income Tax Credit.

 

This special price is only available to the first 200 people who make an appointment for this special offer, and is limited to February 1, 2013 – February 28, 2013.

 

For this time, we will offer our full service tax preparation services to our wage earning EITC clients for $200; that includes the cost of a bank product and all state returns.   A bank product means that we take your payment out of your tax refund.  You may either have your refund direct deposited into your bank account, or we can print a check in our office for you to pick up later.  This works out to be a $50 to $75 savings off of our regular price depending upon your tax return.

 

This is a great savings from those other big ticket tax companies.

 

If you are self employed, for this special offer, we will prepare your EITC tax return for $350 including a bank product.  That’s a $150 savings off of our regular price.

 

We do not provide Refund Anticipation Loans—that is, we don’t do fast refund money.  Your refund will come after the IRS funds the money to the bank which generally is expected to take 21 days.  If you have had problems with other people claiming your children on tax returns, this could take as long as 75 days.

 

What are the rules?  You must legally be able to qualify for the Earned Income Tax Credit and you must provide the necessary documents that are required in the new IRS regulations.  We will be making copies of all of your documents and we are required by law to hold copies of those documents for three years.

 

You will need to bring the following paperwork with you to your appointment:

 

  • Social security cards for every person listed on your tax return
  • W-2s
  • 1099-MISC forms
  • Any other income documentation
  • Proof of your child’s residency such as recent school report cards or medical statements
  • Proof of self employment income (if relevant)
  • Driver’s license or other state issued photo ID

 

For more information on documentation, read our post about the new EITC rules:  http://robergtaxsolutions.com/2012/11/what%e2%80%99s-new-with-the-earned-income-tax-credit-you-need-to-know-this/

 

This offer is limited to persons who can come to our office in person.  We will not do EITC returns over the internet.  (Sorry.)

 

If we discover that you are not eligible to claim an Earned Income Tax Credit, we will return your paperwork and you will be under no obligation to file your tax return with Roberg Tax Solutions.  Of course, if you still choose to file with us, we’ll be happy to have you as a regular client—in which we have another offer for you on our special offers tab.

 

If you’ve been filing your tax returns with some cattle call tax office that treats you like a number instead of a person, maybe it’s time to try something different.

 

Call today to set up your appointment.  (314) 275-9160 or visit www.robergtaxsolutions.

 

***Roberg Tax Solutions EITC Tax Return Special Offer***

Posted on by Jan Roberg

Can I Claim EIC if I Don’t Have a Job?

EIC with no income

Raising a child is a big job, we just don’t get paid for it. In order to qualify for EIC, you need to have what the IRS considers to be “earned income” which comes from a paying job.

 

 

The short answer is no.  But I’ve had about 10 phone calls or emails this week with this question, or something similar anyway, so I figured I should post something about it so people will understand it better.

 

First, EIC stands for the Earned Income Credit (or some people call it EITC for Earned Income Tax Credit, they’re the same thing.)  The key phrase here is “Earned Income”.  You earn income from a job—like working at Target, or you might be self employed like me.  I own my business so I don’t get a W2 but I still earn income.

 

Social security, welfare, child support, food stamps, VA benefits, SSI, and gifts from friends or family—none of those count as earned income.  Neither does bank interest, stock sales or dividends, or rental income.  As far as the IRS is concerned, these things do not count as “earned income” for EIC.  (I know those Smith Barney commercials say they “earn” their income, but if you’re making money in a Smith Barney account—it doesn’t get you anything for EIC either.)

 

Alimony—does not count as earned income for EIC, but it does count as taxable income and can affect how much EIC you can get.  Don’t confuse child support with alimony.  Child support ends when your kids grow up.  Alimony lasts forever or has an end date that has nothing to do with children.  Most people get child support, alimony is pretty rare these days.

 

So if you have a job that gives you a W2—you’re set because the W2 proves your income.   But if you’re self employed—proving your income is harder.

 

The IRS is demanding that tax preparers have proof of your self-employment income before we can file your EIC tax return.  We’ll be fined  for not having proper information.  So if you don’t have good records of your income,  you might get turned away by your tax preparer.

 

So the obvious question is—what records do you need to prove your income?  The IRS has a list that includes the following:  a business license, 1099MISC forms, records of gross receipts, income summary, expense summary, and bank statements.

 

The 1099MISC is really the best proof of income if you receive those.  1099MISC is given to anyone performing work for a small business that got paid over $600 during the year.  If you’re like me, you don’t get 1099MISC forms.  Most of the work I do is for individual people, not businesses so I need to prove my income another way.  But I’m an accountant—I have all the bank statements and business records and a license to back up my income.  It’s what I do for a living.  Not everyone is going to have my kind of records.

 

What do you do if you just clean Mrs. Jones’ house for $50 a week?  Or, maybe you helped paint Mr. Anderson’s garage for $200 last spring.  It’s all cash, you’re just helping out.  Those don’t seem like they’re really jobs but they are.  If Mrs. Jones gives you $50 a week for the whole year, then that’s $2,600.  Add Mr. Anderson’s $200 and you’ve got $2800.  It’s not much but it’s something.

 

If you’ve been doing odd jobs like that, you’ll need to get some kind of documentation.  Put it in writing and have the people you worked for sign it.  In the future, you should keep a log of every place you work:  the date, the location, the person you worked for, and the type of work you did.

 

You can’t make stuff up!  That’s illegal.  And remember, EIC returns with self-employment are an audit target—if you lie about this stuff there’s a really good chance that you’ll get caught.

 

But, if you really did work and you really do deserve to claim EIC, then you should be claiming it.  You just need to make sure that you’ve got your documentation in order so you can prove it.

 

The IRS has a website full of information about EIC.  Check it out:  EIC Home Page

Posted on by Jan Roberg

EIC and Your Family Tree: What Counts as a Qualifying Child?

Qualifying child is an IRS term for claiming a dependent.

Family consists of the people we love, but the IRS definition of family is very strict based upon relationship. When filling out your tax forms, remember you need to use the IRS definition of family to claim dependents.

 

Some people honestly don’t know who does and who does not count as a qualifying child for EIC and they mess it up.  But one of the most common types of EIC fraud is someone claiming a child that does not belong on his income tax return.  If you make an honest mistake, the IRS agent is probably  going to assume you’re committing fraud anyway.  So I’m here to keep you out of trouble.

I come from one of those families where we use phrases like, “first cousin once removed.”  When I was a child I remember going to a wedding reception and playing all evening with my “cousin”, only to be told later that she wasn’t a cousin, she was my “father’s half-brother’s step daughter.”  (Yeah, do the calculation, in any normal family your uncle’s kid is a cousin, right?)

I married into a family that is “we’re all one big happy”.  We don’t have steps, or in-laws, or halfs, we’re all brother, sister, mom, cousin, etc.  I think most people are somewhere in between.  But what we’re dealing with today is the IRS version of family and the IRS version of family  goes like this:

Let’s start with you.  You are the center of the universe and all family members revolve around you.  What we’re trying to figure out here is what counts as a Qualifying Child for you—this eliminates all parents and grandparents and members of their generation.

You may count your brothers and sisters.  You must be older than your brother or sister to claim them (unless they are physically or mentally disabled.)   You can also include step brothers and
sisters, and half brothers and sisters, and adopted brothers and sisters.

A step sibling means that your parent married somebody else who had kids.  There is no blood relation, but there is a marriage license.  If your parent did not marry the other person, even though you all live together and think of yourself as one family unit, there is no IRS relationship.

A half sibling means that one of your parents had a child with someone other than your birth mother or father.  Let’s say your mom had you and then left your dad for someone else and had a child—that child is your half sibling—you two share half of a gene pool.  The counts with the IRS.

Adopted siblings are just that—they’re adopted.  There will be court records showing that they were adopted and part of your family.  Adopted children are always treated like natural born children for IRS purposes.

These people are all on your even level of the family tree.  Imagine you’re standing there with your arms straight out with your brothers and sisters side by side—this is your generation.

Down below your generation is your son, daughter, step child, foster child or a descendent of any of them, for example grandchildren or great grandchildren.  Additionally, any descendents of your  generation—those are your nieces and nephews (or great nieces and nephews.)    So let’s say your half brother adopts a child and he dies and you’re raising that child—that counts as your qualifying child for EIC purposes because he is your nephew.

A foster child is a child who has been placed by an authorized placement agency in your home or by a judgment or decree or court order.  No matter what, a foster child has some legal paperwork involved.  If your neighbor runs off and leaves her kid behind and you wind up raising her, she doesn’t count as a foster child until the courts come in and say she’s a foster child.  This is one of the most common mistakes people make—claiming children they’re taking care of as foster children without the court documents to back it up.  Without that legal piece of paper, the child is not a foster child.

Cousins are never qualifying children for EIC purposes.

Posted on by Jan Roberg

Small Business: Proving You Have Income Without a 1099-MISC

Good records will prove your income to the IRS.

For some small businesses a simple wire bound receipt book is all you need to substantiate your income.

 

 

Now some people may be wondering, “Why would I want to prove I have more income than I have to?”   But for many small business owners, that’s exactly the problem—you have income, you want to report it to the IRS, and you’re having a hard time proving it.  This post is for you.

 

The number two reason for reporting your non-1099 income  (number one of course being basic honesty) is qualifying for the Earned Income Tax Credit.  2011 sort of hit small business owners who normally qualify for EIC with a one-two punch.  We had the new 1099 reporting requirements that upped the ante for so many businesses, and we had the new EIC tax preparer due diligence rules with one of the questions being “Do you have forms 1099-MISC to support the income?” With the next  question being, “If not, is it reasonable that the business type would not receive Form 1099-MISC?”  Here’s a clue:  if you answered NO to the first one, you have to answer YES to the second.

 

So what types of businesses wouldn’t normally receive a 1099?  Bunches of them!  Face it, if you’re reading this—I’m guessing that your business doesn’t receive 1099s.  Generally, it’s reasonable to expect that anybody who works for other people, as opposed to other businesses, would not receive a 1099.  House cleaners, dog walkers, handymen, lawn mowing services, daycare  providers, interior decorators, and even income tax preparers are all types of business that could easily never see a 1099.   (Yeah, me too!  Although I’m now getting 1099k forms because I take credit cards, I don’t get 1099-MISC for preparing personal tax returns.  Maybe I’ll see some 1099-MISC forms from some of my business clients this year, but I never used to get them in the past.)

 

So, how does a small time personal service provider prove his or her income to the IRS?  There are a couple of things you can do.  I’m going to start with my favorite:  the business bank account.  This is what I do and several of my clients do it too.   (Okay, because I’m their accountant and this is what I tell them to do.)   Get an Employer Identification Number (EIN) for your business and set up a separate bank account for your business in your business name.  Only business income goes in, only business expenses go out.  You may have to put some of your own money in for a start up, and once you’re making money you’ll take out a draw, but you’ll label those as such.  Other than those two items, your business checking account is pretty much your profit and loss statement as well.  Now for a bigger company that would be over simplifying things, but for us little folks–I’m spot on.  See this post for more information about getting an EIN number:  Free EIN

 

Why does this make good proof?  Because you’ve got a monthly record of your income and expenses.  I also have deposit slips to back it up:  Mary Jones paid me $200, Fred Smith paid $250.   It’s a good solid audit trail.  Here’s another post about bookkeeping and your business bank account:  Banking and Bookkeeping

 

But what if you don’t have a separate account?   Maybe your business is just too small to bother with the expense of an extra account.  What if you’ve just got something really simple like watching the little neighbor kid for a couple of hours after school every day.  There’s no contract, no business cards, no advertising.   You get $100 a week from your neighbor friend.  She pays you in cash—it never sees the inside of a bank because that’s your grocery money.   It’s not much but it supplements your child support.  How do you prove that kind of income?

 

The easiest way to prove your income if you provided child care is to have the person you provided it for claim your services on their tax return.  You make them a daycare receipt, just like the ones regular day cares do showing the name of the child, how much they paid you and your EIN number.  (You can use your social security number but I never recommend that.  You can get an EIN number for free.  Protect yourself.)  This is doubly good because the IRS will get confirmation of your income from an outside source.  You prove income, your customer gets a tax deduction, it’s a win/win situation.

 

But what if your business isn’t day care?  What if you did something like mow lawns around the neighborhood and shoveled snow in the winter?  Nobody’s going to be claiming you on their tax return, what can you do?  In your case, I like receipt books.  You can find different kinds at Office Max or any office supply store.  I like the ones with a carbon copy—one for you, one for your customer.

 

Now if you have just one customer and you’re always going to the same place—you can just use the little one that just has a couple of lines and the amount on it.  You might write, “Mowing, Mr. Jones, $30, 5/15/2012” on it.  You know what you did, who you did it for, how much you got paid, and when.  If you have multiple customers you’ll want the larger receipt books that include the address and phone number of the customer.  If you do different types of jobs for different people, you might need the bigger ones so you can write down the type of work that you did for them as well.

 

You don’t have to have a 1099-MISC to prove your income to the IRS.  You just need to have a system in place to document your income and you’ll be fine.

Posted on by Jan Roberg

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/
Posted on by Jan Roberg

EIC Help Page

EIC help - questions and answers

 

It’s that time of year and we’re getting bombarded with questions about the Earned Income Tax Credit. Here’s some of the most popular questions and where to get the answers you need.

 

My ex has custody of my kids, but the divorce decree says that I get to claim the exemption. My ex says that she gets to because she has custody. I don’t get it, what should we do?

 

You’re in a situation where you “split” the exemption. Here’s information about how to do that legally:

Split Exemptions

 

According to my divorce decree, I’m supposed to claim the exemption for my child but my ex claimed her anyway. Should I send a copy of the decree to the IRS or the judge?

 

I’m not an attorney so I can’t give legal advice, but this post has information on IRS rules and court ordered exemptions:  Court Ordered Exemptions

 

My child’s daddy is out of the picture. My boyfriend has been living with us for three years now and he’s the primary support for my child. Can my boyfriend claim may child on his tax return because it will give us a bigger refund?

 

No. And here’s all the reasons why:  Boyfriend Can’t Claim Exemptions

 

I went to file my taxes and they got rejected. The IRS says that somebody else used my children’s social security numbers on their tax return. What do I do now?

 

Basically, you’re going to paper file your tax return. Here’s more information:  My Ex Claimed My Kid

 

What do I need to do to qualify for the Earned Income Credit?

 

There are some basic rules that anybody claiming EIC will have to meet, like having a valid Social Security number for one thing. Here’s a list of the rules:  Rules For Qualifying for EIC

 

What if I need more information?

 

The IRS has the EITC home page. (EIC and EITC are the same thing; earned income credit = earned income tax credit.) They have lots of worksheets to help you determine if you qualify for EIC if your children qualify, and where to get help preparing your return. Here’s the link:  EIC Help

 

Now if you can’t find the answer you’re looking for, you can always call the IRS – their phone number is 1 (800) 829-1040. Their phones have been slammed lately so you may be on hold for awhile. A few tips: call early in the morning – like 7 am, or later in the day – like after 6pm. And it’s better to call later in the week; Monday’s the worst day to call the IRS. Please be patient and kind to the IRS agent that is answering your question – they have special rules and procedures they are required to follow.