EIC Due Diligence

[manyhappyreturns]

Had an interesting response to my due diligence questioning last week. I asked my client how he was able to support himself and his wife and 2 children all year on about $12,000 income, and he asked me, "What are my options?" I answered, "Well, actually the truth." Then he got all squirmy and said he needed to go home and do some refiguring, so I said okay see ya later. I don't suppose I'll see him again, except maybe at the grocery store. (I live in a rather small town.)

[Bees Knees]

Good for you. Hopefully all the rest of the preparers he goes to will ask the same question.

[RitaB]

Or

Or, he will come back and say he made $20,000 and get even more EIC.

[zeros]

Interesting Question

How exactly do they survive on so little? Live with other people?

[RitaB]

Well

Well, they get $6,800 in refundable credits. That helps.

[Gretel]

How exactly do they survive on so little? Live with other people?

Well, where I live, I know a mother who raised 3 boys on her own with $20,000 plus put a little money into savings. She really impressed me.

Others earn about $12,000-$15,000 and have children and get food stamps.

So, just the amount does not tell the story. But saying: What are my options does, of course.

[Jiggers]

How do they live on so little? Maybe not so little. Wish there was an accounting like a 1099WB (Welfare Benefits) that would be issued to everyone that is getting some type of benefit.

With food stamps (or the equivalent), free school breakfasts and lunches, free medical care, subsidized housing, subsidized utilities, and on and on and on.

I would bet that $12,000 for the one wage earner turns into about $10,000 or more per person in the household.

[FEDUKE404]

Truth about EITC

After having dealt - in prior life with storefront businesses - with many of the EITC crowd, I've found there are basically two general categories of clients involved.

Category A: A hard-working, honest parent/caregiver who should be considered for sainthood for the skills shown to provide for the child(ren) using limited resources.

or

Category B: A person who knows quite well how to game the EITC system for all it's worth, and could likely be living far better than most people with triple "the income." All it takes is a couple of Soc Sec cards and the "correct" (practiced and rehearsed) answers.

My job, as an employee, was simply to (more or less) accept the answers to my questions and then proceed.

Now that my name is (really!) on the line, and the IRS can put a serious hurtin' on me, you better believe anyone going after EITC now has to endure an only slightly modified version of The Spanish Inquisition.

"And that's the way it is . . . "

FE

[dkss]

Now that my name is (really!) on the line, and the IRS can put a serious hurtin' on me, you better believe anyone going after EITC now has to endure an only slightly modified version of The Spanish Inquisition.

FE

And don't forget the high intensity spotlight, or perhaps try some waterboarding?

[ttbtaxes]

Last week I read the most recent assembly of IRS audit information. 30%+ of all IRS individual audits were for EITC recipients. An EITC client was 3 times as likely to be audited as someone with an AGI of $5,000,000.

That's one of the reasons I made it a point to do no returns in 2011, and beyond, for anyone that has an EITC. Ironically enough, I told my cousin, whose return is perfectly legit, that I couldn't prepare his return this year when I determined he was eligible for an EITC.

I don't want to poison the well.

[David1980]

After having dealt - in prior life with storefront businesses - with many of the EITC crowd, I've found there are basically two general categories of clients involved.

Category A: A hard-working, honest parent/caregiver who should be considered for sainthood for the skills shown to provide for the child(ren) using limited resources.

or

Category B: A person who knows quite well how to game the EITC system for all it's worth, and could likely be living far better than most people with triple "the income." All it takes is a couple of Soc Sec cards and the "correct" (practiced and rehearsed) answers.

My job, as an employee, was simply to (more or less) accept the answers to my questions and then proceed.

Now that my name is (really!) on the line, and the IRS can put a serious hurtin' on me, you better believe anyone going after EITC now has to endure an only slightly modified version of The Spanish Inquisition.

"And that's the way it is . . . "

FE

I'd say there's a third category as well, the ones that know how the system works and realize they're better off only earning X dollars unless they can increase their income more. Not only because of EIC, but other welfare benefits as well, when you're at borderline income it might make more sense to take half a year "unemployed" and keep the social assistance payments (EIC and everything else) than earn a little more and lose more than you made. Especially if they have to pay for daycare for several children. Most of the additional earnings probably go to childcare and then they lose government assistance. You could combine this with the first category I suppose, since they are honest, they're not lying about income, they're just choosing not to earn as much as they could.

[taxea]

It wasn't the question that bothered me. I have my clients review a copy of the due diligence, initial pg 1 & 2 and sign and date page 3 for my file.

What bothered me was the answer. It sounds like an admission of guilt in regard to not declaring all of his income.

If he signs and dates, or better answers the questions himself and then signs and dates the form you are in the clear.

[manyhappyreturns]

I know that there are a lot of people who work hard for very little and take care of their families the best they can -- ya know, the people that the EIC was designed for in the first place -- and then there are the people who work the system and abuse the program. It's sad. Sometimes I wish they'd trash the whole thing, but then I think of my clients who are hard-working good folk who actually need and deserve the financial boost. I'm glad that the penalties for lack of due diligence are getting stiffer.

[RitaB]

I'm pretty fed up

I don't really know anybody that's doing the best they can and only making $12,000 a year. Well, ok, with the present economy, I guess it could happen.

$7.25 x 40 x 52 = 15,080.

Then, there's the option of working more than 40 hours. WE do it all the time, right?

I just have trouble thinking people capable of working deserve my help. Very happy to help the helpless. Really tired of helping the motivationally challenged. There is usually a reason that grown people are making minimum wage. I think it's probably because they goofed off back there in school and have no marketable skills. So we socially promoted them. Yeah, give every participant a trophy.

Maybe the Easter weekend will help this mean streak I have of late.

[Possi]

Not so sure

I don't really know anybody that's doing the best they can and only making $12,000 a year. Well, ok, with the present economy, I guess it could happen.

$7.25 x 40 x 52 = 15,080.

Then, there's the option of working more than 40 hours. WE do it all the time, right?

I just have trouble thinking people capable of working deserve my help. Very happy to help the helpless. Really tired of helping the motivationally challenged. There is usually a reason that grown people are making minimum wage. I think it's probably because they goofed off back there in school and have no marketable skills. So we socially promoted them. Yeah, give every participant a trophy.

Maybe the Easter weekend will help this mean streak I have of late.

Not so sure it will help your mean streak, not if you are like me. Years ago, I thought I had really bad PMS.
Had to have surgery, and when the doc ripped the ovaries from my body, I found out it wasn't PMS after all....
I'm just mean.