Amend 2007? timing of payments? refund?

[tacks]

Low income family with a kid in college. VITA preps both the student daughter's and father's returns. VITA erroneously allows daughter to claim herself so she can get a measily small refund. Meanwhile the parents did NOT claim her and miss out on the bigger refund.

If i amend the return the daughter will owe an additional 1800 dollars in tax (not including any interest). But the parents will get an additional refund of 2,800.

I'm not sure how to best handle the timing of this. If i do amend how should these folks handle the interim between the girl owing an additional 1800 and the parents getting an additional 2800?

I don't expect that this family would have an extra 1800 bucks lying around to use before getting the additional refund of 2800.

I expect that the daughter will also owe interest.

It'd be great i could somehow magically apply a portion of the parent's refund to their kid's tax liability.

(same family in this post, if you're interested: http://www.thetaxbook.com/forums/showthread.php?t=12607 )

thanks for reading

[JohnH]

My first thought would be to go ahead & file both. If the bill for the daughter comes before the parent's refund, she can call IRS & ask for a 90-day extension of time to pay. They usually grant this (or maybe more), with no fee.

Hopefully the parents will get the refund before the time runs out. If not, call and ask for more time or just set up a payment plan for the daughter (about $40/month). There would be a fee for the payment plan and interest will accrue, but the interest isn't really an issue since it's going to accumulate until the tax is paid no matter what you do.

[spanel]

Hows much is she making to owe $1800 in taxes? Are you sure she doesnt provide over 1/2 her support?




Chris


p.s. I would hardly call $1800 in tax benifits measily

[tacks]

Thanks John, much appreciate the response.

[tacks]

...I would hardly call $1800 in tax benifits measily

You're correct Chris. I meant that $1800 is measily when compared to 2800. And 'measily' might not have been the best choice of words either.

[JohnH]

I was waiting to see if anyone had a better plan - hoping they'd jump in if they disagree with me.

I'm working with a couple of somewhat similar situations with respect to timing of payments & refunds. I'd like to know if there are better solutions than what I've told my clients.

[tacks]

Hows much is she making to owe $1800 in taxes? Are you sure she doesnt provide over 1/2 her support?

Grrrr!!

Good call, Chris. But NOT what i wanted to hear!

Suddenly amending does not appear to be the great 'slam dunk' idea that i initially thought it was.

Actually she, the student daughter, did make a good chunk of change. And looking closer, no, i'm certainly not sure that she provided over half of her own support -- far from it.

I'm wondering if there is a chance that they can show that the daughter did NOT provide more than half support. Perhaps the daughter can show that she dumped several thousands of her income in to investments -- a non support item. Or perhaps the father could show tuition bills that he paid from a non reportable source of funds (he was awarded funds from a personal injury case).

But it doesn't look promising.

[OtisMozzetti]

the parent's wallet was doing the thinking

Grrrr!!

Good call, Chris. But NOT what i wanted to hear!

Suddenly amending does not appear to be the great 'slam dunk' idea that i initially thought it was.

Actually she, the student daughter, did make a good chunk of change. And looking closer, no, i'm certainly not sure that she provided over half of her own support -- far from it.

In the original posting, only the refund vs. balance due numbers that would apply to the parent vs. to the student daughter were described and apparently thought about, nothing about whether or not the student daughter could or could not be claimed by another taxpayer. That depends upon whether or not she provided over half of her own support, which apparently wasn't thought about.

This illustrates how thinking about the end result, instead of thinking about the requirements, can lead one into a tax filing that would likely be eventually thrown back by the IRS.

[tacks]

In the original posting, only the refund vs. balance due numbers that would apply to the parent vs. to the student daughter were described and apparently thought about, nothing about whether or not the student daughter could or could not be claimed by another taxpayer. That depends upon whether or not she provided over half of her own support, which apparently wasn't thought about.

This illustrates how thinking about the end result, instead of thinking about the requirements, can lead one into a tax filing that would likely be eventually thrown back by the IRS.

Yes, i neglected to consider the support test. I wrongly assumed that their situation was similar to other years. I didn't consider what effect the daughter's spike in income would have.

In my defense, let me say that I suspect that the prior preparer could have done the right thing for the wrong reason. For a couple of reasons i don't think that the prior preparer even considered the possibility of the father claiming the daughter.

the parent's wallet was doing the thinking

Actually, it was me thinking that the prior preparer missed something. (Which happens often enough. As i'm sure it does for most others on here.)


Again, thanks to everyone for the help on this.