I have two clients, not married but live together and have two children.Of course they want to file so that they will receive the greatest refund.The woman's income is less than the man's, and she will get some EIC if she claims the children. The question is - are there any circumstances under which the woman, whose income is less, could pay more than half the cost of the home and file as Head of Household. For example, the man bought a new car. If he paid a significant amount of cash for the car, then the woman might actually have paid more than half the cost of the home. What if he put some of his money to pay off past debts, or put some of the money in a savings account. Any thoughts?
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How about using the HOH worksheet - pub 17, p. 24 - to find out? http://www.irs.gov/pub/irs-pdf/p17.pdfOriginally posted by Gary View Post -
Worksheet
I will use the worksheet, but clients are smart enough to make the answers come out to their advantage. If, after using the worksheet, it indicates she paid more than half the cost of the home, how could the man with the higher AGI justify that he did not pay more than half. I just want to be prepared before they come in.Comment
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Of course there can be good reasons for paying over half of the costs for maintaining the home with the lower income. If they provide the worksheet and it looks reasonable you should be fine. Just keep notes of the reasons, or have your clients write it on worksheet.Comment
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Question on HOH tracking
At one time I thought the IRS in its infinite wisdom was going to at least attempt to track multiple head of household filers at the same mailing address.
Did that ever come to fruition, faded away, or taxpayers got more creative in their filing approaches??
And then there is always the "I don't need 'em you can have 'em" game, using some extra SSNs for the EITC, which seems to be quite popular.
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Two Heads of Household
I certainly would not allow two heads of household in this case. I'm sure that many in this situation go to different preparers who don't know the entire situation.
Another thing that bothers me is that there would not be any EIC in this case if they were married, since the total household income is about $70,000.Comment
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It is possible to have the individual with the lower income actually provide more than half of the household support. I have one unmarried couple where he makes significantly more than her, but they split household expenses 50/50. He just puts more into savings/retirement. It makes no difference for them as they don't have kids or any dependents. But I think you're right, if you ask the questions of the taxpayer they're going to give you the answers that they think give them more money. But if you can't trust the taxpayer how are you going to preparer taxes. I just document in notes in my software when I have a situation like that. So I know that I did ask them the appropriate questions and it was their information.
That way if it does come back to bite them on the *** I can point to the notes and say "See, you told me..."
If you're only worried about the EIC, then HOH does not matter. You can be single with dependents and get EIC for them. The EIC table does not use a different amount for HOH than it does for single.
HOH is probably more beneficial for him than her. However, he cannot claim HOH without claiming one of the dependents which probably hurts the EIC on her return more than it helps the tax on his.
My guess is the best for this one is to have both file as single, her with the kids as dependents.Comment
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