Fraud

[Lucy]

Have client that divorced but got back together before end of year. They did not remarry but have joint checking account and own home jointly. Had baby but lost SS card. So I prepared returned MFJ and waited for them to get new SS card. After 4 weeks I called to see if they received it yet. They said, oh I forgot to call you. We was over at a friends house and they have Turbo tax. Since we did not remarry we filled separately. One HOH and one S. So this gives one of them EIC and bigger refund. I have been doing taxes for 20 years and nothing has made me more angry than this. They have already paid me and I will not refund their payment.
Does anyone know how to report this to IRS?

Thanks, Lucy

[Armando Beaujolais]

Have client that divorced but got back together before end of year. They did not remarry but have joint checking account and own home jointly. Had baby but lost SS card. So I prepared returned MFJ and waited for them to get new SS card. After 4 weeks I called to see if they received it yet. They said, oh I forgot to call you. We was over at a friends house and they have Turbo tax. Since we did not remarry we filled separately. One HOH and one S. So this gives one of them EIC and bigger refund. I have been doing taxes for 20 years and nothing has made me more angry than this. They have already paid me and I will not refund their payment.
Does anyone know how to report this to IRS?

Thanks, Lucy

Why would you file them as MFJ if they were divorced?

[veritas]

I don't blame you for being angry. I don't think we are talking fraud here. Was the intention of the divorce for tax avoidance? It doesn't sound like it. In my state in order to pepare a return for any type of compensation you must be licensed. I'd love to turn in as many tailgaters as possible.

[Lucy]

In Alabama they are common law. The purpose was to get EIC. Jointly they made to much. The mother's income was 8800.00, so there is 2662.00 EIC. They live together as man and wife. Of course they answered no to the question can anyone else claim child as a dependent.

[Brian EA]

I don't blame you for being angry. I don't think we are talking fraud here. Was the intention of the divorce for tax avoidance? It doesn't sound like it. In my state in order to pepare a return for any type of compensation you must be licensed. I'd love to turn in as many tailgaters as possible.

I love your State. In Florida any Tom **** and Harry can file a return for compensation.
It irks me when some wise guy does a return a screws up the whole system.

There was a situation up to last year where a person with a vast knowledge of taxation was preparing taxes for cash only. Clients would be waiting for hours at her home, for the big refunds. They never knew what hit them. I am now getting some of those returns. She would enter business miles in the thousands and her clients only commute a few miles to work. The IRS caught up with a few of them requesting proof. They then come to me for help.
I suggested that they call their preparer and request appointment since she did such terrific work for them. Her # is disconnected. Some one said she went to GA. We looked up her name on the internet and there she is -in GA. Her mail box is filled and she does not return calls. I bet she is doing the same thing there.- using turbo tax

[Black Bart]

Irs

Have client that divorced but got back together before end of year. They did not remarry but have joint checking account and own home jointly. Had baby but lost SS card. So I prepared returned MFJ and waited for them to get new SS card. After 4 weeks I called to see if they received it yet. They said, oh I forgot to call you. We was over at a friends house and they have Turbo tax. Since we did not remarry we filled separately. One HOH and one S. So this gives one of them EIC and bigger refund. I have been doing taxes for 20 years and nothing has made me more angry than this. They have already paid me and I will not refund their payment.
Does anyone know how to report this to IRS?

Thanks, Lucy

Like Armando said, they're not MFJ. Divorced, the worst thing that could happen to them would be reclassification of one as single instead of HOH. But that's almost beside the point. The best way to deal with IRS is to NOT deal with them or come to their attention if possible--it's always trouble of one sort or another. If you call and complain about them, they'll probably blab it all over the countryside and a perception might develop among your clients that you tell IRS things they don't want them to know. That could be a devastating blow to your reputation and your practice.

[jainen]

report to the IRS

>>nothing has made me more angry than this<<

What exactly are you angry about? They paid you for your work--they can do whatever they want with it. You don't have any evidence of how they actually filed. What they said appears to be the correct way to do it. What would you report to the IRS?

[WhiteOleander]

In Alabama they are common law. The purpose was to get EIC. Jointly they made to much. The mother's income was 8800.00, so there is 2662.00 EIC. They live together as man and wife. Of course they answered no to the question can anyone else claim child as a dependent.

Texas is also a coomon law state. But, the couple must hold themselves out as married. Just because they live together does not mean they are holding themselves out as married. If they were legally divorced in 2005, they are not married to each other for tax purposes.
JMHO

[Bees Knees]

Just because they live together does not mean they are holding themselves out as married. If they were legally divorced in 2005, they are not married to each other for tax purposes.

Agreed. Cohabitation does not make you married in a common law marriage state unless the parties agree to be considered married. The act of getting a divorce indicates they agreed not to be married. Their filing status cannot be MFJ unless they agree to be considered married.

Unfortunately, the federal tax laws give a distinct advantage to two single people living together. It is not illegal, and they have every right to take advantage of the tax benefits for being single, unless local law says cohabitation is illegal.

[Armando Beaujolais]

It's not a tax professional's responsibility to turn people in. Let the enforcement agents enforce. There's one choice in this situation - refuse to do the return.

[Snaggletooth]

I Love Lucy

Lucy - don't do it.

NO ONE will bring your taxes to you. I know who you are and you live in a small town just like I do. Keep their money. One of these days they're going to need real professional help and TurboTax won't be able to help them.

[Matt Sova]

Angered

I have an ex-client I am very angry with. I did their 2003 return and noticed something on the 2002 that should be amended. They refused so I did not take care of it for them. In late 2004 they told someone that I know that I "ripped them off" and they would never be coming back. I would love to turn them in to the IRS for this gem on the 02 return. However, my ethics prevent me from taking the initiative to divulge this information. Even if I could, I would not.

[jainen]

Don't be angry

Don't be angry. They probably lied to you like they lied to the other preparer last year. Next year their new preparer will notice the "mistake" on the return you did. The clients will refuse to fix it, lie to the new preparer, and will tell all their friends the new preparer ripped them off.

[Bob123]

Welcome to the real world regarding taxes

We see several dozen of these a year. People who get divorced. One makes 60K, the other makes 12K. The "unmarried" couple then gets 5K of EIC.

People from other countries who are married by their customs but not married by U.S. law. Again 3 - 6K of EIC for their home between them.

How about this one: Illegals from south of the border filing with false SSNs, or are married but do not list the spouse who has an ITIN. (ITIN disqualifies you from EIC.) Instead the person files HOH and collects the 3 -6 K of EIC.

Better yet, how about claiming the children born in the U.S. of their brothers and sisters who are here illegally and therefore disqualified from EIC. The children may actually live all the way across the country or may be in Mexico. What are we suppose to do as tax pro's? Tell them they are lying? Ask for school records?

If you trap them regarding how they answer the questions, they simply leave without paying for their return, learn how to answer the questions, and go somewhere else, or go to a shady tax place that will file returns but does not sign as preparer. These "offices" are popping up everywhere. More than one has been reported, but maybe it takes time.

All you have to do is "get into the hispanic community" to really learn what is going on." If these people get audited a few years after receiving large EIC checks, they simply move to another part of the country, obtain a new SSN, or go back to Mexico and have a different family member claim the children born in the U.S. To them, it is worth the risk, and many don't have any loyalty to the U.S. They feel they are entitled to the money, unlike when immigrants in the 1800's came here.

Many of these people (not all) (and again I restate, NOT ALL) laugh at the U.S. regarding how they can scam the system. To these (not all) people there is no loyalty or respect to our country. This is the same as we have taught ourselves and our buereacrats (sp) teach us to obtain votes . "Government owes us."

Now for the big question: Do you really believe the IRS (leadership) or our senators are not aware of this fraud? If you believe they are not, I'll hook you up with several border patrol agents who can tell you stories about how they can not patrol watering holes and other major crossing areas for illegals. You probably would not believe willing to believe that either.

Solution: It's easy. There are too many branches of government giving had outs: IRS, AFDC, housing, state, county governments. One agency rarely knows the money the other is giving. All aid should be at the local level where it can be "somewhat" better controlled. Eliminate EIC and substitute it with a two year, once per lifetime job rehab program. Develop tax law to support traditional families, not encourage single parent homes or breeding amoung the non societal contributors.

Cold? Maybe, but nobody ever seems concerned about the working person who has to raise someone else's children.

[Cheryl]

We had a construction business for years and we knew some of our employees were doing the very same scam with the IRS, but they never had me prepare their tax returns. Those same people lied to get into government housing, scammed free Christmas presents out of all the local charities for their kids and stole from us whenever they could. They bragged about getting those big tax refunds by cheating and blew all the money on drinking and partying. We paid them very well, too, $10-$15 per hour ten years ago plus a lot of overtime!

I never really knew what to do about it, but it sure made me angry. We have since sold and moved to Florida. I'm just glad we don't have to deal with it any more. Being in business these days is just too hard.

My husband got a regular job and it is HEAVEN to work for someone else. I still have my tax practice, though, and love it.

Being an EA, I never really knew if I should have reported those people because I never actually did their taxes, but I didn't report them.