Homeless EIC?

[Corduroy Frog]

Truck driver and his wife divorced in Nov 2010 and she moved out. She has been living with relatives ever since and jobless. She has talked to me about EIC and using the money to establish a residence.

Earned income does exist. She drove 2-3 dozen trips @240 miles apiece to pick up customer checks when they were ready instead of waiting on snail mail, plus minimal filing and telephone work for his truck driving business. She will not receive a 1099 nor a W-2.

She has one child by him who lives with her, the rest of the year she lived in his house.

How can she meet the support requirements of "providing a home for more than 6 months?"
I don't see how, except for the remote possibility that his reportable truck driving income was less than hers as described above. And of course, if she succeeds then he will not have EIC on the two other children which are his alone. Furthermore, she will have no way of knowing whether her earned income is greater than his.

I would like to help her, but don't know how I can pull this off. Can anyone think of a way?

As hopeless as this situation may be, I have a friend in a nearby town with a storefront tax operation. She can walk in there and get her EIC with a minimum of questions, simply by producing her SS# and that of her daughter.

[erchess]

Interesting case

I think I would send her to the EIC Shop you mentioned. You have too much knowledge of her situation to be able to get her EIC without risking preparer penalties. The risk to the EIC Shop is less. They will ask her the required questions, document her answers, and have no reason to inquire further.

[MLINDER42]

Eic

I don't see how she has any income picking up checks is not earning income.If she lived with friends and had the child with her for more than six months she can receive Eic for that child.

[erchess]

picking up checks

If she was paid for picking up checks she has earned income.

Agree that if she had child with her she was providing home.

[MLINDER42]

Eic

He does not say she was paid for any of the work she did.One of my preparers had an EIC audit last year they zeroed in on all schedule Cs without a 1099.Preparer was fined $3300.Since than we have lost about 50 returns that could not prove income.

[WhiteOleander]

If she didn't move out until Nov. of that year, she does not meet the requirements to be considered unmarried She can't have lived with the spouse at any time during the last six months of the year.

That leaves her with the choice of MFJ or MFS. If she goes MFS, she cannot have EIC.

[Jesse]

If she didn't move out until Nov. of that year, she does not meet the requirements to be considered unmarried She can't have lived with the spouse at any time during the last six months of the year.

That leaves her with the choice of MFJ or MFS. If she goes MFS, she cannot have EIC.

In the original post it states "his wife divorced in Nov 2010 and she moved out", if they were actually divorced in November she could be single or head of household, however it doesn't sound like she will qualify for HofH. If not actually divorced in November I agree with WhiteOleander.

She doesn't need to meet the support requirements of "providing a home for more than 6 months" to qualify for EIC. However I would require some substantiation for the earned income. Why will she not receive a W-2 or 1099 MISC? Did she get paid by check and if so did she keep copies or some type of documentation? Work orders and bank statements consistent with the method of payment? If not I wouldn't even think about EIC.

"providing a home for more than 6 months" - should clarify kid(s) need to reside with her for more time out of the year than with Dad, but she does not financially need to provide the home.

[Corduroy Frog]

Clearing Up OP Factors

Thanks to all for your responses. These are people I know, so I may have more knowledge than might be practical. To review OP and clear up possible confusion:

1. She was officially divorced, and not living with him by December 31. I don't know why she would have to claim ANY married status, MFJ or MFS. She is entitled to S or HoH, although it might be tough to claim HoH.
2. She DOES have earned income, whether trucker acknowledges with a 1099/W2 or not. Driving 6 hours in her own car 30 times per year? for husband's truck driving operation? If he were to pay her or anyone else to do this it would cost him. My statement here is that she actually DOES have earned income, and I'm not stating that there may be fallout because of not having a 1099/W2.
3. The OP is asking about a support requirement for providing a home for her child. She lived with the father for 10 months, and has lived with relatives (jobless) ever since.

[WhiteOleander]

Yes, everyone is right. I missed the part that she was fully divorced. So, she can file Single or HOH if she qualifies.

[Lion]

Earned?

I agree that she worked in her husband's business, but did she have earned income? Does she have bank deposits or other proof? If so, is it enough that when you deduct her mileage and other expenses she still has a profit?

[newbie]

Look at this Pub for some good info. seems like it would be similar to the homeless shelter.

http://www.irs.gov/pub/irs-pdf/p596.pdf

Page 14
Residency Test
Homeless shelter. Your home can be any location where you regularly live. You do not need a traditional home.

[MLINDER42]

Eic

I still feel that it would be hard to prove she had earned income if no checks were written.Just because you do something it is not earnings if you did not receive pay.She would probably receive EIC if you put earnings on a Sched C but I don't see how it would pass due diligence.

[AJsTax]

If I understand all the information given:

did not move out until November,? no HOH.

No W-2, no 1099, no check stubs or bank deposits to prove income? Then no income to report. It was all his and she was doing him a favor.

No income, he had more and supplied roof for 11 months for child, dependent is his and his alone.

she is stuck with single, no dependents and no income. Nothing else would pass the due diligence tests.

[Snaggletooth]

Custodial Spouse

No income, he had more and supplied roof for 11 months for child, dependent is his and his alone. she is stuck with single, no dependents and no income. Nothing else would pass the due diligence tests.

She has custody of her child. Father has custody of two other children by another marriage. Father cannot claim child as a dependent unless she gives it to him.

Income is not necessarily evidenced by passage of funds. K-1 income from a partnership may or may not result in cash at all and it is "earned" income. Deposit of customer checks into a joint checking account can also becloud the issue, and even from a single account can be withdrawn to buy feminine napkins. In fact even if she claims a small amount of income, it is not terribly unusual for a trucker to claim a loss if he is caught with 2nd yr DD depreciation of a new rig, and caught into fixed payments during periods of dramatic fuel price increases. (However, he cannot continue a loss very long).

From most of the posts, it appears the support issue jeopardizes the head-of-household filing status, and nothing else.

One note about the earned income of the wife (if valid). If things are done right, the amount would ideally be agreed upon, claimed by ex-wife, deducted by ex-husband. But real world the only possibility of this happening would be if both taxpayers used the same preparer. The idea of not deducting all expenses is spreading fast among the self-employed in this new era of EIC. I'm surprised at how many clients seem to want to report income between $14-$20K and are not aggressive about telling me about expenses if they know they're at that level.

One rather conniving but perhaps legal arrangement would be for a trade, if true facts are dealt. If her income is apprx $8K and she has to file single, she could give him an 8332 for 2010 to claim child, and he could give her a 1099 for that amount.

[MLINDER42]

Eic

If she does not have the dependent no reason to file. All this is to be able to obtain the child tax credit and the EIC which would be thousands of dollars.Every time they raise the amounts it puts more pressure on people to lie and it makes it harder on us.The IRS wants preparers who do a large amount of EIC returns to be the auditors of the program.I expect to have that same preparer audited for EIC again I hope this time the changes we made in our procedures to prove Schedule C income is enough.