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    Duplicated Dependents

    By now, you've seen this many times.

    You e-file for someone claiming their kids. E-file is rejected by IRS because someone (most likely an ex-spouse) has already claimed them. Essentially a fire drill - exhusband and exwife are racing each other down to the nearest storefront tax office and the fastest one to e-file gets to claim kids. The other spouse is forced to choose between not claiming them or filing a paper return.

    We are 3-4 years into the custody regulation, now. I have a couple clients who have had to file paper returns to claim their kids three years in a row.

    So what is SUPPOSED to happen? IRS detects the duplication, determines which spouse is entitled to the dependents, and starts collection proceedings against the other spouse. Right?

    Wrong. All I've seen so far is letters being sent out to both spouses informing them that their kids have been claimed by multiple taxpayers, and that one of them must be wrong and please send them a check if they are the wrong party. I've seen such letters now 3-4 years in a row. But no enforcement.

    This involves primarily the EIC crowd. Just ONE of these collection processes would break the will of fraudulent party forever. And they are interested in assessing preparer penalties when they have a road map already in front of them to obvious fraud? As bad as the deficit is?

    Can anyone reflect on this with factual information? Maybe an insider with knowledge?

    #2
    It wouldn't only break the will of the fraudulent party, it would keep them from being able to claim EIC at all for, I believe, 5 years.

    I have seen a lot of EIC audits, but very few where we know of both parents being audited. Of course, the telling phrase is, we know of it.

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