Ethical Question

[Burke]

Should you tell another preparer she does not seem to know what she is doing? Separated couple: I am doing one spouse, that preparer is doing the other. Permission granted (at least to me) to discuss with this other preparer re: dependents, etc so to avoid problems. Other preparer calls. We agree the spouse she is filing will claim the child. (My TP told her we were filing MFS. I didn't say.) Other preparer says since we are filing MFS, that qualifies other spouse for HOH and standard deduction. What? They do not meet the "not living together for last 6 months of year," nor could other spouse pay more than 1/2 of cost of keeping up home since my TP makes 25% - 35% more income than other spouse and payments came out of joint checking acct. Since separation, my TP has paid all. Not my problem, so I don't say anything. Or am I missing something? I would have liked to claim HOH too! Then other preparer calls back later saying her e-file rejected due to SSN. Whose? Primary insured. What? We sure as heck did not claim the spouse. Nor the child. Besides, other preparer filed first. Suggested she take another look, it is probably child's SSN (who had small job) and filed their return early. (I told my TP to check on this earlier in the year before we knew who was claiming whom.) No word since so I guess that was it.

[David1980]

They'll actually get a different reject code for the child claiming him or herself versus someone else claiming the child.

If someone else claims the child, you'll get a reject 0507 (0506 for sch EIC), if the child filed and claimed their own exemption you'll get a reject 0508. So if she knew how to read her rejects she'd realize what happened right away. Obviously if she isn't familiar with something like the rules to qualify as unmarried for HOH, she probably isn't at that level.

[Burke]

If I hear from her again, I will be sure to relate that. Thanks.

[Kram BergGold]

Why did you not talk to her?

I agree if the spouses lived together for more than 6 months no one could be H of H. Why did you not say, "it is my understanding that they lived together for more than 6 months". Then her response would have been either, "well my understanding is they did not live together after June 15" which means the spouse lied, or whoops I made an error, or some other comment which would have shown a lack of knowledge. You may have rushed to an incorrect conclusion.

[Burke]

I interpret the HOH rule as they cannot have lived together "at any time during the last 6 months of the year," not just more than 6 mos. It is my understanding that they were back and forth during this time, and I am pretty sure she is aware of that. She also seemed to disregard the "providing more than 1/2 of the cost of keeping of the home" rule. Her comment was kind of thrown out in a very quick conversation and seemed to be based not on the above two factors, but what our filing status was going to be. I probably was not fast enough on my feet, but then I didn't want to divulge information other than the dependent status either. We itemized, and she knew that as well.

[joanmcq]

It's not an 'interpretation', the code states that they cannot have lived together AT ANY TIME during the last 6 months of the year. There are cases (which unfortunately I cannot cite right now) where the soon-to-be-ex slept on the couch a few nights during the last 6 month period, which disallowed HOH status.

[S T]

In Particular Calif HOH

As Joan Stated, HOH, is really scruntinized and in particular Calif ( Calif sends out HOH Questionnaire's approximately every 2 years)- , it is most definitely to qualify "not living together during the last 6 months at any time - not even for a sleepover" of the year - then one-half the support is another additional issue.

Burke, the other preparer should know the regulations and the facts/circumstances, I do not believe it is up to you to educate the other preparer. As you stated - only relating to the dependency exemption issue, that would be reasonable.

Your responsibility is to file your "Tax Client's return" with the correct filing status and exemptions.

I had one similar for 2010 tax filings - it will take about a year or so, to find out the outcome, of how the ex-spouse (separated spouse) claimed versus how I filed the other spouse. I would suspect a notice will be received, as HOH filing status was involved on a separation date of approximately August, 2010.

Sandy

[FEDUKE404]

Doing the HOH shuffle

This appears to be another example of those who, with a little bit of knowledge, try to beat the system.

I do not see any ethical question here for reaching the correct facts for your own client. (However, I see the need for a bit more due diligence on the part of the other preparer.)

The approach I would take is this: Explain, very carefully, that if a couple is married on the last day of the year they have only two choices: MFJ and MFS.

If, under certain circumstances (abandoned spouse, not living with spouse for >6 months, paying necessary expenses to maintain household for qualifying individual) then, and only then, can the HOH status be considered as an exception to the above general rule.

ASIDE: If you tell either spouse something like "gotta be apart more than six months" in response to proffered "hubby left in September" rest assured they likely will just visit another preparer with a slightly "modified" version. BTDT. It is not at all uncommon for married folks to try to claim HOH for both of them (especially if there are enough dependents and they can perhaps use a "different" mailing address). They frequently will arrive/leave together, visit different preparers in the same office, and have checks/receipts plainly showing the "missing" spouse paid expenses.

Since you mentioned problems with SSNs, it appears there already has been a bit of "creative" name/SSN sharing within the household(s).

FE

[ChEAr$]

If, under certain circumstances (abandoned spouse, not living with spouse for >6 months, paying necessary expenses to maintain household for qualifying individual) then, and only then, can the HOH status be considered as an exception to the above general rule.


FE

correction: "last six months of the tax year." not any 6 months.

[FEDUKE404]

Clarification

correction: "last six months of the tax year." not any 6 months.

I'm fully aware of that specific, but I figured for making the general points about meeting HOH filing status vs MFS it was not really necessary to list the gory details, kinda like I felt no need to define what a qualifying individual is either and/or how divorce issues can relate to such issues as the related dependency exemption requirements.

My guess is several classroom hours might be necessary to cover, in full detail, the finer points related to the one you cited.

But, here we go: The person who was legally married on the last day of the calendar year, namely December 31st, cannot be considered "unmarried" if he/she lived with his/her spouse during the final six months of the year, said date being July 1st or thereafter. Or something like that?

Someone else can take their own time to delve into and explain to us the details of how an infrequent one-night-stand might fit into the IRS regulations re "living" in the home.

But I do stand by my non-specific comments about how clients, especially in the store-front operations, willingly and knowingly milk the system to their benefit. I never had any intention of spouting IRS statutes et al here for making such a point.

In any case, thanks for the correction!

FE

[ChEAr$]

Actually FE, your word "clarification" was better than my hurried choice of "correction".
(GRIN)

[Gary2]

Let's get back to the ethical questions. It's not just what the obligation is to the other preparer, but also what the obligation is to the client with regard to this information.

First off, I trust you've advised your client that a joint return may be more advantageous, unless you're already aware of reasons why it either wouldn't be advantageous or given consideration. If they were to go down this path, they may want their lawyers involved, to make sure that they're each protected against errors or discrepancies.

Second, I assume that the permission you were given to discuss this with the other preparer was in writing. Implicit in it is that the information will get back to the other spouse; my preference would be to have that explicit. In addition, it should be done in such a way that you're not required to reveal all information, but that you're not liable should any information you release be to your client's detriment. (Possibly this is moot, if the divorce laws give each spouse the right to obtain all of this information.)

On the other hand, it's not clear what permission was given to the other preparer. It's also not clear to me what your obligations are concerning this information - perhaps none, since you're not preparing the other spouse's return, but I'd want to be sure about this.

Unless the other preparer is making a mistake that works against your client, or if you happened to both work for the same employer, I agree with the comments that you have no obligation to correct or train the other preparer.

But now let's look at the implications of the information. On the one hand, suppose your client's attorney is informed that the other spouse is filing a return that is questionable. This has the potential of providing leverage during divorce proceedings. This suggests that either you're prohibited from revealing it to your client (unlikely, but as I mention above, I'd want to be quite sure) or else you might be obligated to reveal it to your client, as serving their best interest. I don't think there's any middle ground.

On the other hand, it's conceivable that your client will indirectly benefit from an improper filing by the spouse - say by an agreement to split the tax results in some way as part of the divorce negotiations. This is the issue that others have already raised in this thread, brought back to your situation. In this case, again, you can still prepare the return as is, since the return itself is correct. However, there may still be the obligation to inform your client of the issue, again to bring it to the attorney's attention. Unlike the more general case where married couples conspire to misreport their filing statuses, it's less clear whether your client in this would have any liability. That's a legal question, for the attorney to address.