Head of Household Question

[zeros]

Client has a child and lives in an apartment with her boyfriend ,her mother, and her grandmother. All chip in for the various costs of running the home. She wants to claim HOH. Any problem with this?

[Burke]

Let's hope she "chips in" more than one-half the cost of keeping up the home; then, she might be able to get that filing status depending on the circumstances outlined in TTB 3-13-14 regarding her child or other dependent. Hopefully the tax code reform people will get rid of this one!

[MilTaxEA]

Yes, if no one paid more than 50% of the household upkeep then no one is entitled to the HoH filing status.

[Koss]

Chipping In

I see this as a potential problem. It might be very difficult to sustain in an audit.

HoH positions are not coming under the same scrutiny as EIC. There is no special preparer penalty for an erroneous HoH claim. But be careful. EIC can get bootstrapped into it. If the person claiming HoH is legally married, and living apart from their spouse during the last six months, then they only qualify for EIC if they can also use HoH filing status. If you make the wrong call on HoH, in that context, then you are also making the wrong call on EIC.

As to the fact pattern in the original post, the first question the IRS would probably ask is:

Whose name is on the lease and the utility bills?

This question doesn't settle the issue. If the taxpayer's name is not on the lease, it may be possible to establish that the taxpayer paid more than half the household expenses. But it wouldn't be easy.

Likewise, even if the taxpayer's name is on the lease, that doesn't prove that she actually paid more than half the rent.

The fact that she might not be able to back it up in an audit doesn't transform it into a fraudulent return. We're not expected to audit the return. But you gotta ask the right questions.

One final observation:

What's her income level?

How much does HoH really reduce her tax liability, when compared to single?

If you haven't done it already, you might want to try the return both ways. It's a very subjective judgment call, but it might not be worth the risk.

BMK

[DonPriebe]

And to further confuse things ...

You also have potential questions about dependency and EIC. The child is the potential QC of not only your client, but of the mother and the grandmother. In fact your client may be a QC herself. More complications arise if the boyfriend is the father of the child.