Eitc Audit

[WhiteOleander]

What are some of the circumstances? And for kids under school age, what constitutes evidence of residence?

If the parents are trading the child back and forth each year, or is the dependent is a sibling or nephew/niece, etc. We have the client be able to prove the residency. One of the best sources that the IRS will accept is school records. If the parent can get the school papers that show that the dependent lived at their address, it is very good evidence of residency. Also medical records or medicaid records. Any third party source that can verify the place the child lived.

[FEDUKE404]

Level of proof

If the parents are trading the child back and forth each year, or is the dependent is a sibling or nephew/niece, etc. We have the client be able to prove the residency. One of the best sources that the IRS will accept is school records. If the parent can get the school papers that show that the dependent lived at their address, it is very good evidence of residency. Also medical records or medicaid records. Any third party source that can verify the place the child lived.

Interesting approach - is your employer being overly cautious in the brave new world of the IRS?

While I certainly can understand the need for asking such questions in a clear/firm manner, and recording the answers, I'm not quite at the point of having the taxpayer PROVE to me such things.

I'm fully aware of "the games" folks will play, especially in a high % EIC business, so I'm not being naive here. So how do you "prove" that a child named John Jones is, in fact, the son of Martha Smith who sits down at your desk and seeks some EIC money due to her son and files HOH to boot?

Just curious - PTL my days of working in the EIC mills are far behind me!

FE

[powerage]

I work for JH, and we take notes on what the TP tells us, and they also fill out a customer data sheet that stays with the files we keep. A lot of clients come with their friends, and I listen in on their personal conversations while I'm doing the return, as I sometimes get some great info that way. If they want to file HOH with 2 nieces and $8,000 income, I will flat out ask how they supported a household on that amount of money. For the most part, I take people at their word while doing my DD.

I had someone the other day, married with her husband in jail, and wants nothing to do with him. Was disappointed when HOH ain't going to fly on $2800 income for the year, when she found out the only choices are MFS/MFJ, and was really disappointed when I would not go back and change the info she told me so her FS would be single so she could claim the EIC.

[WhiteOleander]

Interesting approach - is your employer being overly cautious in the brave new world of the IRS?

While I certainly can understand the need for asking such questions in a clear/firm manner, and recording the answers, I'm not quite at the point of having the taxpayer PROVE to me such things.

I'm fully aware of "the games" folks will play, especially in a high % EIC business, so I'm not being naive here. So how do you "prove" that a child named John Jones is, in fact, the son of Martha Smith who sits down at your desk and seeks some EIC money due to her son and files HOH to boot?

Just curious - PTL my days of working in the EIC mills are far behind me!

FE

It is a truly facts and circumstances issue. We by no means require proof of all clients. but, most male HOH cannot prove the residency. We have learned that male HOH are scrutinized more frequently than the females. So, if the IRS holds the refund, it is a long road to get the necessary info. If we require them to prove before we file, it weeds out the ones who will not prevail with the IRS.
This year we are also checking on those claiming siblings or nephews/nieces. We have had the IRS hold several of those already this year.
We are a franchise office. My boss has been in this business for 45 years and the last thing he wants to do is have them leave and go elsewhere. But, especially with the stricter Due Diligence, some have to be checked closer to avoid a lot of hassles later.
And of course we all know, if the IRS refuses the EIC to them, it is our fault and they bad mouth us all over town. So, we have learned it may be better to let them go their way and file somewhere else.

[JohnH]

So did she suddenly remember she forgot a form and will bring it back tomorow?

[FEDUKE404]

Psychic powers of JohnH

So did she suddenly remember she forgot a form and will bring it back tomorow?

My (unposted) question EXACTLY !!

It's in the same category of those autumn/early winter moves that, "upon further review," actually occurred in the month of June.

I would not want to endure the "Tales of the EIC" these days, especially in the store front operations. And I definitely would not want to be an owner of such, having to put up with the client "facts" and also having to worry about the IRS breathing down my neck.

IIRC, for some businesses if you stay with the same (big name) company the software will alert you a file had already been started for that SSN. It does not change things significantly, but at least tells the "new" preparer to raise his/her awareness level a notch or two.

FE

[joanmcq]

Better for them not to get EIC than to get audited. What they'll have to prove in an EITC/dependent/HOH audit (because all three of those go together for the most part)--residency, proof of support, the relationship (birth certificates showing the lineage), proof of over half the cost of the home.....

It's ugly. Really really ugly.

[MLINDER42]

Eitc Audit

The audit is over.He had his supervisor with him yesterday(day 3) their first figure was $5100 fine.After saying we wanted to go over each of those 51 returns in detail the supervisor said they would take a second look.An hour later they had dropped to $3300 we accepted that gave them a check they are now gone.We will now have to pry into every person who is not taking their own children where the parents are.

[tpnl]

Review of 2011

I had a client who did not get his EITC this year. The IRS says it is sending paperwork to the client and he should fill it out and send it back.

Father claims his daughter and grandchild. They with him. The daughter is in college and no job. I have no doubt that he will get the EITC; however, it is going to take a long time to get it.

Anyone else having the 2011 questioned?

[joanmcq]

Are you able to represent him? At the least, you should review the items in the IRS request, and go over the necessary documentation.

Like I said, these are ugly, but if he has the birth certificates to prove his daughter is his daughter and the granchild is his daughter's child, proof they both lived with him and he provided support, proof the daughter is not a qualifying taxpayer (and probably the father as well, where is he?) he should be ok.

[quicksam]

MLINDER,

What software do you use? In my software I require the preparers to answer the question as to "where does the parents live"?

In the case of a father with a different last name, we ask why it is different, why they don't live with the mother, and who keeps the children while they work? I hate asking all of this. If he tells me they live with him, and gives me a reasonable explanation of the last name being different, I feel we should be able to leave it at that.

We are asking way more questions this year, but I do not think we will ever be able to ask enough to not get fined.

You must have been charged on 31 clients at $100 for a total of $3100. Now take into consideration the new fine is $500, and the total is $15,500.

Do you mind blocking out the names and socials and posting a copy of the report that explains why you were fined on a particular taxpayer? It helps us see what the IRS is going after.

I believe many of us ask a lot of questions in determining proper eligibility that the IRS never sees. It is too hard and time consuming to write down every single question and answer that we ask during the interview.

Another problem I have is that the IRS never sees or gives us credit for the ones we catch and file properly that were lying. I'll bet that my schedule C clients have dropped in half since the days of just being able to take the clients figures. To me that means we are doing some sort of due diligence. The IRS only looks at the ones that slipped by.

Thanks for sharing, and I'm glad you survived.

[Gretel]

The audit is over.He had his supervisor with him yesterday(day 3) their first figure was $5100 fine.After saying we wanted to go over each of those 51 returns in detail the supervisor said they would take a second look.An hour later they had dropped to $3300 we accepted that gave them a check they are now gone.We will now have to pry into every person who is not taking their own children where the parents are.

Thank you so much for sharing the results. Once you evaluated these 31 returns I would be most interested if you feel the IRS has been reasonable. I think we need to fight anything ridiculous.