What Status

[TAX4US]

Ok Let me see if I can Explain. Still legally married, no separation aggrement. They live in grandparents old home.(no Rent or mortgage) She pays for utilities, food and kids school stuff. He lives downstairs and she lives upstairs. Per TP they have not had relations for over a year. He moved out Jan 2012. She is fiing for child support. She made about 20k and he made about 25k. Per tp(she), he did not help with bills etc.

I think since there is not separate utilities and he made more $, I cannot see HH for her.

I may even have a hard time with these kids. Can someone else chime in as my brain appears not to see the whole issue. I am only looking at the wife side since he equitively stated NO JOINT RETURN.

[RitaB]

I think

I think Pub 501 says spouse cannot have lived in the same home with you for the last six months of the year (if you're using HH):

http://www.irs.gov/publications/p501/ar02.html#en_US_2011_publink1000220775

I think just cause he made more, it doesn't mean he paid more of the expenses you're interested in.

Finally, I think they are feeding you a big whopper, probably with fries and a Diet Coke.

[Koss]

Twilight Zone

Questions that come to mind:

When did they begin living apart?

It doesn't matter that they haven't had sex in over a year. The question is whether they are living in the same household.

If they have been living apart for at least the last six months of the year, then there is a credible argument that they are maintaining separate households. But that's not enough. It doesn't mean that she paid more than half the cost of keeping up her household. If she wasn't paying any rent, it is unlikely.

If she does not qualify for HOH, then EIC is out of the equation. Because she is legally married, if she does not qualify for HOH, then her filing status must be MFS.

That leaves the question of who takes the children as dependents.

Assume for sake of argument that they are in fact living apart, and did so for most, or all, of 2011.

Where were the kids living? With her or with him?

If they were living with her, then they are her qualifying children. She doesn't have to prove that she supported the children. The only requirement is that the children were not supporting themselves.

If they were not living apart, and they both try to claim the same child, then he will win the tiebreaker rules because he has the higher AGI.

Even if they were living apart, if they both claim the same child, the IRS will apply the tiebreaker rules, and she will have the burden of proving that the children were living with her and not with him. That will be very difficult if both parents and the children all had the same domicile during 2011. It's not impossible. But when a married couple and their children all live at the same address for the entire year, and the address is a single-family home, I think you have rebuttable presumption that the children were living with both parents the entire year, so he would win the tiebreaker rules.

In an audit, it might be almost impossible to establish the "upstairs/downstairs" fact pattern that would somehow show that the children were living with her and not with him.

Since you're probably not dealing with EIC, I wouldn't worry too much about preparer penalties. But I would make sure the client understands that the choices she makes on this return can come back to haunt her for the next three years, long after any refund has been spent. And make sure she understands the burden she will have if the IRS challenges the dependent exemptions.

BMK

[TAX4US]

Thanks, I will continue conversation with her. I really believe this will eventually become a rat in the woodpile. CYA myself everywhere and document all.

[taxea]

Does he have a separate entrance? I still think you need a legal separation which they don't have.