IRS Transcript Incorrect Information

[Burke]

Client just got an IRS transcript of her tax return for FAFSA. Transcript shows dependent child as "step-daughter." What? Child is her natural child, always has been, and the return has shown "daughter" since 2003. I efiled this year. How could it show stepdaughter?

[Koss]

Incorrect Transcript

Wow, that's pretty bizarre.

Data processing error, maybe.

Why does the taxpayer need an IRS transcript if they have a copy of the tax return?

If the financial aid office questions the relationship...

Write a letter for her explaining that it's a data processing error, and attach a copy of the tax return and the birth certificate.

If it is in fact the financial aid office that is asking questions, this is one case where I would definitely recommend that any copy of the tax return provided to the financial aid office have an ink signature of both the taxpayer and the preparer. I still say that such a copy can and should be marked "copy," with a watermark or a rubber stamp.

BMK

[Koss]

Explanation

Just tell your client that this year the IRS is using a new e-file system, and that this has added an extra step to the processing of her return.



BMK

[Burke]

It's the colleges who are requiring the IRS transcripts. Sort of an audit process, it seems. They don't want a copy of the tax return, they want the actual IRS transcript. Had another client get same thing on two of his children, has to wait until Monday to get the transcript (two weeks after efiling.) Letter from college said "your application has been selected for review...." and there are instructions how to download within the FAFSA on-line application. In the first case, I think the mother went to the IRS office and had them print it out. She's going to the Financial Aid office tomorrow. I'm staying out of both situations. I have enough to do.

[Mo Sheets]

Drop Down Box

Is there a chance that the drop down box in your tax software was mistakenly checked as "step-child" rather than child? I use TaxAct, and in order to determine if the child qualifies for the child-tax credit, every year you need to go into the line and choose one of the drop-down boxes, "relationship to you," "dependent type," and "number of months lived with you." Just a thought....

[David1980]

Stepchild wasn't even a valid relationship for efile until this year, so that is interesting. Data processing error sounds as good as anything.

[Burke]

Is there a chance that the drop down box in your tax software was mistakenly checked as "step-child" rather than child? I use TaxAct, and in order to determine if the child qualifies for the child-tax credit, every year you need to go into the line and choose one of the drop-down boxes, "relationship to you," "dependent type," and "number of months lived with you." Just a thought....

In my software, you do not need to select this designation every year. It auto-rolls over from the previous year. You would only need to do that if it were a new return. I checked this one and "stepchild" is an option in the drop-down box. But "daughter" is what is selected in the software and on the return.

[Gretel]

Client just got an IRS transcript of her tax return for FAFSA. Transcript shows dependent child as "step-daughter." What? Child is her natural child, always has been, and the return has shown "daughter" since 2003. I efiled this year. How could it show stepdaughter?

I don't know if "I efiled this year" means that this is the first year you efiled. If so, maybe IRS put it wrong in the system some years back and any efiling later does not overwrite a once established relationship (normally a relationship does not change).