EIC Audit

[DaveO]

I understand the EIC issue but there is the dependency issue as well. Even if she doesn't qualify him for EIC she still is a dependent

[FEDUKE404]

Dependent issue

I understand the EIC issue but there is the dependency issue as well. Even if she doesn't qualify him for EIC she still is a dependent

Well, not necessarily.

There could easily/likely be some goobermint funds coming her way...

....especially with the scenario so far presented.

I agree with John. This is another clear example of why I do not miss having to deal with the situations that accompany many/most EITC returns. (And I felt that way a long time before the IRS started its theoretical "crackdown" on such abuse.)

FE

[Koss]

Appeal

It sounds like this case may need to be appealed, and it sounds like the taxpayer has a good chance of prevailing on appeal if it's done right.

Zeros, you can e-mail me if you want, and I can give you some guidance on the appeal process.

BMK

[zeros]

Yes/No

Did more than one person claim the dependents? You could also have multiple people sending in documentation trying to prove that they are the ones that should get the dependent.

Did he claim the same three dependents the prior year? Any issues in the past?

I prepared all three returns so the grandchildren are being deducted on the grandfather's return only. No problems in the past.

[Gary2]

Also, in the case of the daughter, you'll have to prove support. This could be tricky if she's getting SSI, food stamps, free medical care, etc.

And this is assuming that none of them are getting SSDI. Remember that Social Security benefits are considered support provided by the individual. In a large household, the household expenses are normally divided evenly, so it doesn't take much SSDI for a child to be considered self-supporting.

For some reason, this stuck in my mind till I remembered the flip side.

There is no support test for EIC. So even if the grandkids are disqualified from being dependents because of SSDI, they're still eligible to be claimed for EIC. This works because with SSDI as their only income, they won't be required to file returns claiming themselves.

There's nothing in the information provided suggesting SSDI, so this is just general discussion. On the other hand, SSI and other public aid for the mother does seem likely, so her exemption may be at risk. As already pointed out, without disability she can't be a qualifying child for EIC.