Rejected return -- dependent fraudulently claimed

[manyhappyreturns]

A client of mine had her return rejected because her ex-boyfriend claimed both of her kids (although only one of them is his!). I know this woman, and I know the kids, and I know they live with her year-round. It used to be that a taxpayer in this situation could file a paper return with a letter explaining that the children indeed lived with and were supported by the taxpayer, and documentation to prove that as well. But I've heard lately that the IRS wants parents to work out their own differences and leave the IRS out of the decision-making, meaning the 1st parent to get his/her W-2 is the winner. So is it even worth this lady's time to mail her return with her letter and documentation? Is there anything else she can do to get her duly deserved refund? Without the kids on the return she ends up owing a couple thousand dollars, which she doesn't have right now because she is a teacher and got laid off early in 2011 and hasn't gotten any work since, except a few days as a substitute.

Any ideas? I really want to help this woman.

[thomtax]

I don't know about this year, but a couple of years ago had a couple that someone else - don't know who - claimed their oldest daughter. Had happened three years in a row. They filed a paper return and did not mail any explanations with it. They received the full refund without ever hearing from the IRS.

I had them to come in early the next year and it went through efile without a hitch.

Good luck,
LT

[FEDUKE404]

Rationale?

Can you cite some reasonable reference supporting this position?

"But I've heard lately that the IRS wants parents to work out their own differences and leave the IRS out of the decision-making, meaning the 1st parent to get his/her W-2 is the winner."

FE

[Kram BergGold]

File paper returns

If you know the clinet is in the right, then file paper returns and claim the children.

[MLINDER42]

Children Claimed By Another

I have this happen several times a year with clients.I file a paper return about 25% of the time IRS asks for more info the rest the refund comes in about three months.

[manyhappyreturns]

Thank you everybody! This is good news. I actually don't remember who told me that the IRS is no longer settling these issues. All I know is that it was another tax preparer, so that's why I thought it was real, but it was probably just another rumor going around. My client will be elated that there may be a solution to this, and I am too.

[OtisMozzetti]

A client of mine had her return rejected because her ex-boyfriend claimed both of her kids (although only one of them is his!). I know this woman, and I know the kids, and I know they live with her year-round. It used to be that a taxpayer in this situation could file a paper return with a letter explaining that the children indeed lived with and were supported by the taxpayer, and documentation to prove that as well. But I've heard lately that the IRS wants parents to work out their own differences and leave the IRS out of the decision-making, meaning the 1st parent to get his/her W-2 is the winner. So is it even worth this lady's time to mail her return with her letter and documentation? Is there anything else she can do to get her duly deserved refund? Without the kids on the return she ends up owing a couple thousand dollars, which she doesn't have right now because she is a teacher and got laid off early in 2011 and hasn't gotten any work since, except a few days as a substitute.

Any ideas? I really want to help this woman.

The IRS often isn't satisfied with the documentation provided by the second taxpayer to claim the children. Then, they would send each taxpayer that claims the child(ren) a letter stating that specified documentation is required, or else the return goes through minus the child(ren). For example, the place of residence would have to be proved by school records, medical records, sworn statements by the neighbors, etc.(IRS letter often says what evidence would be helpful.) It does take several months for all of this to get carried out.

What I see happen altogether too often is that the custodial parent gets intimidated by the noncustodial parent, i.e. that child support won't get paid if the claim is disputed or some other form of inducement or threat is apparently applied. Also, I don't know for sure exactly what penalties, if any, are applied by the IRS for the invalid claim of the child(ren).

[MLINDER42]

Children

The only thing I have seen IRS do is charge back the refund that was given in to the wrong tax payer.If eitc was involved the this same taxpayer must file 8862 if he claims eitc for the next 10 years.

[Nelstax]

Rejected return

The same thing happened to a client of mine, the ex claimed the child but she had papers to prove she was entitled to claim her child. They had just gone back to court late fall of 2011 and had more paperwork to show.
The e-filing was rejected but once we filed a paper return with attached proof of court decisions, his school information, doctor visits billed to her address,etc. she received her full refund in no time.

[Gary2]

The only thing I have seen IRS do is charge back the refund that was given in to the wrong tax payer.If eitc was involved the this same taxpayer must file 8862 if he claims eitc for the next 10 years.

That's not the exact rule for 8862 and the 2 or 10 year rule.

The 2/10 year rules apply only when there's a final determination by the IRS of reckless/intentional disregard of rules (2 years) or fraud (10 years). In those cases, you can't file 8862 during those periods; you're simply banned from claiming EITC. I don't know whether claiming a child in violation of a divorce decree, but when allowed by the IRS rules, would count for either of those penalties.

Unintentional errors don't result in either the 2 or 10 year bans. Simply having the EITC denied is not a final determination of either disregard of the rules or fraud. I don't recall ever seeing such a determination letter, but then, I try very hard not to do returns for such people.

Also, once you've filed the 8862 and had it accepted, you don't need to keep filing it. There are also exceptions to it being required.

[taxea]

if she qualifies under the dependent rules to take the kids then he doesn't and she should file a manual return with documentation of her position and a statement explaining who she believes wrongfully took the dependents without qualifying to take them.

Whether or not it was the ex....the IRS will contact the responsible party and charge penalties and interest as well as any illegally obtained refund.

She will eventually get her full refund....but with all the id fraud the IRS is experiencing, I wouldn't expect it any too soon.

If it was the ex...how did he get a signed 8332 from her without her knowledge?

[OtisMozzetti]

...she should file a manual return with documentation of her position and a statement explaining who she believes wrongfully took the dependents without qualifying to take them.

That's an interesting idea, that the paper return should include a statement of who else the taxpayer believes claimed the dependents. That sounds like good advice to me.

....the IRS will contact the responsible party and charge penalties and interest as well as any illegally obtained refund.

In my experience, the IRS might determine that it is proper to ask BOTH parties to provide certain documentation, for example, to show who qualifies as a custodial parent.

...If it was the ex...how did he get a signed 8332 from her without her knowledge?

I don't believe anyone has said that he submitted any signed 8332. In some cases I have seen, it is open to question who is the custodial parent.

[JohnH]

Interesting Idea for Sure

...she should file a manual return with documentation of her position and a statement explaining who she believes wrongfully took the dependents without qualifying to take them...

I agree, that is a very interesting idea. It is almost always the ex who is wrongfully claiming the exemption(s), so by furnishing the name with the paper return you are providing a shortcut for the IRS in sorting things out. For example, if the person claiming the exemptions is not the one named in the letter, then the IRS may take an entirely different approach in how the follow up. It could even speed up resolution of the issue and result in a faster refund to the one entitled to the exemptions.

Two thoughts come to mind, though. 1) The wording should probably be vague enough not to be construed as an accusation. 2) Would it be wise to include the Social Security number of the ex (if known)?

[MLINDER42]

Dependent Claimed

In my practice we just file a paper return with no paper work.In the majority of times we represent the mother.There are no ex's because most are not married .The usual case is the mother did not work the previous year and allowed some other person to claim the child that person claimed the child this year also.Sometimes child's farther most of the time grand parents or other close relatives.

[Nashville]

Fact of Life

Can you cite some reasonable reference supporting this position?

"But I've heard lately that the IRS wants parents to work out their own differences and leave the IRS out of the decision-making, meaning the 1st parent to get his/her W-2 is the winner."

FE

Duke, we don't need a reference or a cite for this. The "early bird gets the worm" is a fact of life and we all know it. I would surmise nearly all of us have had e-filings rejected because an ex-spouse beat to the draw.

However, I have not yet heard from a reliable source that the IRS "wants parents to work out their own differences." They might prefer to do this, but I don't see how they can. If the parents were willing to "work out their differences" these things wouldn't be happening to begin with.