Single vs HOH

[TaxGuyBill]

By the time you verify it does not affect Federal, State, or anything else, it may take less time and effort to go through the Head of Household verification. :-)

[Twin Turbo Z]

I cant get past charging more for HOH vs.Single. But hey thats just me.

[Dude]

I can't get past unnecessarily exposing myself and a client to a Due Diligence audit .

[TaxGuyBill]

I can't get past unnecessarily exposing myself and a client to a Due Diligence audit .

Due Diligence is on you, not your client (unless you don't have things properly documented, in which case they could go to your client).

If you HAVE done your job and documented things as required, you just give the auditor the information and you are done. There really isn't anything to be "exposed" to because you have done things correctly.

As somebody else pointed out, that situation will very often result in the refundable Child Tax Credit and/or Earned Income Credit, so you are exposed to Due Diligence anyways.

[Dude]

Due Diligence is on you, not your client (unless you don't have things properly documented, in which case they could go to your client).

If you HAVE done your job and documented things as required, you just give the auditor the information and you are done. There really isn't anything to be "exposed" to because you have done things correctly.

As somebody else pointed out, that situation will very often result in the refundable Child Tax Credit and/or Earned Income Credit, so you are exposed to Due Diligence anyways.

You act as if there is no grey area in a due diligence audit. A stranger comes in and tells you they provide 50% of household expenses and their dependent is a qualifying child. Regardless of what "proof" you ask for there is always someone out there who will say "yeah, but you should have asked for this..." This of course you get any proof beyond "father is out of the picture"

[kathyc2]

You act as if there is no grey area in a due diligence audit. A stranger comes in and tells you they provide 50% of household expenses and their dependent is a qualifying child. Regardless of what "proof" you ask for there is always someone out there who will say "yeah, but you should have asked for this..." This of course you get any proof beyond "father is out of the picture"

Do you seriously think IRS is going to go hard core on penalties for claiming HOH if is made no difference in tax?

[TaxGuyBill]

You act as if there is no grey area in a due diligence audit. A stranger comes in and tells you they provide 50% of household expenses and their dependent is a qualifying child. Regardless of what "proof" you ask for there is always someone out there who will say "yeah, but you should have asked for this..." This of course you get any proof beyond "father is out of the picture"

Of course there is always that type of situation, but the VAST majority of auditors are nice, and are just there to help you do things correctly. If you have things clearly documented for what the client tells you (and the client's responses seem realistic), it is RARE that you will have someone pushing for more 'proof'.

[Dude]

If there is no tax consequence between a LEGITIMATE Single and a LEGITIMATE HoH, you are right there is nothing to worry about. I am more concerned about the very common situation of married people filing as single and HOH which indeed would trigger a tax consequence. If we only see the HOH claimant how are we to know they are being upfront about the absence of their spouse or common law?

The more I think about what you folks are saying though, the more I realize I am making the issue overly catastrophic. I just am bothered by the implied open ended liability of Due Diligence.

[Dude]

Just curious: Have you even bothered to work through a 2018 Form 8867, especially Parts III, V, and VI ? ? ? (I will assume Part II is "old hat" for you.)


FE[/QUOTE]

Considering part V was just introduced 2 weeks ago, I want to ask everyone that same question. I mean compare part IV and part V. Part IV gives you a specific document to collect and thus claim as due diligence proof. Part V asks if you have "determined" the client is not married. Not too many of us can say their client gave them a divorce decree so how do you "determine" they are not married? You ask them. Again, it bothers me we are suddenly charged with collecting undefined "proof".

[Twin Turbo Z]

We contacted the IRS when the 8867 was first implemented. We spent 2 hours on the phone with reps and reps from the law dept to get a handle on the form. The first year of the 8867, there where a couple questions on the form, that could be interpreted different ways. That is why we called. Last year, the formed was changed to reflect "clarification" of those questions we asked them. Granted the HOH was not on the form. But the jest of it is, if something seems "fishy" then "additional documents" should be asked for. We are in a smaller community, so its fairly easy to verify anything "fishy". Cant imagine what preparers in large cities go through, with the high turn around of clientele. But according to the IRS, if anything seems "not right" THEN you should ask for additional documents and LIST those documents on the 8867. If you go over to the Preparer section of the IRS web site, there are ample videos and documents concerning this subject. And some things you can get "credits" for. Plus TTB has a great "due diligence" flow chart. Dont over think it people !!

[Anarchrist]

Do you seriously think IRS is going to go hard core on penalties for claiming HOH if is made no difference in tax?

Yes. The penalty has nothing to do with tax amount and 100% to do w/ compliance.