Got a rather difficult situation here

[erchess]

My client is blind, 80+, and possibly in the very early stages of dementia,but in my opinion at least is competent. She lives with her adult son. They moved from one home to another during the summer of 07. She tells me that he pays over half of the costs of maintaining the home. That home was in her name but the new home I think I have been told is in his name. She is a social friend but I have met him briefly numerous times. She lives on Social Security and just barely too much pension to be anyone's dependent. He works for (according to her) Minimum or a little over for 40 hours a week. I became involved because she wants me to do her return so she can get a Stimulus Payment. She doesn't have to file since she is not a dependent. He is asking her and me not to file her claiming herself. Of course I can't file her as a dependent when that is incorrect on its face. He is not sure whether he claimed Head of Household or not but he claimed her as a dependent and he won't hear of me amending his return because he is afraid of trouble with the IRS. Part of what is going on here is that I am afraid the new house is in his name and he may put her on the street if she files claiming herself. He did tell me that he would give her money to make up the stimulus payment she will miss if she goes along with him. He tells me he just finished a round of trouble with the IRS and he does not want trouble with them again

What can I tell this son and his mother? I obviously cannot file her return incorrectly. . But let's suppose he lets his return stand and either they file an incorrect return with her as a dependent or they file no return for her. (Her income is above the filing requirement for a dependant.) Would it be true that the odds favor more IRS Trouble? Is it true that if I amend his return so that it is correct and he pays any additional tax due and then she files claiming herself to get the stimulus payment, that he will have no further trouble with them? Why am I failing to get through to this guy that it is the path he is on and not the path I offer that will lead to more trouble?

[JohnH]

May be a bad idea

This may be a bad idea but I'll throw it out. I'm not saying you should definitely do this, but it might solve a one-time problem and prevent a much worse outcome.

Have her sign a paper stimulus return but don't send it in. Then let him deposit $300 to her account a few weeks from now. He has already offered to do this, so it seems he would be willing to follow through. She sees the $300 in her account and everybody's happy. I have a couple of situations dealing with people with mild dementia, and sometimes you just have to do whatever it takes to produce the end result they are looking for, as long as you can do it legally.

[joanmcq]

The problem is that the pension income is reported to the IRS. So if it is above $3400 he may get in trouble simply because a 'dependent' has income over $3400. The SS doesn't count.

[Koss]

Gross Income Test

The problem is that the pension income is reported to the IRS. So if it is above $3400 he may get in trouble simply because a 'dependent' has income over $3400. The SS doesn't count.

Agree. But this may happen even if she does not file a return.

The guy created his own problem by claiming her as a dependent when she does not meet the criteria. And that problem exists regardless of whether she files a return to establish eligibility for the stimulus payment.

I'll concede that if she files a return, the likelihood that he'll have problems goes up dramatically. But even if she doesn't file a return, the IRS still received a copy of her Form 1099-R. So their systems are aware that his dependent has more than $3400 of gross income.

If the guy refuses to amend his return, JohnH's suggestion isn't a terrible idea, and it might just work out okay... but I would be careful about actually recommending those exact steps to the client. I would probably just do the return, give it to the son with an enevelope, and, in a very detailed and creative way, explain the direct deposit process. Then I would conclude by telling him that he should have his mother sign the return, and that "what happens after that is between you and your mom."

If you spell out the exact steps described in John's post... well, maybe I'm just being paranoid. But I can see it getting really unpleasant down the road, if he gets caught by the IRS claiming a dependent and HoH when he's not eligible, and he tells the IRS that "my mom's accountant said it was okay, as long she didn't actually file her return. In fact, I still have her return in my desk drawer, with the accountant's signature on it."

No, John did not "say it was okay" for him to claim her as a dependent if she doesn't file a return. But this type of client is going to hear what he wants to hear. And he may repeat what he thinks he heard.

I don't think this sort of thing would lead to disbarment, but I wouldn't want to have to respond to that sort of assertion. Defintely not worth the fee on a stimulus return. What are you getting for that kind of return? Fifty bucks? Or is it pro bono?

If you do a return at no charge, you don't have to sign it. But he'll still drop your name when the rubber hits the road.

[BHoffman]

I believe if you prepared the return at no charge, you are still obliged to sign the return.

Perhaps this is a family matter and would be better resolved between the son and his Mom. He would put her out in the street over this???!!

I would be sympathetic, but would not prepare any return for Mom.

Good luck, these family things are so hard sometimes.

[JohnH]

I agree

I agree with everybody who has agreed with me and also with everbody who has disagreed with me.

[taxmandan]

He is asking her and me not to file her claiming herself. Of course I can't file her as a dependent when that is incorrect on its face. He is not sure whether he claimed Head of Household or not but he claimed her as a dependent and he won't hear of me amending his return because he is afraid of trouble with the IRS.

He is gaming the system and then says he doesn't want trouble with the IRS? I would tell him he will have trouble with the IRS if he doesn't file correctly, and claiming her as a dependent was not correct. He needs to amend to avoid trouble. I would go heavy on the scare tactics and I would use that to push him to correct this matter and let mom get the stimulus payment.

[joanmcq]

my post didn't infer that he would only get caught if she filed. The IRS gets the 1099-R, so if they go looking, they can match it with a return filed with her as dependent. If she files, they are sure to catch it, because it will flag her as someone not qualified for the stimulus because she was claimed as a dependent. And her income will flag her has not qualified as a dependent. Sonny shot himself in the foot and now wants you to clean it up, but doesn't want to feel any pain. NOT!