EIC: HOw will my faince file and me file? Cont.

What is the name of your state?Nevada

This is my fiance's first time filing since 2005 was her first time working. My question is: I have 2 kids from my previous that I have been claiming for the past 6 years wince I have full custody. I also have 2 with my fiance that are ages 5 and 2. WHat is the best way to do EIC and get the most out of it LEGALLY? I am claiming head of household. I only made about $16,000 last year due to about 6 months being unemplyed. My fiance made about $13,000 part time. I claimed all 4 kids last year. THanks for any advice.

You can work out the figures by using your 1040 packet. Set up one EIC chart with you and the 4 kids, and set up another with her as head of HH and two kids. See what the figures show you.

She cannot claim HOH, because they will have a hard time proving that someone with less income provided more than half the support to the household. Especially if he has always filed HOH in the past.

He should file HOH and claim his two kids, and get the EIC for them.

She should file SINGLE and claim their two kids, and get the EIC for them.

It is also possible for him to file HOH and claim the exemption and Child Tax Credit for all four kids, while she claims only their two kids for EIC only...

Frankly, on this one I would recommend a tax professional.

Snipes

Snipes5 said:

She cannot claim HOH, because they will have a hard time proving that someone with less income provided more than half the support to the household. Especially if he has always filed HOH in the past.

He should file HOH and claim his two kids, and get the EIC for them.

She should file SINGLE and claim their two kids, and get the EIC for them.

It is also possible for him to file HOH and claim the exemption and Child Tax Credit for all four kids, while she claims only their two kids for EIC only...

Frankly, on this one I would recommend a tax professional.

Snipes

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He only made 16k so he isn't even going to get the full benefit of the child tax credit or the additional child tax credit for his two kids. No point in him also including the other two.

Your first suggestion was the best one. She doesn't even need HOH, because she will zero out anyway at 13k, with her standard deduction of 5k, and 9600.00 in exemptions.

You're correct. There are lots of credits to be gained if the pairing is done right.

Question: would the IRS make any denials because it appears the couple is breaking the intent of EIC by not marrying (the combined income possibly putting them over the EIC limit)?

dallas702 said:

You're correct. There are lots of credits to be gained if the pairing is done right.

Question: would the IRS make any denials because it appears the couple is breaking the intent of EIC by not marrying (the combined income possibly putting them over the EIC limit)?

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I would like to know.
My fiance and I are for sure going to marry this year.
But I just want to be sure we can do this the right way.

I went to Jackson Hewwitt and did my preloan "money now" and they said that I get $5100 back with my 2 kids and the guy suggested to my fiance to also claim head of household. I am concerned and don't want to get audited. She is going to wait for her w-2 and claim the other 2 (ours). I just want to know what we might be facing. She tells me that if she gets in trouble it will also be Jackosn Hewitts fault because they have a guarantee of $6000. I don't like that Idea that she is listening to this guy

The JH guy is leading her down a very unethical path. If the IRS catches him, they will forbid him from preparing tax returns again, & probably take a look at th returns he did prepare.

There can only be 1 HH at an address.

BTW, did you see how much you paid for that 'preloan'? The fees are high, then they sock you with refund loan fees when you file the actual return. It probably would have been cheaper to get an actual payday loan from Money Tree. You might be obligated to finish your return with JH, but she should find another firm. That has at least 1 ethic. Even if only one of the office staff can use it at a time.

The trouble she'll get in is that her SSN will be flagged as having filed a fraudulent return in the past & her returns will be looked at in future years. She wouldn't have any actual troubles this year, because filing HH or single won't affect her refund amount. JH doesn't have alot of exposure here....


EIC is not designed to encourage couples to marry. In fact, the way it's set up, it actively discourages lower-income couples from marrying. For example, with $16k & $13k incomes & 2 kids each, you can expect refunds of $4801 & $4700 respectively even if you haven't paid in a dime. If you were married, the joint refund would have been $4435. Getting married will cost you over $5,000 per year. Plus, it may reduce any state benefits you currently receive, like subsidized health care, food stamps, etc.

joeynhia said:

I would like to know.
My fiance and I are for sure going to marry this year.
But I just want to be sure we can do this the right way.

I went to Jackson Hewwitt and did my preloan "money now" and they said that I get $5100 back with my 2 kids and the guy suggested to my fiance to also claim head of household. I am concerned and don't want to get audited. She is going to wait for her w-2 and claim the other 2 (ours). I just want to know what we might be facing. She tells me that if she gets in trouble it will also be Jackosn Hewitts fault because they have a guarantee of $6000. I don't like that Idea that she is listening to this guy

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Even if the Jackson Hewitt guy was correct, and he IS NOT....your fiancee doesn't need to file head of household anyway, because it won't give her any bigger refund than filing single would. She didn't make enough money for Head of Household vs single to make any difference.

I'd do some careful reading on how the IRS looks at actual household income in this situation. If they feel the intent of EIC is to supplement (aka "welfare") low income working families they may not see splitting the income to get more EIC as allowable...or maybe legal. If the kids in question were not all of the same father it wouldn't be a problem, but I'd be really careful here. The EIC is a big source of fraud, and therefore a big source of scrutiny. Just make sure everything is done by the book. In fact, as much as I know it's almost impossible to get the same answer from two IRS employees, I'd go to the source and ask one of their senior agents or auditors. Having to pay back a few thousand dollars isn't the worst thing in the world, but if one agent thinks you are trying to abuse the EIC rules you could have more problems than you bargain for.

?????

What the IRS thinks is the intent behind EIC is irrelevant. Congress wrote very specific laws governing EIC. If you satisfy the requirements, you get EIC. If you don't, you can't have it. Two people who are not married cannot "split" the household income -- they never merged in the first place. Each person must file based on their own income. The fraud occurs when a married couple files as single/HH so that both can claim EIC separately.

The fact that dad has 4 qualifying children for EIC purposes doesn't matter, as long as he & mom agree that she will claim the 2 kids that qualify her for EIC & he will claim the other 2.

Abezon;

I know in theory what you are saying sounds right, but I know by experience that the IRS has and uses powers that go as far as they want them to. If someone in the IRS food chain decides this is an attempt to create a fraudulent receipt of EIC because the children belong to both wage earning members of the same household they will come down with both feet and not let up until they get what they think is right. Even if they can be proven wrong by the letter, it might take the taxpayer(s) years and thousands of dollars to fight it...and the IRS will likely still win. I have been down this road several times. All it takes is an overly aggressive prosecutor, and some of these guys think all the money earned by everyone belongs first to the government, then to the IRS, then what they say is left is for the taxpayer. And the tax courts too many times support them.

OP;

It seems simple, but it's worth asking the people who are going to make or break you on the action you take. Just make the call (to more than one) or go to a local office and ask (more than one).

Dallas,

Besides the fact that Abezon is correct, you need to consider whether something like this is worth the IRS' time. It isn't. They will lose in court, and they just don't have the manpower to go after cases where people are hypothetically violating the intent of the program.

They are better served to go after real EIC fraud rather than cases like this where the "intent" of the program is ill-served. There is absolutely NOTHING in the code that says people can't do as above, and until there is, it is pointless for the IRS to push a case like this to the Tax Court.

This wouldn't even make it past the office of the Taxpayer Advocate.

I agree that you may have seen cases where the IRS has gone after people like a rabid pitbull, but I just don't see it happening here.

Snipes

Thanks for your help guys. I talked to my fiance and since this is her first time ever filing we are going to take precautions and let her file single and claim our 2 and I will file HH and claim my own 2 kids. Then we are going to get married and clean our credit up with the money. Thanks everyone

The same place the Pentagon & retired people get the idea you owe them money: the federal budget says they are entitled to it. If you don't like that, vote for someone who will change how the gov't spends your money. Don't belittle people for collecting money they are legally entitled to get, you whinger. Run for office instead. Perhaps you could get yourself elected dogcatcher.