A few odd tax Q's

[sugacubez]

What is the name of your state? New Yawk

I just found this site & had several questions that my friends
and i have been mulling over.

1) If you owe the IRS $1300 , should you bother to file a return?
Can/will the IRS take their money from any return you do file thus
making you even with them?

2) I have a friend who is married, but fills out his returns as single.
How much hot water can he be in? What could happen?

3) If you have returns that you haven't filed that are many years old,
should you bother to ever file? What if you lost the W2s, can the IRS
give you copies? I'm sure there will be penalties involved, is it worth it
to bother filing?

4) If you made $1000 off the books, when you do your return to pay
your share, are you entitled to any kind of refund or are you strictly
paying the gov't?

Thanks!

[Snipes5]

1) Yes. There is no statute of limitations on an unfiled return. You HAVE to file it. They won't "even it out" by taking your refund from another year. You will continue to accrue interest and penalties until the tax and penalties have been paid in full. Waiting for them to take a later refund is foolish.

2) Let's see. Filing a fraudulent return, for openers. Depends on the amount, but seizure of future refunds, arrest, jail time. It really can vary.

3) Yes, if you meet the filing requirements listed in the first few pages of the 1040 booklet for that year, you should file. Again, there is no SOL on unfiled returns. The IRS can give you a transcript of every dime you've ever made.

4) Why would you get a refund on money that you earned? If you made money, you need to declare it on your tax return and PAY the tax.

Snipes

[sugacubez]

Hey Snipes,
Thanks for responding!

One last Q regarding my first Q.
I guess i wrote that incorrectly - My cousin owes $1300 to the IRS
from 2003's return. He's not even sure why (i asked), but he has w2s
coming to him & he's worried that when he files this year they will
snatch his refund to pay back what he owes. I asked a lady at Jackson
Hewitt & she said they could OR they may let him receive his return &
still continue to bill him. Does that sound about right to you?

Thanks!

[abezon]

Yep. He should take his return into a tax pro to see if there was anything he missed. H&R Block has a free double check program. You still pay if you have them amend the return, but there's no charge to look at it for you.

[sugacubez]

Thanks, I really appreciate the advice.
He did that return at Jackson Hewitt, so i guess he'll
make them review it & see what they missed.
Glad i don't owe!

Thanks again

[abezon]

Have it reviewed at H&R Block. I spend a lot of time amending Jackson Hewitt returns every year. They're cheap, but their employees get about 1/2 the training a Block employee gets. Block isn't perfect, but in my opinion it's significantly better than JH.

[sugacubez]

Abezon Said:

<< They're cheap, but their employees get about 1/2 the training
a Block employee gets. >>

OMG, tell me about it! I recently took their "crash course" tax
prep (last week in fact) & it was supposed to be 4 days/4
hours per day. Because it was on the heels of NYE, the class
was cut by 2 days, so i got only 8 hours of training. Then they
hauled me into their office to do 20 "tests" which are really 20
different practice returns. I got up to 4 before i decided this
was just ridiculous.

There were no official instructors there to monitor the work & when
i finished the tests, there were errors (even though supposedly the
refunds were correct) that no one would explain. The best they
offered me was to get some help from a guy who had just passed
the tests himself! The place is super duper noisy & chaotic & i feel
like i learned absolutely nothing even though i bought 3 gigantic
books (hence the questions my friends & i had that i couldn't
answer myself). The tests were compiled of returns that i was told
i wouldn't be doing at the class as a new preparer. I would only be
doing very basic returns, but yet the tests are filled with itemized,
complicated returns that i was NOT trained for.

Now i have skipped 2 days of going in to complete these tests,
because i feel it's a waste of time & they are ringing my phone
off the hook! When i spoke to 2 different preparers, no one knew
who called me (even though i repeated the name on my machine),
no one could explain why there were no instructors & their only
objective was me coming in to complete the tests. So i explained
the error messages on the federal practice returns & their reply:
Well, come in & finish the tests & talk to a senior preparer.
So i say, "So i should come in & just keep doing tests incorrectly,
just to say i did them & then start doing real returns so i can muck
up people's lives? There were experienced preparers there the day
i did the tests & still no one took the time to review the errors."

Her reply: Come in tomorrow & finish the tests.

Ofcourse i'm not going. Part of me is very interested in learning, but
I want to learn the right way. I know people who've had IRS trouble
& i don't want to be responsible for doing that to someone. I want to
feel confident that i know what i'm doing, not be rushed through 2
days of schooling & be expected to perform the duties of a tax
professional!

So i'm kinda done with my JH experience.

One last Q: I did some research on my cousin's 2003 paperwork.
He got audited because of EIC. After some inspection, i see that
he claimed his live-in girlfriend (of MANY years) as a dependant,
but from my JH "schooling" that's supposed to be okay, but he
also claimed her daughter (with mom's permission), who he has
been a "father" to since she was 2 years old -she was 12 in 2003.
In my textbook, it says that the qualifying child has to be somehow
related (adopted, step -you know the drill). Could that have been
the reason for the audit? JH has the kid down as his "daughter" but
she has a different last name from him AND her mom. So i was
wondering if that may have been the red flag. What do you think?

Suga

[sugacubez]

Another angle...Could it be that the daughter's father claimed her too?
My cuz tells me, the mom has never given permission for the non-cp
to claim the kid, but she found out that he did a few times years ago.
Are there any IRS forms that can be used to ensure that the non-cp
can't claim the child this year (or any others)? They were never married
& she nor the child has ever lived with him. My cuz & the mother provide
100% of the child's support & have been living together as a family for
over 10 years.

Suga

[Snipes5]

It is legitimate for your cousin to claim the child. However, listen very carefully, your cousin must do the following.

First, find out exactly what the IRS was asking for. They always send a letter either asking for information, or flat out telling you that they are changing your return. I'm willing to bet they sent him a big packet asking for a ton of detailed information about the child, and he likely didn't respond, or didn't respond properly.

Bring that letter, if available, and a copy of the return, into an H & R Block office, and ask to see a Senior Preparer, or an Enrolled Agent. If possible, have your cousin compile information showing written, (hopefully official) documented proof of the child's age, and place of residence, and whether or not your cousin treated the child as his own, and provided over half the child's support. He may not need all of that, but it's much easier if he brings it all in to the first appointment.

Official proof would be school records, medical records, daycare records, birth certificate, rental agreement, utility bills. If the IRS request is very specific, he may well need ALL of that information. A notarized letter from the CP giving him the exemption wouldn't hurt either.

It sounds like this can be easily sorted out with some legwork if your cousin is willing to do it. It is entirely possible that your cousin doesn't owe the IRS anything at all.

Incidentally, if he doesn't straighten this out, the State of New York will soon come calling, wanting the additional money owed them as a result of adjustments to the federal return.

By the way, the H & R Block tax course is 66 hours, 6 hours a week for 11 weeks, and a minimum of 24 hours of yearly continuing education if employed.

Snipes

[sugacubez]

Thanks Snipes

I asked him, he says all he got was a few normal envelopes saying that
his return was changed and he was audited with an amount to pay (the other letters were interest rates). I saw the letters, they didn't add any specifics except to say it was about EIC. I just told him to call & find out what about
EIC is the problem. I'll keep ya posted. Thanx!!

Suga

[abezon]

The problem with the EIC claim is that you can't claim a girlfriend's kid as your fosterchild for EIC purposes. He can still claim the kid as a dependent (5 tests) & qualify as head of household with the kid, but he can't get EIC or the child tax credit. For that, a fosterchild must be placed in the taxpayer's home by an authorized placement agency.

So, he can't have the EIC, but can file as head of household. An amendment may be in order to get the HH tax rate.

Also, NEXT YEAR he won't qualify for head of household either. He'll be single with 1 or 2 dependents.

[sugacubez]

Snipes & Abezon:

Thanks for all the advice guys -I have an update.

He spoke to the IRS today & they said: His status was
changed to 2 dependants/single. He says when he went
to JH they explained that they live together as a couple
along with the child, who he has been taking care of
since she was 2 as his daughter. JH filed her as his
"daughter" not foster, stepchild or dependant.

The IRS says they sent a questionaire & the reason why
they changed his status is because he didn't answer (you
were right snipes!), so they are doing an audit reconsideration
& stopping any levy that may get put on his 2004 returns.
They say he can still file as head of household this year
(is that a good idea) & they won't block his EIC as long
as they get an 8862 form with the return.

They say it will take about 7 months to complete the whole
thing, but while they do he can file w/o worrying about a levy.
But now the question is, who's at fault? If they told JH that
they were not married, the baby was her child & they still
filed as her as his daughter, shouldn't they be responsible
for this mess? How should he file this year? Should he file
as single 2 dependants for 2004?

Thanks Guys!
Suga

[abezon]

He should file head of household this year with 2 dependents. For 2005, he will have to file single, as the definition of head of household changed effective 1/1/05.

[sugacubez]

Abezon (& Snipes),

Thank you for all of your help & advice. It's truly appreciated
because i know you didn't have to. I hope 2005 is very good
to both of you.

Sugacubez