IRS is due to crack down on Earned Income Credit

[rainbow4321]

I know someone who is a tax preparer. According to him, the IRS has sent out word that they are going to be taking a closer look at taxpayers who they think are submitting misleading information about the number of kids in their household in order to qualify for EIC.
Taxpayers are going to have to submit definitive documentation that the children have been actually living with them..and not just their social security number. They will want information on the child's/children other parent, doctor's information showing the child's address, etc (guess proof that the adult is actively involved in raising the kid, not just claiming them at tax time), or other similar documents.
All of this will have to be kept on file at the place (big companies like H&R Block and mom/pop tax filing assistance places/self employed tax preparers) taxpayers files their taxes at..like if you use a company or individual to file those taxes. If the IRS sees no such documentation submitted or on file when processing someone's tax return that was submitted, they will fine those tax preparers/companies $500 each incident. The person/taxpayer who tries to pass off a fake claim won't be charged the fine...they will be told that they cannot claim EIC for a few years (thinks that what was said) ...but the person/company who aids them in the false claim will be charged the fine.
If the tax person/company is caught up in such a case, the IRS will then start to look in their past files to see if there are additional cases that they have helped file, and an additional $500 fine will be levied for each found case (i.e no on file documentation).

According to my friend, the fed gov is seeing the $500 fine/case as a much needed revenue source and also to start holding onto all the money that they have given out as tax returns that they should not have..and to keep future false claims from giving away tax return amounts that have apparently, in their eyes, gotten out of control.

So there is a panic going on amongst people/companies who are in the tax business because not ONLY will they have a fine per case to pay, THEY WILL LOSE THEIR LICENSES. Buh-bye career. There have been many cases of accountants/companies looking the other way when people provide little or no documentation about the number of kids who are supposedly living with them...yet they go ahead and file the tax return for these people. My friend has seen this alot in his own company over the years. They were just told by the owners to file the tax returns anyway. They give the "ok" now, they will be putting that worker's livelihood in jeopardy because that false/misleading tax return has that worker's license number on it..which will let the IRS track down who helped the taxpayer file that false claim.

Apparently, this does not affect those who file online (Turbotax, etc..) but to those who physically go into a business or use an individual to assist them in filing.

[Publiuus]

1. Fair share

Times are tough...everyone needs to pay their fair share.

[Purveyor]

2. If they are cheating the system...good. If not they shouldn't have any worries. The biggest

abuse I'm seeing is the SSI disability recipients.

[Sivafae]

3. What do you mean?

Most of the people I know that receive it are disabled.

[Luminous Animal]

5. Everyone I know on SSI is disabled.

[jwirr]

28. I am not disabled - I am 72 years old and poor because for 45 years I took care of my severely

disabled daughter instead of placing her into a very expensive institution. The jobs I worked were all part time and low income when I could.

Curious - how does on cheat on SSI?

[Kurovski]

7. It's tremendously difficult to get SSI disability.

It takes years and the amount is rarely what it would be if the recipient had worked full years to retirement.

It's a pitiful amount, hard to come by, and a perfectly horrible way to live. Dreadful poverty along with disability.

Is there a trend in lawyers getting it for fakers? I've not heard of it. i'd like to read any info on the matter.

[Purveyor]

9. Not if you 'lawyer up' right off the bat. I have 2 neighbors that went that route and are now

living the 'good life' compared to the rest of us.

Both are physically able to work as one does drywall work 'under the table' and the other is a 'scrapper' who can pickup and load 60lbs washers and dryers with ease to take to the scrapyard for cash.

Now, I'm not saying it is that widespread but it is widespread enough in my experience to conclude a lot of it is going on and taxing a system that is meant for the truly 'disabled'.

[Nine]

10. then report them

I'm all for a safety net but loathe frauds.

[Purveyor]

13. Just not my style to rat on neighbors...but the approval system needs to be checked.

It seems if you lawyer up and give them a $5000 cut, the SSI admins don't even fight it and stamp the claim 'allowed'.

[Nine]

17. I'm dubious it's as easy as you think.

And I don't know why you would have any moral qualms about reporting people who are defrauding the government and making it harder all around for people who have genuine claims.

[Purveyor]

18. Yeah...I'm just making it all up as I have nothing better to do. eom

[Nine]

19. I didn't say you were making it up.

Why would I be urging you to report it? I do have my doubts about your general view of how easy it is to defraud but that's just a matter of opinion. Your neighbors' situations may not be as you think it is, but best to report it and let the proper people deal with it.

[Mojorabbit]

26. It was difficult for me and I have MS

Perhaps the neighbors have some good days but mostly bad days? I know I have a good day occasionally.

[duffyduff]

12. Not all disabilities are physical

The "good life"? Are you kidding on less than 700 a month?

SSI is supplemental security income and is means-tested. SSDI is disability, but you have to have enough credits to qualify.

[Kurovski]

15. it's fraud and you can report it.

http://www.ehow.com/how_5027053_report-social-security-disability-fraud.html

"Accusing a person of committing disability fraud can be more complicated than it might seem. First, you have to know exactly why a person has been approved to receive benefits before you can know for certain that he is indeed doing something he should not be. It is difficult to judge a person if you do not know what physical limitations his condition might impose on daily activities. Some people actually suffer from mental or psychological impairments that can restrict them from performing certain physical activities. But if the facts give you reason to suspect a true case of fraud, then you should file a report.



Contact the Social Security Administration Fraud Hotline toll free at [phone] to report that you have knowledge about a person hiding wages earned from employment while at the same time receiving disability benefits. Depending on the number of hours worked and gross wages earned from employment each month, this could affect the person's eligibility for benefits."

[cynatnite]

21. My brother-in-law is on SSDI and allowed to work...

He is limited on how much he can work and how much he is allowed to earn.

It's not that widespread because it doesn't pay that well.

It's worker's comp that is more abused than anything else.

[duffyduff]

11. It's almost impossible to abuse SSI because it is difficult to get in the first place

Typically it takes YEARS to qualify, if one ever does.

[Luminous Animal]

4. Turning yet another profession in "law enforcement".

They should go after the payer not the preparer. I used to prepare taxes for small businesses and I used the info given by my client. Their were many receipts that were given to me and classified as business expenses that were highly suspicious but it is the IRS's enforcement division to figure that out, not mine.

[Orrex]

16. If you sign off on it, you're accountable

So is the payer, but the preparer is responsible for the document that's prepared.

[Luminous Animal]

22. Nope. Do you really think that a preparer should visit an office to ensure

that the artwork or sofa or table is actually in the office?

How about meals or travel?

A graphic designer goes to Spain and instructs her tax preparer to write off 75% of the trip for "research". How is the preparer responsible as to whether or not it is the truth?

Nope. The onus is on the payer and it is the tax collectors responsibility to ensure the tax payer is compliant.

[Orrex]

23. You should work for Enron

I hear that their accounting firm wasn't accountable, either

[Luminous Animal]

24. What the hell. I did my job by the book. I never advised anyone to do anything illegal.

Nor did I do anything illegal. But I am not law enforcement and I have no right to inspect anyone's property to find out if they are telling me the truth. The onus to be honest with the IRS is on them.

[PoliticAverse]

6. They started cracking down at the end of 2011...

after embarrassing revelations about billions being erroneously paid out in refundable credits.

Full info is available from the IRS web site:
http://www.eitc.irs.gov/rptoolkit/hottopicsrp/
http://www.irs.gov/Individuals/EITC-Information-for-Tax-Professionals

[Gman]

8. I've always been suspect of the tax prep services

That pop up in low income neighborhoods. They charge a percent of the refund due. So they have an interest in the biggest refund possible at the poor person's expense.

[Jeff In Milwaukee]

14. They don't do that...

It is illegal for a paid tax preparer to charge a percentage of the refund. While some fly-by-night operations may do this, they looking at fines of several thousand dollar per return if they're caught at it.

[TheDebbieDee]

20. I've read about lots of preparers being prosecuted for sexing up

taxpayer's returns with EIC credit after the taxpayer has left the office.

The taxpayer has signed the refund over to the preparer and has opted for the refund anticipation loan of some type. A crooked preparer sees the opportunity to add his neighbor's girlfriend's dogwalker's triplet's social security numbers to the taxpayer's return and claim a big EIC credit. The fraudulent credit gets refunded directly to the tax preparer (through the office) and the taxpayer is none the wiser that anything out of the ordinary has happened - until the taxpayer gets audited and is asked about the triplets!

[Jeff In Milwaukee]

25. A Jackson Hewitt franchisee did this

The guy owned several dozen outlets in the eastern U.S. Preparers did things like creating "phantom" self-employment income, which increased the taxpayers income (and in turn their EITC). One of the areas that tax preparers are supposed to check for is undocumented income, or income that has no documented expenses.

[fredamae]

27. Just curious-why not crack down on

Religious Orgs, ALEC, and all other Political Orgs claiming 501(c)(3) orgs? Thats where the missing $, and lots of it could be recovered?

[LisaLynne]

29. Because you might be going after some of the 1%, then?