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It seems from this that you are assuming that "if the IRS accepts the return, that means it is correct". But that is not correct. 1. Often the IRS accepts a return, pays the refund, even though it's a bogus return. 2. Often the IRS accepts a return, pays the refund, and then a year or two later challenges the return with a CP2000. What the members here have been trying to communicate to you is what is the correct, legal possible filing status in this situation. You ask how we would have handled this situation. OK, here's how everyone in this group would handle it. We would explain to the client that while he could claim all three as dependents IF they lived with him all year, he can NOT claim any of the four tax benefits that require a qualifying child, including Head of Household, EIC, CTC, and Form 2441. The correct, legal possible filing status is based on what the Code says, not on what someone might get away with. Clearly, the last guy she lived with filed a fraudulent return. If you filed this new client as HOH you did too. How you deal with that is up to you. We've done all we can to help, by explaining why he does not qualify.

If you look at his member profile, he's been doing this only a few years. Says he wants to learn. If so, he will find this board a great resource, but only if he's open to listening. And being a bit less defensive. No one really likes being told they are wrong, but we all make mistakes sometimes. What is important is to acknowledge it and learn from it. Which is the only reason we are still trying to get him to understand. We will see if he accepts advice when he sees it is backed up with cites, and has the cojones to admit his mistake. If so, I for one will be happy to help him in future. If not, I won't waste my time on him.

The Kidd, I don't understand why you asked for advice and then refuse to listen to it. Many experienced pros on this board tried to help you out by explaining the rules and even citing the Code, but you are arguing with them. Omit the extraneous facts about last year, etc. and get to the meat of the issue: To file as HOH, you must have a qualifying child. A qualifying child must be a blood relative. Pub 501 states only the following relationships qualify: Your son, daughter, stepchild, foster child [legally placed by an agency], or a descendant (for example, your grandchild) of any of them, or Your brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant (for example, your niece or nephew) of any of them. These children are not related by blood and do not qualify the taxpayer for HOH. What don't you understand? I don't know how long you have been in the business, but those of us with years under our belts know the IRS looks unkindly at male HOHs. A few years back they audited ALL of them. Since you already filed the return, re-enter the data using Single in a practice return, then call the client and tell him how much of his refund he will have to pay back so he doesn't spend it before the IRS letter comes.

But if someone "has expenses that seem ridiculous", I'm not going to do the return, unless they can document them at least enough to answer my doubts. I'm not their auditor, but I have to sleep at night feeling like I have signed the return in the honest belief that its a valid return.

Absolutely! Big Buy and pie on me and we'll chow down and share war stories.

Networking them for ATX2013 is the smart thing to do. Trust me. Using separate standalone systems is full of potential trouble this year. Forget all you ever know about ATX from prior years. ATX2013 is totally different. I do not recreate the state return after the Federal is accepted. I create them at the same time and put the state (those that allow it) in held status. The program then changes held status to created when the Federal is accepted. Never have had 2 ID# to be the same ever. Not sure why you have that issue.

There IS still one other thing--the amount on that W-2. If it's less than the EIC max of $45,000 I would probably refuse to do the return. The whole engagement is tainted by the family's apparent history of trading SSN's and tax fraud. I would say it exactly in those direct terms, and explain that I am personally required to sign under penalty of perjury that I have investigated inconsistencies, such as whether they moved in 2012 or 2013. If the taxpayer did not immediately agree, I would not waste any more time with him. Because in the end he won't accept the return anyway. By the way, did you ask why he didn't go back to his previous preparer? That's always my FIRST question for a new client.

Kaiser does have the subsidy calculator, but do they have one to calculate the penalty? I looked on that site and couldn't find one. For those using Drake this year, that software does have a penalty calculator built in this year.

That seems to be a very dangerous attitude to me. "Take aggressive positions on the tax return and buy insurance just in case you get audited." I think the policy will have some limitations on what it will pay out. Now, I never read the policy because I don't trust any product that CCH is associated with, but if they are offering an "audit insurance" policy, I am pretty sure they are not going to pay out on unsupported positions. Just my two cents. Tom Hollister, CA

As Mr. Pencil suggested, PUB 4681 will answer your questions. Detailed examples are given regarding the abandonment and the 1099-A. Here is a link for you. Look on page 12 or 13. http://www.irs.gov/pub/irs-pdf/p4681.pdf

The IRS has replaced the DCN with the SID. If you look at your 8879s and 9325s, you may find that the form indicates that the number is the SID but is still in DCN format. Using Drake, the DCN appears on both the 8879 and the 9325. You can go to the EF data base and look the SIDs up one at a time, but there is an easier way. You can go to Reports and create a report under EF and Bank Products. The report can include the client name, Federal SID and State SID. The report can be exported to Excel, and at the end of the tax season or any time in between, you can print the Excel worksheet. Unless a client asks for the SID, it is not too likely that you will actually need this, but to be on the safe side, I'll print the report after tax season and keep it for a few years. Hopefully all software companies will provide some means of doing this.

I am not so sure he is actually a professional. If he is, he is freshly hatched. Of course, he is not seeing this, so no worries!!

What is the issue with Fee Collect not being recognized?? Maybe I can connect to your computer and take a look? As for filing last night, I have read there are issues with Fee Collect. I have told my clients that I am not comfortable filing at the opening bell and would prefer to wait until the dust settles, then offer them the choice if they want to be a guinea pig. All are willing to wait a couple of days until I am confident the bugs have been worked out.

Very true. And that's why I cited the actual tax code itself, which DOES in fact mean it is the way it is. You also believe, "it does not say 100% it cannot happen as HOH," but I already quoted the actual language that DOES say so. Well, I don't know what your game is, but since you have finally stated that they lived together all year, I will fulfill my promise by telling you how to audit-proof this return. First, unless your client is married use filing status of Single. Do not claim any of the four tax benefits that require a qualifying child, including Head of Household, EIC, CTC, and Form 2441. Second, recognize that "random guy" has already declared under penalty of perjury that the mother did NOT join your client during 2012. Obviously that was done with the mother's agreement; you say "they" only claimed one child. So she is being inconsistent. Months after leaving her old boyfriend, she helped him file a fraudulent return with her own SSN! You have minimal proof of residence, so boost it with at least a couple of items dated in 2012. Third, Complete the worksheet on page 16 of Pub 501 for EACH dependent. Make a good faith effort to include support or gifts from the father, welfare, and any other resource for the family. For housing costs, the worksheet allows only 1/4 of fair rental value regardless of actual costs such as mortgage or utilities. That's what it takes. Of course, I'm only teasing you. Just like last year this is an EIC fraud return, which of course only works if they can file HoH. So like I said before, do whatever you want, friend!

Since less than 2% of all returns are ever audited, and about double that get CP-2000 letters, the "fee" is just more $$ to who ever sells it. I should just change the paragraph and add it to my invoices, and then, if there is ever an actual audit, then I am already paid. Probably thousands more than just the one client's representation fees. Hmmm... Rich

I am still waiting for a couple days. At least until the Fee Collect issue is resolved. But thanks for the feedback. Tom Hollister, CA

Won't hear me complaining. I like it and I agree with Jack.

Please tell me ONE instance of the IRS ever checking, verifying or complaining about this fact??? Minutiae!!

Confirmed by Tech Support....duplicate the return, transmit the "new" e-file...good to go.....SOOOO...if you have any e-files that appear to be stuck in a status of "Transmitted to EFC", check the ATX web site e-file status. If the return info does not appear, then your e-file was never actually received by EFC. You will need to duplicate the return and create / transmit the e-file from the new duplicate return.

You have a real problem, IMHO, claiming these people as dependants, given what you just told us. If she was claimed by someone else, last year, the odds are really high that she did not move in with the new guy on 1/1/13, in which case she and the kids do not meet the very strict requirements for non-related dependants. Also, are you clear now that even if he could claim them as dependants, he can not claim HOH ?

I think you are confusing the rules for claiming exemptions with the rules for determining filing status. The rules for exemptions would allow you to claim your girlfriend and her children AS QUALIFYING RELATIVES, if they lived with the taxpayer the entire year. The IRS has different rules for who is a qualifying RELATIVE and who is a qualifying CHILD. You don't have to believe any of us, those rules and definitions are clearly laid out in the instructions for Form 1040 and Pub 501. I'd suggest that you print out those pages from the Form 1040 instruction guide and carefully work through those requirements one at a time answering Yes or No and see where that leads. As Mr Pencil, Pacun and others have already told you, your client should be filing as SINGLE and not HOH because none of the dependents you have mentioned are a QUALIFYING CHILD BECAUSE THEY ARE NOT HIS BLOOD RELATIVES. If we seem like we are jumping on you, it's because we are trying to stop you from making an error by preparing this return as HOH. If you won't take our advice, please talk to someone more experienced in your firm that can guide you through this.

Mashburn, I think it's great that you are trying to get your client the maximum refund, however, none of the people you spoke of qualify your client for Head of Household. The whole issue with the proper filing status has gotten to the point of being ridiculous, so I can certainly see how confusing it can be. Just remember, there's a good probability your client will be very angry when he has to repay the tax savings on Single versus Head of Household. My suggestion is to take a break from it for at least a few hours, then follow the Head of Household instructions paying very close attention to the footnotes if you are using an IRS publication. Also, please never take the word of an IRS employee on the toll free line as their word isn't anything you can use to defend your client against using the wrong filing status. Take care, Cathy

In return manager, click on forms, then choose "customize master" Open the 1040EF INFO page and put an x in the "declines" box. Save it. Now any new returns will have that box checked as default.

You expect your position to be challenged, but you are not worried even though you are not able to support it? And you get upset when an expert gives you the advice you asked for. It sounds to me like you are still confusing dependent exemption with filing status. I think you misunderstood what you read, or it may have been something from before the law changed. Or it may have been wrong, even if it was somewhere on the IRS website. [Yesterday I reported something that the IRS itself challenged in court even though it was from their own publication .] Please tell us how the mother filed in 2012, and when she separated from the father. Then we will tell you how to audit-proof this return. Because based on what you have told us so far, I think the professional at Jackson Hewitt is correct.

If you choose to ignore me I will not be offended. Newbies should not be so quick to dis more experienced tax preparers. Mr. Pencil and I both gave you concrete facts, yet you resist. Your choice. Your very first post indicated you wanted to do something total illegal. Then you went on to try to defend what you said. All newbie symptoms. If you are that thin skinned, you are in for a tough road as a tax preparer.

According to the Instructions for Form 1099-C (for the issuer), "You are not required to report a debt discharged in bankruptcy unless you know from information included in your books and records that the debt was incurred for business or investment purposes." Assuming the subject debts were indeed discharged in the BK (which of course we can't assume), they would probably have no tax effect anyway.

The development team is going to include a fix in the next program update. This was told to me by Kerri Gibson. In the meantime, I am working on a way to get the workaround to those that need it now.

Repeat for posterity!!