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I think this is exactly why we have the due diligence requirements. I would not take the word of either of them. And obviously you can't now. I would make both produce evidence of the kids' residency. School records, medical records, post cards from bull crap solicitations the kids received (somehow THEY always find where the kids live). I would also ask mom for her lease agreement if she's renting or settlement statement where she brought her new place. They'll be dated 2015 or 1/1/2016, right? A lease agreement might also have kids listed on it. I would only prepare the return of the one whose story panned out. And it might be neither. And they may both decide to look for someone who won't be so, well, diligent. If somehow both come up with documents indicating they are being truthful, I'd pick one and hope they wrap it up in 2017. If I did either return I'd document the crap out of everything.

Today I found three daffodils in a paper cup on my desk. I had just returned from a funeral service. The client didn't know anything about that. Small acts of kindness make such a big difference.

One of our DD rules: know or should have known. When you first interviewed her, you knew what you knew and prepared her returns that way. Now you know other things that require you to ask more questions. That first divorcing year is especially hard on preparers, because both parents may have lived in the family home with all the kids more than half the year and feel entitled, have attorneys not familiar with tax law telling them they're entitled, are used to being your clients, expect you to counsel them, and are angry/frustrated/scared/whatever. Each case is different, but choosing zero or only one probably lets you sleep better. Neither client will trust you quite as much ever again, because you do know their ex. If you love them both, then think of two local preparers you respect and send one to each. And, you can NEVER say anything to one that you learned from working with the other, from his documents, from his lawyer, nothing at all.

Perhaps my use of the word "make" was a little heavy-handed. All this season, I have told my parents, "Hey, I'm sorry to ask you to do this but there is so much fraud that IRS is asking us professionals to get some evidence from the person claiming the children blah, blah, blah..." A custodial parent can get evidence and it's all good. Time consuming, and a pain in the ass, but good. A noncustodial parent who has a legitimate right to claim the exemption of a child can get the signed 8332. You've got a two HOH / three kid situation there. I think with CTC and EIC you could see $3030 or heck, even $4040, in penalties. I hate the requirements, too, but evidently that's the price we pay for crooks. Some of whom are preparing returns. (The reports of me actually murdering clients are also exaggerated, just saying. I hardly ever do that.)

Fire them both, unless one of them is willing to pay double..... Tom Newark, CA

SFA, I agree with Rich about the interrogating. IF you still want one or either as clients, you must go back at them with more questions and absolutely must insist on documentation that you are required to keep on file as proof that you completed your due diligence. You don't have to say anything about knowing about the other trying to claim the kid, just talk about the IRS requirements and the crackdown on fraud in these areas and potential penalties that could be imposed on you, and that professional ethics requires you to delve deeper. Blame it on the software if you have to, such as it is giving red warnings about unanswered questions and won't allow you to release or file any return without having this information entered.

SFA: With the above statement? You have to return all the documents to both of them. One of them is right, both of them are wrong. And you are stuck in the middle. You have to choose, and I believe your best answer is to let them both go. The 8867 disclosure form and potential penalty ($500 each client, notwithstanding they look at every ONE of your 8867's if they look at one) put you into the position that you DO have to interrogate your clients. Its no longer reasonable that we ask them some casual questions, accept them at face value, and go from there. The risk is too great. In this particular case, you DO have to interrogate. Have you been involved in divorces cases before? They have lawyers. And they like to beat up on folks if it makes sense for their clients, and if our clients have gained or lost tax deductions or credits like the EITC. AOTC, CTC or whatever, and its because you didn't do your due diligence, then its a real bad day for you. I have plenty of clients that I love both spouses, and their kids, but in a divorce, the rules change, and I am very wary. And hiding behind the disclosure rules isn't going to help you. I would recommend that you ask each client who is representing them in the divorce. If they do not have representation, that is fine, but you have to ask. And if they do have representation, then you need to ask that representation some of the following questions: 1. Has there been any signed agreements between the parties? What is the status of any agreements? 2. Who has legal custody of the children? 3. Who is in the family home? Has something happened to it? Have both parties moved? 4. Child support or alimony? Has there been any arrangements for same? 5. Some other stuff that may be pertinent to your particular clients. Rich

Give them each forms 8332 and tell each that you can't prepare the return until you receive it back, properly filled out and signed by the other parent. Kick the ball into their court.....

HUGE bald eagle flew at low altitude over my car and then landed in front of me (I was going slowly to start with, and stopped). First time I've seen one live and in person. This was in Lexington MA, barely a 1/2 mile from a major interstate highway. Wow. Just wow.

If you do anything except fire both of them, you are setting yourself up to be dragged through the muck that is sure to happen. FIRE THEM BOTH!

Thank you everyone. This is good advice. First thing this morning, she was here to pick up. I told her I am aware there is a challenge, and reviewed with her the F8867 questions. Together we read the tie-breaker rules. She accepted that we cannot file the return at this point without further proof and due diligence info. She will either provide proof documents or remove the dependent. Her return is now on hold. About his return--it's Saturday, he is out-of-town, so he is also on hold. We will most likely return his paperwork.

Yes, that is the correct form to use. Also, you will have no choice but to paper file the return. There are other steps that need to be taken as well. Such as file a police report, contact the credit bureaus;etc. Unfortunately, I have done this too many times and have to do it again for a client now. I wish these crooks would stop

File an ID theft notification for the niece, form 14139 I think. I think you will also need to paper file this return, with the pertinent disclosure form 8948 and a copy of the efile rejection notice

No food this year, but a very nicely drawn picture of Mickey Mouse and a 6 year old written note of thanks! (Priceless). I also received a beautiful bouquet of roses from one of my older clients because I didn't charge her anything (Her husband recently passed away unexpectedly and she is having some financial issues). The price on the vase was more than I would have charged her. It's the simple act of kindness that makes our day!

Yesterday a client dropped by Pecan Pie Muffins. I felt guilty, because I've had her information for 2 weeks and still haven't finished her return. Her situation is complicated with a 1041 needed and a 1040 for a deceased parent, but still . . .

A couple of weeks ago a client brought a large pizza from his shop when he picked up his payroll. The timing could not have been better. That one little act of kindness will carry me through to the end. Did I mention this guy makes the best pizza for miles and miles around?

Yeah, I have sections in the yard by width and length, too. It's efficient use of plot space.

MD doesn't want to print anything anymore and have been encouraging everyone for years to download their 1099G for tax refunds. I know the majority of my client would either fail to download it or not know how to download it. MD is punishing us for not downloading by using the world's crappiest inkjet printer. The 'amount applied' was always a tiny font anyway, but these things are unreadable. Usually the numbers match what we have on last year's return, but still, these things are unreadable! The image below is zoomed about 200% from the actual postcard.

I think we need a topic just for clients who need a Rita-hug. Here's my offering for today. Client is late & I had just about figured he had forgotten. Get an email "on my way; be there in 10 minutes!" Shows up - big box of tax stuff he grabbed on the way out is NOT the big box of tax stuff, but just random family papers. Spends almost FORTY-FIVE minutes here, going through the same wrong pile over and again while apologizing for grabbing the wrong box. I just got rid of the guy. It's OK to kill this client. Yes? (Or at least, hike his bill WAY up!)

Additional guide if you want (online or printable): Salvation Army: https://satruck.org/Home/DonationValueGuide AND --- since you enjoy (????) pencils and there humor' she can do it in pencil too!!

SFA - I think we are allowed to talk to our clients about potential tax issues in general. You don't have to discuss any specifics in order to talk about IRS response in general when, for instance, two parents claim the same child. EFile rejects, the definition of custodial parent, qualifications for filing as HOH, etc. Give each of them Pubs and highlight relevant paragraphs. Then, I would send them both away to hash this out between themselves. It isn't who files first that decides which kid appears on whose tax return. They have a failure to communicate regarding who claims which kid. You simply need to be told that information by each of them after they reach an agreement. It's the HOH status that is the hard part

JK: They may not "impute" income, but they will do what you describe, which is to disallow all the deductions, and show all the use a personal. Rich

^ exactly. Any day that the dwelling unit is used by a related party or is rented to for less than fair rental value are both considered a day of personal use. Exception to that is if the family member uses it as his/her main residence AND rents it for fair value, but if that family member is paying below market rent, then it is entirely personal use. Maybe my 1st post was too vague, but this issue is clearly covered in pub 527. I've also never heard of the IRS imputing rental income.

Imputed rent? I have never heard of it. It is well know fact that below fmv rent limits deductions under section 280A. Under what authority can the IRS impute rent which would otherwise be considered a gift?

Two weeks ago a plate of chocolate chip cookies, Monday a plate of variety cookies and shortbread, and today a fresh from the oven a home made chicken pot pie (client acknowledged how busy I seemed). I love (most of) my clients.

ATX had a problem with 8867 question 9 making you answer yes or no - whether you had a child or not. They fixed it. Now it's back - red warning on return check even if no kids. That punch in the zip code and it would fill in town and state, but in small letters - I didn't like it 'cause I type info with large caps. Somebody must have complained because a week or two ago it began switching to all caps. Now - back to small text. Must be a workaround mentality up there - some things just won't stay fixed.

Thanks. Just wanted a look ahead. This may happen within the next few years.

a client sent a bouquet of flowers to the ladies in the office! he hangs out here too often but they are nice and I do owe him a call to straighten out his 1099 - or not! billed his brother $11,000 for the money ha gave him for land so his books would show the payments in - however, $5,000 was for actual payment - the other $6,000 was legit as stumpage. So the bro screamed - rightly so and when I finally figured out what was going on, the second bro said - no I'll take the $11,000 as capital gains - stumpage as my income - I am saying no - we are going to correct this - so I am not returning wither call - second bro is hubby of old friend out of state - so treading a little carefully but hey - I don't do their taxes and he is trying to cheat!!! now. Write a book - right but no one but tax people would understand it!

Excellent! We have a fair number of them around Blackwater Refuge in MD. I used to see one every morning sitting in a tree. Awesome creatures.

No, it does not. Taxpayer has failed to repay it, so it's a withdrawal. But basis (contributions) in ROTHs are withdrawn first, so that will affect things.

Yeah, I lost it with an S-corp client yesterday. Not the main reason, but they deduct the $400 boots his wife needs for their RADIO program. And, the kids travel with them to expensive resorts; he says they're employees, but not on the payroll. I charge them almost enough. But, they don't listen to me anymore. I won't miss clients that don't trust me. And, that I can't trust anymore.

Well, I've been reminded many times by clients that it's a "voluntary" tax system. Apparently he has the same philosophy.

Well, there ya go! I can expense the lots (just section 179 land, who cares??), and he can just not report the income. I mean, come on, win / win! Patrick Cox is his Realtor anyway. I write off all Patrick's clothes and lunches cause Realtors do that, you know. It's in the Hairdresser's Tax Guide.

That's how I've always considered it... not! lol another hug candidate for you - perhaps YOU need to buy a couple of lots from him. especially if we all start sending you our "hug" clients, you're gonna need the space!

So, I document everything cause I've seen a thing or two. Guy comes in 1/30/17 and asks me what to do about a lot he sold. You report it. Well, I bought another lot. Refer to my first advice. So, I think I'm all done with his return this morning, which includes payback of all the APTC for which he did not qualify, and I warned him he didn't. Yeah, I put it in writing last year. Attached a copy to his stuff 2016, and I'll attach it to 2017, too. And I see my note from 1/30/17 about the lot. I text him: Did you sell lot in 2016 or 2017? 2016, but I bought another lot. I guess taxes are easier when you just make up your own code. Cause IRC is more like guidelines, really.

Yes, none of that side hug crap. Make it count.

I don't get much in the way of gifts. But, this year two retired teachers who drive in together from some distance researched toys for my 17-month-old granddaughter and showed up at their appointment with this great walking/ride-on car with lots of bells and whistles that she will love. Avery visits next week, so we'll take off the ribbons, open the box together, and let her toddle around the living room. Those two women were really excited telling me all the features!

Wow! And two of the fixed assets somehow got linked to the Schedule A instead of the Schedule E . . . That's part of the reason I was having so much trouble matching the entry mess to the returns. Tight hugs.

Rather than amending the return, use a 3115 to return to the correct methods. If any tax is due you get a 4 year forward spread.

I guess I need to find different clients...

I truly think they forget about us. All their docs are out of the house, so out of sight out of mind. Then it hits them...."oh ship, I forgot to call Bill with that, er...now what did he want? I'll call tomorrow and find out, I don't feel like working right now...oh, there's my keys."

Mine? Wants to sell her business... Killing me to update her Qbooks Online accounting so she can send it to all the "prospective" buyers. So, I do all the updating... Did I tell you that anyone who uses the Qbooks Online Edition deserves a hug? Yes. Everyone. Send her an Email, ok, everything looks good, I can prep the corporate return now, and you can send that Qbooks info anywhere you want, but.... Why did you stop paying your sales tax in October? Her reply? "Oh, that? I started making all the "cash" deposits into a new and different account that I do not include in the QBO file...." Yes, she is 5'4" and wide. Rich

I am so far behind I don't know when I will see the light of day. I've lost count of how many returns have been dropped off and are waiting. I'm up 25% from last year - and I was up 45% last year from the previous year. Local CPA firm was acquired by a larger company and decided to double and sometimes triple their fees. It's been good for business. This is the last year I will attempt it as a one-woman operation. Next year I will be hiring some administrative help. But, hey, maybe there won't be a next year since I just received a text saying my mobile number had been randomly selected and I have won $2,000,000!

I want to hug people who don't do email, don't text, no land line, and cell phone voice mail box has not been set up. Yeah, I want to reach out and touch somebody. Can you hear me now?

I print out the suggested FMV from the TaxBook and give it to them to do a detailed list. Others also available online from Goodwill, Salvation Army, DONATE IT, etc. I won't take "xx bags" and "xx boxes." Only took one year and all my regulars got it. Now I get reasonable values and itemized lists. Well, it took a few more than one year to get the message....

I enter it on the 8283 as: Name: Goodwill, Salvation Army and others (17 pickups) Address: various, zip code = same as in T/P address Date of Donation: 12/31/16 Then put in the date of purchase (varioius), cost , FMV = Total, method = thrift shop pricing. The only wrinkle is when the total FMV exceeds $5000, then you need to report as multiple donations to avoid the "appraisal" of used clothing and household items.