Kea Posted March 2, 2014 Report Share Posted March 2, 2014 Divorced Mom claims to have custody of her 3 kids and appears to qualify for EITC. When I asked for the documents to "prove" custody (to be able to mark the appropriate checkbox!), the only thing she had was doctor receipts. The receipts show the kids' names and Mom's address but Dad's name. She said the bill's show Dad's name because he is the one who carries their insurance. (And the divorce decree gives her custody - not that it matters.) School records show Dad's name & address (different address) so that the kids can continue at their old school (less disruption). For 2012 she had a rental agreement for her apartment and all 3 kids were listed on lease. She bought a house (late 2012) and so there is no lease for 2013. Have I met MY due diligence requirements if I accept the doctors' receipts with Dad's name & Mom's address? Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted March 2, 2014 Report Share Posted March 2, 2014 I'd say yes, it's not your responsibility to be a PI, after al. Quote Link to comment Share on other sites More sharing options...
Pacun Posted March 2, 2014 Report Share Posted March 2, 2014 Ask where the children slept those 365 days in 2013. Why do you bother with custody papers if they are meaningless for EIC? What I do is ask the questions and write down the answers for my records. Quote Link to comment Share on other sites More sharing options...
Kea Posted March 3, 2014 Author Report Share Posted March 3, 2014 Agree that I don't want to be a PI. I just don't want it to come back to bite me if I check the box saying I got the Dr receipts when Mom's name isn't on there. In the old days I wouldn't have had an issue with this. Just checking for CYA! Quote Link to comment Share on other sites More sharing options...
David1980 Posted March 3, 2014 Report Share Posted March 3, 2014 The language the IRS uses is: If a reasonable and well-informed tax return preparer knowledgeable in the law would conclude that any information the taxpayer has given you appears to be incorrect, incomplete, or inconsistent with the taxpayer's eligibility to claim the EIC, you must ask the taxpayer reasonable questions to get information that is correct, consistent, and complete. You must document the questions you asked and the answers you received. This is how you meet your knowledge requirement. I suppose the information could be considered inconsistent - the father's name on the medical records and school records. Therefore, you must ask the taxpayer reasonable questions. Sounds like you did. Father's name on medical records as the child is on dad's insurance. Father's address for school so child can continue attending existing school. To me, it seems the requirements are met with the questions you asked. Can you guarantee 100% that the child does live with mother and not father for the greater number of nights? Probably not. I think in order to do that you would need to ask or require unreasonable information. 2 Quote Link to comment Share on other sites More sharing options...
Kea Posted March 3, 2014 Author Report Share Posted March 3, 2014 Thanks. Sounds like I'm staying out of trouble. Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted March 4, 2014 Report Share Posted March 4, 2014 >>>Why do you bother with custody papers if they are meaningless for EIC?<<< I would think that an order from the court that indicates who has the custody and for what duration and type would definitely be sufficient evidence when it comes to due diligence and wouldn't be classified as useless. I will agree that this would not be the only document I would accept if I felt there were other questions that needed to be answered. >>>What I do is ask the questions and write down the answers for my records.<<< Do you really think asking the questions is enough? I suggest you review the 8867. My software has boxes that need to be checked that ask specificallty what documents I relied on. Now with that said, if I have knowledge the client is presenting honest information based on the facts that he/she is a repeat client and their situation is the same over a period of time, then I check that I did not rely on any documents and list my reasons why. Quote Link to comment Share on other sites More sharing options...
Pacun Posted March 4, 2014 Report Share Posted March 4, 2014 >>>Why do you bother with custody papers if they are meaningless for EIC?<<< I would think that an order from the court that indicates who has the custody and for what duration and type would definitely be sufficient evidence when it comes to due diligence and wouldn't be classified as useless. I will agree that this would not be the only document I would accept if I felt there were other questions that needed to be answered. So you have a court document that reads: "children will slept at father's home 4 days a week" and then he wants to get IEC based on that paper, you should be OK with it, right? According to the paper the children will sleep at the father's house more than 200 days and less than 165 with the mother. Well, guess what, that paper is meaningless and you have to ask "how many nights did the children sleep with each parent". If the only document you have it that "famous" court paper, you document your answers and you don't need to rely on any documents but you have to rely on the testimony of the person. Now if you don't trust the person giving you the answers, then you don't prepare his/her taxes. Isn't that what we are supposed to do when we don't trust the client? 1 Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted March 4, 2014 Report Share Posted March 4, 2014 >>>Why do you bother with custody papers if they are meaningless for EIC?<<< I would think that an order from the court that indicates who has the custody and for what duration and type would definitely be sufficient evidence when it comes to due diligence and wouldn't be classified as useless. I will agree that this would not be the only document I would accept if I felt there were other questions that needed to be answered. >>>What I do is ask the questions and write down the answers for my records.<<< Do you really think asking the questions is enough? I suggest you review the 8867. My software has boxes that need to be checked that ask specificallty what documents I relied on. Now with that said, if I have knowledge the client is presenting honest information based on the facts that he/she is a repeat client and their situation is the same over a period of time, then I check that I did not rely on any documents and list my reasons why. Keep in mind, the IRS regulations cannot be altered, negated or usurped by a county court. PERIOD. Facts and circumstances rule in this situation. If you believe the client is not being truthful, do you want to gamble that the return will not be audited? Not me. At the first sign of an issue with the IRS, the taxpayer will point to the preparer and say "...he/she said it was ok..." Quote Link to comment Share on other sites More sharing options...
Janitor Bob Posted March 4, 2014 Report Share Posted March 4, 2014 In situations like these (and I have a few), I always have the client sign a statement attesting to the specific points (i.e. child lived with them). Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted March 4, 2014 Report Share Posted March 4, 2014 JB I have done the same thing in the past. I am not using ATX this year but the software that I am using gives me an option to include the client' signature on the 8867 form. However, I don't think this gets us out of the woods totally if we have any belief that the tax return may not be accurate. I agree that if it smells bad then send them packing. No fee is worth it.Pacun, if you re-read my post you will see that I state that the court ordered custody would NOT be the only document that I would rely on. It would be useful to determine who has custody when and if there is a question. I wouldn't totally ignore it nor would I deem it the only document needed. Quote Link to comment Share on other sites More sharing options...
Pacun Posted March 4, 2014 Report Share Posted March 4, 2014 TerryD, Yes, I know but the point I want to make sure that we need to document their answers. At the end of form 8867, there is a blank page and I enter all the questions I ask and their answers. If the children are here in the office, I ask the children what school they go to and what grade. At the end, I ask the filer(s) to sign the document and I keep it for my records. Do you believe I am transmitting that piece of information with the efile? Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted March 5, 2014 Report Share Posted March 5, 2014 I agree with you regarding the recording of questions and answers. I don't think the questions and answers at the bottom of the 8867 get transmitted and is to be kept for our records in the event we get a compliance audit. Again, I am not using ATX and my software has a note to the affect of the non-filing of the questions and answers. Quote Link to comment Share on other sites More sharing options...
Pacun Posted March 5, 2014 Report Share Posted March 5, 2014 I am glad to report that this year ATX is really good. I mean, this has been the best year software wise. So far I have not called customer service yet and I lot of people will come to ATX next year. That's my prediction and I also predicted that ATX 2013 was going to be robust from the shelf. 1 Quote Link to comment Share on other sites More sharing options...
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