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Loopholes on the personal level IEC HH


Pacun

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I think the biggest loophole I see exploited are:

Married people who file single or HH in order to get EIC.

If I were the IRS, I would not have "you are considered unmarried if you didn't live with your spouse in the last 6 months of the year". I would said: If you are married on Dec 31, you have ONLY two choices: MFJ or MFS period.

Share other loop holes.

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38 minutes ago, Pacun said:

I think the biggest loophole I see exploited are:

Married people who file single or HH in order to get EIC.

 

Well, Pacun, I think your example there of married people filing with the wrong status is tax fraud, not a loophole. 

Loopholes are really just tax laws that are perceived as unfair by someone who doesn't benefit from it.  I think the benefit that rubs me most wrong is pastor housing allowance.  The days of paying the pastor with fried chicken and a dinky, ancient place to stay are long gone.  And getting to deduct home mortgage interest and property tax twice, since they're housing expenses and still allowed on Sch A.  That's a double dip.  I love my pastor.  This is not his fault, and he'd be stupid not to take advantage of it.  But if Joe Parishioner,  busting his butt to make post tax mortgage principle payments and electric bills knew this, I don't think he'd like it much. 

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"loophole" noun
1.
a small or narrow opening, as in a wall, for looking through, for admitting light and air, or, particularly in a fortification, for the discharge of missiles against an enemy outside.
2.
an opening or aperture.
3.
a means of escape or evasion; a means or opportunity of evading a rule, law, etc.: "
 
 
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32 minutes ago, Pacun said:
"noun
1.
a small or narrow opening, as in a wall, for looking through, for admitting light and air, or, particularly in a fortification, for the discharge of missiles against an enemy outside.
2.
an opening or aperture.
3.
a means of escape or evasion; a means or opportunity of evading a rule, law, etc.: "
 
 

Oh, if a loophole is a means of evading a law, the biggest loophole I see is lying about your income and business miles.  Sorry about that.

When politicians and most others talk about tax loopholes, I think they are talking about legit tax laws most of the time.

http://dictionary.reference.com/browse/tax-loophole

Tax Loophole:  A provision in the laws governing taxation that allows people to reduce their taxes. The term has the connotation of an unintentional omission or obscurity in the law that allows the reduction of tax liability to a point below that intended by the framers of the law.

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Yes, there is an obscurity on the fact that if your spouse left you for the last 7 months but only came back to visit you for thanksgiving and slept in the same bed for three days, tax payers forget that little detail and they don't mention Thanksgiving to their tax preparer.

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19 hours ago, Pacun said:

Yes, there is an obscurity on the fact that if your spouse left you for the last 7 months but only came back to visit you for thanksgiving and slept in the same bed for three days, tax payers forget that little detail and they don't mention Thanksgiving to their tax preparer.

Yeah, if they're lying, it's taxpayer fraud.  But, sometimes taxpayers really do forget, or don't realize that they are technically wrong.  There are ways to facilitate getting to the truth with honest but forgetful people. 

Client:  Ricky Bobby left May 25th.

Good tax preparer will casually ask:  Ok, sorry, this will seem like a stupid question, but I have to ask, approximately how many nights did Ricky Bobby stay with you during the last half of the year?

Honest client will remember and tell you.  You can't make the dishonest client tell the truth, but you have done your job and documented the answer.  It's on the taxpayer.

Now Lefty will START by saying, "If Ricky Bobby did not stay with you at all during the 2nd half of the year, it will save you $1,.200 on taxes."

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1 hour ago, kcjenkins said:

If the spouse really did leave, for more than half the year, then the exception is basically very fair, when one parent is left with caring for the child alone.  And it's up to the client to be honest about it.  

I agree.  And I never coach clients.  I try to get the truth out of them, then prepare an accurate return.  When a client tells me the child stay 50/50 with the divorced parents, I figure kid was at Granny's an odd number of nights and take them at their word.  I don't tell them it would be best if kid was with you 183 nights, wink, wink.

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1 hour ago, RitaB said:

I agree.  And I never coach clients.  I try to get the truth out of them, then prepare an accurate return.  When a client tells me the child stay 50/50 with the divorced parents, I figure kid was at Granny's an odd number of nights and take them at their word.  I don't tell them it would be best if kid was with you 183 nights, wink, wink.

I have not yet figured how to have 50/50 split of days in a non-leap year?  Staying at Granny's counts for the parent where the child was supposed to be for that day.

I have yet to see any situation, that in reality, was anywhere near 50/50.

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53 minutes ago, Jack from Ohio said:

I have not yet figured how to have 50/50 split of days in a non-leap year?  Staying at Granny's counts for the parent where the child was supposed to be for that day.

Well, I have been doing that wrong, then.  That's why you make the big bucks and I don't, Jack.  And they don't know that Granny counts as them, either, cause obviously I didn't tell them that.

But I will continue to enter six months if they say 50/50.  Just because you've not seen it does not make it impossible.  People can tell me the truth or they can lie about that.  I don't have time to audit their log of when they had their kids.

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1 hour ago, Lion EA said:

And, if it's really 50/50, then no one gets the dependency exemption and all the benefits!

If the parents don't claim the exception, then the family member (same household) with the highest income can get not only the exception but also EIC, provided that the relationship with the in-laws was excellent and the relative lived in both houses.

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OK, I hear 50/50 most often in the year of separation.  That's certainly possible.  Also, the parent who had the child the most will tell us that.  The parent saying 50/50 did not have the child the most.  Just my completely off the cuff observation about human nature and telling your story.

And non-custodial parents can certainly claim the dependency and CTC.  And they have tie breaker rules for a reason.  OK, had to get that out.  Back to work.

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2 hours ago, Jack from Ohio said:

I have not yet figured how to have 50/50 split of days in a non-leap year?  Staying at Granny's counts for the parent where the child was supposed to be for that day.

I have yet to see any situation, that in reality, was anywhere near 50/50.

I had one where it was 50/50.  Parents divorced but still lived together.  Both had kid 365 days.

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