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Ethical?


kathyc2
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Say unmarried parents have a child under age 6. 

She claimed child in 2019 and 2020 so she received the 1,400 EIP and 1,800 advance CTC.  Her income is under 40K.

For 2021 she releases the exemption.  He then claims the 1,400 EIP plus the 3,600 CTC.

Is suggesting to do this unethical or good planning?

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Come here
(What)
What that
(I don't know)
Look like dog poop to me
(Yah, looks like dog poop to me too)
Hm pick it up
(What?)
Pick up
(Oh)
Feel like dog poop?
(Yah, feel like dog poop)
Smell
(Hm?)
Smell
(*Sniffs* uh)
Smell like dog poop?
(It smell like dog poop)
Taste
(Huh?)
Taste
Taste like dog poop?
(Yah, tastes like dog poop)
Hm good thing we don't step in it
(Yah good thing)
 

(edited for our rated G audiences)

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To me, there is allowed, disallowed, and grey.  If allowed, it is allowed, no matter how much it smells/tastes bad.  Ethics are a personal choice, meaning how much grey can you tolerate.

So, if allowed, it is likely something you should outline, as not doing so has a financial penalty to your client.  No different than medicare planning, SS optimization, and so on.

If it is grey (no clear guideline or prohibition), then you have to use your own smell test.

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1 hour ago, Medlin Software said:

To me, there is allowed, disallowed, and grey.  If allowed, it is allowed, no matter how much it smells/tastes bad.  Ethics are a personal choice, meaning how much grey can you tolerate.

So, if allowed, it is likely something you should outline, as not doing so has a financial penalty to your client.  No different than medicare planning, SS optimization, and so on.

If it is grey (no clear guideline or prohibition), then you have to use your own smell test.

If you subject to Circular 230, then ethics is not a personal choice.

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2 hours ago, cbslee said:

If you subject to Circular 230, then ethics is not a personal choice.

Does that item mean you can only operate in the black area of the law?  Meaning if there are no clear guidelines, you cannot do something?  How about when there is no case law and no regulations (such as happened when the COVID relief items first came out)?  How is that handled?  I am not talking about personal ethics and morality, just what one can defend as being appropriate in accounting or tax prep.

The OP is a perfect example.  Clearly, there are legal ways to double dip COVID bene's.  Morally?  Some would have issues.  Maybe even ethically.  But, the methods are legal, so it is not a disservice to not only process such items, but there is a client duty to get them the best result?  I think it was here the consensus was, despite the IRS asking, there was no requirement to return stimulus payments sent to certain deceased.  How does that "fly" with 230 ethics?  If the argument is the request is not law, then it seems 230 requires only black and white, hampering what many/some? would likely call valid grey area planning/actions.

I know for certain I have some customers who are subject to 230, yet they violate what likely is their required ethics, and IRS regs, by using insecure email, and more importantly insecure operating systems.

Asking because I am curious.  I have no experience with Circular 230, other than receiving emails from those subject, who include the waste of bandwidth and completely useless signature about Circular 230.  (I cannot get past the statement that the email is only for intended recipients and must not be read by others.  How can someone not intended ever see the signature?  Why is someone subject to such a signature sending email in an insecure manner at all?)  I get it, sometimes we have to do things because we are told to, even if they are pointless, but if the information in the email is intended to be private, then it should be sent securely, not "protected" by a disclaimer...

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7 hours ago, kathyc2 said:

so she received the 1,400 EIP and 1,800 advance CTC.

So you are saying she received the advanced payments in 2021 but will not claim CTC for 2021?

In that case won't she have to repay the 1,800, or am I missing something.

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Most licensed professions have rules and regulations which codify how they are expected to handle their relationships with customers, clients, patients and etc.

Those rules and guidelines cover those situations which are not only black and white but also shades of grey.

It's easy to come up with examples of Doctors, Lawyers, Accountants and etc who chose not to follow the ethical guidelines of their profession.

After all we read about them when they are convicted or lose their licenses.

 

 

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1 hour ago, DANRVAN said:

So you are saying she received the advanced payments in 2021 but will not claim CTC for 2021?

In that case won't she have to repay the 1,800, or am I missing something.

That just seems to still be up in the air.  Who knows what will happen?  Addressing a normal year; most of my clients in this situation have an every other year agreement.  I abide by that.  BUT, remember that if the unmarried couple lives together with the child, the rules are very clear and explicit.  The parent with the higher income must take the deduction.

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1 hour ago, mcb39 said:

  BUT, remember that if the unmarried couple lives together with the child, the rules are very clear and explicit.  The parent with the higher income must take the deduction.

I believe in that case higher AGI parent can allow lower AGI parent to claim the credit.  See example 8 on page 16 of 2020 PUB 501.

Going back to OP, "she" will payback advance CTC since she is not claiming the child.  He will receive the full CTC.  Where is the double dipping?  

Looks like a breakeven between the two of them.

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11 hours ago, DANRVAN said:

So you are saying she received the advanced payments in 2021 but will not claim CTC for 2021?

In that case won't she have to repay the 1,800, or am I missing something.

There is a hold harmless safe harbor.   No repayment if under 40K single, 50K HOH, 60K Joint.  Above that and you have to repay.

18 hours ago, kathyc2 said:

  Her income is under 40K.

That is why kathyc2 put that into her OP.

There will be games played to take advantage of this provision this year.   Move the kids to the return of the ex, grandparents etc. 

Tom
Longview, TX

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In this case there would not be a repayment of CTC, as her income is below 40K.  

https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-topic-h-reconciling-your-advance-child-tax-credit-payments-on-your-2021-tax-return

This is a hypothetical case.  Years ago I would have had several clients that this would pertain to, but it seems as I've aged, so have my clients. 

I'm not sure I'll even run across a situation like this. If client was aware of this and wanted to change claiming of kids, I'd be okay with it as long as either qualify.  I just don't think I'd feel comfortable going the extra step and suggesting it, but I'm curious as to other pros thoughts regarding it. 

 

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I have the same issue with EITC.  Unmarried clients, living together with 3 children in common.  One earns over 400K a year, the other about 20K.  One files HOH (claims one child), the other single (claims two of the children).   Since they agree on the claiming of the children, the higher AGI tie breaker rule does not kick in, and the single filer is able to claim EITC and the CTC.  Nothing illegal, but is that really what EITC and the CTC was intended for?

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Any legal move that puts more money in the pockets of average Americans is ethical, in my opinion. Average Americans get screwed every day by unethically high drug costs, high medical costs, high telecom costs, high internet costs, wage theft, low wages and poor benefits, so any chance to get something back, and I'm all in.

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1 hour ago, Patrick Michael said:

 Nothing illegal, but is that really what EITC and the CTC was intended for?

Even with EIC and CTC seems like in total they would be paying more this way  than if they were married and filed MFJ.

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49 minutes ago, Abby Normal said:

Any legal move that puts more money in the pockets of average Americans is ethical, in my opinion. Average Americans get screwed every day by unethically high drug costs, high medical costs, high telecom costs, high internet costs, wage theft, low wages and poor benefits, so any chance to get something back, and I'm all in.

As always, I appreciate the discussion.  Ethics seem to be like (now un) common sense, but it is a huge topic of every day life since early 2020.  Nothing wrong with looking out for #1, but ideally, we should also think about (and accept) the #2 that follows.

While I do not do tax prep for $, I have considered having my own done, but I would be paying for more knowledge and use of the grey, since I can already handle the black, and much of the grey.

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Interestingly, to me.  Dealing with a customer who is blatantly dishonest.  Another who, I think they realize it, is attempting to get me to explain why a competitor may be doing something differently (it is likely a user error).  In both cases, I am the bad guy, I need to consider my line of work, and other attempts to deflect self responsibility.  This is nothing new, it happens more often than not when I have to come up with a way to tell someone the issue is self caused.  Few like to hear they are imperfect.  In one of these situations, I pointed out the black letter law, but left open the chance I am out of date, offering to look over any contracting information the used could supply.  Nut, the reply was yet another nastygram...

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4 minutes ago, Medlin Software said:

Interestingly, to me.  Dealing with a customer who is blatantly dishonest.  Another who, I think they realize it, is attempting to get me to explain why a competitor may be doing something differently (it is likely a user error).  In both cases, I am the bad guy, I need to consider my line of work, and other attempts to deflect self responsibility.  This is nothing new, it happens more often than not when I have to come up with a way to tell someone the issue is self caused.  Few like to hear they are imperfect.  In one of these situations, I pointed out the black letter law, but left open the chance I am out of date, offering to look over any contracting information the used could supply.  Nut, the reply was yet another nastygram...

Wow, that would be very difficult to deal with.

 

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15 minutes ago, cbslee said:

Wow, that would be very difficult to deal with.

 

Sometimes, yes.  Personally, after decades, I can get dry and factual.  I also lean toward being candid.  It is not a normal CR thing, to be candid.  Most teach and do the sugary type of replies.  I just can't.  Yes, it is faster for me to be candid, but it is also faster for the customer to get a clear concise, no BS reply, even if they are the issue.  I try hard to not make judgements, even when being lied to.  I rarely even look at the sender information, not even to confirm if the person is an actual customer.  (One exception is when I suspect it is a third party, such as a computer "expert" trying to get me to help them do their job, or fix their error. Usually it is a transfer to a new computer failure type of problem.)

As one of my customers, you likely have received such a message from me at some point :)

I am "over" the rude customers, and those who try to blackmail (it is a thing, "give me something for free or I will post negative things all over the internet" is one example).  I cannot control them, so I do not try.  I stopped monitoring reviews, as there is nothing I can do about them.  Engage, and they get what they want.

Thankfully, I have a well defined (to me) type of customer, and enough of them to stay in business.  Even more fortunately, some will write to express thanks.

And of course, I have been allowed to post here which can be good therapy.  Even though this is a public forum, where anyone can search, my venting will sometimes attract customers who feel like minded.

To end this post with a good, I was able to locate a certain bit of information last night, needed by certain customers (but not yet in the public domain), and one of them emailed to ask for a copy of the reference.  I appreciate those who trust, but verify... and they expressed thanks for being on top of things.  Candidly, I pay for a service which ferrets our certain things, as I just don't have the resources to do all of the research myself. I still usually find the data before the paid resource, but having a second "set of eyes" on things means I miss less (if anything at all).

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16 hours ago, DANRVAN said:

I believe in that case higher AGI parent can allow lower AGI parent to claim the credit.  See example 8 on page 16 of 2020 PUB 501.

 

I looked at that.  It's not a very good example as their incomes are both so close.  I am talking about a father's income of $40,000 and a mother's income of $18,000.  I have always gone by the higher income rule.  It doesn't seem right for the father to allow the mother to reap all the benefits of EIC, etc; when he is obviously contributing the most to support.  Fortunately, the couple I have in mind got married this year, had another child and there are no questions.  Was this another case where the IRS failed to close all of the loopholes?  I have been highlighting that higher income rule in Quickfinder year after year.  I agree with Kathyc2

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2 hours ago, mcb39 said:

I looked at that.  It's not a very good example as their incomes are both so close.  I am talking about a father's income of $40,000 and a mother's income of $18,000.  I have always gone by the higher income rule.  It doesn't seem right for the father to allow the mother to reap all the benefits of EIC, etc; when he is obviously contributing the most to support.  Fortunately, the couple I have in mind got married this year, had another child and there are no questions.  Was this another case where the IRS failed to close all of the loopholes?  I have been highlighting that higher income rule in Quickfinder year after year.  I agree with Kathyc2

I think you are conflating issues.  The higher income only comes into play as a tie breaker when both parents try to claim the child.  If both parents and one child all live together, then they need to decide which parent will take the child for CTC, HOH, EIC and dependent care.  No splitting the benefits in this case. However, if the parents live separately, then the CTC can be broken off and go to the non-custodial parent.  Also, if parents are unmarried but living together, and have more than one child, then each parent can claim one child for all the benefits if they wish.  

If the father (40K) claims then he could file HOH and all other benefits.

It would be hard to justify mother (18K) as qualifying as HOH, so if she claims child, then both would file Single.  The much higher EIC for 18K would more than offset the tax savings for father claiming HOH in this example by a couple thousand. 

I don't get Quickfinder, but are you sure it's not talking about tie-breaker rules in regard to higher income?

I was thinking more of unmarried parents who do not live together in my OP.  I try not to prepare returns for both parents in divorce situations.

 

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I have a couple who live directly in front of me. He a fireman and she a public school teacher. They have a child and have never married and live in the same home. He claims HOH and claims his son and she claims a son from her former husband and files HOH. I do not prepare her taxes and have not bothered to check if this arrangement provides a greater benefit than their being married but I will bet a dime to a dollar it gives significant advantages. If the Service was on it's game a simple match would show two people claiming HOH at the same physical address duh. Another client whose is single with AGI in excess of $160,000 woke up one morning to discover the Service had dropped $1,400 of EIP into his bank account. I inquired if he planned on sending it back and got a hearty laugh and the reply "Only if they request it".

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16 hours ago, Christian said:

He claims HOH and claims his son and she claims a son from her former husband and files HOH.

Under 2017 proposed regulations, what they are doing is allowed, under the concept of multiple households sharing living quarters.  The rule is that to claim HOH, dependents must be in the household of the person who would win the tiebreaker.  So its only allowed in cases like yours where there is a child of a former spouse.  She could not be HOH based on claiming a shared child (e.g., if they split two of their own children), since he would win the tiebreaker (assuming he has the higher AGI).

https://www.federalregister.gov/documents/2017/01/19/2017-01056/definition-of-dependent

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22 hours ago, kathyc2 said:

I think you are conflating issues.  The higher income only comes into play as a tie breaker when both parents try to claim the child.  If both parents and one child all live together, then they need to decide which parent will take the child for CTC, HOH, EIC and dependent care.  No splitting the benefits in this case. However, if the parents live separately, then the CTC can be broken off and go to the non-custodial parent.  Also, if parents are unmarried but living together, and have more than one child, then each parent can claim one child for all the benefits if they wish.  

If the father (40K) claims then he could file HOH and all other benefits.

It would be hard to justify mother (18K) as qualifying as HOH, so if she claims child, then both would file Single.  The much higher EIC for 18K would more than offset the tax savings for father claiming HOH in this example by a couple thousand. 

I don't get Quickfinder, but are you sure it's not talking about tie-breaker rules in regard to higher income?

I was thinking more of unmarried parents who do not live together in my OP.  I try not to prepare returns for both parents in divorce situations.

 

Yes, it is a tie-breaker rule because the child is the qualifying child of both parents.   However Tie-breaker rule #5 for Unmarried parents clearly states that Mom, Dad and child live together.  Child is the qualifying child of Dad because he has the greater AGI and Dad gets every Credit available to him if his income isn't too high. (for example: EIC)

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