Pedro Posted January 17, 2009 Report Share Posted January 17, 2009 What do you think about the next situation: Taxpayer age 17 yrs old. With two children. Self-employed Earnings around $12,000.00 Records of earnings handwritten on paper. This will be her first time she makes an income tax. Quote Link to comment Share on other sites More sharing options...
JohnH Posted January 17, 2009 Report Share Posted January 17, 2009 Looks like a job for Jackson Hewitt or HRB to me. At least that's what would happen if she walked into my office. Quote Link to comment Share on other sites More sharing options...
taxguy057 Posted January 17, 2009 Report Share Posted January 17, 2009 Well depending on what her biz is and if she can account for how she made her money if audited. Are they hand written receipts from a receipt booklet? Just because its printed all neat doesnt mean its all good! All IRS ask for is documentation and proof of what was said done was done.... Now as for being 17 with two kids worries me, but if she got the proof to show that they r then who r we to judge... Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted January 17, 2009 Report Share Posted January 17, 2009 Well, let me guess, she wants a ral? Guess what, the bank will not fund it. Tom Lodi, CA Quote Link to comment Share on other sites More sharing options...
taxguy057 Posted January 17, 2009 Report Share Posted January 17, 2009 Well, let me guess, she wants a ral? Guess what, the bank will not fund it. Tom Lodi, CA Tru!! has to have a W2 job to go with it... o well! :dunno: Quote Link to comment Share on other sites More sharing options...
jainen Posted January 17, 2009 Report Share Posted January 17, 2009 >>Earnings around $12,000.00<< I don't see any problem with hand written income and expense records; not long ago that was the standard. The income isn't really enough, though, so you would need to inquire about other sources of support. Most of your questions would be resolved if you attend to Form 8867 in a duly diligent manner. Quote Link to comment Share on other sites More sharing options...
David1980 Posted January 17, 2009 Report Share Posted January 17, 2009 What do you think about the next situation: Taxpayer age 17 yrs old. With two children. Self-employed Earnings around $12,000.00 Records of earnings handwritten on paper. This will be her first time she makes an income tax. First question for me would be can the person be claimed as a dependent. After that, I would want to have soemthing more to verify the wages. It meets the classic EIC fraud scenario so I think 8867 due diligence would require asking more questions. Would be nice to see a bank statement or voided checks received or something. If it's like people I've known they'll claim it was all received in cash and they spent it as soon as they got it and cannot get any records from the payers. You could also look into what kind of business she does to see if the expenses (or lack thereof) make sense. Also questions to that end could verify that the income existed. If she's just a contractor for one person they would have a 1099-MISC requirement which would serve nicely (even though 1099-MISC are easily printed.) Ask enough questions and you'll scare her off if she's bogus. In fact ask any questions at all and she'll probably just find someone else willing to do it. Quote Link to comment Share on other sites More sharing options...
Julie Posted January 17, 2009 Report Share Posted January 17, 2009 If she doesn't have a 1099 or W2, you need to ask why, and what her income is. If she's self-employed, she ought to have some expenses. Aside from the dependency questions, I see three likely scenarios: 1. She worked for wages, and does not know what a W2 is, or that she should have it. 2. She worked as a subcontractor, and was taken advantage of because of her ignorance. She doesn't know about 1099s. 3. She's a fraud, and is making it all up. I think #1 is actually the most likely scenario. After all, she's only 17. Is this her first job? Quote Link to comment Share on other sites More sharing options...
JohnH Posted January 17, 2009 Report Share Posted January 17, 2009 I vote for #3 for two reasons: 1) I'm an EIC agnostic 2) I believe Pedro senses there's something wrong. Aside from the flaky nature of the situation & information, his intuition is running up red flags based on the client's demeanor & behavior. That's why he posted this question in the first place. Quote Link to comment Share on other sites More sharing options...
OldJack Posted January 17, 2009 Report Share Posted January 17, 2009 >>then who r we to judge... << >>Most of your questions would be resolved if you attend to Form 8867 in a duly diligent manner. << Are we really working for the IRS? If we are we should be paid by IRS or at least given a tax credit. Quote Link to comment Share on other sites More sharing options...
jainen Posted January 17, 2009 Report Share Posted January 17, 2009 >>Are we really working for the IRS? << We are an integral part of the same system. If we want to do this job, then we should do it. The only proper way for a client to claim EIC is with the proper forms. This includes 8867, a fairly mild inquiry into eligibility. This taxpayer has a plausible story. Some of her circumstances are generally open to fraud, but that is no reason (in my opinion) to be suspicious of her in particular. The IRS has made this part of our job easy. She is inexperienced, probably got some doubtful advice, and has come to a professional for support. We should respond professionally; that's our job. Conduct the interview; fill out the forms; file the the return. (Taxguy's comment about judging was concerning her lifestyle, not her tax position.) Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted January 17, 2009 Report Share Posted January 17, 2009 Well, Pedro did not say what kind of self-employment, which could be a big factor. Was she babysitting, which seems like the most likely form of SE income for a teenage mother of two? I think, tho, that most of us are picking up vibes from his post that he has some serious doubts about her facts, and that is what the nay-sayers are reacting to. So my advice would be, "Trust your own instincts, and if it smells to you, give it a pass. If it just makes you a bit nervous, ask more questions until you either feel comfortable, or decide that your first reaction was the right one." There are some people who advise their friends on 'how to get some free money from the IRS', and some young people are easily led into tax fraud by them. Don't be a part of that path, be a source of guidance to them about what is legal and what is not. If they are honest but misled, you will prevent them from getting into trouble. If they are willfully cheating, they will at least get no help from you. Quote Link to comment Share on other sites More sharing options...
Pedro Posted January 17, 2009 Author Report Share Posted January 17, 2009 I really appreciate all your answers. Thank you very much again to take your time and gave me your point of view with this scenario. The kind of self employee is babysitting. Sincerely Pedro Quote Link to comment Share on other sites More sharing options...
Granny Coral Posted January 18, 2009 Report Share Posted January 18, 2009 Well, Pedro did not say what kind of self-employment, which could be a big factor. Was she babysitting, which seems like the most likely form of SE income for a teenage mother of two? I think, tho, that most of us are picking up vibes from his post that he has some serious doubts about her facts, and that is what the nay-sayers are reacting to. So my advice would be, "Trust your own instincts, and if it smells to you, give it a pass. If it just makes you a bit nervous, ask more questions until you either feel comfortable, or decide that your first reaction was the right one." There are some people who advise their friends on 'how to get some free money from the IRS', and some young people are easily led into tax fraud by them. Don't be a part of that path, be a source of guidance to them about what is legal and what is not. If they are honest but misled, you will prevent them from getting into trouble. If they are willfully cheating, they will at least get no help from you. Excellent answer, KC. Your judgment and compassion are shining through. Congratulations. Granny Coral Quote Link to comment Share on other sites More sharing options...
Julie Posted January 18, 2009 Report Share Posted January 18, 2009 Babysitting throws in another set of possibilities: If the "employer" claims a credit for the child care expense, and she does not file a tax return reporting the income, she will almost certainly hear from the IRS. Quote Link to comment Share on other sites More sharing options...
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