2005 F-1040 ??

[Eli]

New client brought in his 2005 return done by another preparer. Client filed as MFJ claiming two children. Client earned $34122. He had Sch A deductions of 23751. Previous preparer gave him CTC of $76, EIC of $1158 & Add'l CTC of $1924.00 + 5375 of Withholding for a total overpaymentof $8457.

Inputting the return in ATX I came up with CTC of $0, EIC of $661 & Add'l CTC of $2000. + 5375 of Withholding for a total overpayment of:$8036.

I couldn't find where the difference was. Then looking at it more closely I noticed that they were only getting credit for 3 exemptions ($9600) on the previous preparer's return. They have 4 people listed on the return, but it was only showing 3 exemptions.

Which software do they use? TAXWISE...I wonder if this was just a glitch or maybe a more common error??

Eli

P.S. Still couldn't figure how they came up with the EIC of $1158

[Slappy Tax]

I played with several scenarios using ProSeries, and I couldn't duplicate the Taxwise results either. And I couldn't even find an EIC of $1,158 in the TY05 EIC table.

On another note, these clients seem to have serious money management problems, at least according to their 2005 tax return figures. A family of 4 with $34,122 in W2 income really shouldn't have allowed FITW of $5,375 to be deducted from the breadwinner's check to begin with. Secondly, what is a household of 4 with $34,122 in income doing with $23,751 in Schedule A deductions? Either the previous preparer cooked the Schedule A, or these folks need some serious financial counseling. What are they living off of? I realize these points are totally irrelevant to the tax return figures you reviewed for them, but the numbers just jump off the page. Maybe they are especially frugal or independently wealthy or have an inheritance or something. I'm not being facetious here--I'm just trying to figure out how they get by. There seems to be a piece missing from the 2005 puzzle. Plus now it appears they're going to have to repay $421 for TY05.

[Eli]

I played with several scenarios using ProSeries, and I couldn't duplicate the Taxwise results either. And I couldn't even find an EIC of $1,158 in the TY05 EIC table.]

Welcome back Slappy!! Hadn't seen you around these parts for a while.

Unfortunately these types of preparers are the norm around here. I had also checked the EIC table and couldn't find the 1158 figure.

As far as deductions go they listed: cell phone: 587.00; tools: 2200.00; vehicle 'repairment': 2817.00; & clothing: 1600.00 + $9307.00 in mileage deduction. Around here everyone wants the mileage & meals deduction.

Thanks for your response, Slappy!!

Eli

[Slappy Tax]

Hi, Eli. I remember you too from the old original ATX Board. You always were the nicest guy there. Never a cheap shot, never a chip on your shoulder, never any pedantry for the sake of being pedantic. Just always a class act.

I assumed the Schedule A, especially any 2106 expenses, would be the culprits in that client's 2005 return. I notice the former preparer wasn't even subtle about it: claiming both mileage and vehicle "repairment." Then, on top of that, the software miscalculated the refund. So not only does the client owe $421 due to the software miscomputation, he'll also owe an additional $1,133 if the IRS keys on his miscellaneous deductions and disallows them.

It seems Form 2106 is a favorite place for shoddy preparers to try to stash concocted writeoffs, and of course that makes it a favorite place for the IRS to look for them.

Good luck with this one and all the ones yet to come, Eli!

[joanmcq]

oh, and they are loving the EBE deductions on audit right now....

That's the sort of thing that just makes this taxpayer see red.