Amendment -- NOT!

[elfling]

Really long story that I won't go into. In the end it comes down to a client leaving a message that she wants me to remove her dependent high school student son from her return because of an argument with him. He'll get more money in IRS refund if he files alone. NOT!

I tried explaining the rule that a dependent cannot claim his own exemption even if she chooses not to.

I tried explaining that an amendment of this kind will make the return WRONG.

I plan to next let her know that I will refuse to do it. My work is solid and correct.

What more to do, I just don't know. She and her husband have been really good clients for a good many years. My refusal may end up with losing their business. But, so be it. :dunno:

[Pacun]

In total agreement with you. Ask them to go somewhere else for the amendment.

[Lion EA]

Your client does not have to claim a dependent. You are doing nothing wrong. You cannot prepare her son's return with him claiming himself, however, knowing what you know.

[elfling]

True. If the client really does want to go forward with an amendment and face having to pay IRS back part of her refund, I guess that's her call. More money for me.

And, right, boy can't claim himself. I expect he's going to try to do it himself, or with a friend, or whoever. His mother (my client) says he's just being "bratty". She about ready to throw him out of the nest and let him fall flat on his butt! :D

[Tax Prep by Deb]

Really long story that I won't go into. In the end it comes down to a client leaving a message that she wants me to remove her dependent high school student son from her return because of an argument with him. He'll get more money in IRS refund if he files alone. NOT!

I tried explaining the rule that a dependent cannot claim his own exemption even if she chooses not to.

I tried explaining that an amendment of this kind will make the return WRONG.

I plan to next let her know that I will refuse to do it. My work is solid and correct.

What more to do, I just don't know. She and her husband have been really good clients for a good many years. My refusal may end up with losing their business. But, so be it.

I'm sure you've already considered this, but I just have to ask because I have been faced with this exact same issue several times this year. How much did the boy earn? Can he show that he provided more than 1/2 of his own support?

I have several clients with children in college, who are working part time jobs, and when I put the figures together the students are in fact supporting self more than 1/2. It's kind of weird, but with the economy they way it is and so many unemployed, I've seen incomes of parents drop drastically while their kids go to work and can prove their own support issue.

Just a thought!

Deb!

[Pacun]

I'm sure you've already considered this, but I just have to ask because I have been faced with this exact same issue several times this year. How much did the boy earn? Can he show that he provided more than 1/2 of his own support?

I have several clients with children in college, who are working part time jobs, and when I put the figures together the students are in fact supporting self more than 1/2. It's kind of weird, but with the economy they way it is and so many unemployed, I've seen incomes of parents drop drastically while their kids go to work and can prove their own support issue.

Just a thought!

Deb!

I have had just the opposite. According to my clients and children, students have spent their money on discos, ipods, cell phones, games, make up and cool things. When it comes to rent, food and school supplies, the parents have to fork out the money.

[Crank]

As was mentioned, if the dependent files on their own and does claim themself then you are left with the option of filing without them by the due date or convince the client to amendment the dependent return, file an extension for the client (if the dependent admentment wont clear by the initial due date) and them file with the dependent.

I know I added nothing but my opinion to this thread but what I do want to add is that you need to do what you feel is right. I have lost some clients by refusing to do what they insisted even after providing them with concrete documentation supporitng my position. Its hard to lose a client but its also hard to retain them knowing that they are trying to bully you AND basing their agument on obviously flawed logic ... which may be fueled by the enticement of paying lower taxes.

At least you get to sleep with a clear conscious ... and unfortunately less revenue.

The part that really bugs me is that they can easily find another preparer that will do what they want in light of obvious inaccuracies.

[Pacun]

The part that really bugs me is that they can easily find another preparer that will do what they want in light of obvious inaccuracies.

They will find you or they will find me, depending on the order they visit you and me.

If they go to you first, they will walk away with the knowledge that as long as the child didn't provide more than 50% for his own support, the parents will be the only ones who can claim the child. They will also know that if the child provided more than 50% for his own support, the parents cannot claim him. By the time they walk to my office, the story is perfect and I will think "what an easy case, everything is working out perfectly for the student and for the parents".

Same is true if they come first to me. They will come with the story already prepared with the information and arguments I provided.

[jainen]

>>students have spent their money on discos, ipods, cell phones, games, make up and cool things.<<

This is NOT "the opposite." Every bit of this counts as SUPPORT provided by the student. Our opinions about what is or should be the necessities--totally irrelevant in determining whether the student can be claimed as a dependent. Now, if the student did something responsible with the money like save it for grad school, that would not be self-support. That would be the opposite.

[Pacun]

>>students have spent their money on discos, ipods, cell phones, games, make up and cool things.<<

This is NOT "the opposite." Every bit of this counts as SUPPORT provided by the student. Our opinions about what is or should be the necessities--totally irrelevant in determining whether the student can be claimed as a dependent. Now, if the student did something responsible with the money like save it for grad school, that would not be self-support. That would be the opposite.

I agree, disco and whatever else they consume in it is part of support and some of the stuff they consume is very expensive, but FMV rent and food and school are very expensive too.

[elfling]

I'm sure you've already considered this, but I just have to ask because I have been faced with this exact same issue several times this year. How much did the boy earn? Can he show that he provided more than 1/2 of his own support?

I have several clients with children in college, who are working part time jobs, and when I put the figures together the students are in fact supporting self more than 1/2. It's kind of weird, but with the economy they way it is and so many unemployed, I've seen incomes of parents drop drastically while their kids go to work and can prove their own support issue.

Just a thought!

Deb!

Sure I considered it. $4200 grossed by the student for all of 2010 is a far cry from supporting himself. At $200 per month, his car insurance used up half of that. What's left he does use for things he wants - name brand shoes, jeans, movies, pizza with the guys, etc. - which is partly supporting himself. But Mom pays the mortgage, real estate taxes, utilities, food, et al which puts more than 50% on her side of the worksheet.

[jainen]

>>Mom pays the mortgage, real estate taxes, utilities, food, et al<<

Similarly, much of this is NOT support. Only the food, maybe a share of the utilities et al, but definitely not any part of those housing costs you list.

[Cathy]

>>Mom pays the mortgage, real estate taxes, utilities, food, et al<<

Similarly, much of this is NOT support. Only the food, maybe a share of the utilities et al, but definitely not any part of those housing costs you list.

Surely, you jest when you said "not any part of the housing costs you list". ......but, yep, you're right.....must consider fair market rental value cost of housing provided for a dependent (which is often times MORE than that person's share of the mortgage payment, etc....)

[jainen]

>>Surely, you jest<<

Busted! I'm not always rude and mean-spirited, you know. I've been feeling puckish this weekend. [Or is it peckish?]

[Cathy]

>>Surely, you jest<<

Busted! I'm not always rude and mean-spirited, you know. I've been feeling puckish this weekend. [Or is it peckish?]

Whatever you are, it's ok with me...you always keep us on our toes! :rolleyes:

[samingeorgia]

Disco? I thought disco was dead? Now I'm going to be hearing "I like the night life" in my head all day -- and so will you!

[Pacun]

>>Mom pays the mortgage, real estate taxes, utilities, food, et al<<

Similarly, much of this is NOT support. Only the food, maybe a share of the utilities et al, but definitely not any part of those housing costs you list.

Elfling had all the information in front of him and he knows the situation better than all of us. He made the calculations with real numbers and provided his professional assessment of the situation.

[jainen]

>> he knows the situation better than all of us<<

Certainly, but by definition there is NO circumstance under which actual housing costs such as mortgage or property taxes can be included in the calculation of support for purposes of a dependent. If you disagree, I challenge you to cite any authority for your position. I would accept any standard tax guide or IRS pub, as well as any statute or regulation. Any.

[kcjenkins]

Now, Jainen, it's the wrong date to be picking those nits. Yes, you do not use 'actual housing costs' but you DO use the Fair rental value of the home. Use the worksheet 1 Pub 501, page 20, for an easy way to not only calculate it, but to document it in your records.

[Pacun]

>> he knows the situation better than all of us<<

Certainly, but by definition there is NO circumstance under which actual housing costs such as mortgage or property taxes can be included in the calculation of support for purposes of a dependent. If you disagree, I challenge you to cite any authority for your position. I would accept any standard tax guide or IRS pub, as well as any statute or regulation. Any.

I am pretty sure that Elfling was mentioning real estate taxes and interest so that we would understand that FMV of rent was on the parents side which in a lot of places inclines the scale to one side.

[jainen]

>>the wrong date to be picking those nits<<

I had already admitted I was joking, and this thread had wandered off into bad 80's music. Then it was pulled back with a direct quote and challenge, so what's a poor contrarian supposed to do but defend himself? Now the claim is that taxes and mortgage help us understand the FMV. I still disagree. A great many of our Schedule E clients have found that rental income does not support the cash flow. Rental value is often, and sometimes dramatically, less than actual expenses. That's not just a coincidence--part of the reason renters can not afford more is because they can't use tax breaks and leverage the way their landlords can.

Why, kc, just an hour ago you confirmed your earlier assertion [in Marilyn's thread "Rental Real Estate"] that expenses remain deductible even when FMV drops and produces a total loss.