on parole and have an IRS audit that cannot prove?

Question

I know someone that is on parole on drug related issues and they have an IRS audit that they just received from their taxes last year. They claimed someone elses children and gave that person money when the check came in. Now they do not have any proof of supported these childred financially. What will happen???

Answer 1

Say hello silver bracelets.

Answer 2

Do all of the work for them, tie out all of your numbers. Make sure that your receipts equal the deposits in the bank, or have a vaild explanation. Look over your return with a pro for any potential areas of exposure. Chances are you have a friend that is an accountant, maybe they would help. If you didn't lie then don't sweat it. The agent will be very busy and will want to close the case as quickly as possible. I always take the position that if you make their job easier they will breeze through your stuff. I assume you got selected because the IRS is currently undertaking a small business audit program. From what you described you may have an issue with what is called a hobby loss. Peruse the IRS website (WWW.IRS.GOV) - search for hobby losses. You will need to prove that you entered into the business with a profit motive. After you read the IRS stuff note that is their position, tax courts have ruled against the IRS in many cases where they argued hobby loss. I really suggest you pay a pro if you can. The IRS agent is more likely to give a CPA/enrolled agent the benefit of the doubt. It may well be dollars well spent. Good Luck!

Answer 3

It doesn't matter if they supported those children financially or not - a parent is not allowed to let someone else claim their children, so even if they supported them 100% they were not eligible to claim them. Unless the children were closely related and lived with the person who claimed them for over half the year, the exemptions will be disallowed and they'll have to pay back whatever they got due to them, plus interest and penalties. Penalties could be severe if the IRS gets onto what was going on between them and the parents - and they're not dumb, they could very possibly figure it out - what happened was tax fraud.

Answer 4

Hey
well the problem lies with this how did the person get the chlldrens ss number to begin have them to go to a notary and state they gave the money and give a listing on what they spent on each child each month for the year then show that from bank statements or somthing like a lease or school name because they will have to pay all that money back to the IRS without the proof

Answer 5

The person in question committed tax fraud. The exemption will be denied and additional taxes will be assessed. If the IRS is in a bad mood, criminal charges could be pressed and the parole my go away.

Answer 6

They will have to pay back the money and they should serve jail time. I had someone do that to us.. someone who I dont know claimed my children and as a result I am being audited but lucky we have proof. Lock them up and throw away the key I say.

Answer 7

On parole and tax fraud? Some people never learn.

Hope your friend doesn't have any kids, cause it sounds like jail time.

Answer 8

They will have to pay the money back plus interest and penalties.

Assuming the one whom received the money was in on it, they both could be charged with fraud.

Answer 9

Hopefully this person will go to prison for a long time and maybe they can be thankful that they are in the USA and not in some latin american country

Answer 10

Bend over....