Need Tax Advice...Please Help!! Do i need a CPA or Tax Attorney?

Question

Okay,
here it is...i was audited for my 2005 taxes, i faxed all required documents to verify my dependents..my little sister was the dependent in question...i sent every document to prove that she was my sister, that she lived with me since July of 2005, i payed to keep up with the household..etc,,,Well, the IRS is claiming that the documentation i sent does not provide enough proof. When i filed taxes for 06 i was audited again, i sent everything i had, so the 06 taxes are fine, everything checked out. but instead of getting all of my refund for 06 the IRS kept half of it (for 05) & started sending me notices to pay another $2,500.00 plus penalties & interest...for 05
I have gone to the Tax Payer Advocacy and the same result...i still owe the money (that i cant pay)..so the lady at the Tax Payer Advocacy tells me sorry ..and asked me if i would like to appeal the case?
Do i appeal or get a Lawyer?are these Lawyers expensive?
it really upsets me cause i did everything legit? :-(

Well my sister started actually living with me in the middle of May. But i could only prove that she lived with me since beginning of July because that's when we moved into my apartment and i had her listed on the lease..so since it was the beginning of July does this qualify as 1/2 of the year???
Thanks....!!!

Answer 1

in order for your sister to be claimed as a dependent, you have to supply over 1/2 the person's support for the year, AND he/she has to be claimable on no one else's return as a dependent, AND he/she has to live with you for over 1/2 the year.

Since your sister, by your statement above, lived with you from sometime in July 2005 through the end of the year, she can NOT be claimed as a dependent on your 2005 return [unless special circumstances exist, see below] and, therefore, you can NOT claim head of household status for 2005 if your sister was the only dependent who qualified you for this status.

Special circumstances include ONLY a child who was born in 2005 and lived with you for the remainder of the year since birth, plus temporary absences for causes such as school, vacation, medical care, and residence in a state or local facility. If your sister was temporarily in the care of state child welfare authorities prior to being placed in your home in July 2005, you MIGHT have a case even though this is not specifically listed in the tax instructions.

If it appears that the exception might apply to you, you need the services of a CPA or tax attorney to search for a private letter ruling or court case which will definitively answer the question. [Of course, you can try googling for your specific circumstances or try findlaw.com]

Unless one of the special circumstances applies, the IRS' ruling appears to be sound.


:-(

Answer 2

A lawyer would cost more than the tax you have been billed. If you are unable to pay and IRS agreed, you case can be reported currently not collectible until your financial situation improves. I would recommend taking your paperwork to a tax practitioner who is an enrolled agent and let him or her review what you have provided and recommend if you should request that the case be reconsidered.

Answer 3

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