How do we file a joint tax return when one spouse is disqualified for the earned credit.?

Question

We were seperated the following tax year but not divorced, he was audited for filing single with 2 dependents. I filed with turbo tax and did the status and dependents according to how it guided me. Well it did not get into enough detail with turbo tax and it guided me wrong stating that he could file the kids on his taxes if they lived with him for 6 months out of the year. My two children are by someone else and he claims them every year with no problem. The IRS said that since they were not his blood relatives he could not claim them and now he is disqulified from the earned credit for 5 years. This coming January we have to file married joint and I was wondering if we would get the earned income tax for my kids even though he is disqualified.

Answer 1

You have misread what the IRS said. There is NO requirement in the Tax Code that the children be of his blood for him to be able to claim them as long as you were legally married before he claimed them. Additionally, once you marry, the step-parent & step-child relationship is NOT torn by a divorce so he could STILL legally claim the children if he was otherwise entitled to do so even if you were to divorce. This is clearly explained in IRS Pub 501 and no IRS agent would treat the issue otherwise.

Either that or you are making something up to hide what the actual reason was for the denial of the EIC. I suspect this to be the real case since if you are barred from claiming the EIC due to EIC fraud, the bar is for 10 years, not 5.

If you'd care to state the REAL reason behind the denial, maybe someone can give you a correct answer. But generally if either spouse is barred from the EIC you won't be able to claim it on a joint return. And if you file separate returns you cannot claim the EIC either whether you've been barred or not.

Answer 2

"Innocent Spouse Relief" has nothing to do with this.

It's possible that her husband is subject to a 2 year denial (the choices are 2 years or 10 years) and it just seems like 5 years.

"If your EIC for any year after 1996 was denied and it was determined that your error was due to reckless or intentional disregard of the EIC rules, then you cannot claim the EIC for the next 2 years."

The problem is, according to the poster when she filed, she filed for her hubby, didn't read the questions closely enough and happily put down that he was eligible for EIC and a bigger refund. Since the taxpayer is ultimately responsible for his/her own return, failure to read OR REVIEW the tax return before filing can get a 2 year ban. This will include any joint returns with another tax payer...and if you are all living together, there is no other way for you to file except MFS and that status isn't eligible for EIC either.

Answer 3

If you are married as of December 31, 2007, and your spouse has been disqualified from the EIC, you must attach Form 8862 to your return. This form is specifically for your situation. You must provide additional information to the IRS for them to consider your eligibility for the EIC.

Depending on the reasons for the disallowance of the EIC, which are unclear from your question, the IRS may or may not allow you to get EIC this year on your joint return.

The reasons you provide are not consistent with the IRS rules for EIC. If you are not clear on why the EIC was denied, take all correspondence and past tax returns to a preparer for review when you have your taxes done for 2007.

Answer 4

Well, actually Turbo Tax does ask the question if the Qualifying Child and/or Qualifying Relative meet the residency test. Anyway he can claim his step kids with no problems, because even the divorse does not terminate the step child and parents relationship. That should not be the problem! I wonder if he falsely stated his step kids age?! The bottom line is, if your spouse is disqualified for the EIC (usually 10 years), and if you file MFJointly this year, you can't claim the EIC because of your spousal disqualification. But there is something called "Innocent Spouse Relief", you can make some research on the subject whether you can request it or not.

http://www.irs.gov/individuals/article/0,,id=129862,00.html

Answer 5

Once again, Boston's answer is perfect given the data you've shared. However, the facts and circumstances of this kind of thing are such that you will not tell us everything we need to know to give you the bottom line, 100% correct answer for your set of facts. This is no slight on you-- tax law is so complicated that if youleave out 1 detail it can change everything.

Given that the stakes are so high, and I agree with Boston that you may well qualify for the EIC, you will need professional help to get this straightened out. I urge you to contact your state's Society of Enrolled Agents for referral or shop in the phne book for people with EA after their name. EAs, unlike CPAs, focus in on tax law, not accounting rules. ANd, our fee structure often is easier to budget.

Good luck!