So Ive been following these posts in other tax preparer groups about Household Employees

[Just-Lisa-Now-]

and I'm seeing that these "professionals" are using Household Employee wages to bump people up into the sweet spot for EIC.

They claim that these household employees can work for multiple people, each paying them less than $2200/year (or whatever the cutoff is for needing to issue a W2) up to the point of max EIC and its all legal.

They keep a spread sheet of their friends or relatives that supposedly paid them for baby sitting or house cleaning, with each of the people paying them less than the income that requires a W2.

I saw one of them share a screen shot of a 1040 with 11535 in HSH on the wages line, that added to their $5500 W2 and 2 kids, landed them over $7000 in ACTC and EIC.

Theres a certain Service Bureau (theres probably more than one) that trains their tax preparers to use this method to get large refunds..

How is this getting past IRS without scrutiny?

[BobKamman]

We are all so confused by EIC fraud, as a recent discussion here shows.  But if you don’t like EIC, maybe there is hope. From Paul Krugman’s column this morning:

"Democrats are reportedly working on legislation that would offer monthly payments to most American families with children, and could, among other things, cut child poverty roughly in half.

"One especially good thing about the legislation in the works is that Democrats finally seem to have broken free of Republican framing, under which every benefit takes the form of a tax credit. This will apparently be a straightforward proposal to send money to qualifying families."

https://www.nytimes.com/2021/01/25/opinion/democrats-aid-children.html?action=click&module=Opinion&p...

[Just-Lisa-Now-]

I saw that about the monthly amounts in place of these refundable tax credits, Im all for that! Geez, would make our lives so much easier!

[athaureaux6]

It sounds so dangerous, I would not do that, if one client is caught, The EITC will be in danger for some years. I would not do that unless it is absolutely true and verifiable.  

[IRonMaN]

I'm sure if a few IRS folks took some time to read the posts here and on other "preparer groups" they could easily pay for their salaries 😬

[Ernie]

Lisa:  Thanks for posting this.  We work hard to document all our EIC fully and have told people we can not file for them.  We have enough clients that we don't need to get any of them in trouble.

Dusty Ernie

[dkh]

There is a TV commercial that mentions paying Household Employees

[TaxGuyBill]

Interesting.  From a taxpayer's viewpoint, this is a perfectly valid method to "game" the EIC system.

But from the so-called "employer" viewpoint, they better be doing things properly.  They need to be keeping the W-4 and I-9 for hiring a person.  They need to check if State Unemployment and/or Worker's Compensation is applicable.  They need to check other state laws, such as posting "workplace" posters or similar things.

From a tax preparers' viewpoint, they can certainly suggest such things, and take the credit if things are EXTREMELY WELL documented.

I don't know how active they are at it, but the IRS does analyze tax preparers that do a large number of EIC returns, and can even audit the preparer about it (as we saw a few years ago from someone on this forum).

[Just-Lisa-Now-]

I saw one of the advertising flyers for www.taxtax.app that tout the "big refunds for cash wages, no self employment" this is one of the ones that are using household wages to scam EIC.

[TaxGuyBill]

I just went to their website and it seems like that is their "specialty".

[dkh]

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[BobKamman]

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[Just-Lisa-Now-]

They have people fill out this form, its kind of fuzzy, that was sent to me by another preparer that had tried to work with them until she saw what they were doing..Im guessing if IRS went back to the people that paid them, no Sch H will be found

[IRonMaN]

I lose sleep at night worrying that something might have slipped through the cracks on one of our tax returns.  And then there are the scam artists out there playing these ridiculous games and I'm guessing they never lose a wink of sleep over their games.  It's enough to make a legitimate preparer puke.

[Just-Lisa-Now-]

right!?! geez, Ive totally stressed out and lost sleep over whether Ive done something correctly or not on complex things...then I see these people guess theyre making enough money to afford an attorney if they need it.

[TaxGuyBill]

"We require a MINIMUM of 5 employers who employed you as a "household employee".

OMG.  So if a person were to give less than 5 "employers", what would they do?

[IRonMaN]

"So if a person were to give less than 5 "employers", what would they do?"

Probably add one 😬

[Just-Lisa-Now-]

with less than 5 they cant get you up to the sweet spot for EIC

[qbteachmt]

"This will apparently be a straightforward proposal to send money to qualifying families."

I still have the $1,000 bill from Andrew Yang that someone left as a tip at a gig. It's on the fridge. I was hoping for some steady income this year.

[Just-Lisa-Now-]

well this is kind of funny (not for the fraudulent preparers, but it is to me!)

I could only grab this one partial screen shot because once I saw what the IRS was questioning, I mentioned all these fraudulent preparers using household employee income to pump up EIC, IRS was gonna start taking them down one by one...and she deleted the post!  LOL

...but a she shows us a copy of this letter that one of her clients got from IRS.  Asking her to contact them about an investigation.   Her client called the number no teh notice and they told her it was about a prior year return then I asked her if she had seen the prior year return, she says No, but this is what the client told her after calling the number on the notice.

[TaxGuyBill]

I'm glad to see that the IRS is looking into these high-EIC cases with Household income.

[IRonMaN]

Well as long as the election might finally be over, is it ok to start chanting "lock them up"?