Troy is a CPA who prepares the tax returns for Aamna and Samer Mayo who were div

Question

Troy is a CPA who prepares the tax returns for Aamna and Samer Mayo who were divorced last year. Aamna and Samer have one child named Michi who attends George Mason University on a full time basis and qualifies as a dependent for either Aamna or Samer. Both Aamna and Samer are filing separate returns and each wants to claim Michi as a dependent. The divorce decree does not indicate who gets Michi as a dependent. Troy figures that he will prepare the returns with each parent claiming Michi as a dependent and let the IRS figure it out. Neither tax return disclosed this position. What SSTS sections would possibly apply to this situation?

Explanation / Answer

Michi qualifies as dependent for both.If both parents claim depedency exemption, the IRS will usually allow the exemption for the parent with whom the child lived with   - for most part of the year.

but either of the parent to claim Michi as dependent,that non-custodial parent must obtain IRS form 8332 or some other similar written document from the other parent with whom the child lives-, agreeing to desist from claiming such dependency, in his own return.

If both the returns were filed erroneously, IRS allows three years from the date of filing the returns or two years from paying the said tax , to eliminate the exemption claimed and pay the differential tax amount. Penalties may or may not be waived by the IRS , depending on the genuineness of the parties' involved.

The IRS ,if it finds within three years of filing the returns, can re-examine and make additional assessments.Required by audit the claimant has to produce proof of the child living with him or produce the other parent's consent as per Form 8332.

As in this case, the returns have been filed in full knowledge of the error, the IRS may argue that it has unlimited time to examine and reassess , citing reasons of deliberate and wilful attempt to evade income-tax-- this even if the three/two year period- as above has elapsed.

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