I will try to provide this additional information. The audit was for year 2008. Myself, my husband claimed our 5 children, ages 1 through 7 at that time and my 78 year old grandmother. When we received the original audit paperwork it stated it was for dependent verification. For the audit interview I was told to bring all of the dependents Birth Certificates, Social Security Cards, School Records for the school age kids, and doctors records for the younger ones, as well as my grandmothers drivers license. Also bank statements for us and my grandmother.
During the audit, the auditor verified all of the records. She said it all looked good and all seemed fime. She walked away for a few moments and came back to ask about my grandmothers social security check. I said, yes, she draws social security and pulled out her social security statement. She then took one of my grandmothers bank statements (from 2007) and one of ours (from 2008), handed me a calculator and a pencil and had me fill out Worksheet 3-1 on page 33 of Publication 17, The book-Your Federal Income Tax. Having never done this before and using only 1 months bank statements, the answers were very roughly estimated. My grandmother makes approximately 1000 dollars as month in social security, but does not contribute any of her money to our household where she lives with us. She does pay for her own auto insurance and health insurance premiums. She does not buy her food, toiletries, or most of her prescriptions. She saves her money or sends it to various other relatives or church causes. After figuring the worksheet, the auditor hit a few keys on her keyboard and said, "Oh, I thought it was going to work out for you." She printed out some papers and told me to call the 800 number to appeal, and ushered me out the door.
Our 2008 1040 form is as follows:
The Income Tax Examination Changes Worksheet which we were given at the end of the audit FORM 4549 Lines as follows showing what we owe back
3Taxable Income Per Return or as Previously Adjusted-787.00
4Corrected Taxable Income-2713.00
7Corrected Tax Liability-271.00
8 Less Credits-a Child Tax Credit-271.00
11 Total Corrected tax Liability-0
13-Adjustments to Additional Child Tax Credit-2,271.00
16 Balance Due-2,271
19e Amount Due-2385.79
I guess I do not see how claiming my grandmother would have affected the child tax credit that we owe back. Hopefully these numbers help. I have been unable to get through to the IRS office and they will not return my phone calls. My husband lost his job May 24th, and was thankfully able to find another job in a months time, but at much lower pay. We are facing the potential loss of our cars and home, this is impossible right now and seems not right. Thanks for your input, please let me know if you need more information.