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It is not clear from your explanation how the child tax credit is related to claiming your grandmother as a dependent.
I would appreciate if you give more information about your situation.
It would be helpful if you provide amounts for each line on your tax form 1040.
Also please specify for which tax year were you audited.
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.
If you were file a joint tax return without five dependents:
gross income from wages $46,870
student loan interest deduction $2500
adjusted gross income $44,370
itemized deduction $17,066
personal exemptions $24500
taxable income $2,804
tax liability $281
child tax credit - line 52 - $281
additional child tax credit - line 66 - $4719
Here is how your tax return would look
adding your grandmother as a dependent will affect
personal exemptions $28000
taxable income $0
tax liability $0
child tax credit - line 52 - $0
additional child tax credit - line 66 - $5000
So - the difference from claiming your grandmother is about $300
Most likely an auditor made a mistake by disallowing you additional child tax credit.
Please verify following items:
I feel that you are asking about 2007 tax return - http://www.irs.gov/pub/irs-prior/f1040--2007.pdf - not 2008 - please verify...
64 - $3,315 - that is your withholding from W2 - correct?
Did you make any contributions into 401k plan at work?
Oh my, I made a big mistake when giving you the above information! I do apologize...I gave you our 2007 return info, but I should have given you our 2008 info which is as follows:
no 401K contributions at work. 3234 is the amount of income tax withheld from W-2
I sincerely XXXXX XXXXX this mistake on my part. I am so flustered about the whole situation and one of my children was yelling at me the whole time I was typing that up earlier.
I updated information.
Here how your tax return should look if you do not claim your grandmother as a dependent - refund $7963
and here with claiming your grandmother - refund $8234
Please verify if you received recovery rebate credit for your small child - during 2008.
So the difference would be close to our original assessment ~$300 and most likely an auditor made a mistake by disallowing you additional child tax credit.
If you generally agree with the auditor - you may contact a superwisor and poin to the mistake.
If you disagree that claiming your grandmother was disallowed - you need to appeal.
You may use a worksheet from IRS publication 17 page 33 - http://www.irs.gov/pub/irs-prior/p17--2008.pdf
or IRS publication 501 page 20 - http://www.irs.gov/pub/irs-prior/p501--2008.pdf
and make your determination.
While professional help is not required - it is helpful in many situations.
You might need a local CPA or Enrolled Agent to represent you with the IRS
If you are a low income taxpayer - you may apply for help to Taxpayer advocate service - there is no charge if you qualify.
1-877-777-4778 or TTY/TTD: 1-800-829-4059.
A list of Taxpayer Advocate Service offices can also be found in Publication 1546 - http://www.irs.gov/pub/irs-pdf/p1546.pdf
The taxpayer can also file Form 911, Request for Taxpayer Advocate Service Assistance, with the Taxpayer Advocate Service, or request that an IRS employee complete Form 911 on his/her behalf.
Let me know if you need any help.