Tax Law Ignorance

[runwad]

A casual acquaintance just happened to mention to me that although she has been married a few years, she’s never changed her name and still files Single head of household. She has a college age student. She files this way on the fafsa too. Seriously! and this has not been caught by anyone. I told her I don’t think you can do that. She said she’s always been a single mom and filed head of household and she and her DH keep their stuff separate because of this. She actually has no clue that she is doing anything wrong, and I don’t know her well enough to say anymore than I did.

I guess I’m a little jealous of all the extra college aid and tax refund money she gets. While me the working stiff keeps slaving away getting nothing. Why aren’t situations like this caught by anyone? All I can think of is maybe they only got married in a church and didn’t notify the state? How else can it be that they can make out like this?

 

[barkley]

if she gets called for a fafsa verification she could be looking at repayment, fines and jail time because stepparent income/assets are reportable/countable (and it can just be a random pick-colleges do it all the time).


Why aren’t situations like this caught by anyone?

they are-and more often or not its because the person doing it blabs to someone what they're doing, and that person calls the fafsa fraud hotline to report them. same thing happened with many of the welfare cases I handled-and ignorance of the law is not an excuse (cripes-it says outright on the fafsa application what constitutes the household members whose income has to be reported). I'm guessing she IS legaly married b/c why else would she/her husband have to make a point of keeping their 'stuff separate' (unmarried it would legally be separate with no need to do anything to exclude him from fafsa or allow her to retain her single head of household filing status).

me thinks she/he know EXACTLY what they are doing.

 

[morgan98]

Well, I will chime in from the CPA side of this. To be honest with you, I think we give the government a lot more credit than they actually deserve for following things like this. Yes, you get married and it is generally filed in the local jurisdiction where you are married. it is on the woman to go to social security to change her name (if she is) and tell them she is married. Men have no such requirement. I know of no database that would alert the IRS to whether you are married or not.

That being said to lie and file incorrectly is fraud and there are stiff penalties. All I am trying to say is that not every government agency "talks" to other government agencies they way many of us expect them to.

 

[georgina]

A casual acquaintance just happened to mention to me that although she has been married a few years, she’s never changed her name and still files Single head of household. She has a college age student. She files this way on the fafsa too. Seriously! and this has not been caught by anyone. I told her I don’t think you can do that. She said she’s always been a single mom and filed head of household and she and her DH keep their stuff separate because of this. She actually has no clue that she is doing anything wrong, and I don’t know her well enough to say anymore than I did.

I guess I’m a little jealous of all the extra college aid and tax refund money she gets. While me the working stiff keeps slaving away getting nothing. Why aren’t situations like this caught by anyone? All I can think of is maybe they only got married in a church and didn’t notify the state? How else can it be that they can make out like this?

There is no rule that you have to change your name when you get married! Sure the rest of it may be wrong but that is OK.

 

[runwad]

^ Sorry I didn't mean to imply you had to change your name or there was anything wrong if you didn't, just that she specifically said she's not changed her name in order to still continue as things were when she was a single mom.

Probably in a few years when her kid is out of college she'll go thru the process. Whatever I guess it's not my business, I just couldn't wrap my head around how this has been allowed to happen. But as Morgan stated above the left hand doesn't always talk to the right. Since it's the status quo I can see how there wouldn't be any red flags raised. Wasn't sure of the whole process when you get married and how the IRS would know. I guess they don't!

 

[Alexle2007]

Much of the information collected at the state level doesn't get pushed to the federal level. That's why you have dead people still collecting Social Security benefits. And many of the federal systems don't talk to other federal systems. CMS has their own file of medical providers, SSA has its own file and the states who make level 1 and 2 disability decisions have their own provider file.

 

[tvguy]

Well, a large part of our tax system is based on voluntary compliance. And realistically speaking, looking at the tax money the IRS lost in OP's example, it probably isn't enough to offset the cost of an audit.

And having put two kids through collect, FAFSA is just a formality for most middle class parents to pave the way for loans, What they expect parents to contribute is usually more than most tuition and room and board costs at a public college.

 

[MillauFr]

How is what she is doing any different than many of us do when we order stuff online to avoid paying sales tax???? I know the law says I'm supposed to pay the Washington State Department of Revenue 9.6% of my online purchases but I never do.

 

[HM]

How is what she is doing any different than many of us do when we order stuff online to avoid paying sales tax???? I know the law says I'm supposed to pay the Washington State Department of Revenue 9.6% of my online purchases but I never do.

We did, every year.
Now NC collects sales tax on online purchases from the store. We no longer have to claim since we pay at time of purchase.

 

[TheGecko]

People's taxes are really none of anyone's business but their own. I do my best to be honest, but I am sure there was something missed most years which could benefit or potentially hurt me with my tax bill. At the end of the day it is the IRS's job to audit and enforce and not an acquaintance through a casual conversation. This obviously bothered you since it was posted on a message board.

She is peanuts compared to some of the nonsense I have seen in corporate America.

 

[MillauFr]

She is peanuts compared to some of the nonsense I have seen in corporate America.

Why on earth would you be upset that a corporation that makes billions in profit pays no taxes???

 

[Shanti]

I agree with the previous posters. Annoying as her skirting the rules is & getting a little more, it is nothing compared to what corporate America gets away with in relation to taxes. For example, ever notice how much more generous deductions are for "business-related expenses" (which can include first-class travel, four-star hotel stays, dining, etc.) than for medical expenses (which working families have to struggle to pay, particularly if they have a chronic illness in the family)?

The system-wide unfairness and abuse of the tax code is what outrages me, more than individuals making small transgressions (she does at least pay taxes, which some whole corporations don't). I agree that woman is dishonest & is doing the wrong thing. But when you get mad at the person standing next to you, maybe you should look up, instead, and direct that anger at some of the powerful, who get away with much more.

 

[Dakota731]

She is peanuts compared to some of the nonsense I have seen in corporate America.

Most companies in the Unites States are just taking the legal loopholes that are available to them because of the exemptions found in the 70,000 pages of our tax code. That's why I would vote for either party who agrees to get rid of this ridiculous system and just take 10% of everyone's income including corporations and get rid of all the mumbo jumbo that was just initiated just to get a certain group's vote in the first place. Take it right off the paycheck just like social security and put an end to all the millions of dollars that are put into the IRS and filing taxes each year.

 

[Shanti]

Most companies in the Unites States are just taking the legal loopholes that are available to them because of the exemptions found in the 70,000 pages of our tax code. That's why I would vote for either party who agrees to get rid of this ridiculous system and just take 10% of everyone's income including corporations and get rid of all the mumbo jumbo that was just initiated just to get a certain group's vote in the first place. Take it right off the paycheck just like social security and put an end to all the millions of dollars that are put into the IRS and filing taxes each year.

A 10% tax on everyone's income would make life much harder for those who can barely afford to get by as it is, and would be a windfall to the very rich, who already have more money than they could spend in 10 lives. That's why we (and other advanced countries, like those in Europe), have a progessive tax code that has different rates based on income.

Agree with you that the American tax code has way too many legal loopholes for corporations.

 

[kymom99]

Now see, I disagree with the majority here. Just because this is one person and not a lot of money in the scheme of things doesn't make it any less wrong. The fact she chose to tell on herself makes it the OPs business. That's usually how criminals get caught and this lady is breaking the law to get assistance she is likely not entitled to.

Let me give you a similar example from my own life. My son, who is a complete and total rule follower in general and a kid every parent likes to have hanging around their kid, got himself into some trouble. His friend (or should I say former friend) chose to do some shop lifting at a local amusement park. My son, because he did nothing to stop it, got in trouble right along with him. We got a call from security, he was ejected, and his pass revoked. I stood right behind the decision because I told him he was wrong to watch and not at least remove himself from the situation. Shoplifting costs all of us money.

The OP here has every reason to be angry about this. Heck, I'm angry too. I'd have to at least consider reporting this.

 

[mom2my3kids]

I know a couple people who claim a grandchild on there return to get the earned income credit..very wrong and I told them that you don't mess with the IRS but they don't care...One woman's daughter has six kids so it does not hurt her to let her mom claim him...baffles me...

 

[disneydacey]

I worked with a woman whose husband was a union master plumber so he was making good money. She claimed she was a single mother to get free daycare and WIC (food stamps in MA). It made my blood boil.

 

[Dakota731]

A 10% tax on everyone's income would make life much harder for those who can barely afford to get by as it is, and would be a windfall to the very rich, who already have more money than they could spend in 10 lives.

No who it hurts is the middle class. The lower income brackets often pay no tax due to head of household, earned income tax credit etc. It is the WORKING middle class who pay out the nose. We are in the middle of the middle class bracket and 10% would be a welcome break for us. And everyone has a different idea of what rich is (usually someone who makes more than us!) so I say how about a FAIR tax where everyone pays something and the rich will pay more - 10% of a million is more than 10% of $45,000. I'm not one of those people who who thinks everyone who is "rich" is evil. Most wealthy people I know have worked hard for their money and have gone to school longer than I wanted to and work longer hours than I care to. Why should they be punished for their hard work? Contrary to popular opinion most well to do Americans didn't inherit their money, but either had a great idea, worked hard to get through law or medical school or started a small business which is a risk in itself. We really have to get away from this US vs THEM mentality.

 

[Dakota731]

That's why we (and other advanced countries, like those in Europe), have a progessive tax code that has different rates based on income.

Which is why wealthy people in Europe often set up residency in the US to avoid the high taxes in Europe: Ireland citizens pay 48% over $40,000, Belgium - pay 50% of their income over $45,000, Austria 50% over $74,000, Netherlands 52% over $70,000, Denmark 55% over $70,000, and Sweden 56% over $85,000 so the grass isn't always greener ....

 

[MillauFr]

If the wealthy really wanted to take advantage they would move to Washington State. Best state in the country for the wealthy to avoid paying taxes. The state and local governments only like to tax lower income residents here.