Cousin Audited by the irs?

You can’t help your cousin. You can print out the IRS publication 501 and give it to her, but certainly don’t lend her any money!

On a tax return, dependents are classified as one of two types. First there is “qualifying child” for a child who is legally or biologically related to the taxpayer. This requires the child live with the taxpayer for more than 6 months and not support themselves and the government generously allows the qualifying taxpayer to file as Head of Household and claim the exemption, the Child Tax Credit, the Child and Dependent Care Credit and the Earned Income Credit. The “best friends 2 kids” and the “bf son” cannot be claimed as a qualifying child at all. If your cousin did this at any time, she filed a fraudulent return.

The only legal way to claim a child who is not biologically or legally related to you is under the “qualifying relative” rules and these are very strict. The child live with the taxpayer all year, not just on and off; 2) that the parent either did not live with the child for 6+ months or that the parent had less than $4000 in income and is also a dependent of a taxpayer (because a dependent cannot claim dependents of their own)--because if the parent could have claimed the child, an unrelated taxpayer can't; 3) the taxpayer can prove they provided more than half of the child’s total support. Nothing in your post suggests your cousin can pass these tests. The IRS will not accept letters from the parents saying they left their child with the taxpayer. The proof has to be from disinterested third parties such as landlords, schools, doctors, social workers, etc.

If your cousin can’t pass the 2015 audit, she can expect all previous returns to be audited as well. If she listed the best friend’s children as her own, she can expect to owe a lot of money and even be banned from claiming EIC for her own child for the next ten years.

Her friend's kids actually had to live with her ALL year. The only way they had to live half the year is if she lied on her return about their relationship to her. If unrelated, they had to live with her ALL year.

She has no proof, she can't claim them. Consent doesn't matter, one cannot give away a child exemption, it does not work that way. A letter does nothing, it proves nothing. She CAN NOT claim the kids, they DO NOT qualify as her dependents. There is literally NOTHING she can do to make them qualify.

She should also prepare herself for the IRS to go back several years on her and disallow the prior years' claims as well. She's really put herself in a boatload of trouble here. Do not lend her money. She is not going to win this, she is going to end up owing money back for prior years.

If those kids didn't live with her for the ENTIRE year, she can't claim them. The mother CANNOT allow someone to claim the children who are not dependents under the law.

She needs to review IRS Pub 501 https://www.irs.gov/pub/irs-pdf/p501.pdf and amend the returns where she fraudulently claimed the children. If she claimed the EIC, she can plan on being banned from claiming the EIC for 10 years for filing multiple fraudulent claims.

Looks like your cousin will be getting a whole bunch of exemptions disallowed. She had no legal right to claim her best friend's kids if they were not living with her (on and off does not count). A letter is not going to help since it is not considered proof and all having it notarized means is that it was signed by the people who said they signed it.

she is way off base, first of all she can't claim the children of her best friend on her taxes as qualifying children, they are not related to her in any way

what she is attempting and may be able to claim is dependents in her household that live in that household the ENTIRE year, the do not make as much as their personal exemption, she provides more than 50% of their support and they cannot be claimed on another tax return

in this category they do not have to be related

as dependent with the 6 months residency they have to be directly related and children of a best friend does not make it

Your cousin will not get any money for the children that were not related to her. It doesn't matter how long these children lived with her or if she supported them. She may get a refund for her daughter.

She will owe money back from prior years. If you give her money, she will not be able to pay it back from her refund because she will not get a refund for the children she claimed that were not related to her.

Your cousin is clueless to say the least. You can't help her except by directing her to the relevant tax laws which she should peruse so she can find out how many of them she broke and how much the damage is likely to be.

No, a parent can't consent to a person claiming their kids who is not legally entitled to. and she has a bigger problem. Kids not blood-related to her have to live with her ALL year for her to claim them. If she claimed EIC for any of them including the bf's child, she's in even MORE trouble. She's going to lose this one.

If the children are 'school' age....then you need documentation from the school which will show the address they lived at.

see a lawyer who specializes in responding to irs questions, but the rules are posted on irs.gov