- Days left

IRS to mom of two: You can't possibly live that cheap

Rachel Porcaro is the manager of a hair salon, and to look at her, you wouldn't think "tax fraud." If you were to walk into her home, you probably wouldn't think "these kids are obviously fictions of her imagination!"

According to the The Seattle Times, to see her with her two boys, 10 and 8, where they live with her parents, the three look more like a normal family headed by a single mom than any you could imagine. She works, pays her parents $400 rent a month, and pays to feed, clothe and provide for their preteen needs: toilet paper, toothpaste, soap.

That's not how the IRS sees it. Porcaro, the agency says, is making far too little, half the average necessary for a mom to survive with two children in the Seattle area.

At first it audited her, seeking to recover what the government said were $16,000 in unpaid taxes for that income officials were sure she must have been receiving under the table, somewhere.

When they couldn't find the hidden income, they decided she was lying about something else: supporting her children. Living with her parents hmm? Well, grandpa and grandpa must be paying her children's way! Shockingly, Porcaro wasn't keeping receipts for the food and T-shirts and shoes and soap she bought for her kids, so the IRS started auditing her parents; costing them $10,000 in accountant bills and yielding a discovery of absolutely zero fraud.

No matter. The IRS is resilient, and still believes mom wasn't supporting her own children, how could she? She got to keep her earned income tax credit -- which sparked the audit in the first place -- and was told she would have to pay back the taxes she owed due to fraudulently claiming her own children who lived with her as dependents.

A few weeks ago, after giving up on producing proof that she did, indeed, support her own children, she paid back $1,438 plus penalties and interest.

Now, her dad tells the Seattle Times, "we don't buy a roll of toiler paper anymore without keeping the receipt."

And what really irks the family is how focused the IRS was on targeting their family for living in an old-fashioned family-first kind of arrangement, three generations under one roof.

In this era of rising food prices, tight credit, urban areas exceeding their growth boundaries, and climate change, doesn't it make sense to reclaim some of the sensible efficiencies of all the centuries of our history up to this one? Multi-generational living has never been more of a rational decision; I know many families who've adopted it for both financial and environmental reasons, not to mention the benefit of sharing the load of childcare.

I just hope the IRS isn't going to go after them, too.

Increase your money and finance knowledge from home

What is Inflation?

Why do prices go up?

View Course »

Understanding Credit Scores

Credit scores matter -- learn how to improve your score.

View Course »

TurboTax Articles

Will Medicare/Medicaid be Impacted by ACA?

The Affordable Care Act put in place significant tax-related programs that impact Medicare and Medicaid, such as increased Medicare taxes on earned and unearned income for high-wage earners, and Medicaid changes that increase the number of insured individuals. Establishing whether you are affected by the ACA-imposed taxes, or are eligible for certain health programs that fall under the Centers for Medicare and Medicaid Services, is determined by filing your income tax.

8 Things You Think Are Tax Deductible That Aren't

There?s a fine line between looking to save money on your taxes and taking deductions that will raise eyebrows at the Internal Revenue Service. Some taxpayers are tripped up by expenses that they assume are tax deductions, but don?t qualify under IRS guidelines. Here are a dozen items that can lead to unpleasant surprises in case of an audit.

Essential Tax Forms for the Affordable Care Act

The Affordable Care Act (ACA), also referred to as Obamacare, affects how millions of Americans will prepare their taxes in the new year. The law now includes penalties for all who haven?t obtained health insurance -- and those penalties are expected to be paid at tax time. The ACA also provides tax credits to help people pay for insurance, and you can claim those credits when you file your taxes. The Internal Revenue Service (IRS) has introduced a number of tax forms to accommodate the ACA.

How to Determine if You Have Minimum Essential Coverage (MEC)

The Affordable Care Act, also known as Obamacare, requires most Americans to have health insurance that meets a government standard known as "minimum essential coverage," or MEC. Whether your insurance qualifies as MEC depends not on the plan itself, but on how you obtained your coverage.

What are 1095 Tax Forms for Health Care?

In 2014 the Affordable Health Care Act, also known as Obamacare, introduced three new tax forms relevant to individuals, employers and health insurance providers. They are forms 1095-A, 1095-B and 1095-C. These forms help determine if you need to comply with the new shared responsibility payment, the fee you might have to pay if you don't have health insurance. For individuals who bought insurance through the health care marketplace, this information will help to determine whether you are able to receive an additional premium tax credit or have to pay some back.

Add a Comment

*0 / 3000 Character Maximum