- 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

Building Credit from Scratch

Start building credit...now.

View Course »

Goal Setting

Want to succeed? Then you need goals!

View Course »

TurboTax Articles

What is IRS Form 8379: Injured Spouse Allocation

The Internal Revenue Service (IRS) has the power to seize income tax refunds when a taxpayer owes certain debts, such as unpaid taxes or overdue child support. Sometimes, a married couple's joint tax refund will be seized because of a debt for which only one spouse is responsible. When that happens, the other spouse is said to be "injured" and can file Form 8379 to get at least some of the refund.

What are 1095 Tax Forms for Health Care?

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.

A Tax Guide for Solopreneurs: Self-Employed Tax Tips

Flying solo can be the ultimate business adventure. When you run your own business and you're the only employee, you truly hold all the cards and earn the freedom to achieve your ideal work-life balance. Working for yourself also brings tax advantages not available to those who work for others. It's important to understand the tax rules that apply to the self-employed to profit the most from these.

Add a Comment

*0 / 3000 Character Maximum