- 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

How to Avoid Financial Scams

Avoid getting duped by financial scams.

View Course »

Basics Of The Stock Market

Stock Market 101 - everything you need to know but were afraid to ask!

View Course »

TurboTax Articles

Tax Tips for the Blind

Anyone whose field of vision falls at or below 20 degrees, who wears corrective glasses but whose vision is 20/200 or less in his best eye, or who has no eyesight at all, meets the legal definition of being blind and is eligible for certain tax deductions.

What is Form 4255: Recapture of Investment Credit?

When is a tax credit not a tax credit? When the IRS takes it back. If you're in the situation where you have to file IRS Form 4255, you might have to pay back a tax credit you've earned in prior years. This process, known as recapture, occurs if you claim a credit -- in this case, a credit for a specific type of business investment -- and then no longer qualify for that credit.

The Most Important Tax Forms for ALEs (Applicable Large Employers)

In 2015, some parts of the Affordable Care Act specifically apply to businesses, in particular, large employers. The Employer Shared Responsibility provisions affect companies with 50 or more full-time employees or an equivalent of part-time or seasonal workers. These companies are called Applicable Large Employers, or ALEs. 2015 is considered a transition year as everyone gets used to the new normal for workplace health plans.

Employer Sponsored Health Coverage Explained

The Affordable Care Act, also known as Obamacare, is simpler than some people may give it credit for. The basic rule to remember is that everyone must carry Minimum Essential Coverage (MEC) or pay a penalty. Employers with 50 full-time employees or more are obligated to sponsor plans for their workers to help them meet this requirement.

How to Report RSUs or Stock Grants on Your Tax Return

Restricted stock units (RSUs) and stock grants are often used by companies to reward their employees with an investment in the company rather than with cash. As the name implies, RSUs have rules as to when they can be sold. Stock grants often carry restrictions as well. How your stock grant is delivered to you, and whether or not it is vested, are the key factors when determining tax treatment.

Add a Comment

*0 / 3000 Character Maximum