Monday, March 28, 2011

Questions for the Tax Lady: March 28th, 2011

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question: My ex wife let a friend of hers claim our son as a dependent on their taxes, is this legal?

YIKES! Short answer: no this is not legal. Taxpayers are only allowed to claim dependents on their taxes in very specific circumstances. According to the IRS, to claim someone as a dependent they must meet IRS tests for Qualifying Child (including their age, your relationship, where the child lives, who supports the child financially and more) or a Qualifying Relative. From the sound of it, your ex wife’s friend is not able to claim your son as a dependent.

Kids are not commodities you can lend to someone for tax purposes. To avoid the consequences of an audit and a disallowed dependent exemption, your ex wife’s friend should immediately file an amended tax return and pay the difference in tax bills.

Question: If I owe the IRS do I need to pay by check? Can I use a credit card instead?

You can absolutely pay the IRS by credit card. There are a variety of services you can use to do so (See here). Paying with a credit card can be more convenient and payments are securely completed using trusted online services. Paying with your card lets you avoid costly IRS penalties and interest (of course, on the other hand, if your credit card has a high interest rate, you might end up paying more than you would on an IRS installment agreement).

Remember, there are convenience fees for paying with plastic. Those fees can tack on a pretty penny, up to 2.35% of the total. So, be sure you understand that before you enter your information.

For more information on paying the IRS with a credit card, click here.

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