1. 1.Is information provided to the IRS confidential?

  2. The information provided to the IRS is confidential pursuant to Section 6103 of the Internal Revenue Code, which would include information provided to the IRS that would indicate the individual is working without authorization or with a false SSN. 

  3. The House Ways and Means Committee, Subcommittee on Oversight addressed the confidentiality of taxpayer information as applied to undocumented workers in a March 10, 2004 hearing. 

  4. In addition, the Colorado Supreme Court held that tax information provided to a tax preparer is protected under the Colorado and U.S. Constitutions. 

  1. 2.What are some of the common issues relating to undocumented or foreign born U.S. tax filers?

  2. Often, the issues involved in filing a tax return for an undocumented individual will turn on filing status, who can be claimed as a dependent, and if they taxpayer is entitled to claim the Child Tax Credit and Additional Child Tax Credit.  In order to claim a dependency exemption for an individual, the  would be dependent must qualify under the IRS definition of a dependent. 

  3. See also IRS Publication 501, Exemptions, Standard Deduction and Filing Status

  4. 26 USC Section 152, Definition of a Dependent

  5. Generally, the tests to determine whether an individual qualifies to be a dependent are:

  6. Relationship Test

  7. The individual must be a “qualifying child” or a “qualifying relative.”  The list of persons that can be a dependent under both of these tests are: 1) sons and daughters; 2) nieces and nephews; 3) parents; 4) grandparents; 5) grandchildren; 6) stepchildren; 7) parents-in-law; 8) brothers and sisters; 9) and persons who are not specifically listed if the person lived with the taxpayer for the entire year.

  8. To be a qualifying child the individual must be: 1) is  the son, daughter, stepchild, brother, sister, niece or nephew of the taxpayer; 2) who resided with the taxpayer for more than one half the tax year; 3) was less than 19 years of age at the end of the tax year or a full time student less than 24; and 4) who could not be claimed as an exemption for another person.    A taxpayer who has one or more qualifying children may qualify for additional tax benefits such as the Child tax Credit, Addition Child Tax Credit,Head of Household status and Earned Income Tax Credit.  These tax benefits may have additional qualifiers.  For example, to claim the Child Tax Credit, the child cannot have provided more than 1/2 of his or her own support.  Whereas, there is no support test for the Earned Income Tax Credit.  In addition, to claim the Child Tax Credit, the child would have to be less than 17 in the tax year.     

  9. Support Test

  10. Taxpayer must provide over 50% of the financial support for the dependent if they dependent is qualifying as a qualifying family member rather than a qualifying child.

  11. Joint Return Test

  12. The dependent cannot have filed married filing jointly with his or her spouse, unless the filing was only made to claim a refund.

  13. Citizenship Test

  14. Dependent must be a resident of the U.S., Mexico or Canada.  Taxpayers can only claim dependents who qualify as dependents under the family relationship test rather than the member of the household test as exemptions if the individual does not live with the taxpayer.  Whether a dependent lives in the U.S., Mexico or Canada will impact the expectation of support necessary to support a dependent.   

  15. CIA World Facebook

  16. Average World Salaries

  17. USAID Report for Mexico - In 2002 GDP for Mexicans was reported to be $6,884 but 53% of individuals, over 50 million people, reported annual income of less than $720.

  18. Wikipedia World Median Income Report

  19. UNICEF Economic Data by Country

  20. Household Income and Expenditure Statistics for MX household income

  1. 3.Can I file married filing jointly with my wife even though she lives abroad?

  2. Yes.  You and your wife can elect to have her treated as a tax resident.  If you file married filing jointly with your spouse, then your spouse’s income from abroad will have to be included on your tax return.

  1. 4.I am married to someone who is undocumented.  Can I file head of household?

  1. If you lived with your spouse the last 6 months of the tax year, then you do not qualify to file as head of household.  To qualify as head of household you must be considered “unmarried” according to the Internal Revenue Code.  To be considered unmarried you must be single, legally separated by court order, or lived apart from your spouse for the last 6 months of the tax year. 

  1. 5.Do I have to provide a HUD statement to the IRS to claim the New Homebuyer Credit?

  1. Yes.  Congress implemented documentation standards to prevent fraud.  Therefore, claims to the New Homebuyer Credit must be filed on paper.

  1. 6.I am a U.S. Citizen or lawful permanent resident working outside the U.S.  Do I need to file a tax return?

  1. Yes.  However, you may be entitled to claim the foreign income exclusion and other deductions for purposes of reducing your tax.  You must also disclose foreign assets.   

  2. If you are working as a subcontractor or are self-employed while working outside of the U.S., then you will still be subject to the Self-employment tax, which is 15.3% of your income.

  1. 7.How will an IRS lien impact me?

  1. There are different kinds of IRS liens and levies.  But an IRS lien that is filed in the public records will appear on your credit report and can impact your ability to find employment and your credit rating.  A lien that has been paid will ordinarily remain on your credit for 7 years.  Unpaid liens will remain on a credit report from 7 to 15 years. 

  1. 8.Can IRS withdraw the lien after it has been filed?

  1. There are special circumstances where a withdrawal is statutorily permitted.

  1. 9.Who is an unenrolled tax preparer and what can they represent me before the IRS?

  1. Unenrolled tax preparers are individuals who are authorized to prepare tax returns.  In tax year 2011 the IRS will require these individuals to be registered and will require competency testing in 2011 or 2012.  However, at the moment these preparers are not required to have any particular training or competency to prepare a tax return.  They can assist a taxpayer in the examination of the return when the individual was the preparer of the actual return.  However, they cannot continue to represent the taxpayer after the case has gone to collections. 

  1. Unenrolled preparers are permitted to:

  2. *prepare tax returns

  3. *assist taxpayers on examinations of returns prepared by the preparer

  4. *receive transcripts of taxpayer returns via a 2848 or 8821

  5. Unenrolled preparers are not permitted to:

  6. *receive or endorse refund checks;

  7. *represent a taxpayer on a return that was not prepared by the individual in an audit or any

  8.    other IRS proceeding.

  9. Enrolled agents, Certified Public Accountants, and Attorneys are the only individuals who can receive refund checks or represent a taxpayer in IRS proceedings, other than as previously discussed.     

  1. 10.Can I claim my girlfriend and her children as my dependents?

  1. You may be able to claim them as exemptions on your tax returns under rules to qualify dependents under the family relationship test.  In particular, because they are not related as one of the listed relationships, then they can only be your dependent for purposes of the exemption if they lived with you the entire year.  You still must have provided more than 50% of their support and they could not have earned more than the exemption amount in the tax year.

  2. However, you cannot claim these persons as “qualifying children” for the Earned Income Tax Credit, Child Tax Credit, Additional Child Tax Credit, or child care credit because they are not related to you by blood as one of the specifically defined qualifying relationships.  If you were to marry your girlfriend or you are in a common law marriage state, then her children could qualify as your step children.

  1. 11.I received my my Social Security Number in removal when my lawyer filed for a work authorication.  I have a cancellation of removal case.  I heard that I can apply for tax benefits for prior years.  Can I get a refund from prior years or reduce my tax debts?

  1. You may be able to retroactively claim Social Security Number based tax benefits.  The amount of credit will depend upon you marital status and how many qualifying children you had living in your household during the tax years.  You must have been a tax resident in the tax year.  You may be entitled to a refund or these credits can be used reduce any taxes owed.  You can claim refunds for up to 3 prior years.  It is important to ask your immigration lawyer to file the documentation to obtain a Social Security Number for all your children because you will not be eligible for any of the benefits if they do not have a Social Security Number. 

  2. IRS Chief Counsel Opinion Regarding Retroactive Claim to EIC

  3. Claiming these credits is a very complicated procedure and you must be prepared to provide proof of residence for the qualifying children in each of the tax years you want to claim the credits.  In addition, you should not attempt to claim refunds by claiming dependents who are not your children and should not work with a tax preparer who suggests that you claim improper dependents.  If you claim these credits incorrectly or fraudulently, then your future immigration benefits could be denied.

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Disclosure, Privacy and Privilege

You cannot rely on any information on this website for legal advice.  The tax preparer privilege is limited.   Generally the IRS considers information provided to a preparer, even if the preparer is a lawyer or CPA,  for the purpose of preparing a tax return, as information that is not privileged for the purpose of responding to a criminal, IRS or other government proceeding.  Information that you provide to us or any tax preparer for the purpose of preparing your tax return cannot be divulged to a third party without your express consent. 

Disclosure on Nature of this Entity

This is not a law firm.  All services provided by this company are not considered the “practice of law” per the Internal Revenue Code and IRS Circular 230.


Copyright, Atlas Tax Service, DBA Rock & Hardin, 2011