For the purposes of this scenario, you must explain to Inez why her refund is the way it is. As the tax preparer or quality reviewer, your job is to explain to the taxpayer why your work is correct and why this return resulted in the refund that it did. Remember, you are dealing with a taxpayer who is unhappy with your work. For this assignment, you are not required to re-explain to me the results of the return again. Rather, I am looking for a procedure you would use to assure the taxpayer the result of your work are accurate. Remember, all of the policies and procedures that were used in the preparation process. Be creative.

QUESTION

Midterm Exercise

The following scenarios are based on actual returns and situations that have occurred in this years VITA program. The responses provided here would be similar to those you would provide to actual taxpayers in the event a similar situation would occur.

Scenario

Inez Sanchez, age 49, ITIN # 933-12-1987 is married but has been separated from her husband since March 3, 2017. She is a housekeeper for Acme Hotels Inc. She has four daughters, all born and raised in the U.S. who lived with her the entire year who she fully supports. No one had any health insurance for the entire year

Name Date of Birth Social Security Number Earnings

Polet Sanchez 09/09/2006 454-11-2222 $0

Jessica Sanchez 07/07/2004 453-11-2222 $0

Stephanie Sanchez 05/05/2002 452-11-2222 $0

Juanita Sanchez 03/03/1995 451-11-2222 $8000

For legal reasons, she tells you that she wants to file a paper return. She also wants her refund mailed to her.

Inez’s Refund for 2019 was $4,600.

After completing Inez’s return, she mentions to you that many of her friend’s and co-workers who make about the same amount of money and have the same number of children got almost double of what she is getting?

Obviously, one of the major reasons is that she has an ITIN number and not a social security number which does not make her eligible for EIC. Another reason is because she has a child who is over 24 and makes more than $4250. Lastly she has a child who turned 17 in 2019 and is no longer eligible for the child tax credit

As usual the taxpayer is upset and believes that the return was not completed correctly. As the tax preparer or quality reviewer, your job is to explain to the taxpayer why your work is correct and why this changed occur

In the preparation process, all UIW-VITA procedures were followed and the results of your return are 100% accurate.

Instructions

For the purposes of this scenario, you must explain to Inez why her refund is the way it is. As the tax preparer or quality reviewer, your job is to explain to the taxpayer why your work is correct and why this return resulted in the refund that it did. Remember, you are dealing with a taxpayer who is unhappy with your work. For this assignment, you are not required to re-explain to me the results of the return again. Rather, I am looking for a procedure you would use to assure the taxpayer the result of your work are accurate. Remember, all of the policies and procedures that were used in the preparation process. Be creative.

ANSWER

Dear Inez Sanchez,

I understand that you are concerned about the refund amount you received and believe that the return was not completed correctly. As the tax preparer or quality reviewer, it is my responsibility to explain to you why the refund is the way it is and assure you that our work is accurate. I will address each aspect that has affected your refund and provide a clear explanation for each.

Firstly, one of the major reasons why your refund amount is different from that of your friends and co-workers who have similar income and family size is due to your Individual Taxpayer Identification Number (ITIN) instead of a Social Security Number (SSN). The Earned Income Credit (EIC), which is a significant credit that can increase the refund amount, is only available to individuals with a valid SSN. Unfortunately, individuals with ITINs are not eligible for the EIC. This is a legal requirement set by the IRS, and we have followed the established procedures correctly by not including the EIC in your return.

Secondly, the fact that you have a child who is over 24 and earned more than $4,250 during the tax year also affects your refund. According to IRS rules, a child who is over the age of 24 and has income exceeding the threshold is not considered a “qualifying child” for tax purposes. Therefore, you cannot claim the Child Tax Credit for this child. This change in eligibility reduces the overall tax benefits you can receive, which in turn affects your refund amount.

Lastly, one of your children turned 17 during the tax year, which means they no longer qualify for the Child Tax Credit. The Child Tax Credit is available for children under the age of 17, and once a child reaches this age, they are no longer eligible for the credit. This change further impacts the refund amount you would have received if your child was still eligible.

It is important to emphasize that our work has been done diligently and in full compliance with the policies and procedures set by the IRS and the UIW-VITA program. We have accurately reported your income, deductions, and credits based on the information you provided. The refund amount you received is a direct result of these factors and the tax laws that govern them.

I understand that it can be disappointing to see that others in similar circumstances may receive a larger refund, but it is crucial to remember that each taxpayer’s situation is unique and can result in different outcomes. Various factors, such as income, family size, and eligibility for specific tax credits, contribute to the final refund amount. In your case, the combination of an ITIN, a child over 24 with income, and a child who turned 17 affected your refund.

Please be assured that our goal is to provide accurate and thorough assistance to all taxpayers, including yourself. We are committed to following the established guidelines to ensure compliance and fairness in the tax preparation process. If you have any further questions or concerns, please do not hesitate to ask. We are here to help you understand your tax return and provide any additional clarification you may need.

Thank you for your cooperation and understanding.

Sincerely,

[Your Name]

[Your Title/Position]