Section 8 / IRS / Shady accountant?

[Ed O.]

I have another odd situation on my hands.

I need all responders to start by making one assumption - the story I have been told is true. Yes, I totally realize this may not be the case, but I'm trying to understand how this could be true or why it would have happened things are true. Oh, and I also need to be able to make a compelling argument that it's ture, which may be difficult.

I get a call from a tenant. They're in hot water with Section 8. The tenant turned in her 2011 tax returns and on them, they show approximately $10,000 of income from a day care business.

Tenant denies ever running a day care business or providing child care and based on some of my knowledge, was incapable of operating one for at least part of the year. I have never seen any evidence of this as well.

The tenant had income, not counting the mysterious child care income, of somewhere around 3-5k on the year. Also, the accountant took a deduction for over $7000 in supplies for a salon that generated less than $500 in income.

At the end of the day, she got a fat return and fat problems with the housing authority for not reporting income changes.

So, the lingering question is, how would someone benefit from showing 10k in income for which there were no witholdings. The tenant is taking a firm position that the bookkeeper added in the income and she has no idea what it's from and that she didn't look at her taxes at all. Not surprisingly, her taxes were completed by a possibly unscrupulous fly by night operation.

I have been trying to get on the phone with the tax preparer and may have the opportunity to speak with her in the next few days to get to dive into the true issue at hand.

Thanks in advance!

[Account Closed]

When you all are saying fat tax return, you mean a fat tax refund, correct?

For someone who is head of household with a qualifying child, there is a sweet spot for getting the maximum earned income credit (which is a refundable credit. I think it's around $11K OR 13K or so. Over reporting or falsely reporting Schedule C income allows people to get a $1500+ refund, even after paying SE tax.

I say don't get involved in any of this. Don't call the tax preparer, don't call Section 8. This has nothing to do with you. Let the tenant resolve the issue....or not. She signed her return and she got the refund. I'm guessing she didn't save it to pay her rent. There's numbers and there's numbers. She screwed up by telling the IRS one number and Section 8 a different number.