Fraud and Earned Income Tax Credit

jlhug

No surprise to me or any other tax professional but there is fraud, lots of fraud, resulting from the Earned Income Tax Credit. Yep, over the last 10 years the IRS has paid out more than $110 billion in fraudulent EITC claims according to a report by the TIGTA. The report also estimates that somewhere between 21% and 25% of the EITC claims are fraudulent in 2012.

This may explain why I question the honesty of many who receive welfare, SNAP, housing assistance, etc. and people in general. I have the privilege of telling people to leave my office when I get a whiff of fraud. Of course that doesn't stop them from preparing their own fraudulent return or going down the street and lying to the next preparer.

Here is a link that might be useful: TIGTA report

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demifloyd(8)

jlhug--my MIL was a tax preparer until a few years ago and every year she told me how many people she turned away and refused to do the returns when she asked certain questions or ascertained certain information that showed that people were committing fraud and attempting to when filing their tax returns because of the earned income tax credit.

BILLIONS of taxpayer money wasted and misused, and they want MORE from those that do pay federal income taxes.

It is shameful.

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chase_gw

If you upped the minimum wage and put the burden of wages on the corporation and not the taxpayer there would be no EITC.

Programs such as this are magnets for fraud and /or manipulation.

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silversword(9A)

Oh for the Love of Logic Chase!!

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jlhug

Chase, while I agree with your logic, I'm not sure that would solve the problem. It would drive more money into the underground economy.

Do you remember the example of what an increase in minimum wage would do to a small "mom and pop" business that I posted a few weeks ago?

I know how very difficult it is to take an entitlement away from people who are used to getting it every year. My experience is that once a program such as EITC or the Additional Child Tax Credit and refundable portions of the American Opportunity Credit is put in place, it will never go away. Eliminating them would hurt the people who have come to depend on them too much.

Those credits will never go away and people will continue to scheme on how they can get the max refund with the lease effort.

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lottirose

Interesting factoid - so only the poor commit tax fraud? I don't think so. My brother in law's wife (my sister) and I owned a property jointly and he called me at tax time to tell me how to handle the sale of said property on my tax form - he is quite well to do and "needed some capital losses". I am poor but honest. I talked to a widely respected tax person who did taxes for both my daughter and her business although I already knew the answer because I am poor but not stupid. He committed fraud - I did not. I paid tax on my share - he did not. He did not get caught which I think says something about how fragmented oversight of the tax system is - one property - two filers - two different stories.

So yes, tax fraud is likely widespread - next story?

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jerzeegirl(9)

This may explain why I question the honesty of many who receive welfare, SNAP, housing assistance, etc. and people in general.

Cheating on the EIC is not reserved to those receiving welfare or are on snap.

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demifloyd(8)

Lottirose--the wheels of the IRS sometimes are slow, but don't assume your BIL's return won't be examined and the discrepancies noted--it make take a few years.

Of course you could always report him--go to your local office and ask for an agent or representative from the Criminal Investigation Division to see you or contact you if you don't live in a city with an office staffed with agents.

I think people would be surprised at how many criminal cases are initiated from information coming from family members, ex wives and girlfriends and disgruntled employees and business partners.

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jlhug

Nope, I did not say that only the poor commit tax fraud. There is fraud at all levels of income. And all fraud should be prosecuted to the fullest extent of the law.

Lottirose, thanks for being honest. As a taxpayer, I appreciate it.

I am pointing out that contrary to what some posters believe the poor can and do commit fraud annually. While each incident of EITC fraud may cost the taxpayers $6,000 or less, when it is totaled, it adds up to some very large numbers.

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lottirose

It certainly never occurred to me that the poor do not commit fraud - in fact I tend to believe that the more financial pressure one is under the more attractive less than honest behavior becomes - but humans are also by nature greedy and having plenty is certainly no deterrent to dishonesty - I suspect that it is much more widespread than many of us would like to accept - and at all levels of society - it has occurred to me that it is possible that each of us has some point of temptation where he will step aside from the principles he was taught and by which he has tried to live his life - but for some it is obviously more easy than for others. Dishonesty whether small or large, committed by the rich or the poor, is still a corrosive act that does harm to the perpetrator as well as to those against whom it is perpetrated.

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mrskjun(9)

I think that jhug was simply pointing out EITC specifically, and the amount of fraud that goes on in just that one area of taxes. I'm sure at all income levels some fraud is being committed. She was pointing out the cost of fraud to taxpayers in one particular area. I think if you know the numbers in other areas we would be just as appalled. It should make every taxpayer angry when they are honest and pay what they owe only to see someone cheat to get more.

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demifloyd(8)

It should make every taxpayer angry when they are honest and pay what they owe only to see someone cheat to get more.

*

Unfortunately, there is a large percentage of people that do not contribute to the federal revenue system, so many just don't care.

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ohiomom

Chase funny you should mention that ... and this is just the fast food industry.

"... low wage business models that this industry is based on drains resources from the economy by forcing low-pay workers to rely on public assistance in order to make ends meet.”

These public assistance programs include the earned income tax credit, SNAP benefits (also known as food stamps), Medicaid, the Children’s Health Insurance Program, and the Temporary Assistance for Needy Families program. The largest of these is Medicaid. “Almost 90% of workers in the fast-food industry do not get health insurance," Temple said. "In addition to being a low-wage business model, it is also a virtually no-benefit business.”

I wonder who is costing the taxpayers more, the low wage workers or the corporations?

Here is a link that might be useful: source of course

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david52 Zone 6

Interesting study. I never would have guessed that identity theft would lead to $5.2 billion in bogus payments - a full third of the estimated $15.5 billion in bogus payments for the earned income tax credit.

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jerzeegirl(9)

Nope, I did not say that only the poor commit tax fraud. There is fraud at all levels of income. But those with lower incomes are the only ones you singled out so you can understand why some of us are scratching our heads wondering why you picked on the poor.

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lottirose

"Of course you could always report him--go to your local office and ask for an agent or representative from the Criminal Investigation Division to see you or contact you if you don't live in a city with an office staffed with agents."

This is where I draw the line - I police myself. I am not my brother in law's keeper. So perhaps this is the point where my dishonesty kicks in. Whatever, I would never turn anyone in to the IRS - and I have had more than one life event where this was tested - although there are crimes that I could not overlook.

I would not have mentioned this publicly at all if the statute on it had not expired. What brother in law told me was that his tax person said the decision could be defended as an honest mistake if questioned - I suspect that a lot of "honest" mistakes take place around mid April every year.

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demifloyd(8)

Posted by jerzeegirl 9 (My Page) on
Tue, Oct 22, 13 at 19:17

Nope, I did not say that only the poor commit tax fraud. There is fraud at all levels of income. But those with lower incomes are the only ones you singled out so you can understand why some of us are scratching our heads wondering why you picked on the poor.


*

Hmmm..

Who knows?

Why do you and other posters only pick on the rich?

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pls8xx

Fraud committed by the poor? Am I missing something here? Seems to me that it's the poor who are likely getting the credits lawfully as the program is pointed to that end. If there are those scamming the system, isn't it likely they are those that are not so poor?

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jlhug

The TIGTA report only addresses EITC fraud that's why I started discussing it.

1 out of every 4 or 5 returns has fraudulently claimed EITC. That number disturbs me. If people are going to cheat on their taxes, doesn't it stand to reason that they may cheat on their applications for assistance? It does to me. Yet over and over, posters here swear that fraud in the entitlement applications isn't a big enough problem to be concerned about.

I can't find any stats on which type of return or economic bracket shows more fraud. I will post again the "tax gap map" for 2006. The tax gap for those of you that aren't familiar with the term is the difference in taxes paid and taxes owed. Underreporting by individuals causes half of the tax gap. Corporation underreporting of income is about a quarter of individual underreporting or about 15% of the tax gap. Corporations make many, many times more money. That tells me corporations do a better job of accurately reporting income. If you look at the nonpayment and underpayment columns, you will see that we as individuals lead in those areas as well. Corporations are far more likely to get audited than individuals and high income individuals are far more likely to get audited than low income individuals.

The amount that an individual may fraudulently underreport may be small but there are many more individuals. The total fraud by individuals is greater than that of corporations.

Sorry, collectively as individuals, we are a bigger problem with fraud and not paying what we owe than corporations are.

Here is a link that might be useful: Tax Map Gap

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mrskjun(9)

pls..you are probably right. Those that are entitled would not be cheating. It would only be the ones who are not entitled, so sounds like jhug may be picking on the middle class...shame shame lol.

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Iris GW

contrary to what some posters believe the poor can and do commit fraud annually

Who would that be? Of course people at all levels commit fraud. And people of all types: democrats, republicans, independents.

My hair guy was telling me this weekend that his partner is a dedicated Republican. And he doesn't report his income, and he runs a business out of his house when it is not zoned to be used that way, and he doesn't have health insurance and he goes to get free healthcare at Emory for his psychiatric meds ....

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jlhug

People who cheat on their taxes come from all economic backgrounds, political parties, religions, ethnic background.

Pls, you may be right about some but definitely not right about all.

This post was edited by jlhug on Tue, Oct 22, 13 at 20:37

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Michael(5)

My hair guy was telling me this weekend that his partner is a dedicated Republican. And he doesn't report his income, and he runs a business out of his house when it is not zoned to be used that way, and he doesn't have health insurance and he goes to get free healthcare at Emory for his psychiatric meds ....

Even gays commit fraud.

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Iris GW

Gay Republicans! ;)

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Michael(5)

Gay Republicans!

That's two reasons for some to hate them. :(

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Iris GW

And a tax cheater to boot!

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jodik_gw

Fraud is committed at all levels, and for a variety of reasons... the only difference would be the amount on each case of fraud.

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jillinnj

Yet over and over, posters here swear that fraud in the entitlement applications isn't a big enough problem to be concerned about.

That's not what I read. And it's not what I've said.

I would expect that statement from many posters here but not from you, jlhug.

Lottirose - thank you for your honest and fair posts.

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jlhug

Lotti, your brother needs a new tax preparer. If the Office of Preparer Responsibility at the IRS finds out he said something like that, they will go after him. Too many people base their decision to hire a tax preparer on the bottom line, not how ethical the preparer is. We really, really need regulation of tax preparers who aren't enrolled agents, CPAs or attorneys, but sadly there is none unless you are in California or Oregon. That's another soapbox issue for another day.

Jill, thank you, I think. I can well remember posts where people have said that the fraud is so minimal and the risk of taking food from hungry children is so great that the fraud shouldn't be considered a problem. I'm not one of those posters who bookmarks posts and threads to bring back at a later date so I can't provide you with examples.

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Iris GW

I don't know anyone that says fraud doesn't exist or that it should not always be expected and investigated when suspected. That is just realistic and good business sense.

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jodik_gw

What we've actually stated is the fact that welfare fraud doesn't happen at the gigantic rate some keep pushing, nor is it relegated to the poor.

Let's remember context and comprehension, shall we?

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markjames

I know dozens personally that receive numerous welfare benefits. Most have committed numerous forms of fraud for years, yet have never been reported, flagged, investigated, prosecuted or convicted.

The most common forms of fraud are lying about household composition, failure to report frequently changing household composition, lying about household incomes and failure to report incomes of household members - especially under-the-table income.

Fraudulent work searches and address fraud are common as well.

As long as welfare recipients don't leave a paper/electronic trail and fly below the radar so to speak, their chances of getting reported, flagged, investigated, prosecuted, or convicted are low - especially in regions with fewer investigators due to cutbacks.

The poor economy, real unemployment, rules, regulations, taxes, real inflation etc have forced more and more into the booming underground cash/barter economy, so tax/welfare/disability fraud is higher although most aren't reported/investigated/prosecuted.

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adoptedbyhounds

"What we've actually stated is the fact that welfare fraud doesn't happen at the gigantic rate some keep pushing, nor is it relegated to the poor."

Jodi is right. Welfare Queens are far from poor. They earn the name and their "livings" by defrauding people and systems.

People can and do get rich by defrauding government welfare systems every day. As for the rate of fraud, it's in the billions of dollars so it matters. It continues anyway, because politicians who build their careers on encouraging dependency don't want the gravy train stopped, no matter how wasteful it is. This is how what happens when politicians forget who they are supposed to serve, and the people become slaves to the politicians. Like now.

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jillinnj

Jill, thank you, I think. I can well remember posts where people have said that the fraud is so minimal and the risk of taking food from hungry children is so great that the fraud shouldn't be considered a problem. I'm not one of those posters who bookmarks posts and threads to bring back at a later date so I can't provide you with examples.

What I always took from those posts is not that it's not a problem - it is a problem - but compared to the rich hiding assets off shore or mega corporations getting away with minor (to them) fines for their shenanigans it is not as big. And given limited resources for going after this stuff let's go after the big fish first. And then added onto that the risk of a child in need not getting fed is a big risk. Just as i would rather have a criminal go free than jail an innocent, I would rather give a snap card to someone who might not need it than have one child go hungry.

The numbers you posted above are upsetting and something should be done to address that problem. I'd feel a lot better about posts like this if conservatives would get as outraged over some of David's or Joe's posts. And I'm not talking about you :-)

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jodik_gw

Uh.. that's not at all what I said, Nik... unless you consider the Welfare Queens to be those sucking at subsidy and bailouts to the tune of millions and billions.

Context and comprehension issues appear to weigh heavily on this forum.

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jlhug

Jodi, if one out of every four or five people who get EITC file fraudulent returns, do you believe that they are more honest when they file for SNAP or other benefits? If you believe they are more honest, what causes them to be honest when applying for one but not the other?

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elvis

•Posted by jillinnj (My Page) on Wed, Oct 23, 13 at 7:25

***Yet over and over, posters here swear that fraud in the entitlement applications isn't a big enough problem to be concerned about.***

"That's not what I read. And it's not what I've said.

I would expect that statement from many posters here but not from you, jlhug."

There were several posts along the lines of "posters here swear that fraud in the entitlement applications isn't a big enough problem to be concerned about."

Here's part of one of the discussions where jodi did that.

____________

Re: Two articles on food stamps •Posted by elvis 4 (My Page) on Sun, Jun 9, 13 at 13:30

Elvis: "Actually, the info I find says the amount of known welfare fraud is closer to 2%, depending on the program. Insignificant? Tell my employer that I need a 2% raise. Heck, tell them I need 1%. It's only 1%, after all. Quite insignificant.
Jodi, as you well know, a buck's a buck. Just sayin'. That 1% (or 2%) that is being fraudently received would be better spent on someone truly and innocently needy."

--------------------------------------------------------------------------------
RE: Two articles on food stamps

•Posted by jodik 5 (My Page) on Sun, Jun 9, 13 at 14:47

"Sure, and when you're talkin' such large numbers, 1 or 2 percent is a drop in the bucket.
The media has fed a stereotype, and people have eaten it up without even checking."

JL's memory is working just fine.

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david52 Zone 6

You linked to a US Gvt study of the problem, and they used a scientifically based sampling technique and found this level of fraud. Which is quite high - it was even the lead story on the PBS News Hour the other day. I don't doubt it.

You can also find US Gvt studies on food stamp fraud and TANF fraud, several of which I've linked to in the past, and they show a far less rate of fraud - 1 or 2%, not 20%.

So I'm not so sure that one necessarily equates to another.

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elvis

david: "You can also find US Gvt studies on food stamp fraud and TANF fraud, several of which I've linked to in the past, and they show a far less rate of fraud - 1 or 2%, not 20%."

Put on your reading glasses. I didn't say "20%."

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jillinnj

elvis - please try to follow along. Or read the OP, which says:

The report also estimates that somewhere between 21% and 25% of the EITC claims are fraudulent in 2012.

Perhaps it is you that needs to put your reading glasses on.

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david52 Zone 6

Posted by elvis 4 (My Page) on Wed, Oct 23, 13 at 20:41
david: "You can also find US Gvt studies on food stamp fraud and TANF fraud, several of which I've linked to in the past, and they show a far less rate of fraud - 1 or 2%, not 20%."
Put on your reading glasses. I didn't say "20%."

And my post wasn't directed at you. You didn't link to any study. It was addressed to Jhug, in the post immediately prior to yours, and referred to the link in her OP.

Put on your reading glasses.

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elvis

"And my post wasn't directed at you. You didn't link to any study. It was addressed to Jhug, in the post immediately prior to yours, and referred to the link in her OP."

That's a case in point for cutting and pasting that which one is responding to. There was no indication in your post, david, as to whom you were addressing.

As to jill, your post is irrelevant.

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jillinnj

Yes I know. Anyone pointing out your error is irrelevent. To you.

A simple 'oops, my bad' would suffice. But, of course, that would be too simple.

Another piece of irrelevant info for you -- it was quite clear to me who David was talking to. As he said, you hadn't posted any government study. And he was referring to jlhug's claim if they cheat on EITC, they probably cheat on food stamp application as well. His post was refuting that.

But, figuring that out does require reading ALL posts on the thread which you often demonstrate you don't do. And of course, reading comprehension.

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jodik_gw

"Jodi, as you well know, a buck's a buck. Just sayin'. That 1% (or 2%) that is being fraudently received would be better spent on someone truly and innocently needy.""

If that's true, then why aren't we vociferously complaining about the corporate welfare and fraud that overshadows this by millions and millions?

Every time David, Joe, or someone else points out a case of corporate fraud or unnecessary corporate welfare, the thread drops like a stone. No one seems to care about those ungodly large amounts heisted from the taxpayer. It's always about the common citizen, or as others term them, "losers"... tell me, why is that?

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mrskjun(9)

I think because what we are talking about here is fraud, which is illegal. Corporate welfare as you call it, is considered legal according to our generous lawmakers who hope for generous donations. Fraud of any kind, be it by corporations or everyday citizens, cost taxpayers billions of dollars and should be ferreted out at any and every level.

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jmc01

Mrsk, Bingo! you are very correct.

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jodik_gw

I did say fraud... read it again.

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jlhug

Corporations and high income taxpayers are more likely to be audited than middle to lower income taxpayers simply because the IRS gets more return on their investment. So they are already targeting the corporations and high income people more than they are the rest of us.

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demifloyd(8)

Posted by jlhug 6 (My Page) on
Thu, Oct 24, 13 at 9:13

Corporations and high income taxpayers are more likely to be audited than middle to lower income taxpayers simply because the IRS gets more return on their investment. So they are already targeting the corporations and high income people more than they are the rest of us.

*

Then there are the many people who just don't bother to file a return at all, when they are required to do so.

Some who work sporadically or seasonally in the construction industry seem to have a penchant for this practice. Sometimes after a few years they file, some they just keep ignoring it.

What "corporate" tax fraud, specifically, is it that is taking so many dollars from us in revenue?

We know that for individuals, not filing and reporting, filing false and/or fraudulent forms to pay less or in the earned income tax credit instance--to RECEIVE money to which they are not entitled, earning money "under the table" which should be reported and is not, etc. is cheating the country.

Many small businesses use the same tactics--particulate the double sets of books and not reporting income.

What exactly constitutes the large scale "corporate fraud" within our federal tax structure to which so many refer?

This post was edited by demifloyd on Thu, Oct 24, 13 at 9:51

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david52 Zone 6

I thought that in order to claim the earned income tax credit, one had to submit W2 forms showing the income - and I thought that would be hard to fake. Or is there something similar to the mortgage ripoff where one can buy fake W2's?

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demifloyd(8)

David--in order to qualify to receive the "refund" (yea right people getting a refund when they never paid in the first place) or "credit" they have to file documents stating certain information, including the number of children that are their dependents, who lives with them, etc.

That is where much of the fraud comes into play.

From Hubpages:

"The Earned Income Tax Credit is designed for the working poor struggling to make ends meet. The IRS encourages everyone making less than $49,078 per year to see if they qualify to claim the EITC. Last year the EITC disbursed over $59 billion dollars to those who claimed the EITC. The amounts vary but the average filer received $2,200. The maximum EITC amount for 2011 is a whopping $5751.

As you can see there are substantial amounts of money flowing through the EITC program and therefore it is also fertile ground for tax fraud. It’s estimated that 1 out of 3 EITC claims is fraudulent. Fraudulent filing of the EITC is so rampant in fact that the IRS implemented a specific clause that prohibits a filer from claiming the EITC for two years if they are caught claiming it erroneously.

“A person or couple will be disallowed EIC for two years if they claim EIC when not eligible and the IRS determines the "error is due to reckless or intentional disregard of the EIC rules." A person or couple will be disallowed for ten years if they make a fraudulent claim. Form 8862 is required after this time period in order to be reinstated. However, this form is not required if EIC was reduced solely because of math or clerical error.”
How It Works

If your income is under a certain threshold you may qualify for the Earned Income Tax Credit.

EITC eligibility requirements are:

With three or more qualifying children, income less than $43,998 or $49,078 if married filing jointly. Maximum refund: $5,751
With two qualifying children, income less than $40,964 or $46,044 if married filing jointly. Maximum refund: $5,112
With one qualifying child, income less than $36,052 or $41,132 if married filing jointly. Maximum refund: $3,094
With no children, income less than $13,660 or $18,740 if married filing jointly. Maximum refund: $464"

So you see David, why some people would claim children that do not actually live with them all the time and for which someone else might be claiming as a dependent (which is a way to get caught but it takes a while and may not happen).

That is what my MIL came across from so many people she turned away after questioning them and comparing records to earlier records--people making up names, using their friends and relative's children's names, lying about the income and that boyfriends that live with them bring in income, that sort of thing.

Look at those numbers for the free cash people get the more children they have dependent on them and that answers your question.

Just like Walmart thefts--how to take advantage of a program designed to help people and cheat taxpayers by stealing and lying.

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david52 Zone 6

Ok, they fake the number of kids.

I suppose the IRS doesn't cross-references the kids' SS numbers to see if 1) they're fake, or 2) being used elsewhere.

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demifloyd(8)

I can tell you not to suppose anything about the IRS.

I was flabbergasted to learn recently that a scam that I was flabbergasted to learn of when I worked for the IRS is still going on--one which, if social security numbers were cross referenced and information shared like one would assume--even thirty years ago--would never happen.

Trillions and trillions wasted, and just like the Obamacare website--incompetence.

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jerzeegirl(9)

Gee, we must be lucky. Every time we have had a mistake on our tax returns which has a few times, we get that scary letter from the IRS.

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david52 Zone 6

Yea, thats what I was thinking. Make a mathematical mistake, and even two years later, here's a letter in the mail telling me what I did and what I owe, plus interest, and then they inform the state, and I get a revised tax bill from them as well, plus interest.

Which was the last time I did returns by hand and shifted over to turbotax.

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jlhug

IRS verifies names, birth dates and social security numbers of children when the return is filed. If they don't match or someone else has already claimed that child, the return is rejected.

As a paid tax preparer, I can be fined $500 for any return that I prepare that I do not have the correct documentation to verify that the child qualifies the taxpayer for EITC. You better believe that I have copies of all of those papers in my office before the return is filed. We have to complete Form 8867 for each return we do that has EITC on it.

Ahhh, yes, Turbo Tax. Many people are quite capable of preparing their return correctly on Turbo Tax. Yet every year, I see some horrendous errors on those returns. I just fixed one that the taxpayer ended up owing over $7,000 plus penalties and interest. I've also fixed them where people get several thousand dollars back. The IRS won't accept the "Turbo Tax defense". Just because the software lets you do something doesn't make it right. If a question isn't 100% crystal clear, go to the IRS website. Review your return for accuracy and to be sure the numbers end up where they are supposed to be. Ultimately, you are responsible for your return and no one else.

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jerzeegirl(9)

IRS verifies names, birth dates and social security numbers of children when the return is filed. If they don't match or someone else has already claimed that child, the return is rejected.

So then how is there so much cheating, as you maintain?

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jlhug

I cannot tell anyone how to cheat on their taxes. If I were to do so and got caught, I'd be in serious trouble with the IRS - big fines, lose my EA card and possible jail time.

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jillinnj

You lost me. If the IRS verifies that the children claimed are real (valid social security #s) and are not claimed by someone else, then why are they not valid EITC claims?

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demifloyd(8)

Posted by jillinnj (My Page) on
Thu, Oct 24, 13 at 13:48

You lost me. If the IRS verifies that the children claimed are real (valid social security #s) and are not claimed by someone else, then why are they not valid EITC claims?

*

There is much more to a "valid EIC" claim than correct social security numbers.

The children may be "real" but they aren't necessarily allowed under the purview of requirements to receive earned income credit payments.

For example, say Ashley Jo claims she cares for her sister's children because (for whatever reason--sister is dead, on drugs, not around) they are dependents and gives their social security numbers, but they aren't dependents, they don't live with her as required to meet the standards to qualify for and receive the payments.

Ashley Jo also has Skipper Bob shacked up with her buying groceries, paying the rent and buying lotto tickets, but she does not mention that and states she is a single mother taking care of all of these dependents and has no help.

There are many different scenarios to cheat under the EIC provisions of the tax code.

If the people that came up with the ingenious methods to cheat taxpayers applied that same mental effort to caring for themselves not only would we save money that is going to fraud but we could have more tax payers.

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jerzeegirl(9)

Ashley Jo also has Skipper Bob shacked up with her buying groceries, paying the rent and buying lotto tickets, but she does not mention that and states she is a single mother taking care of all of these dependents and has no help.

If she's not married to him then technically she IS a single mother.

For example, say Ashley Jo claims she cares for her sister's children because (for whatever reason--sister is dead, on drugs, not around) they are dependents and gives their social security numbers, but they aren't dependents, they don't live with her as required to meet the standards to qualify for and receive the payments.

There is a whole category for relatives who don't have to live with you. The IRS laws have really changed over the years. Here is the list.

Relatives who do not have to live with you. A person related to you in any of the following ways does not have to live with you all year as a member of your household to meet this test.

Your child, stepchild, foster child, or a descendant of any of them (for example, your grandchild). (A legally adopted child is considered your child.)

Your brother, sister, half brother, half sister, stepbrother, or stepsister.

Your father, mother, grandparent, or other direct ancestor, but not foster parent.

Your stepfather or stepmother.

A son or daughter of your brother or sister.

A son or daughter of your half brother or half sister.

A brother or sister of your father or mother.

Your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.

Any of these relationships that were established by marriage are not ended by death or divorce.

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jodik_gw

The problem is... the IRS is very much against admitting they are fallible and have made a mistake when they make one. And when that mistake is brought to their attention, they seem to be very much against investigating where that mistake is and how it was made, never mind correcting it.

When the problem doesn't lie in the preparation, and one doesn't have the wherewithal to hire an attorney versed in this area to represent one, the IRS can pretty much deny they made a mistake.

And trying to solve it via telephone is an overseas call center of a joke. Hopefully, you can understand the person at the other end of the phone call... and that's not a prejudicial remark. It's the truth. You cannot be transferred to a supervisor, you will not be given a case worker who handles and becomes familiar with your case... so you don't have to launch into a fresh explanation of the case every time you try to speak with someone... and it's just short of a horrible nightmare you hope to awaken from.

And trying to solve it via the US mail system is even more of a joke. Registered mail will be denied received... even though one holds the receipt and knows it has been received... and the list of necessary documents will change from one moment to the next.

Instead of trying to correct their mistake, they seem more apt to try to make a deal that still ends up costing the taxpayer money... that they shouldn't owe in the first place. Ask me how I know... (a rhetorical question, meaning it has happened to me.)

The IRS is not first on my list of agencies that I'm happy with... as I'm sure you can understand. And I STILL don't have a problem paying taxes as a citizen. It's my obligation to do so... for the good of the many.

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demifloyd(8)

Jerzeegirl, one is required to declare their income, I believe.

Not acknowledging a husband or a shack up partner's income to the household is still fraud when declaring available income in some of these situations.

The EIC requirements are listed as to what constitutes dependents and what period of time is allowable that a dependent cannot live in the household, etc.

This is nothing new, and neither is the fraud committed when people claim children that are not dependents in the eyes of the law, and intentionally do not state household income as required.

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jerzeegirl(9)

Jerzeegirl, one is required to declare their income, I believe.

One would assume that the woman files as Head of Household and her boyfriend files as a Single Person. They might actually end up paying more taxes.

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demifloyd(8)

Posted by jerzeegirl 9 (My Page) on
Thu, Oct 24, 13 at 15:41

Jerzeegirl, one is required to declare their income, I believe.

One would assume that the woman files as Head of Household and her boyfriend files as a Single Person. They might actually end up paying more taxes.

*

What does that have to do with submitting fraudulent information about income and dependents when attempting to received earned income credit payments?

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jerzeegirl(9)

I don't see that the information is fraudulent if both parties are filing tax returns and reporting all income. In fact, if the man is contributing to the household, is it possible that he's should also be getting some of the EITC? There is a limit to the amount that you can get for each kid.

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jlhug

Jodi, I do not believe that anyone here has more current experience in dealing with the IRS than I do. I am sorry that you had a bad experience. My experiences are about as different as it is possible for them to be different from yours.

I have never, ever gotten someone on the phone who was difficult to understand and I call the IRS multiple times a week or more. I've never had trouble getting a supervisor on the phone. The IRS does NOT use off shore call centers. In 18 years of calling the IRS, I have only spoken to one person who was rude and unhelpful.

You can visit a local service center of you want to see someone face to face to explain your side of an issue. If you choose to do so, do your research and bring cites from tax code and court cases.

Proving the IRS wrong takes paperwork and research as I mentioned before. You need to show them the actual tax code that supports your position followed up by tax court cases. Tax publications aren't the "authority" but a place to start looking for the authority.

You do not need an attorney to go before the IRS. An enrolled agent can represent you at all levels of the IRS except for tax court at a much lower cost. And you can represent yourself if you so choose.

I do agree that the inability to speak with the same person on a follow up call is a huge problem. Hopefully the person you spoke with before leaves good notes. Most seem to do so.

I have had to wait on hold for over an hour for someone to answer. The IRS seriously needs to change the hold music.

I've never had a problem mailing something to the IRS and I suspect that I mail a lot more in a year than you have in your lifetime.

I have found that if my attitude is one of trying to find a way to solve the taxpayer's problem, the IRS is very helpful. Attitude is everything.

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jlhug

The Congress in it's infinite wisdom has decided to make life fun for all of us by having different qualifiers for children at different times.

A dependent has one set of qualifiers.

A qualifying child for the purpose of Earned Income Credit has another set of qualifiers.

A qualifying child for Child Tax Credit has another set of qualifiers.

A qualifying child for Child and Dependent Care Credit may have a different set of qualifiers.

A qualifying child for Head of household filing status has a different set of qualifiers.

The things that qualify a child to be a qualified child for many of these things overlap to a great extent but there are distinctions where the child will qualify as one but not the other.

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demifloyd(8)

Thank you, jlhug for pointing out the different qualifications depending on what section of the IRS code is in consideration.

*

Posted by jerzeegirl 9 (My Page) on
Thu, Oct 24, 13 at 16:03

"I don't see that the information is fraudulent if both parties are filing tax returns and reporting all income"

--Jerzeegirl, see my previous posts and jlhug's posts.

Some do not report all the income, which is fraudulent, and even if they do, there is fraud in claiming dependents.

If there is no fraud there is no problem.

I don't see what your point is.
Maybe you don't have one.

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jlhug

JZ, you are referring to the member of household or relationship test for qualifying relatives which is one of four tests that must be met before you can claim someone who is not your qualifying child as a dependent.

At bit of background first - just to make things even more fun, Congress has decided there are two kinds of dependents - qualifying child and qualifying relative.

In order for you to claim someone as a qualifying relative they have to meet the following tests:

1. Member of the Household or Relationship Test
2. They cannot be your or any other taxpayer's qualifying child.
3. Their gross income for the year must be under $3,900 for 2013. I'm not about to get into what the definition of gross income is here because I'm not teaching a tax class. Please look it up if you are considering claiming someone as a qualifying relative.
4. You, the taxpayer, must have provided more than half of the person's total support.

Edited for clarity

This post was edited by jlhug on Thu, Oct 24, 13 at 16:39

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jerzeegirl(9)

Some do not report all the income, which is fraudulent, and even if they do, there is fraud in claiming dependents.

Part 1 of this sentence - you never said that. However, you did imply it as if unmarried people living together was some kind of mortal sin in the tax world.
Part 2 of this sentence - there are different tests and one size does not fit all, as jhug so aptly pointed out.

You are the one making assumptions with your Ashley Jo and Skipper Bob scenarios and you most certainly know what they say about making assumptions.

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jlhug

And the tax class continues...

Skipper Bob can't get EITC for the children because they don't meet the relationship test for qualifying children for EITC. They aren't his children and he hasn't adopted them.

Please note the relationship test for EITC is not the same as the relationship for a qualifying child. Nor is it the same as the relationship or member of the household test for a qualifying relative.

Confused?

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demifloyd(8)

Posted by jerzeegirl 9 (My Page) on
Thu, Oct 24, 13 at 16:50

Some do not report all the income, which is fraudulent, and even if they do, there is fraud in claiming dependents.

Part 1 of this sentence - you never said that. However, you did imply it as if unmarried people living together was some kind of mortal sin in the tax world.
Part 2 of this sentence - there are different tests and one size does not fit all, as jhug so aptly pointed out.

You are the one making assumptions with your Ashley Jo and Skipper Bob scenarios and you most certainly know what they say about making assumptions.

*

Oh, I see your point.

It was about me.

I didn't imply anything about a "mortal sin." I suggested a scenario which occurs frequently.

There is either fraud or there is not.

It's that simple.

So is what we see.

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jerzeegirl(9)

lol! However, what if Skipper Bob and Ashley Jo were married, then got divorced, and now are just living together and, wait for it...the kids are his, then he could possibly qualify, is that correct?

And what if a meteor hits the planet and wipes Skipper and Ashley off the face of the earth?

Actually jhug, I really enjoy the tax lessons and am learning quite a bit from your posts.

My real point is that just because people are living together and there are kids involved does not mean they are committing EITC fraud or any other kind of fraud. It just makes it more complicated.

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jodik_gw

Jlhug, I don't have reason to do any more business with the IRS than anyone else normally does, so this case must be that one in a million where everything that could go wrong did go wrong... because if there were a way to make this experience any more negative, i'm sure I don't know what that might be.

I don't like being talked down to as though I were a criminal, when I haven't done anything wrong... I would really enjoy being able to clearly understand the person I'm speaking with... and I would really appreciate the IRS not lying to me about whether they received the registered mail I sent to them.

Furthermore, I am fully aware that attitude is everything, and I am most helpful and pleasant on the phone when I want to get something like this taken care of and the case closed... most especially when they owe me money due to their mistake.

In a 3-way conversation with our tax preparer, ourselves, and the IRS, we were told by the representative that we could not speak with a supervisor, and the person would not give her name or an ID number so we had a reference should we need it. And we only found out this much information by making her repeat what she said several times, as we could not understand a word she said, her accent was so thick and her vocabulary of English so stunted. If I had to guess, I'd say she was of Asian heritage, though I could not nail it down any further.

It was only after multiple attempts to contact them through the mail to send them the copies and forms they requested that they finally admitted receiving them... and this was only because our tax preparer nailed down a date for mailing and told them he would be placing a followup phone call on the day they should arrive to ensure they had received the envelope.

I just hope I never have to go through anything like that again. It was a nightmare of epic proportion... an experience that left a bad taste in my mouth.

I keep telling people that there is a black cloud of bad luck hovering over us, but nobody believes me. ;-)

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jlhug

Jodi, every single time I've called the IRS, the first thing the person on the phone tells me is their last name and their ID number. It makes no difference what area of the IRS I am calling. If you ever get someone you can't understand at the IRS (and I hope it doesn't), hang up on her and call back. It is pretty much guaranteed that you will get someone else. I also suggest that if the customer service rep won't transfer you to her supervisor, get as much information as you can and hang up. The IRS frowns on not transferring a call to a supervisor if a taxpayer requests. If that happens, there is a way to report it to the IRS. The customer service agent, revenue officer or revenue agent's id will be in your file so the IRS can find out who refused to give their ID.

You say many things that truly confuse me though. IRS Service Centers are huge vast places. Mail takes days to be routed to the correct area. Then it sits for days before it lands on someone's desk. I have no idea how your preparer was able to call and verify that what you mailed was there the same day it was received unless it went to a local IRS office. If that were the case, you would most likely be dealing with a specific revenue officer or revenue agent.

The IRS is slooooooooooow. I've been waiting three months for the IRS to confirm that several direct debit installment agreements have been set up. Last year, I submitted another form and it took over five months for the IRS to send a response.

I hope that you never have another nightmare encounter with the IRS.

This post was edited by jlhug on Thu, Oct 24, 13 at 19:34

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lottirose

My favorite experience with the IRS was the year that I got a notice that I had not filed my taxes despite the fact that I had already received a refund. Infallible they are NOT.

My second favorite is the year I got a $16,000 refund to which I was not entitled - it was my fault because I did enter a number on an incorrect line - but if a person had actually looked at the information on the return, it should have been apparent - I amended the return and returned the check of course but once again I have to wonder if anyone would ever have been the wiser if I had just cashed it - this was after the experience where they said I had not filed when I had a refund in hand. I have to trust that someone with a brain is involved on the other end - but can you see why I have questions in that regard?

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jlhug

Lottirose, when you efile a return, it is never touched by human hands which is a good thing. The letters are generated by computer usually at least a week before they are mailed. During the government shutdown, clients were receiving still receiving those computer generated letters.

I've had clients receive similar letters to the one you received. It's a pretty simple matter to clear up especially if you efiled or, as in your case, received a refund.

If you think the IRS is painful to deal with, the states are worse, far worse. I wouldn't wish some of them on my worst enemy.

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elvis

Lottirose re the IRS experience: "I have to trust that someone with a brain is involved on the other end - but can you see why I have questions in that regard?"

...and the IRS is involved with the administration of the ACA how, exactly? These anecdotal stories do not inspire confidence.

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jodik_gw

Jlhug, it was because we specifically discussed sending a registered letter with verification of receipt, and the agent told us specifically that they would make certain it landed where it should.

This isn't just a short time period we're talking about... this case took years to move through the system and gain any traction toward closure!

All I can say is that we dealt with agents who were either not following protocol for some unknown reason, or... I just don't know.

Since it took so long to get a live body on the phone when we did call, we were not about to hang up and go through the process again, playing one of the longest waiting games we've ever played. My cheap cell phone only has so much time on its battery before it drops a call!

Like I said... I just hope we never have to deal with the IRS in this capacity ever again! I don't think I could manage to be quite so patient or civil after all that!

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lottirose

I have never filed anything other than the clay tablet & stick return, which tells you that I am either a traditionalist - or very old - or both.

Elvis, not sure I got your drift, but as to MY faith in the federal government to get it right, I certainly do believe that the many processes are fraught with error - however, I think that is true of any human endeavor and the larger the scale obviously the more opportunity which is why whenever possible I believe in government as close to the governed as possible.

But unlike my state government which is busy trying to disenfranchise as many people of the wrong sort as possible and also cut off their access to services upon which they depend and cast them out into the poverty they so richly deserve, the federal government currently is at least trying in the words of Old Hickory to "do right by these people."

I am one of the "lucky" voters that Mr. Priebus referred to as fortunately living under Republican governors - I had to chortle when he said their focus was on affordable housing and other people related issues since here the legislation so far as been about "stopping voter fraud", defunding women's health services including abortion but certainly not limited to, and just generally putting us women and others obviously of the wrong sort in our places.

A once proud Republican myself, I have been driven out of the current party into the arms of a party that does not represent all of my engrained principles but which is at the moment at least hitting a few of the high spots while the Republicans are so fixated on the low spots and trying to turn back time that they have forgotten their role in the progress of this country.

If the Republicans that were are not able to take back the party that was - and it too was an imperfect party as are all political coalitions doomed to be by the nature of the beast - I see even more dysfunction and chaos in the months and years to come.

I know that I have veered off topic here - but in truth the total fixation with the fraud being committed by the poor as compared to the apparent complacency about other longstanding issues including those that might drive desperate people to fraud and worse gives me at least a leg to stand on.

Also going afield appears to be a time honored tradition on this forum so I hope that I can be forgiven for my little rant.

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jlhug

Lottirose, do you want to hear my "lecture" on the benefits of efiling and why one should never mail their return in if it can be efiled? I know some true horror stories about returns that were mailed in.

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jillinnj

lottirose - your litle rant, as you put it, is more than forgiven. In fact, speaking for myself, it is most welcome. This paragraph in particular stuck me --

A once proud Republican myself, I have been driven out of the current party into the arms of a party that does not represent all of my engrained principles but which is at the moment at least hitting a few of the high spots while the Republicans are so fixated on the low spots and trying to turn back time that they have forgotten their role in the progress of this country.

While I was never a Republican, much less a proud one :-), it is what I have been saying here for some time. I just cannot wrap my head around the fact that people that claim to be compassionate and care about their fellow human being, can continue to support the Republican party. I can certainly understand 'fiscal responsibility' and 'personal responsibility, but I cannot understand their interpretation of that when it seems that what that means is more for the rich and less for the poor.

So, thank you for confirming for me that not everyone in Republican party stands quitely by while they go about hurting our society.

This post was edited by jillinnj on Fri, Oct 25, 13 at 13:49

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jodik_gw

"While I was never a Republican, much less a proud one :-), it is what I have been saying here for some time. I just cannot wrap my head around the fact that people that claim to be compassionate and care about their fellow human being, can continue to support the Republican party. I can certainly understand 'fiscal responsibility' and 'personal responsibility, but I cannot understand their interpretation of that when it seems that what that means is more for the rich and less for the poor.

So, thank you for confirming for me that not everyone in Republican party stands quitely by while they go about hurting our society."

I agree, Jill... and I can't fathom that a party which has changed so much still counts so many supporters. I would have expected some of those more moderate representatives to vocally veer off and leave the extreme edge behind in the dust.

It's nice to hear a conservative speak out honestly about their party and how they feel about those changes.

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