“She has a boyfriend that she lives with; they are not married. She wants to sign a statement granting her boyfriend permission to claim her kids on his tax return. I refuse to do the return for them because I believe they are committing fraud.”==> Not really.
“ My family member insists that she spoke to a tax attorney who told her that it's perfectly legal for her to assign her children to a third party to be used as tax deductions, but I'm skeptical.”====>It depends. please, READ BELOW
“Is it legal for someone to sign authorization allowing a non-family member, non-custodial third party to claim children for the purpose of receiving the earned income credit and a larger tax return?”===>As long as she and her boyfriend meet a few requirements, he can claim the child as his dependent UNLESS the child is claimed as a depednet by the child’s biological father..Not for EIC but as long as the BF was responsible for 50% or more of the child’s support and the child must have lived with her BF the ENTIRE year , NOT more than 6 months. HOWEVER, while a live-in BF MIGHT be able to claim her and/or her child as a dependent as said if certain strict requirements are met, the BF can NEVER claim the EIC based upon that dependency claim. Nor can he claim the Child Tax Credit, Additional Child Tax Credit, Child & Dependent Care Credit, etc.
Although the BF can claim the child if the support conditions discussed above are met, he cannot claim HOH status, since neither she nor her child are related to him.