"Could this be fraud on their part?" Yes

" Will the IRS give her the money or not? "  Probably yes, which does not mean it is right

"if they do will they audit and ask for it back? " Maybe

We can only do what is right, and explain to our clients the tax rules.

Greed is rampant lately with people sticking out their hand for free gov't money.

If your "clients" do this despite being told it is wrong, do you really want this type of client?