All Things Tax

All Things Tax

Like the title says, from the filing process and tax questions to tax policy and reform, you can search and share All Things Tax here. This is the place to find answers to all your general questions that don't fall under the other categories. And just a reminder: questions about software or online filing should be posted in DIY Products.

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Pioneer
Posts: 1
Registered: ‎04-23-2018

2016 Audit

Hello, 

 

I used H&R Block online to do my 2016 taxes, and just last week I got a letter from the IRS saying that some of the information was incorrect and that I owe taxes. The incorrect information relates to Education Credits and Student Loan interest. 

 

In 2016 I relocated and I now live out of country, and I cant find a representative in my area with the search engine on the website. is there a way to get help with this online? 

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Council Member
Posts: 548
Registered: ‎04-06-2016

Re: 2016 Audit

I recommend going back over the return you submitted for 2016 looking specifically at your records and the sections that the IRS is questioning. 

 

I'd start with reading Pub 970: https://www.irs.gov/pub/irs-prior/p970--2016.pdf and making sure you understand the sections for the credit you claimed and the student loan interest deduction. Paying very careful attention to what expenses qualify for the credit you claimed because the eligible expenses for each credit are slightly different.  Then look at your return with the instructions for the forms in question at hand to figure out if what you entered on the form was correct or to locate the source of your mistake. The education credits (AOC, American Opportunity Credit, and LLC, Lifetime Learning Credit) should have been reported on Form 8863. I'd suggest going through the form (and my records of actual qualified education expenses) with the instructions: https://www.irs.gov/pub/irs-pdf/i8863.pdf to make sure that you entered everything correctly.  

 

A few common mistakes that people make regarding education credits that might be a place to start:

1) Were you eligible to be claimed as a dependent on your parent's return? (A majority of undergraduate students are.)  If so, your parent should have claimed your 1098-T and the tuition credits on your behalf on their return. If you claimed the AOC on your return, you would NOT be eligible for the refundable part of the credit. If you did claim it (check Line 68 of your 1040), the IRS would want expect you to pay that back.

2) For either the AOC or LLC, one thing you need to be particularly careful of is the distinction between any amount reported in 1098-T box 2, which is the amount the school BILLED to you, and the amount of qualified expenses ACTUALLY paid in 2016.  They're, more often than not, NOT the same.  I've answered quite a few posts regarding the American Opportunity Credit and figuring out the amount of qualified education expenses to report if your 1098-T has an amount in box 2 on these boards, so doing a search for AOC or American Opportunity Credit might be useful. (I'd look in the All Things Tax and Your Life boards.)

3) Were the qualified education expenses you paid adjusted by the amount of any scholarships or grants you received (that you didn't claim as income) before calculating the credit? If you answered the H&R Block interview questions carefully, it should have handled this correctly for you.

 

 

Regarding the Student Loan Interest: In addition to the section of Pub 970 I linked to above, you can find information in the 2016 Instructions for Form 1040 Line 33, p 37 : https://www.irs.gov/pub/irs-prior/i1040gi--2016.pdf . In this case you need to be aware that only the interest included in your payments can be claimed, NOT the amount of interest that has accrued. So, unless you're making loan payments, you wouldn't be able to claim this deduction.

 

If you go through your return and determine that the IRS is correct in its adjustments, you can just follow the directions in the notice and pay the amount they say you owe.  If you need time to make the payment, or need to set up a payment plan, you can arrange that with them.  If you go through your return and still think you're right, if you can explain to the IRS why you think you're right, they may agree with you.

 

If you want to provide more detail regarding your situation, I may be able to offer more guidance.

 

Karen