Tax Tip of the Week | No. 299 | IRS to Hold Returns with the American Opportunity Tax Credit

Tax Tip of the Week | April 22, 2015 | No. 299 | IRS to Hold Refunds on Returns with the American Opportunity Tax Credit

If you qualify for the American Opportunity Credit (AOTC) this year, please be aware of a possible "refund hold" on the credit to verify attendance.The AOTC is available to eligible students for up to four years of qualified higher education expenses.The AOTC is a “refundable” credit; if the credit exceeds the tax computed, the IRS will pay you the excess. Given the high incidence of refund fraud involving refundable credits like the AOTC, it’s understandable that the IRS would want to verify eligibility before issuing a refund.Colleges and universities have two ways of reporting information on Form 1098-T: 1) Amounts billed, 2) Amounts paid. Generally, online reporting systems at colleges and universities only provide amounts billed. Amounts billed often times are paid, but that information may not be fully disclosed on Form 1098-T. This year, for the 2015 tax season, the IRS is implementing a hold on refunds on returns with American Opportunity Tax Credits until the 201519 cycle (mid-May) until attendance is verified.If refunds are held, the IRS will inform the taxpayer of the reason through letter 4800C to determine if further documentation is required.This year, more than ever, be sure to keep records of the actual expenses you pay for higher education tuition and fees, books, supplies and equipment.Let us know if you have any questions.You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.Rick Prewitt – the guy behind TTW...until next week.