AOC denied by IRS

[AZ-Tax]

Ok, on the IRS website "where is my refund", the detailed explanation is the following: "We didn't allow the amount of Refundable Education Credit claimed on page 2 of your tax return. Information on your return indicates you can be claimed as a dependent on someone else's return."

Now, the TP was NOT claimed on the parents tax return. The questons my software ask are: "Can taxpayer be claimed as depedent of another person?" for which I marked YES. Under that question is: If yes, was taxpayer claimed as a depedent on that person's return? for which I marked NO.

I went into the TP file and changed the first answer to NO and uncheck the box on the 2nd question. Refund did not change thus still allowing for the AOC.

Pub 970 pg 9
You cannot claim the credit: "You are listed as a dependent on another person's tax return (such as your parents')." Says nothing about if could be.

I thought about calling the IRS but then again I thought about just amending the Fed tax return.

[BP.]

"We didn't allow the amount of Refundable Education Credit claimed on page 2 of your tax return. Information on your return indicates you can be claimed as a dependent on someone else's return."

"Can taxpayer be claimed as depedent of another person?" for which I marked YES.

Age of taxpayer?
If taxpayer could be claimed as dependent of another person, that indicates the taxpayer didn't provide over half of their own support, a qualifier for the Refundable AOC if under 24.
TTB 12-3, Pub 970 p. 17

[AZ-Tax]

TP Age 20 on 1/1/2013

Age of taxpayer?
If taxpayer could be claimed as dependent of another person, that indicates the taxpayer didn't provide over half of their own support, a qualifier for the Refundable AOC if under 24.
TTB 12-3, Pub 970 p. 17

TP Age 20 on 1/1/2013

TTB 12-3
Refundable portion. 40% of the American Opportunity Credit is refundable for most taxpayers. Exception: Taxpayers under age 24 cannot claim any part of the credit as refundable if the following conditions apply to them.
1) The taxpayer is:
a) Under age 18 at the end of the tax year, or
b) Age 18 at the end of the tax year and had earned income
of less than one-half of his or her support, or
c) A full-time student over age 18 and under age 24 at the end
of the tax year with earned income of less than one-half of
his or her support,
2) At least one of the taxpayer’s parents was alive at the end of
the tax year, and
3) The taxpayer is filing as Single, Head of Household, Qualifying
Widow(er), or Married Filing Separately for the tax year.

Am I reading 3) above correctly? Due to the TP being under age 24 but over 18 and filing Single (pretty common at age 20), the TP cannot in anyway claim the refundable portion of the AOC. I could not find anything in Pub 970 relating to 3) above.

[S T]

Well in 2011 - I had a totally reverse of what OP is posting - and did not file for the AOC refundable on the Original Tax return, as I did not believe the Age 20 qualified - but IRS refunded the extra amount - made we look like a "fool"

After the prior posts on the board, no wonder this is a confusing issue - double negatives on the instructions, etc

Seems like we are right and then IRS says NO we are wrong
and if we are Wrong - IRS says NO you were wrong and gives the Credit

I see this a a "no win" no matter how much due diligence we practice and try to meet ths Guidelines and do the right thing

Just my thoughts!

Sandy

[mactoolsix]

TP Age 20 on 1/1/2013

Taxpayers under age 24 cannot claim any part of the credit as refundable if the following conditions apply to them. (ALL THREE MUST APPLY, or THE CREDIT IS REFUNDABLE)
1) The taxpayer is:
a) Under age 18 at the end of the tax year, or
b) Age 18 at the end of the tax year and had earned income
of less than one-half of his or her support, or
c) A full-time student over age 18 and under age 24 at the end
of the tax year with earned income of less than one-half of
his or her support,
2) At least one of the taxpayer’s parents was alive at the end of
the tax year, and
3) The taxpayer is filing as Single, Head of Household, Qualifying
Widow(er), or Married Filing Separately for the tax year.

Am I reading 3) above correctly? Due to the TP being under age 24 but over 18 and filing Single (pretty common at age 20), the TP cannot in anyway claim the refundable portion of the AOC. I could not find anything in Pub 970 relating to 3) above.

AZ - I added the "ALL THREE MUST APPLY or THE CREDIT IS REFUNDABLE" to your above reference. If 1, 2 & 3 all apply, then no refundable credit is allowed.
#1 - Since the T/P is 19 yo for 2012, then for #1 to apply they must have earned income of less than 1/2 their support (b & c)
#2 - We'll assume #2 is true (one or both parents were alive) - I've never understood what this has to do with the situation
#3 - The T/P did file as Single.

Thus in your case the T/P had to have earned income of over than 1/2 their support to qualify for refundable credit. Since you answered "YES" that the T/P could be claimed as a dependent by another (even if they weren't claimed), then in essence you were saying the T/P did not provide more than 1/2 their support (QC requirement) or someone else provided more than half of the person's total support (QR requirement). If they had earned income of > 1/2 their support, they could not have been a QC or QR.

A Single T/P over age 18 & under 24, with one or both parents alive, could qualify for the refundable credit IF they have earned income > 1/2 their support. If the T/P (full-time student) was living off of investments or savings with earned income of less than 1/2 their support, then they could not get the refund.

Also, notice that a part-time student over age18 & under 24, would automatically qualify for refundable AOC.

To avoid confusion on this - answer the seven questions in the instructions for form 8863 - makes the decision easier!

http://www.irs.gov/instructions/i8863/ch02.html#d0e545

Mike