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Amend Taxes 2010

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Amend Taxes 2010

Amend taxes 2010 2. Amend taxes 2010   Possession Source Income Table of Contents Types of IncomeCompensation for Labor or Personal Services Investment Income Sales or Other Dispositions of Property Scholarships, Fellowships, Grants, Prizes, and Awards Effectively Connected Income In order to determine where to file your return and which form(s) you need to complete, you must determine the source of each item of income you received during the tax year. Amend taxes 2010 Income you received from sources within, or that was effectively connected with the conduct of a trade or business within, the relevant possession must be identified separately from U. Amend taxes 2010 S. Amend taxes 2010 or foreign source income. Amend taxes 2010 This chapter discusses the rules for determining if the source of your income is from: American Samoa, The Commonwealth of the Northern Mariana Islands (CNMI), The Commonwealth of Puerto Rico (Puerto Rico), Guam, or The U. Amend taxes 2010 S. Amend taxes 2010 Virgin Islands (USVI). Amend taxes 2010 Generally, the same rules that apply for determining U. Amend taxes 2010 S. Amend taxes 2010 source income also apply for determining possession source income. Amend taxes 2010 However, there are some important exceptions to these rules. Amend taxes 2010 Both the general rules and the exceptions are discussed in this chapter. Amend taxes 2010 U. Amend taxes 2010 S. Amend taxes 2010 income rule. Amend taxes 2010   This rule states that income is not possession source income if, under the rules of Internal Revenue Code sections 861–865, it is treated as income: From sources within the United States, or Effectively connected with the conduct of a trade or business within the United States. Amend taxes 2010 Table 2-1 shows the general rules for determining whether income is from sources within the United States. Amend taxes 2010 Table 2-1. Amend taxes 2010 General Rules for Determining U. Amend taxes 2010 S. Amend taxes 2010 Source of Income Item of Income Factor Determining Source Salaries, wages, and other compensation for labor or personal services Where labor or services performed Pensions Contributions: Where services were performed that earned the pension Investment earnings: Where pension trust is located Interest Residence of payer Dividends Where corporation created or organized Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. Amend taxes 2010 Where property is used Sale of business inventory—purchased Where sold Sale of business inventory—produced Allocation if produced and sold in different locations Sale of real property Location of property Sale of personal property Seller's tax home (but see Special Rules for Gains From Dispositions of Certain Property , later, for exceptions) Sale of natural resources Allocation based on fair market value of product at export terminal. Amend taxes 2010 For more information, see Regulations section 1. Amend taxes 2010 863-1(b). Amend taxes 2010 Types of Income This section looks at the most common types of income received by individuals, and the rules for determining the source of the income. Amend taxes 2010 Generally, the same rules shown in Table 2-1 are used to determine if you have possession source income. Amend taxes 2010 Compensation for Labor or Personal Services Income from labor or personal services includes wages, salaries, commissions, fees, per diem allowances, employee allowances and bonuses, and fringe benefits. Amend taxes 2010 It also includes income earned by sole proprietors and general partners from providing personal services in the course of their trade or business. Amend taxes 2010 Services performed wholly within a relevant possession. Amend taxes 2010   Generally, all pay you receive for services performed in a relevant possession is considered to be from sources within that possession. Amend taxes 2010 However, there is an exception for income earned as a member of the U. Amend taxes 2010 S. Amend taxes 2010 Armed Forces or a civilian spouse. Amend taxes 2010 U. Amend taxes 2010 S. Amend taxes 2010 Armed Forces. Amend taxes 2010   If you are a bona fide resident of a relevant possession, your military service pay will be sourced in that possession even if you perform the services in the United States or another possession. Amend taxes 2010 However, if you are not a bona fide resident of a possession, your military service pay will be income from the  United States even if you perform services in a possession. Amend taxes 2010 Civilian spouse of active duty member of the U. Amend taxes 2010 S. Amend taxes 2010 Armed Forces. Amend taxes 2010   If you are a bona fide resident of a U. Amend taxes 2010 S. Amend taxes 2010 possession and choose to keep that possession as your tax residence under MSRRA when relocating with your servicemember spouse under military orders, the source of income for your labor or personal services is considered to be that possession. Amend taxes 2010 Likewise, if your tax residence is in one of the 50 states or the District of Columbia before relocating and you choose to keep it as your tax residence, the source of income for services performed in any of the U. Amend taxes 2010 S. Amend taxes 2010 possessions is considered to be the United States and, specifically, your state of residence or the District of Columbia. Amend taxes 2010 Services performed partly inside and partly outside a relevant possession. Amend taxes 2010   If you are an employee and receive compensation for labor or personal services performed both inside and outside the relevant possession, special rules apply in determining the source of the compensation. Amend taxes 2010 Compensation (other than certain fringe benefits) is sourced on a time basis. Amend taxes 2010 Certain fringe benefits (such as housing and education) are sourced on a geographical basis. Amend taxes 2010   Or, you may be permitted to use an alternative basis to determine the source of compensation. Amend taxes 2010 See Alternative basis , later. Amend taxes 2010   If you are self-employed, determine the source of your income for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. Amend taxes 2010 In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. Amend taxes 2010 Time basis. Amend taxes 2010   Use a time basis to figure your compensation for labor or personal services from the relevant possession (other than the fringe benefits discussed later). Amend taxes 2010 Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed  services in the relevant  possession during the year     Total number of days you  performed services during the year           You can use a unit of time less than a day in the above fraction, if appropriate. Amend taxes 2010 The time period for which the income is made does not have to be a year. Amend taxes 2010 Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. Amend taxes 2010 Example. Amend taxes 2010 In 2013, you worked in your employer's office in the United States for 60 days and in the Puerto Rico office for 180 days, earning a total of $80,000 for the year. Amend taxes 2010 Your Puerto Rico source income is $60,000, figured as follows. Amend taxes 2010       180 days 240 days × $80,000 = $60,000                 Multi-year compensation. Amend taxes 2010   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. Amend taxes 2010 Multi-year compensation is compensation that is included in your income in 1 tax year but is attributable to a period that includes 2 or more tax years. Amend taxes 2010 You determine the period to which the income is attributable based on the facts and circumstances of your case. Amend taxes 2010 For more information on multi-year compensation, see Treasury Decision (T. Amend taxes 2010 D. Amend taxes 2010 ) 9212 and Regulations section 1. Amend taxes 2010 861-4, 2005-35 I. Amend taxes 2010 R. Amend taxes 2010 B. Amend taxes 2010 429, available at www. Amend taxes 2010 irs. Amend taxes 2010 gov/irb/2005-35_IRB/ar14. Amend taxes 2010 html. Amend taxes 2010 Certain fringe benefits sourced on a geographical basis. Amend taxes 2010   If you received any of the following fringe benefits as compensation for labor or services performed as an employee partly inside and partly outside a relevant possession, you must source that income on a geographical basis. Amend taxes 2010 Housing. Amend taxes 2010 Education. Amend taxes 2010 Local transportation. Amend taxes 2010 Tax reimbursement. Amend taxes 2010 Hazardous or hardship duty pay. Amend taxes 2010 Moving expense reimbursement. Amend taxes 2010 For information on determining the source of the fringe benefits listed above, see Regulations section 1. Amend taxes 2010 861-4. Amend taxes 2010 Alternative basis. Amend taxes 2010   You can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your income than the time or geographical basis. Amend taxes 2010 If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your income. Amend taxes 2010 De minimis exception. Amend taxes 2010   There is an exception to the rule for determining the source of income earned in a possession. Amend taxes 2010 Generally, you will not have income from a possession if during a tax year you: Are a U. Amend taxes 2010 S. Amend taxes 2010 citizen or resident, Are not a bona fide resident of that possession, Are not employed by or under contract with an individual, partnership, or corporation that is engaged in a trade or business in that possession, Temporarily perform services in that possession for 90 days or less, and Earned $3,000 or less from such services. Amend taxes 2010 This exception began with income earned during your 2008 tax year. Amend taxes 2010 Pensions. Amend taxes 2010   Generally, pension income has two components: contributions to the pension plan and the earnings accrued from investing those contributions. Amend taxes 2010 The contribution portion is sourced according to where services were performed that earned the pension. Amend taxes 2010 The investment earnings portion is sourced according to the location of the pension trust. Amend taxes 2010 Example. Amend taxes 2010 You are a U. Amend taxes 2010 S. Amend taxes 2010 citizen who worked in Puerto Rico for a U. Amend taxes 2010 S. Amend taxes 2010 company. Amend taxes 2010 All services were performed in Puerto Rico. Amend taxes 2010 Upon retirement you remained in Puerto Rico and began receiving your pension from the U. Amend taxes 2010 S. Amend taxes 2010 pension trust of your employer. Amend taxes 2010 Distributions from the U. Amend taxes 2010 S. Amend taxes 2010 pension trust must be allocated between (1) contributions, which are Puerto Rico source income, and (2) investment earnings, which are U. Amend taxes 2010 S. Amend taxes 2010 source income. Amend taxes 2010 Investment Income This category includes such income as interest, dividends, rents, and royalties. Amend taxes 2010 Interest income. Amend taxes 2010   The source of interest income is generally determined by the residence of the payer. Amend taxes 2010 Interest paid by corporations created or organized in a relevant possession (possession corporation) or by individuals who are bona fide residents of a relevant possession is considered income from sources within that possession. Amend taxes 2010   However, there is an exception to this rule if you are a bona fide resident of a relevant possession, receive interest from a corporation created or organized in that possession, and are a shareholder of that corporation who owns, directly or indirectly, at least 10% of the total voting stock of the corporation. Amend taxes 2010 See Regulations section 1. Amend taxes 2010 937-2(i) for more information. Amend taxes 2010 Dividends. Amend taxes 2010   Generally, dividends paid by a corporation created or organized in a relevant possession will be considered income from sources within that possession. Amend taxes 2010 There are additional rules for bona fide residents of a relevant possession who receive dividend income from possession corporations, and who own, directly or indirectly, at least 10% of the voting stock of the corporation. Amend taxes 2010 For more information, see Regulations section 1. Amend taxes 2010 937-2(g). Amend taxes 2010 Rental income. Amend taxes 2010   Rents from property located in a relevant possession are treated as income from sources within that possession. Amend taxes 2010 Royalties. Amend taxes 2010   Royalties from natural resources located in a relevant possession are considered income from sources within that possession. Amend taxes 2010   Also considered possession source income are royalties received for the use of, or for the privilege of using, in a relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property. Amend taxes 2010 Sales or Other Dispositions of Property The source rules for sales or other dispositions of property are varied. Amend taxes 2010 The most common situations are discussed below. Amend taxes 2010 Real property. Amend taxes 2010   Real property includes land and buildings, and generally anything built on, growing on, or attached to land. Amend taxes 2010 The location of the property generally determines the source of income from the sale. Amend taxes 2010 For example, if you are a bona fide resident of Guam and sell your home that is located in Guam, the gain on the sale is sourced in Guam. Amend taxes 2010 If, however, the home you sold was located in the United States, the gain is U. Amend taxes 2010 S. Amend taxes 2010 source income. Amend taxes 2010 Personal property. Amend taxes 2010   The term “personal property” refers to property (such as machinery, equipment, or furniture) that is not real property. Amend taxes 2010 Generally, gain (or loss) from the sale or other disposition is sourced according to the seller's tax home. Amend taxes 2010 If personal property is sold by a bona fide resident of a relevant possession, the gain (or loss) from the sale is treated as sourced within that possession. Amend taxes 2010   This rule does not apply to the sale of inventory, intangible property, depreciable personal property, or property sold through a foreign office or fixed place of business. Amend taxes 2010 The rules applying to sales of inventory are discussed below. Amend taxes 2010 For information on sales of the other types of property mentioned, see Internal Revenue Code section 865. Amend taxes 2010 Inventory. Amend taxes 2010   Your inventory is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. Amend taxes 2010 The source of income from the sale of inventory depends on whether the inventory was purchased or produced. Amend taxes 2010 Purchased. Amend taxes 2010   Income from the sale of inventory that you purchased is sourced where you sell the property. Amend taxes 2010 Generally, this is where title to the property passes to the buyer. Amend taxes 2010 Produced. Amend taxes 2010   Income from the sale of inventory that you produced in a relevant possession and sold outside that possession (or vice versa) is sourced based on an allocation. Amend taxes 2010 For information on making the allocation, see Regulations section 1. Amend taxes 2010 863-3(f). Amend taxes 2010 Special Rules for Gains From Dispositions of Certain Property There are special rules for gains from dispositions of certain investment property (for example, stocks, bonds, debt instruments, diamonds, and gold) owned by a U. Amend taxes 2010 S. Amend taxes 2010 citizen or resident alien prior to becoming a bona fide resident of a possession. Amend taxes 2010 You are subject to these special rules if you meet both of the following conditions. Amend taxes 2010 For the tax year for which the source of the gain must be determined, you are a bona fide resident of the relevant possession. Amend taxes 2010 For any of the 10 years preceding that year, you were a citizen or resident alien of the United States (other than a bona fide resident of the relevant possession). Amend taxes 2010 If you meet these conditions, gains from the disposition of this property will not be treated as income from sources within the relevant possession for purposes of the Internal Revenue Code. Amend taxes 2010 Accordingly, bona fide residents of American Samoa and Puerto Rico, for example, may not exclude the gain on their U. Amend taxes 2010 S. Amend taxes 2010 tax return. Amend taxes 2010 (See chapter 3 for additional filing information. Amend taxes 2010 ) With respect to the CNMI, Guam, and the USVI, the gain from the disposition of this property will not meet the requirements for certain tax rules that may allow bona fide residents of those possessions to reduce or obtain a rebate of taxes on income from sources within the relevant possessions. Amend taxes 2010 These rules apply to dispositions after April 11, 2005. Amend taxes 2010 For details, see Regulations section 1. Amend taxes 2010 937-2(f)(1) and Examples 1 and 2 of section 1. Amend taxes 2010 937-2(k). Amend taxes 2010 Example 1. Amend taxes 2010 In 2007, Cheryl Jones, a U. Amend taxes 2010 S. Amend taxes 2010 citizen, lived in the United States and paid $1,000 for 100 shares of stock in the Rose Corporation, a U. Amend taxes 2010 S. Amend taxes 2010 corporation listed on the New York Stock Exchange. Amend taxes 2010 On March 1, 2010, she moved to Puerto Rico and changed her tax home to Puerto Rico on the same date. Amend taxes 2010 Cheryl satisfied the presence test in 2010 and, under the year-of-move exception, she was considered a bona fide resident of Puerto Rico for the rest of 2010. Amend taxes 2010 On March 1, 2010, the closing value of Cheryl's stock in the Rose Corporation was $2,000. Amend taxes 2010 On January 5, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold all her Rose Corporation stock for $7,000. Amend taxes 2010 Under the earlier rules, none of Cheryl's $6,000 gain will be treated as income from sources within Puerto Rico. Amend taxes 2010 The source rules discussed in the preceding paragraphs supplement, and may apply in conjunction with, an existing special rule. Amend taxes 2010 This existing special rule applies if you are a U. Amend taxes 2010 S. Amend taxes 2010 citizen or resident alien who becomes a bona fide resident of American Samoa, the CNMI, or Guam, and who has gain from the disposition of certain U. Amend taxes 2010 S. Amend taxes 2010 assets during the 10-year period beginning when you became a bona fide resident. Amend taxes 2010 The gain is U. Amend taxes 2010 S. Amend taxes 2010 source income that generally is subject to U. Amend taxes 2010 S. Amend taxes 2010 tax if the property is either (1) located in the United States; (2) stock issued by a U. Amend taxes 2010 S. Amend taxes 2010 corporation or a debt obligation of a U. Amend taxes 2010 S. Amend taxes 2010 person or of the United States, a state (or political subdivision), or the District of Columbia; or (3) property that has a basis in whole or in part by reference to property described in (1) or (2). Amend taxes 2010 See chapter 3 for filing information. Amend taxes 2010 Special election. Amend taxes 2010   For dispositions after April 11, 2005, you can choose to treat the part of gain (or loss) attributable to the time you held the property while a bona fide resident of the relevant possession (the possession holding period) as gain (or loss) from sources within that possession. Amend taxes 2010 Make the election by reporting the gain attributable to the possession holding period on your income tax return for the year of disposition. Amend taxes 2010 This election overrides both of the special rules discussed earlier. Amend taxes 2010   There are two methods for figuring the gain for the possession holding period, one for marketable securities and another for other types of investment property. Amend taxes 2010 Marketable securities. Amend taxes 2010   Marketable securities are those actively traded on an established financial market, such as stock in a publicly held corporation. Amend taxes 2010 Under the special election, allocate the gain (or loss) by figuring the appreciation separately for your possession and U. Amend taxes 2010 S. Amend taxes 2010 holding periods. Amend taxes 2010   Your possession holding period begins on the first day you do not have a tax home outside the relevant possession. Amend taxes 2010 The gain (or loss) attributable to the possession holding period is the difference in fair market value of the security at the close of the market on the first and last days of this holding period. Amend taxes 2010 This is your gain (or loss) that is treated as being from sources within the relevant possession. Amend taxes 2010 If you were a bona fide resident of the relevant possession for more than one continuous period, combine the gains (or losses) from each possession holding period. Amend taxes 2010 Example 2. Amend taxes 2010 Assume the same facts as in Example 1, except that Cheryl makes the special election to allocate the gain between her U. Amend taxes 2010 S. Amend taxes 2010 and possession holding periods. Amend taxes 2010 Cheryl's possession holding period began March 1, 2010, the date her tax home changed to Puerto Rico. Amend taxes 2010 Therefore, the portion of gain attributable to her possession holding period is $5,000 ($7,000 sale price – $2,000 closing value on first day of the possession holding period). Amend taxes 2010 By reporting $5,000 of her $6,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. Amend taxes 2010 Other personal property. Amend taxes 2010   For personal property other than marketable securities, use a time-based allocation. Amend taxes 2010 Figure the gain (or loss) attributable to the possession holding period by multiplying your total gain (or loss) by the following fraction. Amend taxes 2010      Number of days in the  possession holding period     Total number of days  in your holding period         The result is your gain (or loss) that is treated as being from sources within the relevant possession. Amend taxes 2010 Example 3. Amend taxes 2010 In addition to the stock in Rose Corporation, Cheryl acquired a 5% interest in the Alder Partnership on January 1, 2009. Amend taxes 2010 On March 1, 2010, when she established bona fide residency in Puerto Rico, her partnership interest was not considered a marketable security. Amend taxes 2010 On September 16, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold her interest in Alder Partnership for a $100,000 gain. Amend taxes 2010 She had owned the interest for a total of 1,720 days. Amend taxes 2010 Cheryl's possession holding period (from March 1, 2010, through September 16, 2013) is 1,296 days. Amend taxes 2010 The portion of her gain attributable to Puerto Rico is $75,349 ($100,000 x (1,296 Puerto Rico days ÷ 1,720 total days)). Amend taxes 2010 By reporting $75,349 of her $100,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. Amend taxes 2010 Scholarships, Fellowships, Grants, Prizes, and Awards The source of these types of income is generally the residence of the payer, regardless of who actually disburses the funds. Amend taxes 2010 Therefore, in order to be possession source income, the payer must be a resident of the relevant possession, such as an individual who is a bona fide resident or a corporation created or organized in that possession. Amend taxes 2010 These rules do not apply to amounts paid as salary or other compensation for services. Amend taxes 2010 See Compensation for Labor or Personal Services, earlier in this chapter, for the source rules that apply. Amend taxes 2010 Effectively Connected Income In limited circumstances, some kinds of income from sources outside the relevant possession must be treated as effectively connected with a trade or business in that possession. Amend taxes 2010 These circumstances are listed below. Amend taxes 2010 You have an office or other fixed place of business in the relevant possession to which the income can be attributed. Amend taxes 2010 That office or place of business is a material factor in producing the income. Amend taxes 2010 The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. Amend taxes 2010 An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. Amend taxes 2010 The three kinds of income from sources outside the relevant possession to which these rules apply are the following. Amend taxes 2010 Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the relevant possession or from any interest in such property. Amend taxes 2010 Included are rents or royalties for the use of, or for the privilege of using, outside the relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the relevant possession. Amend taxes 2010 Dividends or interest from the active conduct of a banking, financing, or similar business in the relevant possession. Amend taxes 2010 Income, gain, or loss from the sale or exchange outside the relevant possession, through the office or other fixed place of business in the relevant possession, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. Amend taxes 2010 Item (3) will not apply if you sold the property for use, consumption, or disposition outside the relevant possession and an office or other fixed place of business in a foreign country was a material factor in the sale. Amend taxes 2010 Example. Amend taxes 2010 Marcy Jackson is a bona fide resident of American Samoa. Amend taxes 2010 Her business, which she conducts from an office in American Samoa, is developing and selling specialized computer software. Amend taxes 2010 A software purchaser will frequently pay Marcy an additional amount to install the software on the purchaser's operating system and to ensure that the software is functioning properly. Amend taxes 2010 Marcy installs the software at the purchaser's place of business, which may be in American Samoa, in the United States, or in another country. Amend taxes 2010 The income from selling the software is effectively connected with the conduct of Marcy's business in American Samoa, even though the product's destination may be outside the possession. Amend taxes 2010 However, the compensation she receives for installing the software (personal services) outside of American Samoa is not effectively connected with the conduct of her business in the possession—the income is sourced where she performs the services. Amend taxes 2010 Prev  Up  Next   Home   More Online Publications
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Law Enforcement Assistance Pilot Program on Identity Theft Activity Involving the IRS

As part of its comprehensive identity theft strategy, the IRS is expanding the law enforcement assistance pilot program designed to help law enforcement obtain tax return data vital to their local efforts in investigating and prosecuting specific cases of identity theft. In addition to the initial State of Florida, this pilot program is expanding to work with law enforcement in eight additional states: Alabama, California, Georgia, New Jersey, New York, Oklahoma, Pennsylvania and Texas.

The IRS launched the initial pilot in Florida in April of 2012.  Over 750 waiver requests have been received through October from roughly 50 state and local law enforcement agencies in Florida participating in the pilot. 

Under the pilot program, state and local law enforcement officials with evidence of identity theft involving fraudulently filed federal tax returns will be able to have identity theft victims complete a special IRS disclosure form. Taxpayers must give their permission for the IRS to provide law enforcement with the returns submitted using their Social Security number. Law enforcement officials will need to contact the identity theft victims in order to request and secure the victims' consent for disclosure of the records. In certain instances, the IRS will assist law enforcement in locating taxpayers and soliciting their consent.

Law enforcement would then submit a disclosure authorization form, which the IRS created solely for use by victims of identity theft for this pilot program, to the Criminal Investigation (CI) Division of the IRS, along with a copy of the police report and the IRS Identity Theft Affidavit if available. It is important that identity theft victims still submit the original copy of the IRS Identity Theft Affidavit to the IRS according to the instructions on the back of the form that fit their specific circumstances.

Federal law imposes restrictions on sharing of taxpayer information, including information that can be shared with state and local law enforcement.  This program allows taxpayers the option to permit information to be shared with state and local law enforcement specifically to assist law enforcement officials with their efforts in pursuing identity theft perpetrators.  During this expanded pilot program, the IRS will process the disclosure forms received and forward the documentation to the law enforcement officer who requested the documents. The documents will not be sent directly to the taxpayer. However, the IRS will continue to work directly with taxpayers to resolve their tax accounts as quickly as possible.

Law enforcement in the nine states in this pilot program who are interested in working with the IRS should contact their local IRS Criminal Investigation field office.

Following the pilot, the IRS will carefully assess the results and performance before deciding on how to proceed with the program.

The IRS comprehensive identity theft strategy comprises a dual effort, focusing both on fraud prevention and victim assistance. On the prevention side, this includes implementing new processes for handling returns, new filters to detect fraud, new initiatives to partner with stakeholders and a continued commitment to investigate the criminals who perpetrate these crimes. As for victim assistance, the IRS is working to accelerate case resolution, provide more training for our employees who assist victims of identity theft, and increase outreach to and education of taxpayers so they can prevent and resolve tax-related identity theft issues quickly.

Taxpayers looking for additional information can consult the Taxpayer Guide to Identity Theft or the IRS Identity Theft Protection page on the IRS website.

Page Last Reviewed or Updated: 06-Dec-2013

The Amend Taxes 2010

Amend taxes 2010 6. Amend taxes 2010   Tuition and Fees Deduction Table of Contents IntroductionWhat is the tax benefit of the tuition and fees deduction. Amend taxes 2010 Can You Claim the DeductionWho Can Claim the Deduction Who Cannot Claim the Deduction What Expenses QualifyQualified Education Expenses No Double Benefit Allowed Expenses That Do Not Qualify Who Is an Eligible Student Who Can Claim a Dependent's Expenses Figuring the DeductionEffect of the Amount of Your Income on the Amount of Your Deduction Claiming the Deduction Illustrated Example Introduction You may be able to deduct qualified education expenses paid during the year for yourself, your spouse, or your dependent(s). Amend taxes 2010 You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. Amend taxes 2010 The qualified expenses must be for higher education, as explained later under Qualified Education Expenses . Amend taxes 2010 What is the tax benefit of the tuition and fees deduction. Amend taxes 2010   The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. Amend taxes 2010   This deduction is taken as an adjustment to income. Amend taxes 2010 This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). Amend taxes 2010 This deduction may be beneficial to you if you do not qualify for the American opportunity or lifetime learning credits. Amend taxes 2010 You can choose the education benefit that will give you the lowest tax. Amend taxes 2010 You may want to compare the tuition and fees deduction to the education credits. Amend taxes 2010 See chapter 2, American Opportunity Credit and chapter 3, Lifetime Learning Credit for more information on the education credits. Amend taxes 2010 Table 6-1. Amend taxes 2010 Tuition and Fees Deduction at a Glance summarizes the features of the tuition and fees deduction. Amend taxes 2010 Can You Claim the Deduction The following rules will help you determine if you can claim the tuition and fees deduction. Amend taxes 2010 Who Can Claim the Deduction Generally, you can claim the tuition and fees deduction if all three of the following requirements are met. Amend taxes 2010 You pay qualified education expenses of higher education. Amend taxes 2010 You pay the education expenses for an eligible student. Amend taxes 2010 The eligible student is yourself, your spouse, or your dependent for whom you claim an exemption on your tax return. Amend taxes 2010 The term “qualified education expenses” is defined later under Qualified Education Expenses . Amend taxes 2010 “Eligible student” is defined later under Who Is an Eligible Student . Amend taxes 2010 For more information on claiming the deduction for a dependent, see Who Can Claim a Dependent's Expenses , later. Amend taxes 2010 Table 6-1. Amend taxes 2010 Tuition and Fees Deduction at a Glance Do not rely on this table alone. Amend taxes 2010 Refer to the text for complete details. Amend taxes 2010 Question Answer What is the maximum benefit? You can reduce your income subject to tax by up to $4,000. Amend taxes 2010 What is the limit on modified adjusted gross income (MAGI)? $160,000 if married filing a joint return; $80,000 if single, head of household, or qualifying widow(er). Amend taxes 2010 Where is the deduction taken? As an adjustment to income on  Form 1040 or Form 1040A. Amend taxes 2010 For whom must the expenses be paid? A student enrolled in an eligible educational institution who is either: •you,  •your spouse, or  •your dependent for whom you claim an exemption. Amend taxes 2010 What tuition and fees are deductible? Tuition and fees required for enrollment or attendance at an eligible postsecondary educational institution, but not including personal, living, or family expenses, such as room and board. Amend taxes 2010 Who Cannot Claim the Deduction You cannot claim the tuition and fees deduction if any of the following apply. Amend taxes 2010 Your filing status is married filing separately. Amend taxes 2010 Another person can claim an exemption for you as a dependent on his or her tax return. Amend taxes 2010 You cannot take the deduction even if the other person does not actually claim that exemption. Amend taxes 2010 Your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if filing a joint return). Amend taxes 2010 You (or your spouse) were a nonresident alien for any part of 2013 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. Amend taxes 2010 More information on nonresident aliens can be found in Publication 519. Amend taxes 2010 What Expenses Qualify The tuition and fees deduction is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Amend taxes 2010 Generally, the deduction is allowed for qualified education expenses paid in 2013 in connection with enrollment at an institution of higher education during 2013 or for an academic period beginning in 2013 or in the first 3 months of 2014. Amend taxes 2010 For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning in January 2014, you may be able to use that $1,500 in figuring your 2013 deduction. Amend taxes 2010 Academic period. Amend taxes 2010   An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. Amend taxes 2010 In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. Amend taxes 2010 Paid with borrowed funds. Amend taxes 2010   You can claim a tuition and fees deduction for qualified education expenses paid with the proceeds of a loan. Amend taxes 2010 Use the expenses to figure the deduction for the year in which the expenses are paid, not the year in which the loan is repaid. Amend taxes 2010 Treat loan disbursements sent directly to the educational institution as paid on the date the institution credits the student's account. Amend taxes 2010 Student withdraws from class(es). Amend taxes 2010   You can claim a tuition and fees deduction for qualified education expenses not refunded when a student withdraws. Amend taxes 2010 Qualified Education Expenses For purposes of the tuition and fees deduction, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. Amend taxes 2010 Eligible educational institution. Amend taxes 2010   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Amend taxes 2010 S. Amend taxes 2010 Department of Education. Amend taxes 2010 It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Amend taxes 2010 The educational institution should be able to tell you if it is an eligible educational institution. Amend taxes 2010   Certain educational institutions located outside the United States also participate in the U. Amend taxes 2010 S. Amend taxes 2010 Department of Education's Federal Student Aid (FSA) programs. Amend taxes 2010 Related expenses. Amend taxes 2010   Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance. Amend taxes 2010 Prepaid expenses. Amend taxes 2010   Qualified education expenses paid in 2013 for an academic period that begins in the first three months of 2014 can be used in figuring an education credit for 2013 only. Amend taxes 2010 See Academic period , earlier. Amend taxes 2010 For example, you pay $2,000 in December 2013 for qualified tuition for the 2014 winter quarter that begins in January 2014, you can use that $2,000 in figuring an education credit for 2013 only (if you meet all the other requirements). Amend taxes 2010 You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 education credit(s). Amend taxes 2010 In the following examples, assume that each student is an eligible student and each college or university an eligible educational institution. Amend taxes 2010 Example 1. Amend taxes 2010 Jackson is a sophomore in University V's degree program in dentistry. Amend taxes 2010 This year, in addition to tuition, he is required to pay a fee to the university for the rental of the dental equipment he will use in this program. Amend taxes 2010 Because the equipment rental fee must be paid to University V for enrollment and attendance, Jackson's equipment rental fee is a qualified education expense. Amend taxes 2010 Example 2. Amend taxes 2010 Donna and Charles, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year classes. Amend taxes 2010 The college has no policy about how students should obtain these materials, but any student who purchases them from College W's bookstore will receive a bill directly from the college. Amend taxes 2010 Charles bought his books from a friend, so what he paid for them is not a qualified education expense. Amend taxes 2010 Donna bought hers at College W's bookstore. Amend taxes 2010 Although Donna paid College W directly for her first-year books and materials, her payment is not a qualified education expense because the books and materials are not required to be purchased from College W for enrollment or attendance at the institution. Amend taxes 2010 Example 3. Amend taxes 2010 When Marci enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. Amend taxes 2010 This activity fee is required of all students, and is used solely to fund on-campus organizations and activities run by students, such as the student newspaper and the student government. Amend taxes 2010 No portion of the fee covers personal expenses. Amend taxes 2010 Although labeled as a student activity fee, the fee is required for Marci's enrollment and attendance at College X. Amend taxes 2010 Therefore, it is a qualified expense. Amend taxes 2010 No Double Benefit Allowed You cannot do any of the following. Amend taxes 2010 Deduct qualified education expenses you deduct under any other provision of the law, for example, as a business expense. Amend taxes 2010 Deduct qualified education expenses for a student on your income tax return if you or anyone else claims an American opportunity or lifetime learning credit for that same student in the same year. Amend taxes 2010 Deduct qualified education expenses that have been used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or a qualified tuition program (QTP). Amend taxes 2010 For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program. Amend taxes 2010 See Coordination With Tuition and Fees Deduction in chapter 8, Qualified Tuition Program, later. Amend taxes 2010 Deduct qualified education expenses that have been paid with tax-free interest on U. Amend taxes 2010 S. Amend taxes 2010 savings bonds (Form 8815). Amend taxes 2010 See Figuring the Tax-Free Amount in chapter 10, Education Savings Bond Program, later. Amend taxes 2010 Deduct qualified education expenses that have been paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer. Amend taxes 2010 See the following section on Adjustments to Qualified Education Expenses. Amend taxes 2010 Adjustments to Qualified Education Expenses For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. Amend taxes 2010 The result is the amount of adjusted qualified education expenses for each student. Amend taxes 2010 You must also reduce qualified education expenses by the other amounts referred to in No Double Benefit Allowed , earlier. Amend taxes 2010 Tax-free educational assistance. Amend taxes 2010   For tax-free educational assistance received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. Amend taxes 2010 See Academic period , earlier. Amend taxes 2010   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. Amend taxes 2010 This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2013 for qualified education expenses paid on behalf of a student in 2013 (or attributable to enrollment at an eligible educational institution during 2013). Amend taxes 2010   If this tax-free educational assistance is received after 2013 but before you file your 2013 income tax return, see Refunds received after 2013 but before your income tax return is filed , later. Amend taxes 2010 If this tax-free educational assistance is received after 2013 and after you file your 2013 income tax return, see Refunds received after 2013 and after your income tax return is filed , later. Amend taxes 2010   This tax-free education assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Amend taxes 2010 Generally, any scholarship or fellowship is treated as tax free. Amend taxes 2010 However, a scholarship or fellowship is not treated as tax free to the extent the student includes it in gross income (if the student is required to file a tax return for the year the scholarship or fellowship is received) and either of the following is true. Amend taxes 2010 The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Amend taxes 2010 The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Amend taxes 2010 You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year it is received. Amend taxes 2010 For details, see Adjustments to Qualified Education Expenses in chapters 2 and 3. Amend taxes 2010 Refunds. Amend taxes 2010   A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or require repayment (recapture) of a credit claimed in an earlier year. Amend taxes 2010 Some tax-free educational assistance received after 2013 may be treated as a refund. Amend taxes 2010 See Tax-free educational assistance , earlier. Amend taxes 2010 Refunds received in 2013. Amend taxes 2010   For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses for 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. Amend taxes 2010 Refunds received after 2013 but before your income tax return is filed. Amend taxes 2010   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid before you file an income tax return for 2013, the amount of qualified education expenses for 2013 is reduced by the amount of the refund. Amend taxes 2010 Refunds received after 2013 and after your income tax return is filed. Amend taxes 2010   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid after you file an income tax return for 2013, you may need to repay some or all of the credit. Amend taxes 2010 See Credit recapture , later. Amend taxes 2010 Coordination with Coverdell education savings accounts and qualified tuition programs. Amend taxes 2010   Reduce your qualified education expenses by any qualified education expenses used to figure the exclusion from gross income of (a) interest received under an education savings bond program, or (b) any distribution from a Coverdell education savings account or qualified tuition program (QTP). Amend taxes 2010 For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program. Amend taxes 2010 Credit recapture. Amend taxes 2010    If any tax-free educational assistance for the qualified education expenses paid in 2013 or any refund of your qualified education expenses paid in 2013 is received after you file your 2013 income tax return, you must recapture (repay) any excess credit. Amend taxes 2010 You do this by refiguring the amount of your adjusted qualified education expenses for 2013 by reducing that amount by the amount of the refund or tax-free educational assistance. Amend taxes 2010 You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you had claimed the refigured credit(s). Amend taxes 2010 Include that amount as an additional tax for the year the refund or tax-free assistance was received. Amend taxes 2010 Example. Amend taxes 2010   You paid $3,500 of qualified education expenses in December 2013, and your child began college in January 2014. Amend taxes 2010 You claimed $3,500 as the tuition and fees deduction on your 2013 income tax return. Amend taxes 2010 The reduction reduced your taxable income by $3,500. Amend taxes 2010 Also, you claimed no tax credits in 2013. Amend taxes 2010 Your child withdrew from two classes and you received a refund of $2,000 in 2014 after you filed your 2013 tax return. Amend taxes 2010 Refigure your 2013 tuition and fees deduction using $1,500 of qualified education expense instead of the $3,500. Amend taxes 2010 The refigured tuition and fees deduction is $1,500. Amend taxes 2010 Do not file an amended 2013 tax return to account for this adjustment. Amend taxes 2010 Instead, include the difference of $2,000 (but only to the extent this difference would have increased your 2013 tax) on the “Other income” line of your 2014 Form 1040. Amend taxes 2010 You cannot file Form 1040A for 2014. Amend taxes 2010 Amounts that do not reduce qualified education expenses. Amend taxes 2010   Do not reduce qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. Amend taxes 2010   Do not reduce the qualified education expenses by any scholarship or fellowship reported as income on the student's tax return in the following situations. Amend taxes 2010 The use of the money is restricted, by the terms of the scholarship or fellowship, to costs of attendance (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Restrictions. Amend taxes 2010 The use of the money is not restricted. Amend taxes 2010 Example 1. Amend taxes 2010 In 2013, Jackie paid $3,000 for tuition and $5,000 for room and board at University X. Amend taxes 2010 The university did not require her to pay any fees in addition to her tuition in order to enroll in or attend classes. Amend taxes 2010 To help pay these costs, she was awarded a $2,000 scholarship and a $4,000 student loan. Amend taxes 2010 The terms of the scholarship state that it can be used to pay any of Jackie's college expenses. Amend taxes 2010 University X applies the $2,000 scholarship against Jackie's $8,000 total bill, and Jackie pays the $6,000 balance of her bill from University X with a combination of her student loan and her savings. Amend taxes 2010 Jackie does not report any portion of the scholarship as income on her tax return. Amend taxes 2010 In figuring the tuition and fees deduction, Jackie must reduce her qualified education expenses by the amount of the scholarship ($2,000) because she excluded the entire scholarship from her income. Amend taxes 2010 The student loan is not tax-free educational assistance, so she does not need to reduce her qualified expenses by any part of the loan proceeds. Amend taxes 2010 Jackie is treated as having paid $1,000 in qualified education expenses ($3,000 tuition – $2,000 scholarship) in 2013. Amend taxes 2010 Example 2. Amend taxes 2010 The facts are the same as in Example 1, except that Jackie reports her entire scholarship as income on her tax return. Amend taxes 2010 Because Jackie reported the entire $2,000 scholarship in her income, she does not need to reduce her qualified education expenses. Amend taxes 2010 Jackie is treated as having paid $3,000 in qualified education expenses. Amend taxes 2010 Expenses That Do Not Qualify Qualified education expenses do not include amounts paid for: Insurance, Medical expenses (including student health fees), Room and board, Transportation, or Similar personal, living, or family expenses. Amend taxes 2010 This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. Amend taxes 2010 Sports, games, hobbies, and noncredit courses. Amend taxes 2010   Qualified education expenses generally do not include expenses that relate to any course of instruction or other education that involves sports, games or hobbies, or any noncredit course. Amend taxes 2010 However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. Amend taxes 2010 Comprehensive or bundled fees. Amend taxes 2010   Some eligible educational institutions combine all of their fees for an academic period into one amount. Amend taxes 2010 If you do not receive, or do not have access to, an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed above, contact the institution. Amend taxes 2010 The institution is required to make this allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T. Amend taxes 2010 See Figuring the Deduction , later, for more information about Form 1098-T. Amend taxes 2010 Who Is an Eligible Student For purposes of the tuition and fees deduction, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution (as defined under Qualified Education Expenses , earlier). Amend taxes 2010 Who Can Claim a Dependent's Expenses Generally, in order to claim the tuition and fees deduction for qualified education expenses for a dependent, you must: Have paid the expenses, and Claim an exemption for the student as a dependent. Amend taxes 2010 For you to be able to deduct qualified education expenses for your dependent, you must claim an exemption for that individual. Amend taxes 2010 You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. Amend taxes 2010 IF your dependent is an eligible student and you. Amend taxes 2010 . Amend taxes 2010 . Amend taxes 2010 AND. Amend taxes 2010 . Amend taxes 2010 . Amend taxes 2010 THEN. Amend taxes 2010 . Amend taxes 2010 . Amend taxes 2010 claim an exemption for your dependent you paid all qualified education expenses for your dependent only you can deduct the qualified education expenses that you paid. Amend taxes 2010 Your dependent cannot take a deduction. Amend taxes 2010 claim an exemption for your dependent your dependent paid all qualified education expenses no one is allowed to take a deduction. Amend taxes 2010 do not claim an exemption for your dependent you paid all qualified education expenses no one is allowed to take a deduction. Amend taxes 2010 do not claim an exemption for your dependent your dependent paid all qualified education expenses no one is allowed to take a deduction. Amend taxes 2010 Expenses paid by dependent. Amend taxes 2010   If your dependent pays qualified education expenses, no one can take a tuition and fees deduction for those expenses. Amend taxes 2010 Neither you nor your dependent can deduct the expenses. Amend taxes 2010 For purposes of the tuition and fees deduction, you are not treated as paying any expenses actually paid by a dependent for whom you or anyone other than the dependent can claim an exemption. Amend taxes 2010 This rule applies even if you do not claim an exemption for your dependent on your tax return. Amend taxes 2010 Expenses paid by you. Amend taxes 2010   If you claim an exemption for a dependent who is an eligible student, only you can include any expenses you paid when figuring your tuition and fees deduction. Amend taxes 2010 Expenses paid under divorce decree. Amend taxes 2010   Qualified education expenses paid directly to an eligible educational institution for a student under a court-approved divorce decree are treated as paid by the student. Amend taxes 2010 Only the student would be eligible to take a tuition and fees deduction for that payment, and then only if no one else could claim an exemption for the student. Amend taxes 2010 Expenses paid by others. Amend taxes 2010   Someone other than you, your spouse, or your dependent (such as a relative or former spouse) may make a payment directly to an eligible educational institution to pay for an eligible student's qualified education expenses. Amend taxes 2010 In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. Amend taxes 2010 If you claim, or can claim, an exemption on your tax return for the student, you are not considered to have paid the expenses and you cannot deduct them. Amend taxes 2010 If the student is not a dependent, only the student can deduct payments made directly to the institution for his or her expenses. Amend taxes 2010 If the student is your dependent, no one can deduct the payments. Amend taxes 2010 Example. Amend taxes 2010 In 2013, Ms. Amend taxes 2010 Baker makes a payment directly to an eligible educational institution for her grandson Dan's qualified education expenses. Amend taxes 2010 For purposes of deducting tuition and fees, Dan is treated as receiving the money from his grandmother and, in turn, paying his own qualified education expenses. Amend taxes 2010 If an exemption cannot be claimed for Dan on anyone else's tax return, only Dan can claim a tuition and fees deduction for his grandmother's payment. Amend taxes 2010 If someone else can claim an exemption for Dan, no one will be allowed a deduction for Ms. Amend taxes 2010 Baker's payment. Amend taxes 2010 Tuition reduction. Amend taxes 2010   When an eligible educational institution provides a reduction in tuition to an employee of the institution (or spouse or dependent child of an employee), the amount of the reduction may or may not be taxable. Amend taxes 2010 If it is taxable, the employee is treated as receiving a payment of that amount and, in turn, paying it to the educational institution on behalf of the student. Amend taxes 2010 For more information on tuition reductions, see Qualified Tuition Reduction , in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Amend taxes 2010 Figuring the Deduction The maximum tuition and fees deduction in 2013 is $4,000, $2,000, or $0, depending on the amount of your MAGI. Amend taxes 2010 See Effect of the Amount of Your Income on the Amount of Your Deduction , later. Amend taxes 2010 Form 1098-T. Amend taxes 2010   To help you figure your tuition and fees deduction, the student should receive Form 1098-T (see Appendix A for a completed example of Form 1098-T). Amend taxes 2010 Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by January 31, 2014. Amend taxes 2010 An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. Amend taxes 2010 However, the amount in boxes 1 and 2 of Form 1098-T might be different than what you paid. Amend taxes 2010 When figuring the deduction, use only the amounts you paid in 2013 for qualified education expenses. Amend taxes 2010   In addition, Form 1098-T should give other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether the student was enrolled at least half-time or was a graduate student. Amend taxes 2010    The eligible educational institution may ask for a completed Form W-9S or similar statement to obtain the student's name, address, and taxpayer identification number. Amend taxes 2010 Effect of the Amount of Your Income on the Amount of Your Deduction If your MAGI is not more than $65,000 ($130,000 if you are married filing jointly), your maximum tuition and fees deduction is $4,000. Amend taxes 2010 If your MAGI is larger than $65,000 ($130,000 if you are married filing jointly), but is not more than $80,000 ($160,000 if you are married filing jointly), your maximum deduction is $2,000. Amend taxes 2010 No tuition and fees deduction is allowed if your MAGI is larger than $80,000 ($160,000 if you are married filing jointly). Amend taxes 2010 Modified adjusted gross income (MAGI). Amend taxes 2010   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return before subtracting any deduction for tuition and fees. Amend taxes 2010 However, as discussed below, there may be other modifications. Amend taxes 2010 MAGI when using Form 1040A. Amend taxes 2010   If you file Form 1040A, your MAGI is the AGI on line 22 of that form, figured without taking into account any amount on line 19 (tuition and fees deduction). Amend taxes 2010 MAGI when using Form 1040. Amend taxes 2010   If you file Form 1040, your MAGI is the AGI on line 38 of that form, figured without taking into account any amount on line 34 (tuition and fees deduction) or line 35 (domestic production activities deduction), and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Amend taxes 2010   Table 6-2 shows how the amount of your MAGI can affect your tuition and fees deduction. Amend taxes 2010   You can use Worksheet 6-1. Amend taxes 2010 MAGI for the Tuition and Fees Deduction , later, to figure your MAGI. Amend taxes 2010 Table 6-2. Amend taxes 2010 Effect of MAGI on Maximum Tuition and Fees Deduction IF your filing status is. Amend taxes 2010 . Amend taxes 2010 . Amend taxes 2010 AND your MAGI is. Amend taxes 2010 . Amend taxes 2010 . Amend taxes 2010 THEN your maximum tuition and fees deduction is. Amend taxes 2010 . Amend taxes 2010 . Amend taxes 2010 single,  head of household, or qualifying widow(er) not more than $65,000 $4,000. Amend taxes 2010 more than $65,000  but not more than $80,000 $2,000. Amend taxes 2010 more than $80,000 $0. Amend taxes 2010 married filing joint return not more than $130,000 $4,000. Amend taxes 2010 more than $130,000 but not more than $160,000 $2,000. Amend taxes 2010 more than $160,000 $0. Amend taxes 2010 Claiming the Deduction You claim a tuition and fees deduction by completing Form 8917 and submitting it with your Form 1040 or Form 1040A. Amend taxes 2010 Enter the deduction on Form 1040, line 34, or Form 1040A, line 19. Amend taxes 2010 A filled-in Form 8917 is shown at the end of this chapter. Amend taxes 2010 Illustrated Example Tim Pfister, a single taxpayer, enrolled full-time at a local college to earn a degree in engineering. Amend taxes 2010 This is the first year of his postsecondary education. Amend taxes 2010 During 2013, he paid $3,600 for his qualified 2013 tuition expense. Amend taxes 2010 Both he and the college meet all of the requirements for the tuition and fees deduction. Amend taxes 2010 Tim's total income (Form 1040, line 22) and MAGI are $26,000. Amend taxes 2010 He figures his deduction of $3,600 as shown on Form 8917, later. Amend taxes 2010 Worksheet 6-1. Amend taxes 2010 MAGI for the Tuition and Fees Deduction Use this worksheet if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico. Amend taxes 2010 Before using this worksheet, you must complete Form 1040, lines 7 through 33, and figure any amount to be entered on the dotted line next to line 36. Amend taxes 2010 1. Amend taxes 2010 Enter the amount from Form 1040, line 22   1. Amend taxes 2010         2. Amend taxes 2010 Enter the total from Form 1040, lines 23 through 33   2. Amend taxes 2010               3. Amend taxes 2010 Enter the total of any amounts entered on the dotted line next to Form 1040, line 36   3. Amend taxes 2010               4. Amend taxes 2010 Add lines 2 and 3   4. Amend taxes 2010         5. Amend taxes 2010 Subtract line 4 from line 1   5. Amend taxes 2010         6. Amend taxes 2010 Enter your foreign earned income exclusion and/or housing  exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   6. Amend taxes 2010         7. Amend taxes 2010 Enter your foreign housing deduction (Form 2555, line 50)   7. Amend taxes 2010         8. Amend taxes 2010 Enter the amount of income from Puerto Rico you are excluding   8. Amend taxes 2010         9. Amend taxes 2010 Enter the amount of income from American Samoa you are  excluding (Form 4563, line 15)   9. Amend taxes 2010         10. Amend taxes 2010 Add lines 5 through 9. Amend taxes 2010 This is your modified adjusted gross income   10. Amend taxes 2010     Note. Amend taxes 2010 If the amount on line 10 is more than $80,000 ($160,000 if married filing jointly),  you cannot take the deduction for tuition and fees. Amend taxes 2010       This image is too large to be displayed in the current screen. Amend taxes 2010 Please click the link to view the image. Amend taxes 2010 Form 8917 for Tim Pfister Prev  Up  Next   Home   More Online Publications