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How Do I Ammend My Tax Return

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How Do I Ammend My Tax Return

How do i ammend my tax return Publication 597 - Main Content Table of Contents Application of Treaty Personal Services Pensions, Annuities, Social Security, and AlimonyRoth IRAs. How do i ammend my tax return Tax-deferred plans. How do i ammend my tax return Investment Income From Canadian Sources Other Income Charitable ContributionsQualified charities. How do i ammend my tax return Income Tax Credits Competent Authority Assistance How To Get Tax HelpText of Treaty U. How do i ammend my tax return S. How do i ammend my tax return Taxation Canadian Taxation Application of Treaty The benefits of the income tax treaty are generally provided on the basis of residence for income tax purposes. How do i ammend my tax return That is, a person who is recognized as a resident of the United States who has income from Canada, will often pay less income tax to Canada on that income than if no treaty was in effect. How do i ammend my tax return Article IV provides definitions of residents of Canada and the United States, and provides specific criteria for applying the treaty in cases where a taxpayer is considered by both countries to be a resident. How do i ammend my tax return Saving clause. How do i ammend my tax return   In most instances, a treaty does not affect the right of a country to tax its own residents (including those who are U. How do i ammend my tax return S. How do i ammend my tax return citizens) or of the United States to tax its residents or citizens (including U. How do i ammend my tax return S. How do i ammend my tax return citizens who are residents of the foreign country). How do i ammend my tax return This provision is known as the “saving clause. How do i ammend my tax return ”   For example, an individual who is a U. How do i ammend my tax return S. How do i ammend my tax return citizen and a resident of Canada may have dividend income from a U. How do i ammend my tax return S. How do i ammend my tax return corporation. How do i ammend my tax return The treaty provides a maximum rate of 15% on dividends received by a resident of Canada from sources in the United States. How do i ammend my tax return Even though a resident of Canada, the individual is a U. How do i ammend my tax return S. How do i ammend my tax return citizen and the saving clause overrides the treaty article that limits the U. How do i ammend my tax return S. How do i ammend my tax return tax to 15%. How do i ammend my tax return    Exceptions to the saving clause can be found in Article XXIX, paragraph 3. How do i ammend my tax return Treaty-based position. How do i ammend my tax return   If you take the position that any U. How do i ammend my tax return S. How do i ammend my tax return tax is overruled or otherwise reduced by a U. How do i ammend my tax return S. How do i ammend my tax return treaty (a treaty-based position), you generally must disclose that position on Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), and attach it to your return. How do i ammend my tax return Personal Services A U. How do i ammend my tax return S. How do i ammend my tax return citizen or resident who is temporarily present in Canada during the tax year is exempt from Canadian income taxes on pay for services performed, or remittances received from the United States, if the citizen or resident qualifies under one of the treaty exemption provisions set out below. How do i ammend my tax return Income from employment (Article XV). How do i ammend my tax return   Income U. How do i ammend my tax return S. How do i ammend my tax return residents receive for the performance of dependent personal services in Canada (except as public entertainers) is exempt from Canadian tax if it is not more than $10,000 in Canadian currency for the year. How do i ammend my tax return If it is more than $10,000 for the year, it is exempt only if: The residents are present in Canada for no more than 183 days in any 12-month period beginning or ending in the year concerned, and The income is not paid by, or on behalf of, a Canadian resident and is not borne by a permanent establishment in Canada. How do i ammend my tax return    Whether there is a permanent establishment in Canada is determined by the rules set forth in Article V. How do i ammend my tax return Example. How do i ammend my tax return You are a U. How do i ammend my tax return S. How do i ammend my tax return resident employed under an 8-month contract with a Canadian firm to install equipment in their Montreal plant. How do i ammend my tax return During the calendar year you were physically present in Canada for 179 days and were paid $16,500 (Canadian) for your services. How do i ammend my tax return Although you were in Canada for not more than 183 days during the year, your income is not exempt from Canadian income tax because it was paid by a Canadian resident and was more than $10,000 (Canadian) for the year. How do i ammend my tax return Pay received by a U. How do i ammend my tax return S. How do i ammend my tax return resident for work regularly done in more than one country as an employee on a ship, aircraft, motor vehicle, or train operated by a U. How do i ammend my tax return S. How do i ammend my tax return resident is exempt from Canadian tax. How do i ammend my tax return Income from self-employment (Article VII). How do i ammend my tax return   Income from services performed (other than those performed as an employee) are taxed in Canada if they are attributable to a permanent establishment in Canada. How do i ammend my tax return This income is treated as business profits, and deductions similar to those allowed under U. How do i ammend my tax return S. How do i ammend my tax return law are allowable. How do i ammend my tax return   If you carry on (or have carried on) business in both Canada and the United States, the business profits are attributable to each country based on the profits that the permanent establishment might be expected to make if it were a distinct and separate person engaged in the same or similar activities. How do i ammend my tax return The business profits attributable to the permanent establishment include only those profits derived from assets used, risks assumed, and activities performed by the permanent establishment. How do i ammend my tax return   You may be considered to have a permanent establishment if you meet certain conditions. How do i ammend my tax return For more information, see Article V (Permanent Establishment) and Article VII (Business Profits). How do i ammend my tax return Public entertainers (Article XVI). How do i ammend my tax return   The provisions under income from employment or income from self-employment do not apply to public entertainers (such as theater, motion picture, radio, or television artistes, musicians, or athletes) from the United States who receive more than $15,000 in gross receipts in Canadian currency, including reimbursed expenses, from their entertainment activities in Canada during the calendar year. How do i ammend my tax return However, this provision for public entertainers does not apply (and the other provisions will apply) to athletes participating in team sports in leagues with regularly scheduled games in both the United States and Canada. How do i ammend my tax return Compensation paid by the U. How do i ammend my tax return S. How do i ammend my tax return Government (Article XIX). How do i ammend my tax return   Wages, salaries, and similar income (other than pensions) paid to a U. How do i ammend my tax return S. How do i ammend my tax return citizen by the United States or any of its agencies, instrumentalities, or political subdivisions for discharging governmental functions are exempt from Canadian income tax. How do i ammend my tax return   The exemption does not apply to pay for services performed in connection with any trade or business carried on for profit by the United States, or any of its agencies, instrumentalities, or political subdivisions. How do i ammend my tax return Students and apprentices (Article XX). How do i ammend my tax return   A full-time student, apprentice, or business trainee who is in Canada to study or acquire business experience is exempt from Canadian income tax on remittances received from any source outside Canada for maintenance, education, or training. How do i ammend my tax return The recipient must be or must have been a U. How do i ammend my tax return S. How do i ammend my tax return resident immediately before visiting Canada. How do i ammend my tax return   An apprentice or business trainee can claim this exemption only for a period of one year from the date the individual first arrived in Canada for the purpose of training. How do i ammend my tax return Pensions, Annuities, Social Security, and Alimony Under Article XVIII, pensions and annuities from Canadian sources paid to U. How do i ammend my tax return S. How do i ammend my tax return residents are subject to tax by Canada, but the tax is limited to 15% of the gross amount (if a periodic pension payment) or of the taxable amount (if an annuity). How do i ammend my tax return Canadian pensions and annuities paid to U. How do i ammend my tax return S. How do i ammend my tax return residents may be taxed by the United States, but the amount of any pension included in income for U. How do i ammend my tax return S. How do i ammend my tax return tax purposes may not be more than the amount that would be included in income in Canada if the recipient were a Canadian resident. How do i ammend my tax return Pensions. How do i ammend my tax return   A pension includes any payment under a pension or other retirement arrangement, Armed Forces retirement pay, war veterans pensions and allowances, and payments under a sickness, accident, or disability plan. How do i ammend my tax return It includes pensions paid by private employers and the government for services rendered. How do i ammend my tax return   Pensions also include payments from individual retirement arrangements (IRAs) in the United States, registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) in Canada. How do i ammend my tax return   Pensions do not include social security benefits. How do i ammend my tax return Roth IRAs. How do i ammend my tax return   A distribution from a Roth IRA is exempt from Canadian tax to the extent it would be exempt from U. How do i ammend my tax return S. How do i ammend my tax return tax if paid to a U. How do i ammend my tax return S. How do i ammend my tax return resident. How do i ammend my tax return In addition, you may elect to defer any tax in Canada on income accrued within the Roth IRA but not distributed by the Roth IRA. How do i ammend my tax return However, you cannot defer tax on any accruals due to contributions made after you become a Canadian resident. How do i ammend my tax return Tax-deferred plans. How do i ammend my tax return   Generally, income that accrues in a Canadian RRSP or RRIF is subject to U. How do i ammend my tax return S. How do i ammend my tax return tax, even if it is not distributed. How do i ammend my tax return However, a U. How do i ammend my tax return S. How do i ammend my tax return citizen or resident can elect to defer U. How do i ammend my tax return S. How do i ammend my tax return tax on income from the plan until the income is distributed. How do i ammend my tax return Form 8891 is used to make the election. How do i ammend my tax return Annuities. How do i ammend my tax return    An annuity is a stated sum payable periodically at stated times, during life, or during a specified number of years, under an obligation to make the payments in return for adequate and full consideration (other than services rendered). How do i ammend my tax return Annuities do not include: Non-periodic payments, or An annuity the cost of which was deductible for tax purposes. How do i ammend my tax return Special rules. How do i ammend my tax return    Special rules apply to pensions and annuities with respect to: Short-term assignments, Cross-border commuters, and Individuals who participate in a Canadian qualifying plan. How do i ammend my tax return Generally, distributions in such cases are deemed to be earned in the country in which the plan is established, without regard to where the services were rendered. How do i ammend my tax return Social security benefits. How do i ammend my tax return   U. How do i ammend my tax return S. How do i ammend my tax return social security benefits paid to a resident of Canada are taxed in Canada as if they were benefits under the Canada Pension Plan, except that 15% of the amount of the benefit is exempt from Canadian tax. How do i ammend my tax return Alimony. How do i ammend my tax return   Alimony and similar amounts (including child support payments) from Canadian sources paid to U. How do i ammend my tax return S. How do i ammend my tax return residents are exempt from Canadian tax. How do i ammend my tax return For purposes of U. How do i ammend my tax return S. How do i ammend my tax return tax, these amounts are excluded from income to the same extent they would be excluded from income in Canada if the recipient was a Canadian resident. How do i ammend my tax return Investment Income From Canadian Sources The treaty provides beneficial treatment for certain items of Canadian source income that result from an investment of capital. How do i ammend my tax return Dividends (Article X). How do i ammend my tax return   For Canadian source dividends received by U. How do i ammend my tax return S. How do i ammend my tax return residents, the Canadian income tax generally may not be more than 15%. How do i ammend my tax return   A 5% rate applies to intercorporate dividends paid from a subsidiary to a parent corporation owning at least 10% of the subsidiary's voting stock. How do i ammend my tax return However, a 10% rate applies if the payer of the dividend is a nonresident-owned Canadian investment corporation. How do i ammend my tax return   These rates do not apply if the owner of the dividends carries on, or has carried on, a business in Canada through a permanent establishment and the holding on which the income is paid is effectively connected with that permanent establishment. How do i ammend my tax return Interest (Article XI). How do i ammend my tax return   Generally, Canadian source interest received by U. How do i ammend my tax return S. How do i ammend my tax return residents is exempt from Canadian income tax. How do i ammend my tax return   The exemption does not apply if the owner of the interest carries on, or has carried on, a business in Canada through a permanent establishment and the debt on which the income is paid is effectively connected with that permanent establishment. How do i ammend my tax return Gains from the sale of property (Article XIII). How do i ammend my tax return   Generally, gains from the sale of personal property by a U. How do i ammend my tax return S. How do i ammend my tax return resident having no permanent establishment in Canada are exempt from Canadian income tax. How do i ammend my tax return However, the exemption from Canadian tax does not apply to gains realized by U. How do i ammend my tax return S. How do i ammend my tax return residents on Canadian real property, and on personal property belonging to a permanent establishment in Canada. How do i ammend my tax return   If the property subject to Canadian tax is a capital asset and was owned by the U. How do i ammend my tax return S. How do i ammend my tax return resident on September 26, 1980, not as part of the business property of a permanent establishment in Canada, generally the taxable gain is limited to the appreciation after 1984. How do i ammend my tax return Royalties (Article XII). How do i ammend my tax return   The following are exempt from Canadian tax: Copyright royalties and other like payments for the production or reproduction of any literary, dramatic, musical, or artistic work (other than payments for motion pictures and works on film, videotape, or other means of reproduction for use in connection with television, which may be taxed at 10%), Payments for the use of, or the right to use, computer software, Payments for the use of, or the right to use, any patent or any information concerning industrial, commercial, or scientific experience (but not within a rental or franchise agreement), and Payments for broadcasting as agreed to in an exchange of notes between the countries. How do i ammend my tax return   This rate or exemption does not apply if the owner of the royalties carries on, or has carried on, a business in Canada through a permanent establishment and the right or property on which the income is paid is effectively connected with that permanent establishment. How do i ammend my tax return   This exemption (or lower rate) does not apply to royalties to explore for or to exploit mineral deposits, timber, and other natural resources. How do i ammend my tax return Other Income Generally, Canadian source income that is not specifically mentioned in the treaty, may be taxed by Canada. How do i ammend my tax return Gambling losses. How do i ammend my tax return   Canadian residents may deduct gambling losses in the U. How do i ammend my tax return S. How do i ammend my tax return against gambling winnings in the U. How do i ammend my tax return S. How do i ammend my tax return in the same manner as a U. How do i ammend my tax return S. How do i ammend my tax return resident. How do i ammend my tax return Charitable Contributions United States income tax return. How do i ammend my tax return   Under Article XXI, you may deduct contributions to certain qualified Canadian charitable organizations on your United States income tax return. How do i ammend my tax return Besides being subject to the overall limits applicable to all your charitable contributions under U. How do i ammend my tax return S. How do i ammend my tax return tax law, your charitable contributions to Canadian organizations (other than contributions to a college or university at which you or a member of your family is or was enrolled) are subject to the U. How do i ammend my tax return S. How do i ammend my tax return percentage limits on charitable contributions, applied to your Canadian source income. How do i ammend my tax return If your return does not include gross income from Canadian sources, charitable contributions to Canadian organizations are generally not deductible. How do i ammend my tax return Example. How do i ammend my tax return You are a U. How do i ammend my tax return S. How do i ammend my tax return citizen living in Canada. How do i ammend my tax return You have both U. How do i ammend my tax return S. How do i ammend my tax return and Canadian source income. How do i ammend my tax return During your tax year, you contribute to Canadian organizations that would qualify as charitable organizations under U. How do i ammend my tax return S. How do i ammend my tax return tax law if they were U. How do i ammend my tax return S. How do i ammend my tax return organizations. How do i ammend my tax return To figure the maximum amount of the contribution to Canadian organizations that you can deduct on your U. How do i ammend my tax return S. How do i ammend my tax return income tax return, multiply your adjusted gross income from Canadian sources by the percentage limit that applies to contributions under U. How do i ammend my tax return S. How do i ammend my tax return income tax law. How do i ammend my tax return Then include this amount on your return along with all your domestic charitable contributions, subject to the appropriate percentage limit required for contributions under U. How do i ammend my tax return S. How do i ammend my tax return income tax law. How do i ammend my tax return The appropriate percentage limit for U. How do i ammend my tax return S. How do i ammend my tax return tax purposes is applied to your total adjusted gross income from all sources. How do i ammend my tax return Qualified charities. How do i ammend my tax return   These Canadian organizations must meet the qualifications that a U. How do i ammend my tax return S. How do i ammend my tax return charitable organization must meet under U. How do i ammend my tax return S. How do i ammend my tax return tax law. How do i ammend my tax return Usually an organization will notify you if it qualifies. How do i ammend my tax return For further information on charitable contributions and the U. How do i ammend my tax return S. How do i ammend my tax return percentage limits, see Publication 526, Charitable Contributions. How do i ammend my tax return Canadian income tax return. How do i ammend my tax return   Under certain conditions, contributions to qualified U. How do i ammend my tax return S. How do i ammend my tax return charitable organizations may also be claimed on your Canadian income tax return if you are a Canadian resident. How do i ammend my tax return Income Tax Credits The treaty contains a credit provision (Article XXIV) for the elimination of double taxation. How do i ammend my tax return In general, the United States and Canada both allow a credit against their income tax for the income tax paid to the other country on income from sources in that other country. How do i ammend my tax return For detailed discussions of the U. How do i ammend my tax return S. How do i ammend my tax return income tax treatment of tax paid to foreign countries, see Publication 514, Foreign Tax Credit for Individuals. How do i ammend my tax return See paragraphs (4) and (5) of Article XXIV for certain provisions that affect the computation of the credit allowed by the United States for Canadian income taxes paid by U. How do i ammend my tax return S. How do i ammend my tax return citizens residing in Canada. How do i ammend my tax return Competent Authority Assistance Under Article XXVI, a U. How do i ammend my tax return S. How do i ammend my tax return citizen or resident may request assistance from the U. How do i ammend my tax return S. How do i ammend my tax return competent authority when the actions of Canada, the United States, or both, potentially result in double taxation or taxation contrary to the treaty. How do i ammend my tax return The U. How do i ammend my tax return S. How do i ammend my tax return competent authority may then consult with the Canadian competent authority to determine if the double taxation or denial of treaty benefits in question can be avoided. How do i ammend my tax return If the competent authorities are not able to reach agreement in a case, binding arbitration proceedings may apply. How do i ammend my tax return It is important that your request for competent authority assistance be made as soon as you have been notified by either Canada or the United States of proposed adjustments that would result in denial of treaty benefits or in double taxation. How do i ammend my tax return This is so that implementation of any agreement reached by the competent authorities is not barred by administrative, legal, or procedural barriers. How do i ammend my tax return For information that you should include with your request for competent authority assistance, see Revenue Procedure 2006-54, 2006-49 IRB 1035, available at www. How do i ammend my tax return irs. How do i ammend my tax return gov/irb/2006-49_IRB/ar13. How do i ammend my tax return html. How do i ammend my tax return The request should be addressed to:  Deputy Commissioner (International) Large Business and International Division Attn: Office of Tax Treaty  Internal Revenue Service 1111 Constitution Ave. How do i ammend my tax return , NW Routing: MA3-322A Washington, D. How do i ammend my tax return C. How do i ammend my tax return 20024 In addition to a timely request for assistance, you should take the following measures: File a timely protective claim for credit or refund of U. How do i ammend my tax return S. How do i ammend my tax return taxes on Form 1040X, Form 1120X, or amended Form 1041, whichever is appropriate. How do i ammend my tax return This will, among other things, give you the benefit of a foreign tax credit in case you do not qualify for the treaty benefit in question. How do i ammend my tax return For figuring this credit, attach either Form 1116, Foreign Tax Credit (Individual, Estate, or Trust), or Form 1118, Foreign Tax Credit — Corporations, as appropriate. How do i ammend my tax return Attach your protective claim to your request for competent authority assistance. How do i ammend my tax return Take appropriate action under Canadian procedures to avoid the lapse or termination of your right of appeal under Canadian income tax law. How do i ammend my tax return How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS and the Canada Revenue Agency in several ways. How do i ammend my tax return Text of Treaty You can get the text of the U. How do i ammend my tax return S. How do i ammend my tax return —Canada income tax treaty from: Superintendent of Documents U. How do i ammend my tax return S. How do i ammend my tax return Government Printing Office P. How do i ammend my tax return O. How do i ammend my tax return Box 371954 Pittsburgh, PA 15250-7954 The treaty can also be found on the Internet at IRS. How do i ammend my tax return gov. How do i ammend my tax return U. How do i ammend my tax return S. How do i ammend my tax return Taxation During the filing season, the IRS conducts a taxpayer assistance program in Canada. How do i ammend my tax return To find out if IRS personnel will be in your area, you should contact the consular office at the nearest U. How do i ammend my tax return S. How do i ammend my tax return Embassy or consulate. How do i ammend my tax return Mail. How do i ammend my tax return For answers to technical or account questions, you can write to:   Internal Revenue Service International Section Philadelphia, PA 19255-0525 Phone. How do i ammend my tax return You can call the IRS for help at (267) 941-1000 (not a toll-free call). How do i ammend my tax return Canadian Taxation You can get information on Canadian taxation from the Canada Revenue Agency. How do i ammend my tax return The International Tax Services Office can be contacted on 1-800-267-5177 (from anywhere in Canada and the U. How do i ammend my tax return S. How do i ammend my tax return ) or on the Internet at www. How do i ammend my tax return cra-arc. How do i ammend my tax return gc. 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Treasury, IRS Will Issue Proposed Guidance for Tax-Exempt Social Welfare Organizations

Initial Proposed Guidance Clarifies Qualification Requirements and Seeks Public Input

IR-2013-92, Nov. 26, 2013

WASHINGTON — The U.S. Department of the Treasury and the Internal Revenue Service today will issue initial guidance regarding qualification requirements for tax-exemption as a social welfare organization under section 501(c)(4) of the Internal Revenue Code. This proposed guidance defines the term “candidate-related political activity,” and would amend current regulations by indicating that the promotion of social welfare does not include this type of activity. The proposed guidance also seeks initial comments on other aspects of the qualification requirements, including what proportion of a 501(c)(4) organization’s activities must promote social welfare.

The proposed guidance is expected to be posted on the Federal Register later today.

There are a number of steps in the regulatory process that must be taken before any final guidance can be issued. Given the significant public interest in these and related issues, Treasury and the IRS expect to receive a large number of comments. Treasury and the IRS are committed to carefully and comprehensively considering all of the comments received before issuing additional proposed guidance or final rules.

“This is part of ongoing efforts within the IRS that are improving our work in the tax-exempt area,” said IRS Acting Commissioner Danny Werfel. “Once final, this proposed guidance will continue moving us forward and provide clarity for this important segment of exempt organizations.”

“This proposed guidance is a first critical step toward creating clear-cut definitions of political activity by tax-exempt social welfare organizations,” said Treasury Assistant Secretary for Tax Policy Mark J. Mazur. “We are committed to getting this right before issuing final guidance that may affect a broad group of organizations. It will take time to work through the regulatory process and carefully consider all public feedback as we strive to ensure that the standards for tax-exemption are clear and can be applied consistently.”

Organizations may apply for tax-exempt status under section 501(c)(4) of the tax code if they operate to promote social welfare. The IRS currently applies a “facts and circumstances” test to determine whether an organization is engaged in political campaign activities that do not promote social welfare. Today’s proposed guidance would reduce the need to conduct fact-intensive inquiries by replacing this test with more definitive rules.

In defining the new term, “candidate-related political activity,” Treasury and the IRS drew upon existing definitions of political activity under federal and state campaign finance laws, other IRS provisions, as well as suggestions made in unsolicited public comments.

Under the proposed guidelines, candidate-related political activity includes:

1. Communications

  • Communications that expressly advocate for a clearly identified political candidate or candidates of a political party.
  • Communications that are made within 60 days of a general election (or within 30 days of a primary election) and clearly identify a candidate or political party.
  • Communications expenditures that must be reported to the Federal Election Commission.

2. Grants and Contributions

  • Any contribution that is recognized under campaign finance law as a reportable contribution.
  • Grants to section 527 political organizations and other tax-exempt organizations that conduct candidate-related political activities (note that a grantor can rely on a written certification from a grantee stating that it does not engage in, and will not use grant funds for, candidate-related political activity).

3.  Activities Closely Related to Elections or Candidates

  • Voter registration drives and “get-out-the-vote” drives.
  • Distribution of any material prepared by or on behalf of a candidate or by a section 527 political organization.
  • Preparation or distribution of voter guides that refer to candidates (or, in a general election, to political parties).
  • Holding an event within 60 days of a general election (or within 30 days of a primary election) at which a candidate appears as part of the program.

These proposed rules reduce the need to conduct fact-intensive inquiries, including inquiries into whether activities or communications are neutral and unbiased.

Treasury and the IRS are planning to issue additional guidance that will address other issues relating to the standards for tax exemption under section 501(c)(4). In particular, there has been considerable public focus regarding the proportion of a section 501(c)(4) organization’s activities that must promote social welfare. Due to the importance of this aspect of the regulation, the proposed guidance requests initial comments on this issue.

The proposed guidance also seeks comments regarding whether standards similar to those proposed today should be adopted to define the political activities that do not further the tax-exempt purposes of other tax-exempt organizations and to promote consistent definitions across the tax-exempt sector.

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Page Last Reviewed or Updated: 02-Dec-2013

The How Do I Ammend My Tax Return

How do i ammend my tax return 3. How do i ammend my tax return   Lifetime Learning Credit Table of Contents Introduction Can You Claim the CreditWho Can Claim the Credit Who Cannot Claim the Credit 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 CreditEffect of the Amount of Your Income on the Amount of Your Credit Claiming the Credit Introduction For 2013, there are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. How do i ammend my tax return They are the American opportunity credit and the lifetime learning credit. How do i ammend my tax return This chapter discusses the lifetime learning credit. How do i ammend my tax return The American opportunity credit is discussed in chapter 2, The American Opportunity Credit . How do i ammend my tax return This chapter explains: Who can claim the lifetime learning credit, What expenses qualify for the credit, Who is an eligible student, Who can claim a dependent's expenses, How to figure the credit, How to claim the credit, and When the credit must be repaid. How do i ammend my tax return What is the tax benefit of the lifetime learning credit. How do i ammend my tax return   For the tax year, you may be able to claim a lifetime learning credit of up to $2,000 for qualified education expenses paid for all eligible students. How do i ammend my tax return There is no limit on the number of years the lifetime learning credit can be claimed for each student. How do i ammend my tax return   A tax credit reduces the amount of income tax you may have to pay. How do i ammend my tax return Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. How do i ammend my tax return The lifetime learning credit is a nonrefundable credit. How do i ammend my tax return This means that it can reduce your tax to zero, but if the credit is more than your tax the excess will not be refunded to you. How do i ammend my tax return   Your allowable lifetime learning credit may be limited by the amount of your income and the amount of your tax. How do i ammend my tax return Can you claim more than one education credit this year. How do i ammend my tax return   For each student, you can elect for any year only one of the credits. How do i ammend my tax return For example, if you elect to take the lifetime learning credit for a child on your 2013 tax return, you cannot, for that same child, also claim the American opportunity credit for 2013. How do i ammend my tax return   If you are eligible to claim the lifetime learning credit and you are also eligible to claim the American opportunity credit for the same student in the same year, you can choose to claim either credit, but not both. How do i ammend my tax return   If you pay qualified education expenses for more than one student in the same year, you can choose to take certain credits on a per-student, per-year basis. How do i ammend my tax return This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year. How do i ammend my tax return Differences between the American opportunity and lifetime learning credits. How do i ammend my tax return   There are several differences between these two credits. How do i ammend my tax return For example, you can claim the American opportunity credit for the same student for no more than 4 tax years, but any year in which the Hope Scholarship Credit was claimed counts toward the 4 years. How do i ammend my tax return However, there is no limit on the number of years for which you can claim a lifetime learning credit based on the same student's expenses. How do i ammend my tax return The differences between these credits are shown in Appendix B, Highlights of Education Tax Benefits for Tax Year 2013 near the end of this publication. How do i ammend my tax return Overview of the lifetime learning credit. How do i ammend my tax return   See Table 3-1, Overview of the Lifetime Learning Credit for the basics of the lifetime learning credit. How do i ammend my tax return The details are discussed in this chapter. How do i ammend my tax return Can You Claim the Credit The following rules will help you determine if you are eligible to claim the lifetime learning credit on your tax return. How do i ammend my tax return Who Can Claim the Credit Generally, you can claim the lifetime learning credit if all three of the following requirements are met. How do i ammend my tax return You pay qualified education expenses of higher education. How do i ammend my tax return You pay the education expenses for an eligible student. How do i ammend my tax return The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. How do i ammend my tax return Table 3-1. How do i ammend my tax return Overview of the Lifetime Learning Credit Maximum credit Up to $2,000 credit per return Limit on modified adjusted gross income (MAGI) $127,000 if married filling jointly;  $63,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable Nonrefundable—credit limited to the amount of tax you must pay on your taxable income Number of years of postsecondary education Available for all years of postsecondary education and for courses to acquire or improve job skills Number of tax years credit available Available for an unlimited number of years Type of program required Student does not need to be pursuing a program leading to a degree or other recognized education credential Number of courses Available for one or more courses Felony drug conviction Felony drug convictions do not make the student ineligible Qualified expenses Tuition and fees required for enrollment or attendance (including amounts required to be paid to the institution for course-related books, supplies, and equipment) Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Note. How do i ammend my tax return Qualified education expenses paid by a dependent for whom you claim an exemption, or by a third party for that dependent, are considered paid by you. How do i ammend my tax return “Qualified education expenses” are defined later under Qualified Education Expenses . How do i ammend my tax return “Eligible students” are defined later under Who Is an Eligible Student . How do i ammend my tax return A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . How do i ammend my tax return You may find Figure 3-1, Can You Claim the Lifetime Learning Credit for 2013 , later, helpful in determining if you can claim a lifetime learning credit on your tax return. How do i ammend my tax return Who Cannot Claim the Credit You cannot claim the lifetime learning credit for 2013 if any of the following apply. How do i ammend my tax return Your filing status is married filing separately. How do i ammend my tax return You are listed as a dependent on another person's tax return (such as your parents'). How do i ammend my tax return See Who Can Claim a Dependent's Expenses , later. How do i ammend my tax return Your modified adjusted gross income (MAGI) is $63,000 or more ($127,000 or more in the case of a joint return). How do i ammend my tax return MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . How do i ammend my tax return 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. How do i ammend my tax return More information on nonresident aliens can be found in Publication 519. How do i ammend my tax return You claim the American Opportunity Credit (see chapter 2) or a Tuition and Fees Deduction (see chapter 6) for the same student in 2013. How do i ammend my tax return What Expenses Qualify The lifetime learning credit 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. How do i ammend my tax return Generally, the credit is allowed for qualified education expenses paid in 2013 for an academic period beginning in 2013 or in the first 3 months of 2014. How do i ammend my tax return 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 credit. How do i ammend my tax return Academic period. How do i ammend my tax return   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. How do i ammend my tax return 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. How do i ammend my tax return Paid with borrowed funds. How do i ammend my tax return   You can claim a lifetime learning credit for qualified education expenses paid with the proceeds of a loan. How do i ammend my tax return You use the expenses to figure the lifetime learning credit for the year in which the expenses are paid, not the year in which the loan is repaid. How do i ammend my tax return Treat loan disbursements sent directly to the educational institution as paid on the date the institution credits the student's account. How do i ammend my tax return Student withdraws from class(es). How do i ammend my tax return   You can claim a lifetime learning credit for qualified education expenses not refunded when a student withdraws. How do i ammend my tax return Qualified Education Expenses For purposes of the lifetime learning credit, qualified education expenses are tuition and certain related expenses required for enrollment in a course at an eligible educational institution. How do i ammend my tax return The course must be either part of a postsecondary degree program or taken by the student to acquire or improve job skills. How do i ammend my tax return Eligible educational institution. How do i ammend my tax return   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. How do i ammend my tax return S. How do i ammend my tax return Department of Education. How do i ammend my tax return It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. How do i ammend my tax return The educational institution should be able to tell you if it is an eligible educational institution. How do i ammend my tax return   Certain educational institutions located outside the United States also participate in the U. How do i ammend my tax return S. How do i ammend my tax return Department of Education's Federal Student Aid (FSA) programs. How do i ammend my tax return Related expenses. How do i ammend my tax return   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 for enrollment or attendance. How do i ammend my tax return Prepaid expenses. How do i ammend my tax return   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. How do i ammend my tax return See Academic period , earlier. How do i ammend my tax return 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). How do i ammend my tax return 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). How do i ammend my tax return In the following examples, assume that each student is an eligible student at an eligible educational institution. How do i ammend my tax return Example 1. How do i ammend my tax return   Jackson is a sophomore in University V's degree program in dentistry. How do i ammend my tax return 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. How do i ammend my tax return Because the equipment rental fee must be paid to University V for enrollment and attendance, Jackson's equipment rental fee is a qualified expense. How do i ammend my tax return Example 2. How do i ammend my tax return   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. How do i ammend my tax return 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. How do i ammend my tax return Charles bought his books from a friend, so what he paid for them is not a qualified education expense. How do i ammend my tax return Donna bought hers at College W's bookstore. How do i ammend my tax return Although Donna paid College W directly for her first-year books and materials, her payment is not a qualified expense because the books and materials are not required to be purchased from College W for enrollment or attendance at the institution. How do i ammend my tax return Example 3. How do i ammend my tax return   When Marci enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. How do i ammend my tax return 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 student government. How do i ammend my tax return No portion of the fee covers personal expenses. How do i ammend my tax return Although labeled as a student activity fee, the fee is required for Marci's enrollment and attendance at College X. How do i ammend my tax return Therefore, it is a qualified expense. How do i ammend my tax return No Double Benefit Allowed You cannot do any of the following: Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim a lifetime learning credit based on those same expenses. How do i ammend my tax return Claim a lifetime learning credit in the same year that you are claiming a tuition and fees deduction for the same student. How do i ammend my tax return Claim a lifetime learning credit and an American opportunity credit based on the same qualified education expenses. How do i ammend my tax return Claim a lifetime learning credit based on the same expenses used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP). How do i ammend my tax return See Coordination With American Opportunity and Lifetime Learning Credits in chapter 7, Coverdell Education Savings Account, and Coordination With American Opportunity and Lifetime Learning Credits in chapter 8, Qualified Tuition Program. How do i ammend my tax return Claim a credit based on qualified education expenses paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer. How do i ammend my tax return See Adjustments to Qualified Education Expenses, next. How do i ammend my tax return This image is too large to be displayed in the current screen. How do i ammend my tax return Please click the link to view the image. How do i ammend my tax return Figure 3-1 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. How do i ammend my tax return The result is the amount of adjusted qualified education expenses for each student. How do i ammend my tax return Tax-free educational assistance. How do i ammend my tax return   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. How do i ammend my tax return See Academic period , earlier. How do i ammend my tax return   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. How do i ammend my tax return 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). How do i ammend my tax return   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. How do i ammend my tax return 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. How do i ammend my tax return   Tax-free educational 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. How do i ammend my tax return Generally, any scholarship or fellowship is treated as tax free. How do i ammend my tax return 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. How do i ammend my tax return 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. How do i ammend my tax return 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. How do i ammend my tax return 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. How do i ammend my tax return For examples, see Coordination with Pell grants and other scholarships, later. How do i ammend my tax return Refunds. How do i ammend my tax return   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. How do i ammend my tax return Some tax-free educational assistance received after 2013 may be treated as a refund. How do i ammend my tax return See Tax-free educational assistance , earlier. How do i ammend my tax return Refunds received in 2013. How do i ammend my tax return   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. How do i ammend my tax return Refunds received after 2013 but before your income tax return is filed. How do i ammend my tax return   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. How do i ammend my tax return Refunds received after 2013 and after your income tax return is filed. How do i ammend my tax return   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. How do i ammend my tax return See Credit recapture, next. How do i ammend my tax return Credit recapture. How do i ammend my tax return    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. How do i ammend my tax return You do this by refiguring the amount of your adjusted qualified education expenses for 2013 by reducing the expenses by the amount of the refund or tax-free educational assistance. How do i ammend my tax return 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). How do i ammend my tax return Include that amount as an additional tax for the year the refund or tax-free assistance was received. How do i ammend my tax return Example. How do i ammend my tax return   You pay $9,300 in tuition and fees in December 2013, and your child began college in January 2014. How do i ammend my tax return You filed your 2013 tax return on February 14, 2014, and claimed a lifetime learning credit of $1,860. How do i ammend my tax return You claimed no other tax credits. How do i ammend my tax return After you filed your return, your child withdrew from two courses and you received a refund of $2,900. How do i ammend my tax return You must refigure your 2013 lifetime learning credit using $6,400 of qualified education expenses instead of $9,300. How do i ammend my tax return The refigured credit is $1,280 and your tax liability increased by $580. How do i ammend my tax return See instructions for your 2014 income tax return to determine where to include this tax. How do i ammend my tax return If you pay qualified education expenses in 2014 for an academic period that begins in the first 3 months of 2014 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2014 instead of reducing your expenses for 2013. How do i ammend my tax return Amounts that do not reduce qualified education expenses. How do i ammend my tax return   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. How do i ammend my tax return   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. How do i ammend my tax return 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 Reductions. How do i ammend my tax return The use of the money is not restricted. How do i ammend my tax return For examples, see Adjustments to Qualified Education Expenses in chapter 2, American Opportunity Credit. How do i ammend my tax return Coordination with Pell grants and other scholarships. How do i ammend my tax return   In some cases, you may be able to reduce your tax liability by including scholarships in income. How do i ammend my tax return If you are claiming an education credit for a claimed dependent who received a scholarship, you may be able to reduce your tax liability if the student includes the scholarship in income. How do i ammend my tax return The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. How do i ammend my tax return Example 1—No scholarship. How do i ammend my tax return Judy Green, who is unmarried, is taking courses at a public community college to be recertified to teach in public schools. How do i ammend my tax return Her AGI and her MAGI, for purposes of the credit, are $27,000. How do i ammend my tax return Judy takes the standard deduction of $5,950 and personal exemption of $3,800, reducing her AGI to taxable income of $17,250 and her tax before credits is $2,156. How do i ammend my tax return She claims no credits other than the lifetime learning credit. How do i ammend my tax return In July 2013 she paid $700 for the summer 2013 semester; in August 2013 she paid $1,900 for the fall 2013 semester; and in December 2013 she paid another $1,900 for the spring semester beginning in January 2014. How do i ammend my tax return Judy and the college meet all requirements for the lifetime learning tax credit. How do i ammend my tax return She can use all of the $4,500 tuition she paid in 2013 when figuring her 2013 lifetime learning credit. How do i ammend my tax return She claims a $900 lifetime learning credit and her tax after credits is $1,256. How do i ammend my tax return Example 2—Scholarship excluded from income. How do i ammend my tax return The facts are the same as in Example 1—No scholarship, except that Judy was awarded a $1,500 scholarship. How do i ammend my tax return Under the terms of her scholarship, it may be used to pay any educational expenses, including room and board. How do i ammend my tax return If Judy excludes the scholarship from income, she will be deemed (for purposes of computing her education credit) as having used the scholarship to pay for tuition, required fees, and course materials. How do i ammend my tax return Only $3,000 of the $4,500 tuition she paid in 2013 could be used when figuring her 2013 lifetime learning credit. How do i ammend my tax return Her lifetime learning credit would be reduced to $600 and her tax after credits would be $1,556. How do i ammend my tax return Example 3—Scholarship included in income. How do i ammend my tax return The facts are the same as in Example 2—Scholarship excluded from income. How do i ammend my tax return If, unlike Example 2, Judy includes the $1,500 scholarship in income, she will be deemed to have used the entire scholarship to pay for room and board. How do i ammend my tax return Judy's AGI will increase to $28,500, her taxable income would be $18,750, and her tax before credits would be $2,381. How do i ammend my tax return She would be able to use the $4,500 of adjusted qualified education expenses to figure her credit. How do i ammend my tax return Judy could claim a $900 lifetime learning credit and her tax after credits would be $1,481. How do i ammend my tax return 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. How do i ammend my tax return This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. How do i ammend my tax return Sports, games, hobbies, and noncredit courses. How do i ammend my tax return   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. How do i ammend my tax return However, if the course of instruction or other education is part of the student's degree program or is taken by the student to acquire or improve job skills, these expenses can qualify. How do i ammend my tax return Comprehensive or bundled fees. How do i ammend my tax return   Some eligible educational institutions combine all of their fees for an academic period into one amount. How do i ammend my tax return 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. How do i ammend my tax return 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. How do i ammend my tax return See Figuring the Credit , later, for more information about Form 1098-T. How do i ammend my tax return Who Is an Eligible Student For purposes of the lifetime learning credit, 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). How do i ammend my tax return Who Can Claim a Dependent's Expenses If there are qualified education expenses for your dependent during a tax year, either you or your dependent, but not both of you, can claim a lifetime learning credit for your dependent's expenses for that year. How do i ammend my tax return For you to claim a lifetime learning credit for your dependent's expenses, you must also claim an exemption for your dependent. How do i ammend my tax return You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. How do i ammend my tax return IF you. How do i ammend my tax return . How do i ammend my tax return . How do i ammend my tax return THEN only. How do i ammend my tax return . How do i ammend my tax return . How do i ammend my tax return claim an exemption on your tax return for a dependent who is an eligible student you can claim the lifetime learning credit based on that dependent's expenses. How do i ammend my tax return The dependent cannot claim the credit. How do i ammend my tax return do not claim an exemption on your tax return for a dependent who is an eligible student (even if entitled to the exemption) the dependent can claim the lifetime learning credit. How do i ammend my tax return You cannot claim the credit based on this dependent's expenses. How do i ammend my tax return Expenses paid by dependent. How do i ammend my tax return   If you claim an exemption on your tax return for an eligible student who is your dependent, treat any expenses paid (or deemed paid) by your dependent as if you had paid them. How do i ammend my tax return Include these expenses when figuring the amount of your lifetime learning credit. How do i ammend my tax return    Qualified education expenses paid directly to an eligible educational institution for your dependent under a court-approved divorce decree are treated as paid by your dependent. How do i ammend my tax return Expenses paid by you. How do i ammend my tax return   If you claim an exemption for a dependent who is an eligible student, only you can include any expenses you paid when figuring the amount of the lifetime learning credit. How do i ammend my tax return If neither you nor anyone else claims an exemption for the dependent, only the dependent can include any expenses you paid when figuring the lifetime learning credit. How do i ammend my tax return Expenses paid by others. How do i ammend my tax return   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. How do i ammend my tax return In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. How do i ammend my tax return If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. How do i ammend my tax return Example. How do i ammend my tax return In 2013, Ms. How do i ammend my tax return Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. How do i ammend my tax return For purposes of claiming a lifetime learning credit, Todd is treated as receiving the money from his grandmother and, in turn, paying his qualified education expenses himself. How do i ammend my tax return Unless an exemption for Todd is claimed on someone else's 2013 tax return, only Todd can use the payment to claim a lifetime learning credit. How do i ammend my tax return If anyone, such as Todd's parents, claims an exemption for Todd on his or her 2013 tax return, whoever claims the exemption may be able to use the expenses to claim a lifetime learning credit. How do i ammend my tax return If anyone else claims an exemption for Todd, Todd cannot claim a lifetime learning credit. How do i ammend my tax return Tuition reduction. How do i ammend my tax return   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. How do i ammend my tax return 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. How do i ammend my tax return For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. How do i ammend my tax return Figuring the Credit The amount of the lifetime learning credit is 20% of the first $10,000 of qualified education expenses you paid for all eligible students. How do i ammend my tax return The maximum amount of lifetime learning credit you can claim for 2013 is $2,000 (20% × $10,000). How do i ammend my tax return However, that amount may be reduced based on your MAGI. How do i ammend my tax return See Effect of the Amount of Your Income on the Amount of Your Credit , later. How do i ammend my tax return Example. How do i ammend my tax return Bruce and Toni Harper are married and file a joint tax return. How do i ammend my tax return For 2013, their MAGI is $75,000. How do i ammend my tax return Toni is attending a local college (an eligible educational institution) to earn credits toward a degree in nursing. How do i ammend my tax return She already has a bachelor's degree in history and wants to become a nurse. How do i ammend my tax return In August 2013, Toni paid $5,000 of qualified education expenses for her fall 2013 semester. How do i ammend my tax return Bruce and Toni can claim a $1,000 (20% × $5,000) lifetime learning credit on their 2013 joint tax return. How do i ammend my tax return Form 1098-T. How do i ammend my tax return   To help you figure your lifetime learning credit, the student should receive Form 1098-T. How do i ammend my tax return 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. How do i ammend my tax return An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. How do i ammend my tax return However, the amounts in boxes 1 and 2 of Form 1098-T might be different from what you paid. How do i ammend my tax return When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. How do i ammend my tax return   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. How do i ammend my tax return    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. How do i ammend my tax return Effect of the Amount of Your Income on the Amount of Your Credit The amount of your lifetime learning credit is phased out (gradually reduced) if your MAGI is between $53,000 and $63,000 ($107,000 and $127,000 if you file a joint return). How do i ammend my tax return You cannot claim a lifetime learning credit if your MAGI is $63,000 or more ($127,000 or more if you file a joint return). How do i ammend my tax return Modified adjusted gross income (MAGI). How do i ammend my tax return   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. How do i ammend my tax return MAGI when using Form 1040A. How do i ammend my tax return   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. How do i ammend my tax return MAGI when using Form 1040. How do i ammend my tax return   If you file Form 1040, your MAGI is the AGI on line 38 of that form, 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. How do i ammend my tax return You can use Worksheet 3-1 to figure your MAGI. How do i ammend my tax return Worksheet 3-1. How do i ammend my tax return MAGI for the Lifetime Learning Credit 1. How do i ammend my tax return Enter your adjusted gross income  (Form 1040, line 38)   1. How do i ammend my tax return   2. How do i ammend my tax return Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. How do i ammend my tax return       3. How do i ammend my tax return Enter your foreign housing deduction (Form 2555, line 50)   3. How do i ammend my tax return       4. How do i ammend my tax return Enter the amount of income from Puerto Rico you are excluding   4. How do i ammend my tax return       5. How do i ammend my tax return Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. How do i ammend my tax return       6. How do i ammend my tax return Add the amounts on lines 2, 3, 4, and 5   6. How do i ammend my tax return   7. How do i ammend my tax return Add the amounts on lines 1 and 6. How do i ammend my tax return  This is your modified adjusted  gross income. How do i ammend my tax return Enter this amount  on Form 8863, line 14   7. How do i ammend my tax return   Phaseout. How do i ammend my tax return   If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 10-18 of Form 8863. How do i ammend my tax return The same method is shown in the following example. How do i ammend my tax return Example. How do i ammend my tax return You are filing a joint return with a MAGI of $112,000. How do i ammend my tax return In 2013, you paid $6,600 of qualified education expenses. How do i ammend my tax return You figure the tentative lifetime learning credit (20% of the first $10,000 of qualified education expenses you paid for all eligible students). How do i ammend my tax return The result is a $1,320 (20% x $6,600) tentative credit. How do i ammend my tax return Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($1,320) by a fraction. How do i ammend my tax return The numerator of the fraction is $127,000 (the upper limit for those filing a joint return) minus your MAGI. How do i ammend my tax return The denominator is $20,000, the range of incomes for the phaseout ($107,000 to $127,000). How do i ammend my tax return The result is the amount of your phased out (reduced) lifetime learning credit ($990). How do i ammend my tax return   $1,320 × $127,000 − $112,000  $20,000 = $990   Claiming the Credit You claim the lifetime learning credit by completing Form 8863 and submitting it with your Form 1040 or 1040A. How do i ammend my tax return Enter the credit on Form 1040, line 49, or Form 1040A, line 31. How do i ammend my tax return Note. How do i ammend my tax return In Appendix A, Illustrated Example of Education Credits at the end of this publication, there is an example illustrating the use of Form 8863 when both the American opportunity credit and the lifetime learning credit are claimed on the same tax return. 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