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Www taxes hrblock com Publication 531 - Main Content Table of Contents Keeping a Daily Tip RecordElectronic tip record. Www taxes hrblock com Reporting Tips to Your EmployerElectronic tip statement. Www taxes hrblock com Final report. Www taxes hrblock com Tip Rate Determination and Education Program Reporting Tips on Your Tax Return Allocated Tips How To Get Tax Help Keeping a Daily Tip Record Why keep a daily tip record. Www taxes hrblock com   You must keep a daily tip record so you can: Report your tips accurately to your employer, Report your tips accurately on your tax return, and Prove your tip income if your return is ever questioned. Www taxes hrblock com How to keep a daily tip record. Www taxes hrblock com   There are two ways to keep a daily tip record. Www taxes hrblock com You can either: Write information about your tips in a tip diary, or Keep copies of documents that show your tips, such as restaurant bills and credit or debit card charge slips. Www taxes hrblock com You should keep your daily tip record with your tax or other personal records. Www taxes hrblock com You must keep your records for as long as they are important for administration of the federal tax law. Www taxes hrblock com For information on how long to keep records, see How Long to Keep Records in chapter 1 of Publication 17, Your Federal Income Tax. Www taxes hrblock com    If you keep a tip diary, you can use Form 4070A, Employee's Daily Record of Tips. Www taxes hrblock com To get Form 4070A, ask the Internal Revenue Service (IRS) or your employer for Publication 1244, Employee's Daily Record of Tips and Report to Employer. Www taxes hrblock com Publication 1244 is also available at www. Www taxes hrblock com irs. Www taxes hrblock com gov/pub1244. Www taxes hrblock com Publication 1244 includes a 1-year supply of Form 4070A. Www taxes hrblock com Each day, write in the information asked for on the form. Www taxes hrblock com A filled-in Form 4070A is shown on the following page. Www taxes hrblock com   In addition to the information asked for on Form 4070A, you also need to keep a record of the date and value of any noncash tips you get, such as tickets, passes, or other items of value. Www taxes hrblock com Although you do not report these tips to your employer, you must report them on your tax return. Www taxes hrblock com   If you do not use Form 4070A, start your records by writing your name, your employer's name, and the name of the business (if it is different from your employer's name). Www taxes hrblock com Then, each workday, write the date and the following information. Www taxes hrblock com Cash tips you get directly from customers or from other employees. Www taxes hrblock com Tips from credit and debit card charge customers that your employer pays you. Www taxes hrblock com The value of any noncash tips you get, such as tickets, passes, or other items of value. Www taxes hrblock com The amount of tips you paid out to other employees through tip pools or tip splitting, or other arrangements, and the names of the employees to whom you paid the tips. Www taxes hrblock com Please click here for the text description of the image. Www taxes hrblock com Sample Filled-in Form 4070A from Publication 1244 Electronic tip record. Www taxes hrblock com   You can use an electronic system provided by your employer to record your daily tips. Www taxes hrblock com If you do, you must receive and keep a paper copy of this record. Www taxes hrblock com Service charges. Www taxes hrblock com    Do not write in your tip diary the amount of any service charge that your employer adds to a customer's bill and then pays to you and treats as wages. Www taxes hrblock com This is part of your wages, not a tip. Www taxes hrblock com The following factors determine if you have a tip or service charge: The payment is made free from compulsion; The customer has the right to determine the amount of payment; The payment is not subject to negotiation or dictated by employer policy; and The customer generally has the right to determine who receives the payment. Www taxes hrblock com See examples below. Www taxes hrblock com Example 1. Www taxes hrblock com Good Food Restaurant adds an 18% charge to the bill for parties of 6 or more customers. Www taxes hrblock com Jane's bill for food and beverages for her party of 8 includes an amount on the tip line equal to 18% of the charges for food and beverages, and the total includes this amount. Www taxes hrblock com Because Jane did not have an unrestricted right to determine the amount on the “tip line,” the 18% charge is considered a service charge. Www taxes hrblock com Do not include the 18% charge in your tip diary. Www taxes hrblock com Service charges that are paid to you are considered wages, not tips. Www taxes hrblock com Example 2. Www taxes hrblock com Good Food Restaurant includes sample calculations of tip amounts at the bottom of its bills for food and beverages provided to customers. Www taxes hrblock com David's bill includes a blank “tip line,” with sample tip calculations of 15%, 18%, and 20% of the charges for food and beverages at the bottom of the bill beneath the signature line. Www taxes hrblock com Because David is free to enter any amount on the “tip line” or leave it blank, any amount he includes is considered a tip. Www taxes hrblock com Be sure to include this amount in your tip diary. Www taxes hrblock com Sample Filled-in Form 4070 from Publication 1244 Please click here for the text description of the image. Www taxes hrblock com Filled-in Form 4070 Reporting Tips to Your Employer Why report tips to your employer. Www taxes hrblock com   You must report tips to your employer so that: Your employer can withhold federal income tax and social security, Medicare, Additional Medicare, or railroad retirement taxes, Your employer can report the correct amount of your earnings to the Social Security Administration or Railroad Retirement Board (which affects your benefits when you retire or if you become disabled, or your family's benefits if you die), and You can avoid the penalty for not reporting tips to your employer (explained later). Www taxes hrblock com What tips to report. Www taxes hrblock com   Report to your employer only cash, check, and debit and credit card tips you receive. Www taxes hrblock com   If your total tips for any 1 month from any one job are less than $20, do not report the tips for that month to that employer. Www taxes hrblock com   If you participate in a tip-splitting or tip-pooling arrangement, report only the tips you receive and retain. Www taxes hrblock com Do not report to your employer any portion of the tips you receive that you pass on to other employees. Www taxes hrblock com However, you must report tips you receive from other employees. Www taxes hrblock com   Do not report the value of any noncash tips, such as tickets or passes, to your employer. Www taxes hrblock com You do not pay social security, Medicare, Additional Medicare, or railroad retirement taxes on these tips. Www taxes hrblock com How to report. Www taxes hrblock com   If your employer does not give you any other way to report your tips, you can use Form 4070, Employee's Report of Tips to Employer. Www taxes hrblock com Fill in the information asked for on the form, sign and date the form, and give it to your employer. Www taxes hrblock com A sample filled-in Form 4070 is shown above. Www taxes hrblock com To get a 1-year supply of the form, ask the IRS or your employer for Publication 1244. Www taxes hrblock com   If you do not use Form 4070, give your employer a statement with the following information. Www taxes hrblock com Your name, address, and social security number. Www taxes hrblock com Your employer's name, address, and business name (if it is different from your employer's name). Www taxes hrblock com The month (or the dates of any shorter period) in which you received tips. Www taxes hrblock com The total tips required to be reported for that period. Www taxes hrblock com You must sign and date the statement. Www taxes hrblock com Be sure to keep a copy with your tax or other personal records. Www taxes hrblock com   Your employer may require you to report your tips more than once a month. Www taxes hrblock com However, the statement cannot cover a period of more than 1 calendar month. Www taxes hrblock com Electronic tip statement. Www taxes hrblock com   Your employer can have you furnish your tip statements electronically. Www taxes hrblock com When to report. Www taxes hrblock com   Give your report for each month to your employer by the 10th of the next month. Www taxes hrblock com If the 10th falls on a Saturday, Sunday, or legal holiday, give your employer the report by the next day that is not a Saturday, Sunday, or legal holiday. Www taxes hrblock com Example. Www taxes hrblock com You must report your tips received in September 2014 by October 10, 2014. Www taxes hrblock com Final report. Www taxes hrblock com   If your employment ends during the month, you can report your tips when your employment ends. Www taxes hrblock com Penalty for not reporting tips. Www taxes hrblock com   If you do not report tips to your employer as required, you may be subject to a penalty equal to 50% of the social security, Medicare, Additional Medicare, or railroad retirement taxes you owe on the unreported tips. Www taxes hrblock com (For information about these taxes, see Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer under Reporting Tips on Your Tax Return, later. Www taxes hrblock com ) The penalty amount is in addition to the taxes you owe. Www taxes hrblock com   You can avoid this penalty if you can show reasonable cause for not reporting the tips to your employer. Www taxes hrblock com To do so, attach a statement to your return explaining why you did not report them. Www taxes hrblock com Giving your employer money for taxes. Www taxes hrblock com   Your regular pay may not be enough for your employer to withhold all the taxes you owe on your regular pay plus your reported tips. Www taxes hrblock com If this happens, you can give your employer money until the close of the calendar year to pay the rest of the taxes. Www taxes hrblock com   If you do not give your employer enough money, your employer will apply your regular pay and any money you give to the taxes, in the following order. Www taxes hrblock com All taxes on your regular pay. Www taxes hrblock com Social security, Medicare, Additional Medicare, or railroad retirement taxes on your reported tips. Www taxes hrblock com Federal, state, and local income taxes on your reported tips. Www taxes hrblock com    Any taxes that remain unpaid can be collected by your employer from your next paycheck. Www taxes hrblock com If withholding taxes remain uncollected at the end of the year, you may be subject to a penalty for underpayment of estimated taxes. Www taxes hrblock com See Publication 505, Tax Withholding and Estimated Tax, for more information. Www taxes hrblock com    Uncollected taxes. Www taxes hrblock com You must report on your tax return any social security and Medicare taxes, or railroad retirement taxes that remained uncollected at the end of 2013. Www taxes hrblock com These uncollected taxes will be shown on your 2013 Form W-2. Www taxes hrblock com See Reporting uncollected social security, Medicare, Additional Medicare, or railroad retirement taxes on tips reported to your employer under Reporting Tips on Your Tax Return, later. Www taxes hrblock com Tip Rate Determination and Education Program Your employer may participate in the Tip Rate Determination and Education Program. Www taxes hrblock com The program was developed to help employees and employers understand and meet their tip reporting responsibilities. Www taxes hrblock com There are two agreements under the program: the Tip Rate Determination Agreement (TRDA) and the Tip Reporting Alternative Commitment (TRAC). Www taxes hrblock com A variation of the TRAC program, the Employer Tip Reporting Alternative Commitment, (EmTRAC) was designed to allow employers in the food and beverage industry to design and receive approval for their own TRAC programs. Www taxes hrblock com For information on the EmTRAC program, see Notice 2001-1, which is on page 261 of Internal Revenue Bulletin 2001-2 at www. Www taxes hrblock com irs. Www taxes hrblock com gov/pub/irs-irbs/irb01-02. Www taxes hrblock com pdf. Www taxes hrblock com If you are employed in the gaming industry, your employer may participate in the Gaming Industry Tip Compliance Agreement Program. Www taxes hrblock com See Revenue Procedure 2007-32, 2007-22 I. Www taxes hrblock com R. Www taxes hrblock com B. Www taxes hrblock com 1322, available at www. Www taxes hrblock com irs. Www taxes hrblock com gov/pub/irs-irbs/irb07_22. Www taxes hrblock com pdf. Www taxes hrblock com Your employer can provide you with a copy of any applicable agreement. Www taxes hrblock com To find out more about these agreements, visit IRS. Www taxes hrblock com gov and enter “restaurant tip reporting” in the search box. Www taxes hrblock com You may also call 1-800-829-4933, visit www. Www taxes hrblock com irs. Www taxes hrblock com gov/localcontacts for the IRS Taxpayer Assistance Center in your area, or send an email to Tip. Www taxes hrblock com Program@irs. Www taxes hrblock com gov and request information on this program. Www taxes hrblock com Reporting Tips on Your Tax Return How to report tips. Www taxes hrblock com   Report your tips with your wages on Form 1040, line 7; Form 1040A, line 7; Form 1040EZ, line 1; Form 1040NR, line 8; or Form 1040NR-EZ, line 3. Www taxes hrblock com What tips to report. Www taxes hrblock com   Generally, you must report all tips you received in 2013 on your tax return, including both cash tips and noncash tips. Www taxes hrblock com Any tips you reported to your employer as required in 2013 are included in the wages shown in box 1 of your Form W-2. Www taxes hrblock com Add to the amount in box 1 only the tips you did not report to your employer. Www taxes hrblock com   However, any tips you received in 2013 that you reported to your employer as required after 2013 but before January 11, 2014, are not included in the wages shown in box 1 of your 2013 Form W-2. Www taxes hrblock com Do not include the amount of these tips on your 2013 tax return. Www taxes hrblock com Instead, include them on your 2014 tax return. Www taxes hrblock com Tips you received in 2012 that you reported to your employer as required after 2012 but before January 11, 2013, are included in the wages shown in box 1 of your 2013 Form W-2. Www taxes hrblock com Although these tips were received in 2012, you must report them on your 2013 tax return. Www taxes hrblock com   If you participate in a tip-splitting or tip-pooling arrangement, report only the tips you receive and retain. Www taxes hrblock com Do not report on your income tax return any portion of the tips you receive that you pass on to other employees. Www taxes hrblock com However, you must report tips you receive from other employees. Www taxes hrblock com    If you received $20 or more in cash and charge tips in a month and did not report all of those tips to your employer, see Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer, later. Www taxes hrblock com    If you did not keep a daily tip record as required and an amount is shown in box 8 of your Form W-2, see Allocated Tips, later. Www taxes hrblock com   If you kept a daily tip record and reported tips to your employer as required under the rules explained earlier, add the following tips to the amount in box 1 of your Form W-2. Www taxes hrblock com Cash and charge tips you received that totaled less than $20 for any month. Www taxes hrblock com The value of noncash tips, such as tickets, passes, or other items of value. Www taxes hrblock com Example. Www taxes hrblock com Ben Smith began working at the Blue Ocean Restaurant (his only employer in 2013) on June 30 and received $10,000 in wages during the year. Www taxes hrblock com Ben kept a daily tip record showing that his tips for June were $18 and his tips for the rest of the year totaled $7,000. Www taxes hrblock com He was not required to report his June tips to his employer, but he reported all of the rest of his tips to his employer as required. Www taxes hrblock com Ben's Form W-2 from Blue Ocean Restaurant shows $17,000 ($10,000 wages + $7,000 reported tips) in box 1. Www taxes hrblock com He adds the $18 unreported tips to that amount and reports $17,018 as wages on his tax return. Www taxes hrblock com Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer. Www taxes hrblock com    If you received $20 or more in cash and charge tips in a month from any one job and did not report all of those tips to your employer, you must report the social security, Medicare, and Additional Medicare taxes on the unreported tips as additional tax on your return. Www taxes hrblock com To report these taxes, you must file a return even if you would not otherwise have to file. Www taxes hrblock com You must use Form 1040, Form 1040NR, Form 1040NR-EZ, Form 1040-SS, or 1040-PR (as appropriate) for this purpose. Www taxes hrblock com (You cannot file Form 1040EZ or Form 1040A. Www taxes hrblock com )    Use Form 4137, Social Security and Medicare Tax on Unreported Tip Income, to figure social security and Medicare taxes. Www taxes hrblock com Enter the tax on your return as instructed, and attach the completed Form 4137 to your return. Www taxes hrblock com Use Form 8959 to figure Additional Medicare Tax. Www taxes hrblock com If you are subject to the Railroad Retirement Tax Act, you cannot use Form 4137 to pay railroad retirement tax on unreported tips. Www taxes hrblock com To get railroad retirement credit, you must report tips to your employer. Www taxes hrblock com Reporting uncollected social security, Medicare, Additional Medicare, or railroad retirement taxes on tips reported to your employer. Www taxes hrblock com    You may have uncollected taxes if your regular pay was not enough for your employer to withhold all the taxes you owe and you did not give your employer enough money to pay the rest of the taxes. Www taxes hrblock com For more information, see Giving your employer money for taxes , under Reporting Tips to Your Employer, earlier. Www taxes hrblock com   If your employer could not collect all the social security and Medicare taxes, or railroad retirement taxes you owe on tips reported for 2013, the uncollected taxes will be shown in box 12 of your Form W-2 (codes A and B). Www taxes hrblock com You must report these amounts as additional tax on your return. Www taxes hrblock com   If you worked in the U. Www taxes hrblock com S. Www taxes hrblock com possessions and received Form W-2AS, Form W-2CM, Form W-2GU, or Form W-2VI, any uncollected taxes on tips will be shown in box 12 with codes A and B. Www taxes hrblock com If you received Form 499R-2/W-2PR, any uncollected taxes will be shown in boxes 22 and 23. Www taxes hrblock com Unlike the uncollected portion of the regular (1. Www taxes hrblock com 45%) Medicare tax, the uncollected Additional Medicare Tax is not reported on Form W-2. Www taxes hrblock com   To report these uncollected taxes, you must file a return even if you would not otherwise have to file. Www taxes hrblock com You can report these taxes on Form 1040, in the space next to line 60; Form 1040NR, line 59; Form 1040-SS, Part I, line 6; or Form 1040-PR, Part I, line 6. Www taxes hrblock com See the instructions for the appropriate form and line number indicated, and Form 8959. Www taxes hrblock com (You cannot file Form 1040A, Form 1040EZ, or Form 1040NR-EZ. Www taxes hrblock com ) Self-employed persons. Www taxes hrblock com    If you receive tips as a self-employed person, you should report these tips as income on Schedule C or C-EZ. Www taxes hrblock com See Publication 334, Tax Guide for Small Business, for more information on reporting business income. Www taxes hrblock com Allocated Tips If your employer allocated tips to you, they are shown separately in box 8 of your Form W-2. Www taxes hrblock com They are not included in box 1 with your wages and reported tips. Www taxes hrblock com If box 8 is blank, this discussion does not apply to you. Www taxes hrblock com What are allocated tips. Www taxes hrblock com   These are tips that your employer assigned to you in addition to the tips you reported to your employer for the year. Www taxes hrblock com Your employer will have done this only if: You worked in an establishment (restaurant, cocktail lounge, or similar business) that must allocate tips to employees, and The tips you reported to your employer were less than your share of 8% of food and drink sales. Www taxes hrblock com No income, social security, Medicare, Additional Medicare, or railroad retirement taxes are withheld on allocated tips. Www taxes hrblock com How were your allocated tips figured. Www taxes hrblock com   The tips allocated to you are your share of an amount figured by subtracting the reported tips of all employees from 8% (or an approved lower rate) of food and drink sales (other than carryout sales and sales with a service charge of 10% or more). Www taxes hrblock com Your share of that amount was figured using either a method provided by an employer-employee agreement or a method provided by IRS regulations based on employees' sales or hours worked. Www taxes hrblock com For information about the exact allocation method used, ask your employer. Www taxes hrblock com Must you report your allocated tips on your tax return. Www taxes hrblock com   You must report tips you received in 2013 (including both cash and noncash tips) on your tax return as explained in What tips to report , earlier. Www taxes hrblock com Any tips you reported to your employer in 2013 as required (explained under Reporting Tips to Your Employer , earlier) are included in the wages shown in box 1 of your Form W-2. Www taxes hrblock com Add to the amount in box 1 only the tips you did not report to your employer as required. Www taxes hrblock com This should include any allocated tips shown in box 8 on your Form(s) W-2, unless you have adequate records to show that you received less tips in the year than the allocated amount. Www taxes hrblock com   See What tips to report under Reporting Tips on Your Tax Return, and Keeping a Daily Tip Record , earlier. Www taxes hrblock com How to report allocated tips. Www taxes hrblock com   If you received any tips in 2013 that you did not report to your employer as required (including allocated tips that you are required to report on your tax return), add these tips to the amount in box 1 of your Form(s) W-2 and report this amount as wages on Form 1040, line 7; Form 1040NR, line 8; or Form 1040NR-EZ, line 3. Www taxes hrblock com (You cannot file Form 1040A or Form 1040EZ). Www taxes hrblock com    Because social security, Medicare, or Additional Medicare taxes were not withheld from the allocated tips, you must report those taxes as additional tax on your return. Www taxes hrblock com Complete Form 4137 and include the allocated tips on line 1 of the form as provided in its instructions. Www taxes hrblock com See Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer under Reporting Tips on Your Tax Return, earlier. Www taxes hrblock com How to request an approved lower rate. Www taxes hrblock com   Your employer can use a tip rate lower than 8% (but not lower than 2%) to figure allocated tips only if the IRS approves the lower rate. Www taxes hrblock com Either the employer or the employees can request approval of a lower rate by filing a petition with the IRS. Www taxes hrblock com The petition must include specific information about the establishment that will justify the lower rate. Www taxes hrblock com A user fee must be paid with the petition. Www taxes hrblock com    An employee petition can be filed only with the consent of a majority of the directly tipped employees (waiters, bartenders, and others who receive tips directly from customers). Www taxes hrblock com The petition must state the total number of directly tipped employees and the number of employees consenting to the petition. Www taxes hrblock com Employees filing the petition must promptly notify the employer, and the employer must promptly give the IRS a copy of all Forms 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, filed for the establishment for the previous 3 years. Www taxes hrblock com   For more information about how to file a petition and what information to include, see Allocation of Tips in the Instructions for Form 8027. Www taxes hrblock com How To Get Tax Help Go online, use a smart phone, call or walk in to an office near you. Www taxes hrblock com Whether it's help with a tax issue, preparing your tax return or picking up a free publication or form, get the help you need the way you want it. Www taxes hrblock com Free help with your tax return. Www taxes hrblock com   Free help in preparing your return is available nationwide from IRS-certified volunteers. Www taxes hrblock com The Volunteer Income Tax Assistance (VITA) program is designed to help low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers. Www taxes hrblock com The Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Www taxes hrblock com Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Www taxes hrblock com Some VITA and TCE sites provide taxpayers the opportunity to prepare their return with the assistance of an IRS-certified volunteer. Www taxes hrblock com To find the nearest VITA or TCE site, visit IRS. Www taxes hrblock com gov or call 1-800-906-9887. Www taxes hrblock com   As part of the TCE program, AARP offers the Tax-Aide counseling program. Www taxes hrblock com To find the nearest AARP Tax-Aide site, visit AARP's website at www. Www taxes hrblock com aarp. Www taxes hrblock com org/money/taxaide or call 1-888-227-7669. Www taxes hrblock com   For more information on these programs, go to IRS. Www taxes hrblock com gov and enter “VITA” in the search box. Www taxes hrblock com Internet. Www taxes hrblock com IRS. Www taxes hrblock com gov and IRS2Go are ready when you are — every day, every night, 24 hours a day, 7 days a week. Www taxes hrblock com Apply for an Employer Identification Number (EIN). Www taxes hrblock com Go to IRS. Www taxes hrblock com gov and enter Apply for an EIN in the search box. Www taxes hrblock com Request an Electronic Filing PIN by going to IRS. Www taxes hrblock com gov and entering Electronic Filing PIN in the search box. Www taxes hrblock com Check the status of your 2013 refund with Where's My Refund? Go to IRS. Www taxes hrblock com gov or the IRS2Go app, and click on Where's My Refund? You'll get a personalized refund date as soon as the IRS processes your tax return and approves your refund. Www taxes hrblock com If you e-file, your refund status is usually available within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. Www taxes hrblock com Check the status of your amended return. Www taxes hrblock com Go to IRS. Www taxes hrblock com gov and enter Where's My Amended Return in the search box. Www taxes hrblock com Download forms, instructions, and publications, including some accessible versions. Www taxes hrblock com Order free transcripts of your tax returns or tax account using the Order a Transcript tool on IRS. Www taxes hrblock com gov or IRS2Go. Www taxes hrblock com Tax return and tax account transcripts are generally available for the current year and past three years. Www taxes hrblock com Figure your income tax withholding with the IRS Withholding Calculator on IRS. Www taxes hrblock com gov. Www taxes hrblock com Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Www taxes hrblock com Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Www taxes hrblock com gov. Www taxes hrblock com Locate the nearest Taxpayer Assistance Center using the Office Locator tool on IRS. Www taxes hrblock com gov or IRS2Go. Www taxes hrblock com Stop by most business days for face-to-face tax help, no appointment necessary — just walk in. Www taxes hrblock com An employee can explain IRS letters, request adjustments to your tax account or help you set up a payment plan. Www taxes hrblock com Before you visit, check the Office Locator for the address, phone number, hours of operation and the services provided. Www taxes hrblock com If you have an ongoing tax account problem or a special need, such as a disability, you can request an appointment. Www taxes hrblock com Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Www taxes hrblock com Locate the nearest volunteer help site with the VITA Locator Tool on IRS. Www taxes hrblock com gov. Www taxes hrblock com Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Www taxes hrblock com The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. Www taxes hrblock com Most VITA and TCE sites offer free electronic filing and some provide IRS-certified volunteers who can help prepare your tax return. Www taxes hrblock com AARP offers the Tax-Aide counseling program as part of the TCE program. Www taxes hrblock com Visit AARP's website to find the nearest Tax-Aide location. Www taxes hrblock com Research your tax questions. Www taxes hrblock com Search publications and instructions by topic or keyword. Www taxes hrblock com Read the Internal Revenue Code, regulations, or other official guidance. Www taxes hrblock com Read Internal Revenue Bulletins. Www taxes hrblock com Sign up to receive local and national tax news by email. Www taxes hrblock com Phone. Www taxes hrblock com You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Www taxes hrblock com Download the free IRS2Go mobile app from the iTunes app store or from Google Play. Www taxes hrblock com Use it to watch the IRS YouTube channel, get IRS news as soon as it's released to the public, order transcripts of your tax returns or tax account, check your refund status, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Www taxes hrblock com Call to locate the nearest volunteer help site, 1-800-906-9887. Www taxes hrblock com Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Www taxes hrblock com The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. Www taxes hrblock com Most VITA and TCE sites offer free electronic filing. Www taxes hrblock com Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. Www taxes hrblock com Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. Www taxes hrblock com Call to check the status of your 2013 refund, 1-800-829-1954 or 1-800-829-4477. Www taxes hrblock com The automated Where's My Refund? information is available 24 hours a day, 7 days a week. Www taxes hrblock com If you e-file, your refund status is usually available within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. Www taxes hrblock com Before you call, have your 2013 tax return handy so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Www taxes hrblock com Where's My Refund? can give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. Www taxes hrblock com Where's My Refund? includes information for the most recent return filed in the current year and does not include information about amended returns. Www taxes hrblock com Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. Www taxes hrblock com Call to order forms, instructions and publications, 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions and publications, and prior-year forms and instructions (limited to 5 years). Www taxes hrblock com You should receive your order within 10 business days. Www taxes hrblock com Call to order transcripts of your tax returns or tax account, 1-800-908-9946. Www taxes hrblock com Follow the prompts to provide your Social Security Number or Individual Taxpayer Identification Number, date of birth, street address and ZIP code. Www taxes hrblock com Call for TeleTax topics, 1-800-829-4477, to listen to pre-recorded messages covering various tax topics. Www taxes hrblock com Call to ask tax questions, 1-800-829-1040. Www taxes hrblock com Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. Www taxes hrblock com The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. Www taxes hrblock com These individuals can also contact the IRS through relay services such as the Federal Relay Service available at www. Www taxes hrblock com gsa. Www taxes hrblock com gov/fedrelay. Www taxes hrblock com Walk-in. Www taxes hrblock com You can find a selection of forms, publications and services — in-person, face-to-face. Www taxes hrblock com Products. Www taxes hrblock com You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Www taxes hrblock com Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Www taxes hrblock com Services. Www taxes hrblock com You can walk in to your local TAC most business days for personal, face-to-face tax help. Www taxes hrblock com An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. Www taxes hrblock com If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local TAC where you can talk with an IRS representative face-to-face. Www taxes hrblock com No appointment is necessary—just walk in. Www taxes hrblock com Before visiting, check www. Www taxes hrblock com irs. Www taxes hrblock com gov/localcontacts for hours of operation and services provided. Www taxes hrblock com Mail. Www taxes hrblock com You can send your order for forms, instructions, and publications to the address below. Www taxes hrblock com You should receive a response within 10 business days after your request is received. Www taxes hrblock com  Internal Revenue Service 1201 N. Www taxes hrblock com Mitsubishi Motorway Bloomington, IL 61705-6613 The Taxpayer Advocate Service Is Here to Help You. Www taxes hrblock com   The Taxpayer Advocate Service (TAS) is your voice at the IRS. Www taxes hrblock com Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. Www taxes hrblock com What can TAS do for you?   We can offer you free help with IRS problems that you can't resolve on your own. Www taxes hrblock com We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. Www taxes hrblock com You face (or your business is facing) an immediate threat of adverse action. Www taxes hrblock com You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. Www taxes hrblock com   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. Www taxes hrblock com Here's why we can help: TAS is an independent organization within the IRS. Www taxes hrblock com Our advocates know how to work with the IRS. Www taxes hrblock com Our services are free and tailored to meet your needs. Www taxes hrblock com We have offices in every state, the District of Columbia, and Puerto Rico. Www taxes hrblock com How can you reach us?   If you think TAS can help you, call your local advocate, whose number is in your local directory and at www. Www taxes hrblock com irs. Www taxes hrblock com gov/advocate, or call us toll-free at 1-877-777-4778. Www taxes hrblock com How else does TAS help taxpayers?   TAS also works to resolve large-scale, systemic problems that affect many taxpayers. Www taxes hrblock com If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. Www taxes hrblock com irs. Www taxes hrblock com gov/sams. Www taxes hrblock com Low Income Taxpayer Clinics. Www taxes hrblock com   Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals, and tax collection disputes. Www taxes hrblock com Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Www taxes hrblock com Visit www. Www taxes hrblock com TaxpayerAdvocate. Www taxes hrblock com irs. Www taxes hrblock com gov or see IRS Publication 4134, Low Income Taxpayer Clinic List. Www taxes hrblock com Prev  Up  Next   Home   More Online Publications
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Hurricane Sandy Recovery

Resources to help you recover from Hurricane Sandy.

Get Help

  • Register for Assistance: Survivors in declared counties can use DisasterAssistance.gov to apply for assistance and check the status of your application online. The portal is a clearinghouse of more than 70 forms of assistance from 17 federal agencies and is accessible via Web-enabled mobile devices.
  • Find Housing - The Department of Housing and Urban Development has help for people displaced by the storm, steps to take for a storm damaged home, and contacts if you feel you have experienced housing discrimination.
  • Wreckage Removal - State and local governments who are public assistance applicants may be reimbursed by the Department of Homeland Security for the salaries and benefits of employees involved in cleanup efforts.
  • Avoid Disaster Scams - Learn how to avoid charity and home repair cams after a disaster, from the Federal Trade Commission.
  • Guides for Rebuilding - The U.S. Department of Housing and Urban Development offers disaster recovery guides for builders.
  • Food Assistance - USDA provides food to disaster relief organizations for people affected by a disaster. It also offers grants for rural communities with water quality and supply issues, and assistance to farmers and others for natural disaster losses.
  • Business Loans – Your business may be eligible for disaster assistance from the Small Business Administration.
  • Government Contracting – The General Services Administration helps federal, state, and local governments get supplies, equipment, and services needed to support disaster relief.

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Health and Safety

Safety is a primary issue when you're recovering from a disaster. Follow these tips to help ensure your safety and cope with the disaster. If you aren't able to return home, states, tribes, localities, and the Red Cross continue to operate emergency shelters along the East Coast. Here's how to find shelter:

  • Stay informed about the federal public health response and recovery effort, food and water safety, preventing disease and injury, safe clean-up, sanitation, and mental health resources.
  • Monitor conditions in your area; find shelter; and let others know you are safe, with the Red Cross Hurricane App.
  • Download the FEMA app to find a map with open shelters and open FEMA Disaster Recovery Centers.
  • Call the Red Cross at 1-800-RED-CROSS (1-800-733-2767).
  • Search for shelters via text message: text: SHELTER and your ZIP code to 43362 (4FEMA). For example: Shelter 01234 (standard rates apply).
  • Check local news media outlets.

Responders: People working on clean-up and helping disaster survivors also need to be concerned about their health and safety. The Department of Labor offers technical assistance and resources to help protect the occupational safety and health of workers in disaster areas.

Cancer patients can have can have weakened immune systems and may be at higher risk for infections, bleeding, fatigue, and injury. Call 1-800-4-CANCER (1-800-422-6237) to learn where to receive care if a disaster event disrupts care or displaces patients.

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Find Family and Friends

  • Red Cross Safe and Well List  – During a disaster, register yourself as "safe and well" so that family and friends know of your well-being. You can also use the database to search for missing loved ones.
  • Next of Kin National Registry  – Register with, or search, this emergency contact system if you or your family member is missing, injured, or deceased.
  • International Evacuees and Foreign Nationals  – If you are a tourist or other foreign national and cannot reach family members directly, contact your consulate.

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Donate and Volunteer

Donate Blood caused the cancellation of hundreds of Red Cross blood drives, resulting in a shortage of blood and platelets.

Cash donations are very useful in situations where supplies must be acquired quickly. This is the most efficient way to make an impact with your donations. If you need help in determining who to give to, the National Voluntary Organization Active in Disaster website has a list of major nonprofits that are active in disaster work or you can make your offer through the National Donations Management Network.

Volunteer - Affiliate with existing non-profit organizations before going to the disaster area. Immediately following a disaster, a community can become easily overwhelmed by the amount of generous people who want to help. Contacting and affiliating with an established organization will help to ensure that you are appropriately trained to respond in the most effective way. Be patient: Recovery lasts a lot longer than the media attention. There will be volunteer needs for many months.

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Find Volunteer Opportunities

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What Government is Doing

  • Hurricane Sandy Rebuilding Task Force - The Task Force will coordinate long-term rebuilding plans for the affected region and its infrastructure.
  • Safety and Cleanup - The US Environmental Protection Agency is checking areas affected by Hurricane Sandy for potential contamination, and offers safety and cleanup information for parents, homeowners, communities and local governments, and builders.
  • Federal Building Closures  – The General Services Administration provides a list of closed federal facilities in areas affected by Hurricane Sandy.
  • Social Security Office Closures  – If your local Social Security office is closed, there may be other ways to complete your business.
  • Power Restoration  – The Department of Energy is supporting utility power restoration.
  • Federal Communications Commission  – View notices on filing deadlines and information on the commission’s efforts to support the recovery of communications infrastructure.
  • Restoring Wildlife Refuges  – The Fish and Wildlife Service is working to assess damage to National Wildlife Refuges, and restore storm damaged areas for safe public access.
  • Customs and Border Protection - News, photos and videos of Customs and Border Protection officers resume work in New York and New Jersey.
  • Federal Employees and Retirees - The Office of Personnel Management has information about leave and pay for federal employees and retirees.

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Hurricane Sandy Widget

To use the widget on your own site, copy the code below and paste it onto your web page:

<iframe 
src="http://www.usa.gov/widgets/sandy/sandy-2012-widget.htm" 
height="298" width="200" 
frameborder="0" scrolling="auto" title="Hurricane 
Sandy Widget">
<a href="http://www.usa.gov/Topics/Weather/Hurricane/sandy.shtml">
Government Resources to Help You Recover 
from Hurricane Sandy</a></iframe>

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The Www Taxes Hrblock Com

Www taxes hrblock com 2. Www taxes hrblock com   American Opportunity 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 StudentException. Www taxes hrblock com Who Can Claim a Dependent's Expenses Figuring the CreditEffect of the Amount of Your Income on the Amount of Your Credit Refundable Part of 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. Www taxes hrblock com They are the American opportunity credit (this chapter) and the lifetime learning credit ( chapter 3 ). Www taxes hrblock com This chapter explains: Who can claim the American opportunity 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. Www taxes hrblock com What is the tax benefit of the American opportunity credit. Www taxes hrblock com   For the tax year, you may be able to claim an American opportunity credit of up to $2,500 for qualified education expenses paid for each eligible student. Www taxes hrblock com   A tax credit reduces the amount of income tax you may have to pay. Www taxes hrblock com Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. Www taxes hrblock com Forty percent of the American opportunity credit may be refundable. Www taxes hrblock com This means that if the refundable portion of your credit is more than your tax, the excess will be refunded to you. Www taxes hrblock com   Your allowable American opportunity credit may be limited by the amount of your income. Www taxes hrblock com Also, the nonrefundable part of the credit may be limited by the amount of your tax. Www taxes hrblock com Overview of the American opportunity credit. Www taxes hrblock com   See Table 2-1, Overview of the American Opportunity Credit , for the basics of this credit. Www taxes hrblock com The details are discussed in this chapter. Www taxes hrblock com Can you claim more than one education credit this year. Www taxes hrblock com   For each student, you can elect for any year only one of the credits. Www taxes hrblock com For example, if you elect to take the American opportunity credit for a child on your 2013 tax return, you cannot use that same child's qualified education expenses to figure the lifetime learning credit for 2013. Www taxes hrblock com   If you pay qualified education expenses for more than one student in the same year, you can choose to take the American opportunity credit on a per-student, per-year basis. Www taxes hrblock com If you pay qualified education expenses for a student (or students) for whom you do not claim the American opportunity credit, you can use the adjusted qualified education expenses of that student (or those students) in figuring your lifetime learning credit. Www taxes hrblock com 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. Www taxes hrblock com Differences between the American opportunity and lifetime learning credits. Www taxes hrblock com   There are several differences between these two credits. Www taxes hrblock com For example, you can claim the American opportunity credit based on the same student's expenses for no more than 4 tax years, which includes any tax years you claimed the Hope Scholarship Credit for that student. Www taxes hrblock com 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. Www taxes hrblock com 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. Www taxes hrblock com If you claim the American opportunity credit for any student, you can choose between using that student's adjusted qualified education expenses for the American opportunity credit or the lifetime learning credit. Www taxes hrblock com If you have the choice, the American opportunity credit will always be greater than the lifetime learning credit. Www taxes hrblock com Table 2-1. Www taxes hrblock com Overview of the American Opportunity Credit Maximum credit Up to $2,500 credit per eligible student Limit on modified adjusted gross income (MAGI) $180,000 if married filing jointly; $90,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable 40% of credit may be refundable; the rest is nonrefundable Number of years of postsecondary education Available ONLY if the student had not completed the first 4 years of postsecondary education before 2013 Number of tax years credit available Available ONLY for 4 tax years per eligible student (including any year(s) Hope Scholarship Credit was claimed) Type of program required Student must be pursuing a program leading to a degree or other recognized education credential Number of courses Student must be enrolled at least half time for at least one academic period that begins during the tax year Felony drug conviction As of the end of 2013, the student had not been convicted of a felony for possessing or distributing a controlled substance Qualified expenses Tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Can You Claim the Credit The following rules will help you determine if you are eligible to claim the American opportunity credit on your tax return. Www taxes hrblock com Who Can Claim the Credit Generally, you can claim the American opportunity credit if all three of the following requirements are met. Www taxes hrblock com You pay qualified education expenses of higher education. Www taxes hrblock com You pay the education expenses for an eligible student. Www taxes hrblock com The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Www taxes hrblock com Student qualifications. Www taxes hrblock com   Generally, you can take the American opportunity credit for a student only if all of the following four requirements are met. Www taxes hrblock com As of the beginning of 2013, the student had not completed the first four years of postsecondary education (generally, the freshman through senior years of college), as determined by the eligible educational institution. Www taxes hrblock com For this purpose, do not include academic credit awarded solely because of the student's performance on proficiency examinations. Www taxes hrblock com Neither the American opportunity credit nor the Hope Scholarship Credit has been claimed (by you or anyone else) for this student for any four tax years before 2013. Www taxes hrblock com If the American opportunity credit (and Hope Scholarship Credit) has been claimed for this student for any three or fewer tax years before 2013, this requirement is met. Www taxes hrblock com For at least one academic period beginning (or treated as beginning) in 2013, the student both: Was enrolled in a program that leads to a degree, certificate, or other recognized educational credential; and Carried at least one-half the normal full-time workload for his or her course of study. Www taxes hrblock com The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Www taxes hrblock com However, the standard may not be lower than any of those established by the U. Www taxes hrblock com S. Www taxes hrblock com Department of Education under the Higher Education Act of 1965. Www taxes hrblock com For purposes of whether the student satisfies this third requirement for 2013, treat an academic period beginning in the first three months of 2014 as if it began in 2013 if qualified education expenses for the student were paid in 2013 for that academic period. Www taxes hrblock com See Prepaid expenses, later. Www taxes hrblock com As of the end of 2013, the student had not been convicted of a federal or state felony for possessing or distributing a controlled substance. Www taxes hrblock com Example 1. Www taxes hrblock com Sharon was eligible for the Hope Scholarship Credit for 2007 and 2008 and for the American opportunity credit for 2010 and 2012. Www taxes hrblock com Her parents claimed the Hope Scholarship Credit for Sharon on their tax returns for 2007 and 2008 and claimed the American opportunity credit for Sharon on their 2010 tax return. Www taxes hrblock com Sharon claimed the American opportunity credit on her 2012 tax return. Www taxes hrblock com The American opportunity credit and Hope Scholarship Credit have been claimed for Sharon for four tax years before 2013. Www taxes hrblock com Therefore, the American opportunity credit cannot be claimed by Sharon for 2013. Www taxes hrblock com If Sharon were to file Form 8863 for 2013, she would check “Yes” for Part III, line 23, and would be eligible to claim only the lifetime learning credit. Www taxes hrblock com Example 2. Www taxes hrblock com Wilbert was eligible for the American opportunity credit for 2009, 2010, 2011, and 2013. Www taxes hrblock com His parents claimed the American opportunity credit for Wilbert on their tax returns for 2009, 2010, and 2011. Www taxes hrblock com No one claimed an American opportunity credit or Hope Scholarship Credit for Wilbert for any other tax year. Www taxes hrblock com The American opportunity credit and Hope Scholarship Credit have been claimed for Wilbert for only three tax years before 2013. Www taxes hrblock com Therefore, Wilbert meets the second requirement to be eligible for the American opportunity credit. Www taxes hrblock com If Wilbert were to file Form 8863 for 2013, he would check “No” for Part III, line 23. Www taxes hrblock com If Wilbert meets all of the other requirements, he is eligible for the American opportunity credit. Www taxes hrblock com Example 3. Www taxes hrblock com Glenda enrolls on a full-time basis in a degree program for the 2014 Spring semester, which begins in January 2014. Www taxes hrblock com Glenda pays her tuition for the 2014 Spring semester in December 2013. Www taxes hrblock com Because the tuition Glenda paid in 2013 relates to an academic period that begins in the first 3 months of 2014, her eligibility to claim an American opportunity credit in 2013 is determined as if the 2014 Spring semester began in 2013. Www taxes hrblock com If the requirements above are not met for any student, you cannot take the American opportunity credit for that student. Www taxes hrblock com You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. Www taxes hrblock com Note. Www taxes hrblock com 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. Www taxes hrblock com “Qualified education expenses” are defined later under Qualified Education Expenses . Www taxes hrblock com “Eligible students” are defined later under Who Is an Eligible Student . Www taxes hrblock com A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . Www taxes hrblock com You may find Figure 2-1, Can You Claim the American Opportunity Credit for 2013 , later, helpful in determining if you can claim an American opportunity credit on your tax return. Www taxes hrblock com This image is too large to be displayed in the current screen. Www taxes hrblock com Please click the link to view the image. Www taxes hrblock com Figure 2-1 Can you claim the American opportunity credit for 2012? Who Cannot Claim the Credit You cannot claim the American opportunity credit for 2013 if any of the following apply. Www taxes hrblock com Your filing status is married filing separately. Www taxes hrblock com You are listed as a dependent on another person's tax return (such as your parents'). Www taxes hrblock com See Who Can Claim a Dependent's Expenses , later. Www taxes hrblock com Your modified adjusted gross income (MAGI) is $90,000 or more ($180,000 or more in the case of a joint return). Www taxes hrblock com MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . Www taxes hrblock com 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. Www taxes hrblock com More information on nonresident aliens can be found in Publication 519, U. Www taxes hrblock com S. Www taxes hrblock com Tax Guide for Aliens. Www taxes hrblock com What Expenses Qualify The American opportunity credit is based on adjusted qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Www taxes hrblock com Generally, the credit is allowed for adjusted qualified education expenses paid in 2013 for an academic period beginning in 2013 or beginning in the first three months of 2014. Www taxes hrblock com For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning January 2014, you can use that $1,500 in figuring your 2013 credit. Www taxes hrblock com Academic period. Www taxes hrblock com   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. Www taxes hrblock com 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. Www taxes hrblock com Paid with borrowed funds. Www taxes hrblock com   You can claim an American opportunity credit for qualified education expenses paid with the proceeds of a loan. Www taxes hrblock com Use the expenses to figure the American opportunity credit for the year in which the expenses are paid, not the year in which the loan is repaid. Www taxes hrblock com Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. Www taxes hrblock com Student withdraws from class(es). Www taxes hrblock com   You can claim an American opportunity credit for qualified education expenses not refunded when a student withdraws. Www taxes hrblock com Qualified Education Expenses For purposes of the American opportunity credit, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. Www taxes hrblock com Eligible educational institution. Www taxes hrblock com   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. Www taxes hrblock com S. Www taxes hrblock com Department of Education. Www taxes hrblock com It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Www taxes hrblock com The educational institution should be able to tell you if it is an eligible educational institution. Www taxes hrblock com   Certain educational institutions located outside the United States also participate in the U. Www taxes hrblock com S. Www taxes hrblock com Department of Education's Federal Student Aid (FSA) programs. Www taxes hrblock com Related expenses. Www taxes hrblock com   Student-activity fees are included in qualified education expenses only if the fees must be paid to the institution as a condition of enrollment or attendance. Www taxes hrblock com   However, expenses for books, supplies, and equipment needed for a course of study are included in qualified education expenses whether or not the materials are purchased from the educational institution. Www taxes hrblock com Prepaid expenses. Www taxes hrblock com   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. Www taxes hrblock com See Academic period, earlier. Www taxes hrblock com For example, if 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). Www taxes hrblock com    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). Www taxes hrblock com   In the following examples, assume that each student is an eligible student at an eligible educational institution. Www taxes hrblock com Example 1. Www taxes hrblock com Jefferson is a sophomore in University V's degree program in dentistry. Www taxes hrblock com 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. Www taxes hrblock com Because the equipment rental is needed for his course of study, Jefferson's equipment rental fee is a qualified expense. Www taxes hrblock com Example 2. Www taxes hrblock com Grace and William, 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. Www taxes hrblock com 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. Www taxes hrblock com William bought his books from a friend; Grace bought hers at College W's bookstore. Www taxes hrblock com Both are qualified education expenses for the American opportunity credit. Www taxes hrblock com Example 3. Www taxes hrblock com When Kelly enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. Www taxes hrblock com 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. Www taxes hrblock com No portion of the fee covers personal expenses. Www taxes hrblock com Although labeled as a student activity fee, the fee is required for Kelly's enrollment and attendance at College X and is a qualified expense. Www taxes hrblock com No Double Benefit Allowed You cannot do any of the following. Www taxes hrblock com Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim an American opportunity credit based on those same expenses. Www taxes hrblock com Claim an American opportunity credit in the same year that you are claiming a tuition and fees deduction for the same student. Www taxes hrblock com Claim an American opportunity credit for any student and use any of that student's expenses in figuring your lifetime learning credit. Www taxes hrblock com Figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP) using the same expenses you used to figure the American opportunity credit. Www taxes hrblock com 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. Www taxes hrblock com 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. Www taxes hrblock com See Adjustments to Qualified Education Expenses, next. Www taxes hrblock com 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. Www taxes hrblock com The result is the amount of adjusted qualified education expenses for each student. Www taxes hrblock com Tax-free educational assistance. Www taxes hrblock com   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. Www taxes hrblock com See Academic period, earlier. Www taxes hrblock com   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. Www taxes hrblock com 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). Www taxes hrblock com   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. Www taxes hrblock com 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. Www taxes hrblock com   Tax-free educational assistance includes: The tax-free parts 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). Www taxes hrblock com 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. Www taxes hrblock com Generally, any scholarship or fellowship is treated as tax free. Www taxes hrblock com 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. Www taxes hrblock com 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. Www taxes hrblock com 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. Www taxes hrblock com 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. Www taxes hrblock com For examples, see Coordination with Pell grants and other scholarships, later. Www taxes hrblock com Refunds. Www taxes hrblock com   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. Www taxes hrblock com Some tax-free educational assistance received after 2013 may be treated as a refund. Www taxes hrblock com See Tax-free educational assistance, earlier. Www taxes hrblock com Refunds received in 2013. Www taxes hrblock com   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. Www taxes hrblock com Refunds received after 2013 but before your income tax return is filed. Www taxes hrblock com   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. Www taxes hrblock com Refunds received after 2013 and after your income tax return is filed. Www taxes hrblock com   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. Www taxes hrblock com See Credit recapture, next. Www taxes hrblock com Credit recapture. Www taxes hrblock com    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. Www taxes hrblock com 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. Www taxes hrblock com You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you claimed the refigured credit(s). Www taxes hrblock com Include that amount as an additional tax for the year the refund or tax-free assistance was received. Www taxes hrblock com Example. Www taxes hrblock com   You paid $7,000 tuition and fees in August 2013, and your child began college in September 2013. Www taxes hrblock com You filed your 2013 tax return on February 17, 2014, and claimed an American opportunity credit of $2,500. Www taxes hrblock com After you filed your return, you received a refund of $4,000. Www taxes hrblock com You must refigure your 2013 American opportunity credit using $3,000 of qualified education expenses instead of $7,000. Www taxes hrblock com The refigured credit is $2,250. Www taxes hrblock com The increase to your tax liability is also $250. Www taxes hrblock com Include the difference of $250 as additional tax on your 2014 tax return. Www taxes hrblock com See the instructions for your 2014 income tax return to determine where to include this tax. Www taxes hrblock com 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. Www taxes hrblock com Amounts that do not reduce qualified education expenses. Www taxes hrblock com   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. Www taxes hrblock com   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. Www taxes hrblock com 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. Www taxes hrblock com The use of the money is not restricted. Www taxes hrblock com Example 1. Www taxes hrblock com Joan paid $3,000 for tuition and $5,000 for room and board at University X. Www taxes hrblock com The university did not require her to pay any fees in addition to her tuition in order to enroll in or attend classes. Www taxes hrblock com To help pay these costs, she was awarded a $2,000 scholarship and a $4,000 student loan. Www taxes hrblock com The terms of the scholarship state that it can be used to pay any of Joan's college expenses. Www taxes hrblock com University X applies the $2,000 scholarship against Joan's $8,000 total bill, and Joan pays the $6,000 balance of her bill from University X with a combination of her student loan and her savings. Www taxes hrblock com Joan does not report any portion of the scholarship as income on her tax return. Www taxes hrblock com In figuring the amount of either education credit (American opportunity or lifetime learning), Joan must reduce her qualified education expenses by the amount of the scholarship ($2,000) because she excluded the entire scholarship from her income. Www taxes hrblock com 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. Www taxes hrblock com Joan is treated as having paid $1,000 in qualified education expenses ($3,000 tuition – $2,000 scholarship). Www taxes hrblock com Example 2. Www taxes hrblock com The facts are the same as in Example 1, except that Joan reports her entire scholarship as income on her tax return. Www taxes hrblock com Because Joan reported the entire $2,000 scholarship in her income, she does not need to reduce her qualified education expenses. Www taxes hrblock com Joan is treated as having paid $3,000 in qualified education expenses. Www taxes hrblock com Coordination with Pell grants and other scholarships. Www taxes hrblock com   In some cases, you may be able to reduce your tax liability by including scholarships in income. Www taxes hrblock com 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. Www taxes hrblock com The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. Www taxes hrblock com Example 1—No scholarship. Www taxes hrblock com Bill Pass, age 28 and unmarried, enrolled full-time in 2013 as a first-year student at a local college to earn a degree in law enforcement. Www taxes hrblock com This was his first year of postsecondary education. Www taxes hrblock com During 2013, he paid $5,600 for his qualified education expenses and $4,400 for his room and board for the fall 2013 semester. Www taxes hrblock com He and the college meet all the requirements for the American opportunity credit. Www taxes hrblock com Bill's AGI and his MAGI, for purposes of figuring his credit, are $30,000. Www taxes hrblock com Bill takes the standard deduction of $5,950 and personal exemption of $3,800, reducing his AGI to taxable income of $20,250. Www taxes hrblock com His income tax liability, before credits, is $2,599 and Bill claims no credits other than the American opportunity credit. Www taxes hrblock com He figures his American opportunity credit based on qualified education expenses of $4,000, which results in a credit of $2,500 and tax after credits of $99. Www taxes hrblock com Example 2—Scholarship excluded from income. Www taxes hrblock com The facts are the same as in Example 1—No scholarship, except that Bill was awarded a $5,600 scholarship. Www taxes hrblock com Under the terms of his scholarship, it may be used to pay any educational expenses, including room and board. Www taxes hrblock com If Bill excludes the scholarship from income, he will be deemed (for purposes of computing his education credit) to have used the scholarship to pay for tuition, required fees, and course materials. Www taxes hrblock com His adjusted qualified education expenses will be zero and he will not have an education credit. Www taxes hrblock com Therefore, Bill's tax after credits would be $2,599. Www taxes hrblock com Example 3—Scholarship partially included in income. Www taxes hrblock com The facts are the same as in Example 2—Scholarship excluded from income. Www taxes hrblock com If, unlike Example 2, Bill includes $4,000 of the scholarship in income, he will be deemed to have used that amount to pay for room and board. Www taxes hrblock com The remaining $1,600 of the $5,600 scholarship will reduce his qualified education expenses and his adjusted qualified education expenses will be $4,000. Www taxes hrblock com Bill's AGI will increase to $34,000, his taxable income will increase to $24,250, and his tax before credits will increase to $3,199. Www taxes hrblock com Based on his adjusted qualified education expenses of $4,000, Bill would be able to claim an American opportunity tax credit of $2,500 and his tax after credits would be $699. Www taxes hrblock com 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. Www taxes hrblock com This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. Www taxes hrblock com Sports, games, hobbies, and noncredit courses. Www taxes hrblock com   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. Www taxes hrblock com However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. Www taxes hrblock com Comprehensive or bundled fees. Www taxes hrblock com   Some eligible educational institutions combine all of their fees for an academic period into one amount. Www taxes hrblock com 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 earlier, contact the institution. Www taxes hrblock com 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, Tuition Statement. Www taxes hrblock com See Figuring the Credit , later, for more information about Form 1098-T. Www taxes hrblock com Who Is an Eligible Student To claim the American opportunity credit, the student for whom you pay qualified education expenses must be an eligible student. Www taxes hrblock com This is a student who meets all of the following requirements. Www taxes hrblock com The student did not have expenses that were used to figure an American opportunity credit in any 4 earlier tax years. Www taxes hrblock com This includes any tax year(s) in which you claimed the Hope Scholarship Credit for the same student. Www taxes hrblock com The student had not completed the first 4 years of postsecondary education (generally, the freshman, sophomore, junior, and senior years of college) before 2013. Www taxes hrblock com For at least one academic period beginning in 2013, the student was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. Www taxes hrblock com The student has not been convicted of any federal or state felony for possessing or distributing a controlled substance as of the end of 2013. Www taxes hrblock com These requirements are also shown in Figure 2-2, Who is an Eligible Student for the American Opportunity Credit , later. Www taxes hrblock com Completion of first 4 years. Www taxes hrblock com   A student has completed the first 4 years of postsecondary education if the institution at which the student is enrolled awards the student 4 years of academic credit at that institution for coursework completed by the student before 2013. Www taxes hrblock com This student generally would not be an eligible student for purposes of the American opportunity credit. Www taxes hrblock com Exception. Www taxes hrblock com   Any academic credit awarded solely on the basis of the student's performance on proficiency examinations is disregarded in determining whether the student has completed 4 years of postsecondary education. Www taxes hrblock com Enrolled at least half-time. Www taxes hrblock com   A student was enrolled at least half-time if the student was taking at least half the normal full-time work load for his or her course of study. Www taxes hrblock com   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Www taxes hrblock com However, the standard may not be lower than any of those established by the U. Www taxes hrblock com S. Www taxes hrblock com Department of Education under the Higher Education Act of 1965. Www taxes hrblock com Please click here for the text description of the image. Www taxes hrblock com Figure 2-2 Example 1. Www taxes hrblock com Mack graduated from high school in June 2012. Www taxes hrblock com In September, he enrolled in an undergraduate degree program at College U, and attended full-time for both the 2012 fall and 2013 spring semesters. Www taxes hrblock com For the 2013 fall semester, Mack was enrolled less than half-time. Www taxes hrblock com Because Mack was enrolled in an undergraduate degree program on at least a half-time basis for at least one academic period that began during 2012 and at least one academic period that began during 2013, he is an eligible student for tax years 2012 and 2013 (including the 2013 fall semester when he enrolled at College U on less than a half-time basis). Www taxes hrblock com Example 2. Www taxes hrblock com After taking classes at College V on a part-time basis for a few years, Shelly became a full-time student for the 2013 spring semester. Www taxes hrblock com College V classified Shelly as a second-semester senior (fourth year) for the 2013 spring semester and as a first-semester graduate student (fifth year) for the 2013 fall semester. Www taxes hrblock com Because College V did not classify Shelly as having completed the first 4 years of postsecondary education as of the beginning of 2013, Shelly is an eligible student for tax year 2013. Www taxes hrblock com Therefore, the qualified education expenses paid for the 2013 spring semester and the 2013 fall semester are taken into account in calculating the American opportunity credit for 2013. Www taxes hrblock com Example 3. Www taxes hrblock com During the 2012 fall semester, Larry was a high school student who took classes on a half-time basis at College X. Www taxes hrblock com Larry was not enrolled as part of a degree program at College X because College X only admits students to a degree program if they have a high school diploma or equivalent. Www taxes hrblock com Because Larry was not enrolled in a degree program at College X during 2012, Larry was not an eligible student for tax year 2012. Www taxes hrblock com Example 4. Www taxes hrblock com The facts are the same as in Example 3. Www taxes hrblock com During the 2013 spring semester, Larry again attended College X but not as part of a degree program. Www taxes hrblock com Larry graduated from high school in June 2013. Www taxes hrblock com For the 2013 fall semester, Larry enrolled as a full-time student in College X as part of a degree program, and College X awarded Larry credit for his prior coursework at College X. Www taxes hrblock com Because Larry was enrolled in a degree program at College X for the 2013 fall term on at least a half-time basis, Larry is an eligible student for all of tax year 2013. Www taxes hrblock com Therefore, the qualified education expenses paid for classes taken at College X during both the 2013 spring semester (during which Larry was not enrolled in a degree program) and the 2013 fall semester are taken into account in computing any American opportunity credit. Www taxes hrblock com Example 5. Www taxes hrblock com Dee graduated from high school in June 2012. Www taxes hrblock com In January 2013, Dee enrolled in a 1-year postsecondary certificate program on a full-time basis to obtain a certificate as a travel agent. Www taxes hrblock com Dee completed the program in December 2013, and was awarded a certificate. Www taxes hrblock com In January 2014, she enrolled in a 1-year postsecondary certificate program on a full-time basis to obtain a certificate as a computer programmer. Www taxes hrblock com Dee is an eligible student for both tax years 2013 and 2014 because she meets the degree requirement, the work load requirement, and the year of study requirement for those years. Www taxes hrblock com 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 an American opportunity credit for your dependent's expenses for that year. Www taxes hrblock com For you to claim an American opportunity credit for your dependent's expenses, you must also claim an exemption for your dependent. Www taxes hrblock com You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. Www taxes hrblock com IF you. Www taxes hrblock com . Www taxes hrblock com . Www taxes hrblock com THEN only. Www taxes hrblock com . Www taxes hrblock com . Www taxes hrblock com claim an exemption on  your tax return for a  dependent who is an  eligible student you can claim the American opportunity credit based on that dependent's expenses. Www taxes hrblock com The dependent cannot claim the credit. Www taxes hrblock com 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 American opportunity credit. Www taxes hrblock com You cannot claim the credit based on this dependent's expenses. Www taxes hrblock com Expenses paid by dependent. Www taxes hrblock com   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. Www taxes hrblock com Include these expenses when figuring the amount of your American opportunity credit. Www taxes hrblock com    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. Www taxes hrblock com Expenses paid by you. Www taxes hrblock com   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 American opportunity credit. Www taxes hrblock com If neither you nor anyone else claims an exemption for the dependent, only the dependent can include any expenses you paid when figuring the American opportunity credit. Www taxes hrblock com Expenses paid by others. Www taxes hrblock com   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. Www taxes hrblock com In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. Www taxes hrblock com If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. Www taxes hrblock com Example. Www taxes hrblock com In 2013, Ms. Www taxes hrblock com Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. Www taxes hrblock com For purposes of claiming an American opportunity credit, Todd is treated as receiving the money from his grandmother and, in turn, paying his qualified education expenses himself. Www taxes hrblock com Unless an exemption for Todd is claimed on someone else's 2013 tax return, only Todd can use the payment to claim an American opportunity credit. Www taxes hrblock com 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 an American opportunity credit. Www taxes hrblock com If anyone else claims an exemption for Todd, Todd cannot claim an American opportunity credit. Www taxes hrblock com Tuition reduction. Www taxes hrblock com    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. Www taxes hrblock com 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. Www taxes hrblock com For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Www taxes hrblock com Figuring the Credit The amount of the American opportunity credit (per eligible student) is the sum of: 100% of the first $2,000 of qualified education expenses you paid for the eligible student, and 25% of the next $2,000 of qualified education expenses you paid for that student. Www taxes hrblock com The maximum amount of American opportunity credit you can claim in 2013 is $2,500 multiplied by the number of eligible students. Www taxes hrblock com You can claim the full $2,500 for each eligible student for whom you paid at least $4,000 of adjusted qualified education expenses. Www taxes hrblock com However, the credit may be reduced based on your MAGI. Www taxes hrblock com See Effect of the Amount of Your Income on the Amount of Your Credit , later. Www taxes hrblock com Example. Www taxes hrblock com Jack and Kay Ford are married and file a joint tax return. Www taxes hrblock com For 2013, they claim an exemption for their dependent daughter on their tax return. Www taxes hrblock com Their MAGI is $70,000. Www taxes hrblock com Their daughter is in her junior (third) year of studies at the local university. Www taxes hrblock com Jack and Kay paid qualified education expenses of $4,300 in 2013. Www taxes hrblock com Jack and Kay, their daughter, and the local university meet all of the requirements for the American opportunity credit. Www taxes hrblock com Jack and Kay can claim a $2,500 American opportunity credit in 2013. Www taxes hrblock com This is 100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000. Www taxes hrblock com Form 1098-T. Www taxes hrblock com   To help you figure your American opportunity credit, the student should receive Form 1098-T, Tuition Statement. Www taxes hrblock com 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. Www taxes hrblock com An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. Www taxes hrblock com However, the amounts in boxes 1 and 2 of Form 1098-T might be different than what you paid. Www taxes hrblock com When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. Www taxes hrblock com   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. Www taxes hrblock com    The eligible educational institution may ask for a completed Form W-9S, Request for Student's or Borrower's Taxpayer Identification Number and Certification, or similar statement to obtain the student's name, address, and taxpayer identification number. Www taxes hrblock com Effect of the Amount of Your Income on the Amount of Your Credit The amount of your American opportunity credit is phased out (gradually reduced) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). Www taxes hrblock com You cannot claim an American opportunity credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return). Www taxes hrblock com Modified adjusted gross income (MAGI). Www taxes hrblock com   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. Www taxes hrblock com MAGI when using Form 1040A. Www taxes hrblock com   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. Www taxes hrblock com MAGI when using Form 1040. Www taxes hrblock com   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. Www taxes hrblock com You can use Worksheet 2-1, next, to figure your MAGI. Www taxes hrblock com    Worksheet 2-1. Www taxes hrblock com MAGI for the American Opportunity Credit 1. Www taxes hrblock com Enter your adjusted gross income  (Form 1040, line 38)   1. Www taxes hrblock com   2. Www taxes hrblock com Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. Www taxes hrblock com       3. Www taxes hrblock com Enter your foreign housing deduction (Form 2555, line 50)   3. Www taxes hrblock com       4. Www taxes hrblock com Enter the amount of income from Puerto Rico you are excluding   4. Www taxes hrblock com       5. Www taxes hrblock com Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. Www taxes hrblock com       6. Www taxes hrblock com Add the amounts on lines 2, 3, 4, and 5   6. Www taxes hrblock com   7. Www taxes hrblock com Add the amounts on lines 1 and 6. Www taxes hrblock com  This is your modified adjusted  gross income. Www taxes hrblock com Enter here and  on Form 8863, line 3   7. Www taxes hrblock com   Phaseout. Www taxes hrblock com   If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 2-7, of Form 8863, Part I. Www taxes hrblock com The same method is shown in the following example. Www taxes hrblock com Example. Www taxes hrblock com You are filing a joint return and your MAGI is $165,000. Www taxes hrblock com In 2013, you paid $5,000 of qualified education expenses. Www taxes hrblock com You figure a tentative American opportunity credit of $2,500 (100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000 of qualified education expenses). Www taxes hrblock com Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($2,500) by a fraction. Www taxes hrblock com The numerator of the fraction is $180,000 (the upper limit for those filing a joint return) minus your MAGI. Www taxes hrblock com The denominator is $20,000, the range of incomes for the phaseout ($160,000 to $180,000). Www taxes hrblock com The result is the amount of your phased out (reduced) American opportunity credit ($1,875). Www taxes hrblock com      $2,500 × $180,000 − $165,000  $20,000 = $1,875   Refundable Part of Credit Forty percent of the American opportunity credit is refundable for most taxpayers. Www taxes hrblock com However, if you were under age 24 at the end of 2013 and the conditions listed below apply to you, you cannot claim any part of the American opportunity credit as a refundable credit on your tax return. Www taxes hrblock com Instead, your allowed credit (figured on Form 8863, Part II) will be used to reduce your tax as a nonrefundable credit only. Www taxes hrblock com You do not qualify for a refund if items 1 (a, b, or c), 2, and 3 below apply to you. Www taxes hrblock com You were: Under age 18 at the end of 2013, or Age 18 at the end of 2013 and your earned income (defined below) was less than one-half of your support (defined below), or Over age 18 and under age 24 at the end of 2013 and a full-time student (defined below) and your earned income (defined below) was less than one-half of your support (defined below). Www taxes hrblock com At least one of your parents was alive at the end of 2013. Www taxes hrblock com You are filing a return as single, head of household, qualifying widow(er), or married filing separately for 2013. Www taxes hrblock com Earned income. Www taxes hrblock com   Earned income includes wages, salaries, professional fees, and other payments received for personal services actually performed. Www taxes hrblock com Earned income includes the part of any scholarship or fellowship that represents payment for teaching, research, or other services performed by the student that are required as a condition for receiving the scholarship or fellowship. Www taxes hrblock com Earned income does not include that part of the compensation for personal services rendered to a corporation which represents a distribution of earnings or profits rather than a reasonable allowance as compensation for the personal services actually rendered. Www taxes hrblock com   If you are a sole proprietor or a partner in a trade or business in which both personal services and capital are material income-producing factors, earned income also includes a reasonable allowance for compensation for personal services, but not more than 30% of your share of the net profits from that trade or business (after subtracting the deduction for one-half of self-employment tax). Www taxes hrblock com However, if capital is not an income-producing factor and your personal services produced the business income, the 30% limit does not apply. Www taxes hrblock com Support. Www taxes hrblock com   Your support includes food, shelter, clothing, medical and dental care, education, and the like. Www taxes hrblock com Generally, the amount of the item of support will be the amount of expenses incurred by the one furnishing such item. Www taxes hrblock com If the item of support is in the form of property or lodging, measure the amount of such item of support by its fair market value. Www taxes hrblock com However, a scholarship received by you is not considered support if you are a full-time student. Www taxes hrblock com See Publication 501 for details. Www taxes hrblock com Full-time student. Www taxes hrblock com   You are a full-time student for 2013 if during any part of any 5 calendar months during the year you were enrolled as a full-time student at an eligible educational institution (defined earlier), or took a full-time, on-farm training course given by such an institution or by a state, county, or local government agency. Www taxes hrblock com Claiming the Credit You claim the American opportunity credit by completing Form 8863 and submitting it with your Form 1040 or 1040A. Www taxes hrblock com Enter the nonrefundable part of the credit on Form 1040, line 49, or on Form 1040A, line 31. Www taxes hrblock com Enter the refundable part of the credit on Form 1040, line 66, or on Form 1040A, line 40. Www taxes hrblock com A filled-in Form 8863 is shown at the end of this publication. Www taxes hrblock com Note. Www taxes hrblock com In Appendix A. Www taxes hrblock com 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. Www taxes hrblock com Prev  Up  Next   Home   More Online Publications