Education Tax Credits provides details for preparing tax returns with education tax credits such as the American Opportunity Tax Credit. Expanding on the Essentials edition, this book adds useful information on Section 529 College Savings Plans, Coverdell ESAs, IRAs used for education, savings bonds, and strategies for coordinating benefits. More Internal Revenue Code references and a brief index have been added to the text.
This systematic analysis guides preparers in the steps required to process education credit claims, from researching scholarships and calculating the maximum credit to coordinating with educational savings accounts and Pell grants. Beginning with an overview of education credits it then discusses treasury regulations, types of scholarships, scholarship treatments, and scholarship research. This book also discusses 1098T reporting rules, coordinating tax benefits, and tax planning.
Illustrated aids assist in document preparation and student account tabulation with examples of records from two local institutions.
The AOTC worksheet included is instrumental in calculating the maximum credit and a collection of tax preparation techniques are discussed to simplify credit calculations based on individual circumstances. A section on software solutions also shows recommended steps for claiming the credit in some of the major tax software systems.
Planning includes a discussion of claiming strategies and coordination with other forms of educational assistance, amending returns to claim the credit for prior years, and coordinating tax returns for family members when there is a education credit claim. Some special issues discussed include AGI considerations, AOTC phase-outs, changes in EITC, common errors, and a discussion of alternate treatments. Additional advice is given to help to insure that returns with education credits clearly comply with tax law and regulations and can be documented.
Additional sections cover other educational incentives, such as Educational Savings (Section 529 and Coverdell), UTMA considerations, IRAs used for education, and employer assistance. There is also a section discussing financial aid and the relationship with tax benefits, and student loans.
The book comes at a time when there are mixed signals from Washington about education credits. While the IRS and Treasury Department has been promoting the use of treasury regulations to increase the refund amount available with a claim, the Treasury Inspector General for Tax Administration (TIGTA) is saying there may be potentially billions in education credit fraud, and now restrictions have been added that could deprive some taxpayers of tax credits and deductions. A final chapter takes a look at the future of tax credits.
