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1040 ez 2011 2. 1040 ez 2011   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. 1040 ez 2011 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. 1040 ez 2011 They are the American opportunity credit (this chapter) and the lifetime learning credit ( chapter 3 ). 1040 ez 2011 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. 1040 ez 2011 What is the tax benefit of the American opportunity credit. 1040 ez 2011   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. 1040 ez 2011   A tax credit reduces the amount of income tax you may have to pay. 1040 ez 2011 Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. 1040 ez 2011 Forty percent of the American opportunity credit may be refundable. 1040 ez 2011 This means that if the refundable portion of your credit is more than your tax, the excess will be refunded to you. 1040 ez 2011   Your allowable American opportunity credit may be limited by the amount of your income. 1040 ez 2011 Also, the nonrefundable part of the credit may be limited by the amount of your tax. 1040 ez 2011 Overview of the American opportunity credit. 1040 ez 2011   See Table 2-1, Overview of the American Opportunity Credit , for the basics of this credit. 1040 ez 2011 The details are discussed in this chapter. 1040 ez 2011 Can you claim more than one education credit this year. 1040 ez 2011   For each student, you can elect for any year only one of the credits. 1040 ez 2011 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. 1040 ez 2011   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. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 Differences between the American opportunity and lifetime learning credits. 1040 ez 2011   There are several differences between these two credits. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 If you have the choice, the American opportunity credit will always be greater than the lifetime learning credit. 1040 ez 2011 Table 2-1. 1040 ez 2011 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. 1040 ez 2011 Who Can Claim the Credit Generally, you can claim the American opportunity credit if all three of the following requirements are met. 1040 ez 2011 You pay qualified education expenses of higher education. 1040 ez 2011 You pay the education expenses for an eligible student. 1040 ez 2011 The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. 1040 ez 2011 Student qualifications. 1040 ez 2011   Generally, you can take the American opportunity credit for a student only if all of the following four requirements are met. 1040 ez 2011 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. 1040 ez 2011 For this purpose, do not include academic credit awarded solely because of the student's performance on proficiency examinations. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 The standard for what is half of the normal full-time work load is determined by each eligible educational institution. 1040 ez 2011 However, the standard may not be lower than any of those established by the U. 1040 ez 2011 S. 1040 ez 2011 Department of Education under the Higher Education Act of 1965. 1040 ez 2011 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. 1040 ez 2011 See Prepaid expenses, later. 1040 ez 2011 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. 1040 ez 2011 Example 1. 1040 ez 2011 Sharon was eligible for the Hope Scholarship Credit for 2007 and 2008 and for the American opportunity credit for 2010 and 2012. 1040 ez 2011 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. 1040 ez 2011 Sharon claimed the American opportunity credit on her 2012 tax return. 1040 ez 2011 The American opportunity credit and Hope Scholarship Credit have been claimed for Sharon for four tax years before 2013. 1040 ez 2011 Therefore, the American opportunity credit cannot be claimed by Sharon for 2013. 1040 ez 2011 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. 1040 ez 2011 Example 2. 1040 ez 2011 Wilbert was eligible for the American opportunity credit for 2009, 2010, 2011, and 2013. 1040 ez 2011 His parents claimed the American opportunity credit for Wilbert on their tax returns for 2009, 2010, and 2011. 1040 ez 2011 No one claimed an American opportunity credit or Hope Scholarship Credit for Wilbert for any other tax year. 1040 ez 2011 The American opportunity credit and Hope Scholarship Credit have been claimed for Wilbert for only three tax years before 2013. 1040 ez 2011 Therefore, Wilbert meets the second requirement to be eligible for the American opportunity credit. 1040 ez 2011 If Wilbert were to file Form 8863 for 2013, he would check “No” for Part III, line 23. 1040 ez 2011 If Wilbert meets all of the other requirements, he is eligible for the American opportunity credit. 1040 ez 2011 Example 3. 1040 ez 2011 Glenda enrolls on a full-time basis in a degree program for the 2014 Spring semester, which begins in January 2014. 1040 ez 2011 Glenda pays her tuition for the 2014 Spring semester in December 2013. 1040 ez 2011 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. 1040 ez 2011 If the requirements above are not met for any student, you cannot take the American opportunity credit for that student. 1040 ez 2011 You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. 1040 ez 2011 Note. 1040 ez 2011 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. 1040 ez 2011 “Qualified education expenses” are defined later under Qualified Education Expenses . 1040 ez 2011 “Eligible students” are defined later under Who Is an Eligible Student . 1040 ez 2011 A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . 1040 ez 2011 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. 1040 ez 2011 This image is too large to be displayed in the current screen. 1040 ez 2011 Please click the link to view the image. 1040 ez 2011 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. 1040 ez 2011 Your filing status is married filing separately. 1040 ez 2011 You are listed as a dependent on another person's tax return (such as your parents'). 1040 ez 2011 See Who Can Claim a Dependent's Expenses , later. 1040 ez 2011 Your modified adjusted gross income (MAGI) is $90,000 or more ($180,000 or more in the case of a joint return). 1040 ez 2011 MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . 1040 ez 2011 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. 1040 ez 2011 More information on nonresident aliens can be found in Publication 519, U. 1040 ez 2011 S. 1040 ez 2011 Tax Guide for Aliens. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 Academic period. 1040 ez 2011   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. 1040 ez 2011 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. 1040 ez 2011 Paid with borrowed funds. 1040 ez 2011   You can claim an American opportunity credit for qualified education expenses paid with the proceeds of a loan. 1040 ez 2011 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. 1040 ez 2011 Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. 1040 ez 2011 Student withdraws from class(es). 1040 ez 2011   You can claim an American opportunity credit for qualified education expenses not refunded when a student withdraws. 1040 ez 2011 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. 1040 ez 2011 Eligible educational institution. 1040 ez 2011   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. 1040 ez 2011 S. 1040 ez 2011 Department of Education. 1040 ez 2011 It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. 1040 ez 2011 The educational institution should be able to tell you if it is an eligible educational institution. 1040 ez 2011   Certain educational institutions located outside the United States also participate in the U. 1040 ez 2011 S. 1040 ez 2011 Department of Education's Federal Student Aid (FSA) programs. 1040 ez 2011 Related expenses. 1040 ez 2011   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. 1040 ez 2011   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. 1040 ez 2011 Prepaid expenses. 1040 ez 2011   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. 1040 ez 2011 See Academic period, earlier. 1040 ez 2011 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). 1040 ez 2011    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). 1040 ez 2011   In the following examples, assume that each student is an eligible student at an eligible educational institution. 1040 ez 2011 Example 1. 1040 ez 2011 Jefferson is a sophomore in University V's degree program in dentistry. 1040 ez 2011 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. 1040 ez 2011 Because the equipment rental is needed for his course of study, Jefferson's equipment rental fee is a qualified expense. 1040 ez 2011 Example 2. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 William bought his books from a friend; Grace bought hers at College W's bookstore. 1040 ez 2011 Both are qualified education expenses for the American opportunity credit. 1040 ez 2011 Example 3. 1040 ez 2011 When Kelly enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. 1040 ez 2011 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. 1040 ez 2011 No portion of the fee covers personal expenses. 1040 ez 2011 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. 1040 ez 2011 No Double Benefit Allowed You cannot do any of the following. 1040 ez 2011 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. 1040 ez 2011 Claim an American opportunity credit in the same year that you are claiming a tuition and fees deduction for the same student. 1040 ez 2011 Claim an American opportunity credit for any student and use any of that student's expenses in figuring your lifetime learning credit. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 See Adjustments to Qualified Education Expenses, next. 1040 ez 2011 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. 1040 ez 2011 The result is the amount of adjusted qualified education expenses for each student. 1040 ez 2011 Tax-free educational assistance. 1040 ez 2011   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. 1040 ez 2011 See Academic period, earlier. 1040 ez 2011   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. 1040 ez 2011 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). 1040 ez 2011   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. 1040 ez 2011 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. 1040 ez 2011   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). 1040 ez 2011 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. 1040 ez 2011 Generally, any scholarship or fellowship is treated as tax free. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 For examples, see Coordination with Pell grants and other scholarships, later. 1040 ez 2011 Refunds. 1040 ez 2011   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. 1040 ez 2011 Some tax-free educational assistance received after 2013 may be treated as a refund. 1040 ez 2011 See Tax-free educational assistance, earlier. 1040 ez 2011 Refunds received in 2013. 1040 ez 2011   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. 1040 ez 2011 Refunds received after 2013 but before your income tax return is filed. 1040 ez 2011   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. 1040 ez 2011 Refunds received after 2013 and after your income tax return is filed. 1040 ez 2011   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. 1040 ez 2011 See Credit recapture, next. 1040 ez 2011 Credit recapture. 1040 ez 2011    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. 1040 ez 2011 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. 1040 ez 2011 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). 1040 ez 2011 Include that amount as an additional tax for the year the refund or tax-free assistance was received. 1040 ez 2011 Example. 1040 ez 2011   You paid $7,000 tuition and fees in August 2013, and your child began college in September 2013. 1040 ez 2011 You filed your 2013 tax return on February 17, 2014, and claimed an American opportunity credit of $2,500. 1040 ez 2011 After you filed your return, you received a refund of $4,000. 1040 ez 2011 You must refigure your 2013 American opportunity credit using $3,000 of qualified education expenses instead of $7,000. 1040 ez 2011 The refigured credit is $2,250. 1040 ez 2011 The increase to your tax liability is also $250. 1040 ez 2011 Include the difference of $250 as additional tax on your 2014 tax return. 1040 ez 2011 See the instructions for your 2014 income tax return to determine where to include this tax. 1040 ez 2011 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. 1040 ez 2011 Amounts that do not reduce qualified education expenses. 1040 ez 2011   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. 1040 ez 2011   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. 1040 ez 2011 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. 1040 ez 2011 The use of the money is not restricted. 1040 ez 2011 Example 1. 1040 ez 2011 Joan paid $3,000 for tuition and $5,000 for room and board at University X. 1040 ez 2011 The university did not require her to pay any fees in addition to her tuition in order to enroll in or attend classes. 1040 ez 2011 To help pay these costs, she was awarded a $2,000 scholarship and a $4,000 student loan. 1040 ez 2011 The terms of the scholarship state that it can be used to pay any of Joan's college expenses. 1040 ez 2011 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. 1040 ez 2011 Joan does not report any portion of the scholarship as income on her tax return. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 Joan is treated as having paid $1,000 in qualified education expenses ($3,000 tuition – $2,000 scholarship). 1040 ez 2011 Example 2. 1040 ez 2011 The facts are the same as in Example 1, except that Joan reports her entire scholarship as income on her tax return. 1040 ez 2011 Because Joan reported the entire $2,000 scholarship in her income, she does not need to reduce her qualified education expenses. 1040 ez 2011 Joan is treated as having paid $3,000 in qualified education expenses. 1040 ez 2011 Coordination with Pell grants and other scholarships. 1040 ez 2011   In some cases, you may be able to reduce your tax liability by including scholarships in income. 1040 ez 2011 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. 1040 ez 2011 The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. 1040 ez 2011 Example 1—No scholarship. 1040 ez 2011 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. 1040 ez 2011 This was his first year of postsecondary education. 1040 ez 2011 During 2013, he paid $5,600 for his qualified education expenses and $4,400 for his room and board for the fall 2013 semester. 1040 ez 2011 He and the college meet all the requirements for the American opportunity credit. 1040 ez 2011 Bill's AGI and his MAGI, for purposes of figuring his credit, are $30,000. 1040 ez 2011 Bill takes the standard deduction of $5,950 and personal exemption of $3,800, reducing his AGI to taxable income of $20,250. 1040 ez 2011 His income tax liability, before credits, is $2,599 and Bill claims no credits other than the American opportunity credit. 1040 ez 2011 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. 1040 ez 2011 Example 2—Scholarship excluded from income. 1040 ez 2011 The facts are the same as in Example 1—No scholarship, except that Bill was awarded a $5,600 scholarship. 1040 ez 2011 Under the terms of his scholarship, it may be used to pay any educational expenses, including room and board. 1040 ez 2011 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. 1040 ez 2011 His adjusted qualified education expenses will be zero and he will not have an education credit. 1040 ez 2011 Therefore, Bill's tax after credits would be $2,599. 1040 ez 2011 Example 3—Scholarship partially included in income. 1040 ez 2011 The facts are the same as in Example 2—Scholarship excluded from income. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. 1040 ez 2011 Sports, games, hobbies, and noncredit courses. 1040 ez 2011   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. 1040 ez 2011 However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. 1040 ez 2011 Comprehensive or bundled fees. 1040 ez 2011   Some eligible educational institutions combine all of their fees for an academic period into one amount. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 See Figuring the Credit , later, for more information about Form 1098-T. 1040 ez 2011 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. 1040 ez 2011 This is a student who meets all of the following requirements. 1040 ez 2011 The student did not have expenses that were used to figure an American opportunity credit in any 4 earlier tax years. 1040 ez 2011 This includes any tax year(s) in which you claimed the Hope Scholarship Credit for the same student. 1040 ez 2011 The student had not completed the first 4 years of postsecondary education (generally, the freshman, sophomore, junior, and senior years of college) before 2013. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 These requirements are also shown in Figure 2-2, Who is an Eligible Student for the American Opportunity Credit , later. 1040 ez 2011 Completion of first 4 years. 1040 ez 2011   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. 1040 ez 2011 This student generally would not be an eligible student for purposes of the American opportunity credit. 1040 ez 2011 Exception. 1040 ez 2011   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. 1040 ez 2011 Enrolled at least half-time. 1040 ez 2011   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. 1040 ez 2011   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. 1040 ez 2011 However, the standard may not be lower than any of those established by the U. 1040 ez 2011 S. 1040 ez 2011 Department of Education under the Higher Education Act of 1965. 1040 ez 2011 Please click here for the text description of the image. 1040 ez 2011 Figure 2-2 Example 1. 1040 ez 2011 Mack graduated from high school in June 2012. 1040 ez 2011 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. 1040 ez 2011 For the 2013 fall semester, Mack was enrolled less than half-time. 1040 ez 2011 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). 1040 ez 2011 Example 2. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 Example 3. 1040 ez 2011 During the 2012 fall semester, Larry was a high school student who took classes on a half-time basis at College X. 1040 ez 2011 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. 1040 ez 2011 Because Larry was not enrolled in a degree program at College X during 2012, Larry was not an eligible student for tax year 2012. 1040 ez 2011 Example 4. 1040 ez 2011 The facts are the same as in Example 3. 1040 ez 2011 During the 2013 spring semester, Larry again attended College X but not as part of a degree program. 1040 ez 2011 Larry graduated from high school in June 2013. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 Example 5. 1040 ez 2011 Dee graduated from high school in June 2012. 1040 ez 2011 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. 1040 ez 2011 Dee completed the program in December 2013, and was awarded a certificate. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 For you to claim an American opportunity credit for your dependent's expenses, you must also claim an exemption for your dependent. 1040 ez 2011 You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. 1040 ez 2011 IF you. 1040 ez 2011 . 1040 ez 2011 . 1040 ez 2011 THEN only. 1040 ez 2011 . 1040 ez 2011 . 1040 ez 2011 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. 1040 ez 2011 The dependent cannot claim the credit. 1040 ez 2011 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. 1040 ez 2011 You cannot claim the credit based on this dependent's expenses. 1040 ez 2011 Expenses paid by dependent. 1040 ez 2011   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. 1040 ez 2011 Include these expenses when figuring the amount of your American opportunity credit. 1040 ez 2011    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. 1040 ez 2011 Expenses paid by you. 1040 ez 2011   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. 1040 ez 2011 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. 1040 ez 2011 Expenses paid by others. 1040 ez 2011   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. 1040 ez 2011 In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. 1040 ez 2011 If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. 1040 ez 2011 Example. 1040 ez 2011 In 2013, Ms. 1040 ez 2011 Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011 If anyone else claims an exemption for Todd, Todd cannot claim an American opportunity credit. 1040 ez 2011 Tuition reduction. 1040 ez 2011    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. 1040 ez 2011 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. 1040 ez 2011 For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. 1040 ez 2011 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. 1040 ez 2011 The maximum amount of American opportunity credit you can claim in 2013 is $2,500 multiplied by the number of eligible students. 1040 ez 2011 You can claim the full $2,500 for each eligible student for whom you paid at least $4,000 of adjusted qualified education expenses. 1040 ez 2011 However, the credit may be reduced based on your MAGI. 1040 ez 2011 See Effect of the Amount of Your Income on the Amount of Your Credit , later. 1040 ez 2011 Example. 1040 ez 2011 Jack and Kay Ford are married and file a joint tax return. 1040 ez 2011 For 2013, they claim an exemption for their dependent daughter on their tax return. 1040 ez 2011 Their MAGI is $70,000. 1040 ez 2011 Their daughter is in her junior (third) year of studies at the local university. 1040 ez 2011 Jack and Kay paid qualified education expenses of $4,300 in 2013. 1040 ez 2011 Jack and Kay, their daughter, and the local university meet all of the requirements for the American opportunity credit. 1040 ez 2011 Jack and Kay can claim a $2,500 American opportunity credit in 2013. 1040 ez 2011 This is 100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000. 1040 ez 2011 Form 1098-T. 1040 ez 2011   To help you figure your American opportunity credit, the student should receive Form 1098-T, Tuition Statement. 1040 ez 2011 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. 1040 ez 2011 An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. 1040 ez 2011 However, the amounts in boxes 1 and 2 of Form 1098-T might be different than what you paid. 1040 ez 2011 When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. 1040 ez 2011   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. 1040 ez 2011    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. 1040 ez 2011 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). 1040 ez 2011 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). 1040 ez 2011 Modified adjusted gross income (MAGI). 1040 ez 2011   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. 1040 ez 2011 MAGI when using Form 1040A. 1040 ez 2011   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. 1040 ez 2011 MAGI when using Form 1040. 1040 ez 2011   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. 1040 ez 2011 You can use Worksheet 2-1, next, to figure your MAGI. 1040 ez 2011    Worksheet 2-1. 1040 ez 2011 MAGI for the American Opportunity Credit 1. 1040 ez 2011 Enter your adjusted gross income  (Form 1040, line 38)   1. 1040 ez 2011   2. 1040 ez 2011 Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. 1040 ez 2011       3. 1040 ez 2011 Enter your foreign housing deduction (Form 2555, line 50)   3. 1040 ez 2011       4. 1040 ez 2011 Enter the amount of income from Puerto Rico you are excluding   4. 1040 ez 2011       5. 1040 ez 2011 Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. 1040 ez 2011       6. 1040 ez 2011 Add the amounts on lines 2, 3, 4, and 5   6. 1040 ez 2011   7. 1040 ez 2011 Add the amounts on lines 1 and 6. 1040 ez 2011  This is your modified adjusted  gross income. 1040 ez 2011 Enter here and  on Form 8863, line 3   7. 1040 ez 2011   Phaseout. 1040 ez 2011   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. 1040 ez 2011 The same method is shown in the following example. 1040 ez 2011 Example. 1040 ez 2011 You are filing a joint return and your MAGI is $165,000. 1040 ez 2011 In 2013, you paid $5,000 of qualified education expenses. 1040 ez 2011 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). 1040 ez 2011 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. 1040 ez 2011 The numerator of the fraction is $180,000 (the upper limit for those filing a joint return) minus your MAGI. 1040 ez 2011 The denominator is $20,000, the range of incomes for the phaseout ($160,000 to $180,000). 1040 ez 2011 The result is the amount of your phased out (reduced) American opportunity credit ($1,875). 1040 ez 2011      $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. 1040 ez 2011 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. 1040 ez 2011 Instead, your allowed credit (figured on Form 8863, Part II) will be used to reduce your tax as a nonrefundable credit only. 1040 ez 2011 You do not qualify for a refund if items 1 (a, b, or c), 2, and 3 below apply to you. 1040 ez 2011 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). 1040 ez 2011 At least one of your parents was alive at the end of 2013. 1040 ez 2011 You are filing a return as single, head of household, qualifying widow(er), or married filing separately for 2013. 1040 ez 2011 Earned income. 1040 ez 2011   Earned income includes wages, salaries, professional fees, and other payments received for personal services actually performed. 1040 ez 2011 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. 1040 ez 2011 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. 1040 ez 2011   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). 1040 ez 2011 However, if capital is not an income-producing factor and your personal services produced the business income, the 30% limit does not apply. 1040 ez 2011 Support. 1040 ez 2011   Your support includes food, shelter, clothing, medical and dental care, education, and the like. 1040 ez 2011 Generally, the amount of the item of support will be the amount of expenses incurred by the one furnishing such item. 1040 ez 2011 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. 1040 ez 2011 However, a scholarship received by you is not considered support if you are a full-time student. 1040 ez 2011 See Publication 501 for details. 1040 ez 2011 Full-time student. 1040 ez 2011   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. 1040 ez 2011 Claiming the Credit You claim the American opportunity credit by completing Form 8863 and submitting it with your Form 1040 or 1040A. 1040 ez 2011 Enter the nonrefundable part of the credit on Form 1040, line 49, or on Form 1040A, line 31. 1040 ez 2011 Enter the refundable part of the credit on Form 1040, line 66, or on Form 1040A, line 40. 1040 ez 2011 A filled-in Form 8863 is shown at the end of this publication. 1040 ez 2011 Note. 1040 ez 2011 In Appendix A. 1040 ez 2011 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. 1040 ez 2011 Prev  Up  Next   Home   More Online Publications
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The 1040 Ez 2011

1040 ez 2011 Publication 556 - Main Content Table of Contents Examination of ReturnsIf Your Return Is Examined Interest Netting Abatement of Interest Due to Error or Delay by the IRS Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions Offer in Compromise Appeal RightsAppeal Within the IRS Appeals to the Courts Refund or Credit of Overpayments Before Final Determination Claims for RefundTime for Filing a Claim for Refund Limit on Amount of Refund Processing Claims for Refund Reduced Refund How To Get Tax Help Examination of Returns Your return may be examined for a variety of reasons, and the examination may take place in any one of several ways. 1040 ez 2011 After the examination, if any changes to your tax are proposed, you can either agree with those changes and pay any additional tax you may owe, or you can disagree with the changes and appeal the decision. 1040 ez 2011 Examination selection criteria. 1040 ez 2011   Your return may be selected for examination on the basis of computer scoring. 1040 ez 2011 A computer program called the Discriminant Inventory Function System (DIF) assigns a numeric score to each individual and some corporate tax returns after they have been processed. 1040 ez 2011 If your return is selected because of a high score under the DIF system, the potential is high that an examination of your return will result in a change to your income tax liability. 1040 ez 2011   Your return may also be selected for examination on the basis of information received from third-party documentation, such as Forms 1099 and W-2, that does not match the information reported on your return. 1040 ez 2011 Or, your return may be selected to address both the questionable treatment of an item and to study the behavior of similar taxpayers (a market segment) in handling a tax issue. 1040 ez 2011   In addition, your return may be selected as a result of information received from other sources on potential noncompliance with the tax laws or inaccurate filing. 1040 ez 2011 This information can come from a number of sources, including newspapers, public records, and individuals. 1040 ez 2011 The information is evaluated for reliability and accuracy before it is used as the basis of an examination or investigation. 1040 ez 2011 Notice of IRS contact of third parties. 1040 ez 2011    The IRS must give you reasonable notice before contacting other persons about your tax matters. 1040 ez 2011 You must be given reasonable notice in advance that, in examining or collecting your tax liability, the IRS may contact third parties such as your neighbors, banks, employers, or employees. 1040 ez 2011 The IRS must also give you notice of specific contacts by providing you with a record of persons contacted on both a periodic basis and upon your request. 1040 ez 2011    This provision does not apply: To any pending criminal investigation, When providing notice would jeopardize collection of any tax liability, Where providing notice may result in reprisal against any person, or When you authorized the contact. 1040 ez 2011 Taxpayer Advocate Service. 1040 ez 2011   The Taxpayer Advocate Service is an independent organization within the IRS whose goal is to help taxpayers resolve problems with the IRS. 1040 ez 2011 If you have an ongoing issue with the IRS that has not been resolved through normal processes, or your problems with the IRS are causing financial difficulty, contact the Taxpayer Advocate Service. 1040 ez 2011    Before contacting the Taxpayer Advocate Service, you should first discuss any problem with a supervisor. 1040 ez 2011 Your local Taxpayer Advocate will assist you if you are unable to resolve the problem with the supervisor. 1040 ez 2011   For more information, see Publication 1546. 1040 ez 2011 See How To Get Tax Help , near the end of this publication, for more information about contacting the Taxpayer Advocate Service. 1040 ez 2011 Comments from small business. 1040 ez 2011    The Small Business and Agricultural Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards have been established to receive comments from small business about federal agency enforcement actions. 1040 ez 2011 The Ombudsman will annually evaluate the enforcement activities of each agency and rate their responsiveness to small business. 1040 ez 2011 If you wish to comment on the enforcement actions of the IRS, you can take any of the following steps. 1040 ez 2011 Fax your comments to 1-202-481-5719. 1040 ez 2011 Write to the following address: Office of the National Ombudsman U. 1040 ez 2011 S. 1040 ez 2011 Small Business Administration 409 3rd Street, SW Washington, DC 20416 Call 1-888-734-3247. 1040 ez 2011 Send an email to ombudsman@sba. 1040 ez 2011 gov. 1040 ez 2011 File a comment or complaint online at www. 1040 ez 2011 sba. 1040 ez 2011 gov/ombudsman. 1040 ez 2011 If Your Return Is Examined Some examinations are handled entirely by mail. 1040 ez 2011 Examinations not handled by mail can take place in your home, your place of business, an Internal Revenue office, or the office of your authorized representative. 1040 ez 2011 If the time, place, or method is not convenient for you, the examiner will try to work out something more suitable. 1040 ez 2011 However, the IRS makes the final determination of when, where, and how the examination will take place. 1040 ez 2011 Throughout the examination, you can act on your own behalf or have someone represent you or accompany you. 1040 ez 2011 If you filed a joint return, either you or your spouse, or both, can meet with the IRS. 1040 ez 2011 The person representing you can be any federally authorized practitioner, including an attorney, a certified public accountant, an enrolled agent (a person enrolled to practice before the IRS), an enrolled actuary, or the person who prepared the return and signed it as the preparer. 1040 ez 2011 If you want someone to represent you in your absence, you must furnish that person with proper written authorization. 1040 ez 2011 You can use Form 2848 or any other properly written authorization. 1040 ez 2011 If you want to consult with an attorney, a certified public accountant, an enrolled agent, or any other person permitted to represent a taxpayer during an interview for examining a tax return or collecting tax, you should make arrangements with that person to be available for the interview. 1040 ez 2011 In most cases, the IRS must suspend the interview and reschedule it. 1040 ez 2011 The IRS cannot suspend the interview if you are there because of an administrative summons. 1040 ez 2011 Third party authorization. 1040 ez 2011   If you checked the box in the signature area of your income tax return (Form 1040, Form 1040A, or Form 1040EZ) to allow the IRS to discuss your return with another person (a third party designee), this authorization does not replace Form 2848. 1040 ez 2011 The box you checked on your return only authorizes the other person to receive information about the processing of your return and the status of your refund during the period your return is being processed. 1040 ez 2011 For more information, see the instructions for your return. 1040 ez 2011 Confidentiality privilege. 1040 ez 2011   Generally, the same confidentiality protection that you have with an attorney also applies to certain communications that you have with federally authorized practitioners. 1040 ez 2011   Confidential communications are those that: Advise you on tax matters within the scope of the practitioner's authority to practice before the IRS, Would be confidential between an attorney and you, and Relate to noncriminal tax matters before the IRS, or Relate to noncriminal tax proceedings brought in federal court by or against the United States. 1040 ez 2011   In the case of communications in connection with the promotion of a person's participation in a tax shelter, the confidentiality privilege does not apply to written communications between a federally authorized practitioner and that person, any director, officer, employee, agent, or representative of that person, or any other person holding a capital or profits interest in that person. 1040 ez 2011   A tax shelter is any entity, plan, or arrangement, a significant purpose of which is the avoidance or evasion of income tax. 1040 ez 2011 Recordings. 1040 ez 2011    You can make an audio recording of the examination interview. 1040 ez 2011 Your request to record the interview should be made in writing. 1040 ez 2011 You must notify the examiner 10 days in advance and bring your own recording equipment. 1040 ez 2011 The IRS also can record an interview. 1040 ez 2011 If the IRS initiates the recording, you must be notified 10 days in advance and you can get a copy of the recording at your expense. 1040 ez 2011 Transfers to another area. 1040 ez 2011    Generally, your return is examined in the area where you live. 1040 ez 2011 But if your return can be examined more quickly and conveniently in another area, such as where your books and records are located, you can ask to have the case transferred to that area. 1040 ez 2011 Repeat examinations. 1040 ez 2011    The IRS tries to avoid repeat examinations of the same items, but sometimes this happens. 1040 ez 2011 If your tax return was examined for the same items in either of the 2 previous years and no change was proposed to your tax liability, please contact the IRS as soon as possible to see if the examination should be discontinued. 1040 ez 2011 The Examination An examination usually begins when you are notified that your return has been selected. 1040 ez 2011 The IRS will tell you which records you will need. 1040 ez 2011 The examination can proceed more easily if you gather your records before any interview. 1040 ez 2011 Any proposed changes to your return will be explained to you or your authorized representative. 1040 ez 2011 It is important that you understand the reasons for any proposed changes. 1040 ez 2011 You should not hesitate to ask about anything that is unclear to you. 1040 ez 2011 The IRS must follow the tax laws set forth by Congress in the Internal Revenue Code. 1040 ez 2011 The IRS also follows Treasury Regulations, other rules, and procedures that were written to administer the tax laws and court decisions. 1040 ez 2011 However, the IRS can lose cases that involve taxpayers with the same issue and still apply its interpretation of the law to your situation. 1040 ez 2011 Most taxpayers agree to changes proposed by examiners, and the examinations are closed at this level. 1040 ez 2011 If you do not agree, you can appeal any proposed change by following the procedures provided to you by the IRS. 1040 ez 2011 A more complete discussion of appeal rights is found later under Appeal Rights . 1040 ez 2011 If You Agree If you agree with the proposed changes, you can sign an agreement form and pay any additional tax you may owe. 1040 ez 2011 You must pay interest on any additional tax. 1040 ez 2011 If you pay when you sign the agreement, the interest is generally figured from the due date of your return (excluding any extension of time to file) to the date of your payment. 1040 ez 2011 If you do not pay the additional tax when you sign the agreement, you will receive a bill that includes interest. 1040 ez 2011 If you pay the amount due within 10 business days of the billing date, you will not have to pay more interest or penalties. 1040 ez 2011 This period is extended to 21 calendar days if the amount due is less than $100,000. 1040 ez 2011 If you are due a refund, you will receive it sooner if you sign the agreement form. 1040 ez 2011 You will be paid interest on the refund. 1040 ez 2011 If the IRS accepts your tax return as filed, you will receive a letter in a few weeks stating that the examiner proposed no changes to your return. 1040 ez 2011 You should keep this letter with your tax records. 1040 ez 2011 If You Do Not Agree If you do not agree with the proposed changes, the examiner will explain your appeal rights. 1040 ez 2011 If your examination takes place in an IRS office, you can request an immediate meeting with the examiner's supervisor to explain your position. 1040 ez 2011 If an agreement is reached, your case will be closed. 1040 ez 2011 If you cannot reach an agreement with the supervisor at this meeting, or if the examination took place outside of an IRS office, the examiner will write up your case explaining your position and the IRS's position. 1040 ez 2011 The examiner will forward your case for processing. 1040 ez 2011 Fast track mediation. 1040 ez 2011   The IRS offers fast track mediation services to help taxpayers resolve many disputes resulting from: Examinations (audits), Offers in compromise, Trust fund recovery penalties, and Other collection actions. 1040 ez 2011   Most cases that are not docketed in any court qualify for fast track mediation. 1040 ez 2011 Mediation can take place at a conference you request with a supervisor, or later. 1040 ez 2011 The process involves an Appeals Officer who has been trained in mediation. 1040 ez 2011 You may represent yourself at the mediation session, or someone else can act as your representative. 1040 ez 2011 For more information, see Publication 3605. 1040 ez 2011 30-day letter and 90-day letter. 1040 ez 2011   Within a few weeks after your closing conference with the examiner and/or supervisor, you will receive a package with: A letter (known as a 30-day letter) notifying you of your right to appeal the proposed changes within 30 days, A copy of the examination report explaining the examiner's proposed changes, An agreement or waiver form, and A copy of Publication 5. 1040 ez 2011 You generally have 30 days from the date of the 30-day letter to tell the IRS whether you will accept or appeal the proposed changes. 1040 ez 2011 The letter will explain what steps you should take, depending on which action you choose. 1040 ez 2011 Be sure to follow the instructions carefully. 1040 ez 2011 Appeal Rights are explained later. 1040 ez 2011 90-day letter. 1040 ez 2011   If you do not respond to the 30-day letter, or if you later do not reach an agreement with an Appeals Officer, the IRS will send you a 90-day letter, which is also known as a notice of deficiency. 1040 ez 2011 You will have 90 days (150 days if it is addressed to you outside the United States) from the date of this notice to file a petition with the Tax Court. 1040 ez 2011 Filing a petition with the Tax Court is discussed later under Appeals to the Courts and Tax Court . 1040 ez 2011 The notice will show the 90th (or 150th) day by which you must file your petition with the Tax Court. 1040 ez 2011 Suspension of interest and penalties. 1040 ez 2011   Generally, the IRS has 3 years from the date you filed your return (or the date the return was due, if later) to assess any additional tax. 1040 ez 2011 However, if you file your return timely (including extensions), interest and certain penalties will be suspended if the IRS does not mail a notice to you, stating your liability and the basis for that liability, within a 36-month period beginning on the later of: The date on which you filed your tax return, or The due date (without extensions) of your tax return. 1040 ez 2011 If the IRS mails a notice after the 36-month period, interest and certain penalties applicable to the suspension period will be suspended. 1040 ez 2011   The suspension period begins the day after the close of the 36-month period and ends 21 days after the IRS mails a notice to you stating your liability and the basis for that liability. 1040 ez 2011 Also, the suspension period applies separately to each notice stating your liability and the basis for that liability received by you. 1040 ez 2011    The suspension does not apply to a: Failure-to-pay penalty, Fraudulent tax return, Penalty, interest, addition to tax, or additional amount with respect to any tax liability shown on your return or with respect to any gross misstatement, Penalty, interest, addition to tax, or additional amount with respect to any reportable transaction that is not adequately disclosed or any listed transaction, or Criminal penalty. 1040 ez 2011 Seeking relief from improperly assessed interest. 1040 ez 2011   You can seek relief if interest is assessed for periods during which interest should have been suspended because the IRS did not mail a notice to you in a timely manner. 1040 ez 2011   If you believe that interest was assessed with respect to a period during which interest should have been suspended, submit Form 843, writing “Section 6404(g) Notification” at the top of the form, with the IRS Service Center where you filed your return. 1040 ez 2011 The IRS will review the Form 843 and notify you whether interest will be abated. 1040 ez 2011 If the IRS does not abate interest, you can pay the disputed interest assessment and file a claim for refund. 1040 ez 2011 If your claim is denied or not acted upon within 6 months from the date you filed it, you can file suit for a refund in your United States District Court or in the United States Court of Federal Claims. 1040 ez 2011   If you believe that an IRS officer or employee has made an unreasonable error or delay in performing a ministerial or managerial act (discussed later under Abatement of Interest Due to Error or Delay by the IRS ), file Form 843 with the IRS Service Center where you filed the tax return. 1040 ez 2011 If the IRS denies your claim, the Tax Court may be able to review that determination. 1040 ez 2011 See Tax Court can review failure to abate interest later under Abatement of Interest Due to Error or Delay by the IRS . 1040 ez 2011 If you later agree. 1040 ez 2011    If you agree with the examiner's changes after receiving the examination report or the 30-day letter, sign and return either the examination report or the waiver form. 1040 ez 2011 Keep a copy for your records. 1040 ez 2011 You can pay any additional amount you owe without waiting for a bill. 1040 ez 2011 Include interest on the additional tax at the applicable rate. 1040 ez 2011 This interest rate is usually for the period from the due date of the return (excluding any extension of time to file) to the date of payment. 1040 ez 2011 The examiner can tell you the interest rate(s) or help you figure the amount. 1040 ez 2011   You must pay interest on penalties and additions to tax for failing to file returns, for overstating valuations, for understating valuations on estate and gift tax returns, and for substantially understating tax liability. 1040 ez 2011 Interest is generally figured from the date (including extensions) the tax return is required to be filed to the date you pay the penalty and/or additions to tax. 1040 ez 2011   If you pay the amount due within 10 business days after the date of notice and demand for immediate payment, you will not have to pay any additional penalties and interest. 1040 ez 2011 This period is extended to 21 calendar days if the amount due is less than $100,000. 1040 ez 2011 How To Stop Interest From Accruing If you think that you will owe additional tax at the end of the examination, you can stop the further accrual of interest by sending money to the IRS to cover all or part of the amount you think you will owe. 1040 ez 2011 Interest on part or all of any amount you owe will stop accruing on the date the IRS receives your money. 1040 ez 2011 You can send an amount either in the form of a deposit in the nature of a cash bond or as a payment of tax. 1040 ez 2011 Both a deposit and a payment stop any further accrual of interest. 1040 ez 2011 However, making a deposit or payment will stop the accrual of interest on only the amount you sent. 1040 ez 2011 Because of compounding rules, interest will continue to accrue on accrued interest, even though you have paid the underlying tax. 1040 ez 2011 To stop the accrual of interest on both tax and interest, you must make a deposit or payment for both the tax and interest that has accrued as of the date of deposit or payment. 1040 ez 2011 Payment or Deposit Deposits differ from payments in two ways: You can have all or part of your deposit returned to you without filing for a refund. 1040 ez 2011 However, if you request and receive your deposit and the IRS later assesses a deficiency for that period and type of tax, interest will be figured as if the funds were never on deposit. 1040 ez 2011 Also, your deposit will not be returned if one of the following situations applies: The IRS assesses a tax liability. 1040 ez 2011 The IRS determines that, by returning the deposit, it may not be able to collect a future deficiency. 1040 ez 2011 The IRS determines that the deposit should be applied against another tax liability. 1040 ez 2011 Deposits returned to you will include interest based on the Federal short-term rate determined under section 6621(b). 1040 ez 2011 The deposit returned will be treated as a tax payment to the extent of the disputed tax. 1040 ez 2011 A disputed tax means the amount of tax specified at the time of deposit as a reasonable estimate of the maximum amount of any tax owed by you, such as the deficiency proposed in the 30-day letter. 1040 ez 2011 Notice not mailed. 1040 ez 2011    If you send money before the IRS mails you a notice of deficiency, you can ask the IRS to treat it as a deposit. 1040 ez 2011 You must make your request in writing. 1040 ez 2011   If, after being notified of a proposed liability but before the IRS mails you a notice of deficiency, you send an amount large enough to cover the proposed liability, it will be considered a payment unless you request in writing that it be treated as a deposit. 1040 ez 2011 Keep copies of all correspondence you send to the IRS. 1040 ez 2011   If the amount you send is at least as much as the proposed liability and you do not request that it be treated as a deposit, the IRS will not send you a notice of deficiency. 1040 ez 2011 If you do not receive a notice of deficiency, you cannot take your case to the Tax Court. 1040 ez 2011 See Tax Court , later under Appeal Rights . 1040 ez 2011 Notice mailed. 1040 ez 2011    If, after the IRS mails the notice of deficiency, you send money without written instructions, it will be treated as a payment. 1040 ez 2011 You will still be able to petition the Tax Court. 1040 ez 2011   If you send money after receiving a notice of deficiency and you have specified in writing that it is a “deposit in the nature of a cash bond,” the IRS will treat it as a deposit if you send it before either: The close of the 90-day or 150-day period for filing a petition with the Tax Court to appeal the deficiency, or The date the Tax Court decision is final, if you have filed a petition. 1040 ez 2011 Using a Deposit To Pay the Tax If you agree with the examiner's proposed changes after the examination, your deposit will be applied against any amount you may owe. 1040 ez 2011 The IRS will not mail you a notice of deficiency and you will not have the right to take your case to the Tax Court. 1040 ez 2011 If you do not agree to the full amount of the deficiency after the examination, the IRS will mail you a notice of deficiency. 1040 ez 2011 Your deposit will be applied against the proposed deficiency unless you write to the IRS before the end of the 90-day or 150-day period stating that you still want the money to be treated as a deposit. 1040 ez 2011 You will still have the right to take your case to the Tax Court. 1040 ez 2011 Installment Agreement Request You can request a monthly installment plan if you cannot pay the full amount you owe. 1040 ez 2011 To be valid, your request must be approved by the IRS. 1040 ez 2011 However, if you owe $10,000 or less in tax and you meet certain other criteria, the IRS must accept your request. 1040 ez 2011 Before you request an installment agreement, you should consider other less costly alternatives, such as a bank loan. 1040 ez 2011 You will continue to be charged interest and penalties on the amount you owe until it is paid in full. 1040 ez 2011 Unless your income is below a certain level, the fee for an approved installment agreement has increased to $105 ($52 if you make your payments by electronic funds withdrawal). 1040 ez 2011 If your income is below a certain level, you may qualify to pay a reduced fee of $43. 1040 ez 2011 For more information about installment agreements, see Form 9465, Installment Agreement Request. 1040 ez 2011 Interest Netting If you owe interest to the IRS on an underpayment for the same period the IRS owes you interest on an overpayment, the IRS will figure interest on the underpayment and overpayment at the same interest rate (up to the amount of the overpayment). 1040 ez 2011 As a result, the net rate is zero for that period. 1040 ez 2011 Abatement of Interest Due to Error or Delay by the IRS The IRS may abate (reduce) the amount of interest you owe if the interest is due to an unreasonable error or delay by an IRS officer or employee in performing a ministerial or managerial act (discussed later). 1040 ez 2011 Only the amount of interest on income, estate, gift, generation-skipping, and certain excise taxes can be reduced. 1040 ez 2011 The amount of interest will not be reduced if you or anyone related to you contributed significantly to the error or delay. 1040 ez 2011 Also, the interest will be reduced only if the error or delay happened after the IRS contacted you in writing about the deficiency or payment on which the interest is based. 1040 ez 2011 An audit notification letter is such a contact. 1040 ez 2011 The IRS cannot reduce the amount of interest due to a general administrative decision, such as a decision on how to organize the processing of tax returns. 1040 ez 2011 Ministerial act. 1040 ez 2011    This is a procedural or mechanical act, not involving the exercise of judgment or discretion, during the processing of a case after all prerequisites (for example, conferences and review by supervisors) have taken place. 1040 ez 2011 A decision concerning the proper application of federal tax law (or other federal or state law) is not a ministerial act. 1040 ez 2011 Example 1. 1040 ez 2011 You move from one state to another before the IRS selects your tax return for examination. 1040 ez 2011 A letter stating that your return has been selected is sent to your old address and then forwarded to your new address. 1040 ez 2011 When you get the letter, you respond with a request that the examination be transferred to the area office closest to your new address. 1040 ez 2011 The examination group manager approves your request. 1040 ez 2011 After your request has been approved, the transfer is a ministerial act. 1040 ez 2011 The IRS can reduce the interest because of any unreasonable delay in transferring the case. 1040 ez 2011 Example 2. 1040 ez 2011 An examination of your return reveals tax due for which a notice of deficiency (90-day letter) will be issued. 1040 ez 2011 After you and the IRS discuss the issues, the notice is prepared and reviewed. 1040 ez 2011 After the review process, issuing the notice of deficiency is a ministerial act. 1040 ez 2011 If there is an unreasonable delay in sending the notice of deficiency to you, the IRS can reduce the interest resulting from the delay. 1040 ez 2011 Managerial act. 1040 ez 2011    This is an administrative act during the processing of a case that involves the loss of records or the exercise of judgment or discretion concerning the management of personnel. 1040 ez 2011 A decision concerning the proper application of federal tax law (or other federal or state law) is not a managerial act. 1040 ez 2011 Example. 1040 ez 2011 A revenue agent is examining your tax return. 1040 ez 2011 During the middle of the examination, the agent is sent to an extended training course. 1040 ez 2011 The agent's supervisor decides not to reassign your case, so the work is unreasonably delayed until the agent returns. 1040 ez 2011 Interest from the unreasonable delay can be abated since both the decision to send the agent to the training class and not to reassign the case are managerial acts. 1040 ez 2011 How to request abatement of interest. 1040 ez 2011    You request an abatement (reduction) of interest on Form 843. 1040 ez 2011 You should file the claim with the IRS Service Center where you filed the tax return that was affected by the error or delay. 1040 ez 2011   If you have already paid the interest and you would like a credit or refund of interest paid, you must file Form 843 within 3 years from the date you filed your original return or 2 years from the date you paid the interest, whichever is later. 1040 ez 2011 If you have not paid any of the interest, these time limitations for filing Form 843 do not apply. 1040 ez 2011   Generally, you should file a separate Form 843 for each tax period and each type of tax. 1040 ez 2011 However, complete only one Form 843 if the interest is from an IRS error or delay that affected your tax for more than one tax period or for more than one type of tax (for example, where 2 or more tax years were being examined). 1040 ez 2011   If your request for abatement of interest is denied, you can appeal the decision to the IRS Appeals Office. 1040 ez 2011 Tax Court can review failure to abate interest. 1040 ez 2011    The Tax Court can review the IRS's refusal to abate (reduce) interest if all of the following requirements are met: You filed a request for abatement of interest (Form 843) with the IRS after July 30,1996. 1040 ez 2011 The IRS has mailed you a notice of final determination or a notice of disallowance. 1040 ez 2011 You file a petition with the Tax Court within 180 days of the mailing of the notice of final determination or the notice of disallowance. 1040 ez 2011   The following requirements must also be met: For individual and estate taxpayers — your net worth must not exceed $2 million as of the filing date of your petition for review. 1040 ez 2011 For this purpose, individuals filing a joint return shall be treated as separate individuals. 1040 ez 2011 For charities and certain cooperatives — you must not have more than 500 employees as of the filing date of your petition for review. 1040 ez 2011 For all other taxpayers — your net worth must not exceed $7 million, and you must not have more than 500 employees as of the filing date of your petition for review. 1040 ez 2011 Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions If you are (or were) affected by a Presidentially declared disaster occurring after 1996 or a terrorist or military action occurring after September 10, 2001, the IRS may abate (reduce) the amount of interest you owe on certain taxes. 1040 ez 2011 The IRS may abate interest for the period of any additional time to file or pay that the IRS provides on account of the disaster or the terrorist or military action. 1040 ez 2011 The IRS will issue a notice or news release indicating who are affected taxpayers and stating the period of relief. 1040 ez 2011 If you are eligible for relief from interest, but were charged interest for the period of relief, the IRS may retroactively abate your interest. 1040 ez 2011 To the extent possible, the IRS can take the following actions: Make appropriate adjustments to your account. 1040 ez 2011 Notify you when the adjustments are made. 1040 ez 2011 Refund any interest paid by you where appropriate. 1040 ez 2011 For more information on disaster area losses, see Disaster Area Losses in Publication 547. 1040 ez 2011 For more information on other tax relief for victims of terrorist attacks, see Publication 3920. 1040 ez 2011 Offer in Compromise In certain circumstances, the IRS will allow you to pay less than the full amount you owe. 1040 ez 2011 If you think you may qualify, you should submit your offer by filing Form 656, Offer in Compromise. 1040 ez 2011 The IRS may accept your offer for any of the following reasons: There is doubt about the amount you owe (or whether you owe it). 1040 ez 2011 There is doubt as to whether you can pay the amount you owe based on your financial situation. 1040 ez 2011 An economic hardship would result if you had to pay the full amount owed. 1040 ez 2011 Your case presents compelling reasons that the IRS determines are a sufficient basis for compromise. 1040 ez 2011 If your offer is rejected, you have 30 days to ask the Appeals Office of the IRS to reconsider your offer. 1040 ez 2011 The IRS offers fast track mediation services to help taxpayers resolve many issues including a dispute regarding an offer in compromise. 1040 ez 2011 For more information, see Publication 3605. 1040 ez 2011 Generally, if you submit an offer in compromise, the IRS will delay certain collection activities. 1040 ez 2011 The IRS usually will not levy (take) your property to settle your tax bill during the following periods: While the IRS is evaluating your offer in compromise. 1040 ez 2011 The 30 days immediately after the offer is rejected. 1040 ez 2011 While your timely-filed appeal is being considered by Appeals. 1040 ez 2011 Also, if the IRS rejects your original offer and you submit a revised offer within 30 days of the rejection, the IRS generally will not levy your property while it considers your revised offer. 1040 ez 2011 For more information about submitting an offer in compromise, see Form 656. 1040 ez 2011 Appeal Rights Because people sometimes disagree on tax matters, the IRS has an appeals system. 1040 ez 2011 Most differences can be settled within this system without expensive and time-consuming court trials. 1040 ez 2011 However, your reasons for disagreeing must come within the scope of the tax laws. 1040 ez 2011 For example, you cannot appeal your case based only on moral, religious, political, constitutional, conscientious, or similar grounds. 1040 ez 2011 In most instances, you may be eligible to take your case to court if you do not reach an agreement at your appeals conference, or if you do not want to appeal your case to the IRS Office of Appeals. 1040 ez 2011 See Appeals to the Courts , later, for more information. 1040 ez 2011 Appeal Within the IRS You can appeal an IRS tax decision to a local Appeals Office, which is separate from and independent of the IRS office taking the action you disagree with. 1040 ez 2011 The Appeals Office is the only level of appeal within the IRS. 1040 ez 2011 Conferences with Appeals Office personnel are held in an informal manner by correspondence, by telephone, or at a personal conference. 1040 ez 2011 If you want an appeals conference, follow the instructions in the letter you received. 1040 ez 2011 Your request will be sent to the Appeals Office to arrange a conference at a convenient time and place. 1040 ez 2011 You or your representative should be prepared to discuss all disputed issues at the conference. 1040 ez 2011 Most differences are settled at this level. 1040 ez 2011 If agreement is not reached at your appeals conference, you may be eligible to take your case to court. 1040 ez 2011 See Appeals to the Courts , later. 1040 ez 2011 Protests and Small Case Requests When you request an Appeals conference, you may also need to file either a formal written protest or a small case request with the office named in the letter you received. 1040 ez 2011 Also, see the special appeal request procedures in Publication 1660. 1040 ez 2011 Written protest. 1040 ez 2011   You need to file a written protest in the following cases: All employee plan and exempt organization cases without regard to the dollar amount at issue. 1040 ez 2011 All partnership and S corporation cases without regard to the dollar amount at issue. 1040 ez 2011 All other cases, unless you qualify for the small case request procedure, or other special appeal procedures such as requesting Appeals consideration of liens, levies, seizures, or installment agreements. 1040 ez 2011   If you must submit a written protest, see the instructions in Publication 5 about the information you need to provide. 1040 ez 2011 The IRS urges you to provide as much information as you can, as it will help speed up your appeal. 1040 ez 2011 That will save you both time and money. 1040 ez 2011    Be sure to send the protest within the time limit specified in the letter you received. 1040 ez 2011 Small case request. 1040 ez 2011   If the total amount for any tax period is not more than $25,000, you may make a small case request instead of filing a formal written protest. 1040 ez 2011 In figuring the total amount, include a proposed increase or decrease in tax (including penalties), or claimed refund. 1040 ez 2011 If you are making an offer in compromise, include total unpaid tax, penalty, and interest due. 1040 ez 2011 For a small case request, follow the instructions in our letter to you by sending a letter: Requesting Appeals consideration, Indicating the changes you do not agree with, and Indicating the reasons why you do not agree. 1040 ez 2011 Representation You can represent yourself at your appeals conference, or you can be represented by any federally authorized practitioner, including an attorney, a certified public accountant, an enrolled actuary, or an enrolled agent. 1040 ez 2011 If your representative attends a conference without you, he or she can receive or inspect confidential information only if you have filed a power of attorney or a tax information authorization. 1040 ez 2011 You can use a Form 2848 or any other properly written power of attorney or authorization. 1040 ez 2011 You can also bring witnesses to support your position. 1040 ez 2011 Confidentiality privilege. 1040 ez 2011   Generally, the same confidentiality protection that you have with an attorney also applies to certain communications that you have with federally authorized practitioners. 1040 ez 2011 See Confidentiality privilege under If Your Return Is Examined , earlier. 1040 ez 2011 Appeals to the Courts If you and the IRS still disagree after the appeals conference, you may be entitled to take your case to the United States Tax Court, the United States Court of Federal Claims, or a United States District Court. 1040 ez 2011 These courts are independent of the IRS. 1040 ez 2011 If you elect to bypass the IRS's appeals system, you may be able to take your case to one of the courts listed above. 1040 ez 2011 However, a case petitioned to the United States Tax Court will normally be considered for settlement by an Appeals Officer before the Tax Court hears the case. 1040 ez 2011 If you unreasonably fail to pursue the IRS's appeals system, or if your case is intended primarily to cause a delay, or your position is frivolous or groundless, the Tax Court may impose a penalty of up to $25,000. 1040 ez 2011 See Appeal Within the IRS, earlier. 1040 ez 2011 Prohibition on requests to taxpayers to give up rights to bring civil action. 1040 ez 2011   The Government cannot ask you to waive your right to sue the United States or a Government officer or employee for any action taken in connection with the tax laws. 1040 ez 2011 However, your right to sue can be waived if: You knowingly and voluntarily waive that right, The request to waive that right is made in writing to your attorney or other federally authorized practitioner, or The request is made in person and your attorney or other representative is present. 1040 ez 2011 Burden of proof. 1040 ez 2011   For court proceedings resulting from examinations started after July 22, 1998, the IRS generally has the burden of proof for any factual issue if you have met the following requirements: You introduced credible evidence relating to the issue. 1040 ez 2011 You complied with all substantiation requirements of the Internal Revenue Code. 1040 ez 2011 You maintained all records required by the Internal Revenue Code. 1040 ez 2011 You cooperated with all reasonable requests by the IRS for information regarding the preparation and related tax treatment of any item reported on your tax return. 1040 ez 2011 You had a net worth of $7 million or less and not more than 500 employees at the time your tax liability is contested in any court proceeding if your tax return is for a corporation, partnership, or trust. 1040 ez 2011    The burden of proof does not change on an issue when another provision of the tax laws requires a specific burden of proof with respect to that issue. 1040 ez 2011 Use of statistical information. 1040 ez 2011   In the case of an individual, the IRS has the burden of proof in court proceedings based on any IRS reconstruction of income solely through the use of statistical information on unrelated taxpayers. 1040 ez 2011 Penalties. 1040 ez 2011   The IRS has the burden of initially producing evidence in court proceedings with respect to the liability of any individual taxpayer for any penalty, addition to tax, or additional amount imposed by the tax laws. 1040 ez 2011 Recovering litigation or administrative costs. 1040 ez 2011   These are the expenses that you pay to defend your position to the IRS or the courts. 1040 ez 2011 You may be able to recover reasonable litigation or administrative costs if all of the following conditions apply: You are the prevailing party. 1040 ez 2011 You exhaust all administrative remedies within the IRS. 1040 ez 2011 Your net worth is below a certain limit (see Net worth requirements , later). 1040 ez 2011 You do not unreasonably delay the proceeding. 1040 ez 2011 You apply for administrative costs within 90 days of the date on which the final decision of the IRS Office of Appeals as to the determination of the tax, interest, or penalty was mailed to you. 1040 ez 2011 You apply for litigation costs within the time frames provided by Tax Court Rule 231, found at http://www. 1040 ez 2011 ustaxcourt. 1040 ez 2011 gov  www. 1040 ez 2011 ustaxcourt. 1040 ez 2011 gov . 1040 ez 2011   Prevailing party, reasonable litigation costs, and reasonable administrative costs are explained later. 1040 ez 2011 Note. 1040 ez 2011 If the IRS denies your award of administrative costs, and you want to appeal, you must petition the Tax Court within 90 days of the date on which the IRS mails the denial notice. 1040 ez 2011 Prevailing party. 1040 ez 2011   Generally, you are the prevailing party if: You substantially prevail with respect to the amount in controversy or on the most significant tax issue or set of issues in question, and You meet the net worth requirements, discussed later. 1040 ez 2011   You will not be treated as the prevailing party if the United States establishes that its position was substantially justified. 1040 ez 2011 The position of the United States is presumed not to be substantially justified if the IRS: Did not follow its applicable published guidance (such as regulations, revenue rulings, notices, announcements, private letter rulings, technical advice memoranda, and determination letters issued to the taxpayer) in the proceeding (This presumption can be overcome by evidence. 1040 ez 2011 ), or Has lost in courts of appeal for other circuits on substantially similar issues. 1040 ez 2011   The court will generally decide who is the prevailing party. 1040 ez 2011 Reasonable litigation costs. 1040 ez 2011   These include the following costs: Reasonable court costs. 1040 ez 2011 The reasonable costs of studies, analyses, engineering reports, tests, or projects found by the court to be necessary for the preparation of your case. 1040 ez 2011 The reasonable costs of expert witnesses. 1040 ez 2011 Attorney fees that generally may not exceed $125 maximum hourly rate as set by statute and indexed for inflation. 1040 ez 2011 See Attorney fees , later. 1040 ez 2011 Reasonable administrative costs. 1040 ez 2011   These include the following costs: Any administrative fees or similar charges imposed by the IRS. 1040 ez 2011 The reasonable costs of studies, analyses, engineering reports, tests, or projects. 1040 ez 2011 The reasonable costs of expert witnesses. 1040 ez 2011 Attorney fees that generally may not exceed $125 per hour. 1040 ez 2011 See Attorney fees , later. 1040 ez 2011 Timing of costs. 1040 ez 2011    Administrative costs can be awarded for costs incurred after the earliest of: The date the first letter of proposed deficiency is sent that allows you an opportunity to request administrative review in the IRS Office of Appeals, The date you receive notice of the IRS Office of Appeals' decision, or The date of the notice of deficiency. 1040 ez 2011 Net worth requirements. 1040 ez 2011   An individual taxpayer may be able to recover litigation or administrative costs if the following requirements are met: For individuals — your net worth does not exceed $2 million as of the filing date of your petition for review. 1040 ez 2011 For this purpose, individuals filing a joint return are treated as separate individuals. 1040 ez 2011 For estates — your net worth does not exceed $2 million as of the date of the decedent's death. 1040 ez 2011 For charities and certain cooperatives — you do not have more than 500 employees as of the filing date of your petition for review. 1040 ez 2011 For all other taxpayers — as of the filing date of your petition for review, your net worth does not exceed $7 million, and you must not have more than 500 employees. 1040 ez 2011 Qualified offer rule. 1040 ez 2011    You can also receive reasonable costs and fees and be treated as a prevailing party in a civil action or proceeding if: You make a qualified offer to the IRS to settle your case, The IRS does not accept that offer, and The tax liability (not including interest, unless interest is at issue) later determined by the court is equal to or less than the amount of your qualified offer. 1040 ez 2011 You must also meet the remaining requirements, including the exhaustion of administrative remedies and the net worth requirement, discussed earlier, to get the benefit of the qualified offer rule. 1040 ez 2011 Qualified offer. 1040 ez 2011    This is a written offer made by you during the qualified offer period. 1040 ez 2011 It must specify both the offered amount of your liability (not including interest) and that it is a qualified offer. 1040 ez 2011   To be a qualified offer, it must remain open from the date it is made until the earliest of: The date it is rejected, The date the trial begins, or 90 days from the date it is made. 1040 ez 2011 Qualified offer period. 1040 ez 2011    This period begins on the day the IRS mails you the first letter of proposed deficiency that allows you to request review by the IRS Office of Appeals. 1040 ez 2011 It ends 30 days before your case is first set for trial. 1040 ez 2011 Attorney fees. 1040 ez 2011   Attorney fees generally may not exceed $125 maximum hourly rate as set by statute and indexed for inflation. 1040 ez 2011 However, this amount can be higher in certain limited circumstances depending on the level of difficulty of the issues in the case and the local availability of tax expertise. 1040 ez 2011 See IRS. 1040 ez 2011 gov for more information. 1040 ez 2011    Attorney fees include the fees paid by a taxpayer for the services of anyone who is authorized to practice before the Tax Court or before the IRS. 1040 ez 2011 In addition, attorney fees can be awarded in civil actions for unauthorized inspection or disclosure of a taxpayer's return or return information. 1040 ez 2011   Fees can be awarded in excess of the actual amount charged if: You are represented for no fee, or for a nominal fee, as a pro bono service, and The award is paid to your representative or to your representative's employer. 1040 ez 2011 Jurisdiction for determination of employment status. 1040 ez 2011    The Tax Court can review IRS employment status determinations (for example, whether individuals hired by you are in fact your employees or independent contractors) and the amount of employment tax under such determinations. 1040 ez 2011 Tax Court review can take place only if, in connection with an audit of any person, there is a controversy involving a determination by the IRS that either: One or more individuals performing services for that person are employees of that person, or That person is not entitled to relief under Section 530(a) of the Revenue Act of 1978 (discussed later). 1040 ez 2011   The following rules also apply to a Tax Court review of employment status: A Tax Court petition to review these determinations can be filed only by the person for whom the services are performed, If you receive a Notice of Determination by certified or registered mail, you must file a petition for Tax Court review within 90 days of the date of mailing that notice (150 days if the notice is addressed to you outside the United States), If during the Tax Court proceeding, you begin to treat as an employee an individual whose employment status is at issue, the Tax Court will not consider that change in its decision, Assessment and collection of tax is suspended while the Tax Court review is taking place, Payment of the asserted employment tax deficiency is not required to petition the U. 1040 ez 2011 S. 1040 ez 2011 Tax Court for a determination of employment status. 1040 ez 2011 There can be a de novo review by the Tax Court (a review which does not consider IRS administrative findings), and At your request and with the Tax Court's agreement, small tax case procedures (discussed later) are available to simplify the case resolution process when the amount at issue (including additions to tax and penalties) is $50,000 or less for each tax period involved. 1040 ez 2011   For further information, see Publication 3953, Questions and Answers About Tax Court Proceedings for Determination of Employment Status Under IRC Section 7436. 1040 ez 2011 Section 530(a) of the Revenue Act of 1978. 1040 ez 2011   This section relieves an employer of certain employment tax responsibilities for individuals not treated as employees. 1040 ez 2011 It also provides relief to taxpayers under audit or involved in administrative or judicial proceedings. 1040 ez 2011 Tax Court review of request for relief from joint and several liability on a joint return. 1040 ez 2011    As discussed later, at Relief from joint and several liability on a joint return under Claims for Refund, you can request relief from liability for tax you owe, plus related penalties and interest, that you believe should be paid by your spouse (or former spouse). 1040 ez 2011 You also can petition (ask) the Tax Court to review your request for innocent spouse relief or separation of liability if either: The IRS sends you a determination notice denying, in whole or in part, your request, or You do not receive a determination notice from the IRS within 6 months from the date you file Form 8857. 1040 ez 2011   If you receive a determination notice, you must petition the Tax Court to review your request during the 90-day period that begins on the date the IRS mails the notice. 1040 ez 2011 See Publication 971 for more information. 1040 ez 2011 Note. 1040 ez 2011 Your spouse or former spouse may file a written protest and request an Appeals conference to protest your claim of innocent spouse relief or separation of liability. 1040 ez 2011 See Rev. 1040 ez 2011 Proc. 1040 ez 2011 2003-19, which is on page 371 of the Internal Revenue Bulletin 2003-5 at  www. 1040 ez 2011 irs. 1040 ez 2011 gov/pub/irs-irbs/irb03-05. 1040 ez 2011 pdf. 1040 ez 2011 Tax Court You can take your case to the United States Tax Court if you disagree with the IRS over: Income tax, Estate tax, Gift tax, Employment tax involving IRS employment status determinations, or Certain excise taxes of private foundations, public charities, qualified pension and other retirement plans, or real estate investment trusts. 1040 ez 2011 For information on Tax Court review of a determination of employment status, see Jurisdiction for determination of employment status, earlier. 1040 ez 2011 For information on Tax Court review of an IRS refusal to abate interest, see Tax Court can review failure to abate interest, earlier under Examination of Returns. 1040 ez 2011 For information on Tax Court review of Appeals determinations with respect to lien notices and proposed levies, see Publication 1660. 1040 ez 2011 You cannot take your case to the Tax Court before the IRS sends you a notice of deficiency. 1040 ez 2011 You can only appeal your case if you file a petition within 90 days from the date the notice is mailed to you (150 days if it is addressed to you outside the United States). 1040 ez 2011 The notice will show the 90th (or 150th) day by which you must file your petition with the Tax Court. 1040 ez 2011 Withdrawal of notice of deficiency. 1040 ez 2011 If you consent, the IRS can withdraw a notice of deficiency. 1040 ez 2011 A notice of deficiency may be rescinded if the notice was issued as a result of an administrative error; the taxpayer submits information establishing the actual tax due is less than the amount shown in the notice; the taxpayer specifically requests a conference with the appropriate Appeals office for the purpose of entering into settlement negotiations. 1040 ez 2011 However, the notice may be rescinded only if the appropriate Appeals office first decides that the case is susceptible to agreement. 1040 ez 2011 See Revenue Procedure 98-54 for a more detailed explanation of the requirements. 1040 ez 2011 Once withdrawn, the limits on credits, refunds, and assessments concerning the notice are void, and you and the IRS have the rights and obligations that you had before the notice was issued. 1040 ez 2011 The suspension of any time limitation while the notice of deficiency was issued will not change when the notice is withdrawn. 1040 ez 2011 After the notice is withdrawn, you cannot file a petition with the Tax Court based on the notice. 1040 ez 2011 Also, the IRS can later issue a notice of deficiency in a greater or lesser amount than the amount in the withdrawn deficiency. 1040 ez 2011 Generally, the Tax Court hears cases before any tax has been assessed and paid; however, you can pay the tax after the notice of deficiency has been issued and still petition the Tax Court for review. 1040 ez 2011 If you do not file your petition on time, the proposed tax will be assessed, a bill will be sent, and you will not be able to take your case to the Tax Court. 1040 ez 2011 Under the law, you must pay the tax within 21 days (10 business days if the amount is $100,000 or more). 1040 ez 2011 Collection can proceed even if you think that the amount is excessive. 1040 ez 2011 Publication 594 explains IRS collection procedures. 1040 ez 2011 If you filed your petition on time, the court will schedule your case for trial at a location convenient to you. 1040 ez 2011 You can represent yourself before the Tax Court or you can be represented by anyone admitted to practice before that court. 1040 ez 2011 Small tax case procedure. 1040 ez 2011   If the amount in your case is $50,000 or less for any 1 tax year or period, you can request that your case be handled under the small tax case procedure. 1040 ez 2011 If the Tax Court approves, you can present your case to the Tax Court for a decision that is final and that you cannot appeal. 1040 ez 2011 You can get more information regarding the small tax case procedure and other Tax Court matters from the United States Tax Court, 400 Second Street, N. 1040 ez 2011 W. 1040 ez 2011 , Washington, DC 20217. 1040 ez 2011 More information can be found on the Tax Court's website at www. 1040 ez 2011 ustaxcourt. 1040 ez 2011 gov. 1040 ez 2011 Motion to request redetermination of interest. 1040 ez 2011   In certain cases, you can file a motion asking the Tax Court to redetermine the amount of interest on either an underpayment or an overpayment. 1040 ez 2011 You can do this only in a situation that meets all of the following requirements: The IRS has assessed a deficiency that was determined by the Tax Court. 1040 ez 2011 The assessment included interest. 1040 ez 2011 You have paid the entire amount of the deficiency plus the interest claimed by the IRS. 1040 ez 2011 The Tax Court has found that you made an overpayment. 1040 ez 2011 You must file the motion within one year after the decision of the Tax Court becomes final. 1040 ez 2011 District Court and Court of Federal Claims Generally, the District Courts and the Court of Federal Claims hear tax cases only after you have paid the entire tax and penalties, and filed a claim for a credit or refund. 1040 ez 2011 The taxpayer may litigate certain types of employment tax cases in either the United States District Court or the United States Court of Federal Claims. 1040 ez 2011 Before taxpayers can initiate suit in either of these courts with respect to certain employment taxes, they will have to pay, at a minimum, the employment tax assessment attributable to one employee for any one quarter and file a claim for refund of the tax. 1040 ez 2011 Once the claim for refund is denied or 6 months elapse without any action by the IRS, the taxpayer may initiate suit. 1040 ez 2011 As explained later under Claims for Refund, you can file a claim with the IRS for a credit or refund if you think that the tax you paid is incorrect or excessive. 1040 ez 2011 If your claim is totally or partially disallowed by the IRS, you should receive a notice of claim disallowance. 1040 ez 2011 If the IRS does not act on your claim within 6 months from the date you filed it, you can then file suit for a refund. 1040 ez 2011 You generally must file suit for a credit or refund no later than 2 years after the IRS informs you that your claim has been rejected. 1040 ez 2011 However, you can file suit if it has been 6 months since you filed your claim and the IRS has not yet delivered a decision. 1040 ez 2011 You can file suit for a credit or refund in your United States District Court or in the United States Court of Federal Claims. 1040 ez 2011 However, you cannot appeal to the United States Court of Federal Claims if your claim is for credit or refund of a penalty that relates to promoting an abusive tax shelter or to aiding and abetting the understatement of tax liability on someone else's return. 1040 ez 2011 For information about procedures for filing suit in either court, contact the Clerk of your District Court or of the United States Court of Federal Claims. 1040 ez 2011 Refund or Credit of Overpayments Before Final Determination Any court with proper jurisdiction, including the Tax Court, can order the IRS to refund any part of a tax deficiency that the IRS collects from you during a period when the IRS is not permitted to assess that deficiency, or to levy or engage in any court proceeding to collect that deficiency. 1040 ez 2011 In addition, the court can order a refund of any part of an overpayment determined by the Tax Court that is not at issue on appeal to a higher court. 1040 ez 2011 The court can order these refunds before its decision on the case is final. 1040 ez 2011 Taxpayers should thoroughly review IRS settlement offers before signing a Tax Court Decision document to ensure that all adjustments are correct, including the inclusion of any tax credits that the taxpayer is allowed to claim. 1040 ez 2011 Note. 1040 ez 2011 The court may no longer order a refund of an overpayment after the case is final. 1040 ez 2011 Generally, the IRS is not permitted to take action on a tax deficiency during: The 90-day (or 150-day if outside the United States) period that you have to petition a notice of deficiency to the Tax Court, or The period that the case is under appeal if a bond is provided. 1040 ez 2011 Claims for Refund If you believe you have overpaid your tax, you have a limited amount of time in which to file a claim for a credit or refund. 1040 ez 2011 You can claim a credit or refund by filing Form 1040X. 1040 ez 2011 See Time for Filing a Claim for Refund , later. 1040 ez 2011 File your claim by mailing it to the IRS Service Center where you filed your original return. 1040 ez 2011 File a separate form for each year or period involved. 1040 ez 2011 Include an explanation of each item of income, deduction, or credit on which you are basing your claim. 1040 ez 2011 Corporations should file Form 1120X, Amended U. 1040 ez 2011 S. 1040 ez 2011 Corporation Income Tax Return, or other form appropriate to the type of credit or refund claimed. 1040 ez 2011 See Publication 3920 for information on filing claims for tax forgiveness for individuals affected by terrorist attacks. 1040 ez 2011 Requesting a copy of your tax return. 1040 ez 2011   You can obtain a copy of the actual return and all attachments you filed with the IRS for an earlier year. 1040 ez 2011 This includes a copy of the Form W-2 or Form 1099 filed with your return. 1040 ez 2011 Use Form 4506 to make your request. 1040 ez 2011 You will be charged a fee, which you must pay when you submit Form 4506. 1040 ez 2011 Requesting a copy of your tax account information. 1040 ez 2011   Use Form 4506-T, Request for Transcript of Tax Return, to request free copies of your tax return transcript, tax account transcript, record of account, verification of nonfiling, or Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript. 1040 ez 2011 The tax return transcript contains most of the line items of a tax return. 1040 ez 2011 A tax account transcript contains information on the financial status of the account, such as payments, penalty assessments, and adjustments. 1040 ez 2011 A record of account is a combination of line item information and later adjustments to the account. 1040 ez 2011 Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript contains data from these information returns. 1040 ez 2011 Penalty for erroneous claim for refund. 1040 ez 2011   If you claim an excessive amount of tax refund or credit relating to income tax (other than a claim relating to the earned income credit), you may be liable for a penalty of 20% of the amount that is determined to be excessive. 1040 ez 2011 An excessive amount is the amount of the claim for refund or credit that is more than the amount of claim allowable for the tax year. 1040 ez 2011 The penalty may be waived if you can show that you had a reasonable basis for making the claim. 1040 ez 2011 Time for Filing a Claim for Refund Generally, you must file a claim for a credit or refund within 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later. 1040 ez 2011 If you do not file a claim within this period, you may no longer be entitled to a credit or a refund. 1040 ez 2011 If the due date to file a return or a claim for a credit or refund is a Saturday, Sunday, or legal holiday, it is filed on time if it is filed on the next business day. 1040 ez 2011 Returns you filed before the due date are considered filed on the due date. 1040 ez 2011 This is true even when the due date is a Saturday, Sunday, or legal holiday. 1040 ez 2011 Disaster area claims for refund. 1040 ez 2011   If you live in a Presidentially declared disaster area or are affected by terroristic or military action, the deadline to file a claim for a refund may be postponed. 1040 ez 2011 This section discusses the special rules that apply to Presidentially declared disaster area refunds. 1040 ez 2011    A Presidentially declared disaster is a disaster that occurred in an area declared by the President to be eligible for federal assistance under the Disaster Relief and Emergency Assistance Act. 1040 ez 2011 Postponed refund deadlines. 1040 ez 2011   The IRS may postpone for up to 1 year the deadlines for filing a claim for refund. 1040 ez 2011 The postponement can be used by taxpayers who are affected by a Presidentially declared disaster. 1040 ez 2011 The IRS may also postpone deadlines for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. 1040 ez 2011 For more information, see Publication 547. 1040 ez 2011   If any deadline is postponed, the IRS will publicize the postponement in your area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin. 1040 ez 2011 A list of the areas eligible for assistance under the Disaster Relief and Emergency Assistance Act is available at the Federal Emergency Management Agency (FEMA) website at www. 1040 ez 2011 fema. 1040 ez 2011 gov and at the IRS website at www. 1040 ez 2011 irs. 1040 ez 2011 gov. 1040 ez 2011 Nonfilers can get refund of overpayments paid within 3-year period. 1040 ez 2011   The Tax Court can consider taxes paid during the 3-year period preceding the date of a notice of deficiency for determining any refund due to a nonfiler. 1040 ez 2011 This means that if you do not file your return, and you receive a notice of deficiency in the third year after the due date (with extensions) of your return and file suit with the Tax Court to contest the notice of deficiency, you may be able to receive a refund of excessive amounts paid within the 3-year period preceding the date of the notice of deficiency. 1040 ez 2011 The IRS may postpone for up to 1 year certain tax deadlines, including the time for filing claims for refund, for taxpayers who are affected by a terrorist attack occurring after September 10, 2001. 1040 ez 2011 For more information, see Publication 3920. 1040 ez 2011 Claim for refund by estates electing the installment method of payment. 1040 ez 2011   In certain cases where an estate has elected to make tax payments through the installment method, the executor can file a suit for refund with a U. 1040 ez 2011 S. 1040 ez 2011 District Court or the U. 1040 ez 2011 S. 1040 ez 2011 Court of Federal Claims before all the installment payments have been made. 1040 ez 2011 However, all the following must be true before a suit can be filed: The estate consists largely of an interest in a closely-held business. 1040 ez 2011 All installment payments due on or before the date the suit is filed have been made. 1040 ez 2011 No accelerated installment payments have been made. 1040 ez 2011 No Tax Court case is pending with respect to any estate tax liability. 1040 ez 2011 If a notice of deficiency was issued to the estate regarding its liability for estate tax, the time for petitioning the Tax Court has passed. 1040 ez 2011 No proceeding is pending for a declaratory judgment by the Tax Court on whether the estate is eligible to pay tax in installments. 1040 ez 2011 The executor has not included any previously litigated issues in the current suit for refund. 1040 ez 2011 The executor does not discontinue making installment payments timely, while the court considers the suit for refund. 1040 ez 2011    If in its final decision on the suit for refund the court redetermines the estate's tax liability, the IRS must refund any part of the estate tax amount that is disallowed. 1040 ez 2011 This includes any part of the disallowed amount previously collected by the IRS. 1040 ez 2011 Protective claim for refund. 1040 ez 2011   If your right to a refund is contingent on future events and may not be determinable until after the time period for filing a claim for refund expires, you can file a protective claim for refund. 1040 ez 2011 A protective claim can be either a formal claim or an amended return for credit or refund. 1040 ez 2011 Protective claims are often based on current litigation or expected changes in the tax law, other legislation, or regulations. 1040 ez 2011 A protective claim preserves your right to claim a refund when the contingency is resolved. 1040 ez 2011 A protective claim does not have to state a particular dollar amount or demand an immediate refund. 1040 ez 2011 However, to be valid, a protective claim must: Be in writing and be signed, Include your name, address, social security number or individual taxpayer identification number, and other contact information, Identify and describe the contingencies affecting the claim, Clearly alert the IRS to the essential nature of the claim, and Identify the specific year(s) for which a refund is sought. 1040 ez 2011   Generally, the IRS will delay action on the protective claim until the contingency is resolved. 1040 ez 2011 Once the contingency is resolved, the IRS may obtain additional information necessary to process the claim and then either allow or disallow the claim. 1040 ez 2011   Mail your protective claim for refund to the address listed in the instructions for Form 1040X, under Where To File. 1040 ez 2011 Exceptions The limits on your claim for refund can be affected by the type of item that forms the basis of your claim. 1040 ez 2011 Special refunds. 1040 ez 2011   If you file a claim for refund based on one of the items listed below, the limits discussed earlier under Time for Filing a Claim for Refund may not apply. 1040 ez 2011 These special items are: A bad debt, A worthless security, A payment or accrual of foreign tax, A net operating loss carryback, and A carryback of certain tax credits. 1040 ez 2011   The limits discussed earlier also may not apply if you have signed an agreement to extend the period of assessment of tax. 1040 ez 2011 For information on special rules on filing claims for an individual affected by a terrorist attack, see Publication 3920. 1040 ez 2011 Periods of financial disability. 1040 ez 2011   If you are an individual (not a corporation or other taxpaying entity), the period of limitations on credits and refunds can be suspended during periods when you cannot manage your financial affairs because of physical or mental impairment that is medically determinable and either: Has lasted or can be expected to last continuously for at least 12 months, or Can be expected to result in death. 1040 ez 2011    The period for filing a claim for refund will not be suspended for any time that someone else, such as your spouse or guardian, was authorized to act for you in financial matters. 1040 ez 2011   To claim financial disability, you generally must submit the following statements with your claim for credit or refund: A written statement signed by a physician, qualified to make the determination, that sets forth: The name and a description of your physical or mental impairment, The physician's medical opinion that your physical or mental impairment prevented you from managing your financial affairs, The physician's medical opinion that your physical or mental impairment was or can be expected to result in death, or that it has lasted (or can be expected to last) for a continuous period of not less than 12 months, and To the best of the physician's knowledge, the specific time period during which you were prevented by such physical or mental impairment from managing your financial affairs, and A written statement by the person signing the claim for credit or refund that no person, including your spouse, was authorized to act on your behalf in financial matters during the period described in paragraph (1)(d) of the physician's statement. 1040 ez 2011 Alternatively, if a person was authorized to act on your behalf in financial matters during any part of the period described in that paragraph, the beginning and ending dates of the period of time the person was so authorized. 1040 ez 2011    The period of limitations will not be suspended on any claim for refund that (without regard to this provision) was barred as of July 22, 1998. 1040 ez 2011 Limit on Amount of Refund If you file your claim within 3 years after filing your return, the credit or refund cannot be more than the part of the tax paid wi