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2012 Tax Forms 1040

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2012 Tax Forms 1040

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

Update Feb. 21, 2014

On Feb. 11, 2014, the U.S. Court of Appeals for the District of Columbia Circuit upheld the decision of the lower court in the case of Loving vs. IRS, finding insufficient statutory support for the IRS’ regulation of federal tax return preparers.

Taxpayer reliance on paid tax return preparers and effective tax administration are inextricably linked to quality return preparation. As we assess the scope and impact of the court’s decision and determine our way forward, our focus on improved competency will continue.  

Please continue to check this site for additional information as it becomes available.

Background

On Friday, Jan. 18, 2013, the United States District Court for the District of Columbia enjoined the Internal Revenue Service from enforcing the regulatory requirements for registered tax return preparers. In accordance with this order, tax return preparers covered by this program are not required to complete competency testing or secure continuing education. The ruling does not affect the regulatory practice requirements for CPAs, attorneys, enrolled agents, enrolled retirement plan agents or enrolled actuaries.

On Friday, Feb. 1, 2013, the court modified its order to clarify that the order does not affect the requirement for all paid tax return preparers to obtain a preparer tax identification number (PTIN). Consistent with this modification, the IRS has reopened the online PTIN system. On March 29, 2013, the IRS appealed the district court opinion.

In July 2013, the IRS refunded testing fees to return preparers who tested or were scheduled to test on or after Jan. 18, 2013 (the date the registered tax return preparer test was enjoined). No decisions have been made about additional refunds related to registered tax return preparer regulations at this time.

 

 

Page Last Reviewed or Updated: 05-Mar-2014

The 2012 Tax Forms 1040

2012 tax forms 1040 11. 2012 tax forms 1040   Departing Aliens and the Sailing or Departure Permit Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Aliens Not Required To Obtain Sailing or Departure Permits Aliens Required To Obtain Sailing or Departure PermitsGetting a Sailing or Departure Permit Forms To File Paying Taxes and Obtaining Refunds Bond To Ensure Payment Filing Annual U. 2012 tax forms 1040 S. 2012 tax forms 1040 Income Tax Returns Introduction Before leaving the United States, all aliens (except those listed under Aliens Not Required To Obtain Sailing or Departure Permits must obtain a certificate of compliance. 2012 tax forms 1040 This document, also popularly known as the sailing permit or departure permit, is part of the income tax form you must file before leaving. 2012 tax forms 1040 You will receive a sailing or departure permit after filing a Form 1040-C or Form 2063. 2012 tax forms 1040 These forms are discussed in this chapter. 2012 tax forms 1040 To find out if you need a sailing or departure permit, first read Aliens Not Required To Obtain Sailing or Departure Permits . 2012 tax forms 1040 If you do not fall into one of the categories in that discussion, you must obtain a sailing or departure permit. 2012 tax forms 1040 Read Aliens Required To Obtain Sailing or Departure Permits . 2012 tax forms 1040 Topics - This chapter discusses: Who needs a sailing permit, How to get a sailing permit, and Forms you file to get a sailing permit. 2012 tax forms 1040 Useful Items - You may want to see: Form (and Instructions) 1040-C U. 2012 tax forms 1040 S. 2012 tax forms 1040 Departing Alien Income Tax Return 2063 U. 2012 tax forms 1040 S. 2012 tax forms 1040 Departing Alien Income Tax Statement See chapter 12 for information about getting these forms. 2012 tax forms 1040 Aliens Not Required To Obtain Sailing or Departure Permits If you are included in one of the following categories, you do not have to get a sailing or departure permit before leaving the United States. 2012 tax forms 1040 If you are in one of these categories and do not have to get a sailing or departure permit, you must be able to support your claim for exemption with proper identification or give the authority for the exemption. 2012 tax forms 1040 Category 1. 2012 tax forms 1040   Representatives of foreign governments with diplomatic passports, whether accredited to the United States or other countries, members of their households, and servants accompanying them. 2012 tax forms 1040 Servants who are leaving, but not with a person with a diplomatic passport, must get a sailing or departure permit. 2012 tax forms 1040 However, they can get a sailing or departure permit on Form 2063 without examination of their income tax liability by presenting a letter from the chief of their diplomatic mission certifying that: Their name appears on the “White List” (a list of employees of diplomatic missions), and They do not owe to the United States any income tax, and will not owe any tax up to and including the intended date of departure. 2012 tax forms 1040   The statement must be presented to an IRS office. 2012 tax forms 1040 Category 2. 2012 tax forms 1040    Employees of international organizations and foreign governments (other than diplomatic representatives exempt under category 1) and members of their households: Whose compensation for official services is exempt from U. 2012 tax forms 1040 S. 2012 tax forms 1040 tax under U. 2012 tax forms 1040 S. 2012 tax forms 1040 tax laws (described in chapter 10), and Who receive no other income from U. 2012 tax forms 1040 S. 2012 tax forms 1040 sources. 2012 tax forms 1040 If you are an alien in category (1) or (2), above, who filed the waiver under section 247(b) of the Immigration and Nationality Act, you must get a sailing or departure permit. 2012 tax forms 1040 This is true even if your income is exempt from U. 2012 tax forms 1040 S. 2012 tax forms 1040 tax because of an income tax treaty, consular agreement, or international agreement. 2012 tax forms 1040 Category 3. 2012 tax forms 1040   Alien students, industrial trainees, and exchange visitors, including their spouses and children, who enter on an “F-1,” “F-2,” “H-3,” “H-4,” “J-1,” “J-2,” or “Q” visa only and who receive no income from U. 2012 tax forms 1040 S. 2012 tax forms 1040 sources while in the United States under those visas other than: Allowances to cover expenses incident to study or training in the United States, such as expenses for travel, maintenance, and tuition, The value of any services or food and lodging connected with this study or training, Income from employment authorized by the U. 2012 tax forms 1040 S. 2012 tax forms 1040 Citizenship and Immigration Services (USCIS), or Interest income on deposits that is not effectively connected with a U. 2012 tax forms 1040 S. 2012 tax forms 1040 trade or business. 2012 tax forms 1040 (See Interest Income in chapter 3. 2012 tax forms 1040 ) Category 4. 2012 tax forms 1040   Alien students, including their spouses and children, who enter on an “M-1” or “M-2” visa only and who receive no income from U. 2012 tax forms 1040 S. 2012 tax forms 1040 sources while in the United States under those visas, other than: Income from employment authorized by the U. 2012 tax forms 1040 S. 2012 tax forms 1040 Citizenship and Immigration Services (USCIS) or Interest income on deposits that is not effectively connected with a U. 2012 tax forms 1040 S. 2012 tax forms 1040 trade or business. 2012 tax forms 1040 (See Interest Income in chapter 3. 2012 tax forms 1040 ) Category 5. 2012 tax forms 1040   Certain other aliens temporarily in the United States who have received no taxable income during the tax year up to and including the date of departure or during the preceding tax year. 2012 tax forms 1040 If the IRS has reason to believe that an alien has received income subject to tax and that the collection of income tax is jeopardized by departure, it may then require the alien to obtain a sailing or departure permit. 2012 tax forms 1040 Aliens in this category are: Alien military trainees who enter the United States for training under the sponsorship of the Department of Defense and who leave the United States on official military travel orders, Alien visitors for business on a “B-1” visa, or on both a “B-1” visa and a “B-2” visa, who do not remain in the United States or a U. 2012 tax forms 1040 S. 2012 tax forms 1040 possession for more than 90 days during the tax year, Alien visitors for pleasure on a “B-2” visa, Aliens in transit through the United States or any of its possessions on a “C-1” visa, or under a contract, such as a bond agreement, between a transportation line and the Attorney General, and Aliens who enter the United States on a border-crossing identification card or for whom passports, visas, and border-crossing identification cards are not required, if they are: Visitors for pleasure, Visitors for business who do not remain in the United States or a U. 2012 tax forms 1040 S. 2012 tax forms 1040 possession for more than 90 days during the tax year, or In transit through the United States or any of its possessions. 2012 tax forms 1040 Category 6. 2012 tax forms 1040   Alien residents of Canada or Mexico who frequently commute between that country and the United States for employment, and whose wages are subject to the withholding of U. 2012 tax forms 1040 S. 2012 tax forms 1040 tax. 2012 tax forms 1040 Aliens Required To Obtain Sailing or Departure Permits If you do not fall into one of the categories listed under Aliens Not Required To Obtain Sailing or Departure Permits, you must obtain a sailing or departure permit. 2012 tax forms 1040 To obtain a permit, file Form 1040-C or Form 2063 (whichever applies) with your local IRS office before you leave the United States. 2012 tax forms 1040 See Forms To File , later. 2012 tax forms 1040 You must also pay all the tax shown as due on Form 1040-C and any taxes due for past years. 2012 tax forms 1040 See Paying Taxes and Obtaining Refunds , later. 2012 tax forms 1040 Getting a Sailing or Departure Permit The following discussion covers when and where to get your sailing permit. 2012 tax forms 1040 Where to get a sailing or departure permit. 2012 tax forms 1040   If you have been working in the United States, you should get the permit from an IRS office in the area of your employment, or you may obtain one from an IRS office in the area of your departure. 2012 tax forms 1040 When to get a sailing or departure permit. 2012 tax forms 1040   You should get your sailing or departure permit at least 2 weeks before you plan to leave. 2012 tax forms 1040 You cannot apply earlier than 30 days before your planned departure date. 2012 tax forms 1040 Do not wait until the last minute in case there are unexpected problems. 2012 tax forms 1040 Papers to submit. 2012 tax forms 1040   Getting your sailing or departure permit will go faster if you bring to the IRS office papers and documents related to your income and your stay in the United States. 2012 tax forms 1040 Bring the following records with you if they apply. 2012 tax forms 1040 Your passport and alien registration card or visa. 2012 tax forms 1040 Copies of your U. 2012 tax forms 1040 S. 2012 tax forms 1040 income tax returns filed for the past 2 years. 2012 tax forms 1040 If you were in the United States for less than 2 years, bring the income tax returns you filed for that period. 2012 tax forms 1040 Receipts for income taxes paid on these returns. 2012 tax forms 1040 Receipts, bank records, canceled checks, and other documents that prove your deductions, business expenses, and dependents claimed on your returns. 2012 tax forms 1040 A statement from each employer showing wages paid and tax withheld from January 1 of the current year to the date of departure if you were an employee. 2012 tax forms 1040 If you were self-employed, you must bring a statement of income and expenses up to the date you plan to leave. 2012 tax forms 1040 Proof of estimated tax payments for the past year and this year. 2012 tax forms 1040 Documents showing any gain or loss from the sale of personal property and/or real property, including capital assets and merchandise. 2012 tax forms 1040 Documents relating to scholarship or fellowship grants including: Verification of the grantor, source, and purpose of the grant. 2012 tax forms 1040 Copies of the application for, and approval of, the grant. 2012 tax forms 1040 A statement of the amount paid, and your duties and obligations under the grant. 2012 tax forms 1040 A list of any previous grants. 2012 tax forms 1040 Documents indicating you qualify for any special tax treaty benefits claimed. 2012 tax forms 1040 Document verifying your date of departure from the United States, such as an airline ticket. 2012 tax forms 1040 Document verifying your U. 2012 tax forms 1040 S. 2012 tax forms 1040 taxpayer identification number, such as a social security card or an IRS issued Notice CP 565 showing your individual taxpayer identification number (ITIN). 2012 tax forms 1040 Note. 2012 tax forms 1040   If you are married and reside in a community property state, also bring the above-listed documents for your spouse. 2012 tax forms 1040 This applies whether or not your spouse requires a permit. 2012 tax forms 1040 Forms To File If you must get a sailing or departure permit, you must file Form 2063 or Form 1040-C. 2012 tax forms 1040 Employees in the IRS office can assist in filing these forms. 2012 tax forms 1040 Both forms have a “certificate of compliance” section. 2012 tax forms 1040 When the certificate of compliance is signed by an agent of the Field Assistance Area Director, it certifies that your U. 2012 tax forms 1040 S. 2012 tax forms 1040 tax obligations have been satisfied according to available information. 2012 tax forms 1040 Your Form 1040-C copy of the signed certificate, or the one detached from Form 2063, is your sailing or departure permit. 2012 tax forms 1040 Form 2063 This is a short form that asks for certain information but does not include a tax computation. 2012 tax forms 1040 The following departing aliens can get their sailing or departure permits by filing Form 2063. 2012 tax forms 1040 Aliens, whether resident or nonresident, who have had no taxable income for the tax year up to and including the date of departure and for the preceding year, if the period for filing the income tax return for that year has not expired. 2012 tax forms 1040 Resident aliens who have received taxable income during the tax year or preceding year and whose departure will not hinder the collection of any tax. 2012 tax forms 1040 However, if the IRS has information indicating that the aliens are leaving to avoid paying their income tax, they must file a Form 1040-C. 2012 tax forms 1040 Aliens in either of these categories who have not filed an income tax return or paid income tax for any tax year must file the return and pay the income tax before they can be issued a sailing or departure permit on Form 2063. 2012 tax forms 1040 The sailing or departure permit detached from Form 2063 can be used for all departures during the current year. 2012 tax forms 1040 However, the IRS may cancel the sailing or departure permit for any later departure if it believes the collection of income tax is jeopardized by that later departure. 2012 tax forms 1040 Form 1040-C If you must get a sailing or departure permit and you do not qualify to file Form 2063, you must file Form 1040-C. 2012 tax forms 1040 Ordinarily, all income received or reasonably expected to be received during the tax year up to and including the date of departure must be reported on Form 1040-C and the tax on it must be paid. 2012 tax forms 1040 When you pay any tax shown as due on the Form 1040-C, and you file all returns and pay all tax due for previous years, you will receive a sailing or departure permit. 2012 tax forms 1040 However, the IRS may permit you to furnish a bond guaranteeing payment instead of paying the taxes for certain years. 2012 tax forms 1040 See Bond To Ensure Payment , discussed later. 2012 tax forms 1040 The sailing or departure permit issued under the conditions in this paragraph is only for the specific departure for which it is issued. 2012 tax forms 1040 Returning to the United States. 2012 tax forms 1040   If you furnish the IRS with information showing, to the satisfaction of the IRS, that you intend to return to the United States and that your departure does not jeopardize the collection of income tax, you can get a sailing or departure permit by filing Form 1040-C without having to pay the tax shown on it. 2012 tax forms 1040 You must, however, file all income tax returns that have not yet been filed as required, and pay all income tax that is due on these returns. 2012 tax forms 1040   Your Form 1040-C must include all income received and reasonably expected to be received during the entire year of departure. 2012 tax forms 1040 The sailing or departure permit issued with this Form 1040-C can be used for all departures during the current year. 2012 tax forms 1040 However, the Service may cancel the sailing or departure permit for any later departure if the payment of income tax appears to be in jeopardy. 2012 tax forms 1040 Joint return on Form 1040-C. 2012 tax forms 1040   Departing husbands and wives who are nonresident aliens cannot file joint returns. 2012 tax forms 1040 However, if both spouses are resident aliens, they can file a joint return on Form 1040-C if: Both spouses can reasonably be expected to qualify to file a joint return at the normal close of their tax year, and The tax years of the spouses end at the same time. 2012 tax forms 1040 Paying Taxes and Obtaining Refunds You must pay all tax shown as due on the Form 1040-C at the time of filing it, except when a bond is furnished, or the IRS is satisfied that your departure does not jeopardize the collection of income tax. 2012 tax forms 1040 You must also pay any taxes due for past years. 2012 tax forms 1040 If the tax computation on Form 1040-C results in an overpayment, there is no tax to pay at the time you file that return. 2012 tax forms 1040 However, the IRS cannot provide a refund at the time of departure. 2012 tax forms 1040 If you are due a refund, you must file either Form 1040NR or Form 1040NR-EZ at the end of the tax year. 2012 tax forms 1040 Bond To Ensure Payment Usually, you must pay the tax shown as due on Form 1040-C when you file it. 2012 tax forms 1040 However, if you pay all taxes due that you owe for prior years, you can furnish a bond guaranteeing payment instead of paying the income taxes shown as due on the Form 1040-C or the tax return for the preceding year if the period for filing that return has not expired. 2012 tax forms 1040 The bond must equal the tax due plus interest to the date of payment as figured by the IRS. 2012 tax forms 1040 Information about the form of bond and security on it can be obtained from your IRS office. 2012 tax forms 1040 Filing Annual U. 2012 tax forms 1040 S. 2012 tax forms 1040 Income Tax Returns Form 1040-C is not an annual U. 2012 tax forms 1040 S. 2012 tax forms 1040 income tax return. 2012 tax forms 1040 If an income tax return is required by law, that return must be filed even though a Form 1040-C has already been filed. 2012 tax forms 1040 Chapters 5 and 7 discuss filing an annual U. 2012 tax forms 1040 S. 2012 tax forms 1040 income tax return. 2012 tax forms 1040 The tax paid with Form 1040-C should be taken as a credit against the tax liability for the entire tax year on your annual U. 2012 tax forms 1040 S. 2012 tax forms 1040 income tax return. 2012 tax forms 1040 Prev  Up  Next   Home   More Online Publications