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Income Tax Return Preparation

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Income Tax Return Preparation

Income tax return preparation Index A Accountable plan, Accountable plans. Income tax return preparation Additional Medicare Tax, What's New, Introduction, Additional Medicare Tax. Income tax return preparation Administrators, Teachers or administrators. Income tax return preparation American Samoa, Residents of Puerto Rico, the U. Income tax return preparation S. Income tax return preparation Virgin Islands, Guam, the CNMI, and American Samoa. Income tax return preparation , Specified U. Income tax return preparation S. Income tax return preparation possessions. Income tax return preparation Assistance (see Tax help) C Cantors, Cantors. Income tax return preparation Christian Science Practitioners, Table 1. Income tax return preparation Are Your Ministerial Earnings* Covered Under FICA or SECA?, Christian Science Practitioners and Readers, Practitioners. Income tax return preparation , Christian Science Practitioners and Readers, Members of the Clergy Readers, Table 1. Income tax return preparation Are Your Ministerial Earnings* Covered Under FICA or SECA?, Christian Science Practitioners and Readers, Readers. Income tax return preparation , Christian Science Practitioners and Readers Common-law employee, Common-law employee. Income tax return preparation Commonwealth of the Northern Mariana Islands (CNMI), Residents of Puerto Rico, the U. Income tax return preparation S. Income tax return preparation Virgin Islands, Guam, the CNMI, and American Samoa. Income tax return preparation , Specified U. Income tax return preparation S. Income tax return preparation possessions. Income tax return preparation Comprehensive example, Comprehensive Example, Attachment 2—John E. Income tax return preparation White011-00-2222 Worksheet 4. Income tax return preparation Figuring Net Self-Employment Income for Schedule SE (Form 1040) Credit Earned income, Earned Income Credit Retirement savings contributions, Retirement savings contributions credit. Income tax return preparation D Deduction for self-employment tax, Deduction for SE Tax E Earned income credit, Earned Income Credit Effective date Exemption from FICA taxes, Effective date. Income tax return preparation Exemption from self-employment (SE) tax, Effective date of exemption. Income tax return preparation , Effective date of exemption. Income tax return preparation Employment status, Employment status for other tax purposes. Income tax return preparation Estimated tax, Income Tax Withholding and Estimated Tax Exclusion, foreign earned income, Foreign Earned Income Exemption Form 4029, Table 2. Income tax return preparation The Self-Employment Tax Exemption Application and Approval Process, Requesting Exemption—Form 4029 Form 4361, Table 2. Income tax return preparation The Self-Employment Tax Exemption Application and Approval Process, Requesting Exemption—Form 4361 From FICA taxes, Exemption From FICA Taxes From self-employment (SE) tax, Exemption From Self-Employment (SE) Tax, Refunds of SE tax paid. Income tax return preparation F Federal Insurance Contributions Act (see FICA) FICA Earnings covered, Table 1. Income tax return preparation Are Your Ministerial Earnings* Covered Under FICA or SECA? Effective date of exemption, Effective date. Income tax return preparation Election to exclude church employees, Election by Church To Exclude Its Employees From FICA Coverage Filing requirements for most taxpayers, Filing Your Return Foreign earned income, Foreign Earned Income Form 1040, Excess rental allowance. Income tax return preparation , Health Insurance Costs of Self-Employed Ministers, Deduction for SE Tax, Exemption from SE tax. Income tax return preparation , Form 1040, , 1040-ES, Income Tax Withholding and Estimated Tax 1040X, Refunds of SE tax. Income tax return preparation , Refunds of SE tax paid. Income tax return preparation 2106-EZ, 4029, Table 2. Income tax return preparation The Self-Employment Tax Exemption Application and Approval Process, Requesting Exemption—Form 4029, Exemption from SE tax. Income tax return preparation 4361, Table 2. Income tax return preparation The Self-Employment Tax Exemption Application and Approval Process, Requesting Exemption—Form 4361, Exemption from SE tax. Income tax return preparation 8959, What's New, Introduction, Additional Medicare Tax. Income tax return preparation 941, Forms 941, 943, and 944. Income tax return preparation 943, Forms 941, 943, and 944. Income tax return preparation 944, Forms 941, 943, and 944. Income tax return preparation Schedule A (Form 1040), Schedule C-EZ (Form 1040), Schedule SE (Form 1040), SS-8, Form SS-8. Income tax return preparation Free tax services, Free help with your tax return. Income tax return preparation G Gross income Amounts included in, Amounts included in gross income. Income tax return preparation Amounts not included in, Amounts not included in gross income. Income tax return preparation Guam, Residents of Puerto Rico, the U. Income tax return preparation S. Income tax return preparation Virgin Islands, Guam, the CNMI, and American Samoa. Income tax return preparation , Specified U. Income tax return preparation S. Income tax return preparation possessions. Income tax return preparation H Health insurance costs, deductibility, Health Insurance Costs of Self-Employed Ministers Help (see Tax help) Home ownership, exclusion of allowance, Home ownership. Income tax return preparation , Cantors. Income tax return preparation House or parsonage, fair rental value, Fair rental value of parsonage. Income tax return preparation I Income tax Estimated tax, Income Tax Withholding and Estimated Tax Income and expenses, Income Tax: Income and Expenses, Income Tax Withholding and Estimated Tax Withholding, Income Tax Withholding and Estimated Tax Individual retirement arrangements (IRAs), Individual retirement arrangements (IRAs). Income tax return preparation K Keogh (H. Income tax return preparation R. Income tax return preparation 10) plans, Retirement plans for the self-employed. Income tax return preparation L Lay employees (see Religious workers) Living abroad, Overseas duty. Income tax return preparation , Foreign Earned Income M Members of recognized religious sects, Table 1. Income tax return preparation Are Your Ministerial Earnings* Covered Under FICA or SECA?, Members of Recognized Religious Sects Members of religious orders, Table 1. Income tax return preparation Are Your Ministerial Earnings* Covered Under FICA or SECA?, Members of Religious Orders, Members of Religious Orders, Members of the Clergy, Refunds of SE tax. Income tax return preparation , Earnings—Members of Religious Orders Ministerial services, exemption for Christian Science practitioners and readers, Christian Science Practitioners and Readers Members of religious orders, Members of Religious Orders Ministers, Ministers Ministers, Table 1. Income tax return preparation Are Your Ministerial Earnings* Covered Under FICA or SECA?, Ministers, Ministers defined. Income tax return preparation , Form SS-8. Income tax return preparation , Ministers, Members of the Clergy, Refunds of SE tax. Income tax return preparation , Income Tax: Income and Expenses, Income Tax Withholding and Estimated Tax Retired, Retired ministers. Income tax return preparation Missionary team, married couple, Married Couple Missionary Team N Nonaccountable plan, Nonaccountable plan. Income tax return preparation Nonfarm optional method, Nonfarm Optional Method Nonresident aliens, U. Income tax return preparation S. Income tax return preparation Citizens and Resident and Nonresident Aliens O Offerings and fees, Amounts included in gross income. Income tax return preparation , Offerings and Fees Overseas duty, Overseas duty. Income tax return preparation , Foreign Earned Income P Parsonage allowance, Amounts included in gross income. Income tax return preparation , Exclusion of Rental Allowance and Fair Rental Value of a Parsonage, Cantors. Income tax return preparation Publications (see Tax help) Puerto Rico, Residents of Puerto Rico, the U. Income tax return preparation S. Income tax return preparation Virgin Islands, Guam, the CNMI, and American Samoa. Income tax return preparation , Specified U. Income tax return preparation S. Income tax return preparation possessions. Income tax return preparation Q Qualified retirement plan, Retirement plans for the self-employed. Income tax return preparation R Refunds, self-employment tax, Refunds of SE tax. Income tax return preparation , Refunds of SE tax paid. Income tax return preparation Reimbursements, Employee reimbursement arrangements. Income tax return preparation Religious orders, members of, Table 1. Income tax return preparation Are Your Ministerial Earnings* Covered Under FICA or SECA?, Members of Religious Orders, Members of Religious Orders, Members of the Clergy, Refunds of SE tax. Income tax return preparation , Earnings—Members of Religious Orders Religious workers, Table 1. Income tax return preparation Are Your Ministerial Earnings* Covered Under FICA or SECA?, Coverage of Religious Workers (Church Employees) Rental allowance, Amounts included in gross income. Income tax return preparation , Exclusion of Rental Allowance and Fair Rental Value of a Parsonage, Rental allowances. Income tax return preparation , Cantors. Income tax return preparation Resident aliens, U. Income tax return preparation S. Income tax return preparation Citizens and Resident and Nonresident Aliens Retired ministers, Retired ministers. Income tax return preparation Retirement savings arrangements, Retirement Savings Arrangements Retirement savings contributions credit, Retirement savings contributions credit. Income tax return preparation Royalty income from books, Books or articles. Income tax return preparation S SECA, Table 1. Income tax return preparation Are Your Ministerial Earnings* Covered Under FICA or SECA?, Social Security Coverage Sects, members of recognized religious, Table 1. Income tax return preparation Are Your Ministerial Earnings* Covered Under FICA or SECA?, Members of Recognized Religious Sects Self-Employment Contributions Act (see SECA) Self-employment tax Deduction, Deduction for SE Tax Exemption, Exemption From Self-Employment (SE) Tax, Refunds of SE tax paid. Income tax return preparation , Exemption from SE tax. Income tax return preparation Maximum earnings, Earnings Subject to SE Tax Nonfarm optional method, Nonfarm Optional Method Refunds of, Refunds of SE tax. Income tax return preparation , Refunds of SE tax paid. Income tax return preparation Regular method, Regular Method Self-employment, net earnings from, Self-Employment Tax: Figuring Net Earnings, More information. Income tax return preparation SIMPLE plan, Retirement plans for the self-employed. Income tax return preparation Simplified employee pension (SEP) plan, Retirement plans for the self-employed. Income tax return preparation Social security coverage, Social Security Coverage T Tax help, How To Get Tax Help Tax-free income, deductibility of expenses, Expenses Allocable to Tax-Free Income Tax-sheltered annuity plans, Tax-sheltered annuity plans. Income tax return preparation Teachers, Teachers or administrators. Income tax return preparation Theological students, Theological students. Income tax return preparation Traveling evangelists, Traveling evangelists. Income tax return preparation U U. Income tax return preparation S. Income tax return preparation citizens, U. Income tax return preparation S. Income tax return preparation Citizens and Resident and Nonresident Aliens U. Income tax return preparation S. Income tax return preparation Virgin Islands, Residents of Puerto Rico, the U. Income tax return preparation S. Income tax return preparation Virgin Islands, Guam, the CNMI, and American Samoa. Income tax return preparation , Specified U. Income tax return preparation S. Income tax return preparation possessions. Income tax return preparation V Vow of poverty, Table 1. Income tax return preparation Are Your Ministerial Earnings* Covered Under FICA or SECA?, Vow of poverty. Income tax return preparation , Services performed outside the order. Income tax return preparation , Effect of employee status. Income tax return preparation , Exemption From Self-Employment (SE) Tax, Earnings—Members of Religious Orders Prev  Up     Home   More Online Publications
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Understanding your CP259B Notice

Your organization didn’t file a Form 990-PF.


What you need to do

  • File a Form 990-PF
  • Complete the response page
  • Mail it to the address on the notice

    Answers to Common Questions

    What should I do if I have all ready filed Form 990-PF?
    If you filed within the last four weeks using the same name and Employer ID number (EIN) on your notice, you don’t have to do anything. Our system may not have processed your return at the time we mailed the notice.
    If you filed more than four weeks ago or used a different name or EIN, complete the Response form starting on Page 3, and mail it to us with a signed and dated copy of the return.

    What should I do if I don’t think I have to file a Form 990-PF?
    Complete the response form starting on Page 3 of the notice and mail it to us.


    Understanding your notice

    Reading your notice
    Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

    Notice CP259B, Page 1

    Notice CP259B, Page 2

    Notice CP259B, Page 3

    Notice CP259B, Page 4

Page Last Reviewed or Updated: 15-Jan-2014

Printable samples of this notice (PDF)

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Income Tax Return Preparation

Income tax return preparation 35. Income tax return preparation   Education Credits Table of Contents Introduction Useful Items - You may want to see: Who Can Claim an Education Credit Qualified Education ExpensesNo Double Benefit Allowed Adjustments to Qualified Education Expenses Introduction For 2013, there are two tax credits available to persons who pay expenses for higher (postsecondary) education. Income tax return preparation They are: The American opportunity credit, and The lifetime learning credit. Income tax return preparation The chapter will present an overview of these education credits. Income tax return preparation To get the detailed information you will need to claim either of the credits, and for examples illustrating that information, see chapters 2 and 3 of Publication 970. Income tax return preparation Can you claim more than one education credit this year?   For each student, you can choose for any year only one of the credits. Income tax return preparation For example, if you choose to take the American opportunity credit for a child on your 2013 tax return, you cannot, for that same child, also claim the lifetime learning credit for 2013. Income tax return preparation   If you are eligible to claim the American opportunity credit and you are also eligible to claim the lifetime learning credit for the same student in the same year, you can choose to claim either credit, but not both. Income tax return preparation   If you pay qualified education expenses for more than one student in the same year, you can choose to take the American opportunity and the lifetime learning credits on a per-student, per-year basis. Income tax return preparation 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. Income tax return preparation Table 35-1. Income tax return preparation Comparison of Education Credits Caution. Income tax return preparation You can claim both the American opportunity credit and the lifetime learning credit on the same return—but not for the same student. Income tax return preparation   American Opportunity Credit Lifetime Learning Credit Maximum credit Up to $2,500 credit per eligible student Up to $2,000 credit per return Limit on modified adjusted gross income (MAGI) $180,000 if married filing jointly;  $90,000 if single, head of household, or qualifying widow(er) $127,000 if married filing jointly;  $63,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable 40% of credit may be refundable Credit limited to the amount of tax you must pay on your taxable income Number of years of postsecondary education Available ONLY if the student had not completed the first 4 years of postsecondary education before 2013 Available for all years of postsecondary education and for courses to acquire or improve job skills Number of tax years credit available Available ONLY for 4 tax years per eligible student (including any year(s) the Hope credit was claimed) Available for an unlimited number of years Type of program required Student must be pursuing a program leading to a degree or other recognized education credential Student does not need to 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 beginning during the tax year Available for one or more courses Felony drug conviction At the end of 2013, the student had not been convicted of a felony for possessing or distributing a controlled substance Felony drug convictions do not make the student ineligible 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 Tuition and fees required for enrollment or attendance (including amounts required to be paid to the institution for course-related books, supplies, and equipment) Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Differences between the American opportunity and lifetime learning credits. Income tax return preparation   There are several differences between these two credits. Income tax return preparation These differences are summarized in Table 35-1, later. Income tax return preparation Useful Items - You may want to see: Publication 970 Tax Benefits for Education Form (and Instructions) 8863 Education Credits (American Opportunity and Lifetime Learning Credits) Who Can Claim an Education Credit You may be able to claim an education credit if you, your spouse, or a dependent you claim on your tax return was a student enrolled at or attending an eligible educational institution. Income tax return preparation The credits are based on the amount of qualified education expenses paid for the student in 2013 for academic periods beginning in 2013 and in the first 3 months of 2014. Income tax return preparation For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning in January 2014, you may be able to use that $1,500 in figuring your 2013 education credit(s). Income tax return preparation Academic period. Income tax return preparation   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. Income tax return preparation 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. Income tax return preparation Eligible educational institution. Income tax return preparation   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. Income tax return preparation S. Income tax return preparation Department of Education. Income tax return preparation It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Income tax return preparation The educational institution should be able to tell you if it is an eligible educational institution. Income tax return preparation   Certain educational institutions located outside the United States also participate in the U. Income tax return preparation S. Income tax return preparation Department of Education's Federal Student Aid (FSA) programs. Income tax return preparation Who can claim a dependent's expenses. Income tax return preparation   If an exemption is allowed as a deduction for any person who claims the student as a dependent, all qualified education expenses of the student are treated as having been paid by that person. Income tax return preparation Therefore, only that person can claim an education credit for the student. Income tax return preparation If a student is not claimed as a dependent on another person's tax return, only the student can claim a credit. Income tax return preparation Expenses paid by a third party. Income tax return preparation   Qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. Income tax return preparation However, qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. Income tax return preparation Therefore, you are treated as having paid expenses that were paid by the third party. Income tax return preparation For more information and an example see Who Can Claim a Dependent's Expenses in Pub. Income tax return preparation 970, chapter 2 or 3. Income tax return preparation Who cannot claim a credit. Income tax return preparation   You cannot take an education credit if any of the following apply. Income tax return preparation You are claimed as a dependent on another person's tax return, such as your parent's return. Income tax return preparation Your filing status is married filing separately. Income tax return preparation You (or your spouse) were a nonresident alien for any part of 2013 and did not elect to be treated as a resident alien for tax purposes. Income tax return preparation Your MAGI is one of the following. Income tax return preparation American opportunity credit: $180,000 or more if married filing jointly, or $90,000 or more if single, head of household, or qualifying widow(er). Income tax return preparation Lifetime learning credit: $127,000 or more if married filing jointly, or $63,000 or more if single, head of household, or qualifying widow(er) . Income tax return preparation   Generally, your MAGI is the amount on your Form 1040, line 38, or Form 1040A, line 22. Income tax return preparation However, if you are filing Form 2555, Form 2555–EZ, or Form 4563, or are excluding income from Puerto RIco, add to the amount on your Form 1040, line 38, or Form 1040A, line 22, the amount of income you excluded. Income tax return preparation For details, see Pub. Income tax return preparation 970. Income tax return preparation    Figure 35-A may be helpful in determining if you can claim an education credit on your tax return. Income tax return preparation The American opportunity credit will always be greater than or equal to the lifetime learning credit for any student who is eligible for both credits. Income tax return preparation However, if any of the conditions for the American opportunity credit, listed in Table 35-1 earlier, are not met for any student, you cannot take the American opportunity credit for that student. Income tax return preparation You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. Income tax return preparation See Pub. Income tax return preparation 970 for information on other education benefits. Income tax return preparation Qualified Education Expenses Generally, qualified education expenses are amounts paid in 2013 for tuition and fees required for the student's enrollment or attendance at an eligible educational institution. Income tax return preparation It does not matter whether the expenses were paid in cash, by check, by credit or debit card, or with borrowed funds. Income tax return preparation For course-related books, supplies, and equipment, only certain expenses qualify. Income tax return preparation American opportunity credit: Qualified education expenses include amounts spent on books, supplies, and equipment needed for a course of study, whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance. Income tax return preparation Lifetime learning credit: Qualified education expenses include amounts for books, supplies, and equipment only if required to be paid to the institution as a condition of enrollment or attendance. Income tax return preparation Qualified education expenses include nonacademic fees, such as student activity fees, athletic fees, or other expenses unrelated to the academic course of instruction, only if the fee must be paid to the institution as a condition of enrollment or attendance. Income tax return preparation However, fees for personal expenses (described below) are never qualified education expenses. Income tax return preparation Qualified education expenses for either credit do not include amounts paid for: Personal expenses. Income tax return preparation This means room and board, insurance, medical expenses (including student health fees), transportation, and other similar personal, living, or family expenses. Income tax return preparation Any course or other education involving sports, games, or hobbies, or any noncredit course, unless such course or other education is part of the student's degree program or (for the lifetime learning credit only) helps the student acquire or improve job skills. Income tax return preparation You should receive Form 1098–T, Tuition Statement, from the institution reporting either payments received in 2013 (box 1) or amounts billed in 2013 (box 2). Income tax return preparation However, the amount in box 1 or 2 of Form 1098–T may be different from the amount you paid (or are treated as having paid). Income tax return preparation In completing Form 8863, use only the amounts you actually paid (plus any amounts you are treated as having paid) in 2013, reduced as necessary, as described in Adjustments to Qualified Education Expenses , later. Income tax return preparation Qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. Income tax return preparation Qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. Income tax return preparation If you or the student takes a deduction for higher education expenses, such as on Schedule A or C (Form 1040), you cannot use those expenses in your qualified education expenses when figuring your education credits. Income tax return preparation Qualified education expenses for any academic period must be reduced by any tax-free educational assistance allocable to that academic period. Income tax return preparation See Adjustments to Qualified Education Expenses, later. Income tax return preparation Prepaid Expenses. Income tax return preparation   Qualified education expenses paid in 2013 for an academic period that begins in the first 3 months of 2014 can be used in figuring an education credit for 2013 only. Income tax return preparation See Academic period , earlier. Income tax return preparation 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). Income tax return preparation    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). Income tax return preparation Paid with borrowed funds. Income tax return preparation   You can claim an education credit for qualified education expenses paid with the proceeds of a loan. Income tax return preparation Use the expenses to figure the credit for the year in which the expenses are paid, not the year in which the loan is repaid. Income tax return preparation Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. Income tax return preparation Student withdraws from class(es). Income tax return preparation   You can claim an education credit for qualified education expenses not refunded when a student withdraws. Income tax return preparation No Double Benefit Allowed You cannot do any of the following. Income tax return preparation Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim an education credit based on those same expenses. Income tax return preparation Claim more than one education credit based on the same qualified education expenses. Income tax return preparation Claim an education credit based on the same expenses used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP). Income tax return preparation Claim an education credit based on qualified education expenses paid with educational assistance, such as a tax-free scholarship, grant, or employer-provided educational assistance. Income tax return preparation See Adjustments to Qualified Education Expenses, next. Income tax return preparation Adjustments to Qualified Education Expenses For each student, reduce the qualified education expenses paid in 2013 by or on behalf of that student under the following rules. Income tax return preparation The result is the amount of adjusted qualified education expenses for each student. Income tax return preparation Tax-free educational assistance. Income tax return preparation   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. Income tax return preparation See Academic period , earlier. Income tax return preparation      Tax-free educational assistance includes:    Tax-free parts of scholarships and fellowships (see chapter 12 of this publication and chapter 1 of Pub. Income tax return preparation 970), The tax-free part of Pell grants (see chapter 1 of Pub. Income tax return preparation 970), The tax-free part of employer-provided educational assistance (see Pub. Income tax return preparation 970), Veterans' educational assistance (see chapter 1 of Pub. Income tax return preparation 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Income tax return preparation Generally, any scholarship or fellowship is treated as tax-free educational assistance. Income tax return preparation However, a scholarship or fellowship is not treated as tax-free educational assistance 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: 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 Pub. Income tax return preparation 970, chapter 1; or 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 Pub. Income tax return preparation 970, chapter 1. Income tax return preparation 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 received. Income tax return preparation For details, see Adjustments of Qualified Education Expenses, in chapters 2 and 3 of Pub. Income tax return preparation 970. Income tax return preparation Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. Income tax return preparation 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). Income tax return preparation 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. Income tax return preparation 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. Income tax return preparation Refunds. Income tax return preparation   A refund of qualified education expenses may reduce qualified education expenses for the tax year or may require you to repay (recapture) the credit that you claimed in an earlier year. Income tax return preparation Some tax-free educational assistance received after 2013 may be treated as a refund. Income tax return preparation See Tax-free educational assistance, earlier. Income tax return preparation Refunds received in 2013. Income tax return preparation   For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses paid in 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. Income tax return preparation Refunds received after 2013 but before your income tax return is filed. Income tax return preparation   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is received before you file your 2013 income tax return, reduce the amount of qualified education expenses for 2013 by the amount of the refund. Income tax return preparation Refunds received after 2013 and after your income tax return is filed. Income tax return preparation   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is received after you file your 2013 income tax return, you may need to repay some or all of the credit that you claimed. Income tax return preparation See Credit recapture, next. Income tax return preparation Credit recapture. Income tax return preparation    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. Income tax return preparation 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. Income tax return preparation You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you had claimed the refigured credit(s). Income tax return preparation Include that amount as an additional tax for the year the refund or tax-free assistance was received. Income tax return preparation Example. Income tax return preparation    You paid $8,000 tuition and fees in December 2013 for your child's Spring semester beginning in January 2014. Income tax return preparation You filed your 2013 tax return on February 3, 2014, and claimed a lifetime learning credit of $1,600 ($8,000 qualified education expense paid x . Income tax return preparation 20). Income tax return preparation You claimed no other tax credits. Income tax return preparation After you filed your return, your child withdrew from two courses and you received a refund of $1,400. Income tax return preparation You must refigure your 2013 lifetime learning credit using $6,600 ($8,000 qualified education expenses − $1,400 refund). Income tax return preparation The refigured credit is $1,320 and your tax liability increased by $280. Income tax return preparation You must include the difference of $280 ($1,600 credit originally claimed − $1,320 refigured credit) as additional tax on your 2014 income tax return. Income tax return preparation See the instructions for your 2014 income tax return to determine where to include this tax. Income tax return preparation If you also 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. Income tax return preparation Amounts that do not reduce qualified education expenses. Income tax return preparation   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. Income tax return preparation   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. Income tax return preparation 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 Chapter 1 of Pub. Income tax return preparation 970. Income tax return preparation The use of the money is not restricted. Income tax return preparation   For examples, see chapter 2 in Pub. Income tax return preparation 970. Income tax return preparation Figure 35-A. Income tax return preparation Can You Claim an Education Credit for 2013? This image is too large to be displayed in the current screen. Income tax return preparation Please click the link to view the image. Income tax return preparation Figure 35-A. Income tax return preparation Can You Claim an Education Credit for 2013? Prev  Up  Next   Home   More Online Publications