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Tax Planning Us 1040ez

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Tax Planning Us 1040ez

Tax planning us 1040ez 1. Tax planning us 1040ez   Importance of Records Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Benefits of Recordkeeping Kinds of Records To Keep How Long To Keep Records Introduction A farmer, like other taxpayers, must keep records to prepare an accurate income tax return and determine the correct amount of tax. Tax planning us 1040ez This chapter explains the benefits of keeping records, what kinds of records you must keep, and how long you must keep them for federal tax purposes. Tax planning us 1040ez Tax records are not the only type of records you need to keep for your farming business. Tax planning us 1040ez You should also keep records that measure your farm's financial performance. Tax planning us 1040ez This publication only discusses tax records. Tax planning us 1040ez The Farm Financial Standards Council has produced a publication that provides a detailed explanation of the recommendations of the Council for financial reporting and analysis. Tax planning us 1040ez For information on recordkeeping, you can purchase and download Financial Guidelines for Agricultural Producers at www. Tax planning us 1040ez ffsc. Tax planning us 1040ez org. Tax planning us 1040ez For more information, contact Countryside Marketing, Inc. Tax planning us 1040ez in the following manner. Tax planning us 1040ez Call 262-253-6902. Tax planning us 1040ez Send a fax to 262-253-6903. Tax planning us 1040ez Write to: Farm Financial Standards Council N78 W14573 Appleton Ave. Tax planning us 1040ez , #287 Menomonee Falls, WI 53051. Tax planning us 1040ez Topics - This chapter discusses: Benefits of recordkeeping Kinds of records to keep How long to keep records Useful Items - You may want to see: Publication 51 (Circular A), Agricultural Employer's Tax Guide 463 Travel, Entertainment, Gift, and Car Expenses See chapter 16 for information about getting publications. Tax planning us 1040ez Benefits of Recordkeeping Everyone in business, including farmers, must keep appropriate records. Tax planning us 1040ez Recordkeeping will help you do the following. Tax planning us 1040ez Monitor the progress of your farming business. Tax planning us 1040ez   You need records to monitor the progress of your farming business. Tax planning us 1040ez Records can show whether your business is improving, which items are selling, or what changes you need to make. Tax planning us 1040ez Records can help you make better decisions that may increase the likelihood of business success. Tax planning us 1040ez Prepare your financial statements. Tax planning us 1040ez   You need records to prepare accurate financial statements. Tax planning us 1040ez These include income (profit and loss) statements and balance sheets. Tax planning us 1040ez These statements can help you in dealing with your bank or creditors and help you to manage your farm business. Tax planning us 1040ez Identify source of receipts. Tax planning us 1040ez   You will receive money or property from many sources. Tax planning us 1040ez Your records can identify the source of your receipts. Tax planning us 1040ez You need this information to separate farm from nonfarm receipts and taxable from nontaxable income. Tax planning us 1040ez Keep track of deductible expenses. Tax planning us 1040ez   You may forget expenses when you prepare your tax return unless you record them when they occur. Tax planning us 1040ez Prepare your tax returns. Tax planning us 1040ez   You need records to prepare your tax return. Tax planning us 1040ez For example, your records must support the income, expenses, and credits you report. Tax planning us 1040ez Generally, these are the same records you use to monitor your farming business and prepare your financial statements. Tax planning us 1040ez Support items reported on tax returns. Tax planning us 1040ez   You must keep your business records available at all times for inspection by the IRS. Tax planning us 1040ez If the IRS examines any of your tax returns, you may be asked to explain the items reported. Tax planning us 1040ez A complete set of records will speed up the examination. Tax planning us 1040ez Kinds of Records To Keep Except in a few cases, the law does not require any specific kind of records. Tax planning us 1040ez You can choose any recordkeeping system suited to your farming business that clearly shows, for example, your income and expenses. Tax planning us 1040ez You should set up your recordkeeping system using an accounting method that clearly shows your income for your tax year. Tax planning us 1040ez See  chapter 2. Tax planning us 1040ez If you are in more than one business, you should keep a complete and separate set of records for each business. Tax planning us 1040ez A corporation should keep minutes of board of directors' meetings. Tax planning us 1040ez Your recordkeeping system should include a summary of your business transactions. Tax planning us 1040ez This summary is ordinarily made in accounting journals and ledgers. Tax planning us 1040ez For example, they must show your gross income, as well as your deductions and credits. Tax planning us 1040ez In addition, you must keep supporting documents. Tax planning us 1040ez Purchases, sales, payroll, and other transactions you have in your business generate supporting documents such as invoices and receipts. Tax planning us 1040ez These documents contain the information you need to record in your journals and ledgers. Tax planning us 1040ez It is important to keep these documents because they support the entries in your journals and ledgers and on your tax return. Tax planning us 1040ez Keep them in an orderly fashion and in a safe place. Tax planning us 1040ez For instance, organize them by year and type of income or expense. Tax planning us 1040ez Electronic records. Tax planning us 1040ez   All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. Tax planning us 1040ez When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law. Tax planning us 1040ez An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. Tax planning us 1040ez The electronic storage system must index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format. Tax planning us 1040ez All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS. Tax planning us 1040ez Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. Tax planning us 1040ez The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to establish that the hard copy books and records are being reproduced in compliance with IRS requirements for an electronic storage system and procedures are established to ensure continued compliance with all applicable rules and regulations. Tax planning us 1040ez You still have the responsibility of retaining any other books and records that are required to be retained. Tax planning us 1040ez The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. Tax planning us 1040ez This test is not considered an examination and the results must be shared with you. Tax planning us 1040ez If your electronic storage system meets the requirements mentioned earlier, you will be in compliance. Tax planning us 1040ez If not, you may be subject to penalties for non-compliance, unless you continue to maintain your original hard copybooks and records in a manner that allows you and the IRS to determine your correct tax. Tax planning us 1040ez For details on electronic storage system requirements, see Rev. Tax planning us 1040ez Proc. Tax planning us 1040ez 97-22. Tax planning us 1040ez You can find Rev. Tax planning us 1040ez Proc. Tax planning us 1040ez 97-22 on page 9 of Internal Revenue Bulletin 1997-13 at  www. Tax planning us 1040ez irs. Tax planning us 1040ez gov/pub/irs-irbs/irb97-13. Tax planning us 1040ez pdf. Tax planning us 1040ez Travel, transportation, entertainment, and gift expenses. Tax planning us 1040ez   Specific recordkeeping rules apply to these expenses. Tax planning us 1040ez For more information, see Publication 463. Tax planning us 1040ez Employment taxes. Tax planning us 1040ez   There are specific employment tax records you must keep. Tax planning us 1040ez For a list, see Publication 51 (Circular A). Tax planning us 1040ez Excise taxes. Tax planning us 1040ez   See How To Claim a Credit or Refund in chapter 14 for the specific records you must keep to verify your claim for credit or refund of excise taxes on certain fuels. Tax planning us 1040ez Assets. Tax planning us 1040ez   Assets are the property, such as machinery and equipment, you own and use in your business. Tax planning us 1040ez You must keep records to verify certain information about your business assets. Tax planning us 1040ez You need records to figure your annual depreciation deduction and the gain or (loss) when you sell the assets. Tax planning us 1040ez Your records should show all the following. Tax planning us 1040ez When and how you acquired the asset. Tax planning us 1040ez Purchase price. Tax planning us 1040ez Cost of any improvements. Tax planning us 1040ez Section 179 deduction taken. Tax planning us 1040ez Deductions taken for depreciation. Tax planning us 1040ez Deductions taken for casualty losses, such as losses resulting from fires or storms. Tax planning us 1040ez How you used the asset. Tax planning us 1040ez When and how you disposed of the asset. Tax planning us 1040ez Selling price. Tax planning us 1040ez Expenses of sale. Tax planning us 1040ez   The following are examples of records that may show this information. Tax planning us 1040ez Purchase and sales invoices. Tax planning us 1040ez Real estate closing statements. Tax planning us 1040ez Canceled checks. Tax planning us 1040ez Bank statements. Tax planning us 1040ez Financial account statements as proof of payment. Tax planning us 1040ez   If you do not have a canceled check, you may be able to prove payment with certain financial account statements prepared by financial institutions. Tax planning us 1040ez These include account statements prepared for the financial institution by a third party. Tax planning us 1040ez These account statements must be legible. Tax planning us 1040ez The following table lists acceptable account statements. Tax planning us 1040ez IF payment is by. Tax planning us 1040ez . Tax planning us 1040ez . Tax planning us 1040ez THEN the statement must show the. Tax planning us 1040ez . Tax planning us 1040ez . Tax planning us 1040ez Check Check number. Tax planning us 1040ez Amount. Tax planning us 1040ez Payee's name. Tax planning us 1040ez Date the check amount was posted to the account by the financial institution. Tax planning us 1040ez Electronic funds  transfer Amount transferred. Tax planning us 1040ez Payee's name. Tax planning us 1040ez Date the transfer was posted to the account by the financial institution. Tax planning us 1040ez Credit card Amount charged. Tax planning us 1040ez Payee's name. Tax planning us 1040ez Transaction date. Tax planning us 1040ez    Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. Tax planning us 1040ez You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost. Tax planning us 1040ez Tax returns. Tax planning us 1040ez   Keep copies of your filed tax returns. Tax planning us 1040ez They help in preparing future tax returns and making computations if you file an amended return. Tax planning us 1040ez Keep copies of your information returns such as Form 1099, Schedule K-1, and Form W-2. Tax planning us 1040ez How Long To Keep Records You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Tax planning us 1040ez Keep records that support an item of income or a deduction appearing on a return until the period of limitations for the return runs out. Tax planning us 1040ez A period of limitations is the period of time after which no legal action can be brought. Tax planning us 1040ez Generally, that means you must keep your records for at least 3 years from when your tax return was due or filed or within 2 years of the date the tax was paid, whichever is later. Tax planning us 1040ez However, certain records must be kept for a longer period of time, as discussed below. Tax planning us 1040ez Employment taxes. Tax planning us 1040ez   If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. Tax planning us 1040ez Assets. Tax planning us 1040ez   Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. Tax planning us 1040ez You must keep these records to figure any depreciation, amortization, or depletion deduction and to figure your basis for computing gain or (loss) when you sell or otherwise dispose of the property. Tax planning us 1040ez   You may need to keep records relating to the basis of property longer than the period of limitation. Tax planning us 1040ez Keep those records as long as they are important in figuring the basis of the original or replacement property. Tax planning us 1040ez Generally, this means as long as you own the property and, after you dispose of it, for the period of limitations that applies to you. Tax planning us 1040ez For example, if you received property in a nontaxable exchange, you must keep the records for the old property, as well as for the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. Tax planning us 1040ez For more information on basis, see chapter 6. Tax planning us 1040ez Records for nontax purposes. Tax planning us 1040ez   When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. Tax planning us 1040ez For example, your insurance company or creditors may require you to keep them longer than the IRS does. Tax planning us 1040ez Prev  Up  Next   Home   More Online Publications
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The Tax Planning Us 1040ez

Tax planning us 1040ez 35. Tax planning us 1040ez   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. Tax planning us 1040ez They are: The American opportunity credit, and The lifetime learning credit. Tax planning us 1040ez The chapter will present an overview of these education credits. Tax planning us 1040ez 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. Tax planning us 1040ez Can you claim more than one education credit this year?   For each student, you can choose for any year only one of the credits. Tax planning us 1040ez 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. Tax planning us 1040ez   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. Tax planning us 1040ez   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. Tax planning us 1040ez 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. Tax planning us 1040ez Table 35-1. Tax planning us 1040ez Comparison of Education Credits Caution. Tax planning us 1040ez You can claim both the American opportunity credit and the lifetime learning credit on the same return—but not for the same student. Tax planning us 1040ez   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. Tax planning us 1040ez   There are several differences between these two credits. Tax planning us 1040ez These differences are summarized in Table 35-1, later. Tax planning us 1040ez 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. Tax planning us 1040ez 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. Tax planning us 1040ez 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). Tax planning us 1040ez Academic period. Tax planning us 1040ez   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. Tax planning us 1040ez 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. Tax planning us 1040ez Eligible educational institution. Tax planning us 1040ez   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. Tax planning us 1040ez S. Tax planning us 1040ez Department of Education. Tax planning us 1040ez It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Tax planning us 1040ez The educational institution should be able to tell you if it is an eligible educational institution. Tax planning us 1040ez   Certain educational institutions located outside the United States also participate in the U. Tax planning us 1040ez S. Tax planning us 1040ez Department of Education's Federal Student Aid (FSA) programs. Tax planning us 1040ez Who can claim a dependent's expenses. Tax planning us 1040ez   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. Tax planning us 1040ez Therefore, only that person can claim an education credit for the student. Tax planning us 1040ez If a student is not claimed as a dependent on another person's tax return, only the student can claim a credit. Tax planning us 1040ez Expenses paid by a third party. Tax planning us 1040ez   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. Tax planning us 1040ez 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. Tax planning us 1040ez Therefore, you are treated as having paid expenses that were paid by the third party. Tax planning us 1040ez For more information and an example see Who Can Claim a Dependent's Expenses in Pub. Tax planning us 1040ez 970, chapter 2 or 3. Tax planning us 1040ez Who cannot claim a credit. Tax planning us 1040ez   You cannot take an education credit if any of the following apply. Tax planning us 1040ez You are claimed as a dependent on another person's tax return, such as your parent's return. Tax planning us 1040ez Your filing status is married filing separately. Tax planning us 1040ez 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. Tax planning us 1040ez Your MAGI is one of the following. Tax planning us 1040ez 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). Tax planning us 1040ez 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) . Tax planning us 1040ez   Generally, your MAGI is the amount on your Form 1040, line 38, or Form 1040A, line 22. Tax planning us 1040ez 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. Tax planning us 1040ez For details, see Pub. Tax planning us 1040ez 970. Tax planning us 1040ez    Figure 35-A may be helpful in determining if you can claim an education credit on your tax return. Tax planning us 1040ez 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. Tax planning us 1040ez 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. Tax planning us 1040ez You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. Tax planning us 1040ez See Pub. Tax planning us 1040ez 970 for information on other education benefits. Tax planning us 1040ez 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. Tax planning us 1040ez It does not matter whether the expenses were paid in cash, by check, by credit or debit card, or with borrowed funds. Tax planning us 1040ez For course-related books, supplies, and equipment, only certain expenses qualify. Tax planning us 1040ez 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. Tax planning us 1040ez 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. Tax planning us 1040ez 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. Tax planning us 1040ez However, fees for personal expenses (described below) are never qualified education expenses. Tax planning us 1040ez Qualified education expenses for either credit do not include amounts paid for: Personal expenses. Tax planning us 1040ez This means room and board, insurance, medical expenses (including student health fees), transportation, and other similar personal, living, or family expenses. Tax planning us 1040ez 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. Tax planning us 1040ez 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). Tax planning us 1040ez 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). Tax planning us 1040ez 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. Tax planning us 1040ez 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. Tax planning us 1040ez 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. Tax planning us 1040ez 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. Tax planning us 1040ez Qualified education expenses for any academic period must be reduced by any tax-free educational assistance allocable to that academic period. Tax planning us 1040ez See Adjustments to Qualified Education Expenses, later. Tax planning us 1040ez Prepaid Expenses. Tax planning us 1040ez   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. Tax planning us 1040ez See Academic period , earlier. Tax planning us 1040ez 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). Tax planning us 1040ez    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). Tax planning us 1040ez Paid with borrowed funds. Tax planning us 1040ez   You can claim an education credit for qualified education expenses paid with the proceeds of a loan. Tax planning us 1040ez 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. Tax planning us 1040ez Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. Tax planning us 1040ez Student withdraws from class(es). Tax planning us 1040ez   You can claim an education credit for qualified education expenses not refunded when a student withdraws. Tax planning us 1040ez No Double Benefit Allowed You cannot do any of the following. Tax planning us 1040ez 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. Tax planning us 1040ez Claim more than one education credit based on the same qualified education expenses. Tax planning us 1040ez 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). Tax planning us 1040ez 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. Tax planning us 1040ez See Adjustments to Qualified Education Expenses, next. Tax planning us 1040ez 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. Tax planning us 1040ez The result is the amount of adjusted qualified education expenses for each student. Tax planning us 1040ez Tax-free educational assistance. Tax planning us 1040ez   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. Tax planning us 1040ez See Academic period , earlier. Tax planning us 1040ez      Tax-free educational assistance includes:    Tax-free parts of scholarships and fellowships (see chapter 12 of this publication and chapter 1 of Pub. Tax planning us 1040ez 970), The tax-free part of Pell grants (see chapter 1 of Pub. Tax planning us 1040ez 970), The tax-free part of employer-provided educational assistance (see Pub. Tax planning us 1040ez 970), Veterans' educational assistance (see chapter 1 of Pub. Tax planning us 1040ez 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Tax planning us 1040ez Generally, any scholarship or fellowship is treated as tax-free educational assistance. Tax planning us 1040ez 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. Tax planning us 1040ez 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. Tax planning us 1040ez 970, chapter 1. Tax planning us 1040ez 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. Tax planning us 1040ez For details, see Adjustments of Qualified Education Expenses, in chapters 2 and 3 of Pub. Tax planning us 1040ez 970. Tax planning us 1040ez Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. Tax planning us 1040ez 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). Tax planning us 1040ez 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. Tax planning us 1040ez 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. Tax planning us 1040ez Refunds. Tax planning us 1040ez   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. Tax planning us 1040ez Some tax-free educational assistance received after 2013 may be treated as a refund. Tax planning us 1040ez See Tax-free educational assistance, earlier. Tax planning us 1040ez Refunds received in 2013. Tax planning us 1040ez   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. Tax planning us 1040ez Refunds received after 2013 but before your income tax return is filed. Tax planning us 1040ez   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. Tax planning us 1040ez Refunds received after 2013 and after your income tax return is filed. Tax planning us 1040ez   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. Tax planning us 1040ez See Credit recapture, next. Tax planning us 1040ez Credit recapture. Tax planning us 1040ez    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. Tax planning us 1040ez 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. Tax planning us 1040ez 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). Tax planning us 1040ez Include that amount as an additional tax for the year the refund or tax-free assistance was received. Tax planning us 1040ez Example. Tax planning us 1040ez    You paid $8,000 tuition and fees in December 2013 for your child's Spring semester beginning in January 2014. Tax planning us 1040ez 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 . Tax planning us 1040ez 20). Tax planning us 1040ez You claimed no other tax credits. Tax planning us 1040ez After you filed your return, your child withdrew from two courses and you received a refund of $1,400. Tax planning us 1040ez You must refigure your 2013 lifetime learning credit using $6,600 ($8,000 qualified education expenses − $1,400 refund). Tax planning us 1040ez The refigured credit is $1,320 and your tax liability increased by $280. Tax planning us 1040ez 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. Tax planning us 1040ez See the instructions for your 2014 income tax return to determine where to include this tax. Tax planning us 1040ez 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. Tax planning us 1040ez Amounts that do not reduce qualified education expenses. Tax planning us 1040ez   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. Tax planning us 1040ez   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. Tax planning us 1040ez 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. Tax planning us 1040ez 970. Tax planning us 1040ez The use of the money is not restricted. Tax planning us 1040ez   For examples, see chapter 2 in Pub. Tax planning us 1040ez 970. Tax planning us 1040ez Figure 35-A. Tax planning us 1040ez Can You Claim an Education Credit for 2013? This image is too large to be displayed in the current screen. Tax planning us 1040ez Please click the link to view the image. Tax planning us 1040ez Figure 35-A. Tax planning us 1040ez Can You Claim an Education Credit for 2013? Prev  Up  Next   Home   More Online Publications