refund-aoc

[TAXMAN]

Am I reading right? tp 23 year old, totally self supporting, final year of school cannot get refundable part because parents still alive? What does parents being alive got to do with this situation? Tp is teacher living different state and received no support from parents in 2012. In fact TP made 3 times what parents made on their return. Bummer?

[Jack from Ohio]

Am I reading right? tp 23 year old, totally self supporting, final year of school cannot get refundable part because parents still alive? What does parents being alive got to do with this situation? Tp is teacher living different state and received no support from parents in 2012. In fact TP made 3 times what parents made on their return. Bummer?

You are reading it correctly. Essentially, there was so much fraud with the Hope Credit, that this was put in place. Ya gotta love our Congress!! Same rule goes for Federal Education Assistance and the FAFSA system. You are a member of your parent's household until you turn 24 or get married.

[taxtrio]

In the taxbook, 1040 Edition Plus; page 12-3. Right column, paragraph that says Refundable portion.

Says Taxpayers under age 24 cannot claim any part of the credit as refundable if the following "conditions" (plural) apply to them.

1. The taxpayer is: a. Under age 18 at the end of the tax years, or b. Age 18 at the end of the tax year and had earned income of less than one-half of his or her support, or c. A full-time student over age 18 and under age 24 at the end of the tax year with earned income of less than one-half of his or her support.

2. At least one of the taxpayer's parents was alive at the end of the tax year, and

3. The taxpayers is filing, single, HH, QW, or MFS for the tax year.

My note now: Above says "conditions" so all 1, 2, and 3 would have to appy for them not to qualify.

not just #2.

Right? What say you all?

[jainen]

>>What does parents being alive got to do with this situation?<<

It is in reference to the Kiddie Tax rules of Section 1(g), which limit tax benefits for families who shift investment income to children in a lower bracket. These apply even if the child is not a dependent, unless the child's earnings (i.e. non-investment income) is more than half his or her support.

[Jack from Ohio]

In the taxbook, 1040 Edition Plus; page 12-3. Right column, paragraph that says Refundable portion.

Says Taxpayers under age 24 cannot claim any part of the credit as refundable if the following "conditions" (plural) apply to them.

1. The taxpayer is: a. Under age 18 at the end of the tax years, or b. Age 18 at the end of the tax year and had earned income of less than one-half of his or her support, or c. A full-time student over age 18 and under age 24 at the end of the tax year with earned income of less than one-half of his or her support.

2. At least one of the taxpayer's parents was alive at the end of the tax year, and

3. The taxpayers is filing, single, HH, QW, or MFS for the tax year.

My note now: Above says "conditions" so all 1, 2, and 3 would have to appy for them not to qualify.

not just #2.

Right? What say you all?

You said the same thing I did, only you were quite verbose!

[TAXMAN]

TP has no investment income. All income comming from her teaching job. Only income on the tax return. So are we saying that tp CANNOT have the refundable portion?

[kcjenkins]

The rule is based on convenience for the IRS rather than on individual fairness. But it is what it is. As Jack said " Essentially, there was so much fraud with the Hope Credit, that this was put in place. "

[frazzled]

My two cents...

He CAN take the refundable portion of the AOC because his earned income is MORE than half of his support, and therefore condition # 1 would not apply in his case. And because condition #1 does not apply, the other conditions do not matter because they ALL have to apply.

[kcjenkins]

Good point,

[jainen]

>>The rule is based on convenience for the IRS rather than on individual fairness. But it is what it is. As Jack said " Essentially, there was so much fraud with the Hope Credit, that this was put in place."<<

I think the reason was more technical than just "convenience for the IRS." The 2009 law greatly expanded this credit and even allowed it in addition to other personal credits that already reduced tax liability. The new refundable portion was tied to existing kiddie tax standards in a complex coordination with the other credits. The purpose was consistency and fairness, not fraud prevention.;

[TAXMAN]

After rereading I am now bending to the side that TP can have this since all income is earned and no support from mom or dad as stated. Reckon IRS will allow or not?

[Guest Taxed]

IRS will send a letter to verify. My clients daughter 22 yrs old makes $23,000 as a teacher/fitness trainer lives with her mother and had 1098-T for 2012 that qualified for the refundable portion (mom did not take her as a dependent for 2012). Taxpayer called the IRS customer service after receiving the letter and the issue was put to bed. She told the IRS that she helps her mom pay utility bills and food in exchange for a bed. Mom does not pay her bills.