Supporting documents for AOC

[NECPA in NEBRASKA]

I am so sorry to ask so many questions, but I want to prepare this tax return correctly for myself and the client. I have a 20 year old that is actually completely on her own and has been for 2 years. She made $28k and paid over half of her own support. I have a 1098T for her school with the payments and her scholarship. She does not have the receipts for her books, but does have her bank statement with the debit card charges to the college bookstore for her books. I want the receipts for due diligence, but I found the 886-H-AOC from the IRS "Supporting Documents to Prove AOC" and it says that copies of cancelled checks, bank statements, credit card statement or receipts provide proof of payment for other qualified expenses such as additional course related fees, books and supplies. 

I have a statement for her to sign that everything that she told me is true and I don't want her to miss out on a legit credit, but I don't want either of us to get penalized. I really hate having to audit everything and not trust anyone. Do you think that I should use the books of just the tuition?

 

[Pacun]

If you have $4K after you deduct the scholarships from payments to the U, you don't need to mention the books and computer (if any). 

Credit card payments to the book store is a good record and I accept them. Technically you have two documents to prove that books are needed and students have to pay.  You have the 1098-T that shows the student was enrolled in classes and most classes require books and you have the credit card receipts.

 

[NECPA in NEBRASKA]

3 hours ago, Pacun said:

If you have $4K after you deduct the scholarships from payments to the U, you don't need to mention the books and computer (if any). 

Credit card payments to the book store is a good record and I accept them. Technically you have two documents to prove that books are needed and students have to pay.  You have the 1098-T that shows the student was enrolled in classes and most classes require books and you have the credit card receipts.

 

Thanks. Total tuition and books are $1,900 with a $1k scholarship. I tried making the scholarship taxable, but it cost her money. I am keeping the IRS form with her file. She will keep her tuition receipts from now on, since she knows how important they are now.

[Pacun]

Yes, but the benefit will be bigger because you will have to base AOC from $1,900 vs $1K.

 

[NECPA in NEBRASKA]

6 hours ago, Pacun said:

Yes, but the benefit will be bigger because you will have to base AOC from $1,900 vs $1K.

 

I will run the numbers again, but the first time it reduced the credit. I will have to see where I went wrong.

[Sara EA]

You don't want to waste the AOC, which is only good for four years.  If your student plans to keep attending school and only went for one semester in 2020, you might want to claim the Lifetime cr and save the AOC for years when she will have double those expenses.  About those book receipts, students today do everything electronically, look at you funny when you ask for records like 1098Ts or bursar account printouts, and buy books online and never think about a paper trail.  I warm all parents of new students to demand that they get/keep book receipts.  They do come in handy at tax time.

[NECPA in NEBRASKA]

On 3/2/2021 at 8:35 PM, Sara EA said:

You don't want to waste the AOC, which is only good for four years.  If your student plans to keep attending school and only went for one semester in 2020, you might want to claim the Lifetime cr and save the AOC for years when she will have double those expenses.  About those book receipts, students today do everything electronically, look at you funny when you ask for records like 1098Ts or bursar account printouts, and buy books online and never think about a paper trail.  I warm all parents of new students to demand that they get/keep book receipts.  They do come in handy at tax time.

I have a phone call into her to check and see how long she plans to go to college. She is not a full time student and I need to find out if she intends to get a 4 year degree. She is working full time and supporting herself, so it could take her awhile to graduate. Normally, the parents can help with receipts, but they aren't even in the picture.