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Switched Keys - Categories: "Published In" https://tylerhosting.com/b2e/dbell.php Switched Keys, the blogs of Dana Bell of Tyler, Texas en-US http://blogs.law.harvard.edu/tech/rss 60 Education Credits: Beyond the Basics https://tylerhosting.com/b2e/dbell.php/education-credits-beyond-the-basics Wed, 18 Jan 2017 20:28:00 +0000 Dana Bell Professional Tax Accounting Today's CPA 378@https://tylerhosting.com/b2e/
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<p>Note: This article was previously published in Today's CPA, the publication of the Texas Society of Certified Public Accountants. At that time, proposed treasury regulations were not released which change the effect of 1098-T requirements. Buried in the proposed regulations is this reprieve for students who do not receive a 1098-T.</p> <p style="padding-left: 30px;"><em>Until the proposed regulations under §§ 1.25A–1(f) and 1.6050S–1(a) are published in the Federal Register as final regulations, a taxpayer (or the taxpayer’s dependent) (other than a non-resident alien) who does not receive a Form 1098–T because its institution is exempt from furnishing a Form 1098–T under current § 1.6050S–1(a)(2) may claim an education tax credit under section 25A(a) if the taxpayer (1) is otherwise qualified, (2) can demonstrate that the taxpayer (or the taxpayer’s dependent) was enrolled at an eligible educational institution, and (3) can substantiate the payment of qualified tuition and related expenses.</em></p> <p>Also not mentioned in that article are the new due diligence requirements. Effective in 2017 paid preparers claiming the American Opportunity Tax Credit are required to answer the questions in the AOTC column on Form 8867. </p> <hr /> <p>Tax incentives for education may be the most overlooked and most abused items on an individual tax return. They are frequently criticized for their complexity, with each form of education credit or deduction having different rules. With some credits as easy targets for fraud some practitioners are leery of education credit claims. Other problems with these incentives are not so obvious. Software support is limited and taxpayers are not always aware of the benefits or may have false notions about the requirements.</p> <p>This article focuses on the American Opportunity Tax Credit (AOTC) with incidental mentions of the Lifetime Learning Credit (LLC) and other benefits. It then goes beyond the frequently published basic requirements with a look at IRS regulations that enhance the credits.</p> <p>The AOTC is an expansion of the Hope Credit, which was created by the Taxpayer Relief Act of 1997, along with the Lifetime Learning Credit. The credits are governed chiefly by IRC § 25A.</p> <h4>Taxpayer Qualifications</h4> <p>In general taxpayers can receive a credit for qualifying educational expenses paid during a tax year. The credit is equal to 100% of the first $2,000, and 25% of the next $2,000, with 40% of the total credit refundable. It is phased out between $80,000 ($160,000 joint) and $90,000 MAGI ($180,000 joint). Also, the taxpayer must not file married filing separately.</p> <p>The taxpayer must be claiming a dependency exemption for the student which can be any dependent for which the taxpayer is allowed to take a dependency exemption, including individuals that meet the test for dependency exemption as a qualifying relative.<a href="#_edn1" name="_ednref1">[1]</a> So, it’s possible to claim the credit for a student who is a parent or a person whom the taxpayer supports and who lives with him all year.</p> <p>The taxpayer must not be claimed by someone else as a dependent. One of the quirks in this requirement is that dependency and the dependency exemption amount are separate issues.<a href="#_edn2" name="_ednref2">[2]</a> Clarifying the exemption amount Chief Counsel Advice in 2002 determined that a taxpayer who could have been claimed as a dependent could have a zero exemption amount and claim the credit if nobody claims the exemption.<a href="#_edn3" name="_ednref3">[3]</a></p> <h4>Student Qualifications</h4> <p><a href="/b2e/media/blogs/dbell/aotcstudentqualtest.png?mtime=1484776828"><img style="float: right; margin: 10px;" src="/b2e/media/blogs/dbell/aotcstudentqualtest.png?mtime=1484776828" alt="" width="60%" /></a></p> <p>Generally, once dependency is determined, the rest of the qualifications relate to the student and the expenses used to claim the credit.</p> <ul> <li>Student must be pursuing an undergraduate degree or other recognized education credential</li> <li>Student must be enrolled at least half time for at least one academic period beginning during the year</li> <li>No felony drug conviction on student’s record</li> <li>Available for first 4 years of post secondary education</li> <li>Cannot be claimed more than 4 tax years</li> </ul> <h4>Qualifying Expenses</h4> <p>Expenses that can be used to claim the credits include costs of tuition and required fees, as well as required books and course materials. When available the 1098-T can provide the amount of qualifying expenses for the AOTC though preparers should verify the amounts reported. A 1098-T is not always provided.</p> <p>Currently books and other course materials have to be required, but they do not have to be purchased at the institution to qualify. If an institution or degree program requires the student to have a computer it may also be considered a qualifying expense. Expenses unrelated to the educational program are not qualifying expenses.<a href="#_edn4" name="_ednref4">[4]</a> Non-qualifying expenses include</p> <ul> <li>Room and board</li> <li>Insurance</li> <li>Medical Expenses (including student health fees)</li> <li>Transportation (including parking fees)</li> <li>Living expenses</li> </ul> <h4>Qualifying Payments</h4> <p>In addition to having qualifying expenses, the taxpayer must have made payments for those expenses in the tax year. Payments for qualifying expenses include amounts paid by the student, the taxpayer, or through student loans. Special rules apply to certain qualified installment agreements which could affect the recognition of payments.<a href="#_edn5" name="_ednref5">[5]</a></p> <p>Payments made by a third party may also qualify as paid by the taxpayer if paid directly to the institution. In that case, the taxpayer is treated as receiving the payment from the third party and, in turn, paying the qualified tuition and related expenses.” <a href="#_edn6" name="_ednref6">[6]</a> So if a grandparent pays the institution for part of the cost of attending college, the taxpayer can claim the credit using those amounts. Those payments (tuition only) are also exclusions from the gift tax and without regard to relationship.<a href="#_edn7" name="_ednref7">[7]</a> Also considered paid by the taxpayer are amounts paid by certain scholarships that the student includes in income.</p> <p>Generally payments must be made in the year the term begins. Payments made for educational expenses for the first three months of the following year can also be considered as qualifying in the year paid. Qualifying expenses are also limited to amounts for attendance at an eligible educational institution. The institution must be an eligible to participate in Title IV programs such as Pell grants and federally insured student loans.<a href="#_edn8" name="_ednref8">[8]</a></p> <p>It is important to be familiar with all the nuances of 1098-T reporting and verify its accuracy. For example, although 1098-T may indicate graduate student status, the requirement is that the student has not earned a four-year degree, but that test is made based on the beginning of the tax year, not the end of the tax year. If a student graduated in May, all expenses for the year still qualify for the AOTC. In fact, prepaying for the first semester of graduate school in the next year is also an option.</p> <h4>Refundable Qualifications</h4> <p><a href="/b2e/media/blogs/dbell/aotcrefundcredittest.png?mtime=1484776819"><img style="float: right; margin: 10px;" src="/b2e/media/blogs/dbell/aotcrefundcredittest.png?mtime=1484776819" alt="" width="60%" /></a></p> <p>Additional qualifications exist for the refundable portion of the credit. Students age 24 and over qualify for the refundable portion of the credit, as well as parents of children under the age of 24 if they claim the child as a dependent.</p> <p>Publication 970 lists those who <strong>do not</strong> qualify for the refundable credit but it may be easier to reverse the logic to see which taxpayers do qualify. While many students under the age of 24 do not qualify for the refundable portion of the credit, it is important to review the regulations that apply to each case as there are several exceptions.</p> <div class="image_block">Filing a joint return or when both parents are deceased are two cases where a student under age 24 could qualify. Students that are age 18 and over may also qualify if they provide more than half of their support through earned income. Students over 18 and only attending half-time may also qualify.</div> <p>The Refundable Credit Test flowchart can help in evaluating whether the refundable qualifications are met. Publication 970 already has a flowchart to identify eligible students for the AOTC.</p> <h4>Lifetime Learning Credit</h4> <p>The LLC is not as generous as the AOTC but it does not have as stringent student qualifications. While it must be for attendance at an eligible educational institution, it does not require the student to be seeking a degree credential. The expenses can be used to pay for expenses to simply help the student acquire or improve a job skill. The LLC does not require half-time attendance and isn’t limited by a drug felony conviction.</p> <p>Up to $10,000 of expenses can be considered in calculating the 20% credit for a maximum credit of $2,000, and the taxpayer can take the credit for an unlimited number of years. Qualifying expenses for the LLC include costs of tuition and required fees, as well as required books. Books DO have to be required and purchased at the institution to be qualified expenses for the LLC.</p> <p>Whether the taxpayer uses the LLC or decides to use a tuition deduction may depend on his income and marginal tax rate. The credit is phased out for modified MAGI between $52,000 ($104,000 joint), and $62,000 ($124,000 joint).</p> <h4>General Scholarship Treatment</h4> <p>For both the AOTC and LLC, scholarships are often treated as tax-free when applied to qualified expenses, in which case the qualified expenses for the credits are reduced by that amount. The tax code defines the term qualified scholarship as any amount used for qualifying expenses and refers to both scholarships and grants.<a href="#_edn9" name="_ednref9">[9]</a></p> <p>Scholarships (or fellowships) that are paid for services rendered to the institution, such as teaching or research, are not qualified scholarships and should be reported to the taxpayer on a W-2 and included in income. There are some exceptions to this requirement.<a href="#_edn10" name="_ednref10">[10]</a></p> <h3>Scholarship Inclusion</h3> <p>While scholarships generally offset expenses, the regulations do allow taxpayers to treat some scholarships differently in order to increase their qualifying expenses. Treas. Reg. § 1.25A-5 enhances/clarifies the options taxpayers have when claiming education credits and gives the procedure for calculating expenses for the credit.</p> <h4>Three Types of Scholarships</h4> <p>Although not defined as such in the code, scholarships can be defined as exclusive, taxable, or elective based on the terms of the scholarship. <strong>Exclusive</strong> scholarships are those scholarships, by the terms of scholarship, which must be used exclusively to pay qualified expenses. The full amount of the scholarships must reduce the amount of qualified expenses and are tax-free up to the amount of those expenses.</p> <p>A <strong>taxable</strong> scholarship is one that must be used exclusively for <strong><em>other than</em></strong> qualified expenses, or is taxable for other reasons. Room and board is not a qualifying expense, so scholarships that cover only that is normally taxable. Scholarships in excess of qualifying expenses are also taxable.</p> <h4>Elective Scholarships</h4> <p>The third type of scholarship is the <strong>elective</strong> scholarship. If any amount of a scholarship “may or must be used” for other than qualified expenses the taxpayer can elect to treat it as tax-free and offset qualified expenses or include it in income. When treated as income, the amount of qualified expenses is not reduced and the taxpayer may qualify for a higher education credit.</p> <p>Scholarships that are available for elective treatment include Pell grants. Most other federal aid, as well as Coverdell Educational Savings Accounts and Qualified Tuition Plans (Section 529) can also be effectively treated as elective scholarships.<a href="#_edn11" name="_ednref11">[11]</a></p> <p>If a scholarship covers both specific qualified and non-qualified expenses such as tuition or room and board, the taxpayer can choose how to allocate the amounts, but may be limited by the amount of actual expenses. If the scholarship is $6,000 and room and board is $5,000, $5,000 is the most that can be applied to non-qualified expenses.</p> <h4>Measured Scholarships</h4> <p>There is no regulation that addresses scholarships that are <strong><em>measured by</em></strong> the amount of tuition, as opposed to <strong><em>must be used for</em></strong> tuition, but IRS rulings do support the elective nature of such scholarships. In 1999 the Louisiana legislature went from a system that required a TOPS award to be used for tuition to a system that measures the amount of the award by the amount of tuition. That change in the wording was the defining characteristic that allowed scholarship inclusion in the Louisiana TOPS program. In the IRS private letter ruling (PLR) related to the Louisiana Tuition Opportunity Program for Students (TOPS) program in Louisiana, it was determined that the TOPS awards could be used for either qualifying or non-qualifying expenses and the exclusion of the grant was determined by the tax reporting of the taxpayer.<a href="#_edn12" name="_ednref12">[12]</a></p> <p>Following the ruling, the Louisiana Law Review published an article encouraging recipients of the TOPS grant to amend their returns to claim prior year education credits.<a href="#_edn13" name="_ednref13">[13]</a> The terms of the Texas Grant now contains similar wording and although PLRs cannot be used as precedent, the same reasoning can be used to consider that as elective in the same manner.</p> <p>The focus of scholarship inclusion is often on the AOTC, but elective scholarships can be treated the same way in calculating the LLC.  The LLC is not refundable so the benefit is limited to the amount of tax owed. Scholarship inclusion will also incur an increase in tax at the taxpayer’s tax bracket while only generating a 20% credit.</p> <h3>Scholarship Calculations</h3> <p>The IRS provides several examples of adjusting qualifying expenses using scholarship inclusion in Treas. Reg. § 1.25A-5 and Publication 970. For instance, in two examples in Publication 970 the taxpayer includes $4,000 of his Pell grant in income in order to claim that amount for the AOTC.<a href="#_edn14" name="_ednref14">[14]</a></p> <p>One of the problems with calculating education credits is that software doesn’t handle the calculations when scholarship inclusion is involved or when coordinating benefits. Where only scholarships are considered, the AOTC worksheet provided here can calculate the maximum credit amount, by adjusting qualifying expenses to equal the maximum $4,000.</p> <p><a href="/b2e/media/blogs/dbell/aotc_worksheet_only.png?mtime=1422203429"><img src="/b2e/media/blogs/dbell/aotc_worksheet_only.png?mtime=1422203429" alt="AOTC Worksheet" width="100%" /></a></p> <h3>Coordinating With Other Benefits</h3> <p>Just as taxpayers can coordinate their credit with scholarships, they can coordinate with other educational benefits with different qualifications. For example, room and board is a qualifying expense for Section 529, but not for AOTC. By systematically considering each benefit and making adjustments to qualifying expenses, it is possible to determine the best claiming strategy. Consider the following example:</p> <p>Taxpayer has AGI of $48,000 and is claiming AOTC for a dependent child. AOTC qualifying expenses (QE) were $8,000, and room and board was $3,000. He received $4,000 from a Section 529 account. The student also took a $5,000 student loan. After acceptance, he received a $5,000 Pell grant and a $4,000 scholarship that was required to be used for tuition, fees, and room and board. Because his scholarships and grants exceeded his qualifying expenses, he did not receive a 1098-T.</p> <p><a href="/b2e/media/blogs/dbell/aotc_qualpmts.png?mtime=1484776744"><img class="loadimg" style="float: right; margin: 10px;" src="/b2e/media/blogs/dbell/aotc_qualpmts.png?mtime=1484776744" alt="" width="50%" /></a></p> <p>The first step is to allocate $3,000 of the Section 529 to cover room and board (tax-free). Next the $4,000 scholarship can be allocated to tuition and fees, reducing QE to $4,000. Instead of using the Pell grant to offset the remaining expenses, the student can include that $5,000 in income and the taxpayer can claim AOTC on the remaining $4,000 of expenses paid. The taxable portion of the remaining $1,000 of Section 529 is also taxable to the beneficiary, pro-rated based on earnings.</p> <p>The scholarship is not used for room and board because it is not tax-free for that purpose. Section 529 was not used to cover part of the tuition because it is only partially taxable. No penalty applies to the Section 529 distribution because both the scholarships and qualified expenses were more than the distribution amount.<a href="#_edn15" name="_ednref15">[15]</a></p> <h3>IRAs for Education</h3> <p>IRA distributions can also be used for educational expenses without incurring a penalty and they do not have to be for education expenses when taken. If an IRA distribution was for home improvement and later in the tax year the taxpayer incurs education expenses, the amounts can be allocated to the education. Unlike Section 529, amounts are taxable and the amount qualifying for penalty exclusion is reduced by other payments for qualified expenses. In the above example, if an IRA distribution was used instead of Section 529, the $1,000 would also be subject to the 10% penalty. With Roth IRAs, distributions up to the amount of contributions are tax-free.</p> <h3>Family Coordination</h3> <p>One of the quirks of education credits involves coordinating returns of the taxpayer and student. If the taxpayer claims an education credit based on including scholarships in income, it is the student, not the taxpayer, who must include the scholarship in income. Paid expenses can be used by whoever claims the credit but scholarships are always the student's responsibility.</p> <p>The challenge is that the student may be increasing his taxable income, while the parent is enjoying the credit. In order to avoid family conflict it is possible to file Form 8888 to allocate part of the refund to the student by depositing an amount in her bank account that offsets the student’s sacrifice.</p> <p>One factor to consider when only the refundable credit is being claimed is the credit percentage.  The refundable credit can be viewed as 40% of the first $2,000 and 10% (40% * 25%) of the next $2,000. This 10% is important when student must include taxable scholarships in income and tax is owed on it. With the minimum tax rate at 10% the credit from the second $2,000 is wiped out by the scholarships being taxed.</p> <h3>Education Tax Update</h3> <p>Education was addressed Congress on two occasions during in 2015. In June the Trade Preferences Extension Act of 2015 added a provision requiring taxpayers to have a 1098-T payee statement to claim an education credit.<a href="#_edn16" name="_ednref16">[16]</a> The law is effective for tax years beginning after enactment, i.e. the 2016 calendar tax year.</p> <p>Then in December, with the passage of the Protecting Americans from Tax Hikes (PATH) Act of 2015, the AOTC was made permanent and due diligence requirements were added. That law also enhances Section 529 benefits with the most notable change being that expenses for computer equipment, software, and Internet access are now tax-free if used primarily by the beneficiary.<a href="#_edn17" name="_ednref17">[17]</a> Since Coverdell rules refer to this code section, computers will also be tax-free expenses. Section 529 account rules were also changed to eliminate the distribution aggregation requirements, and account owners can now avoid penalties due to tuition refunds by contributing the amount back to a 529 account within 60 days of the date of the refund.</p> <p>The IRS is also addressing the regulations in light of the legislation requiring a 1098-T. Because current regulations allow institutions to forego sending the 1098-T to many students, some taxpayers may not be able to claim the credit they would otherwise have qualified for. Proposed regulations<a href="#_edn18" name="_ednref18">[18]</a> will address that discrepancy by requiring institutions to send 1098-T to most students. Comments are being received until October 31 and a public hearing is not scheduled until November 30, so changes may not be final until into 2017. In the interim, the regulations provide the following reprieve:</p> <p><em>Until the proposed regulations under §§ 1.25A–1(f) and 1.6050S–1(a) are published in the Federal Register as final regulations, a taxpayer (or the taxpayer’s dependent) (other than a non-resident alien) who does not receive a Form 1098–T because its institution is exempt from furnishing a Form 1098–T under current § 1.6050S–1(a)(2) may claim an education tax credit under section 25A(a) if the taxpayer (1) is otherwise qualified, (2) can demonstrate that the taxpayer (or the taxpayer’s dependent) was enrolled at an eligible educational institution, and (3) can substantiate the payment of qualified tuition and related expenses.</em></p> <h3>Education Tax Planning</h3> <p>The many incentives available make education tax planning a complex area but the benefits available allow prudent taxpayers to save on ever-increasing education expenses for themselves, children, and grandchildren. An education saving and spending plan is almost as important as a retirement plan. In both cases, it is important to consider all of the options available and the consequences (or benefits) of distributions, credits, exclusions, and deductions throughout the process. </p> <h3><em>About the Author: </em></h3> <p><em>Dana Bell, EA – Tyler, Texas – is author of the book Education Tax Credits: And Other Educational Incentives. </em> </p> <p> </p> <p><a href="#_ednref1" name="_edn1">[1]</a> IRC § 25A(f)(1)(A)(iii)</p> <p><a href="#_ednref2" name="_edn2">[2]</a> IRC § 151(d)(2) and Treas. Reg. § 1.25A-1(f)</p> <p><a href="#_ednref3" name="_edn3">[3]</a> PLR 200236001 &lt;http://www.irs.gov/pub/irs-wd/0236001.pdf&gt;</p> <p><a href="#_ednref4" name="_edn4">[4]</a> Treas. Reg. § 1.25A-2(d)(3)</p> <p><a href="#_ednref5" name="_edn5">[5]</a> Treas. Reg. § 1.25A-5(e)(4)</p> <p><a href="#_ednref6" name="_edn6">[6]</a> Treas. Reg. § 1.25A-5(b)(2)</p> <p><a href="#_ednref7" name="_edn7">[7]</a> Treas. Reg. § 25.2503-6(b)(1)(i)</p> <p><a href="#_ednref8" name="_edn8">[8]</a> 20 USC § 1088(b)</p> <p><a href="#_ednref9" name="_edn9">[9]</a> IRC § 117(b)(1)</p> <p><a href="#_ednref10" name="_edn10">[10]</a> IRC § 117(c) and (d)</p> <p><a href="#_ednref11" name="_edn11">[11]</a> IRC § 530(d)(2)(C)</p> <p><a href="#_ednref12" name="_edn12">[12]</a> PLR 200137006 &lt;http://www.irs.gov/pub/irs-wd/0137006.pdf&gt;</p> <p><a href="#_ednref13" name="_edn13">[13]</a> Kalinka, Susan. "TOPS Scholarship Recipients Who Failed to Claim the Education Tax Credits for 1998 Should Consider Filing Amended Returns." <em>Louisiana Law Review</em> 60.1 (1999): 281-91. &lt;http://digitalcommons.law.lsu.edu/cgi/viewcontent.cgi?article=5806&amp;context=lalrev&gt;.</p> <p><a href="#_ednref14" name="_edn14">[14]</a> https://www.irs.gov/publications/p970/ch02.html#en_US_2014_publink1000300227</p> <p><a href="#_ednref15" name="_edn15">[15]</a> IRC § 530(d)(4)(B)(iii) and (v)</p> <p><a href="#_ednref16" name="_edn16">[16]</a> IRC § 25A(g)(8)</p> <p><a href="#_ednref17" name="_edn17">[17]</a> IRC § 529(e)(3)(A)(iii)</p> <p><a href="#_ednref18" name="_edn18">[18]</a> <a href="https://www.irs.gov/irb/2016-33_IRB/ar11.html" class="linebreak">https://www.irs.gov/irb/2016-33_IRB/ar11.html</a></p><div class="item_footer"><p><small><a href="https://tylerhosting.com/b2e/dbell.php/education-credits-beyond-the-basics">Original post</a> blogged on <a href="http://www.tylerhosting.com/b2e/">Switched Keys</a>.</small></p></div>
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Note: This article was previously published in Today's CPA, the publication of the Texas Society of Certified Public Accountants. At that time, proposed treasury regulations were not released which change the effect of 1098-T requirements. Buried in the proposed regulations is this reprieve for students who do not receive a 1098-T.

Until the proposed regulations under §§ 1.25A–1(f) and 1.6050S–1(a) are published in the Federal Register as final regulations, a taxpayer (or the taxpayer’s dependent) (other than a non-resident alien) who does not receive a Form 1098–T because its institution is exempt from furnishing a Form 1098–T under current § 1.6050S–1(a)(2) may claim an education tax credit under section 25A(a) if the taxpayer (1) is otherwise qualified, (2) can demonstrate that the taxpayer (or the taxpayer’s dependent) was enrolled at an eligible educational institution, and (3) can substantiate the payment of qualified tuition and related expenses.

Also not mentioned in that article are the new due diligence requirements. Effective in 2017 paid preparers claiming the American Opportunity Tax Credit are required to answer the questions in the AOTC column on Form 8867. 


Tax incentives for education may be the most overlooked and most abused items on an individual tax return. They are frequently criticized for their complexity, with each form of education credit or deduction having different rules. With some credits as easy targets for fraud some practitioners are leery of education credit claims. Other problems with these incentives are not so obvious. Software support is limited and taxpayers are not always aware of the benefits or may have false notions about the requirements.

This article focuses on the American Opportunity Tax Credit (AOTC) with incidental mentions of the Lifetime Learning Credit (LLC) and other benefits. It then goes beyond the frequently published basic requirements with a look at IRS regulations that enhance the credits.

The AOTC is an expansion of the Hope Credit, which was created by the Taxpayer Relief Act of 1997, along with the Lifetime Learning Credit. The credits are governed chiefly by IRC § 25A.

Taxpayer Qualifications

In general taxpayers can receive a credit for qualifying educational expenses paid during a tax year. The credit is equal to 100% of the first $2,000, and 25% of the next $2,000, with 40% of the total credit refundable. It is phased out between $80,000 ($160,000 joint) and $90,000 MAGI ($180,000 joint). Also, the taxpayer must not file married filing separately.

The taxpayer must be claiming a dependency exemption for the student which can be any dependent for which the taxpayer is allowed to take a dependency exemption, including individuals that meet the test for dependency exemption as a qualifying relative.[1] So, it’s possible to claim the credit for a student who is a parent or a person whom the taxpayer supports and who lives with him all year.

The taxpayer must not be claimed by someone else as a dependent. One of the quirks in this requirement is that dependency and the dependency exemption amount are separate issues.[2] Clarifying the exemption amount Chief Counsel Advice in 2002 determined that a taxpayer who could have been claimed as a dependent could have a zero exemption amount and claim the credit if nobody claims the exemption.[3]

Student Qualifications

Generally, once dependency is determined, the rest of the qualifications relate to the student and the expenses used to claim the credit.

  • Student must be pursuing an undergraduate degree or other recognized education credential
  • Student must be enrolled at least half time for at least one academic period beginning during the year
  • No felony drug conviction on student’s record
  • Available for first 4 years of post secondary education
  • Cannot be claimed more than 4 tax years

Qualifying Expenses

Expenses that can be used to claim the credits include costs of tuition and required fees, as well as required books and course materials. When available the 1098-T can provide the amount of qualifying expenses for the AOTC though preparers should verify the amounts reported. A 1098-T is not always provided.

Currently books and other course materials have to be required, but they do not have to be purchased at the institution to qualify. If an institution or degree program requires the student to have a computer it may also be considered a qualifying expense. Expenses unrelated to the educational program are not qualifying expenses.[4] Non-qualifying expenses include

  • Room and board
  • Insurance
  • Medical Expenses (including student health fees)
  • Transportation (including parking fees)
  • Living expenses

Qualifying Payments

In addition to having qualifying expenses, the taxpayer must have made payments for those expenses in the tax year. Payments for qualifying expenses include amounts paid by the student, the taxpayer, or through student loans. Special rules apply to certain qualified installment agreements which could affect the recognition of payments.[5]

Payments made by a third party may also qualify as paid by the taxpayer if paid directly to the institution. In that case, the taxpayer is treated as receiving the payment from the third party and, in turn, paying the qualified tuition and related expenses.” [6] So if a grandparent pays the institution for part of the cost of attending college, the taxpayer can claim the credit using those amounts. Those payments (tuition only) are also exclusions from the gift tax and without regard to relationship.[7] Also considered paid by the taxpayer are amounts paid by certain scholarships that the student includes in income.

Generally payments must be made in the year the term begins. Payments made for educational expenses for the first three months of the following year can also be considered as qualifying in the year paid. Qualifying expenses are also limited to amounts for attendance at an eligible educational institution. The institution must be an eligible to participate in Title IV programs such as Pell grants and federally insured student loans.[8]

It is important to be familiar with all the nuances of 1098-T reporting and verify its accuracy. For example, although 1098-T may indicate graduate student status, the requirement is that the student has not earned a four-year degree, but that test is made based on the beginning of the tax year, not the end of the tax year. If a student graduated in May, all expenses for the year still qualify for the AOTC. In fact, prepaying for the first semester of graduate school in the next year is also an option.

Refundable Qualifications

Additional qualifications exist for the refundable portion of the credit. Students age 24 and over qualify for the refundable portion of the credit, as well as parents of children under the age of 24 if they claim the child as a dependent.

Publication 970 lists those who do not qualify for the refundable credit but it may be easier to reverse the logic to see which taxpayers do qualify. While many students under the age of 24 do not qualify for the refundable portion of the credit, it is important to review the regulations that apply to each case as there are several exceptions.

Filing a joint return or when both parents are deceased are two cases where a student under age 24 could qualify. Students that are age 18 and over may also qualify if they provide more than half of their support through earned income. Students over 18 and only attending half-time may also qualify.

The Refundable Credit Test flowchart can help in evaluating whether the refundable qualifications are met. Publication 970 already has a flowchart to identify eligible students for the AOTC.

Lifetime Learning Credit

The LLC is not as generous as the AOTC but it does not have as stringent student qualifications. While it must be for attendance at an eligible educational institution, it does not require the student to be seeking a degree credential. The expenses can be used to pay for expenses to simply help the student acquire or improve a job skill. The LLC does not require half-time attendance and isn’t limited by a drug felony conviction.

Up to $10,000 of expenses can be considered in calculating the 20% credit for a maximum credit of $2,000, and the taxpayer can take the credit for an unlimited number of years. Qualifying expenses for the LLC include costs of tuition and required fees, as well as required books. Books DO have to be required and purchased at the institution to be qualified expenses for the LLC.

Whether the taxpayer uses the LLC or decides to use a tuition deduction may depend on his income and marginal tax rate. The credit is phased out for modified MAGI between $52,000 ($104,000 joint), and $62,000 ($124,000 joint).

General Scholarship Treatment

For both the AOTC and LLC, scholarships are often treated as tax-free when applied to qualified expenses, in which case the qualified expenses for the credits are reduced by that amount. The tax code defines the term qualified scholarship as any amount used for qualifying expenses and refers to both scholarships and grants.[9]

Scholarships (or fellowships) that are paid for services rendered to the institution, such as teaching or research, are not qualified scholarships and should be reported to the taxpayer on a W-2 and included in income. There are some exceptions to this requirement.[10]

Scholarship Inclusion

While scholarships generally offset expenses, the regulations do allow taxpayers to treat some scholarships differently in order to increase their qualifying expenses. Treas. Reg. § 1.25A-5 enhances/clarifies the options taxpayers have when claiming education credits and gives the procedure for calculating expenses for the credit.

Three Types of Scholarships

Although not defined as such in the code, scholarships can be defined as exclusive, taxable, or elective based on the terms of the scholarship. Exclusive scholarships are those scholarships, by the terms of scholarship, which must be used exclusively to pay qualified expenses. The full amount of the scholarships must reduce the amount of qualified expenses and are tax-free up to the amount of those expenses.

A taxable scholarship is one that must be used exclusively for other than qualified expenses, or is taxable for other reasons. Room and board is not a qualifying expense, so scholarships that cover only that is normally taxable. Scholarships in excess of qualifying expenses are also taxable.

Elective Scholarships

The third type of scholarship is the elective scholarship. If any amount of a scholarship “may or must be used” for other than qualified expenses the taxpayer can elect to treat it as tax-free and offset qualified expenses or include it in income. When treated as income, the amount of qualified expenses is not reduced and the taxpayer may qualify for a higher education credit.

Scholarships that are available for elective treatment include Pell grants. Most other federal aid, as well as Coverdell Educational Savings Accounts and Qualified Tuition Plans (Section 529) can also be effectively treated as elective scholarships.[11]

If a scholarship covers both specific qualified and non-qualified expenses such as tuition or room and board, the taxpayer can choose how to allocate the amounts, but may be limited by the amount of actual expenses. If the scholarship is $6,000 and room and board is $5,000, $5,000 is the most that can be applied to non-qualified expenses.

Measured Scholarships

There is no regulation that addresses scholarships that are measured by the amount of tuition, as opposed to must be used for tuition, but IRS rulings do support the elective nature of such scholarships. In 1999 the Louisiana legislature went from a system that required a TOPS award to be used for tuition to a system that measures the amount of the award by the amount of tuition. That change in the wording was the defining characteristic that allowed scholarship inclusion in the Louisiana TOPS program. In the IRS private letter ruling (PLR) related to the Louisiana Tuition Opportunity Program for Students (TOPS) program in Louisiana, it was determined that the TOPS awards could be used for either qualifying or non-qualifying expenses and the exclusion of the grant was determined by the tax reporting of the taxpayer.[12]

Following the ruling, the Louisiana Law Review published an article encouraging recipients of the TOPS grant to amend their returns to claim prior year education credits.[13] The terms of the Texas Grant now contains similar wording and although PLRs cannot be used as precedent, the same reasoning can be used to consider that as elective in the same manner.

The focus of scholarship inclusion is often on the AOTC, but elective scholarships can be treated the same way in calculating the LLC.  The LLC is not refundable so the benefit is limited to the amount of tax owed. Scholarship inclusion will also incur an increase in tax at the taxpayer’s tax bracket while only generating a 20% credit.

Scholarship Calculations

The IRS provides several examples of adjusting qualifying expenses using scholarship inclusion in Treas. Reg. § 1.25A-5 and Publication 970. For instance, in two examples in Publication 970 the taxpayer includes $4,000 of his Pell grant in income in order to claim that amount for the AOTC.[14]

One of the problems with calculating education credits is that software doesn’t handle the calculations when scholarship inclusion is involved or when coordinating benefits. Where only scholarships are considered, the AOTC worksheet provided here can calculate the maximum credit amount, by adjusting qualifying expenses to equal the maximum $4,000.

AOTC Worksheet

Coordinating With Other Benefits

Just as taxpayers can coordinate their credit with scholarships, they can coordinate with other educational benefits with different qualifications. For example, room and board is a qualifying expense for Section 529, but not for AOTC. By systematically considering each benefit and making adjustments to qualifying expenses, it is possible to determine the best claiming strategy. Consider the following example:

Taxpayer has AGI of $48,000 and is claiming AOTC for a dependent child. AOTC qualifying expenses (QE) were $8,000, and room and board was $3,000. He received $4,000 from a Section 529 account. The student also took a $5,000 student loan. After acceptance, he received a $5,000 Pell grant and a $4,000 scholarship that was required to be used for tuition, fees, and room and board. Because his scholarships and grants exceeded his qualifying expenses, he did not receive a 1098-T.

The first step is to allocate $3,000 of the Section 529 to cover room and board (tax-free). Next the $4,000 scholarship can be allocated to tuition and fees, reducing QE to $4,000. Instead of using the Pell grant to offset the remaining expenses, the student can include that $5,000 in income and the taxpayer can claim AOTC on the remaining $4,000 of expenses paid. The taxable portion of the remaining $1,000 of Section 529 is also taxable to the beneficiary, pro-rated based on earnings.

The scholarship is not used for room and board because it is not tax-free for that purpose. Section 529 was not used to cover part of the tuition because it is only partially taxable. No penalty applies to the Section 529 distribution because both the scholarships and qualified expenses were more than the distribution amount.[15]

IRAs for Education

IRA distributions can also be used for educational expenses without incurring a penalty and they do not have to be for education expenses when taken. If an IRA distribution was for home improvement and later in the tax year the taxpayer incurs education expenses, the amounts can be allocated to the education. Unlike Section 529, amounts are taxable and the amount qualifying for penalty exclusion is reduced by other payments for qualified expenses. In the above example, if an IRA distribution was used instead of Section 529, the $1,000 would also be subject to the 10% penalty. With Roth IRAs, distributions up to the amount of contributions are tax-free.

Family Coordination

One of the quirks of education credits involves coordinating returns of the taxpayer and student. If the taxpayer claims an education credit based on including scholarships in income, it is the student, not the taxpayer, who must include the scholarship in income. Paid expenses can be used by whoever claims the credit but scholarships are always the student's responsibility.

The challenge is that the student may be increasing his taxable income, while the parent is enjoying the credit. In order to avoid family conflict it is possible to file Form 8888 to allocate part of the refund to the student by depositing an amount in her bank account that offsets the student’s sacrifice.

One factor to consider when only the refundable credit is being claimed is the credit percentage.  The refundable credit can be viewed as 40% of the first $2,000 and 10% (40% * 25%) of the next $2,000. This 10% is important when student must include taxable scholarships in income and tax is owed on it. With the minimum tax rate at 10% the credit from the second $2,000 is wiped out by the scholarships being taxed.

Education Tax Update

Education was addressed Congress on two occasions during in 2015. In June the Trade Preferences Extension Act of 2015 added a provision requiring taxpayers to have a 1098-T payee statement to claim an education credit.[16] The law is effective for tax years beginning after enactment, i.e. the 2016 calendar tax year.

Then in December, with the passage of the Protecting Americans from Tax Hikes (PATH) Act of 2015, the AOTC was made permanent and due diligence requirements were added. That law also enhances Section 529 benefits with the most notable change being that expenses for computer equipment, software, and Internet access are now tax-free if used primarily by the beneficiary.[17] Since Coverdell rules refer to this code section, computers will also be tax-free expenses. Section 529 account rules were also changed to eliminate the distribution aggregation requirements, and account owners can now avoid penalties due to tuition refunds by contributing the amount back to a 529 account within 60 days of the date of the refund.

The IRS is also addressing the regulations in light of the legislation requiring a 1098-T. Because current regulations allow institutions to forego sending the 1098-T to many students, some taxpayers may not be able to claim the credit they would otherwise have qualified for. Proposed regulations[18] will address that discrepancy by requiring institutions to send 1098-T to most students. Comments are being received until October 31 and a public hearing is not scheduled until November 30, so changes may not be final until into 2017. In the interim, the regulations provide the following reprieve:

Until the proposed regulations under §§ 1.25A–1(f) and 1.6050S–1(a) are published in the Federal Register as final regulations, a taxpayer (or the taxpayer’s dependent) (other than a non-resident alien) who does not receive a Form 1098–T because its institution is exempt from furnishing a Form 1098–T under current § 1.6050S–1(a)(2) may claim an education tax credit under section 25A(a) if the taxpayer (1) is otherwise qualified, (2) can demonstrate that the taxpayer (or the taxpayer’s dependent) was enrolled at an eligible educational institution, and (3) can substantiate the payment of qualified tuition and related expenses.

Education Tax Planning

The many incentives available make education tax planning a complex area but the benefits available allow prudent taxpayers to save on ever-increasing education expenses for themselves, children, and grandchildren. An education saving and spending plan is almost as important as a retirement plan. In both cases, it is important to consider all of the options available and the consequences (or benefits) of distributions, credits, exclusions, and deductions throughout the process. 

About the Author:

Dana Bell, EA – Tyler, Texas – is author of the book Education Tax Credits: And Other Educational Incentives.  

 

[1] IRC § 25A(f)(1)(A)(iii)

[2] IRC § 151(d)(2) and Treas. Reg. § 1.25A-1(f)

[3] PLR 200236001 <http://www.irs.gov/pub/irs-wd/0236001.pdf>

[4] Treas. Reg. § 1.25A-2(d)(3)

[5] Treas. Reg. § 1.25A-5(e)(4)

[6] Treas. Reg. § 1.25A-5(b)(2)

[7] Treas. Reg. § 25.2503-6(b)(1)(i)

[8] 20 USC § 1088(b)

[9] IRC § 117(b)(1)

[10] IRC § 117(c) and (d)

[11] IRC § 530(d)(2)(C)

[12] PLR 200137006 <http://www.irs.gov/pub/irs-wd/0137006.pdf>

[13] Kalinka, Susan. "TOPS Scholarship Recipients Who Failed to Claim the Education Tax Credits for 1998 Should Consider Filing Amended Returns." Louisiana Law Review 60.1 (1999): 281-91. <http://digitalcommons.law.lsu.edu/cgi/viewcontent.cgi?article=5806&context=lalrev>.

[14] https://www.irs.gov/publications/p970/ch02.html#en_US_2014_publink1000300227

[15] IRC § 530(d)(4)(B)(iii) and (v)

[16] IRC § 25A(g)(8)

[17] IRC § 529(e)(3)(A)(iii)

[18] https://www.irs.gov/irb/2016-33_IRB/ar11.html

]]>
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Managing Localization in Combo Boxes https://tylerhosting.com/b2e/dbell.php/managing-localization-in-combo-boxes Wed, 18 Jan 2017 19:41:00 +0000 Dana Bell Information Technology Computing Code Project 377@https://tylerhosting.com/b2e/
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<h2>Introduction</h2> <p>This example combines the use of combo boxes, a separate DataSource, and localized <code>string</code>s for alternate cultures.</p> <h2>Background</h2> <p>Using a combo box, programmers can use a selected item as a variable or parameter within a single method. In other cases, the combo box is a collection of options, each of which executes a different method. The combo box can be populated within the design, or assigned using a <code>DataSource</code>. Even a simple <code>string</code> array can be used for that. Processing the selection from the combo box when executing a different method for each combo box entry can be done using the index of the selected item.</p> <pre lang="cs">string[] special = { "Select", "Vowels", "DoubleI", "DoubleU", "NoVowels", "Consonants", "QNotU", "Palins", "HighFives", "HighFours", "NoHooks"}; cboSearch.DataSource = special; switch (cboSearch.SelectedIndex) { case 1: btnVowelHeavy_Click(sender, e); break; ... case 5: btnConsonantDumps_Click(sender, e); break; ... }</pre> <h2>An Alternate</h2> <p>When using the combo box selected index the routine may have to be modified each time a new item is added or items are moved around. If we add an item to the middle of the list, we have to figure out what the item number will be and then change the <code>select</code> statement. Case 2 may be the new one, so the original case 2 has to be changed to case 3, case 3 to case 4, etc.</p> <p>To avoid that, it is possible to use the selected item's content. Using the actual <code>string</code> in the collection is often a clearer way to code.</p> <pre lang="cs">switch(cboSearch.SelectedText) { case "Vowels": ...</pre> <p>Thus, case 1 would be replaced with case "<code>Vowels</code>". Additions to the collection will not require any reordering.</p> <h2>The Challenge</h2> <p>This works well until you have to support localization, that is, present different collections of <code>string</code>s based on the language selected. The <code>string</code> used in a <code>switch</code> statement must be a constant, so you can't use:</p> <pre lang="cs">switch (cboSearch.SelectedText) { case rm.GetString("Vowels"): ...</pre> <p>We could go back to using indexes, but we want to avoid going back to that. This is where the <code>CultureCombo</code> comes in handy. This simple class and the supporting method uses the characteristics of a combo box to create localized strings, while keeping the ability to process the selection using <code>string</code> identification.</p> <pre lang="cs">class CultureCombo { public string name {get; set;} public string display {get; set;} }</pre> <p>Next, you would incorporate the method that processes the array. Using this code, you can then apply that to the combo box.</p> <pre lang="cs">private List&lt;CultureCombo&gt; comboList(string[] termList) { List&lt;CultureCombo&gt; options = new List&lt;CultureCombo&gt;(); foreach (string word in termList) options.Add(new CultureCombo { name = word, display = rm.GetString(word) }); return options; }</pre> <p>The code assumes you have created a <code>ResourceManager</code> called <code>rm</code>. Replace <code>rm</code> above with whatever variable you used for the <code>ResourceManager</code>. In my code, it is represented with the code.</p> <pre lang="cs">Assembly myAssembly = typeof(Utilities).Assembly; ResourceManager rm = new ResourceManager("Hoot.Resources.Strings", myAssembly)</pre> <h2>Implementation</h2> <p>The first step to using this in a program is to create an array of <code>string</code> IDs, the <code>string</code> used to access the culture's translation. If you have incorporated localized <code>string</code>s, you would already have these. In my example:</p> <pre lang="cs">string[] special = { "Select", "Vowels", "DoubleI", "DoubleU", "NoVowels", "Consonants", "QNotU", "Palins", "HighFives", "HighFours", "NoHooks"};</pre> <p>Next, use the method to populate the combo box.</p> <pre lang="cs">searchOptions = comboList(special); cboSearch.ValueMember = "name"; cboSearch.DisplayMember = "display"; cboSearch.DataSource = searchOptions;</pre> <p>Finally, find the item in the list by looking at the <code>value</code> (or "<code>name</code>") of the combo box item:</p> <pre lang="cs">switch (cboSearch.SelectedValue.ToString()) { case "Vowels": btnVowelHeavy_Click(sender, e); break; case "Consonants": btnConsonantDumps_Click(sender, e); break; .. }</pre> <p>While the <code>string</code> presented in the combo box could be "<code>Vowels</code>", or "<code>Voyelles</code>" depending on the language, the value is the constant "<code>Vowels</code>".</p> <h2>Points of Interest</h2> <p>Combo boxes have a <code>DataSource</code> field, so you can use many different sources to populate the box. They also have separate fields for identifying the option chosen. You can use the <code>SelectedIndex</code>, as well as the <code>SelectedText</code> or <code>SelectedValue</code>. You determine what each represents by modifying the <code>DisplayMember</code> or <code>ValueMember</code> field.</p> <p>List boxes are very similar having the same <code>DataSource</code>, <code>DisplayMember</code>, and <code>ValueMember</code>. You can also change each of them programmatically.</p> <p>This code is from the program <a title="Hoot" href="/hoot/" target="_blank">Hoot</a>, a word game study tool I created for Scrabble and Words with Friends players.</p><div class="item_footer"><p><small><a href="https://tylerhosting.com/b2e/dbell.php/managing-localization-in-combo-boxes">Original post</a> blogged on <a href="http://www.tylerhosting.com/b2e/">Switched Keys</a>.</small></p></div>
Introduction

This example combines the use of combo boxes, a separate DataSource, and localized strings for alternate cultures.

Background

Using a combo box, programmers can use a selected item as a variable or parameter within a single method. In other cases, the combo box is a collection of options, each of which executes a different method. The combo box can be populated within the design, or assigned using a DataSource. Even a simple string array can be used for that. Processing the selection from the combo box when executing a different method for each combo box entry can be done using the index of the selected item.

string[] special = { "Select", "Vowels", "DoubleI", 
"DoubleU", "NoVowels", "Consonants", "QNotU", 
    "Palins", "HighFives", "HighFours", "NoHooks"};

cboSearch.DataSource = special;

switch (cboSearch.SelectedIndex) {

case 1: btnVowelHeavy_Click(sender, e); break;
        
... 

case 5: btnConsonantDumps_Click(sender, e); break;

...
}

An Alternate

When using the combo box selected index the routine may have to be modified each time a new item is added or items are moved around. If we add an item to the middle of the list, we have to figure out what the item number will be and then change the select statement. Case 2 may be the new one, so the original case 2 has to be changed to case 3, case 3 to case 4, etc.

To avoid that, it is possible to use the selected item's content. Using the actual string in the collection is often a clearer way to code.

switch(cboSearch.SelectedText) {
    case "Vowels": ...

Thus, case 1 would be replaced with case "Vowels". Additions to the collection will not require any reordering.

The Challenge

This works well until you have to support localization, that is, present different collections of strings based on the language selected. The string used in a switch statement must be a constant, so you can't use:

switch (cboSearch.SelectedText) {
    case rm.GetString("Vowels"): ...

We could go back to using indexes, but we want to avoid going back to that. This is where the CultureCombo comes in handy. This simple class and the supporting method uses the characteristics of a combo box to create localized strings, while keeping the ability to process the selection using string identification.

class CultureCombo
{
    public string name {get; set;}
    public string display {get; set;}
}

Next, you would incorporate the method that processes the array. Using this code, you can then apply that to the combo box.

private List<CultureCombo> comboList(string[] termList)
{
    List<CultureCombo> options = new List<CultureCombo>();
    foreach (string word in termList)
        options.Add(new CultureCombo { name = word, display = rm.GetString(word) });
    return options;         
}

The code assumes you have created a ResourceManager called rm. Replace rm above with whatever variable you used for the ResourceManager. In my code, it is represented with the code.

Assembly myAssembly = typeof(Utilities).Assembly;
ResourceManager rm = new ResourceManager("Hoot.Resources.Strings", myAssembly)

Implementation

The first step to using this in a program is to create an array of string IDs, the string used to access the culture's translation. If you have incorporated localized strings, you would already have these. In my example:

string[] special = { "Select", "Vowels", 
"DoubleI", "DoubleU", "NoVowels", "Consonants",
                "QNotU", "Palins", 
                "HighFives", "HighFours", "NoHooks"};

Next, use the method to populate the combo box.

searchOptions = comboList(special);
cboSearch.ValueMember = "name";
cboSearch.DisplayMember = "display";
cboSearch.DataSource = searchOptions;

Finally, find the item in the list by looking at the value (or "name") of the combo box item:

switch (cboSearch.SelectedValue.ToString())
{
    case "Vowels":
        btnVowelHeavy_Click(sender, e);
        break;
    case "Consonants":
        btnConsonantDumps_Click(sender, e);
        break;
..
}

While the string presented in the combo box could be "Vowels", or "Voyelles" depending on the language, the value is the constant "Vowels".

Points of Interest

Combo boxes have a DataSource field, so you can use many different sources to populate the box. They also have separate fields for identifying the option chosen. You can use the SelectedIndex, as well as the SelectedText or SelectedValue. You determine what each represents by modifying the DisplayMember or ValueMember field.

List boxes are very similar having the same DataSource, DisplayMember, and ValueMember. You can also change each of them programmatically.

This code is from the program Hoot, a word game study tool I created for Scrabble and Words with Friends players.

]]>
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The Research Review Method https://tylerhosting.com/b2e/dbell.php/the-research-review-method Mon, 11 Jun 2012 06:00:00 +0000 Dana Bell CPA Exam CPA Exam Club 6@https://tylerhosting.com/b2e/
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<p>&lt;posted on cpaexamclub.com&gt;</p> <p>For my first CPA exam, I decided to go without one of the review courses. Instead, I am researching the material as a method of preparing for the CPA exam. I'm currently going through REG material and I have found that there is a wide range of material available for review. I am using the cheap Wiley review books but my study process is much like researching for a paper. I get a general overview of the subject first, and then dig into different topics as I review.</p> <p>For example, I have a basic business law book (Barron's) for the basics of the business law section. Following that I study the Wiley CPA exam review book and a more comprehensive business law textbook (Business Law Today). The Wiley is an outline while the textbooks provide explanation. For all three, I reconcile any apparent differences and omissions. One or the other may have better explanations of the topic. For example, Barron's lists the non-dischargeable debts in two separate lists while the Wiley has a long disorganized list. </p> <p>Of course, those are just a few of the resources. There are also some outlines of business law material available for studying for the bar exam. Obviously, you wouldn't try to use a bar exam review, but you could benefit from reading sections on Secured Transactions or Bankruptcy. The US court system website is another resource. You can get an overview of all six chapters of the bankruptcy code there.</p> <p>Finally, I make some of my own notes and outlines. One thing I noted in the order of bankruptcy distribution is that the items can be categorized. Alimony and administration are <strong>high priority</strong> items. The next five are <strong>business related</strong> (ordinary course, wages, benefit plans, storage, and deposits). The next three are <strong>government related</strong> (taxes, FDIC claims, and DUI liabilities) with general creditors (timely or untimely) as <strong>low priority</strong>items. Of course there are details to remember about each, but at least I have the order right.</p> <p>My philosophy is that a mastery of the subject is more related to how much you know and how well you know it, rather than how good the review course is. While "research review" may not be the most efficient way to prepare, it may be the most effective way to master the material. I suspect the better you master the subject, the better you will be prepared on the job.</p> <p>Yet another advantage of the research method is that it is less likely to put me to sleep. Reading and re-reading all of the same material tends to make my eyelids heavy.</p><div class="item_footer"><p><small><a href="https://tylerhosting.com/b2e/dbell.php/the-research-review-method">Original post</a> blogged on <a href="http://www.tylerhosting.com/b2e/">Switched Keys</a>.</small></p></div>
<posted on cpaexamclub.com>

For my first CPA exam, I decided to go without one of the review courses. Instead, I am researching the material as a method of preparing for the CPA exam. I'm currently going through REG material and I have found that there is a wide range of material available for review. I am using the cheap Wiley review books but my study process is much like researching for a paper. I get a general overview of the subject first, and then dig into different topics as I review.

For example, I have a basic business law book (Barron's) for the basics of the business law section. Following that I study the Wiley CPA exam review book and a more comprehensive business law textbook (Business Law Today). The Wiley is an outline while the textbooks provide explanation. For all three, I reconcile any apparent differences and omissions. One or the other may have better explanations of the topic. For example, Barron's lists the non-dischargeable debts in two separate lists while the Wiley has a long disorganized list. 

Of course, those are just a few of the resources. There are also some outlines of business law material available for studying for the bar exam. Obviously, you wouldn't try to use a bar exam review, but you could benefit from reading sections on Secured Transactions or Bankruptcy. The US court system website is another resource. You can get an overview of all six chapters of the bankruptcy code there.

Finally, I make some of my own notes and outlines. One thing I noted in the order of bankruptcy distribution is that the items can be categorized. Alimony and administration are high priority items. The next five are business related (ordinary course, wages, benefit plans, storage, and deposits). The next three are government related (taxes, FDIC claims, and DUI liabilities) with general creditors (timely or untimely) as low priorityitems. Of course there are details to remember about each, but at least I have the order right.

My philosophy is that a mastery of the subject is more related to how much you know and how well you know it, rather than how good the review course is. While "research review" may not be the most efficient way to prepare, it may be the most effective way to master the material. I suspect the better you master the subject, the better you will be prepared on the job.

Yet another advantage of the research method is that it is less likely to put me to sleep. Reading and re-reading all of the same material tends to make my eyelids heavy.

]]>
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BLT (business law & tax) in July? https://tylerhosting.com/b2e/dbell.php/blt-business-law-tax-in Thu, 31 May 2012 00:00:00 +0000 Dana Bell CPA Exam CPA Exam Club 7@https://tylerhosting.com/b2e/
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<p>&lt;Posted on cpaexamclub.com&gt;</p> <p>Studying for REG, I've decided that it could best be described as Business Law and Tax (BLT). I've taken individual and entity taxation classes, and a basic Business Law course and that covers practically everything in REG. Right now I'm studying the subjects in business law not covered in the class that are mentioned in the CSOs. In the process I've frequently found myself studying notes from the Bar exam. I guess you could say that a miniature version of the bar exam is a part of the REG section of the CPA exam.</p> <p>I'm actually a week behind my schedule leading to a July 13 exam date. That may be a good thing. The 13th is also a Friday. Also, I discovered that my degrees won't make it to my transcript until mid to late June, so there may not be enough time to get exam qualifications approved with the state board until later in July.</p> <p>I have heard many say that CPAs rarely use most of what is on the exam in their jobs. That may be true, but I've found the material I have been studying very informative and potentially useful. Things like contract law, bankruptcy, commercial paper, and secured transactions. Of course, I'm looking more to working toward consulting instead of full-time auditing or exclusively taxation.</p> <p>I've also heard that if possible, it's best to get the exam out of the way before going to work. I understand the scheduling challenges, but it seems that work in the same area will only enforce exam study. I feel much more confident about taxation after doing tax returns in my recent internship. I still need to study, but there are so many things that I've learned in the work environment that I won't have to relearn.That's also why I'm taking REG first. I would probably also prefer to be working in Auditing while studying for AUD, or doing something with books while studying for FAR. I wonder if there are firms that have a sort of work-study program that match job duties with the part of the exam the person is working on. That would by impressive.</p> <p>Anyway, that's my first blog post here.</p><div class="item_footer"><p><small><a href="https://tylerhosting.com/b2e/dbell.php/blt-business-law-tax-in">Original post</a> blogged on <a href="http://www.tylerhosting.com/b2e/">Switched Keys</a>.</small></p></div>
<Posted on cpaexamclub.com>

Studying for REG, I've decided that it could best be described as Business Law and Tax (BLT). I've taken individual and entity taxation classes, and a basic Business Law course and that covers practically everything in REG. Right now I'm studying the subjects in business law not covered in the class that are mentioned in the CSOs. In the process I've frequently found myself studying notes from the Bar exam. I guess you could say that a miniature version of the bar exam is a part of the REG section of the CPA exam.

I'm actually a week behind my schedule leading to a July 13 exam date. That may be a good thing. The 13th is also a Friday. Also, I discovered that my degrees won't make it to my transcript until mid to late June, so there may not be enough time to get exam qualifications approved with the state board until later in July.

I have heard many say that CPAs rarely use most of what is on the exam in their jobs. That may be true, but I've found the material I have been studying very informative and potentially useful. Things like contract law, bankruptcy, commercial paper, and secured transactions. Of course, I'm looking more to working toward consulting instead of full-time auditing or exclusively taxation.

I've also heard that if possible, it's best to get the exam out of the way before going to work. I understand the scheduling challenges, but it seems that work in the same area will only enforce exam study. I feel much more confident about taxation after doing tax returns in my recent internship. I still need to study, but there are so many things that I've learned in the work environment that I won't have to relearn.That's also why I'm taking REG first. I would probably also prefer to be working in Auditing while studying for AUD, or doing something with books while studying for FAR. I wonder if there are firms that have a sort of work-study program that match job duties with the part of the exam the person is working on. That would by impressive.

Anyway, that's my first blog post here.

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MySQL Selected for Database Design Class https://tylerhosting.com/b2e/dbell.php/mysql-selected-for-database-design Tue, 13 Jan 2009 06:17:00 +0000 Dana Bell Information Technology UT Tyler IT Toolbox 8@https://tylerhosting.com/b2e/
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<p>&lt;posted on it-toolbox.com&gt;</p> <p>I returned to school today for the first day of the new semester, and it seems reason has made a breakthrough. <br /> <br />As many of you know, institutions tend to favor the more respectable software packages, and not necessarily the most used. One case in particular is the use of Dreamweaver as a web-developer tool. It is probably the most used tool for designing web pages, and has been for years. However, the web design class at my school uses Web Expressions by Microsoft, an item I hadn't heard of until this school year. It's Microsoft, it's respected. <br /> <br />I've heard a lot about Microsoft's other web tool, Frontpage, and it hasn't been good. Still, Microsoft is respected in the business community, and by extension, it will be in academia. It is true that Microsoft Office and Windows have matured, but that doesn't mean their siblings are the same. <br /> <br />In my Database Design class, the RDMS of choice has been Oracle. It figures that it would be that or something like Microsoft SQL Server. They are respected systems. They are not bad tools, but they are not the best or the most used. To my pleasant surprise, that class this semester will be focusing instead on MySQL, the reason being the widespread use of it in local businesses. <br /> <br />In addition, the introductory theme of most of my classes is that we will be doing more hands on, practical work. It is true that classes may be more difficult and more time-consuming, but in the end they should be more useful. For me, for anyone I may work for. In an area (education) that is resistant to change, that is good news.</p><div class="item_footer"><p><small><a href="https://tylerhosting.com/b2e/dbell.php/mysql-selected-for-database-design">Original post</a> blogged on <a href="http://www.tylerhosting.com/b2e/">Switched Keys</a>.</small></p></div>
<posted on it-toolbox.com>

I returned to school today for the first day of the new semester, and it seems reason has made a breakthrough.

As many of you know, institutions tend to favor the more respectable software packages, and not necessarily the most used. One case in particular is the use of Dreamweaver as a web-developer tool. It is probably the most used tool for designing web pages, and has been for years. However, the web design class at my school uses Web Expressions by Microsoft, an item I hadn't heard of until this school year. It's Microsoft, it's respected.

I've heard a lot about Microsoft's other web tool, Frontpage, and it hasn't been good. Still, Microsoft is respected in the business community, and by extension, it will be in academia. It is true that Microsoft Office and Windows have matured, but that doesn't mean their siblings are the same.

In my Database Design class, the RDMS of choice has been Oracle. It figures that it would be that or something like Microsoft SQL Server. They are respected systems. They are not bad tools, but they are not the best or the most used. To my pleasant surprise, that class this semester will be focusing instead on MySQL, the reason being the widespread use of it in local businesses.

In addition, the introductory theme of most of my classes is that we will be doing more hands on, practical work. It is true that classes may be more difficult and more time-consuming, but in the end they should be more useful. For me, for anyone I may work for. In an area (education) that is resistant to change, that is good news.

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Laptops https://tylerhosting.com/b2e/dbell.php/laptops Wed, 31 Dec 2008 06:20:00 +0000 Dana Bell Information Technology UT Tyler IT Toolbox 9@https://tylerhosting.com/b2e/
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<p>&lt;posted on it-toolbox.com&gt;</p> <p>I finished my first semester back in school and did it without a laptop. I considered getting a new wide-screen laptop during the semester, but I kept asking myself, "What do I do with it?" <br /> <br />I hear that some elite schools require students to buy a laptop when they first enroll, and there is rumor this school is considering that. I just don't understand why. All of my computer classes were in rooms with computers, and there are ample computer labs all over campus. Big screen, full keyboard, and no need to charge it. Plug in your jump drive and your ready to go. <br /> <br />When I was doing a lot more writing, I did carry a laptop with me quite often, but now wonder what people really need laptops for. <br /> <br />Also, in school, I have a bag full of books, and don't really need something else to carry around. If I had the text of the books on the laptop, I could cut back on my luggage, but then I would have to boot it up every time I wanted to read something. <br /> <br />But, I did find a reason to buy one over the break. One reason to have my own laptop is to be able to use the Dvorak keyboard layout. I switched from the Sholes (Qwerty) keyboard a couple years ago and have no plans to switch back. Lab computers have the Dvorak keyboard disabled, so in protest I got my own computer. <br /> <br />To minimize the additional load I got an Asus EEE (8.9" screen). That also comes with XP instead of Vista, another plus. And the best thing is it can last 4-6 hours on a single charge. <br /> <br />Now I'm rethinking the benefits of having a laptop. No, it's not a necessity; but having a laptop will mean I can go anywhere to do my study, or whatever I want to do. It's freedom. And with campus wide WiFi, I can connect with the world while I'm fishing at the campus lake... if I knew how to fish. And, if I drank coffee I could compute at the coffee shop.</p><div class="item_footer"><p><small><a href="https://tylerhosting.com/b2e/dbell.php/laptops">Original post</a> blogged on <a href="http://www.tylerhosting.com/b2e/">Switched Keys</a>.</small></p></div>
<posted on it-toolbox.com>

I finished my first semester back in school and did it without a laptop. I considered getting a new wide-screen laptop during the semester, but I kept asking myself, "What do I do with it?"

I hear that some elite schools require students to buy a laptop when they first enroll, and there is rumor this school is considering that. I just don't understand why. All of my computer classes were in rooms with computers, and there are ample computer labs all over campus. Big screen, full keyboard, and no need to charge it. Plug in your jump drive and your ready to go.

When I was doing a lot more writing, I did carry a laptop with me quite often, but now wonder what people really need laptops for.

Also, in school, I have a bag full of books, and don't really need something else to carry around. If I had the text of the books on the laptop, I could cut back on my luggage, but then I would have to boot it up every time I wanted to read something.

But, I did find a reason to buy one over the break. One reason to have my own laptop is to be able to use the Dvorak keyboard layout. I switched from the Sholes (Qwerty) keyboard a couple years ago and have no plans to switch back. Lab computers have the Dvorak keyboard disabled, so in protest I got my own computer.

To minimize the additional load I got an Asus EEE (8.9" screen). That also comes with XP instead of Vista, another plus. And the best thing is it can last 4-6 hours on a single charge.

Now I'm rethinking the benefits of having a laptop. No, it's not a necessity; but having a laptop will mean I can go anywhere to do my study, or whatever I want to do. It's freedom. And with campus wide WiFi, I can connect with the world while I'm fishing at the campus lake... if I knew how to fish. And, if I drank coffee I could compute at the coffee shop.

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Project Management Styles https://tylerhosting.com/b2e/dbell.php/project-management-styles Wed, 10 Dec 2008 06:23:00 +0000 Dana Bell Information Technology UT Tyler IT Toolbox 10@https://tylerhosting.com/b2e/
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<p>&lt;posted on it-toolbox.com&gt;</p> <p>It's been two weeks since my last post here. I guess you could say I've been slacking a little with the blog but I have a good excuse. This week I'm finishing up my last major project, and next week is finals week. <br /> <br />That project is to flowchart the systems development project being followed in the text. While it is very educational, it is a little frustrating. The text discusses many of the principles that could, and even should be used, but that are not necessarily a part of the project in question. I'm about at the point where cost:benefit ratio is at it's highest; where more time spent on it will not significantly change the outcome. <br /> <br />One of the things I have discovered is that project management has so many standards available, and at the same time there is so much creative opportunity in project management. PMBOK and my studies have the standard procedures down. At the other extreme there are agile methods, RAD and Scrum. <br /> <br />One of the things that keeps coming to mind has to do with the subject of our research paper, failed projects. While failed projects are unfortunate, I'm beginning to believe that project failure has very little to do with methodology. Methodology has less to do with doing everything just right than it does with reflecting the philosophy of the organization, and development style of the team. <br /> <br />Like my disc golf game, if you are creative, there will be greater risks. But, if you are successful, there are greater rewards. In addition, it seems the more radical approaches require more work and more interest. It's not for the nine to five manager. <br /> <br />One thing that strikes me as odd is that so many projects seem to adopt a methodology that combine various development styles, and yet there are no standards for how to do that. Maybe there are and I don't know about them yet. <br /> <br />Yes, I know a standard for creativity is something of an oxymoron, but standards, best practices, things that are known to work are more reliable. So, which is it? It may be like any sport we play; We have to develop our own style. There may be some rules, but our style can still be unique. <br /> <br />If my programming experience is any indication, I would probably be more of a prototyping, iterative type manager, but also one that will have to learn to control scope creep. It never takes me very long to see that there are so many opportunities in the business environment that one could harness; so many things that need to be improved.</p><div class="item_footer"><p><small><a href="https://tylerhosting.com/b2e/dbell.php/project-management-styles">Original post</a> blogged on <a href="http://www.tylerhosting.com/b2e/">Switched Keys</a>.</small></p></div>
<posted on it-toolbox.com>

It's been two weeks since my last post here. I guess you could say I've been slacking a little with the blog but I have a good excuse. This week I'm finishing up my last major project, and next week is finals week.

That project is to flowchart the systems development project being followed in the text. While it is very educational, it is a little frustrating. The text discusses many of the principles that could, and even should be used, but that are not necessarily a part of the project in question. I'm about at the point where cost:benefit ratio is at it's highest; where more time spent on it will not significantly change the outcome.

One of the things I have discovered is that project management has so many standards available, and at the same time there is so much creative opportunity in project management. PMBOK and my studies have the standard procedures down. At the other extreme there are agile methods, RAD and Scrum.

One of the things that keeps coming to mind has to do with the subject of our research paper, failed projects. While failed projects are unfortunate, I'm beginning to believe that project failure has very little to do with methodology. Methodology has less to do with doing everything just right than it does with reflecting the philosophy of the organization, and development style of the team.

Like my disc golf game, if you are creative, there will be greater risks. But, if you are successful, there are greater rewards. In addition, it seems the more radical approaches require more work and more interest. It's not for the nine to five manager.

One thing that strikes me as odd is that so many projects seem to adopt a methodology that combine various development styles, and yet there are no standards for how to do that. Maybe there are and I don't know about them yet.

Yes, I know a standard for creativity is something of an oxymoron, but standards, best practices, things that are known to work are more reliable. So, which is it? It may be like any sport we play; We have to develop our own style. There may be some rules, but our style can still be unique.

If my programming experience is any indication, I would probably be more of a prototyping, iterative type manager, but also one that will have to learn to control scope creep. It never takes me very long to see that there are so many opportunities in the business environment that one could harness; so many things that need to be improved.

]]>
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