Tax Credits and Amendments

Andrea is a 26 year old female that was unemployed for all of 2013 and decided to go back to school to complete her criminal justice degree in the fall. She registered in August, received a $1,000 scholarship, a $2,750 Pell grant, a $2,000 student loan, and had tuition and other educational expenses of $4,000. She had no kids, no job, and no house expenses. When it came time to file tax returns this year, she knew she didn't have to file because she didn't make any money, and her scholarship and Pell grant were tax free. She filed anyway because she knew she would get a $1,000 refund due to an education credit.

During tax season H & R Block had been running a series of ads taunting that taxpayers could have gotten back a billion dollars from the IRS. While that tax chain may not actually be getting that billion back for taxpayers, it does point out that many taxpayers (even though they don't have to pay any taxes) are not aware of a lot of the credits. An article in Accounting Today confirms that with a story of how the IRS is trying to encourage filing for tax refunds.

Two credits that may surprise students are the education credits and earned income credits. Both can be claimed even though you don't have to file a tax return. Some students may not realize they can claim education credits. This generally applies to students age 24 and over, and parents of students under the age of 24. Although tax-free scholarships can generally offset education expenses, in certain cases you can include some or all of your scholarships and grants in income and then claim expenses paid for education. If you have little or no other income you may not have to pay any tax on the income, and still get the education credit. This isn't a tax loophole either. The IRS issued treasury regulations in 2003, complete with examples, explaining how students can maximize their education credit this way. Those regulations are also published in IRS Publication 970. And if you are working, that education credit could be worth up to $2,500 on $4,000 of educational expenses.

The second credit often overlooked by new taxpayers is the earned income credit, although it has become more popular recently. If you work, even as a student worker, you could get a tax credit (refund) based on how much earnings you had during the year. Unlike the education credit, if you file a return with earned income and do not claim the earned income credit, the IRS may add that to your refund. They can't do that if you don't file a return. These are just two of the credits you could qualify for without having to pay taxes.

One other thing that many taxpayers are not aware of is that you can amend, or redo, tax returns. April 15 was the due date for filing your 2013 return, but there's no hurry. Provided you don't owe taxes, there is no penalty, and you can file or amend your return after April 15. In fact, you can file/amend for three years after its due date, so when you file your 2014 return next year you can file/amend returns for 2011, 2012, and 2013 at the same time. All returns are different, so don't count you money before you get it. Amended returns cannot be e-filed and keep in mind that due to the increase in the number of amended returns, it's been reported that the normal 8 to 12 weeks processing for amended returns has been extended to 16 weeks.

If you don't want to pay someone to see if you can get one of these refunds, there are some free options for filing your tax returns. Volunteers in Tax Assistance (VITA) at the PATH office, or the AARP foundation at multiple sites in East Texas provides free tax assistance during tax season. Of course, if you do not want to wait until tax season next year to take advantage of the credits, consult a local tax pro (EA or CPA) or research it yourself at You might find that the summer break is just the right time to check on it.

Depending on whether you filed or not, what you'll need are: All W-2s, 1099, 1098, etc. If you don't have that information you can request a transcript on-line from the IRS. For the education credit a 1098 is not necessary and may even by inaccurate. The best documentation is a printout of your school account showing fees and payments, and receipts for books and other expenses paid for elsewhere.

Circular 230 Disclaimer: Any tax advice contained in this article, or referred to in hyperlinks is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

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