Tax Credit question

[esferre]

My daughter did her 2023 Tax return using the turbotax web product and I feel her tax return is not accurate and as a result she is missing out on a larger Tax refund.

She currently attends postsecondary school at a community college and her tax return did not include the Education Tax credits. I feel she should of been entitled to the "Lifetime Education Credit" and  I also noticed that on her teturn, the Scholarship she received which went directly to pay the tuition was taxed as additional income. 

She received a 1098-T form from the Community College in which Box 1 has the out of pocket amount she paid in Tuition and Box 5 the amount she received for the scholarship or Grant. There was no 8863 form included in her Tax return.  I thought perhaps she did not put the information when she did the return, but I figured this was not the case because they added the scholarship amount as taxable income and that comes from form 1098-T. Unless there is a requirement I don't know and theefore she does not qualify. This is her status...

- She works and lives by herself.

- Her income is way below the $90,000 limit.

- She is not claimed as a dependent.  

So my question is

1. Why did Turbotax not include the Lifetime Education Credit?

2. Why was the scholarship she received and which was used to pay for her tuition taxed as additional income?

Is this something that can be amended and if so, can the tax return be amended by herself using the Turbotax account she used to file her return.

Thank you in advance for any help.

[xmasbaby0]

Th eLifetime Learning Credit is not a refundable credit.  It can only be used to reduce any tax owed.  Did she owe any tax?

[esferre]

Thank you for responding. 

Yes, she had a Tax liability of over $4000. The worst part of the whole thing, in my opinion, is that it included the $3000 Scholarship that paid paret of the school tuition as additional income on line 8 of form 1040 and it also created a "Schedule 1"  form listing the scholarship. So, she got no Education credit and in addition was taxed for going to school.  I am not a tax expert but I think something is wrong.

[Mike9241]

we don't know what she entered which has a huge bearing on how her return turns out.

in her return, there should be a student info worksheet (SIW). answering the questions incorrectly or omitting the worksheet completely is what could result in Turbotax concluding that the scholarship was taxable.

as to the LLC (or even the AOC)

since she is not claimed as a dependent, she qualifies to get the credit (but the LLC is not refundable). To get the proper results the student info worksheet (SIW) must be completed correctly. if she is not going for a degree, certificate or credential then the scholarship is taxable (IRC Code Sec 117).  The SIW has questions about this

if she qualifies and the SIW is completed correctly form 8863 should appear in her return with part 3 completed

you did not explain why she/you would not qualify for the American Opportunity Credit. Admitedly the AOC has many restrictions. 

[esferre]

Thank you for your response.

You are right I do not know what questions she was asked as well and more importantly how she answered. I did ask her and she couldn't exactly remember what questions and more importanty what answers she provided. 

She currently attends a Community College for an associates degree. She does not qualify for the American Opportunity Credit because she used it while attending UCF for 4 years and got her Bachelors degree. She is attending this community college because she wants to pursue something different.  

At this point I have the following questions...

- Do you know if Turbotax keeps a log of the questions and the answers provided that led to the final Tax return outcome?  I think this would help in clearing up the Tax return outcome as well as help in not making the same mistake in the future.

- I am not familiar with the different Turbotax editions. She said she used the PLUS web version. Can she try to amend the Tax return using the web version?

Again, thank you all for the help and Happy Thanksgiving.

[taxlady28]

There is no log of questions asked and how they were answered.  I believe the only way to amend now is to download the desktop version of TurboTax and complete the amend in that product. 

She would need to have meet all requirements and also have enough tax liability to use the credit.

• For tax year 2023, the amount of your LLC is gradually reduced (phased out) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return).
• You can’t claim the credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return).

The amount of the credit is 20 percent of the first $10,000 of qualified education expenses or a maximum of $2,000 per return. The LLC is not refundable. So, you can use the credit to pay any tax you owe but you won’t receive any of the credit back as a refund.

My experience with TurboTax has been that if the conditions are correct for the credit, TurboTax tells you that and asks if you want to use it.  But that is assuming that the questions were all answered correctly and that the income and expenses are within the allowable limits.

[esferre]

Thank you for your response.

I think she qualifies for the credit. At this point I would assume something was not answered correctly along the way. I think the next step is to try to amend the return.

You mentioned that you believe that in order to amend a return you must use the desktop version of Turbotax?  This return was done and filed using the online version. I am not familiar with all the turbotax versions but when I look at their website it appears that in order to use the desktop version she'd need to purchase it. Is this correct, even though is to amend a return that has already been done and paid for?

Is there information ssoemwhere as to the cost to ammend a return?

Thank you.

[xmasbaby0]

There is no fee to amend your tax return unless you have to upgrade to a higher version of the software; if you have to upgrade then you pay the difference between the one you used and the higher version.   Online amending is closed, so you need to use desktop software on a full PC or Mac in order to amend.

See this TurboTax support FAQ for amending a tax return - https://ttlc.intuit.com/turbotax-support/en-us/help-article/tax-return/amend-change-correct-return-a...

Do not expect quick results from amending. It can take four months or more for the IRS to process an amended return.  

You can watch for information here:

https://www.irs.gov/Filing/Individuals/Amended-Returns-(Form-1040-X)/Wheres-My-Amended-Return-1

[esferre]

Thank you.

Sorry for all the questions but it seems like one answer leads to another question. You mentioned that "online amending is closed".

Does that mean that it is closed because of the time of the year or does it mean that Turbotax only allows you to amend a tax return using the desktop version?

If it is closed because of the time of the year, when does it  open again? 

If I must use the desktop version to amend the return, it cannot be efiled and my only option is to mail it to the IRS? 

[xmasbaby0]

You cannot use online software for 2023 any more--not for a new return, not for amending a 2023 return.   Online for 2023 is permanently closed-- it will not re-open.   And, the amended 2023 return must be filed by mail.  It cannot be e-filed.

[esferre]

Ok, Thank you all. 

Based on all the answers, yesterday I decided to try to amend the return to see if it would allow me to do it, so I logged in to the online account and was able to amend it with no problems. The numbers from the 1098-T form were improperly entered and thus explains the incorrect original tax return.

I couldn't e-file it, so it said my only option was to print it and mail it and that is what I did.

Again, thank you all for all the help.