My daughter has to pay $250 for TurboTax because she is entitled to a $78 Ammerican Opportunity Tax Credit?

[cathy_f]

My daughter graduated from college and started graduate school in 2020. Since she paid for more than 50% of her support, she is no longer a dependent.

She is a part-time resident in two states, one of which she earned $8000 of income, and earned $750 of income as a non-resident in a 3rd state.

TurboTax "Free" calculated her federal taxes and all three state taxes. Then at the end as she went to file, a window popped up saying that since she received the American Opportunity Tax Credit (which was for only $78) she was not eligible for TurboTax Free.

So she would have to pay

$60 for TurboTax Deluxe

$50 for TurboTax State for the part-year-resident state that she earned income in

$50 for TurboTax State for the part-year-resident state that she did not earn income in

$50 for TurboTax State for the non-resident state that she earned income in

And her choices were to pay the $210 on a credit card or for a "small" $40 fee, Intuit would expropriate $250 from her federal refund!

(TurboTax Deluxe plus one free state costs $49.99 at amazon, and the part-year-resident state that she did not earn income in has an excellent free online site where she can file without paying any money to Intuit.)

We went back and tried to remove the American Opportunity Credit (which would cost her $78) but Intuit still wants $210 on credit card or to take $250 of her refund. (Oh, and also offered to charge another $50 for "audit defense"!)

Apparently TurboTax "Free" is a scam to steal money from low-income people by pretending to be free and then holding their taxes for a ransom of 5x the amount that rich people have to pay to file their taxes?

I own TurboTax Home and Business, and it's supposed to allow me to file up to five returns. (It cost me $65 from amazon.) But I only have one of the 3 states that she needs, and it's the one that has the excellent online site.

Is there a way to file her taxes for free with TurboTax Free? Or do we have to start over with one of the other programs? (TaxSlayer, OLT, TaxAct)

[mesquitebean · Accepted solution]

TurboTax has 2 free products.  One of them, the TurboTax IRS Free File Program, is fully-featured and free for both Federal and state returns--IF one qualifies to use it.  And based on the income amounts you mentioned above, your daughter likely qualifies, and she might get to keep the American Opportunity Tax Credit since no upgrades are needed in the TurboTax IRS Free File Program. It can handle all the usual forms and schedules including that credit.

It is not the same as the regular Free Edition your daughter has been using, which is very limited.   One can switch to TurboTax IRS Free File Program in the same account without starting over if one meets one of the qualifications I outline below.  I've provided info on how to switch.

The following pasted info says "you", but in your case it's referring to the daughter since you are asking in a third-person fashion.  

To qualify for free 2020 Federal and state tax returns through the IRS Free File Program delivered by TurboTax, you just need to meet one of these requirements:

• Your 2020 AGI is $39,000 or less (if filing jointly MFJ, this figure is for the AGI of both spouses combined.)  ; or
• You qualify for the Earned Income Tax Credit (EITC); or
• In 2020, you served as active duty military (including Reservists and National Guard) with a maximum AGI of $72,000, and you have a military-issued W-2.

If you meet one of those qualifications and want to use it, it is at this special website:

https://freefile.intuit.com/

but see these 2 FAQs first, including how to switch without starting over:

FAQ:  What is the TurboTax IRS Free File Program?
https://ttlc.intuit.com/community/choosing-a-product/help/what-is-the-turbotax-free-file-program/01/...

and

FAQ:  How do I switch to the TurboTax IRS Free File Program? 

https://ttlc.intuit.com/community/downgrading/help/how-do-i-switch-to-turbotax-free-file-program/00/...

There are also other free file options that may have different requirements at the IRS website:
https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free

[Hal_Al]

Be careful about claiming the American Opportunity Tax Credit (AOTC) for a $78 credit.  Each student's education  is limited to the AOTC being claimed 4 times (whether by the parent and/or the the student) during the first 4 years of college credits.  Since it's worth up to $2500, you may not want to "waste" one of those 4 times on $78. 

[cathy_f]

Hal, can you give me more information about these limitations? We took the credit four times during her undergrad years when she was our dependent -- does the four-times clock start again for her now that she is self-supporting? Or is she not supposed to be getting it at all because we got it four times already?

[xmasbaby0]

@cathy_f The four times is a limit for good.   The clock does not start ticking again for her to get it---if you used it four times --that is it.   Your daughter cannot get the AOC if it has been used four times already for her.

[Hal_Al · Accepted solution]

I confirm what xmasbaby0 said: your daughter is not eligible for the AOTC, because it has already been use the maximum 4 times, for her education (by you).

Furthermore, the AOTC is only good for undergrad education. It cannot be claimed for grad school. 

[cathy_f]

Thanks so much everyone!

Mosquitobean I think she must have gotten herself on Free Edition when she needs to be on IRS Free File Program. And she's got 2 grad school finals to study for, and was going to let Intuit take $250 from her refund and file for $78 she's not entitled to!

Fortunately she came to me for help first, and it made me mad enough to go out and find out what the problem is. (While she studies for her statistical physics final that's tomorrow.)

[Wayne888]

I had the same problem.  The TurboTax didn't disclose these fees only until after you paid with you credit card - I never seen practice last.  Clearly,  several of these fees should be applied to my daughter, but they were already charged to my daughter's credit card, and how could she get the refund?  I am typing this also because she will have final tmr.

Thx,

Wayne

[mesquitebean]

---

@Wayne888 wrote:

I had the same problem.  The TurboTax didn't disclose these fees only until after you paid with you credit card - I never seen practice last.  Clearly,  several of these fees should be applied to my daughter, but they were already charged to my daughter's credit card, and how could she get the refund?  I am typing this also because she will have final tmr.

---

I don't fully understand your daughter's situation, what product your daughter ended up using, and what specific fees you are referring to, but this is a user community forum, and nothing account-specific can be handled here anyway.   There should have been a "Review your order" screen prior to paying that showed any fees.   Since you already paid, you may have trouble getting a refund.  You'll need to plead your case with TurboTax Support.   If your daughter would have met one of the qualifications (I list them in a comment above) to use the IRS Free File Program delivered by TurboTax, then stress that she ended up in the wrong product.  I don't know what they will say or do.

Support hours are 5AM-9PM Pacific (8AM-12 Midnight Eastern) 7 days/week.

FAQ: What is the TurboTax phone number?
https://ttlc.intuit.com/community/using-turbotax/help/what-is-the-turbotax-phone-number/00/25632

Or you can use this contact form to get a phone number, or it may schedule a callback.
https://support.turbotax.intuit.com/contact

[Wayne888]

Yes, that's what we usually expected:  Have a "Review your order" before you pay, but that was not the case for TurboTax this time.  My daughter was also using a free online version, then TurboTax asked for upgrade to Deluxe version (In order to get the stimulus fund?).  Once she hit "paid", the fee jumped and included to two states' filing fees (Similar to the user who started this thread).

Thanks so much for your help!  The TurboTax contact phone is very hard to find.