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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4114
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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hi please I want to ask about amending my return for 2011 &

Resolved Question:

hi please I want to ask about amending my return for 2011 & 2012
ON 2011 I WENT TO TAX SERVICES OFFICE AND THEY FILED TO ME AND THEY REPORTED ME THAT I HAVE NO INCOME , AND I GAVE THEM STATEMENT SAYS THAT MONTHLY ALLOWANCES FORM MY SCHOLARSHIP PROGRAM , THEY SAID IT IS NOT TAXABLE , LAST YEAR I MET WITH FRIEND AND HE TOLD ME THAT IT IS TAXABLE BUT WITHOUT AMOUNT THAT I AM PAYING IT FOR RENT SO CAN YOU CLARIFY THAT FOR ME PLEASE ? FIRST

THEN i WILL TELL YOU 2012 STORY
Submitted: 1 year ago.
Category: Tax
Expert:  Stephen G. replied 1 year ago.

Stephen G. :

Hello, my name isXXXXX & I'll be helping you today. My goal is to give you a complete & accurate answer that you can understand.

Stephen G. :

What type of a scholarship is it you have and where are you enrolled in school and what degree are you earning?

Customer :

I am permanent resident and I am from Libya I got this scholarship to finish my postgraduate study , I was enrolled in english course and later in preparation courses for licencing exam .

Customer :

the scholarship from government of libya and it is around 26500$ /year , and I am married with 3 kids .

Customer :

so when the tax service office reported that I have no income on 2011 tax return I got few money .

Stephen G. :

What are you studying & what license are you talking about?

Customer :

first I want to know is it considered income or not

Customer :

medicine and I am going to get licence to practice medicine here in USA

Stephen G. :

Ok, it isn't taxable.

Stephen G. :

What about 2012?

Customer :

why is not taxable

Customer :

can you explain to me please ?

Stephen G. :

Educational scholarships aren't taxable.

Customer :

let me explain something the amount 26500 $ is only for living and rent , ....and the tuition fees and other expenses paid directly from my government .and before 2 days I went to H& R block office one of tax prof there told me it is taxable too !!

Customer :

so I am confused again

Stephen G. :

Well, you said it was a scholarship?

Stephen G. :

Hold on.

Stephen G. :

I'm afraid you have a problem with the room & board.

Stephen G. :

Here's a copy of the rules as they relate to scholarships:

Stephen G. :
Topic 421 - Scholarship and Fellowship Grants

A scholarship is generally an amount paid or allowed to a student at an educational institution for the purpose of study. A fellowship is generally an amount paid to an individual for the purpose of research.


If you receive a scholarship or fellowship grant, all or part of the amounts you receive may be tax-free.


Qualified scholarship and fellowship grants are treated as tax-free amounts if the following conditions are met:



  • You are a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities; and

  • Amounts you receive as a scholarship or fellowship grant are used for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses at the educational institution.


You must include in gross income amounts used for incidental expenses, such as room and board, travel, and optional equipment, and generally amounts received as payments for teaching, research, or other services required as a condition for receiving the scholarship or fellowship grant. Also you must include in income any part of the scholarship or fellowship that represents payments for services. Generally when reporting scholarship income on your tax return, you will include the amounts on the same line as “Wages, salaries, tips, etc.” Review the instructions of your tax form to determine how to report any income from scholarships.


However, you do not need to include in gross income any amounts you receive for services that are required by the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance Program.


If any part of your scholarship or fellowship grant is taxable, you may have to make estimated tax payments. For more information refer to Publication 970, Tax Benefits for Education.


Stephen G. :

If you want to read more about other educational items you can obtain Publication 970 at IRS.gov by following the link above.

Customer :

so what is that mean ?

Customer :

part of my schoolarship is taxable

Stephen G. :

It means money you received for room & board is taxable.

Customer :

it is all amount

Stephen G. :

What?

Customer :

I mean 26500 $ all for room and board

Customer :

how can I fix that ?

Stephen G. :

OK, that would be the taxable part. You need to file an amended 2011 tax return on Form 1040X. If you use H&R Block, they can do it.

Customer :

no I filled through tax office

Stephen G. :

I'd bring whatever paperwork you have on your scholarship award to them & have them make the final determination that it is taxable.

Customer :

in colorado and I am in TX now

Stephen G. :

What tax office? the IRS?

Customer :

no I mean local tax service

Customer :

tax prepartion office

Customer :

can I use any soft ware to amend 2011 even I didnot fill by software

Stephen G. :

It doesn't matter. You need to get the Amended Return done where you are now. Just bring a copy of your 2011 tax return & your information about your scholarship with you.

Stephen G. :

I don't think you will be able to figure out exactly what needs to be done yourself & you don't want to make any mistakes as it will take forever to straighten it out.

Customer :

so what do you advice me ?

Stephen G. :

Now what about 2012?

Customer :

2012 I filled with my friend he told me that rent part is not taxable so I reported just 12600 as taxable part of scholarship

Customer :

so the amount need to fixed also

Stephen G. :

I don't know where he got that idea.

Customer :

but with 2012 I used turbo tax so is it possible to fix it by myself ?

Stephen G. :

You better get them refiled with Amended Returns ASAP as you will have to pay penalty and interest charges also.

Stephen G. :

You can't just do the return over; you have to file a Form 1040X - Amended Return.

Customer :

why I have to pay penalty and interst charges

Stephen G. :

Because you didn't pay the tax when due.

Customer :

I may get credit !!!

Stephen G. :

I don't think so.

Customer :

how I tried by soft ware and I got credit !!

Customer :

I have 3 kids

Stephen G. :

If you have a tax preparer that knows what he's doing, he will be able to write an explanation to eliminate or reduce any penalties.

Customer :

so even I have credit I will get penalties

Stephen G. :

Well, I doubt you are filling the form out correctly because you may be claiming the earned income credit but what you are receiving isn't earned income.

Stephen G. :

If you don't owe anything, there's no penalty & interest charges. However, even with your children, it doesn't sound correct because you have had no tax withholding.

Customer :

so what is considered !

Stephen G. :

What do you mean?

Customer :

I mean not earned income

Stephen G. :

Earned income means income from a job that was reported to you on a W2 form at the end of the year.

Customer :

I filled on software as foreign income

Customer :

because it is from Libya

Stephen G. :

You need help.

Stephen G. :

I have no idea where you put that on your tax return.

Customer :

there is section on turbo tax software called other income

Customer :

I put it there as foreign income

Stephen G. :

Besides, it doesn't matter where you received income from; you a resident alien so all of your income is taxed the same no matter where in the world it comes from.

Stephen G. :

The only effect of foreign income would be if the foreign country withheld foreign tax from you; or you were in the foreign country earning the money and away from the US for a year, at least

Stephen G. :

So, that part doesn't sound correct.

Customer :

foreign country withheld foregien tax from me what is that mean ?

Stephen G. :

We can't do returns here; so I strongly recommend that you get some help and get yourself up to date with your taxes so that you don't have that hanging over your head;

Stephen G. :

If you owed tax to a foreign country.

Customer :

you mean If I have income in Libya and it is taxable there too

Stephen G. :

Please understand, I can't explain everything to you in this format; all I can do now is give you my professional advice; you need to get some professional help to get your tax returns straightened out; you really can't do it yourself, just by the questions you are asking; I'm just trying to make sure you do the right thing & don't make any more mistakes.

Customer :

H&R blook is good ?

Stephen G. :

We can't make specific recommendations for tax preparers; they do a lot of returns; they are probably still around even though yesterday was the final filing day for 2012 returns for people who had obtained filing extensions back in April.

Stephen G. :

They are a national firm so they are pretty much everywhere.

Customer :

what is about nationalization process is it affected by such stuff ?

Stephen G. :

I don't understand what you are asking?

Customer :

I mean If I want to apply for citizenship in the future would that affects me ?

Stephen G. :

Sure. You will have to have a clean record with respect to your tax filings.

Stephen G. :

That's one reason I'm suggesting you get it right.

Stephen G. :

We've been at this over an hour now; (the average time is about 15 minutes); I think I've told you all I can about your issues;

Stephen G. :

Please remember to rate my response; it is the only way we get credit for out work:

Stephen G. :

Thanks for using JustAnswer.com

Stephen G. :

Are you having trouble with the rating system?

Stephen G. :

Can I assist you further?

Customer :

hi

Customer :

I was just trying to keep connection

Stephen G. :

OK, can you please provide my rating?

Customer :

just I have some details it is still clear for me ?

Customer :

nor clear

Stephen G. :

ok what?

Customer :

about foreign income you told me I have to be at least a year outside USA

Stephen G. :

that's just one of the rules for the foreign income exclusion; it doesn't pertain to you; I was just trying to explain one of the reasons that foreign income is identified as such; but that's not you.

Customer :

so what are the credited foreign income because I might I have income this year for rent and salary form the company that I was worked with as compensation would that consider foreign earned income for me and I can credit for it ?

Customer :

you know because of war

Stephen G. :

If you pay tax on earning to a foreign government, in order to guard against double taxation, you must also include that income in your US income, but you can receive a credit for the tax on the same income that you paid to the foreign government against your US tax presuming there's a tax treaty or no conflict with a tax treaty; if that situation were to arise in any tax year, your tax preparer will determine if there's an applicable tax treaty involved;

Stephen G. :

I'm not sure we are on good terms with Libya at the moment; you probably know more than I do about that;

Customer :

no I dont pay tax for libyan goverment now the goverment shutdown for period of time so

Stephen G. :

The government will be open tomorrow here.

Stephen G. :

If you don't pay tax to a foreign country, there's no credit to be concerned with.

Customer :

oh great news but in Libya I dont thing so soon

Stephen G. :

I really need to cut this off now as we have asked and answered a lot more than 1 question and a couple of follow-ups.

Customer :

just to make it clear if I am paying tax in libya I would get crdit 11

Customer :

!!

Stephen G. :

Now what you need to do for me is to provide a rating in order than I can get credit for the time that I have spent with you.

Customer :

man just last point it is so important to me

Customer :

If I pay tax in libya would I get credit for my income or the oposit is right ?

Stephen G. :

Generally yes but it would depend upon the status of any tax treaty at the time you pay the tax; so we don't know about the future, do we?

Customer :

last question what is about if it cash

Stephen G. :

If what is cash?

Customer :

yes

Stephen G. :

Cash earnings are taxed just like anything else.

Customer :

I mean forgien earned income in cash

Stephen G. :

Doesn't matter what form it is in; if you don't report it, it is a violation of the tax law.

Customer :

I mean would I get credit for it too

Stephen G. :

There is no credit for foreign income.

Stephen G. :

only tax paid & that depends upon the treaty; isn't there a jihad tax in Lybia?

Stephen G. :

I doubt a jihad tax would qualify for a credit.

Customer :

I dont know it

Stephen G. :

That's what one of the tax websites says.

Customer :

there are alot of tax but I know the bigest one is income tax

Stephen G. :

Really, I can't just keep answering your questions; let's be fair here.

Customer :

the problem I dont understand treaty tax

Customer :

what is that mean ?

Stephen G. :

Look, I answered your original questions about your 2011 and 2012 tax returns. The rest of your questions have nothing to do with your original questions.

Customer :

believe me I will credit you just clarify that for me , I pay so I deserve to understand 1

Stephen G. :

You don't have any tax to Libya in 2011 and 2012.

Stephen G. :

Not for 2 hours.

Customer :

it looks like you got anger mr.Stephen

Stephen G. :

I told you before that it depends on any treaty in the FUTURE when you actually have foreign taxes paid.

Customer :

but I put the option on detailed so

Stephen G. :

I'm not mad, I'm just tired; it's been 2 hours;

Customer :

ok I have on 2012 too

Stephen G. :

option on??

Customer :

so how I report this and be credit it for it ?

Stephen G. :

You said you only had the 26,500. in 2012 of which you didn't report the rent. Isn't that correct?

Stephen G. :

There's no credit involved.

Customer :

I have some form libya but ariund 3000

Customer :

it was taxable in libya

Stephen G. :

around $3,000. of what? Income?

Customer :

so would I get credit for it

Customer :

yes

Customer :

I know it is little

Stephen G. :

There's no tax on that

Stephen G. :

You don't get credit for income.

Customer :

why you told me if it is taxable in Libya i would get credit for it ?

Stephen G. :

Not the income.

Stephen G. :

I never said that.

Customer :

just stop explain to me by example and let us finish that

Customer :

this is the point I am looking for it /

Stephen G. :

There's no credit for income. There's no example involved.

Customer :

you make it harder

Customer :

let me make it by myself

Customer :

if I HAVE 3000 $ AND i GOT TAXED FOR 1000 WOULD i GET CREDIT FOR 1000

Stephen G. :

What don't you understand about the fact that there's no credit for foreign income? Only foreign tax if it is withheld and the treaty permits it.

Customer :

TREATY ??

Stephen G. :

You would get credit only if you were also taxed in the USA & we had a tax treaty with Lybia. I know what Lybia's tax rates are & the highest is 10%.

Customer :

LET ME TRASULATE IT ?

Customer :

ok what is treaty says

Stephen G. :

There is no tax treaty with Lybia.

Stephen G. :

So, it is possible to be double taxed; if Americans were in Lybia, the same thing would happen to them.

Stephen G. :

I just checked on it.

Stephen G. :

But it would only apply to earnings in Libya.

Customer :

it Libya not Lybia

Customer :

just to be sure

Stephen G. :

Yes, I know. Not familiar with the spelling until now.

Customer :

no just because there is lyberia

Customer :

which different

Stephen G. :

Of course; no I looked up Libya; the computer automatically correct my error anyway.

Customer :

so would I get any credit for at least any earning on 2012 and 2013 in general if it is double taxed .

Stephen G. :

No.

Customer :

so what mean then

Stephen G. :

Bur it wasn't taxed in Libya if it was a scholarship paid by the government

Customer :

I am taking about sallary and rent from the comany I worke for

Customer :

not the schoolarship

Stephen G. :

I thought you said you received a scholarship of $26,500. in 2011 and 2012?

Stephen G. :

If you had additional income and you are a US resident alien, then you will be taxed on that income in the US. There is no treaty with Libya, so there is no tax credit involved.

Customer :

yes plus I have some earning in this year and part of last year as sallary and rent form company I worked for it and during the war every thing stopped and then they compensates all employee for damages

Stephen G. :

Well, you have tax to pay on that to the US. You'll need to bring all that information with you to H&R Block if you chose to go to them.

Customer :

so again there is no credit for those also

Stephen G. :

No credits.

Customer :

thank you and have good night and I am sorry for keep you so long but I have no choice you know I need to get as much information as I can .

Stephen G. :

I understand & I am happy to tell you everything I can. If you wish to reach me again here, you can do so by asking for "Steve G." at the beginning of your question. Thanks for the rating & thanks again for using JustAnswer.com

Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4114
Experience: Extensive Experience with Tax, Financial & Estate Issues
Stephen G. and 5 other Tax Specialists are ready to help you

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Stephen G.
Stephen G.
Tax Professional
4114 Satisfied Customers
Extensive Experience with Tax, Financial & Estate Issues