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Richard
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 55717
Experience:  29 years of experience as a tax, real estate, and business attorney.
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We got a CP2000 and one of the items was about discrepancy

Customer Question

Hi Richard, we got a CP2000 and one of the items was about discrepancy on 1098T. Apparently, I had claimed Educational Credit but now realize that the amount on 1098T (BOX 2) was for the billed amount only and not the actual amount paid. The amount was $8292.53I have a loan through a private bank who makes the payment directly to the school as well. I have the following documents from the school showing the payments for Spring and Fall but I am unable to tell if it counts as me having paid at least $8292.53. I have some refunds too (credited back to my account) so am not sure. The bank did make a payment of $12,000 in 2013 (which you can see from the documents). I am just not sure how to respond to this CP2000.
Submitted: 1 year ago.
Category: Tax
Expert:  Richard replied 1 year ago.

Good evening. Can you provide me a bit more information? Specifically, what mistake does the CP2000 contend was made and what change does it cause for your tax liability?

Customer: replied 1 year ago.
See attached. This was the piece of the educational credit in the CP2000. I believe I just need to provide documentation to support the amount claimed. When I called IRS, they said that if I have indeed made the payment, I can fax in a letter stating the same. She said I don't need to submit proof (since this is not an audit).
Expert:  Richard replied 1 year ago.

That's great. Then, you can simply send the bank the documentation evidencing the payments made by the bank on your behalf. It doesn't matter the source of the funds used to make the payment, just that the payments were made by you or on your behalf. This is no different than paying a deductible expense with a credit card or taking out a loan to pay property tax. You're liable to repay the source of the loan from which the payments are made so the payments are deemed to be made by you.

Customer: replied 1 year ago.
IRS says that this is independent from my tax filing and as long as I can fax them soon, it should not affect my tax liability (i.e. they will not deduct the $1659 of credit I had claimed from my tax refund this year). .
Expert:  Richard replied 1 year ago.

That's great. Then, you can simply send the bank the documentation evidencing the payments made by the bank on your behalf. It doesn't matter the source of the funds used to make the payment, just that the payments were made by you or on your behalf. This is no different than paying a deductible expense with a credit card or taking out a loan to pay property tax. You're liable to repay the source of the loan from which the payments are made so the payments are deemed to be made by you.

Customer: replied 1 year ago.
The statements from the school is confusing and they cannot tell me exactly how much I paid (because of the refunds, etc.) Again, the refund was not a check written back to me but credited to my account/balance.So, I guess as long as I can verify that my Bank sent an amount of $12000 in 2013 to the school (which those statements say it did), then that would probably suffice in this case, correct? Am I correct in assuming that internal refunds (within my account) should not matter?
Expert:  Richard replied 1 year ago.

Yes, that is correct. :)

Customer: replied 1 year ago.
Ok great. One last thing, when claiming Educational Credits, when I claim my educational credits (I use TurboTax), it asks me to put in the Amount in Box 1 or 2 on 1098T sent by the school. If the actual amount paid is more that what was billed (as you saw in the case above for last year), can I claim credits using the actual amount (the higher amount)?
Expert:  Richard replied 1 year ago.

Yes, you can, but if you do, you'll have to file an amended return if you are claiming a larger credit that would change your tax liability. All the IRS is asking in the CP2000 is to substantiate the amount you did claim.

Customer: replied 1 year ago.
No, I am talking about when filing this year. I won't be changing anything on last year's (for which the cp2000 was issued)
Expert:  Richard replied 1 year ago.

Gotcha. Yes, you can claim what you paid. :) If it differs from the 1098T, you should send in a letter of explanation with the return to explain the difference.

Expert:  Richard replied 1 year ago.

I just wanted to let you know that I will be logging off for the evening. Should you have a follow up while I’m away, I will address it immediately upon my return in the morning. Thank you in advance for your patience. I apologize for any inconvenience.

Customer: replied 1 year ago.
Sure tomorrow morning is fine, Richard.Now, if the amount paid (loan) by the bank to school was $12,000 and only about $8000 was for tuition and the remaining was for boarding, supplies etc., can entire $12,000 be claimed as Educational Credit?However, this year, the college actually refunded me $4000 from the $12,000 for boarding, etc, do I claim $8000 or $12000?
Customer: replied 1 year ago.
Two different scenarios above..
Expert:  Richard replied 1 year ago.

You can only include "qualified educational expenses." Qualified expenses include tuition, any fees that are required for enrollment, and course materials the student was required to buy from the school.