Can anyone help with a tax question?

[Darcy03231]

I'm helping one of the girls that lives with us do her taxes. She's in her first year of college and got a 1098T from the school. When we fill everything in we get a screen that says:

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Check here if all of 1, 2, and 3 below apply to this return.

You were:
1. Under age 18 at the end of 2010, or Age 18 and the end of 2010 and your earned income was less than one-half of your support, or
A full-time student over age 18 and under age 24 at the end of 2010 and your earned income was less than one-half of your support.

2. At least one of your parents was alive at the end of 2010.

3. You are not filing a joint return for 2010.

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1. She was 19 at the end of 2010 and a full time student. Her earned income was used 100% for her support (She made around 10k last year). While she lives with us, she pays for all of her own expenses (car, cell phone, food, clothing, entertainment, books, tuition, etc. ) Basically, the only thing we provide for her is a roof over her head. She's not related to us in any way. We took her in when her parents abandoned her at the beginning of her senior year in high school.

2. Both of her so-called parents are still alive.

3. She is not filing a joint return.

The way I read this is that we do not check the box because her earned income is more than one-half of her support.

Am I reading this right?

 

[mistysue]

yes. You do not check because ALL of them are not correct.

 

[jedijohn]

Whatever website/program you are using is trying to figure out if a portion of the "American Opportunity Credit" is refundable.

For more information read the following IRS publication (the part about refundable credit is towards the end): http://www.irs.gov/publications/p970/ch02.html#en_US_publink1000204325

From what you describe it sounds like she does qualify since #1 definitely does not apply to her situation. Basically they are trying to make sure that she is not a student who is being supported by other source (such as parents or a spouse), thus making her undeserving of a refund of any amount of the credit that exceeded her tax liability. Since she is basically supporting herself, she is entitled to a full refund of the credit.

 

[vicki_c]

You say her earned income was used 100% for her support and you provide nothing but the lodging (don't know how to quantify that) - so how could her earned income be less than 1/2 of her support?

If she had enough earned income to support herself except for the lodging piece that you provide, it doesn't seem that you could say that one statement is true.

Just thinking out loud - and like I said I don't know how you put a number on the lodging you provide, but I'm sure it can be done.

(just saw jedijohn's edited post now - maybe I don't understand what it means - sorry! Sounds like I'm reading it backwards from the way it's intended, but I can't figure out how - maybe too tired!)

 

[Sadie22]

The question is whether the student is anyone's dependent. She apparently is independent and receiving free rent from some generous people. She paid her own tuition and can receive whatever tax credit or deduction works out best for her. If she were the dependent of a parent or the people who took her in, no one would be eligible for the tuition tax credit or deduction for the tuition paid by the student.

My personal question is, aside from income tax questions, is this student receiving all the college financial aid to which she might be entitled?

 

[seashoreCM]

If her earned income was less than half of her support then she must have received support in a larger amount from somewhere else such as from stock dividends or bank interest or you.

The following sentences are not the same:
1. She used 100% of her income for her support.
2. She provided 100% of her support.

Just because she stayed with you in a very upscale neighborhood and did not pay rent does not mean that you provided support to her to the tune of what a comparable room would rent for in that neighborhood. Rather it could be the difference between what it costs to run your household with her stayng there compared with her not staying there. You would have provided support to her if you paid rent for her to stay someplace else. If she did pay rent to you then that amount counts as part of what she did to support herself.

 

[LilyWDW]

The question is whether the student is anyone's dependent. She apparently is independent and receiving free rent from some generous people. She paid her own tuition and can receive whatever tax credit or deduction works out best for her. If she were the dependent of a parent or the people who took her in, no one would be eligible for the tuition tax credit or deduction for the tuition paid by the student.

My personal question is, aside from income tax questions, is this student receiving all the college financial aid to which she might be entitled?

Just so it doesn't confuse anyone, they did not pass a tuition deduction this year. So, if you don't meet the requirements for one of the credits, you seem to be sorry out of luck.

 

[jedijohn]

Just so it doesn't confuse anyone, they did not pass a tuition deduction this year. So, if you don't meet the requirements for one of the credits, you seem to be sorry out of luck.

Actually that is more confusing. They actually extended it at the last minute last year (2010) and so you are correct in saying they didn't pass it this year (2011).

The tuition deduction has been extended through 2011 so if you do not qualify for any of the other credits, you still have a chance to save on your taxes.


http://turbotax.intuit.com/tax-tools/tax-tips/IRS-Tax-Return/Summary-of-Federal-Tax-Law-Changes-for-2010-2017/INF12041.html

Tuition and Fees Deduction

You can deduct up to $4,000 of college tuition and fees through 2011.

 

[Darcy03231]

The question is whether the student is anyone's dependent. She apparently is independent and receiving free rent from some generous people. She paid her own tuition and can receive whatever tax credit or deduction works out best for her. If she were the dependent of a parent or the people who took her in, no one would be eligible for the tuition tax credit or deduction for the tuition paid by the student.

My personal question is, aside from income tax questions, is this student receiving all the college financial aid to which she might be entitled?

She receives very little in financial aid. Because her parents are both alive and working in another state and will provide their information for the FAFSA form, they school considers her to be dependent. We ran around in circles this time last year. The city we live in deemed her to be in danger of being homeless, she received all kinds of free stuff at school (bus ticket, meals, free SAT, etc.) and she received food stamps from the city. At that time she lived independent of her parents for almost a year, but not good enough for financial aid.

Thank you everyone for your help. I was reading it that we didn't check the box too, but started second guessing myself. I really don't think it costs that much extra to have her here. The room was empty, I have to heat the house anyway, so maybe just little more water and electric. She's a great kid and good student and no trouble to have. If she had to pay rent somewhere there's no way should could afford to go to school.

 

[LadyBeBop]

Basically, you'd check the box if either you, or her parents, are going to claim her as a dependent.

I'm assuming you aren't. And her parents aren't entitled to claim her.

You're right in not checking the box.

 

[Darcy03231]

Basically, you'd check the box if either you, or her parents, are going to claim her as a dependent.

I'm assuming you aren't. And her parents aren't entitled to claim her.

You're right in not checking the box.

No, I'm not claiming her. Legally, I can't since I don't provide more than half of her support. Parents aren't claiming her either. She's claiming herself.

By not checking the box she'll get back about $1200 more than if the box was checked so its a big difference. I just want to make sure we're doing it right. I'm one of those people that is totally honest on my taxes - no fudging for me. I don't want any issues down the road. We were audited once and, for us, it was really easy because we didn't claim anything we weren't entitled to and I keep all receipts.

 

[laurafergie]

She receives very little in financial aid. Because her parents are both alive and working in another state and will provide their information for the FAFSA form, they school considers her to be dependent. We ran around in circles this time last year. The city we live in deemed her to be in danger of being homeless, she received all kinds of free stuff at school (bus ticket, meals, free SAT, etc.) and she received food stamps from the city. At that time she lived independent of her parents for almost a year, but not good enough for financial aid.

Thank you everyone for your help. I was reading it that we didn't check the box too, but started second guessing myself. I really don't think it costs that much extra to have her here. The room was empty, I have to heat the house anyway, so maybe just little more water and electric. She's a great kid and good student and no trouble to have. If she had to pay rent somewhere there's no way should could afford to go to school.

Bolding mine - I assume by the above she was registered by the equivalent of the your city's Homeless Liaison Office for the public schools? Did you know that the Homeless Liaison Office can contact the the college financial aid office (in writing) and tell them she qualified as a "homeless youth". Her Financial Aid can be appealed with this new information and she will eligible for government backed loans.

BTDT with a child that I sheltered. I suggest that the Homeless Liaison Office is contacted for an appointment and asked for this in writing. Then make an appointment with the head of her colleges financial aid armed with the letter and also armed with their procedure for appeal.

ETA: The meetings should be done by the youth in question.

The key here is face to face meetings. It can be done, just takes time.

 

[Darcy03231]

Bolding mine - I assume by the above she was registered by the equivalent of the your city's Homeless Liaison Office for the public schools? Did you know that the Homeless Liaison Office can contact the the college financial aid office (in writing) and tell them she qualified as a "homeless youth". Her Financial Aid can be appealed with this new information and she will eligible for government backed loans.

BTDT with a child that I sheltered. I suggest that the Homeless Liaison Office is contacted for an appointment and asked for this in writing. Then make an appointment with the head of her colleges financial aid armed with the letter and also armed with their procedure for appeal.

ETA: The meetings should be done by the youth in question.

The key here is face to face meetings. It can be done, just takes time.

We did this. In our city its set up through the school system since she was 18 when her parents left her. Legally she was an adult, although she turned 18 in her junior year of high school. She got a letter from the school system, a letter from the high school guidance counselor and we did a letter too. According to her school's financial aid office, she still didn't qualify as "independent." Because she's a great student she did receive merit aid scholarships which helped, and she received some other scholarships due to her major. She basically saves every dime she can to put toward tuition and books, but she did take some student loans.

 

[LilyWDW]

Actually that is more confusing. They actually extended it at the last minute last year (2010) and so you are correct in saying they didn't pass it this year (2011).

The tuition deduction has been extended through 2011 so if you do not qualify for any of the other credits, you still have a chance to save on your taxes.


http://turbotax.intuit.com/tax-tools/tax-tips/IRS-Tax-Return/Summary-of-Federal-Tax-Law-Changes-for-2010-2017/INF12041.html

Thank you! Everything I had looked up said you would not be able to take the tuition deduction. I will try to do it on Turbo Tax. H&R Block wouldn't allow me to do so.

Do you have to file a specific form in order to do this?

 

[jedijohn]

Thank you! Everything I had looked up said you would not be able to take the tuition deduction. I will try to do it on Turbo Tax. H&R Block wouldn't allow me to do so.

Do you have to file a specific form in order to do this?

Form 8917...since congress changed the tax laws at the last minute, it is one of the deductions you can't file until mid-February.

http://www.irs.gov/newsroom/article/0,,id=234736,00.html?portlet=7

Beginning Feb. 14, the IRS will start processing both paper and e-filed returns claiming itemized deductions on Schedule A, the higher education tuition and fees deduction on Form 8917 and the educator expenses deduction

 

[Sadie22]

We did this. In our city its set up through the school system since she was 18 when her parents left her. Legally she was an adult, although she turned 18 in her junior year of high school. She got a letter from the school system, a letter from the high school guidance counselor and we did a letter too. According to her school's financial aid office, she still didn't qualify as "independent." Because she's a great student she did receive merit aid scholarships which helped, and she received some other scholarships due to her major. She basically saves every dime she can to put toward tuition and books, but she did take some student loans.

It sounds like all of this was done at least a year ago? What about now? Is she preparing a FAFSA based on her present information from the income tax return she's preparing now? I would encourage the girl to try to set up the meetings a previous poster mentioned. I know it's time-consuming and frustrating but this needs to be revisited every year. Sometimes the FAFSA is required for the renewal of the merit scholarships as well.

You are wonderful to look out for this girl's best interests. You're certainly making a difference for this girl.