Well the tax firm just called to say he doesn’t even think I need representation yet. He told me to appeal one more time with all of the articles and any info I could get on the Pell grant. Then to make a spreadsheet that has separate columns for qualifying and non-qualifying expenses and showing how I allocated each expense against which grant/loan and the grant I used for non-qualifying is what I paid tax on … He said if they deny it again, then its eligible to go to the mediation process and the tax firm would help me then. In his words “don’t worry, you got this!” Lol. So I imagine it will be a couple more months because that’s how long they give themselves to reply.
I’ve never seen this. Would you let us know how it proceeds?
From the December 2014 IRS presentation at the FSA Conference:
Scholarships and Education Credits
No double benefit: Tuition and related expenses paid for with scholarships or grants do not qualify for education credits in order to prevent double benefits for the same expenses.
Trade-off between qualified expenses for education credits and taxability of grants: Scholarships and grants allocated to tuition and related expenses are tax-free, but they may also reduce the value of education credits. (If allocated to living expenses, grants are counted as taxable income.)
Taxpayers can choose how to allocate their scholarships and grants for tax purposes, regardless of how the institution allocated the funds (as long as the choice is in accordance with the terms of the scholarship or grant).
Pell Grants and AOTC
The AOTC made education credits available to many Pell Grant recipients for the first time.
Pell Grant recipients can face complicated decisions at tax time and, in total, forgo hundreds of millions of dollars in education credit each year.
Even if a student’s Pell Grant fully covers tuition and related expenses, the student may still have unmet need for living expenses.
These taxpayers must choose between claiming an education credit and making their Pell Grant taxable.
Many students do not realize that they have this choice, and that they could increase their AOTC by treating a portion of their Pell Grants as taxable income.
Most Pell Grant recipients should claim at least $2,000 in tuition and related expenses for the AOTC even if that means allocating some or all of their Pell Grant to living expenses and therefore including that amount as taxable income.
Beyond this rule of thumb, the right choice depends on the student’s and their family’s circumstances.
The presentation also included actual examples of families using the Pell for living expenses. A gentleman from the IRS gave the presentation, by the way. This is in line with annoyingdad’s post #16 … meaning that the info he found is still correct, even though there is no date.
Oh, and I found these in my notes from the presentation:
http://www.treasury.gov/connect/blog/Documents/Pell%20AOTC%204%20pager.pdf
http://www.treasury.gov/connect/blog/Pages/Helping-students-and-families-access-college-tax-benefits.aspx
Hope these help!
The material that kelsmom quoted clearly shows that the IRS agent dealing with the OP’s case is wrong. If s/he won’t budge after your next contact, I would call the IRS’s number for reaching a Taxpayer’s Advocate. The Advocates are more knowledgable/powerful than the average agent (at least he was in my case, involving my being misclassified as an independent contractor - by the SSA, no less! The case had been dragging on for about 2 years, but involving a Taxpayer’s Advocate really moved things along. Neighbors had similar success after involving an Advocate.)
using an Advocate is free, whereas involving your tax person or attorney is gonna cost you, possibly a lot.
Wondering how this came out @sherri0629
She hasn’t been on CC in about a year. Try PMing.