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Filing An Amended Tax Return 2012

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Filing An Amended Tax Return 2012

Filing an amended tax return 2012 1. Filing an amended tax return 2012   Scholarships, Fellowships, Grants, and Tuition Reductions Table of Contents Reminder Introduction Scholarships and FellowshipsTax-Free Scholarships and Fellowships Taxable Scholarships and Fellowships Reporting Scholarships and Fellowships Other Types of Educational AssistanceFulbright Grants Pell Grants and Other Title IV Need-Based Education Grants Payment to Service Academy Cadets Veterans' Benefits Qualified Tuition Reduction Reminder Individual retirement arrangements (IRAs). Filing an amended tax return 2012  You can set up and make contributions to an IRA if you receive taxable compensation. Filing an amended tax return 2012 Under this rule, a taxable scholarship or fellowship is compensation only if it is shown in box 1 of your Form W-2, Wage and Tax Statement. Filing an amended tax return 2012 For more information about IRAs, see Publication 590. Filing an amended tax return 2012 Introduction This chapter discusses the income tax treatment of various types of educational assistance you may receive if you are studying, teaching, or researching in the United States. Filing an amended tax return 2012 The educational assistance can be for a primary or secondary school, a college or university, or a vocational school. Filing an amended tax return 2012 Included are discussions of: Scholarships, Fellowships, Need-based education grants, such as a Pell Grant, and Qualified tuition reductions. Filing an amended tax return 2012 Many types of educational assistance are tax free if they meet the requirements discussed here. Filing an amended tax return 2012 Special rules apply to U. Filing an amended tax return 2012 S. Filing an amended tax return 2012 citizens and resident aliens who have received scholarships or fellowships for studying, teaching, or researching abroad. Filing an amended tax return 2012 For information about these rules, see Publication 54, Tax Guide for U. Filing an amended tax return 2012 S. Filing an amended tax return 2012 Citizens and Resident Aliens Abroad. Filing an amended tax return 2012 Scholarships and Fellowships A scholarship is generally an amount paid or allowed to, or for the benefit of, a student (whether an undergraduate or a graduate) at an educational institution to aid in the pursuit of his or her studies. Filing an amended tax return 2012 A fellowship is generally an amount paid for the benefit of an individual to aid in the pursuit of study or research. Filing an amended tax return 2012 Amount of scholarship or fellowship. Filing an amended tax return 2012   The amount of a scholarship or fellowship includes the following: The value of contributed services and accommodations. Filing an amended tax return 2012 This includes such services and accommodations as room (lodging), board (meals), laundry service, and similar services or accommodations that are received by an individual as a part of a scholarship or fellowship. Filing an amended tax return 2012 The amount of tuition, matriculation, and other fees that are paid or remitted to the student to aid the student in pursuing study or research. Filing an amended tax return 2012 Any amount received in the nature of a family allowance as a part of a scholarship or fellowship. Filing an amended tax return 2012 Tax-Free Scholarships and Fellowships A scholarship or fellowship is tax free (excludable from gross income) only if you are a candidate for a degree at an eligible educational institution. Filing an amended tax return 2012 A scholarship or fellowship is tax free only to the extent: It does not exceed your expenses; It is not designated or earmarked for other purposes (such as room and board), and does not require (by its terms) that it cannot be used for qualified education expenses; and It does not represent payment for teaching, research, or other services required as a condition for receiving the scholarship. Filing an amended tax return 2012 (But for exceptions, see Payment for services,later. Filing an amended tax return 2012 Use Worksheet 1–1 to figure the amount of a scholarship or fellowship you can exclude from gross income. Filing an amended tax return 2012 Candidate for a degree. Filing an amended tax return 2012   You are a candidate for a degree if you: Attend a primary or secondary school or are pursuing a degree at a college or university, or Attend an educational institution that: Provides a program that is acceptable for full credit toward a bachelor's or higher degree, or offers a program of training to prepare students for gainful employment in a recognized occupation; and Is authorized under federal or state law to provide such a program and is accredited by a nationally recognized accreditation agency. Filing an amended tax return 2012 Eligible educational institution. Filing an amended tax return 2012   An eligible educational institution is one whose primary function is the presentation of formal instruction and that normally 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. Filing an amended tax return 2012 Qualified education expenses. Filing an amended tax return 2012   For purposes of tax-free scholarships and fellowships, these are expenses for: Tuition and fees required to enroll at or attend an eligible educational institution, and Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. Filing an amended tax return 2012 These items must be required of all students in your course of instruction. Filing an amended tax return 2012 Expenses that do not qualify. Filing an amended tax return 2012   Qualified education expenses do not include the cost of: Room and board, Travel, Research, Clerical help, or Equipment and other expenses that are not required for enrollment in or attendance at an eligible educational institution. Filing an amended tax return 2012 Payment for services. Filing an amended tax return 2012   Generally, you cannot exclude from your gross income the part of any scholarship or fellowship that represents payment for teaching, research, or other services required as a condition for receiving the scholarship. Filing an amended tax return 2012 This applies even if all candidates for a degree must perform the services to receive the degree. Filing an amended tax return 2012 (See exceptions next. Filing an amended tax return 2012 ) Exceptions. Filing an amended tax return 2012   You do not have to treat as payment for services the part of any scholarship or fellowship that represents payment for teaching, research, or other services if you receive the amount under: The National Health Service Corps Scholarship Program, or The Armed Forces Health Professions Scholarship and Financial Assistance Program. Filing an amended tax return 2012 Example 1. Filing an amended tax return 2012 You received a scholarship of $2,500. Filing an amended tax return 2012 The scholarship was not received under either of the exceptions mentioned above. Filing an amended tax return 2012 As a condition for receiving the scholarship, you must serve as a part-time teaching assistant. Filing an amended tax return 2012 Of the $2,500 scholarship, $1,000 represents payment for teaching. Filing an amended tax return 2012 The provider of your scholarship gives you a Form W-2 showing $1,000 as income. Filing an amended tax return 2012 Your qualified education expenses were at least $1,500. Filing an amended tax return 2012 Assuming that all other conditions are met, $1,500 of your scholarship is tax free. Filing an amended tax return 2012 The $1,000 you received for teaching is taxable. Filing an amended tax return 2012 Example 2. Filing an amended tax return 2012 You are a candidate for a degree at a medical school. Filing an amended tax return 2012 You receive a scholarship (not under either of the exceptions mentioned above) for your medical education and training. Filing an amended tax return 2012 The terms of your scholarship require you to perform future services. Filing an amended tax return 2012 A substantial penalty applies if you do not comply. Filing an amended tax return 2012 The entire amount of your grant is taxable as payment for services in the year it is received. Filing an amended tax return 2012 Athletic Scholarships An athletic scholarship is tax free only if and to the extent it meets the requirements discussed later. Filing an amended tax return 2012 Worksheet 1-1. Filing an amended tax return 2012    You can use Worksheet 1-1, Taxable Scholarship and Fellowship Income , later, to figure the tax-free and taxable parts of your athletic scholarship. Filing an amended tax return 2012    Worksheet 1-1. Filing an amended tax return 2012 Taxable Scholarship and Fellowship Income 1. Filing an amended tax return 2012 Enter the total amount of any scholarship or fellowship for 2013. Filing an amended tax return 2012 See Amount of scholarship or fellowship, earlier. Filing an amended tax return 2012 1. Filing an amended tax return 2012       If you are a degree candidate at an eligible educational institution, go to line 2. Filing an amended tax return 2012 If you are not a degree candidate at an eligible educational institution, stop here. Filing an amended tax return 2012 The entire amount is taxable. Filing an amended tax return 2012 For information on how to report this amount on your tax return, see Reporting Scholarships and Fellowships , earlier, in this chapter. Filing an amended tax return 2012       2. Filing an amended tax return 2012 Enter the amount from line 1 that was for teaching, research, or any other services required as a condition for receiving the scholarship. Filing an amended tax return 2012 (Do not include amounts received for these items under the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance Program. Filing an amended tax return 2012 ) 2. Filing an amended tax return 2012     3. Filing an amended tax return 2012 Subtract line 2 from line 1 3. Filing an amended tax return 2012     4. Filing an amended tax return 2012 Enter the amount from line 3 that your scholarship or fellowship required you to use for other than qualified education expenses 4. Filing an amended tax return 2012     5. Filing an amended tax return 2012 Subtract line 4 from line 3 5. Filing an amended tax return 2012     6. Filing an amended tax return 2012 Enter the amount of your qualified education expenses 6. Filing an amended tax return 2012     7. Filing an amended tax return 2012 Enter the smaller of line 5 or line 6. Filing an amended tax return 2012 This amount is the most you can exclude from your gross income (the tax-free part of the scholarship or fellowship) 7. Filing an amended tax return 2012     8. Filing an amended tax return 2012 Subtract line 7 from line 5 8. Filing an amended tax return 2012     9. Filing an amended tax return 2012 Taxable part. Filing an amended tax return 2012 Add lines 2, 4, and 8. Filing an amended tax return 2012 See Reporting Scholarships and Fellowships , earlier, for how to report this amount on your tax return 9. Filing an amended tax return 2012     Taxable Scholarships and Fellowships If and to the extent your scholarship or fellowship does not meet the requirements described earlier, it is taxable and must be included in gross income. Filing an amended tax return 2012 You can use Worksheet 1–1, Taxable Scholarship and Fellowship Income, later, to figure the tax-free and taxable parts of your scholarship or fellowship. Filing an amended tax return 2012 Reporting Scholarships and Fellowships Whether you must report your scholarship or fellowship depends on whether you must file a return and whether any part of your scholarship or fellowship is taxable. Filing an amended tax return 2012 If your only income is a completely tax-free scholarship or fellowship, you do not have to file a tax return and no reporting is necessary. Filing an amended tax return 2012 If all or part of your scholarship or fellowship is taxable and you are required to file a tax return, report the taxable amount as explained below. Filing an amended tax return 2012 You must report the taxable amount whether or not you received a Form W-2. Filing an amended tax return 2012 If you receive an incorrect Form W-2, ask the payer for a corrected one. Filing an amended tax return 2012 For information on whether you must file a return, see Publication 501, Exemptions, Standard Deduction, and Filing Information, or your income tax form instructions. Filing an amended tax return 2012 How To Report How you report any taxable scholarship or fellowship income depends on which return you file. Filing an amended tax return 2012 Form 1040EZ. Filing an amended tax return 2012   If you file Form 1040EZ, include the taxable amount in the total on line 1. Filing an amended tax return 2012 If the taxable amount was not reported on Form W-2, also enter “SCH” and the taxable amount in the space to the left of line 1. Filing an amended tax return 2012 Form 1040A. Filing an amended tax return 2012   If you file Form 1040A, include the taxable amount in the total on line 7. Filing an amended tax return 2012 If the taxable amount was not reported on Form W-2, also enter “SCH” and the taxable amount in the space to the left of line 7. Filing an amended tax return 2012 Form 1040. Filing an amended tax return 2012   If you file Form 1040, include the taxable amount in the total on line 7. Filing an amended tax return 2012 If the taxable amount was not reported on Form W-2, also enter “SCH” and the taxable amount on the dotted line next to line 7. Filing an amended tax return 2012 Schedule SE (Form 1040). Filing an amended tax return 2012   To determine your net earnings from self-employment, include amounts you receive under a scholarship as pay for your services that are reported to you on Form 1099-MISC, Miscellaneous Income. Filing an amended tax return 2012 If your net earnings are $400 or more, you must pay self-employment tax. Filing an amended tax return 2012 Use Schedule SE, Self-Employment Tax, to figure this tax. Filing an amended tax return 2012 Form 1040NR. Filing an amended tax return 2012   If you file Form 1040NR, report the taxable amount on line 12. Filing an amended tax return 2012 Generally, you must report the amount shown in box 2 of Form(s) 1042-S, Foreign Person's U. Filing an amended tax return 2012 S. Filing an amended tax return 2012 Source Income Subject to Withholding. Filing an amended tax return 2012 See the Instructions for Form 1040NR for more information. Filing an amended tax return 2012 Form 1040NR-EZ. Filing an amended tax return 2012   If you file Form 1040NR-EZ, report the taxable amount on line 5. Filing an amended tax return 2012 Generally, you must report the amount shown in box 2 of Form(s) 1042-S. Filing an amended tax return 2012 See the Instructions for Form 1040NR-EZ for more information. Filing an amended tax return 2012 Other Types of Educational Assistance The following discussions deal with other common types of educational assistance. Filing an amended tax return 2012 Fulbright Grants A Fulbright grant is generally treated as a scholarship or fellowship in figuring how much of the grant is tax free. Filing an amended tax return 2012 Pell Grants and Other Title IV Need-Based Education Grants These need-based grants are treated as scholarships for purposes of determining their tax treatment. Filing an amended tax return 2012 They are tax free to the extent used for qualified education expenses during the period for which a grant is awarded. Filing an amended tax return 2012 Payment to Service Academy Cadets An appointment to a United States military academy is not a scholarship or fellowship. Filing an amended tax return 2012 Payment you receive as a cadet or midshipman at an armed services academy is pay for personal services and will be reported to you in box 1 of Form W-2. Filing an amended tax return 2012 Include this pay in your income in the year you receive it unless one of the exceptions, discussed earlier under Payment for services , applies. Filing an amended tax return 2012 Veterans' Benefits Payments you receive for education, training, or subsistence under any law administered by the Department of Veterans Affairs (VA) are tax free. Filing an amended tax return 2012 Do not include these payments as income on your federal tax return. Filing an amended tax return 2012 If you qualify for one or more of the education benefits discussed in chapters 2 through 12, you may have to reduce the amount of education expenses qualifying for a specific benefit by part or all of your VA payments. Filing an amended tax return 2012 This applies only to the part of your VA payments that is required to be used for education expenses. Filing an amended tax return 2012 You may want to visit the Veteran's Administration website at www. Filing an amended tax return 2012 gibill. Filing an amended tax return 2012 va. Filing an amended tax return 2012 gov for specific information about the various VA benefits for education. Filing an amended tax return 2012 Example. Filing an amended tax return 2012 You have returned to college and are receiving two education benefits under the latest GI Bill: (1) a $1,534 monthly basic housing allowance (BHA) that is directly deposited to your checking account, and (2) $3,840 paid directly to your college for tuition. Filing an amended tax return 2012 Neither of these benefits is taxable and you do not report them on your tax return. Filing an amended tax return 2012 You also want to claim an American opportunity credit on your return. Filing an amended tax return 2012 You paid $5,000 in qualified education expenses (see chapter 2, American Opportunity Credit , later). Filing an amended tax return 2012 To figure the amount of credit, you must first subtract the $3,840 from your qualified education expenses because this payment under the GI Bill was required to be used for education expenses. Filing an amended tax return 2012 You do not subtract any amount of the BHA because it was paid to you and its use was not restricted. Filing an amended tax return 2012 Qualified Tuition Reduction If you are allowed to study tuition free or for a reduced rate of tuition, you may not have to pay tax on this benefit. Filing an amended tax return 2012 This is called a “tuition reduction. Filing an amended tax return 2012 ” You do not have to include a qualified tuition reduction in your income. Filing an amended tax return 2012 A tuition reduction is qualified only if you receive it from, and use it at, an eligible educational institution. Filing an amended tax return 2012 You do not have to use the tuition reduction at the eligible educational institution from which you received it. Filing an amended tax return 2012 In other words, if you work for an eligible educational institution and the institution arranges for you to take courses at another eligible educational institution without paying any tuition, you may not have to include the value of the free courses in your income. Filing an amended tax return 2012 The rules for determining if a tuition reduction is qualified, and therefore tax free, are different if the education provided is below the graduate level or is graduate education. Filing an amended tax return 2012 You must include in your income any tuition reduction you receive that is payment for your services. Filing an amended tax return 2012 Eligible educational institution. Filing an amended tax return 2012   An eligible educational institution is one 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. Filing an amended tax return 2012 Officers, owners, and highly compensated employees. Filing an amended tax return 2012   Qualified tuition reductions apply to officers, owners, or highly compensated employees only if benefits are available to employees on a nondiscriminatory basis. Filing an amended tax return 2012 This means that the tuition reduction benefits must be available on substantially the same basis to each member of a group of employees. Filing an amended tax return 2012 The group must be defined under a reasonable classification set up by the employer. Filing an amended tax return 2012 The classification must not discriminate in favor of owners, officers, or highly compensated employees. Filing an amended tax return 2012 Payment for services. Filing an amended tax return 2012   Generally, you must include in income the part of any qualified tuition reduction that represents payment for teaching, research, or other services by the student required as a condition of receiving the qualified tuition reduction. Filing an amended tax return 2012 This applies even if all candidates for a degree must perform the services to receive the degree. Filing an amended tax return 2012 (See below for exceptions. Filing an amended tax return 2012 ) Exceptions. Filing an amended tax return 2012   You do not have to include in income the part of any scholarship or fellowship that represents payment for teaching, research, or other services if you receive the amount under: The National Health Service Corps Scholarship Program, or The Armed Forces Health Professions Scholarship and Financial Assistance Program. Filing an amended tax return 2012 Education Below the Graduate Level If you receive a tuition reduction for education below the graduate level (including primary, secondary, or high school), it is a qualified tuition reduction, and therefore tax free, only if your relationship to the educational institution providing the benefit is described below. Filing an amended tax return 2012 You are an employee of the eligible educational institution. Filing an amended tax return 2012 You were an employee of the eligible educational institution, but you retired or left on disability. Filing an amended tax return 2012 You are a widow or widower of an individual who died while an employee of the eligible educational institution or who retired or left on disability. Filing an amended tax return 2012 You are the dependent child or spouse of an individual described in (1) through (3), above. Filing an amended tax return 2012 Child of deceased parents. Filing an amended tax return 2012   For purposes of the qualified tuition reduction, a child is a dependent child if the child is under age 25 and both parents have died. Filing an amended tax return 2012 Child of divorced parents. Filing an amended tax return 2012   For purposes of the qualified tuition reduction, a dependent child of divorced parents is treated as the dependent of both parents. Filing an amended tax return 2012 Graduate Education A tuition reduction you receive for graduate education is qualified, and therefore tax free, if both of the following requirements are met. Filing an amended tax return 2012 It is provided by an eligible educational institution. Filing an amended tax return 2012 You are a graduate student who performs teaching or research activities for the educational institution. Filing an amended tax return 2012 You must include in income any other tuition reductions for graduate education that you receive. Filing an amended tax return 2012 How To Report Any tuition reduction that is taxable should be included as wages in box 1 of your Form W-2. Filing an amended tax return 2012 Report the amount from Form W-2, box 1, on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ). Filing an amended tax return 2012 Prev  Up  Next   Home   More Online Publications
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Understanding Your CP145 Notice

We were unable to credit the full amount you requested to the succeeding tax period.


What you need to do

  • Read and review your notice carefully. It will explain why we were unable to apply the amount you requested to the following year’s taxes. It may also suggest additional steps for you to take, depending on your situation.
  • Compare our changes to the information on your tax return.
  • You don't need to do anything if you agree with the notice.
  • Correct the copy of your tax return that you kept for your records.
  • If you disagree with the notice, contact us at the toll-free number on the top right corner of your notice (within 60 days of the notice date).
  • Adjust this year’s tax payments to avoid any possible underpayment.

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Answers to Common Questions

Q. What should I do if I disagree with the changes you made?

A. If you disagree, contact us at the toll-free number listed on the top right corner of your notice.

Q. What do I say when I call the IRS?

A. Mention that you received a CP 145 notice and you need to review your account with a customer service representative. Be sure to have a copy of your notice and your tax return before you call.

Q. What should I do if I find you misapplied a payment or haven't credited a payment that I made?

A. Contact us with your information at the toll-free number listed on your notice. Please have your documentation (such as cancelled checks, amended return, etc.) ready when you call. Our representative will discuss the issue with you and give you further instructions.

Q. What if I need to make another correction to my account?

A. You'll need to file an amended return.

Q. What if I have tried to get answers and after contacting IRS several times have not been successful?

A. Call Taxpayer Advocate at 1-877-777-4778 or for TTY/TDD 1-800-829-4059.


Tips for the next tax period

Make sure that you claim the proper amount of credit on your next tax return. You may need to adjust your estimated tax payments or your federal tax deposits.

Page Last Reviewed or Updated: 10-Feb-2014

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How to get help

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The Filing An Amended Tax Return 2012

Filing an amended tax return 2012 9. Filing an amended tax return 2012   Education Exception to Additional Tax on Early IRA Distributions Table of Contents Introduction Who Is Eligible Figuring the Amount Not Subject to the 10% Tax Reporting Early Distributions Introduction Generally, if you take a distribution from your IRA before you reach age 59½, you must pay a 10% additional tax on the early distribution. Filing an amended tax return 2012 This applies to any IRA you own, whether it is a traditional IRA (including a SEP-IRA), a Roth IRA, or a SIMPLE IRA. Filing an amended tax return 2012 The additional tax on an early distribution from a SIMPLE IRA may be as high as 25%. Filing an amended tax return 2012 See Publication 560, Retirement Plans for Small Business, for information on SEP-IRAs, and Publication 590, for information about all other IRAs. Filing an amended tax return 2012 However, you can take distributions from your IRAs for qualified higher education expenses without having to pay the 10% additional tax. Filing an amended tax return 2012 You may owe income tax on at least part of the amount distributed, but you may not have to pay the 10% additional tax. Filing an amended tax return 2012 Generally, if the taxable part of the distribution is less than or equal to the adjusted qualified education expenses (AQEE), none of the distribution is subject to the additional tax. Filing an amended tax return 2012 If the taxable part of the distribution is more than the AQEE, only the excess is subject to the additional tax. Filing an amended tax return 2012 Who Is Eligible You can take a distribution from your IRA before you reach age 59½ and not have to pay the 10% additional tax if, for the year of the distribution, you pay qualified education expenses for: yourself, your spouse, or your or your spouse's child, foster child, adopted child, or descendant of any of them. Filing an amended tax return 2012 Qualified education expenses. Filing an amended tax return 2012   For purposes of the 10% additional tax, these expenses are tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. Filing an amended tax return 2012 They also include expenses for special needs services incurred by or for special needs students in connection with their enrollment or attendance. Filing an amended tax return 2012   In addition, if the student is at least a half-time student, room and board are qualified education expenses. Filing an amended tax return 2012   The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. Filing an amended tax return 2012 The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. Filing an amended tax return 2012 The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Filing an amended tax return 2012 You will need to contact the eligible educational institution for qualified room and board costs. Filing an amended tax return 2012 Eligible educational institution. Filing an amended tax return 2012   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Filing an amended tax return 2012 S. Filing an amended tax return 2012 Department of Education. Filing an amended tax return 2012 It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Filing an amended tax return 2012 The educational institution should be able to tell you if it is an eligible educational institution. Filing an amended tax return 2012   Certain educational institutions located outside the United States also participate in the U. Filing an amended tax return 2012 S. Filing an amended tax return 2012 Department of Education's Federal Student Aid (FSA) programs. Filing an amended tax return 2012 Half-time student. Filing an amended tax return 2012   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing as determined under the standards of the school where the student is enrolled. Filing an amended tax return 2012 Figuring the Amount Not Subject to the 10% Tax To determine the amount of your distribution that is not subject to the 10% additional tax, first figure your adjusted qualified education expenses. Filing an amended tax return 2012 You do this by reducing your total qualified education expenses by any tax-free educational assistance, which includes: Expenses used to figure the tax-free portion of distributions from a Coverdell education savings account (ESA) (see Distributions in chapter 7, Coverdell Education Savings Account), The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Filing an amended tax return 2012 Do not reduce the qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance given to either the student or the individual making the withdrawal, or A withdrawal from personal savings (including savings from a qualified tuition program (QTP)). Filing an amended tax return 2012 If your IRA distribution is equal to or less than your adjusted qualified education expenses, you are not subject to the 10% additional tax. Filing an amended tax return 2012 Example 1. Filing an amended tax return 2012 In 2013, Erin (age 32) took a year off from teaching to attend graduate school full-time. Filing an amended tax return 2012 She paid $5,800 of qualified education expenses from the following sources. Filing an amended tax return 2012   Employer-provided educational assistance  (tax free) $5,000     Early distribution from IRA (includes $500 taxable earnings) 3,200           Before Erin can determine if she must pay the 10% additional tax on her IRA distribution, she must reduce her total qualified education expenses. Filing an amended tax return 2012   Total qualified education expenses $5,800     Minus: Tax-free educational assistance −5,000     Equals: Adjusted qualified  education expenses (AQEE) $ 800   Because Erin's AQEE ($800) are more than the taxable portion of her IRA distribution ($500), she does not have to pay the 10% additional tax on any part of this distribution. Filing an amended tax return 2012 However, she must include the $500 taxable earnings in her gross income subject to income tax. Filing an amended tax return 2012 Example 2. Filing an amended tax return 2012 Assume the same facts as in Example 1 , except that Erin deducted some of the contributions to her IRA, so the taxable part of her early distribution is higher by $1,000. Filing an amended tax return 2012 This must be included in her income subject to income tax. Filing an amended tax return 2012 The taxable part of Erin's IRA distribution ($1,000) is larger than her $800 AQEE. Filing an amended tax return 2012 Therefore, she must pay the 10% additional tax on $200, the taxable part of her distribution ($1,000) that is more than her qualified education expenses ($800). Filing an amended tax return 2012 She does not have to pay the 10% additional tax on the remaining $800 of her taxable distribution. Filing an amended tax return 2012 Reporting Early Distributions By January 31, 2014, the payer of your IRA distribution should send you Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Filing an amended tax return 2012 The information on this form will help you determine how much of your distribution is taxable for income tax purposes and how much is subject to the 10% additional tax. Filing an amended tax return 2012 If you received an early distribution from your IRA, you must report the taxable earnings on Form 1040, line 15b (Form 1040NR, line 16b). Filing an amended tax return 2012 Then, if you qualify for an exception for qualified higher education expenses, you must file Form 5329 to show how much, if any, of your early distribution is subject to the 10% additional tax. Filing an amended tax return 2012 See the Instructions for Form 5329, Part I, for help in completing the form and entering the results on Form 1040 or 1040NR. Filing an amended tax return 2012 There are many other situations in which Form 5329 is required. Filing an amended tax return 2012 If, during 2013, you had other distributions from IRAs or qualified retirement plans, or have made excess contributions to certain tax-favored accounts, see the instructions for line 58 (Form 1040) or line 56 (Form 1040NR) to determine if you must file Form 5329. Filing an amended tax return 2012 Prev  Up  Next   Home   More Online Publications