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Over the last 2 weeks it has brought my attention that IRS is now performing correspondence audits on tax returns claiming the American Opportunity Credit (Up to $2,500 per student). Thus far I have seen them looking for automatic “repayment” plus interest and penalty of course for the $1,000 refundable portion. Even if you have a form 1098T which all the correct information, they will still proceed with the exam.


They want money. In fact this project goes against current tax law and what is spelled out in IRS publications and regulations so I would expect a challenge by someone in tax court. And IRS will lose unless the law is changed or perhaps another “executive order” is in the works.

What should you do?
IRS is demanding proof of tuition payment if your return is selected. Schools generally use the box “amount billed for qualified tuition” but is usually paid for by loans, grants, or cash. Grants are listed on the form anyway, so to prepare I would contact the school and request a statement that displays all the sources of tuition payments as well as copies of cancelled checks or credit card statements, or a loan statement showing the payments to the school. Debt is considered like cash since you must repay that.

Can I handle this on my own?
That’s up to you. You can call the number on the audit letter and speak to an auditor, or forward the document to us. Either way the documents mentioned above must be presented for them to not continue and cause a levy or other collection action. If we respond our ordinary rates will apply based on time spent. It depends how cooperative your auditor is!