IRS Audits Its Own Activity | Tax Tip of the Week | No. 130

More Reports of Tax Fraud

After the enactment of the refundable American Opportunity Credit, Treasury inspectors estimate tax filers erroneously received $3.2 billion in credits for 2009 and 2010.  Inspectors found the IRS was doing a poor job of policing returns, which contained these educational credits. (See TTW#87 for a refresher on refundable vs. non refundable credits).In many of these cases, the IRS didn’t have a Form 1098-T from the college that the student supposedly attended.  Colleges and universities are required to issue a Form 1098-T to students and the IRS.  The IRS is now in the process of recovering these credits when there is no 1098-T that matches the IRS records and filer’s tax returns.Editor’s Note:  The IRS is getting increasingly better, and more aggressive, in matching all forms of 1099s and 1098s to tax returns.As always, you need to be able to substantiate any information on your tax return with good records.

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