An already delayed tax season is supposed to begin Wednesday when the feds and Oregon officially begin processing returns. But there are a host of tax forms that the Internal Revenue Service won't accept until late February or March. It's Only Money warned you about those delays this weekend.
Today came notice of another group facing delays -- parents and students claiming popular college tuition credits. The IRS said today it has discovered during testing that it can't accurately process Form 8863 for Education Credits without further tweak its computers. So, it won't process returns claiming the American Opportunity Tax Credit and the Lifetime Learning Credit until mid February.
The delay won't impact taxpayers who claim the above-the-line tuition and fees deduction and the student loan interest deduction, the IRS said. But the credits generally are more popular and lucrative to most taxpayers. That will mean later refunds for them.
The American Opportunity Credit, previously known as the Hope Credit, provides a dollar-for-dollar credit on your first $2,000 in college-related expenses, then 25 percent of your next $2,000. That's $2,500 on up to $4,000 of expenses. Plus, up to 40 percent of it, or $1,000, is refundable, meaning you get to use its full value whether you owe taxes or not.
The Lifetime Learning Credit provides 20 percent of tuition expenses up to $10,000. That means the most you'll get from it is a $2,000 reduction in taxes. It's a better option for graduate students or those not pursuing a degree or taking only a course or two.
Distributed by MCT Information Services
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