How to Appeal if Your HOPE Scholarship Tax Credit is Denied:
The HOPE Scholarship Tax Credit is an American tax credit available for qualified education expenses paid for an eligible student. It provides a tax credit of up to $1,500 per eligible student per year for qualified tuition and related expenses. The credit is available for the first two years of postsecondary education for eligible students.
Why Might Your HOPE Credit be Denied?
There are a few common reasons why the IRS may deny a taxpayer’s claim for the HOPE credit:
- The student did not meet the eligibility requirements. To qualify for the HOPE credit, the student must be pursuing an undergraduate degree or other recognized education credential, be enrolled at least half-time for at least one academic period, and not have been convicted of a felony for possessing or distributing a controlled substance.
- The expenses claimed were not qualified education expenses. Qualified expenses include tuition and fees required for enrollment or attendance, but do not include room and board or insurance costs.
- The taxpayer or student did not provide required supporting documentation. Taxpayers need to submit Form 1098-T from the educational institution documenting qualified tuition and fees paid.
- The credit was claimed for more than two tax years of postsecondary education per student. The HOPE credit can only be claimed for the first two years of a student’s postsecondary education.
- The student’s modified adjusted gross income exceeded eligibility limits. For the 2020 tax year, the credit starts phasing out for single taxpayers with a MAGI over $80,000 or joint filers over $160,000.
Appealing a Denied HOPE Credit
If your HOPE credit claim is denied, you have the right to appeal. Here are the steps to take:
- Request an Audit Reconsideration (Form 12203) from the IRS. Explain in writing why you believe the credit should not have been denied based on the qualifications. Provide any supporting documentation.
- If the Audit Reconsideration is denied, request a conference with the Office of Appeals (Form 12203). At this conference, you can discuss your case with an independent IRS appeals officer.
- If the appeals process does not result in allowing the credit, pay the tax amount and file a claim for refund (Form 1040X) with the IRS. You may also choose to take your case to US Tax Court.
- Consult with a tax attorney if needed for representation during the appeals process or Tax Court hearing. An experienced tax lawyer can help strengthen your case.
FAQs on Appealing Hope Scholarship Tax Credit when Denied
Q: What is the deadline to claim the HOPE credit for a tax year?
The deadline to claim the HOPE credit on your tax return is generally three years from the original filing due date of your return. For example, if you paid qualified education expenses in 2020, the deadline to claim the credit for that year would be April 15, 2024 since the original filing due date for the 2020 return was April 15, 2021.
Q: Can I claim the HOPE credit if I didn’t have any tax liability for the year?
No, you cannot get a refund of any amount that exceeds your tax liability for the year. However, you can carry the unused portion of the HOPE credit forward to the next tax year.
Q: Does the HOPE credit affect eligibility for student financial aid?
No, claiming the HOPE credit will not impact a student’s eligibility for federal student aid programs like grants, loans or work-study. The HOPE credit is a non-refundable tax credit based on qualified education expenses, whereas financial aid eligibility is based on financial need.
Q: Can I claim the HOPE credit if I have not received Form 1098-T from my college yet?
You do not need to wait until you receive Form 1098-T to file your tax return and claim education credits like the HOPE credit. However, you will need the information from Form 1098-T to accurately report qualified tuition and fees paid. You can estimate the expenses if needed.
Q: Can I amend a return to claim the HOPE credit for a prior year if I recently found out I was eligible?
Yes, you can amend your federal tax return for a prior year using Form 1040-X in order to claim the HOPE credit if you recently discovered you were eligible for that year but did not originally claim it. Generally you have three years from the filing due date of the original return to amend and claim the credit.