Taxes UhOh! WWYD?

Sugargirl1019 · February 2015

TL;DR We want to claim tuition that MIL already unknowingly claimed on her last year's taxes, and one of us is going to lose.

Tax refund season! Woohoo! Except DH and I have discovered a small situation, and our options are sticky. What would you do in this situation?

DH graduated the previous year, and it is important to note that the university bills on an academic year, not a calendar year. So, when he received his 1098-T, he received 2 - one from 2014 and one from 2013. According to a tax specialist we have seen, the 2013 1098-T does include the spring 2014 tuition bill because it was billed then. The 2014 1098-T has 0 for tuition. Well obviously that is wrong, DH paid for spring tuition. Tax specialist told us, no problem! If you have proof that you did not claim the whole tuition yourself last year AND you have proof that you paid after January 1, 2014, then you can claim that exact amount despite the 1098-T reading 0.

Following still?

Good news: DH's 2013 tax return did not show any 1098-T tuition filed.

Bad news: DH's 2013 tax return did not show any 1098-T filed.. so has it been claimed?

MIL did claim it on her taxes. Which, she has a right to since he was unmarried and technically her dependent (I disagree, I supported all of his living costs, but whatever). She took them to HR Block and they did it this way. But, they claimed ALL of the 2013 1098-T tuition on her taxes.

I have issues with this, as she did not pay any tuition, DH was responsible for it all, I think he should have gotten the benefits of tax season. But the problem comes down to taking credit for this spring 2014 tuition.

We have a billing statement that $xxxx dollars in tuition was paid in January by DH. So we want to claim it on our taxes and get this awesome refund and education credit woohoo! Because we have proof! But, that money will now be double claimed.

You see that somebody is going to lose out. 2 options:

1) We claim it and get the large refund, but that means MIL will need to file an amended return and PAY back thousands with interest to the IRS for the error.

2) Not claim it and not get the large refund back.

MIL is not pleased to hear this is how the tax accountant chose to file her taxes, and obviously it's not fraud, but she is pushing DH to not claim his education refund (which is legally his) so she doesn't have to pay.

DH wants the refund (and I really want the refund too) but we also don't want to cause undue stress on our relationship with his parents or upon their finances. DH is unsure of which decision he wants to make.

Tough decision.

What would you do?

twoleighs · February 2015

That is a tough one. I would say if he wasn't her dependent and she didn't pay the tuition, she doesn't get the tax credit. I do not understand at all why any accountant with any sense would do it any other way?!

Would it be an option for her to pay the difference directly to you to keep the IRS out of it? I remember one year I wasn't a dependent on my parents, but they got WAY more money back by claiming me, so my dad just gave me what the IRS would have. I still got my money and they got more money. So you calculate your return with and without the credit, and she pays the difference and you don't claim it?

ETF: STUPID PARAGRAPHS.

I'm struggling today.

theartistformerlyknownas · February 2015

Will it really be THOUSANDS that she has to pay back? My dad claimed all of my tuition despite the fact that I paid my own way, because it made more of an impact on his taxes than it would have on mine (because he itemized and I took the standard deduction). He paid me back what I would have gotten if I claimed it myself, and kept the rest (whatever, not a big deal). But it never amounted to THOUSANDS.

I would approach her and ask if she can help you reach a middle ground because while you want to get the refund you're entitled to this year, you also don't want her to get burned or audited (and IMO, don't have much right to since you didn't notice this last year). If she's not willing to deal though... I think you need to let it go.

ashley8918 · February 2015

I would probably let it go. I can't imagine that it actually amounts to thousands of dollars, and it's really too late to do anything without completely screwing your MIL.

Sugargirl1019 · February 2015

I had thought that since the difference in the tuition was thousands on our refund that it would also be on hers (including the education credits, too). Plus, IRS charges you interest on any money you took "in error".

Middle ground might be the best way to go. I'll talk to DH about how he would like to set up that discussion with his parents!

KatieinBkln · February 2015

I like Lolo's suggestion. Cut the IRS out of this completely, and see if your MIL will offer to give you the amount she "gained" from claiming that money last year.

I recommend your H be the one to suggest this.

But ultimately, this seems like one of those "expensive lesson"-type situations. You can't win by getting into a money argument with your MIL, so it might be best to just let it go.

plainjane0415 · February 2015

lolo883 said:

Will it really be THOUSANDS that she has to pay back? My dad claimed all of my tuition despite the fact that I paid my own way, because it made more of an impact on his taxes than it would have on mine (because he itemized and I took the standard deduction). He paid me back what I would have gotten if I claimed it myself, and kept the rest (whatever, not a big deal). But it never amounted to THOUSANDS.

I would approach her and ask if she can help you reach a middle ground because while you want to get the refund you're entitled to this year, you also don't want her to get burned or audited (and IMO, don't have much right to since you didn't notice this last year). If she's not willing to deal though... I think you need to let it go.

My parents did the same as your dad. And my part NEVER amounted to thousands... I agree, approach her about it to see if you can compromise something, but if she doesn't, then there's not much you can do I don't think.

thisismynickname2 · February 2015

Actually yes, it can be "thousands."

I was enrolled spring, summer, and fall of 2013, so on my 2014 taxes I got two grand back just for the education credit.

I like the suggestion that MIL shares the refund with you. She didn't pay the tuition, the refund shouldn't be hers to keep. I know that's easier said than done, but it's fair.

Good luck...

JennyColada · February 2015

It certainly can be thousands. I got about a $2000 credit from the Lifetime Learning Credit when I had a 1089-T.

How old is your DH? Did he need to use MIL's taxes to file for financial aid? If her taxes were part of his financial aid package then I'd probably say that she has a right to use it. If not, then she doesn't.

But the annoying thing is that you get less of a credit the more money that you earn as income. So it's entirely possible that she got less (or more) of a credit than what DH would get.

Here's some quick info:

http://www.irs.gov/publications/p970/ch03.html

http://en.wikipedia.org/wiki/Lifetime_Learning_Credit

http://taxes.about.com/od/Tax-Credits/qt/Lifetime-Learning-Tax-Credit.htm

JCbride2015 · February 2015

Yes, if this would mean you can claim the lifetime learnin credit, that's $2000 back right there. Honestly I would let it go, though. If MIL is already upset, asking her for the money back won't make things any better. My parents pocketed tax money for "supporting" me for years when I was a student and not taking a penny from either of them. I missed out on thousands those years. They never shared it with me. But I would not ask them to amend their taxes after the fact. Once I figured out what was going on, I just asked them to stop claiming me as a dependent going forward. It's not worth the fight.

STARMOON44 · February 2015

Do nothing. If DH had been on top of his own taxes last year he would have noticed it and it could have been dealt with in a timely matter. It seems wrong to inconvenience MIL like this because he's just now taking his taxes seriously. And in terms of family relations it's a bad plan.

jenna8984 · February 2015

Yea I would just let it go. I think it sounds really petty to be honest. She raised him and paid for everything for 18 years, if not more. It was the last year she was able to claim him and she went all in and got what she could, not knowing that it was the wrong year. I think it's kind of fucked up and inappropriate to ask for it back at this point.

Sugargirl1019 · February 2015

JennyColada said:
It certainly can be thousands. I got about a $2000 credit from the Lifetime Learning Credit when I had a 1089-T.

How old is your DH? Did he need to use MIL's taxes to file for financial aid? If her taxes were part of his financial aid package then I'd probably say that she has a right to use it. If not, then she doesn't.

But the annoying thing is that you get less of a credit the more money that you earn as income. So it's entirely possible that she got less (or more) of a credit than what DH would get.

Here's some quick info:
http://www.irs.gov/publications/p970/ch03.html
http://en.wikipedia.org/wiki/Lifetime_Learning_Credit
http://taxes.about.com/od/Tax-Credits/qt/Lifetime-Learning-Tax-Credit.htm

Thanks for those links. DH is 25 years old, and he did qualify for a lot of financial aid (grants) because of his parents inability to contribute at all to college. I'm not sure if that's what you were asking for.

When I asked DH about his taxes last year, he asked his mom for the papers that were mailed to the house so he could file for himself. She said not to worry that she would file for him. Which is a kind offer from a parent to ease the stress of a college student, right? I was irked that she wasn't giving it to him to do, but he did ask.

I asked DH what he thought about us not taking the refund and he was like but that's a lot of money from my tuition that we can pay off our last debt with! And then I suggested compromising with his mom to see what the difference would be and give us the remainder (if there is a positive difference). He said he would ask, but agreed it's a weird question to ask his mom.

So I'm preparing my mind to just be okay with losing the money and not filing it. It totally sucks. But it's important that I don't have any hard feelings over it. Gotta let it goooo!

lyndausvi · February 2015

Your husband was an adult last year. He had to have signed the tax returns, so it's on him to make sure it was correct. If he didn't, his loss. Lesson learned.

JennyColada · February 2015

Sugargirl1019 said:

It certainly can be thousands. I got about a $2000 credit from the Lifetime Learning Credit when I had a 1089-T.

How old is your DH? Did he need to use MIL's taxes to file for financial aid? If her taxes were part of his financial aid package then I'd probably say that she has a right to use it. If not, then she doesn't.

But the annoying thing is that you get less of a credit the more money that you earn as income. So it's entirely possible that she got less (or more) of a credit than what DH would get.

Here's some quick info:
http://www.irs.gov/publications/p970/ch03.html
http://en.wikipedia.org/wiki/Lifetime_Learning_Credit
http://taxes.about.com/od/Tax-Credits/qt/Lifetime-Learning-Tax-Credit.htm
Thanks for those links. DH is 25 years old, and he did qualify for a lot of financial aid (grants) because of his parents inability to contribute at all to college. I'm not sure if that's what you were asking for. When I asked DH about his taxes last year, he asked his mom for the papers that were mailed to the house so he could file for himself. She said not to worry that she would file for him. Which is a kind offer from a parent to ease the stress of a college student, right? I was irked that she wasn't giving it to him to do, but he did ask. I asked DH what he thought about us not taking the refund and he was like but that's a lot of money from my tuition that we can pay off our last debt with! And then I suggested compromising with his mom to see what the difference would be and give us the remainder (if there is a positive difference). He said he would ask, but agreed it's a weird question to ask his mom. So I'm preparing my mind to just be okay with losing the money and not filing it. It totally sucks. But it's important that I don't have any hard feelings over it. Gotta let it goooo!

http://www.fastweb.com/financial-aid/articles/federal-financial-aid-and-the-independent-student

If he was under 24 years old (as well as some other things, which I'm assuming don't apply), then he had to use his parent's taxes on the FAFSA application (which, depending on his employment status might have actually gotten him MORE grants depending on how little his parents are able to contribute) because he's still considered a "dependent" student.

JoanE2012 · February 2015

I agree with the others, I'd let it go. I know it seems like a lot of money now, but peace within the family is priceless.

theartistformerlyknownas · February 2015

I think letting it go is wise. He likely benefited in other ways by being her dependent (financial aid Jenny mentioned, and staying on her insurance?)... calling it a wash and a learning experience isn't such a bad idea.

Sugargirl1019 · February 2015

JennyColada said:

Sugargirl1019 said:

JennyColada said:
It certainly can be thousands. I got about a $2000 credit from the Lifetime Learning Credit when I had a 1089-T.

How old is your DH? Did he need to use MIL's taxes to file for financial aid? If her taxes were part of his financial aid package then I'd probably say that she has a right to use it. If not, then she doesn't.

But the annoying thing is that you get less of a credit the more money that you earn as income. So it's entirely possible that she got less (or more) of a credit than what DH would get.

Here's some quick info:
http://www.irs.gov/publications/p970/ch03.html
http://en.wikipedia.org/wiki/Lifetime_Learning_Credit
http://taxes.about.com/od/Tax-Credits/qt/Lifetime-Learning-Tax-Credit.htm
Thanks for those links. DH is 25 years old, and he did qualify for a lot of financial aid (grants) because of his parents inability to contribute at all to college. I'm not sure if that's what you were asking for.

When I asked DH about his taxes last year, he asked his mom for the papers that were mailed to the house so he could file for himself. She said not to worry that she would file for him. Which is a kind offer from a parent to ease the stress of a college student, right? I was irked that she wasn't giving it to him to do, but he did ask.

I asked DH what he thought about us not taking the refund and he was like but that's a lot of money from my tuition that we can pay off our last debt with! And then I suggested compromising with his mom to see what the difference would be and give us the remainder (if there is a positive difference). He said he would ask, but agreed it's a weird question to ask his mom.

So I'm preparing my mind to just be okay with losing the money and not filing it. It totally sucks. But it's important that I don't have any hard feelings over it. Gotta let it goooo!

http://www.fastweb.com/financial-aid/articles/federal-financial-aid-and-the-independent-student

If he was under 24 years old (as well as some other things, which I'm assuming don't apply), then he had to use his parent's taxes on the FAFSA application (which, depending on his employment status might have actually gotten him MORE grants depending on how little his parents are able to contribute) because he's still considered a "dependent" student.

Yes, for the FAFSA he did use his parent's taxes and he was under 24. I get what you're saying that they do have a right to the money since he used their tax status for financial aid (no insurance benefits). But at the same time I'm still struggling with "but he contributed all the tuition payments, not them" and have conflicting thoughts until I set my mind straight about how it's gonna be.

Most everyone is saying to let it go, so that's the winner. Gosh it's hard! But not straining our relationship over "but it's our money!" is much better in the long run.

JennyColada · February 2015

I know this is a personal question, but...if he contributed all of the funds, then how much money was he making in income (you don't actually have to answer, just something to consider)? Would he have even gotten the same grants without his parents? I mean, sure, maybe he should be entitled to any tax deductions due to the credit, but in that case he'd also be entitled to fewer grants, so he may end up coming out in the negative.

This obviously isn't a perfect estimate, but maybe try using this calculator:

https://fafsa.ed.gov/FAFSA/app/f4cForm?execution=e1s1

You could do it once for his family/parents and once for him alone to see what the estimated differences are.

I totally get how, when the money exists because of you (him), it's easy to think of it as "your" money. But the reality is that less of that money would probably exist if it really was earned as "belonging" to you (him) in the first place. If that makes sense.

Like, when I went back to school (at 27), I actually got less money as an independent student (due to using just my income and 1 "dependent") than I would have if I could be considered independent and use claim 3 dependents (me and my parents) and three "incomes" (since my dad isn't working and I make more than my mom). So any money that I could have gotten from this scenario (had I gone to school 3 years earlier) SHOULD have belonged to my parents, as I don't "earn" it without them.

VulgarGirl · February 2015

Girl you gotta deal with your MIL for the rest of your life. She will be the grandmother to your future children. A couple of grand (at most) is just not worth it.

Taxes UhOh! WWYD?

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