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So now I see us at the top of the hour. For those of you just joining, welcome to today's webinar Sailing Through the Rules of Refundable Tax Credits. We're glad you're joining us today. My name is My name is Roy Chaney, and I am your Senior Stakeholder Liaison with Internal Revenue Service, and I'll be your moderator for today's webinar, which is slated for approximately 75 minutes.

Before we begin, if there's anyone in the audience that is with the media, please send an email to the address on the slide. Be sure to include your contact information and the news publication you're with. Our media relations and stakeholder liaison staff will assist you and answer any questions you may have. As a reminder, this webinar will be recorded and posted to the IRS Video Portal in a few weeks. This portal is located on www.irsvideos.gov. Please note, continuing education credit, or certificates of completion are not offered if you view any version of our webinars after the live broadcast. Again, we hope you won't experience any technology issues, but if you do, this slide shows helpful tips and reminders. We posted a technical help document you can download from the material section on the left side of your screen. It provides the minimum system requirements for viewing this webinar, along with some best practices and quick solutions.

If you completed and passed your systems check and are still having problems, try one of the following: close the screen where you're viewing the webinar and simply relaunch it; or click on settings on your browser viewing screen and select HLS. Now, you should have received today's PowerPoint in a reminder email, but if not, no worries, you can download it by clicking on the materials dropdown arrow on the left side of your screen as shown on this slide. As mentioned during the ICYMI segment, you can also download the resource document on the AFSR program from this dropdown. Closed captioning is available for today's presentation. If you're having trouble hearing the audio through your computer speakers, please click the Closed Captioning dropdown arrow located on the left side of your screen. This feature will be available throughout the webinar. If you have a topic specific question today, please submit it by clicking the Ask Question dropdown arrow to reveal the text box, type your question in the text box, click Send.

But very important, please do not enter any sensitive or taxpayer specific information. During the presentation, we'll take a few breaks to share knowledge based questions with you. At those times, the polling style feature will pop-up on your screen with a question and multiple choice answers. Select the response you believe is correct by clicking on the radio button next to your selection, then click Submit. Some people may not get the polling question. This may be because you have your pop-up blocker on, so please take a moment to disable your pop-up blocker now so you can answer the question. We've included several technical documents that describe how you can allow pop-up blockers based on the browser you're using. We have documents for Chrome, Firefox, Microsoft Edge, and Safari for Mac, and you can access them by clicking on the materials dropdown arrow on the left side of your screen. We're going to take some time and test the polling feature. Here's your opportunity to ensure your pop-up blocker is not on, so you can receive the polling questions throughout today's presentation. So have you ever downloaded an IRS national webinar recording from the video portal? Is it A, yes; B, no; or C, where is the video portal? Take a moment, click the radio button that corresponds to your answer. But let me reread the question. Have you ever downloaded an IRS national webinar recording from the video portal?

Again, A, yes; B, no; or C, where is the video portal? I'll give you a few more seconds to make your selection. Okay, we're going to go ahead and stop the polling now and let's see how the majority of you responded. Again, welcome and thank you for joining us for today's webinar.

Before we move along with our session, let me make sure you're in the right place. Today's webinar is Sailing Through the Rules of Refundable Tax Credits. This webinar is scheduled for approximately 75 minutes from the top of the hour. I'd like to introduce today's speaker, Ron Peruzzi. Ron Peruzzi is currently a Senior Program Analyst in the Refundable Credit Administration, Stakeholder Engagement area of the Internal Revenue Service. Ron has had a career with the Internal Revenue Service for over 33 years. He has held positions as office auditor, revenue agent, senior stakeholder relationship manager, and this current position as a senior relationship manager. He worked with local groups to promote the Volunteer Income Tax Assistance Program, or VITA, in the State of Connecticut and upstate New York, for over 20 years. Part of his responsibilities was to educate the public on refundable credit, such as Earned Income Tax Credit, Child Tax, and Advanced Child Tax Credit and the American Opportunity Credit. Ron is married and a proud father of two grown daughters. In his off time, he volunteers to run a VITA site in his hometown for the last 10 years. And with that, I'm going to turn it over to Roy to begin our presentation. Ron, the floor is yours. Thank you so much, Roy. I appreciate that.

Welcome, everyone. Thank you for taking time out of your busy schedule to attend this webinar. I hope that it proves to be informative. During the seminar, we will review the eligibility rules for Earned Income Tax Credit or EITC; Child Tax Credit, CTC; Additional Child Tax Credit, ACTC; and Credit for Other Dependents, ODC; as well as American Opportunity Credit, which is AOTC; Head of Household filing status. And your requirements as paid tax preparers when preparing your clients returns with these credits and filing status. And before we end this webinar, I will provide some useful online resources available on IRS.gov to help with questions you might have about these credits. Now let's get started. Let's talk about the permanent changes the American Rescue Plan Act included that apply to tax year 2023. First, investment income, more workers and working families with investment income will qualify to claim EITC, since the maximum amount of investment income has increased to $11,000 for 2023. Remember tax year 2022, it was $10,300.

Second, self-only EITC, if your client has a child, who is a qualifying child for purposes of claiming EITC, but that child does not have a valid Social Security Number, your client may still qualify for self-only EITC. Finally, married but separated spouses, if your client is married but separated and is not filing a joint return, they may qualify to claim EITC. I think it may be useful for us to dig a little deeper into this particular change. If your client is married and not filing a joint return, they qualify to claim EITC only if they had a qualifying child who lived with them for more than half of the tax year and they either lived apart from their spouse for the last 6 months of the tax year for which EITC is being claimed, or are legally separated according to their state law under a written separation agreement or decree of separate maintenance, and do not live in the same household as their spouse at the end of the tax year for which EITC is being claimed. This change under the American Rescue Plan Act impacts all married people who don't file a joint return, including clients filing as Married Filing Separate, and married clients filing as head of household. Okay, we are done with the review of the American Rescue Plan Act, so let's move on to the basic EITC eligibility rules. I'd like to ask a rhetorical question at this point. Does anyone know what is the main requirement to be eligible for EITC? Some of you probably guessed it, earned income. The Publication 596, entitled Earned Income Credit, which is available on IRS.gov, has a very useful table called Earned Income Credit in a nutshell. This table has a great outline of EITC rules, specifically under Chapter 1, which is rules for everyone. This lists seven very important rules that apply to everyone. Our first three rules that apply are your client must have a valid Social Security Number issued by the due date of the tax return; be a U.S. citizen or resident alien all year; meet certain rules if they are separated from their spouse and not filing a joint return. We already discussed that one. Let's continue with the EITC rules. The next four rules are your client must have an Adjusted Gross Income, or AGI, less than the applicable limits; cannot file Form 2555, foreign earned income. You can find more information about this form in the Publication 54 entitled Tax Guide for U.S. citizens and resident aliens abroad. You must have investment income of $11,000 or less, the amount is adjusted for inflation each year; and must have earned income. Hey, here's a quick tip. If you want to look up any prior or current tax year EITC amount, AGI limitations or investment income limitation, it's all available on IRS.gov. Okay, it is time for you to apply what we just covered. Roy, let's check in with a question on EITC. Sure, Ron. Audience, here's our first polling question. Jane is married to Raul. However, Raul moved out in February 2023 and filed for divorce. They did not have any children. Jane has worked part time and supported herself since Raul moved out. Her earned income was $12,000 for the year. She will not file a joint return with Raul, can she claim the Earned Income Tax Credit. Is it A, yes, Jane can file as Married Filing Separately, and claim Earned Income Tax Credit since she and her husband lived apart for more than half the year; B, no, Jane must file Married Filing Separately cannot claim the Earned Income Tax Credit; or C, yes, since Jane is in the process of a divorce and does not live with Raul, she can file single and claim the Earned Income Tax Credit? Take a moment and click the radio button that best answers the question. I'll give you a few more seconds to make your selection. All right, we're going to stop the polling now, and let's share the correct answer on the next slide. And the correct answer is B, no, but the preparer must make additional inquiries if responses to probing questions do not appear to be correct, consistent and complete. I see that only 30% of you responded correctly. So Ron, can you please clarify for us? Yes, I can, Roy. Okay. Since Jane will not file jointly with her spouse and does not have a qualifying child, she can only file Married Filing Separately. Okay, let's move on to reviewing EITC rules for people with qualifying children. We just discussed eligibility rules that apply to all taxpayers. Now, let's discuss the eligibility rules that apply to taxpayers who have qualifying children. First, your client's qualifying children must meet the relationship, age, residency and joint return test. Note that a qualifying child cannot be claimed by more than one person. As you may know, being a qualifying child of more than one person is not uncommon for unmarried parents or when a parent lives with other relatives, such as a grandparent. You may have to apply the tie-breaker rules, which we will discuss later in this webinar. Let's continue with rules for taxpayers with qualifying children. At a glance, you may think that the relationship, age, residency, and joint return test would be easy for you to discuss with your client. However, I'm sure you have dealt with many scenarios that prove just how difficult a task this really is. If you can relate to this, the IRS has several online resources to assist you.

First, we have the Publication 4687. It's Publication 4687, which is paid preparer due diligence, which includes great scenarios. Also at IRS.gov, in the search box, type in qualifying child rules. That's qualifying child rules. This will yield many hits. And of course, the Publication 596, Earned Income Credit, Chapter 2, in particular, rules if you have a qualifying child. This also provides guidance on the relationship, age, residency, and joint return test for qualifying children. Roy, how about another EITC polling question? Okay. Audience, here is our next polling question. Your client wants to claim their child, Jodi, as a qualifying child for Earned Income Tax Credit in 2023. Jodi turned 19 on December 10, 2023, and she is not disabled. Jodi graduated high school in 2022 and was not a student anytime during 2023. Jodi did not work. Is Jodi a qualifying child for Earned Income Tax Credit? Is it A, yes, Jodi was 19 years old for most of the year and lived with your client. Furthermore, she did not work; B, no, Jodi wasn't under 19 at the end of the year, she was not a student and was not totally and permanently disabled; or C, yes, Jodi is being claimed on your client's tax return, so she is automatically a qualifying child for Earned Income Tax Credit? Take a moment and click the radio button that best answers the question. I'll give you a few more seconds to make your selection. Okay, we're going to stop the polling now, and let's share the correct answer on the next slide. And the correct response is B, no, Jodi wasn't under 19 at the end of the year, she was not a student and was not totally and permanently disabled. I see that 89% of you responded correctly. So, Ron, passing it back to you. Great. Thank you, Roy. I am sure some of you are finding some of these questions easy. As we continue some questions will become more challenging. But before we go into those questions, let's talk about some of the rules that apply when your clients might be eligible for EITC without a qualifying child. For tax year 2023, taxpayers with no qualifying child must meet the following rules to claim EITC, be at least age 25, but under age 65, either spouse can meet this criterion if filing a joint return. Live in one of the 50 states or the District of Columbia for more than one-half of the tax year. This rule applies to both spouses if married filing joint.

Exceptions exist for those serving in the military, cannot be independent of another person or a EITC qualifying child of another person. That's it. Now, let's discuss some of the most common errors that are made when claiming EITC. These errors are: first, claiming EITC for children who do not meet the qualifying child rules. You should ask your client questions to find out whether the child meets the residency, relationship, age and joint return test. Don't forget that you should ask your client if the child has a Social Security Number valid for employment issued on or before the due date of the return, including extension. Second, filing tax returns with an incorrect filing status. To prevent this error, ask your client questions regarding their marital status and family situation. If your client is married but separated, make sure your client did not live with his or her spouse at any time during the last 6 months of the year or did not live with his or her spouse at the end of the year and was legally separated according to state law in the ways we discussed earlier. Third, misreporting income. It is extremely important to assure that your client's income and, of course, expenses are correctly reported on their tax return. Your clients should provide you with all their sources of income, such as Forms W-2, W-2G, 1099-MISC, 1099 non-employee compensation or other records of their income. As a professional paid preparer, you should be alert for any questionable Forms W-2 or 1099. As we all know with YouTube, Instagram, Uber, DoorDash, et cetera, there are lots of opportunities for people outside of traditional employment compared to just a few years ago. So if you have a client who says they own a business or who are engaged in the gig economy, but they do not have any business expenses, you might want to ask additional questions to make sure your client has a true business and claims all the business income and the allowable expenses. Fourth, common error, more than one person claiming the same child. This may result in the second return rejecting when electronically filed. Ask your client questions about where the child has lived the past year and verify the child's Social Security Number, especially for new clients or when a new child is added as a dependent. The final common error, the name does not match the Social Security Number. IRS matches data received from the Social Security Administration, including name, date of birth, date of death, and of course, the Social Security Number. You should verify your client's last name, especially if they have multiple hyphenated last names. Now remember, I said we would talk about the tie-breaker rule, so let's do that now. The tie-breaker rules apply when more than one person has the same qualifying child for certain tax benefits. Naturally, the tie-breaker rules do not apply if the other qualifying person is your client's spouse and they are filing a joint return. To determine which person can treat the child as a qualifying child to claim tax benefits, the following rules apply. If only one of the persons is the child's parent, the child is treated as the qualifying child of that parent. If the parents file a joint return together, the child is treated as the qualifying child of the two parents. If the parents don't file a joint return together, but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived with for the longer period of time during the year. If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income for the year. If no parent can claim the child as the qualifying child, the child is treated as the qualifying child of the person who had the highest adjusted gross income for the year. Finally, if a parent can claim the child as a qualifying child, but no parent does claim the child, the child is treated as the qualifying child of the person who had the highest adjusted gross income for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. If you would like some more information about the tie-breaker rules, please refer to the Publication 596, which is available on IRS.gov. It's a great resource. It has this all laid out. Roy, let's move on to our third poll question. I believe this one is on the tie-breaker rules. Yes, it is, Ron. You covered the earned income tax tie-breaker rules, so let's see how the audience is doing. Here's our third polling question. Tasha, 25 years old, lives with her 2-year-old son, Jackson, and her parents.

Shortly after Jackson was born, his father passed away. Tasha's adjusted gross income is $25,000, and her parents' adjusted gross income is $22,000. Everyone has a valid Social Security Number.

Who can claim Jackson as a qualifying child for Earned Income Tax Credit? Is it, A, Tasha's parents because she and her son live with them all year; B, Tasha can choose to let her parents claim Jackson; C, Tasha, she is Jackson's mother and her adjusted gross income is higher than her parents; or D, Tasha's parents because their adjusted gross income will qualify for more Earned Income Tax Credit? Take a moment and click the radio button that best answers the question, I'll give you a few more seconds to make your selection. All right, we're going to stop the polling now, and let's share the correct answer on the next slide. And the correct response is, C, Tasha, she is Jackson's mother and her adjusted gross income is higher than her parents. I see that 90% of you responded correctly. That's a great response. I see we're doing well. I'll go ahead and pass it back over to you, Ron. Thanks again, Roy. Great job, everyone. Now, let's talk about two of our most frequently asked questions regarding the tie-breaker rule. One of the most frequently asked questions is how does the treated as unmarried filing status change eligibility for EITC? Well, here's the answer. Prior to tax year 2021, married taxpayers had to file jointly with their spouse or as a head of household to meet the requirements to claim the EITC. Beginning in 2021, taxpayers who were married living apart from their spouse for the last 6 months of the year or legally separated according to their state law under a written separation agreement or decree of separate maintenance, and did not live in the same household as their spouse at the end of the tax year, and had a qualifying child who lived with them for more than half the year could meet the filing requirement to claim EITC. Now, let's take a look at the second most frequently asked question before we move on to our next topic. The second most frequently asked question is, can a 23-year-old with no qualifying children claim EITC? I think a lot of you could guess this answer. The answer is no. The age limitation for tax year 2023 is at least 25 but under age 65. So in a nutshell, your client must be at least age 25, but under 65. This rule can be met by either spouse if married filing jointly; be in the U.S. for more than one-half of the tax year. This rule applies to both spouses, if married filing jointly; and not be a dependent of another person or an EITC qualifying child of another person. Now, let's talk about the tax preparer resources. Our Tax Preparer Toolkit on IRS.gov has so many due diligence resources, consider making this one of your favorites. There is a section dedicated solely to hot topics for return preparer, and even a section where you can test your knowledge with the IRS's due diligence training module, which is in both English and Spanish. By the way, you can earn one continuing professional education credit when you take this training, and guess what? It's free.

There is also a tools and tips tab, which includes information the IRS requests during audit and a list of recommended documents that a taxpayer can provide to confirm their eligibility for the credits claimed on their return. Having this knowledge will assist you when you are advising your clients. One last item, if you have a client who is currently being audited by the IRS, the tax return preparer toolkit also includes a link to templates, your client can use when requesting information from schools, healthcare providers and/or childcare providers. Yes, the toolkit is amazing. Now that we have discussed EITC, let's move on to our next refundable credit, Child Tax Credit. Like EITC, you need to ask your client adequate questions to make sure they qualify for the credit. For tax year 2023 through tax year 2025, Child Tax Credit, or as we here at the IRS say, CTC is $2,000 per qualifying child, of which up to $1,600 is refundable for tax year 2023.

The qualifying child must have a valid Social Security Number issued before the due date of the return, including extensions. Your client and spouse, if filing jointly, must have a valid taxpayer identification number issued on or before the due date of the return, including extensions. Okay, let's continue with Child Tax Credit permanent provision. The total Child Tax Credit amount is phased out by $50 for each $1,000, or fraction thereof, if the modified adjusted gross income that exceeds $400,000 in the case of a joint return, or $200,000 for all other filing statuses. A Schedule 8812, which is Credits for Qualifying Children and Other Dependents, is also required. Also, the qualifying child must be under 17 years old at the end of the year and qualified to be claimed as a dependent on the return be the taxpayer's son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister or descendant of any of them not have provided over half of his or her own support for the tax year generally have lived with your client for more than half of the tax year be a U.S. citizen, U.S. national, or a resident of the United States. Roy, it's time to check in with another polling question. This time the topic, of course, is Child Tax Credit. I agree, Ron, thank you. Before we get started with polling question, audience, I want to apologize if you hear some static on the phone, we are currently working at it. But let's get back to the polling question. Audience, here's our fourth polling question. Which of the following taxpayers, all of whom have two qualifying Tax Credit per child on their tax return? Is it, A, Fiona, who is Married Filing Separately with children under 17 for the purposes of Child Tax Credit, are eligible to claim the $2,000 Child an adjusted gross income of $78,000? Is it, B, Ken, who is a Surviving Spouse with an adjusted gross income of $200,100? C, Nick, who is single with an adjusted gross income of $70,000? D, Julie, who is Married Filing Jointly with an adjusted gross income of $422,000? Or is it, E, Fiona and Nick? Take a moment and click the radio button that best answers the question. I'll give you a few more seconds to make your selection. This seems to be a difficult one. Okay, we're going to stop the polling now, and let's share the correct answer on the next slide. And the correct answer is actually E. Fiona and Nick. Fiona, who is Married Filing Separately with an adjusted gross income of $78,000, and Nick, who is single with an adjusted gross income of $70,000. And I see that 70% of you responded correctly, so it looks like we need more clarification. Ron, can you clarify? Yes, I can. And I mean, I agree was a little tricky on our part here by offering up that extra choice E at the end. But the explanation is Fiona and Nick can each take the full $2,000 credit for each of the qualifying children, because their adjusted gross income is not affected by the threshold limit, which is $400,000 for married filing joint, $200,000 for all other filing statuses. So let's take a few minutes to discuss some common errors made when claiming the Child Tax Credit. The first most common error is claiming CTC for a child who does not meet the qualifying child requirement, such as the age requirement. The second most common error is claiming CTC for a child who does not have a Social Security Number valid for employment issued before the due date of the tax return, including extensions. The only exception is if the dependent child who was born and died before the end of the year. How should you, as a paid professional tax preparer, avoid these errors? Ask your client questions and if you have a reason to doubt the answer provided by your client, you should ask additional questions, record those questions and your client's answers, keep copies of any documents you have relied on to determine your client's eligibility for the credit. Now that we have discussed the Child Tax Credit, let's go over Credit for Other Dependents, or as we call it at the IRS ODC. Now that we have discussed the Child Tax Credit, we're going to talk about ODC. This credit can provide up to $500 non-refundable tax credit per qualifying dependent. It does not apply to dependents that qualify for the Child Tax Credit. This credit can reduce or in some cases eliminate a tax bill.

However, the IRS cannot refund the taxpayer any portion of the credit that may be left over. You can claim ODC if they can claim the person as a dependent, and dependent is a U.S. citizen, U.S.

national, a resident of the United States, and cannot claim the dependent to claim the Child Tax or Additional Child Tax Credit. Just in case you were not aware, a qualifying child for CTC requires a valid Social Security Number, but ODC does not require a valid Social Security Number.

The qualifying person can have a Social Security Number not valid for employment, an individual taxpayer identification number, or an adoption taxpayer identification number. The number must be issued by the due date of the return, including extensions. However, it's acceptable if the qualifying person applied for the individual taxpayer identification number or adoption taxpayer identification number by the due date. Now, let's talk about ODC for a qualifying relative. The test for a qualifying relative is broader than a qualifying child. ODC can be claimed for dependents any age, including those who are age 17 or older, who are parents of the qualifying relatives supported by your client who lived with your client all year as a member of their household. Basically, the key word is dependent. Your client must be able to claim the person as a dependent, which means the person's income must be below the exemption amount and for tax year 2023, that amount is $4,700. Your client provides over half of the person's financial support.

The person needs to be a U.S. citizen, national, or resident alien, and the person cannot file a joint return unless that joint return is filed only to claim a refund of withheld income tax or estimated tax paid. The credit begins to phase out when the taxpayer's income is more than $200,000. This phase out begins for married couples filing a joint return at $400,000. There are special rules that apply if your client dependent is disabled. For more information regarding child based tax benefits for disabled workers, please refer to Publication 3966, Living and Working with Disabilities. Okay, Roy, let's go to our next polling question to see how the audience does with this topic. All right, audience, here is our fifth polling question. Karla, 42, is single and has no children. Her best friend Sally, 41, has lived with her in the U.S. for over 3 years. Sally lost her job during the pandemic, and has been unable to find another one.

Karla earned $40,000 this past tax year and supported Sally all year. Is Karla eligible to receive ODC? A, Karla is not eligible to receive other dependent credits, Sally is not her child and is over 16 years old; B, Karla is eligible to receive other dependent credits, Sally can be claimed as a qualifying relative on her return; or C, Karla is not eligible to receive other dependent credits, Sally is not a qualifying relative since she is not related to Karla. Again, take a moment, click the radio button that best answers the question. I'll give you a few more seconds to make your Okay, we're going to go on to the next slide. And the correct response is B, Karla is eligible to receive other dependent credit, because Sally can be claimed as a qualifying relative on her return. And I see that 43% of you responded correctly. So Ron, it looks like we need some more clarification. Can you complete that for us, please? I sure can.

Okay, so Karla meets the eligibility rules for a qualifying relative, Sally. Sally's income is less than the exemption amount, which is $4,700. Karla provides more than half of Sally's support and Sally is a U.S. citizen and she cannot file a joint return. So they have it. Okay, let's go over the most common errors that are made when claiming ODC. The first error is claiming the ODC for an individual who does not have a Taxpayer Identification Number. The individual must have some form of identification number. It can be an Individual Taxpayer Identification Number, ITIN, an Adoption Taxpayer Identification Number, ATIN, or an SSN. And the SSN does not have to be valid for employment. Either way, the identification number must be issued on or before the due date of the tax return, including extensions. However, it's accessible if the individual applies for the ITIN or ATIN by the due date. The second error is claiming ODC for an individual who does not meet the dependency requirements. The individual must be claimed as a dependent on your client's return and meet all the eligibility rules for a dependent. The third and final common error is claiming ODC for a non-citizen who does not meet the residency requirement. The individual claimed must be a U.S. citizen, U.S. national, or U.S. resident. Now, let's look at some very helpful resources that can assist you when filing a return claiming either the CTC or ODC. So back to the Tax Preparer Toolkit that has great information also on child-related tax benefit comparisons. The comparison chart includes CTC and ODC as well as several other child-related tax benefits. Basically, the toolkit has everything you need to assist you with preparing accurate returns, meeting your due diligence requirements, and getting your clients the credits they are eligible for. All right. Now, let's talk about the credit that applies to your clients that have children in college. The American Opportunity Tax Credit, or AOTC. AOTC is a tax credit to help pay for education expenses for the first 4 years of postsecondary education. The amount of the credit is 100% of the first $2,000 of paid education expenses and 25% of the next $2,000 of paid qualified education expenses for each qualified student. Your client can claim AOTC even if they paid for the expenses with a student loan and get a maximum credit of $2,500 per eligible student, of which 40% or $1,000 can be fully refundable if they don't owe any tax. AOTC is phased out if your client's modified adjusted gross income exceeds certain levels, the AOTC amount is reduced when modified adjusted gross income is more than $80,000, but no AOTC is allowed when the modified adjusted gross income is $90,000 or more. These amounts are doubled for joint filers. Joint filers claim a reduced AOTC when their modified adjusted gross income is more than $160,000, but claim no AOTC if their modified adjusted gross income is $180,000 or more. The AOTC is not available to taxpayers who are married filing separate. Now, let's discuss who is a qualifying student for AOTC. Okay, so who is eligible for AOTC? First off, the student can be a taxpayer, their spouse or dependent that's listed on the tax return. And to be eligible for AOTC, the student must be pursuing a degree or other recognized education credential; be enrolled at least half time for at least one academic period beginning in the tax year have qualifying education expenses at an eligible educational institution; not have finished the first 4 years of higher education at the beginning of the tax year; not have been claimed for AOTC or the former Hope credit for more than 4 tax years; not have a felony drug conviction at the end of the tax year. I would like to note that schools determine the academic period. Academic periods can be semesters, trimesters, quarters, or any other period of study, such as a summer school session. For schools that solely use credit hours and do not have academic terms, the payment period may be treated as the academic period. Hey, Roy, I believe we have a polling question about the AOTC. That's correct, Ron. Audience, we have another polling question for you. Molly, a single parent, has a daughter named Joy. In 2023, Joy turned 22 years old, completed her final college semester, and graduated in May. Joy started college in the fall of 2019. She received a Form 1098-T, Tuition Statement, from her college which showed she was at least a halftime student and paid $10,000 in tuition expenses. Molly has claimed AOTC with Joy every tax year since 2019. Joy has no felony drug convictions. Can Molly claim AOTC on her 2023 tax return? A, no, Molly has already claimed AOTC for Joy for 4 years; B, no, Joy graduated in May of 2023, and it is her fifth year in college; or C, yes, Joy was still in college in 2023. Take a moment and click the radio button that best answers the question. I'll give you a few more seconds to make your selection. Okay, we're going to stop the polling now unless they're the correct answer on the next slide. And the correct response is, A, no, Molly has already claimed the AOTC for Joy for 4 years. I see that 65% of you responded correctly. So, again, Ron, I think we need a little bit more clarification. Okay, not a problem. So AOTC can be claimed for 4 years. Molly was in her fifth year of school, so therefore, she's not able to claim the credit. Okay, let's discuss some common errors that are made when claiming AOTC. The most common error involves claiming the AOTC for a student who didn't attend an eligible educational institution. The AOTC is for postsecondary education, which may include education at a college, university, or technical school. To be an eligible educational institution, the school must be able to participate in the U.S. Department of Education Student Aid program. The second most common error made when claiming the AOTC involves claiming the credit for a student who didn't pay qualifying college expenses. Education expenses must be allowable expenses paid or considered paid by your client, your client's spouse, or the student claimed as a dependent on the tax return. So, for example, expenses paid by a scholarship that is excluded from gross income are not qualifying expenses. In addition, qualifying expenses do not include personal expenses such as room and board, insurance, medical expenses, including student health fees and transportation. The final two errors we will discuss involves claiming AOTC for a student for too many years. The AOTC is only available for the first 4 years of postsecondary education and can only be claimed for 4 tax years per eligible student. Note that the 4 years do not have to be consecutive. This limitation includes any years your client claims the Hope credit. What are ways you can avoid these common errors? You guessed it correctly. Ask questions and document your answers. Use the Publication 4687, which is paid preparer due diligence. This has examples that can assist you as well. Also, the Form 1098-T that is issued by the school is a good indicator that your client is eligible for the AOTC, but it does not contain all the information needed to determine the eligibility of the credit or to compute the amount of the credit. You must also find out whether your client received any scholarships, how and when these expenses were paid, whether your client has a felony drug conviction, and whether your client claimed AOTC or the Hope credit previously, and if so, for how many years. Let's look at some helpful resources that can assist you with AOTC. A useful resource is the other refundable credits toolkit where you will find helpful tools such as the education credit comparison chart and a section entitled what you need to know about AOTC and LLC. The toolkit has links that will provide you with more information about reviewing the Form 1098-T and what to do if the student didn't receive it. You will also find a link to the Form 886-H-AOC. The Form 886-H-AOC] includes a list of recommended documents that taxpayer can provide to the IRS during the audit process to confirm their eligibility for AOTC. These forms can be helpful as a discussion prompts when you're interviewing and educating your clients. Now, let's talk about Head of Household filing status.

The IRS definition of Head of Household is generally an unmarried taxpayer who has dependents and paid more than half the cost of keeping the home for the year. This tax filing status commonly includes single parents, divorced parents, and some separated parents who have custody of a dependent. In a nutshell, in order for your client to file as Head of Household, they must be considered unmarried for the tax year, have paid more than half of the household expenses, and have claimed a qualifying person, such as a qualifying child or qualifying relative. The IRS has an online tool called the Interactive Tax Assistant, which is very helpful to use when trying to determine your client's filing status. Now, let's take a moment to talk about what it really means to be considered unmarried. To be considered unmarried, your client must meet five tests. First, your client must not file a joint return with their spouse. Second, your client must have paid more than half of the cost of keeping up their home for the tax year. When determining the cost of keeping up a home, include the cost of expenses such as rent, mortgage interest, real estate, taxes, insurance on the home, repairs, utilities, and food eaten in the home; do not include the cost of clothing, education, medical treatment, vacations, life insurance, or transportation. Third, your clients' spouse must not have lived in the home during the last 6 months of the year. Your client's spouse is considered to have lived in the home even if he or she was temporarily absent due to special circumstances. Special circumstances include absences due to illness, school, business, vacation, and military service. For more information, please refer to Publication 501, dependent, standard deduction and filing information. Fourth, your client's home must be the main home of their child, stepchild, or foster child for more than half the year. A grandchild, niece, nephew, or other relative meets the rule only if they were placed in the home as a foster child by an authorized placement agency or court. The final fifth test, your client must be able to claim the child as a dependent. However, they may meet this test if they can't claim the child as a dependent, but only as under the special rules for children of divorced and separated parents or parents who live apart. Now, if your married client spouse was a nonresident alien at any time during the year, and the client doesn't choose to treat their nonresident spouse as a resident alien, they may be considered not married for Head of Household. Your client must have another qualifying person and meet all other tests to be eligible to file as Head of Household, please see Publication 519, U.S. Tax Guide for Aliens.

Okay, I know that was a lot of information. Let's see how the audience does with the Head of Household topic. Over to you, Roy. Thank you, Ron. Audience, here's our seventh polling question.

Denise is married but has lived apart from her spouse for 2 years. Denise pays all the costs of keeping up her home for herself, her dependent 12-year-old son who lives with her. Can Denise file as Head of Household? Is it, A, no, Denise is not divorced and is still married; B, no, Denise needs to get a Form 8332, Release/Revocation of Release of Claim to Exemption for Child by the Custodial Parent, from her husband to be able to claim their son; C, yes, Denise can file as Head of Household. She meets all the tests to be considered unmarried; Or is it, D, A and B?

Take a moment and click the radio button that best answers the question. I'll give you a few more seconds to make your selection. All right, let's go to the next slide, and the correct response is, C, yes, Denise can file as Head of Household. She meets all the tests to be considered unmarried. I see that 82% of you responded correctly, so that's a good response. Ron, I'll pass it back to you. Okay, let's move on to another topic. Hey, how can you help your client if they had a prior tax examination or audit during which they were disallowed a tax benefit which they are now eligible to receive? Your client must meet all the eligibility rules for the tax benefit they wish to claim. Form 8862, which is information to claim certain refundable credits after disallowance, must be attached to the tax return for taxpayers claiming EITC, CTC, advanced CTC, and/or American Opportunity Credit on their return. When the credit being claimed was disallowed or reduced after examination, your client must demonstrate eligibility for the same type of credit previously disallowed or adjusted by completing the form with the return. For your information, if your client is claiming EITC without a qualifying child, the Form 8862 is not required. IRS does notify all taxpayers who must recertify. If your client was advised by the IRS that they must file Form 8862 to receive a credit in a future year, please file a Form 8862 with your client's tax return. For more information on the recertification process, see Publication 596, Earned Income Credit. Hey, we just finished talking about recertification. So, Roy, it's time for the final polling question. Hopefully, it's going to be a simple one. All right, let's see how they do, Ron. Audience, here's our eighth and final polling question. If your client qualifies for Head of Household filing status but the IRS denied the client the filing status in the past, must the client file Form 8862, Information to Claim Certain Credits After Disallowance? Is it, A, no, Form 8862 is required only to recertify when Earned Income Tax Credit, Child Tax Credit, Additional Child Tax Credit, or Credit for Other Dependents or American Opportunity Tax Credit was disallowed; B, yes, Form 8862 is required for Head of Household filing status; C, yes, if your client is claiming Head of Household and the Earned Income Tax Credit; or D, no, Form 8862 is required only to recertify the Earned Income Tax Credit? Again, please take a moment, click the radio button that best answers the question. I'll give you a few more seconds, so you can make your selection. All right, we're going to stop the polling now, and let's share the correct answer on the next slide. And the correct response is, A, no, Form 8862 is required only to recertify when Earned Income Tax Credit, Child Tax Credit, Additional Child Tax Credit, Credit for Other Dependents, or the American Opportunity Tax Credit was disallowed. But I see that only 42% of you responded correctly. So, Ron, maybe you can clarify this a little bit more. Sure. So, again, the Form 8862 is only required if it only covers Earned Income Tax Credit, Child Tax Credit, Additional Child Tax Credit, and the American Opportunity Credit. If your client had an audit for Head of Household and it was changed, the form is not required. So it's only for those specific credits that are listed with the answer for A. Okay, so that brings us to the end of the presentation today. I'm going to hand it back to Roy to see if we have any time for questions. Hello, again, audience, it's me, Roy Chaney, and I'll be moderating the Q&A session, although we're kind of pressed for time, so we may not be able to get to all the questions or maybe some. But we're going to start with the Q&A session, I want to thank everyone for attending today's presentation, Sailing Through the Rules of Refundable Tax Credits. Earlier I mentioned we want to know what questions you have for our presenters, and here's your opportunity. If you haven't input your question, there's still time, go ahead, click on the top dropdown arrow next to ask question field, type in your question and click Send. Ron is going to stay on with us to answer your questions if we have time. One thing before we start, we may not even have time to answer all or some of the questions submitted, but we'll answer as many as time allows. So let's get started, so we can get to as many questions as possible. So let me take a look and see what we have here. The first question, Ron, how does AOTC differ from the existing Lifetime Learning Credit? Oh, okay, Roy. Yeah, I mean, we didn't talk about the Lifetime Learning Credit, but I mean, this is a good opportunity to kind of compare it. So unlike the other education tax credits, the American Opportunity Credit is allowed for expenses for course related books, supplies and equipment that are not necessarily paid to the educational institution, but are needed for attendance. Another difference is you can claim the credit for 4 years, as compared to the Lifetime Learning Credit, which has no limitation on the number of years. So that's the big differences. Okay, I see, we have some more questions here, Ron. This question, I have a client who was 67 at the end of 2023. Her husband passed away in 2023, a few weeks before he turned 65 years old. If all other tests are met, can we claim Earned Income Tax Credit on her 2023 tax year? Oh, that's kind of a sad question, but also a very good question. So you meet the age test if you were at least age 25, but under 65 at the end of 2023, or your spouse was at least age 25 but under 65 at time of death. So based on the specific information in the question, the way I understand it, the husband was 64 when he passed away. So if that's the case, and as the question asked, if all other tests are met, then they will be able to claim Earned Income Tax Credit. All right. Thank you. I appreciate that. I'm pretty sure the audience does, too. We have a third question. What might happen to a client's return if there were errors made in claiming Earned Income Tax Credit? Yeah, errors. Well, first of all, let's hope that your clients don't have that, because they're looking to get their refund as soon as possible. Who can blame them? And so the top thing that could happen is it may take longer for your client to get their refund or they may get audited. That would not be fun. And all are part of the Earned Income Tax Credit might be denied. So those are some of the things that can happen. Appreciate it, Ron. Appreciate it. Quick question again. What makes a Social Security Number valid to claim the Earned Income Tax Credit? Yeah, I mean, we use that term valid. So a Social Security Number is valid for Earned Income Credit if it was issued before the due date of the return, including extensions, and they were a U.S. citizen, when the Social Security Number was received, or Social Security Number card reads valid for work only with INS authorization, and the authorization is still valid. You don't see a lot of those. And a Social Security Number is not valid for EITC, just on the flip side, if the Social Security Number card reads not valid for work or not valid for employment, however, their status could change. So if that's the case and they're claiming the EIC, if their immigration status changes before the due date of the return, including extensions, they would still be able to file for Earned Income Credit. And they should also ask Social Security to issue them a new card without that notation on it. Okay. Okay. Ron, I think, we might have time for one more. Can you summarize quickly who is a qualifying child for Child Tax Credit and ACTC? Okay, I will try to be quick. The child must be under 17 at the end of the tax year. Again, this is for Child Tax Credit and/or the Additional Child Tax Credit. They must meet the relationship and residency test for uniform definition of a qualifying child. The child must not provide more than half of his or her own support for the tax year. They must have lived with the client for more than half of the tax year. They need to be claimed as a dependent on the tax return. They cannot file a joint return unless they're filing just to get back a refund of taxes or estimated taxes. They must be U.S.

citizen, U.S. national, U.S. resident alien. And finally, they must have a Social Security Number issued by Social Security Administration before the due date of the tax return, including extension. Thank you, Ron. We appreciate that. Audience, unfortunately, that's all the time we have for questions. I want to thank our presenter, Ron Peruzzi, sharing his knowledge and expertise and for answering your questions. But before we close the Q&A session, Ron, can you share some key points you want the attendees to remember from today's webinar? Sure. So here are some key points and takeaways that I just want to go over. So for Earned Income Credit, as we see on the screen here, just a reminder that there's been an increase to $11,000 for those with investment income. You can claim EITC without a qualifying child when the qualifying child does not have a valid Social Security Number. Married but separated spouses who do not file a joint return might qualify to claim EITC for the Child Tax Credit. Please remember, the child must have a valid Social Security Number, or parent only needs to have a valid Taxpayer Identification Number. And moving on to ODC, some key points is true. Is dependent being claimed must have a valid, well, can have a valid ITIN. Additionally, qualifying dependent for ODC can be 17 or older. And let's move on to American Opportunity quite quickly. This has a maximum credit of $2,500, of which $1,000 can be fully refunded if your client does not have any federal tax liability. This credit can be claimed for the taxpayer, spouse if married or dependent, or all of them if they all meet the requirements. And then finally, I just want to touch upon some of the useful tools that we had mentioned earlier. The IRS has information meant specifically for tax preparers, which is the Tax Preparer Toolkit. This is located in the EITC central section of the IRS website. The web resource includes information on the refundable credits we discussed on this webinar, information on preparer due diligence, if it interests you, as mentioned earlier, you can watch due diligence videos, watch recorded seminars from the National Tax forum, or even take the due diligence training. And remember I said it's available in English and Spanish. If you take the training, you will of course be eligible for a CPE credit at no cost to you. There is a newly created page just for the tax professionals. Check out the Tax Professional Awareness Week web page. This site has tools and information to help prepare accurate returns on behalf of your clients. It is designed to empower tax professionals with updated knowledge and skills in the evolving field of taxation. The other refundable credit area has great resources that you can use to assist with questions you or your clients might have about American Opportunity Credit and Lifetime Learning Credit, as well as the Child Tax Credit, Advanced Child Tax Credit, and Credit for Other Dependents. I encourage you to mark all of these sites as favorites. That's all the key points I have. Let me turn it back to Roy. Thank you, Ron. Audience we're planning additional webinars throughout the year. To register for any of the upcoming webinars, please visit IRS.gov keyword search Webinars and select Webinars for Tax Practitioners or Webinars for Small Business. When appropriate, we will be offering CE credits. We invite you to visit our Video Portal, www.irsvideos.gov. There you can view archived versions of our webinars. CE credits are not offered if you view an archived webinar of any of our webinars on the IRS Video Portal.

Another big thank you to Ron Peruzzi for a great webinar and for sharing his expertise. I also want to thank you our attendees for attending today's webinar, Sailing Through the Rules of Refundable Tax Credits. If you attend today's webinar for at least 50 minutes after the official start time, you will receive a certificate of completion that you can use with your credentialing organization for one possible CE credit. Again, the time we spent chatting before the webinar doesn't count towards the 50 minutes. Now, if you're eligible for continuing education from the IRS and register with your valid PTIN, your credit will be posted in your PTIN account. If you're eligible for continuing education from California Tax Education Council, your credit will be posted to your CTEC account as well. And if you qualify and have not received your certificate by February 9, please email us at cl.sl.web.conference.team@irs.gov.

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