A new tax scam promising folks refunds based on the American Opportunity education tax credit is making the rounds.
Under the scheme, con artists claim they can get a taxpayer a refund or nonexistent stimulus payment based on this higher education tax credit even if the victim is not enrolled in or paying for college.
In many cases, says the Internal Revenue Service, the scammers falsely claim that the refunds are available even if the victim went to school decades ago.
The IRS says the targets of this latest tax scam are people who have little or no income and normally don't have to file a tax return. The crooks also are showing up at places frequented by senior citizens, such as churches.
If you're approached by someone with this bogus offer of free tax money, run away and fast. Then inform the IRS of the con attempt (call toll-free 800-829-1040 or visit your local Taxpayer Assistance Center) so agents can add it to the agency's growing list of investigations.
And be sure to warn any of your older relatives about this scam so they won't fall prey.
Taking advantage of real tax breaks: Using a real tax break is a common trick of tax scammers. It gives them the veneer of legitimacy when they cite real tax deductions, credits or forms.
That's too bad, because such actions sometimes scare away folks from the real tax benefits that they can legitimately claim.
To help clear up any confusion about the American Opportunity tax credit, we have today a timely convergence of tax scam and tax truth.
The Daily Tax Tip looks at how tax credits can help pay higher education costs.
In addition to the American Opportunity tax credit, there's also the Lifetime Learning tax credit. Each of these education-related tax credits offer ways to help pay for schooling.
The great thing about these two educational tax benefits is that they are credits. And by now you know that tax credits are better than deductions because provide a dollar-for-dollar offset against your tax bill. And refundable credits can even get you a refund when you don't owe any taxes.
Something for every student: The American Opportunity tax credit, a temporary (for now) expanded version of the Hope credit, is worth a possible $2,500.
And there's a bonus: Up to 40 percent of the American Opportunity credit is refundable, meaning you could get up to $1,000 back from the IRS even if you don't owe any taxes.
There are income limits, however, and the American Opportunity credit only applies to expenses incurred during the first four years of college.
The Lifetime Learning credit, lives up to its name. This credit, which could be as much as $2,000, is available to undergrads, graduate students and folks already in the workforce who want to take some courses to improve their job skills.
And while the American Opportunity credit is available on a per student basis, the Lifetime Learning credit applies to up to $20,000 of a family's total educational costs.
If you or a family member is in college, check out both of these educational tax credits to determine what kind of tax help you can get in paying those costs.
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