The American Opportunity Credit is an education credit that is in the news right now. Its notoriety is not that it’s a good credit for students and/or parents of students but that it’s being used as the basis for a tax scam.
Con people are targeting the elderly and other taxpayers who might not have to file and convincing them to file a tax return claiming this credit. The key is that the American Opportunity Credit is partially refundable. This means that a taxpayer who legitimately can claim the credit but doesn’t have any tax can get a refund check or direct deposit for going to college. The current scam is targeting taxpayers who do not qualify for the credit. The taxpayers will pay a fee up front for the return to be filed. By the time they realize they have been taken, the con people are long gone. But the taxpayer has filed a fraudulent tax return and they are the ones the IRS will hold liable when the return is examined.
As Kay Bell points out, when some taxpayers question filing a return for an education credits when they didn’t go to school in 2011, the scammers tell them that the credit also helps to offset the sales tax on groceries. Not true. So if someone approaches you about filing a return with the American Opportunity Credit and you don’t have any education expenses that qualify, don’t let them file a return for you. If you do have education expenses and you’re not sure if you qualify, check with a tax pro or VITA site to be sure. You don’t want to have to pay the IRS back later on.
For Kansas and Oklahoma residents, I do want to point out that each state has sales tax rebates that are paid on the state income tax return and are refundable. In Oklahoma, it covers sales tax in general. The Kansas rebate actually rebates the sales tax on groceries. Both programs have income and other criteria to qualify so please check with a tax pro or VITA to see if you qualify.
For more info on the education credits, please check out this post; Education Credits and Deductions.