Flexibility Exists in Tax Law
A LITC legal intern successfully resolved an American Opportunity Tax Credit tax controversy, eliminating the client’s approximately $2,000 tax deficiency and showcasing the existence of flexibility within tax law.
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Research conducted by 3L legal intern Ryan Mets ’23 of the Low Income Taxpayer Clinic (LITC) resolved an American Opportunity Tax Credit (AOTC) tax controversy by eliminating the client’s tax deficiency of approximately $2,000.00. The LITC is committed to serving low and moderate-income taxpayers with a variety of tax controversies that explore the levels of rigidity and flexibility in tax law.
For context, the American Opportunity Tax Credit (AOTC) is a refundable federal tax credit that can help offset qualified education expenses paid for an eligible student for the first 4 years of higher education. In this case, the client accidentally received the AOTC in a year for which he was not eligible, which prevented him from receiving it in the year he should have. The IRS denied the credit in the correct year because his tax records appeared to show that he had already received the credit for the first 4 years of undergraduate education. Normally, a taxpayer would amend their return to fix this problem, but the tax year in question fell outside of the relevant statute of limitations.
After many hours of research and analysis, Mets found a provision of the tax code called the tax benefit rule that allowed the client to adjust his tax filings to pay back the erroneously received refund and receive the AOTC for the year in question. Through negotiations with the Internal Revenue Service (IRS), Mets secured a favorable settlement where the client owed $0.00 to the Internal Revenue Service instead of approximately $2,000.00.
