The Treasury Inspector General for Tax Administration (TIGTA) asserted that the Hope credit for underclass (freshman and sophomore) college students probably allowed hundreds of millions of dollars in undeserved credits because of two significant defects in the administration of the credit. The first defect is that a given taxpayer could in practice claim the credit for the same student for more than the two permissible years. TIGTA estimates that nearly $600 million in excess credits were taken based on that defect. A second flaw is that many colleges failed to report the amount of tuition and other school-related expenses that qualified for the credit; allowing taxpayers to claim more than the permissible amount. TIGTA recommended that the IRS be given math error authority to challenge claims for the same student covering three or more years and that schools report amounts paid for tuition and that the reporting forms tie more clearly to Form 8863, the annual reporting form for the Hope credit.
The TIGTA did a good job of catching the defective reporting procedures--though one wishes this had been caught sooner. One concern--can the IRS find a simpler procedure for universities to report tuition on this credit--5 million processing hours seems like a lot of "busy work" for clerical staffs of universities.
NOTE: This will be one of the last topical posts in December--most of my other posts this month will center on the "Twelve Blogs of Christmas."