Hundreds of Thousands Claimed $532M in Excess College Tax Credits

November 20, 2009

The Hope tax credit is designed to help middle class families pay for college -- but not this much. A Treasury Department audit released Thursday found that several hundred thousand taxpayers sought credit in 2006 and 2007 for more than half a billion dollars more than they were supposed to by claiming the tax credit for a third or even a fourth year; it is limited by statute to two years. The agency's inspector general for tax administration found that the IRS system is not set up to flag taxpayers who seek the credit for more than two years, and that agency officials lack the ability to disallow claims for Hope credits because of "math errors." The audit recommends that the IRS be given that authority. The Hope credit was significantly expanded for 2009 and 2010 as part of the federal economic stimulus package.

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