Discussion:Tuition deduction on Sch A of 1040NR?
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Discussion Forum Index --> Tax Questions --> Tuition deduction on Sch A of 1040NR?
| 13 May 2007 | |
| I have never heard of this before and I am seeking expertise in this area. New client used HRB last year who deducted $40,000 college tuition(Harvard)on Sch A for a non-resident alien (Form 1040NR). Is this correct? I have done a few 1040NR before but I am not aware of this. Any comments? Thank you. | |
| 13 May 2007 | |
| I would hope that the person paid the extra $29 to buy the Piece of Mind where HRB will pay up to $5,000 in taxes for their errors. | |
| 13 May 2007 | |
| Schedule A for an NR? Someone needs to amend this and hopefully quickly :) | |
| 13 May 2007 | |
| I think Sch A is OK. Non-resident aliens can't take standard deduction but they can claim itemized deductions. | |
| 13 May 2007 | |
| Page 3 of 1040NR is called Sch A on the form... You can deduct any continuing educational expenses related to improving your job skills but not qualifying you for a new job. Most MBA students have spent some time in the real world before they start their MBA, and go back to similar work, often even the same job for the same company. If the $40,000 was for an MBA, there's a good chance it's a legit deduction. Ideally, they would have done a 2106 that flowed to the Sch A, but straight on the Sch A also works fine. If it's for law school, med school, etc., then it qualifies him for a new career and isn't allowed.
I lived equidistant between MIT and Harvard for about ten years; the place I was working was doing 40+ of these annually. | |
| 13 May 2007 | |
| The education would have to maintain or improve the skills in the current line of work without qualifying for another line of work. If the current line of work were management, or at least something in business, it might qualify. If the current line of work was bussing tables at the cafeteria while going to school, it wouldn't qualify. | |
| 13 May 2007 | |
| Schedule A itemized deductions are very limited for NR aliens. If it is for an employee situation that the education was met, then yes the 2106 would be filed and then the tuition would go on Schedule A, but then the deduction is to offset income from that job and would be deductible.
Also, I think if you are having the tuition to offset income from a trade or business you are involved in, then this too would be deductible against that income. Strictly speaking though, tuition deduction for a "student" that is not incurring the tuition in response to his employee business expenses or without trade or business would essentially do away with this Schedule A.... | |
| 14 May 2007 | |
| To be deductible, the educational expenses would need to be effectively connected with a US trade or business. It is hard to visualize how this could be true. | |
| 14 May 2007 | |
| Yes...he has to have income either as an employee to take on 2106 or as expenses for a US trade or business. I, like Riley can't fathom either being appropriate, but the tax return from HR Block should indicate these nonetheless :) | |
| 15 May 2007 | |
| Out of curiosity, was it the Block on Mass Av in Cambridge MA? Block bought out my former employer; it looks like they're still doing the MBA programme. That particular Block is a Block-owned subsidiary with a certain amount of autonomy in designing their marketing programme - the successful programmes are then brought out nationwide.
It's appropriate when there was US trade or business work prior - this is true for many of these NRA MBAs. Of course, they may not have been following the rules quite as closely as they should have in every case. Back when I worked there (and it was a different company), in one year we did about 100 or more of these; 40 were audited to some degree, and all but two passed the audit. The two who failed had tried to reply to the IRS themselves instead of coming to us. We had a standard reply quoting various IRS code sections, letter rulings, and tax court cases. Each person was informed of the risk of audit, and the fact that they might have to pay back tax and interest, but that penalties were not too likely. They all jumped at the chance to deduct the full tuition anyways. We turned away anyone who didn't meet the company definition of a good case. | |
Mrbarrytax (talk|edits) said: | 7 May 2009 |
| i have my first form 1040nr, still on my desk. taxpayer has been a teacher for the past four years and has paid for college tuition this year which i believe would be deductible under sch a (form 1040nr). she , of course, has met the minimum requirements prior to this year. any confirmation would be appreciated. | |
Mrbarrytax (talk|edits) said: | 7 May 2009 |
| ANY RESPONSES WOULD BE APPRECIATED | |
| 8 May 2009 | |
| Teachers are generally exempt individuals for only 2 years. See Code § 7701(b)(5)(E)(i). | |
Mrbarrytax (talk|edits) said: | 9 May 2009 |
| she is on h-1 visa | |
| 9 May 2009 | |
| Wow! HRB made a mistake...tell me it isn't true! How could HRB let this happen? I'm shocked! | |
| 9 May 2009 | |
| Since the client has filed incorrect returns in the past & doubtless has foreign isues perhaps she can use the voluntary dislosure initiative & sue HRB for the 20% penalty? The FAQs on this can be viewed at: http://www.irs.gov/pub/irs-news/faqs.pdf. | |
MRBARRYTAX (talk|edits) said: | 9 May 2009 |
| I ASSUME THAT I SHOULD BE FILING A REGULAR FORM 1040, AND AMEND YEARS 2006, 2007. IS THAT CORRECT? | |
| 9 May 2009 | |
| Sorry I thought this was for a client, I did not know it was your own return you were filing.
As I said in my previous post the past returns were signed under penalty of perjury. They were wrong & right now the ONLY way to correct these is via the voluntary disclosure initiative. This will mean a substantial penalty is in play so take professional advice from an expert on voluntary disclosure and tax issues for aliens. | |
| 10 May 2009 | |
| You should look at the treaty, if this person is from a treaty country. The treaties typically have special rules for teachers. The recent voluntary disclosure program seems unlikely to apply here. | |
| 10 May 2009 | |
| There seems to be another intertwined question shouted in here from BarryTax. Someone on an H1 visa in his/her third year should not be filing on a 1040NR. Qualified after 183 days of presence.
As for 1040NR, the work-related Sch A deductions apply to a NRA as well, but if an student, hard to make the case their education is supporting their work, since they are admitted to US to get an education. Teacher/researcher, may be able to make the argument with an MBA program. | |
