Form 2290 Deadline

Form 2290 Deadline

IR-2022-146, August 8, 2022

WASHINGTON — The Internal Revenue Service today is reminding those who have registered, or are required to register, large trucks and buses that it’s time to file Form 2290, Heavy Highway Vehicle Use Tax ReturnPDF. The form 2290 deadline is August 31, 2022, for vehicles first used in July 2022.

Truckers that have a highway motor vehicle with a taxable gross weight of 55,000 pounds or more registered in their name must file Form 2290 and pay the tax. However, on vehicles they expect to use for 5,000 miles or less (7,500 for farm vehicles), they’re required to file a return, but pay no tax. If the vehicle exceeds the mileage use limit during the tax period, the tax becomes due.

The filing deadline is not tied to the vehicle registration date. Taxpayers must file Form 2290 by the last day of the month following the month in which the taxpayer first used the vehicle on a public highway during the taxable period, regardless of the vehicle’s registration renewal date.

Vehicles first used on a public highway during the month of July 2022 must file Form 2290 and pay the appropriate tax between July 1 and August 31. Any additional taxable vehicles placed on the road during any month other than July should be prorated for the months during which it was in service. has a table to help determine the filing deadline.

File and pay the easy way

Get the facts

Gather the required information

  • Vehicle Identification Number(s).
  • Employer Identification Number (EIN) – not a Social Security number. It can take about four weeks to establish a new EIN. See How to Apply for an EIN.
  • Taxable gross weight of each vehicle.

Filing options

  • All Form 2290 filers are encouraged to e-file, a list of IRS-approved e-file providers is on
  • E-file is required when reporting 25 or more vehicles on Form 2290.
  • A watermarked Schedule 1 is sent within minutes after acceptance of an e-filed return.
  • If filing by mail, ensure that the correct mailing address is used.
  • Mail filers will receive their stamped Schedule 1 within 6 weeks after the IRS receives the form.

Payment options

More information:


Questions? Contact ATS Advisors

Where’s My Michigan Refund?

Where’s My Michigan Refund?

You may be asking yourself, ” Where’s My Michigan Refund? ”

Don’t worry, To check the status of your Michigan state refund online, visit

Michigan refundIn order to view status information, you will be prompted to enter:

Note: Adjusted Gross Income is found on line 10 of your MI-1040. Total Household Resources are found on line 33 of your MI-1040CR or line 34 of your MI-1040CR-7

You may also call 1-517-636-4486.

For e-filed returns: Allow two weeks from the date you received confirmation that your e-filed state return was accepted before checking for information.

For Paper-filed returns: Allow six to eight weeks before checking for information.

What can cause a delay in my Michigan refund?

A number of things can cause a delay in your Michigan refund, including the following:

  • If the department needs to verify information reported on your return or request additional information, the process will take longer.
  • Math errors in your return or other adjustments.
  • You used more than one form type to complete your return.
  • Your return was missing information or incomplete.

Need more Michigan refund and tax information?

For more information about your Michigan refund, visit the following website:

Need more tax guidance?

Please Contact ATS Advisors to talk with one of our tax professionals regarding any tax related questions you have.


Where’s My Michigan Refund? – 2022

How Long Should I Keep My Tax Records Michigan

Tax Forms Retention Guide: How long is long enough?

April 15 has come and gone and another year of tax forms and shoeboxes full of receipts is behind us. But what should be done with those documents after your check or refund request is in the mail? How Long Should I Keep My Tax Records Michigan?

Federal law requires you to maintain copies of your tax returns and supporting documents for three years. This is called the “three-year law” and leads many people to believe they’re safe provided they retain their documents for this period of time.

However, if the IRS believes you have significantly underreported your income (by 25 percent or more), it may go back six years in an audit. If there is any indication of fraud, or you do not file a return, no period of limitation exists.To be safe, use the following guidelines.

Business Documents To Keep For One Year

  • Correspondence with Customers and Vendors
  • Duplicate Deposit Slips
  • Purchase Orders (other than Purchasing Department copy)
  • Receiving Sheets
  • Requisitions
  • Stenographer’s Notebooks
  • Stockroom Withdrawal Forms

Business Documents To Keep For Three Years

  • Employee Personnel Records (after termination)
  • Employment Applications
  • Expired Insurance Policies
  • General Correspondence
  • Internal Audit Reports
  • Internal Reports
  • Petty Cash Vouchers
  • Physical Inventory Tags
  • Savings Bond Registration Records of Employees
  • Time Cards For Hourly Employees

Business Documents To Keep For Six Years

  • Accident Reports, Claims
  • Accounts Payable Ledgers and Schedules
  • Accounts Receivable Ledgers and Schedules
  • Bank Statements and Reconciliations
  • Cancelled Checks
  • Cancelled Stock and Bond Certificates
  • Employment Tax Records
  • Expense Analysis and Expense Distribution Schedules
  • Expired Contracts, Leases
  • Expired Option Records
  • Inventories of Products, Materials, Supplies
  • Invoices to Customers
  • Notes Receivable Ledgers, Schedules
  • Payroll Records and Summaries, including payment to pensioners
  • Plant Cost Ledgers
  • Purchasing Department Copies of Purchase Orders
  • Records related to net operating losses (NOL’s)
  • Sales Records
  • Subsidiary Ledgers
  • Time Books
  • Travel and Entertainment Records
  • Vouchers for Payments to Vendors, Employees, etc.
  • Voucher Register, Schedules

Business Records To Keep Forever

While federal guidelines do not require you to keep tax records “forever,” in many cases there will be other reasons you’ll want to retain these documents indefinitely.

  • Audit Reports from CPAs/Accountants
  • Cancelled Checks for Important Payments (especially tax payments)
  • Cash Books, Charts of Accounts
  • Contracts, Leases Currently in Effect
  • Corporate Documents (incorporation, charter, by-laws, etc.)
  • Documents substantiating fixed asset additions
  • Deeds
  • Depreciation Schedules
  • Financial Statements (Year End)
  • General and Private Ledgers, Year End Trial Balances
  • Insurance Records, Current Accident Reports, Claims, Policies
  • Investment Trade Confirmations
  • IRS Revenue Agent Reports
  • Journals
  • Legal Records, Correspondence and Other Important Matters
  • Minutes Books of Directors and Stockholders
  • Mortgages, Bills of Sale
  • Property Appraisals by Outside Appraisers
  • Property Records
  • Retirement and Pension Records
  • Tax Returns and Worksheets
  • Trademark and Patent Registrations

Personal Documents To Keep For One Year

While it’s important to keep year-end mutual fund and IRA contribution statements forever, you don’t have to save monthly and quarterly statements once the year-end statement has arrived.

Personal Documents To Keep For Three Years

  • Credit Card Statements
  • Medical Bills (in case of insurance disputes)
  • Utility Records
  • Expired Insurance Policies

Personal Documents To Keep For Six Years

  • Supporting Documents For Tax Returns
  • Accident Reports and Claims
  • Medical Bills (if tax-related)
  • Sales Receipts
  • Wage Garnishments
  • Other Tax-Related Bills

Personal Records To Keep Forever

  • CPA Audit Reports
  • Legal Records
  • Important Correspondence
  • Income Tax Returns
  • Income Tax Payment Checks
  • Property Records / Improvement Receipts (or six years after property sold)
  • Investment Trade Confirmations
  • Retirement and Pension Records (Forms 5448, 1099-R and 8606 until all distributions are made from your IRA or other qualified plan)

Special Circumstances

  • Car Records (keep until the car is sold)
  • Credit Card Receipts (keep until verified on your statement)
  • Insurance Policies (keep for the life of the policy)
  • Mortgages / Deeds / Leases (keep 6 years beyond the agreement)
  • Pay Stubs (keep until reconciled with your W-2)
  • Sales Receipts (keep for life of the warranty)
  • Stock and Bond Records (keep for 6 years beyond selling)
  • Warranties and Instructions (keep for the life of the product)
  • Other Bills (keep until payment is verified on the next bill)
  • Depreciation Schedules and Other Capital Asset Records (keep for 3 years after the tax life of the asset)


Questions? Contact your trusted Michigan tax pros!

How Long Should I Keep My Tax Records Michigan? – 2022

5 Different Types of IRA’s

IRS Tax Tip 2022-107, July 14, 2022

There are many ways people plan for retirement. Individual Retirement Arrangements, or IRAs, are a common one. Listed below are the 5 Different Types of IRA’s. IRAs provide tax incentives for people to make investments that can provide financial security when they retire. These accounts can be with a bank or other financial institution, a life insurance company, mutual fund, or stockbroker.

Here are some things to know about a traditional IRA.

  • traditional IRA is a tax-advantaged personal savings plan where contributions may be tax deductible.
  • Generally, the money in a traditional IRA isn’t taxed until it’s withdrawn.
  • There are annual limits to contributions depending on the person’s age and the type of IRA.
  • When planning when to withdraw money from an IRA, taxpayers should know that:
    • They may face a 10% penalty and a tax bill if they withdraw money before age 59½, unless they qualify for an exception.
    • Usually, they must start taking withdrawals from their IRA when they reach age 72. For tax years 2019 and earlier, that age was 70½.
    • Special distribution rules apply for IRA beneficiaries.

Roth IRAs are like traditional IRAs, but there are some important differences.

A Roth IRA is another tax-advantaged personal savings plan with many of the same rules as a traditional IRA but there are exceptions:

  • A taxpayer can’t deduct contributions to a Roth IRA.
  • Qualified distributions are tax-free.
  • Roth IRAs don’t require withdrawals until after the death of the owner.

Here are a few other types of IRAs:

  • Savings Incentive Match Plan for Employees. A SIMPLE IRA allows employees and employers to contribute to traditional IRAs set up for employees. It is suited as a start-up retirement savings plan for small employers not currently sponsoring a retirement plan.
  • Simplified Employee Pension. A SEP IRA is set up by an employer. The employer makes contributions directly to an IRA set up for each employee.
  • Rollover IRA. This is when the IRA owner receives a payment from their retirement plan and deposits it into a different IRA within 60 days.

More information:


Contact ATS Advisors with any questions today about the 5 Different Types of IRA’s

Michigan Income Tax Calculator

Welcome to ATS Advisors, your trusted Michigan tax professionals!

Listed here is a free Michigan Income Tax Calculator: CLICK HERE

Questions? Contact ATS Advisors today!

What You Need To Know About Michigan State Taxes

The state of Michigan requires you to pay taxes if you’re a resident or nonresident that receives income from a Michigan source. The state income tax rate is 4.25%, and the sales tax rate is 6%.

Michigan Income Tax Brackets and Rates

Michigan has a flat tax rate of 4.25% for 2021, meaning everyone pays the same state income tax regardless of their income.

Michigan Tax Exemptions You Didn’t Know About

Located in the State of Michigans 2021 Taxpayer guide is 5 Michigan Tax Exemptions You Didn’t Know About!

Lets begin…

PRINCIPAL RESIDENCE EXEMPTION: A principal residence is exempt from taxes levied by a local school district for operating purposes of up to 18 mills. A homeowner’s principal residence is defined as “the one place where an owner of the property has his or her true, fixed, and permanent home to which, whenever absent, he or she intends to return and that shall continue as a principal residence until another principal residence is established.” Property owners may claim only one exemption. A married couple, filing income tax returns jointly, are generally entitled to no more than one principal residence exemption. However, there are exceptions to these rules. The law allows a temporary, additional exemption for up to three years on an unoccupied homestead listed for sale. Homeowners with a principal residence exemption currently residing in a nursing home, assisted living facility, or other location while convalescing and members of the armed services absent on active duty may maintain the exemption so long as they continue to own and maintain the property, they do not establish a new primary residence, and the property is not used for most commercial and business purposes. A homeowner who vacates their home because of damage or destruction may maintain the exemption for up to three years as long as they demonstrate an intent to move back in. To be eligible for the homeowner’s principal residence property exemption, a taxpayer must file an affidavit with the local tax collecting unit on or before June 1 for an exemption from the immediately succeeding summer tax levy and November 1 for an exemption from the immediately succeeding winter tax levy. Once filed, exemptions are valid in future years until rescinded. A denial of this exemption may be appealed to the Michigan Tax Tribunal. The appeal must be filed within 35 days from date of notice.


FARMLAND (QUALIFIED AGRICULTURAL) PROPERTY EXEMPTION: Farmland may be exempt from taxes levied by a local school district for operating purposes of up to 18 mills. Farmland must be determined to be qualified agricultural property. The state has defined qualified agricultural property as “unoccupied property and related buildings classified as agricultural, or other unoccupied property and related buildings located on that property devoted primarily to agricultural use.” If a property is classified as agricultural for assessment purposes, a property owner does not need to take any action to receive the exemption, unless requested by the local assessor. Otherwise, a property owner must claim an exemption by filing an affidavit with the local tax collecting unit on or before May 1. In some cases, a partial exemption may be approved if part of the property is used for non-agricultural purposes. An exemption remains in place unless withdrawn or until rescinded. A denial of an exemption may be appealed to the local board of review. A board of review decision may be appealed to the Michigan Tax Tribunal within 35 days from the decision.


POVERTY EXEMPTION: A person may be eligible to request a poverty exemption from property taxes if they, at a minimum, own and occupy the property as their homestead, demonstrate evidence of ownership and identification, and meet poverty income standards. The local board of review makes the determination if the exemption should be granted or denied based on the guidelines for both income and asset levels adopted by the local unit of government. To be eligible for an exemption, a homeowner must apply to the local assessing unit after January 1 but before the day prior to the last day of the board of review. In certain jurisdictions, where permitted by resolution of the local governmental unit, a person who received the exemption in 2019, 2020, or both, or was approved for the first time in 2021, and receives a fixed income from public assistance may receive the exemption for up to 3 additional years without reapplication. March board of review denials may be appealed to the Michigan Tax Tribunal by the end of July. July and December board of review denials must be appealed to the Michigan Tax Tribunal within 35 days of notice.


DISABLED VETERANS EXEMPTION: Property owned and used as a homestead by a disabled and honorably discharged veteran is exempt from Michigan property taxes. To be eligible for this exemption, a disabled veteran must be determined by the U.S. Department of Veterans Affairs to be permanently or totally disabled as a result of military service and entitled to veterans’ benefits at the 100% rate, have a certificate from the U.S. Veterans Administration certifying that they are receiving or have received pecuniary assistance due to disability for special adaptive housing, or be rated by the U.S Department of Veterans Affairs as individually unemployable. This exemption is also available to an unremarried surviving spouse of a disabled veteran. An affidavit to qualify for this exemption must be filed annually with the local tax unit. A claim for the exemption is reviewed by the local board of review. A board of review decision may be appealed to the Michigan Tax Tribunal.


FARMLAND DEVELOPMENT RIGHTS AGREEMENT OR EASEMENT EXEMPTION: Property owners who own farmland covered by a development rights agreement or easement with the state are exempt from special assessments for sanitary sewers, water, lights, and nonfarm drainage on land covered by the agreement or easement. The exemption does not apply to assessments in place prior to entering into an agreement or easement. In addition, the property owner cannot take advantage of the services financed through the assessment on the exempted land and may be required to pay the assessment if the agreement or easement is ended.

As always, If you have any tax questions, please never hesitate to contact us!

Michigan Tax Exemptions You Didn’t Know About – 2021

Best CPA’s Michigan

Best CPA’s Michigan: Welcome to ATS Advisors, A Certified Public Accounting Firm with a Personal Touch.

ATS Advisors is not just another CPA firm. As your partner we understand your desire to save time and money. With locations in Plymouth, Royal Oak, Allen Park, and Grayling, we work with you, not just for you, to find effective solutions for your needs whether they are tax, accounting, finance, business, or personal.

ATS Advisors offers a wide variety of different services stemming from business and individual services.

Business Accounting Services:

Tax advisory services go beyond just the preparation of a tax return. Our aim is to resolve tax issues before they become tax nightmares. Therefore, our comprehensive tax service begins long before returns are due or financial decisions are made. Our tax advisors rely on the combination of dedicated client involvement, vast technical knowledge, and extensive experience when helping clients achieve their financial goals. We focus on helping clients turn business strengths into tax saving advantages.

Individual Services:

If it’s tax-related, we can help you with it.

Whether you want us to handle the filings or just give you some advice, we can help you with personal income tax returns, trusts and estate-planning, and retirement-planning.

We’ll probably never convince you that doing your taxes is fun, but at least we can make life easier when it’s time to file.


The range of solutions that ATS offers is another reason why ATS is one of the Best CPA’s Michigan!

View ATS Advisors LinkedIn or Contact Us Today with any questions!

IRS expands calling options for faster service, less wait time

Assistance for eligible taxpayers in setting up or modifying payment plans now available; more functions planned in 2022 to help taxpayers obtain account information

Voice Bot Video

IR-2022-127, June 17, 2022

WASHINGTON – The Internal Revenue Service today announced expanded voice bot options to help eligible taxpayers easily verify their identity to set up or modify a payment plan while avoiding long wait times.

“This is part of a wider effort at the IRS to help improve the experience of taxpayers,” said IRS Commissioner Chuck Rettig. “We continue to look for ways to better assist taxpayers, and that includes helping people avoid waiting on hold or having to make a second phone call to get what they need. The expanded voice bots are another example of how technology can help the IRS provide better service to taxpayers.”

Voice bots run on software powered by artificial intelligence, which enables a caller to navigate an interactive voice response. The IRS has been using voice bots on numerous toll-free lines since January, enabling taxpayers with simple payment or notice questions to get what they need quickly and avoid waiting. Taxpayers can always speak with an English- or Spanish-speaking IRS telephone representative if needed.

Eligible taxpayers who call the Automated Collection System (ACS) and Accounts Management toll-free lines and want to discuss payment plan options can authenticate or verify their identities through a personal identification number (PIN) creation process. Setting up a PIN is easy: Taxpayers will need their most recent IRS bill and some basic personal information to complete the process.

“To date, the voice bots have answered over 3 million calls. As we add more functions for taxpayers to resolve their issues, I anticipate many more taxpayers getting the service they need quickly and easily,” said Darren Guillot, IRS Deputy Commissioner of Small Business/Self Employed Collection & Operations Support.

Additional voice bot service enhancements are planned in 2022 that will allow authenticated individuals (taxpayers with established or newly created PINs) to get:

  • Account and return transcripts.
  • Payment history.
  • Current balance owed.

In addition to the payment lines, voice bots help people who call the Economic Impact Payment (EIP) toll-free line with general procedural responses to frequently asked questions. The IRS also added voice bots for the Advance Child Tax Credit toll-free line in February to provide similar assistance to callers who need help reconciling the credits on their 2021 tax return.

The IRS also reminds taxpayers about numerous other available self-service options.


Contact ATS Advisors today with any questions!

8 Things to Know About a Letter From The IRS

If you receive a letter this year from the IRS, don’t be alarmed. After every tax season, the agency sends out a variety of notices to taxpayers. Not every letter means there’s an impending audit coming your way. Here are 8 Things to Know About a Letter From The IRS.

As always, if you do not feel comfortable, reach out to a tax professional like us here at ATS Advisors for help.

Many of the notices are routine and can easily be resolved. Here’s what to do if one shows up in your mailbox.

1. Stay calm.

Before your heart starts racing, remember that not all IRS letters are delivering bad news. In fact, the large majority can be taken care of fairly quickly and painlessly. You often only need to respond to take care of a notice.

2. The IRS sends letters for all sorts of reasons.

Any notice you receive from the IRS could be about a number of different topics regarding your account or your federal tax return. For instance, the letter could mention any of the following:

  • you have a balance due
  • the IRS has a question about your tax return
  • something on your return was changed
  • you are due a larger or smaller refund
  • you need to verify your identity
  • additional information is requested
  • there’s a delay in return processing

Sometimes letters can wind up being quite lengthy because they also must inform you of your rights and other information required by law. If you need help understanding the letter, contact a tax professional like us here at ATS or call the IRS to ask questions.

3. It could be a change or correction.

You may get a notice that states the IRS has made a change or correction to your tax return. If you do, review the information and compare it with your original return.

4. There are specific instructions.

Each notice should state explicit instructions on what you need to do. As long as you follow them, you likely can take care of the request rather quickly.

Most importantly, do not ignore it! Don’t shove the letter to the side thinking you’ll take care of it later. Many of the instructions within those letters include a due date, so it’s important to take care of it right away. If you procrastinate, another letter will arrive in your mailbox not long after.

5. You shouldn’t have to visit the IRS.

Thankfully, most notices don’t require a call or visit to an IRS office. If you do have questions, however, you can call the phone number located in the upper right-hand corner of the notice. When you call, make sure to have your tax return and the notice in front of you so you can easily refer to specific information and answer any questions the IRS agent may ask.

6. You can agree or disagree with the notice.

Many letters from the IRS will require a response by a specific date. It’s important to comply with that date to minimize additional interest and penalty charges and to preserve your appeal rights if you don’t agree with what’s stated in the notice.

If you agree with the notice, you typically won’t need to reply unless other instructions are listed or you need to make a payment. Follow whatever instructions are given.

If you do not agree with the notice, you will need to respond by writing a letter explaining why you disagree. Within your letter, include any information and documents that support your claim. Mail your reply to the address shown in the upper left-hand corner with the bottom tear-off portion of the notice. Keep in mind, it can take up to 30 days to get a response back from the agency.

In the event that you owe money, always pay as much as you can right away. Even if you can’t pay the full amount, it’s better to send in some money than none at all. Doing so will reduce the extra penalties and fees you may accrue from paying late.

7. Keep a copy.

It’s in your best interest to keep copies of any notices you receive from the IRS with your other tax records. It may be a small chance you have to refer back to it, but it’s better to have a concrete paper trail of the occurrence than nothing at all.

8. All notices come by snail mail.

The IRS always sends letters and notices by mail. They will not contact you by email or social media to ask for personal or financial information. If you are ever contacted by someone via phone, email or social media who claim they are the IRS, immediately discontinue the conversation and call the IRS directly to ask if they are trying to reach you.

Suspicious letters

Even though the IRS only communicates via paper letters, that doesn’t mean you couldn’t wind up receiving a fake notice. If any letter you receive seems suspicious, always contact the IRS to check its validity before you do anything else.

You can report fraudulent letters by visiting the IRS’ Report Phishing page or calling 800-829-1040.

Tax Information for Michigan Students

Listed below is some useful Tax Information for Michigan Students:

American Opportunity Credit

  • Maximum Credit: Up to $2,500 per eligible student annually
  • Limit on modified adjusted gross income: $180,000 if married filing jointly; $90,000 if single, head of household, or qualifying widow(er)
  • Refundable or nonrefundable: 40 percent of credit may be refundable; the rest is nonrefundable
  • Number of years of postsecondary education: Available only for the first four years of postsecondary education
  • Number of tax years credit available: Available only for four tax years per eligible student, including any year(s) Hope credit was claimed
  • Type of degree required: Undergraduate or graduate degree
  • Number of courses: Student must be enrolled at least half time for at least one academic period that begins during the year
  • Felony drug conviction: No felony drug convictions on student’s records
  • Qualified expenses: Tuition and fees required for enrollment; course-related books, supplies, and equipment do not need to be purchased from the institution in order to qualify

Lifetime Learning Credit

  • Maximum Credit: Up to $2,000 credit per return
  • Limit on modified adjusted gross income: $160,000 if married jointly; $80,000 if single, head of household, or qualifying widow(er)
  • Refundable or nonrefundable: Nonrefundable—credit limited to the amount of tax you must pay on your taxable income
  • Number of years of post-secondary education: Available for all years of post-secondary education and for courses to acquire or improve job skills
  • Number of tax years credit available: Available for an unlimited number of years
  • Type of degree required: Undergraduate or graduate degree or non-degree courses to acquire or improve job skills
  • Felony drug conviction: Felony drug convictions are permitted
  • Qualified expenses: Tuition and fees required for enrollment, including amounts required to be paid to the institution for course-related books, supplies, and equipment

Student Loan Interest Deduction

  • Maximum benefit: You can reduce your income subject to tax by up to $2,500
  • Loan qualifications: Your student loan must have been taken out solely to pay qualified education expenses and cannot be from a related person or made under a qualified employer plan.
  • Student Qualifications: The student must be a taxpayer, taxpayer’s spouse, or taxpayer’s dependent and enrolled at least half-time in a degree program.
  • Time limit on deduction: You can deduct interest paid during the remaining period of your student loan.
  • Limit on modified adjusted gross income: $175,000 if married filing a joint return; $85,000 if single, head of household, or qualifying widow(er)

Coverdell Education Savings Account

A Coverdell ESA is set up to pay the qualified education expenses of a designated beneficiary.

Where can it be established?

It can be opened in the United States at any bank or other IRS-approved entity that covers Coverdell ESAs.

Who can have a Coverdell ESA?

Any beneficiary who is under the age 18 or is a special needs beneficiary.

Who can contribute to this ESA?

Generally, any individual (including a beneficiary) whose modified adjusted gross income for the year is less than the IRS limits.

Are distributions tax free?

Yes, if the distributions are not more than the beneficiary’s adjusted qualified education expenses for the year.

Education Savings Bonds

You may be able to cash in qualified US savings bonds without having to include in your income some or all of the interest earned on the bonds, if you meet the following conditions:

  • you pay qualified education expenses for yourself, your spouse, or a dependent for whom you claim an exemption on your return;
  • your modified adjusted gross income is less than the IRS limits; and
  • your filing status is not married filing separately.

Scholarships and Fellowships

A scholarship is generally an amount paid or allowed to, or for the benefit of, a student at an educational institution to aid in the pursuit of studies. The student may be either an undergraduate or a graduate.

A fellowship is generally an amount paid for the benefit of an individual to aid in the pursuit of study or research.

Scholarships and Fellowships are tax free only if

  • the student is a candidate for a degree at an eligible educational institution; and
  • the aid is used to pay for qualified education expenses:
    • tuition and fees required to enroll or attend an eligible educational institution, or
    • course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. Expenses don’t include room and board, travel, research, clerical help, or equipment and other expenses that are not required for enrollment or attendance.

Qualified Tuition Program (QTP)

  • Qualified tuition programs are also called “529 plans.”
  • States may establish and maintain programs that allow you to either prepay or contribute to an account for paying a student’s qualified education expenses at a postsecondary institution. Eligible educational institutions may establish and maintain programs that allow you to prepay a student’s qualified education expenses. If you prepay tuition, the student will be entitled to a waiver or a payment of qualified education expenses. You cannot deduct either payments or contributions to a QTP. For information on a specific QTP, you will need to contact the state agency or eligible educational institution that established and maintains it.
  • The tax benefit of a QTP is that no tax is due on a distribution for a QTP unless the amount distributed is greater than qualified educational expenses.

Business Deduction for Work-Related Education

  • If you are an employee and can itemize deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses is greater than 2 percent of your adjusted gross income.
  • If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. This reduces the amount of your income subject to both tax and self-employment tax.
  • Your work-related education expenses may also qualify you for other tax benefits, such as the tuition and fees deduction and the American Opportunity and Lifetime Learning credits. You may qualify for these benefits even if you do not meet the requirements listed above.

Qualifying Work-Related Education

You can deduct the costs of qualifying work-related education as business expenses. This is education that meets at least one of the following two tests:

  • The education is required by your employer or the law to keep your present salary, status, or job. The required education must serve a bona fide business purpose of your employer.
  • The education maintains or improves skills needed in your present work.

However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it is

  • needed to meet the minimum educational requirements of your present trade or business, or
  • part of a program or study that will qualify you for a new trade or business.

If you have any questions please contact us today!