You might want to request a Wage and Income Transcript from the IRS for the year they think you claimed the credit. It should show all forms filed under your SSN that year, including a Form 5405 if one was actually filed. If no 5405 appears on your transcript, that's your proof one wasn't filed. Also request your Account Transcript which shows any credits applied. If the credit appears there but no corresponding 5405 on your Wage and Income Transcript, that helps demonstrate the error. Lastly, if you still have your tax return from that year (or can get a Return Transcript), that would show you didn't claim the credit on your actual filed return.

Thanks for these suggestions. I hadn't thought about using the absence of forms as proof! I just checked and I can get my transcripts online through the IRS website. I'll request both the Wage and Income and the Account transcripts to see what they show. I definitely don't have my actual tax return from 2008 anymore, but hopefully the transcripts will be enough to show there's a mismatch between what was filed and what credits were applied.

I did try going to the local IRS office - that's where they gave me the 5405 form and told me to fill it out! Maybe I just got someone who didn't know what they were doing? I think I'll try going back and hopefully get a different representative who might be more helpful like in your case.

Thanks for the extra info! The tax software did have me fill out those schedules, but I wasn't totally clear on what they were for. How do the quarterly estimated payments work? Is there a minimum amount I need to earn before I'm required to make them? And how do I calculate how much to pay?

Generally, you should make estimated tax payments if you expect to owe $1,000 or more when you file your return. The IRS wants you to pay as you earn throughout the year, not just at tax time. To calculate your payments, you have two options: You can pay 100% of last year's tax liability (110% if your income is over $150,000), divided into four equal payments. This is the safest method to avoid underpayment penalties. Or you can estimate your current year's tax and pay it in quarterly installments, which might be more accurate if your income changes significantly. The IRS Form 1040-ES has worksheets to help you calculate this. Payments are due April 15, June 15, September 15, and January 15 of the following year. You can pay online through the IRS Direct Pay system.

Yeah, it's confusing! The threshold was supposed to drop to $600 for 2023, but the IRS delayed it. For 2023 tax returns (what we're filing now in 2024), the threshold is still $20,000 AND 200 transactions. In 2024 (for next year's taxes), it'll be $5,000 with no transaction minimum. Then in 2025, it'll finally go down to $600. But some states have their own lower thresholds, and some platforms might be issuing 1099-Ks at lower amounts anyway just to be safe. Super confusing!

That's really scary - I definitely don't want to get hit with penalties on top of everything else. Would filing a small claims court case help show the IRS that I'm actively trying to get the money I'm owed? Or would that possibly complicate things?

Filing in small claims court is actually a great move for two reasons. First, it creates an official legal record showing you're actively pursuing the unpaid funds, which demonstrates to the IRS you're not trying to evade taxes but are dealing with a payment issue. Many small claims courts have simple filing procedures designed for situations exactly like yours. Second, it often lights a fire under companies that have been dragging their feet. Many businesses will suddenly "find" your payment rather than deal with a court appearance and potential judgment against them. Just the act of serving them papers can be enough to get your money. Plus, in most states, you can add filing fees and even interest to your claim amount.

I used TurboTax to file an amended return for a similar issue last year. It can definitely handle Form 1040-X, but it doesn't have great guidance for Form 4852 (the substitute 1099 form). I ended up having to do quite a bit of research on my own to figure out how to fill it out correctly. If your situation is complicated, you might want to consult with a tax pro who has experience with these disputes specifically.

I didn't have any unemployment this year, but I did cash out about $2000 from an old 401k from a job I had years ago. Could that affect things? I completely forgot about that until just now.

That would absolutely affect your taxes! 401k withdrawals are typically taxed as ordinary income, and there's usually an additional 10% early withdrawal penalty if you're under 59½. So on a $2000 withdrawal, you could be looking at your regular tax rate plus potentially a $200 penalty. This is definitely what caused your situation. The withdrawal added $2000 to your taxable income, and if they only withheld the standard 20% (which is common), that might not have covered your full tax obligation including the penalty. Mystery solved!

This is a good point. I had a similar experience a few years back. Made almost the same income but lost the American Opportunity Credit when I graduated. My refund dropped by like $1000 even though nothing else changed!

Thanks for sharing your experience! What specific types of grants did your spouse have that were affected by filing status? My wife mentioned something about a state grant but I'm not sure which one exactly.

My wife had a combination of a federal Pell Grant and a state grant that was specifically for lower-income students returning to education. Both had income limits that would have been exceeded if we filed jointly. The state grant (in California) was particularly sensitive to income changes. If your wife has a state grant, that's a huge flag to investigate further because many state grants have strict income requirements that can disappear entirely once you cross a threshold - unlike federal aid which often gradually phases out. I'd recommend having her contact her school's financial aid office directly to ask how joint filing would impact her specific grants. They usually have better information than the general FAFSA helpline.

Yes! The new FAFSA has increased the income protection allowance, meaning more of your income is shielded from aid calculations. For married couples, you get a higher protection amount than single filers. This actually makes filing jointly slightly LESS harmful to aid eligibility than before.