How to resolve IRS dispute over Lifetime Learning credit denial?

This is actually a really common issue with education credits and the timing of payments versus when classes are taken. The IRS follows a specific rule here that trips up many students. When it comes to education credits like the Lifetime Learning Credit, what matters is when you actually paid the qualified education expenses, not when you took the classes. This is called the "payment rule" for education credits. Based on what your school told you, it sounds like your tuition was charged in December 2020, which means technically that's when the qualified expenses occurred for tax purposes - even though the classes were in 2021. The 1098-T forms follow this same logic, which is why you didn't receive one for 2021. The correct approach would have been to claim the Lifetime Learning Credit on your 2020 tax return (for the payments made in December 2020), not your 2021 return. Unfortunately, the IRS is technically correct in their determination based on the timing. If you have documentation showing you actually made payments in 2021 (your credit card statement, loan disbursement, etc.), you could potentially appeal this with the IRS. You'd need to show that although the charges were applied in December 2020, you didn't actually pay until 2021.

I had a similar issue last year and found an incredibly helpful tool called taxr.ai (https://taxr.ai) that basically saved my sanity when dealing with my education credits mess. I was in a similar situation with confusing payment dates and missing tax forms from my school. What taxr.ai did was analyze all my documentation - student account statements, payment confirmations, loan disbursements - and then provided me with a clear analysis of when my qualified educational expenses actually occurred for tax purposes. The best part was I could upload all my statements and they created a proper paper trail showing when payments were actually made versus when the school recorded them. They even generated a letter explaining the situation that I could send to the IRS with all the right tax code citations. Their AI does document analysis specifically for tax disputes like this.

Just wanted to follow up about taxr.ai since I ended up trying it for my American Opportunity Credit issue. It was seriously impressive! I uploaded my confusing mess of student account statements, bank payments, and scholarship info, and it sorted everything by tax year and identified exactly which expenses qualified. The analysis report it generated showed why some of my payments counted for 2021 taxes rather than 2022, which was exactly what the IRS was questioning. I was able to respond to the IRS with the organized documentation and explanation letter, and they accepted it within 3 weeks! No more threatening letters about owing $2,500 plus penalties. What really helped was how it explained the "paid vs. charged" distinction that was confusing me. Turns out my situation was almost identical to the original poster's problem.

If you need to actually get through to a human at the IRS to resolve this (which you probably will), I highly recommend using Claimyr (https://claimyr.com). I discovered it after wasting literally days trying to get through on the IRS phone lines. I had a similar education credit dispute last year and kept getting automated messages or disconnects when calling the IRS directly. Claimyr got me connected to an actual IRS agent in about 15 minutes when I had previously been trying for weeks. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Once I actually got through to a real person, I was able to explain my situation with the education credits and missing forms. The agent walked me through exactly what documentation I needed to provide to resolve the dispute. Having that direct conversation saved me from months more of back-and-forth letters.

I feel like an idiot for being so skeptical, but I tried Claimyr yesterday out of desperation after getting another CP2000 notice. After trying to call the IRS myself for THREE WEEKS (and never getting through), I was connected to an actual IRS agent in 22 minutes. The agent was super helpful once I explained my situation with education credits from an online program. Turns out there was a specific form I needed to submit showing when I actually made the payments versus when the school recorded them. She even gave me her direct extension for follow-up questions. I literally wouldn't have gotten this resolved without actually speaking to someone. The written notices were completely useless for explaining my specific situation. I was about to give up and just pay the $2,300 they claimed I owed even though I knew I qualified for the credit.

Something nobody has mentioned yet is that you can request a 1098-T from your school for verification purposes even if they didn't initially send you one. I work in a university bursar's office, and we do this for students all the time. Specifically request a "student account statement" that shows the dates when charges were applied AND the dates when payments were received. This statement should have official school letterhead and show all transactions. The date discrepancy you're describing is very common, especially for spring semester charges that post in December. What matters to the IRS is when YOU made the payment, not when the school posted the charges.

Just to add - make sure you're responding to the CP2000 notice within the deadline they gave you! Even if you're still gathering documentation, send something in writing before the deadline saying you disagree with their findings and are gathering evidence. The worst thing you can do is miss their response deadline because then it becomes much harder to dispute. You can always send additional documentation later, but that initial response preserving your right to dispute is super important.