My wife and I took the Tuition and Fees Deduction in 2015 after receiving a 1098-T from her accredited University that had box 2 (Amounts billed for qualified tuition and related expenses) as $5603.80. The same year, we received $5645 in assistance paid directly to the school from Americorps for a program my wife was participating in.
In addition, we had a good bit of carryover tuition from the previous year that we had not yet paid which we then paid for in 2015. We paid about $5,133 out of pocket for tuition in total in 2015.
Now we have received a CP2000 letter saying we were ineligible for the 2015 Tuition and Fees Deduction and owe $500 in back taxes and an additional $28 in interest. I assume this is because of the Third Party Assistance.
My question is, can we fight this and assert that we deserve to take the Tuition and Fees Deduction when we spent $5133 out of pocket for tuition that year? If not, would we be eligible for any other deduction or credit which would get us out of having to pay back this $528?