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Most clients do not want to get a letter from the IRS. It creates anxiety in them even before they open it. Even if you tell them ahead of time and that you will handle the matter if it arises, they will find a way to blame you as the return preparer. Also, knowing that they may not get a letter for more than a year could create long term anxiety to such a degree that the client will call you and ask if the return can be changed so as not to claim the credit.

The Internal Revenue Service is now letting taxpayers submit Form 1040-X electronically when they want to file an amended tax return through commercial tax software, in what the agency called a “major milestone in tax administration.” https://www.accountingtoday.com/news/irs-makes-form-1040-x-amended-tax-returns-available-for-e-filing

No matter which way you go, your client is going to receive a AUR letter when there is no 1098-T to match the claimed credit. The LLC should be relatively easy to defend with only proof of payment. So, you should be advising your client of the options and, if the claim is rejected, it will result in penalties and interest. However, the AOC will be more difficult. You would have to get a letter from the dean's office at Yale that the Dartmouth courses were accepted as part of the Yale program leading to a degree. The IRS could also argue that the summer course was not a full time course. Dartmouth Summer offer three hours and it looks like the son, from what was paid, took 2 hours (the Dartmouth website provides the tuition by hours). Without a 1098-T from Dartmouth, the return will have to be paper filed where it is more likely to be flagged for audit.

She can be high income but still have too much outstanding debt used and available. Or, the corporation could have too high a debt to equity ratio. Find out who told her to pay off her other cars. Tell her to come to you for tax advice.

Ron: Here's what I've been pondering. Offered for critique or criticism. From an accounting standpoint, the funds are a loan from the bank, booked in the same manner as any other loan. So as long as that status remains, this is a loan payable on the books and the expenses are tax deductible. Forgiveness isn't guaranteed, so it's perfectly logical to retain it as a loan until forgiveness is certain. Now if a taxpayer requests & receives forgiveness in the same year and the bank relies on the SBA reimbursement to forgive the loan, then the offsetting entry would negate the expense as you have described. But if the taxpayer waits until Jan 2021 to request forgiveness, then the adjustment to income (or expense, as you see fit), would occur in 2021. Nothing is certain until the loan is actually forgiven. Depending upon the taxpayer's circumstances, it might be desirable to shift the income into 2021. (I could spin out a few scenarios where this would be applicable but that isn't relevant to this conversation) Now it's possible IRS may offer guidance on this before the end of the year. But it's a bit of an esoteric issue so they may not pay it much attention. In any event, this is my thinking right now given my understanding of the way this timing would impact a cash-basis taxpayer. It is somewhat similar to the tax treatment of a medical expense paid in 2020 and then reimbursed in 2021, at least in concept.

She can choose mileage. Or, she can choose actual expenses. Either way, she needs to know the business mileage and total mileage. If the corporation owns the vehicle, it must include her personal usage on her W-2. If she owns the vehicle, she'll want the corporation to establish an accountable plan so she can turn in expense accounts and get reimbursed for business mileage. The reimbursements will NOT be income to her but WILL be deductions to the corporation. She can buy or lease a vehicle. The corporation can buy or lease a vehicle. WHERE did she hear that she has to pay off all the rest of her cars? If the finance company, maybe she has too much credit outstanding to get a good loan on yet another car. How many cars does she have?!

I tell them I don't aspire to be the cheapest, I aspire to be the BEST. I also don't sell tax returns like tax-in-a-box. I sell service.