Claiming a stipend or scholarship as basis for the child tax credit refund?

Claiming a stipend or scholarship as basis for the child tax credit refund?

I've come across people who did this in good faith, not knowing that this is considered unearned income and does not qualify as basis for the child tax credit refund.

Here's an excerpt from a recently released IRS audit practice unit, which teaches auditors how to perform an audit on a claim for the child tax credit. 

They're clearly directed to examine refund claims for this error, and adjust the return to disallow the refund based on their findings. 

If you have been doing this in the past, it's best to act fast and amend your prior year returns before you're audited. 

Penalties can be stiff, especially if the auditor suspects intentional fraud.