Final answer:
If refundable credits are disallowed, students may face penalties such as increased tax liability and loss of additional benefits or incentives associated with the credits.
Step-by-step explanation:
If refundable credits are disallowed, it means that a student is no longer eligible to receive those credits. This can result in a reduction or elimination of the tax benefits associated with those credits. However, it is important to note that penalties specifically related to disallowance of refundable credits vary depending on individual circumstances and the specific tax laws of each country or jurisdiction.
One example of a penalty that may be imposed is an increase in the amount of tax owed. If a student previously received a refundable credit that reduced their tax liability, disallowing that credit would effectively increase their taxable income and potentially result in higher tax liability.
Another penalty could be the loss of any additional benefits or incentives associated with the refundable credits. For example, certain tax credits may also qualify individuals for other government programs or assistance. If the credits are disallowed, the student may no longer qualify for those additional benefits.