My Daughters 1098-T had 3 semesters of payments (Spring 2015, Fall 2015, Spring 2016). In 2012 it only had two (Fall 2012 Spring 2013). What happened? How do I report?

[ghegewald]

I really need some advice.  As stated above, my daughter had received 1098-T in 2011 and 2012.  They listed the Fall of that year and the spring of the next year as expenses and scholarships.  For example, the 2012 had Fall expenses and scholarships and Spring 2013 expenses and scholarships.  Since I have been billed and paid these expenses (Spring) before the end of the year, I have claimed them on the current tax year just like the 1098-T reflected.  The last two years my daughter did not receive 1098-T (Scholarships were more than expenses).  I continued to report Fall current year and Spring new year.  Now this year she recieved a 1098-T that has three semesters of Expense.  Her 1098 lists Spring of 2015, Fall of 2015, and spring 2016 all on the 2015 1098-T.  It also has one semester of scholarships (Spring 2015 - which was her last).  I claimed the Spring 2015 expenses and scholarships on last years Tax Return.  I am not sure what to do now.

[Carl]

This education stuff can be confusing, I know. I myself have been there, done that, got the T-shirt -and with two kids mind you! Please read all of the following and take your time. It's all inclusive in what I hope is "plain English" and covers situations that "might" arise for you, that you just are not yet aware of. Pay attention to the wording, and interpret it "literally".

If you received a 1098-T for 2015, understand that the student is the only person on the planet that received that specific 1098-T. A copy is not sent to the IRS. The 1098-T is "informational only" for the student. You are not required to utilize the information on the 1098-T if you don't want to. Also, it’s not that uncommon for the 1098-T to be wrong either.

 The best thing to do is to have the student log on to their college account and go to their financials section of their account. There they can get a detailed printout of everything which can be used for filing taxes. But first, let me provide more information (which you may already be aware of) which may help alleviate confusion.

Understand that the IRS works in calendar years, while colleges work in academic years. So the reality is, it takes 5 calendar years to get that four year degree. So with that said:

 - Qualified education expenses are claimed in the tax year they are paid. It does not matter what year they pay "for".

 - Scholarhips and grants are claimed as taxable income (initially) in the tax year they are received. It does not matter what year that scholarship or grant is *for*.

So when looking at the detailed printout, be careful. What you are concerned with is the date a qualified expense was paid/applied. You should completely ignore the start date of the class it applies to.

If you don't find the below helpful because you may already know it, then I'm sure others reading this thread will. So please bear with me. (I like to be complete - it's just me)

• College Education Expenses

Colleges work in academic years, while the IRS works in calendar years. So the reality is, it takes you 5 calendar years to get that 4 year degree. With that said:

 - Scholarships and grants are claimed/reported as taxable income (initially) in the year they are received. It does not matter what year that scholarship or grant is *for*

- Tuition and other qualified education expenses are reported/claimed in the tax year they are paid. It does not matter what year they pay *for*.

Understand that figuring out who claims the student as a dependent, and determining who claims the education expenses & credits, is two different determinations. It depends on the specific situation as outlined below. After you read it, I have also attached a chart at the bottom. You can click on the chart to enlarge it so you can read it. If it’s still to hard to read on your screen then right-click on the enlarged image and elect to save it to your computer. Then you can double-click the saved image file on your computer to open it, and it will be even easier to read.

Here’s the general rules gisted from IRS Publication 970 at http://www.irs.gov/pub/irs-pdf/p970.pdf

If the student:

Is under the age of 24 on Dec 31 of the tax year and:

Is enrolled in an undergraduate program at an accredited institution and:

Is enrolled as at least a half time student for one academic semester that begins during the tax year, (each institution has their own definition of a half time student) and:

the STUDENT did NOT provide more that 50% of the STUDENT’S support (schollarships/grants received by the student do not count as the student providing their own support)

Then:

The parents will claim the student as a dependent on the parent's tax return and:

The parents will claim all schollarships, grants, tuition payments, and the student's 1098-T on the parent's tax return and:

The parents will claim all educational tax credits that qualify.

If the student will be filing a tax return and:

The parents qualify to claim the student as a dependent, then:

The student must select the option for "I can be claimed on someone else's return", on the student's tax return. The student must select this option ieven f the parent's qualify to claim the student as a dependent, and the parents do not claim them.

Now here’s some additional information that may or may not affect who files the 1098-T. If the amount of scholarships/grants exceeds the amount of qualified education expenses, the parent will know this when reporting the education on their tax return, because the parent will not qualify for any of the tax credits. (They only qualify for tax credits based on out-of-pocket qualified expenses not covered by scholarships/grants.)  Also, the parent’s will not qualify for the credits depending on their MAGI which is different for each credit, and depends on the marital status of the parent or parents.

In the case where scholarships/grants covers “all” qualified education expenses, the parent’s don’t need to report educational information on their dependent student at all – but they still claim the student as a dependent if they “qualify” to claim the student.

 If the scholarships/grants exceed the qualified education expenses, then the student will report the 1098-T and all other educational expenses and scholarships/grants on the student’s tax return. The student will pay taxes on the amount of scholarships/grants that are not used for qualified education expenses. However, if the student’s earned income reported on a W-2, when added to the excess scholarships/grants does NOT exceed $6200, then the student doesn’t even need to file a tax return, and nothing has to be reported.

If the student has any other taxable income not reported on a W-2, and it exceeds $400, (not including taxable portion of scholarships/grants) then most likely it’s considered self-employment income. That will require a tax return to be filed and the student will have to pay the Self-Employment tax on that income.

Finally, regardless of the student’s W-2 earnings, if any taxes were withheld on those earnings and it was less than $6200, then the student should file a tax return so as to get those withheld taxes refunded.

[ghegewald]

The 1098-T says "This is important tax information and is being furnished to the Internal Revenue Service."

[Carl]

The information may be what is being reported. But the IRS is not getting a copy of that form. With that said, there is the possibility that the 1098-T could be completely different and not agree at all with what is being reported to the IRS. It doesn't happen that often. But it does happen. One wrong 1098-T is one to many. For the most part, you can probably trust it. But if you get questioned on your education expesnes by the IRS and it's related to your 1098-T information, you can always provide them a copy of the one you recived.
If the one you got was wrong, it would preclude you from having to pay penalties maybe. But you would STILL have to correct your tax return if it was in fact, wrong because of the 1098-T information. Of the eight years my 2 kids were in college, I had one year when the 1098-T was so far off, it was useless. Stopped trusting the 1098-T's after that.

[ghegewald]

Well here is another one.  My son (first year) just got his 1098.  It has only the fall payment billed.  I paid both in 2015 (Fall and Spring of 2016).  So since this is my first year reporting, do I ignore the 1098 and record what I paid.  Or go ahead and show the payment for Spring of 2016 next year.  It seems to me that there should be a "correct" way to do it.

[Carl]

have your son log into his online college account as outlined above. I would expect what the college has in their official online records in his account, to agree with you, before I would expect the 1098-T to agree with you. Then when you enter the 1098-T, later screens will ask for expenses not reported on the 1098-T. That's where you can make your tax return, agree with what the college says in their more official online records in your son's college account.

[fanfare]

For each filing year, regardless of Box 1 or 2, report the actual amount paid for tuition and fees in that calendar year.

For this you need to consult your checkbook.

[Carl]

Thanks fanfare. That's basically what I was going around my elbow to get to my thumb, to say. 🙂