1098-T Box 1 University is using lower of Charges or Payments Received

[Cam7120]

Our son was a full time undergrad student who graduated in May 2022.  He had $30K in wages last year and provided over half of his own support.  We have not claimed him as a dependent since 2020.  His Spring 2022 semester charges, which were billed in Dec 2021, were $11k ($10k tuition plus $1k in misc fees and a meal plan).  We paid $2k of the charges in Dec 2021 and $6k in Jan 2022.  They also posted his $3k in awarded grants/scholarships in Jan 2022.  His 2022 1098-T has $0 in Box 1 and $3k in Box 5 so TT is treating the scholarship as $3k in taxable income. 

The university posts the supporting details behind each 1098-T online so we can see their computation for each box, as well as the payments and charges data.  Their method for calculating the amount for Box 1 is to use the LOWER OF charges billed or payments received.  Since billings in 2022 were $0, that's what they put in Box 1.   I've read through the 970 and the 1098-T instructions, etc., and I do not see an option for them to calculate Box 1 in this manner.  Box 1 should be payments received in 2022 INCLUDING the $3k scholarship.  So $9k in Box 1 and $3k in Box 5.  If I go into TT and put $3k in Box 1, then the tax owed on the scholarship goes away - great.  If I put $9k in Box 1, then he also gets the $2,500 AOTC.  He's only received that credit one time in the past due to too much parent income.  Do the regulations permit the university to calc Box 1 in this manner or is a leftover pre-2018 method?  Should I put the $9k in Box 1?  We have proof that we paid the $6k in Jan 2022 and that the $3k scholarship was posted in Jan 2022.

[Hal_Al]

The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. However receipt of a 1098-T frequently means you are either eligible for a tuition credit or possibly your student has taxable scholarship income. 

If you claim the tuition credit, you do need to report that you got one or that you qualify for an exception (the TurboTax interview will handle this)

You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. In the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid. You will also reach a screen that allows you to adjust the scholarship amount for "amounts not awarded for 2022 expenses".

Or if you find it easier, just change the numbers in boxes 1& 5 to what your records show. The 1098-T that you enter in TT is not sent to the IRS

[Cam7120]

Great - thanks for the answer.  It was easy to update in TT.  I've contacted the school in writing and requested a corrected 1098-T.  Don't expect to receive one but wanted it documented.

Another question: my son graduated in May 2022 and earned $28k in wages for the year.  Is that high enough to justify claiming he supported himself using his earnings to qualify for the refundable AOTC?  If that earned income is too low on the face of it, I won't bother asking him to complete the "Worksheet for Determining Support".  He only lived at home for 2 months in 2022.

[Hal_Al]

Q. My son graduated in May 2022 and earned $28k in wages for the year.  Is that high enough to justify claiming he supported himself, with earned income,  for the refundable AOTC? 

A. Yes, almost certainly.  It only has to be more than half his support. But, the only way to be absolutely sure is to do the support calculation. 

Q.  He only lived at home for 2 months in 2022?

A. Then, he cannot be a "qualifying Child" dependent.  His income is over $4400, so he cannot be a Qualifying Relative either.  But the dependent question is separate from the eligibility of a 23 y.o. for the refundable credit.