1098-T Boxes 1 and 2 blank?

[awsomealesha]

I just got my 1098-T form from my school and it shows that the school did not bill me for anything or collect any money with blanks in both boxes 1 and 2, but it shows all of my scholarships and financial aid in box five at over 12,000 for the semester. However, I paid out of pocket and that financial aid was given to the school just for the 2016 semester. I have statements from my school showing the billing and distributing of my money for 2016 so why is this blank, and it really messes up my tax return but thousands if it is left blank like this. When I enter the information is wrong and correct it will that change the actual 1098-t form and make it right, or will I just have to send in supporting documents with my taxes to prove it is wrong and what I actually was charged? Also, Will I still get my same return I would if I didn't have to correct this information?

[Opus 17]

Did you pay tuition in 2016 with your own money from earnings, savings, or loans in your name?  Not including room and board and not including tuition amounts that were paid with tax-free scholarships, grants, or employee tuition assistance.    Also note that your 2015 1098-T may have included amounts that were billed or paid for the Spring 2016 semester, and won't be listed twice.

[awsomealesha]

yes, I did and the money from the scholarships and grants were given straight to the school and were still not enough to cover the tuition. So I'm just confused why these amounts I was charged are not even listed. If they were on the 2015 one wouldn't the school also list the scholarships and grants too and not move just those to the next years form? Right now it looks like I was given a few thousand in scholarships and grants, and not charged anything when I didn't actually receive a dime of this to me because it was government aid and was used to pay the billed amounts for that semester.

[Carl]

Keep in mind that when working through the program, after you enter the 1098-T you're asked for those things not reported on the 1098-T. So long as you check the dates in your online account, you'll be fine claiming those qualified expenses that you can prove you paid in 2016, in the "not reported on the 1098-T" sections.

[awsomealesha]

Okay thank you!!

[Carl]

Don't base your qualified education expenses on the 1098-T alone. Those forms are not always correct, or inclusive. What you need to do is to log on to your college account and go to the financial section of your account. Then drill down for the details. Dates are important, so let me explain.

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

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

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

When looking at the financial information in your online account, when it comes to tuition paid you are only interested in the date the payment was applied. The start date of the class it was applied to does not matter. If the payment "received" date is listed separately from the applied, date, then again, it's the date the payment was applied that matters for tax purposes.

For scholarship monies received by the college and not applied, it's not a problem. The program will ask you about this situation as you work through it, and will handle it accordingly. But understand that if the college cuts you a check and sends it to you because those scholarships and grants are more than your qualified education expenses, then that money they send to you is taxable income to *you* the student, and must be reported as such. (Again, the program handles this pretty efficiently)

Don't be surprised if you end up paying taxes on some of that scholarship money. Remember, it takes you five calendar years to get that four year degree. So next year on your 2017 taxes, that means all your qualified expenses would be "out of pocket" and therefore deductible, provided you have the "earned" income in 2017 to deduct it from. (That's why the parents are the ones to claim the education expenses on the parent's tax return)

I've added more details on this, in a separate post in this thread, in case you find it helpful.

[Carl]

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 Some words are in bold, italicized, or capitalized just for emphasis. This is because correct interpretation by the reader is everything. Take the below contents LITERALLY, and do not try to “read between the lines”. If you do, you’ll interpret it incorrectly and risk reporting things wrong on your taxes. For example, there is a vast difference between “can be claimed” and “must be claimed”.  The first one indicates a choice. The second one provides no choice.

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 a full 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.

1099-Q Funds

 First, scholarships & grants are applied to qualified education expenses. The only qualified expenses for scholarships and grants are tuition, books, and lab fees. that's it. If there is any excess, then it's taxable income. It automatically gets transferred to line 21 of the 1040 with an annotation of "SCH" next to it.

Next, 520/Coverdell funds reported on 1099-Q are applied to qualified education expenses. The qualified expenses for 1099-Q funds are tuition, books, lab fees, AND room & board. That's it. If there are any excess 1099-Q funds they are taxable. The amount is transferred to line 21 of the 1040 with an annotation of "SCH" next to it.

Finally, out of pocket money is applied to qualified education expenses. The only qualified expenses for out of pocket money is tuition, books, and lab fees. Room & board is NOT a qualified expense for out of pocket money.

When you have a 1099-Q it is extremely important that you work through the education section of the program in the order it is designed and intended to be used. If you do not, then there is a high probability that you will not be asked for room & board expenses, and you could therefore be TAXED on your 1099-Q funds.

Finally, if "all" qualified expenses are covered by scholarships, grants, 1099-Q funds and there is ANY of those funds left over that are taxable, then while the parent can still claim the student as a dependent, it is the student who will report all the education stuff on the student's tax return. That's because the STUDENT pays the taxes on any excess scholarships, grants and 1099-Q funds.