1098-T Scholarship and Tuition Discrepancy

[mccajm16]

I just received by 1098-T and it has nothing in box 1 and then my financial aid amount in box 5. When I input it like this, I end up getting taxed on the whole amount in box 5 because tuition was charged and reported in 2019 for spring 2020 but financial aid was paid out in january 2020.

There are two different ways I've thought to reconcile this. First, in another post someone recommended to put the total amount paid in the "This isn't what I paid to the school" box, This has a great increase on my refund (due to educational credits). I also saw the "these scholarships weren't for 2020 expenses" box. Which ones of these should I fill in? Should I put that the scholarships weren't for 2020 or just fill the true amount I paid in 2020 in the box asking for the real amount paid? I'm just trying to avoid having any issues with double dipping and the IRS.

[Hal_Al]

Use the  the "these scholarships weren't for 2020 expenses" screen.

OR

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 deduction or possibly your student has taxable scholarship income.  You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. 

[mccajm16]

If I paid $30k including $20k of scholarships, where would I claim the $10k that I paid out of pocket since that wasn't claimed on last year's taxes? Just to break it down a little more clearly

Spring 2020 tuition reported on 2019 1098-T 

Spring 2020 $20k financial aid (scholarships) reported on 2020 1098-T

Spring 2020 $10k out of pocket not reported on either 1098-T

Total Spring 2020 payments ~$30k including scholarship

I'm trying to figure out exactly how to enter these numbers without the IRS coming after me for any reason. Right now I have the 30 as "The number in box one is not the amount I paid the school" and the scholarship number in the proper designated box. If I delete the 30 from that box and designate the $20k as for 2019 expenses, how do I get the credit for the $10k out of pocket payment?

[Hal_Al]

 In that case you do both.

Choose "The number in box one is not the amount I paid the school"  and enter 10,000  as the amount you paid.

Choose "these scholarships weren't for 2020 expenses" box, and enter $20,000 as the amount.

That should wipe out the $20,000 in box 5 and enter $10,000 as the amount paid on form 8863. 

There's nothing you can do to totally avoid IRS scrutiny. So keep good records, in case you have to defend  this. The TurboTax worksheet may be helpful