1098T college tuition form noted payment, but $0.00 billed, which is causing the IRS to decline the deduction. Is the form received from the college correct?

[rjs]

You didn't say what year you are asking about. Form 1098-T for 2018 or 2019 shouldn't show an amount billed. Box 2 should be completely blank. If box 2 says "Amounts billed" the college is using an old form.

But if you are asking about 2017 or earlier, the college had a choice of showing payments received in box 1 or amounts billed in box 2, or both. If they chose to show only the payments received, they should have left box 2 blank. Did they actually bill you for tuition in the year in question? If so, they should have shown the amount billed in box 2, or left it blank. If they did not bill you for tuition, then what year were the payments for? I think that's what the IRS is really questioning. You cannot claim a deduction or credit for tuition that you paid for an earlier year.

[Hal_Al]

Q. Is the form received from the college correct?

Only you can answer that from your own financial records.  If you did not pay tuition (and/or other qualified expenses) during the tax year, you are not eligible to claim the credit. or deduction. 

That said, it is highly unusual for the IRS not to accept the amount shown in box 1 of the 1098-T as proof of payment. Read the IRS letter carefully to see which technicality they are after you for.

You may only need to prove that you actually paid tuition (and other qualified expenses), with school statements and cancelled checks and/or bank or credit card statements. The IRS has been cracking down on schools that send out a 1098-T with box 1 blank. They are no longer accepting an amount in box 2, of a 1098-T, as proof that you paid tuition.

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[Carl]

If the 1098-T was issued for the last semester of your last year in college, then that would be for your fifth ***CALENDAR* year. It is more common for that last semester of your last year to have actually been paid in the prior semester, which would be the fourth calendar year. So it's perfectly possible that your 1098-T would show a ZERO in box 1 *AND* and ZERO in box 2. (Box 2 is no longer used after the 2017 tax year)

However, if you *ACTUALLY* did pay tuition, books, and/or lab fees in that fifth calendar year, and you paid them "AFTER" the 1098-T was cut (which would be highly unusual, but not impossible) then the 1098-T would "in fact" show zeros in boxes 1 and 2.  So long as you can provide the IRS receipts that prove you paid the qualified expense in whatever tax year we're referring to here, then it shouldn't be a problem.

Just understand that the letter you got from the IRS has a "drop dead" date on it. If you don't respond with your proof by that drop dead date, then you lose with no possibility of recourse.

[Hal_Al]

Another thing about the  fifth calendar year: you are only eligible for the most generous credit (The American Opportunity Credit - AOC) a total of four times.  This may be the reason the IRS  "declined" your credit.  You might be able to  claim the Lifetime Learning credit (LLC) instead. But. it has lower income limits than the AOC