Box 1 1098-T wrong

[carol_tuck]

The tuition at my university is $25,000. I received a $20,000 scholarship and paid $5000 out of pocket. My 1098-T shows $5,000 in box 1 and $20,000 in box 5. My accountant said I cannot take the opportunity credit because box 5 is larger than my box 1. I think my credit should be based on the $5,000 I paid out of pocket. Who is right?

[Lisa995]

This is really a question your professional accountant should be helping you with, but.....Did the school already show the tuition as being billed on the 2017 1098T and you got credit for it then?

[carol_tuck]

The tuition was 25000 for the spring and fall of 2018. I paid 5000 in 2018 and they gave me a scholarship for 20000. They refuse to change it.  They say they are following the instructions.

[LMA1fromny]

I am in a similar position with my son's 1098-T.  They correctly report what was collected for TRE in box 1 which includes his tuition scholarship $, plus $10,000 in our money to cover the tuition not covered by the scholarship.  The problem is in box 5 they reported his Tuition scholarship + his Room & Board scholarship.  This makes box 5 greater than box 1 and it looks like he is being paid to go to school which is just not the case.  We paid $10M for tuition (as well as books etc).  The school says the form is accurate, but it is really comparing reporting apples in box 1 and apples & oranges in box 5.

[Opus 17]

A scholarship for room and board is taxable.  Only a scholarship for tuition is tax-free.  Your question does not make clear what you think the problem is.

[LMA1fromny]

The problem as I see it is I know I wrote a check for $10K for tuition and would like to claim the $2500 Education credits that we are entitled to based on paying more than $4K in TRE.  But because box 5 is larger than box 1 it appears that I didn't pay that amount in TRE and can't declare anything.  Is there a way to indicate on  my taxes this reality that is not being shown by 2 figures on a 1098T?

[Opus 17 · Accepted solution]

The 1098-T should show $25,000 in box 1. You will have to ask the school to correct it, and you may need to get an extension on your tax return deadline.  If you report $25,000 in box 1 now, your taxes will be correct, but the IRS will start an inquiry when the form doesn't match your return.  Your accountant should be able to right an authoritative letter to the school.

The 1098-T instructions for box 1 specifically say "The amount reported is not reduced by scholarships and grants reported in box 5." https://www.irs.gov/pub/irs-pdf/i1098et_18.pdf

[Lisa995]

If the tuition amount was shown as billed last year and they took the credit then as it being "paid" then there wouldn't be anything to get the credit on in 2018.

[Opus 17]

Well, for 2018, the school can only use box 1 for amounts actually received in 2018.  They aren't allowed to use box 2 for amounts billed.  I haven't read the instructions to see what the school is supposed to do if they reported the amount as "billed" in 2017 but it was actually received in 2018.  But in this case, what the school has done is to turn a $5000 tuition payment into $15,000 of taxable income to the student, and that is a far greater inequity than simply denying the credit.  Something is not right here.  Perhaps the accountant needs to review the 2017 and 2018 form 1098-T along with the actual tuition bills and account statements from the school.

Perhaps the student claimed the credit last year on money that was billed but not paid in 2017, and is not entitled to a credit on the same expense twice, but they are certainly not liable for income tax on the scholarship.

[carol_tuck]

The tuition was 25000 for the spring and fall of 2018. I paid 5000 in 2018 and they gave me a scholarship for 20000. They refuse to change it.  They say they are following the instructions.

[Lisa995]

If you paid 5000 in 2018, then its correct.  Did the 2017 1098T show 20000 as billed and you took the credit on that back in 2017?   What did the scholarship cover if you paid all the  tuition yourself?

[Opus 17]

Box 1 is total tuition before any scholarship, as quoted above.  You will need to work with your accountant, or find another accountant.  

[cb5341]

For 2019, my daughters college populated Box 1 with the amount I actually paid them (total tuition minus the scholarships  in Box 5). In previous years, Box 1 used to be the total tuition, without subtracting scholarships. So either the school is not populating Box 1 correctly, or TurboTax (or the tax code?) is not applying the new definition of Box 1 correctly. The net result is that I (and many other people) are wrongly missing out on education tax credits.

[cb5341]

I've been digging into this a bit more, and I think the discrepancy is because the college is including the Spring 2019 scholarship, but not my Spring 2019 tuition payment, in the 2019 1098-T.  In 2017, they included my Spring 2018 tuition payment, but not the Spring 2018 scholarship, in the 2017 1098-T.  Common sense says the 1098-T should include my payments as well as scholarships for every semester covered by the 1098-T, but that's not how it seems to work.  This seems illogical and unfair, but I don't know what I can do about it.

[DMarkM1]

It appears the school may be mis-reporting.  Here are the IRS instructions for completing the form 1098-T.  I have extracted box 1 information below and you can see the other boxes in the link. 

You should work with the school to get the form corrected.  The form isn’t due to the IRS until Feb. 28 if filed by mail or March 31 if filed electronically. This way, if a student receives an incorrect 1098-T, they could have time to contact the college or university and request a correction before the school sends the information to the IRS.  

"Box 1. Payments Received for Qualified Tuition and Related Expenses Enter the total amount of payments received for qualified tuition and related expenses from all sources during the calendar year. The amount reported is the total amount of payments received less any reimbursements or refunds made during the calendar year that relate to the payments received for qualified tuition and related expenses during the same calendar year. The amount reported is not reduced by scholarships and grants reported in box 5. Include in this box the receipt of a payment of past-due qualified tuition or related expenses from a previous calendar year, but only if the educational institution previously billed the student for such amount(s)."