If the 1098-T that the school issued to you
has Box 1 AND Box 2 reported, enter the amount from Box 1 and
continue through the TurboTax software. Box 2 is not needed.
If the 1098-T that the school issued to you
has ONLY
Box 2 reported, you may have a problem.
Why the confusion
this year? There was a time that schools had the option of reporting Box 1
OR Box 2, but in 2016 the IRS mandated that schools report Box 1. The IRS was
lenient for a couple of years, accepting a 1098-T with either box reported, but
for tax year 2018, Box 1 must be used.
Education Credits are
based on Box 1 “What was paid to the school”.
Box 2 reports “What was billed by the school” and that
amount may, or may not, be the same as the amount in Box 1. (WHY??
Because schools often bill in one year for classes that start the next year. If
the school bills in 2018 for classes that start the first three months of 2019,
the amount will be included in Box 2; HOWEVER, if the classes are paid for in 2018, that amount should also be
included in Box 1 of the 2018 1098-T
and may be used as “Qualified Education
Expenses” to offset tax-free assistance ((such as a scholarship)) or to
apply for a tax credit. ON THE OTHERHAND, if
the classes are paid for in 2019, the amount will still be in Box 2 of the
2018 1098-T, but not Box 1. That amount is “not usable” until tax year 2019. That amount will be in Box 1 on the 2019
1098-T and may be used on your 2019 tax return.)
WHAT SHOULD YOU DO
IF THE SCHOOL REPORTED ONLY BOX 2 AND NOT BOX 1 ON YOUR 1098-T?
First:
you need to contact the school and tell them to issue a corrected 1098-T. They
need to report Box 1.
Next:
you can wait for the corrected
1098-T, or
use the original 1098-T and adjust
for the amount of tuition paid.
Remember, the IRS gets a copy of the 1098-T, and
if Box 1 is blank, the IRS is under the assumption that the school did not
receive any payments on your account. If this is not the case, and you are
reporting education expenses, you will
need PROPER DOCUMENTATION proving those payments. A copy of your student
account would work. Be sure to keep a copy of your school account activity with
your tax file in case you face an audit and need to prove to the IRS that the
payments were made. Check with the school to see if your amount matched what
they will/should have reported in Box 1
HOW TO ENTER IN TURBOTAX:
To illustrate, I will use an
example of $10,000 tuition paid.
The tuition was paid with 3,000
cash (from you, your parents, your aunt, whomever), a 3,500 school loan you took out, a 1,500
distribution from a 529 savings plan, and a 2,000 scholarship. Whatever the
school received in 2018 as payment on the student’s account.
On the
2018 1098-T you received,
Box 1 is blank
-the school did not properly report the 1098-T
Box 2 is 12,000 -the school billed
10,000 for 2018 classes and 2,000 for 2019 classes that you did not pay for
until 2019
Box 5 is 2,000
-the scholarship you received in 2018
Enter the
2018 1098-T -leave Box 1 blank, also
do not use the information from Box 2
You may get to a screen that points out that
Box 1 is blank and if you enter an amount on this screen. It will force the
amount onto the 1098-T. I do not suggest this solution since the 1098-T the IRS
gets will show Box 1 blank and I prefer to not alter the form. I suggest you
move on from this screen and allow the program to enter a “0” into Box 1. (see
screenshot #1 below)
After you
enter the 1098-T and get to the “Here’s
Your Education Summary” page, scroll down to “Other Education Expenses (for all schools)” and click Start or Edit. When you land on the “Did You Pay for Books or Materials to
Attend School?”, enter the amount of
tuition and fees paid directly to the school in the box provided. In my
example it is 10,000. The program will round up or down to whole dollars. This is
the equivalent of the amount having been reported in Box 1. The scholarship
amount was already entered in box 5, so I do not report it a second time. If
you have other expenses you paid, for instance purchasing books on Amazon,
enter that on the accompanying line, “Books
and materials not required to be purchased from the school” (see screenshot #2
and #3 below).
AGAIN, keep good school records with your tax file.
Always CONTINUE through
the Education section of the software until you get to the “Maximize My Credit” page. Do this after any entries you make that
could affect the education credit, such as a 1099-Q reporting 529
distributions. If you follow the interview step-by-step you’ll be fine, but if
you make any entries out of order, you may need to update the “Maximize My Credit” page. (see screenshot #4 below)
Read IRS Pub 970 for more information.
