Background: My daughter files her own taxes as Single and a dependent since my wife and I still claim her on our return. She attends a California community college and is receiving the California College Promise Grant, which covers tuition for the first two years. She started in fall 2019 and did not pay any tuition out of pocket for that semester, since the grant paid off the amounts due toward the end of the semester, and she did not receive a 1098-T for 2019.
The promise grant also paid her spring 2020 semester tuition, which was $644. She took a class over summer 2020 that she had to pay for out of pocket, which cost $138, so she was expecting a 1098-T for 2020 showing that amount. Her fall 2020 semester tuition was $598, which the promise grant also (eventually) covered.
Toward the end of last year, when she went to register for spring 2021, she found out she couldn't because she still had an amount due for her fall 2020 semester. This is not supposed to happen to promise grant recipients, and indeed she had previously been able to register for a future semester before the grant paid off the current semester.
Not wanting to risk some competitive classes filling up, she paid the fall 2020 tuition of $598 out of pocket and was then able to complete her spring 2021 registration. The promise grant did end up paying her fall 2020 tuition, and she received a refund for the $598 just last month.
Issue: When she received her 1098-T for 2020, it has $736 in Box 1 (payments received) and $1,242 in Box 5 (scholarships or grants). It correctly reported the total amount that the promise grant paid to cover the spring and fall semesters ($644+$598=$1,242), but it is only reporting the out of pocket payments for summer and fall ($138+$598=$736).
This makes it appear as if my daughter received extra money from the grant because it's not counting the spring 2020 semester's tuition expense that the grant covered. In fact, had she not had the registration issue and hadn't pay her the $598 out of pocket, her 1098-T would be even more lopsided, showing just $138 for her summer class in Box 1, making it look like she pocketed an extra grand when all the money went toward tuition.
Sorry for the long-winded explanation, but what should she do to remedy this? Should she use the "this is not what I paid" (not exact verbiage) checkbox in TurboTax to adjust the amount, adding in the $644 to Box 1 to account for the fact that all of Box 5 went toward tuition?
