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Do I disable Lifetime Learning Credit? Job gave $5k, covers school. TT won't disable LLC. Should I enter $5k under "Employer-Provided Assistance?" It increases fed due.

Context:
1098-T Box 1 says payments received for
qualified tuition and related
expenses "5,514.00. " 
1098-T Box 5, there is a $551 scholarship. Employer assists up to $5,000 for education via check/deposit (that came January 2024 if it matters). This means, we likely received a check from employer for $4963 (5,514 - 551).
My understanding is that this $4963 is not taxable income since its for school, is less than $5250, and its for a job skill related bonafide educational pursuit.

Now, in TurboTax, it "Finds the best tax breaks" for me, and assigns us the Lifetime Learning Credit, (which I can't disable, but might need to). 

Then under deductions & credits, Scholarships & Grants,  it asks us to enter amounts received, "Enter the amount [Spouse] received. Don't include amounts already listed on a w-2 or other tax form[...]"

Next to "Employer-Provided Assistance," there is a blank field. This is where the concern occurs.

If I type in $4963 here, it significantly alters our return from owed to owing. I didn't expect tuition support from work to be taxable income (assuming thats whats happening).  I am also concerned Lifetime Learning Credit is causing some conflict, since job paid for school.  Don't want to double dip. Maybe its a bug? I am probably misunderstanding something.
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1 Best answer

Accepted Solutions
Hal_Al
Level 15

Do I disable Lifetime Learning Credit? Job gave $5k, covers school. TT won't disable LLC. Should I enter $5k under "Employer-Provided Assistance?" It increases fed due.

Just don't enter the 1098-T. It's too confusing for you and TurboTax to straighten out. 

The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. Although receipt of a 1098-T frequently means you are either eligible for a tuition credit or possibly your student has taxable scholarship income, you know that neither applies.  You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. 

 

 Because of the January reimbursement payment the expenses and payment don't align, but you can and should treat it as matching. You are not allowed to use the mismatched payment to claim the LLC, for 2023. This situation is covered in Pub 970. 

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4 Replies
AmyC
Expert Alumni

Do I disable Lifetime Learning Credit? Job gave $5k, covers school. TT won't disable LLC. Should I enter $5k under "Employer-Provided Assistance?" It increases fed due.

The tax free employer assistance takes away the Lifetime Learning Credit. You need to find out if the reimbursement is for 2023 or 2024. If it is 2024, that could affect your tax free income this year, 2024, and cause some taxation. It also means that you can file 2023 without the income.

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Hal_Al
Level 15

Do I disable Lifetime Learning Credit? Job gave $5k, covers school. TT won't disable LLC. Should I enter $5k under "Employer-Provided Assistance?" It increases fed due.

Just don't enter the 1098-T. It's too confusing for you and TurboTax to straighten out. 

The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. Although receipt of a 1098-T frequently means you are either eligible for a tuition credit or possibly your student has taxable scholarship income, you know that neither applies.  You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. 

 

 Because of the January reimbursement payment the expenses and payment don't align, but you can and should treat it as matching. You are not allowed to use the mismatched payment to claim the LLC, for 2023. This situation is covered in Pub 970. 

Do I disable Lifetime Learning Credit? Job gave $5k, covers school. TT won't disable LLC. Should I enter $5k under "Employer-Provided Assistance?" It increases fed due.

Thanks so much for your reply.

Let's see if I can answer the y ear and the Lifetime Learning Credit issue.

First, the lifetime learning Credit....
TLDR: TurboTax forces us to accept Lifetime Learning Credit and it cant be undone or disabled. This cannot be claimed if expenses are paid by employer. 2023 IRS publication 970clearly says one cannot claim lifetime learning credit if  "[...]the same expenses paid with a tax-free scholarship, grant, or employer-provided educational assistance[.]"  So this might be a TT tech support issue?

TurboTax flow chart: first asks for user input for Scholarships and Grants information: where we are presented with an empty field next to "Employer-Provided Assistance." ( Its important to note  that TurboTax specifies that any amount entered here should not already be on any W2 or other tax form. In our case, and probably many other working students' cases, this dollar amount won't likely exist any tax form or w2  because its an Employer-Provided Assistance tax free benefit less than $5,250... and thus fulfill this specification obligation).

Now, regardless if I leave this field empty, or enter $5,000, TurboTax will then lead to a page "Next, We'll See Which Credit Will Save You the Most" and it only give the option to "Maximize my Education Tax Break" where it defaults to qualifying us for Lifetime Learning Credit. 


That is concern 1. double dipping and I can't disable it.

Concern 2:
Regarding the ~$5,000 from the employer, it arrived in January 2024. On its face, I should not enter anything for this 2023 taxes... but TT asks for this information and doesn't stipulate anything for handling fall semester delayed reimbursement situations. But i could infer something for 2024 in this case...
But to my understanding, it wont be on any w2 for either year.  I guess I could say the $5000 was for 2023 since 2023's efforts where where it was earned...good grades and all that to earn it.  However, since the deposit arrived in 2024 maybe I have to stick with that for accounting sake, but not enter it for 2023 filing?

The delayed reimbursement should not open us up to receiving the Lifetime Learning Credit for 2023 either. 
In reality, work paid for school. But the year we received that "income" was 2024. Its just confusing because TT seems to want this information.

"if it is 2024, that could affect your tax free income this year, 2024"  
I am probably missing something important here, if you can see how this might be true, could you elaborate? 

Thanks so much for your reply.

Hal_Al
Level 15

Do I disable Lifetime Learning Credit? Job gave $5k, covers school. TT won't disable LLC. Should I enter $5k under "Employer-Provided Assistance?" It increases fed due.

Q. I am probably missing something important here, if you can see how this might be true, could you elaborate? 

A. You're simply missing the fact that TT can't do what you want it to do, in the standard interview. You need to use a workaround.  The simplest workaround is just don't enter anything as you know you don't get the credit.

 

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 possibly your student has taxable scholarship income. 

If you claim the tuition credit, you do need to report that you got one or that you qualify for an exception (the TurboTax interview will handle this)

You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. In the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid. You will also reach a screen that allows you to adjust the scholarship amount for "amounts not awarded for 2023 expenses".

Or if you find it easier, just change the numbers in boxes 1& 5 to what your records show. The 1098-T that you enter in TT is not sent to the IRS.

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