Employer provided tuition assistance and 1098-T

[robawsc]

Hi there. My employer pays for all of my tuition and school expenses including books and such. I received a 1098-T form stating 6069.20 paid in tuition in box 1, and 6069.20 in scholarships/grants in box 5. My issue is, how do I tell if they included that in my wages on my W2? Doing the math, it kind of adds up... but I can't find any certain answers on this. From the company that my employer does tuition assistance through:

What happens if I receive more than $5,250 in educational benefits in a year?

If eligible, your tuition and other education benefits may total more than $5,250 in a year. If so, the excess is generally considered to be taxable wages. This means that the extra amount may be subject to the same tax withholding (and other rules) as wage income.

What’s a “tax gross-up” and how would it affect the taxation of educational benefits more than $5,250?

Some employers offer tax gross-ups. If so, they will gross up tax liability incurred by you on your paycheck while you're participating in the education benefit. 

If your employer doesn't provide tax gross-ups, the amount that goes over $5,250 per year may be reflected as taxable income on your W-2. In some states, this amount may also be subject to applicable state income tax.

How should I reflect this on my taxes? I ask because when continuing with the process of filling everything out, I end up at a section that forces me to review certain items on my 1098-T that don't add up to their calculations - namely this section that states "Portion of box 5 from tax free benefits plus employer-provided assistance included income should not be greater than box 5 amount, $6069." And in the box it is filled out as $6069. I cannot continue unless I lower this value, so I changed it to $5250, and had the remaining $819 as tuition reported as income on my W2. Is this correct?

[Hal_Al · Accepted solution]

Q. Box  5 is filled out as $6069. I cannot continue unless I lower this value, so I changed it to $5250, and had the remaining $819 as tuition reported as income on my W2. Is this correct?

A. Yes. Rather than getting bogged down in the interview, just change box 5 to $5250, when you enter the 1098-T,* since you know that is the correct amount. 

Bottom line: you can use $819 to claim the tuition credit.** This is because that much was paid by "you," with your after tax employer benefit (only the first $5250 was tax free assistance).

*The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. 

If you claim the tuition credit, you do need to report that you got one (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.

**If you are an undergrad, and have not used the American Opportunity Credit (AOC) 4 times, in the past (including when you were a dependent), you can add the cost of books.  But, if you'll have more expensive undergrad  education, in the future, you may want to save your 4 AOCs, for later.