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Full Scholarship TAX return

Unfortunately this way does not work in the Turbotax. When dependent filing out 1098-T information program know about all numbers and there is no way to put own numbers equal to room and board spending.

JamesG1
Employee Tax Expert

Full Scholarship TAX return

It sounds like box 5 of the 1098-T for your daughter is larger than box 1?

 

If there is scholarship income, then there likely is no benefit to reporting the 1098-T in your tax return.

 

Then your daughter will be reporting the scholarship income on her own dependent tax return.

 

If there are education benefits available, you may find that your income will be too high to permit you to use those  benefits.  You just have to enter the 1098-T to see the outcome.

 

This help is a good explanation of the various possibilities.

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Hal_Al
Level 15

Full Scholarship TAX return

Room and board SPENDING is irrelevant (unless you have a 529 plan).  What's relevant is excess scholarship; the amount that exceeds qualified educational expenses (QEE) (tuition, fees and course materials). 

 

Using an example: student has $10,000 in scholarships and $6000 in QEE. She reports $4000 of scholarship income. 

If the parent wants to claim the AOC, she reports $8000 of income. 

 

"information program know about all numbers". Only if you enter em.  When you enter the educational program, in TT, you get blank form at the 1098-T screen.

Full Scholarship TAX return

Thank you!

Here is the process:

1. I put 1098-T into my tax return, where daughter is claimed dependent.

2. Turbotax knows about all numbers in the 1098-T boxes by itself based on the college license.

3. After step 2 it asked me about how much was spent on the books and materials, it asked me to qualify how much of that amount is required to be spent in the college student store, and how much was spent on materials and devices bought outside.

4. In the next step TURBOTAX by itself WARNED daughter to have her personal dependent tax return prepared, and showed the exact amount of money she has to put in education part of the deductions division. It is not my will, I of course can put tripled amount, but it is not required by the program and I assume by the IRS. 

5. I finished preparation of my own TAX return.

6. I then started new return for my daughter, at this moment turbotax already knew what I put in my return regarding her higher education, and come up with numbers in boxes 1 and 5 and asked me  "How much of this amount (box 5) was spent on room and board?".  Attention: it does not ask me about excess, it is asking me specifically about room and board. If you look at the start of our conversation, you will see what problem was the subject of my concern, without any knowledge of how turbotax is working I assumed there the way of calculating the taxable amount of the scholarship and grants,  and my preliminary assessment was exactly what you are saying :  box5 - box1 with some discrepancies , but it is wrong, only room and board is taxable, and this amount is less then difference between numbers in the  boxes. I do not know, that is why I wanted to understand how turbotax is working on the first place and opened this topic.

7. It is not the end of adventure. Now turbotax is asking about "Child with Investment Income", and I have to go back to my state tax return (Form 540/540A/540NR, Line 19) and put the number from that line into "Your Parent's Total Taxable Income" field, and after this Total Taxes.

And basically that's all, at least for me.

 

In the end I still could not file because of this message: "From 1040:Individual Form 8615 Tax for certain Children will be available only on 02/20/2020".

 

And all this is only because my daughter had income in the amount of the part of the scholarship spent only on room and board, and it is $10,000 in my example. I am not sure in the "Child investment income", I never seen it before.

 

Still I am not confident that everything is correct, I do not understand why it is more complicated then the rocket science. 🙂

 

Thanks again! This is my first experience, so I am sorry to keep posting.

Hal_Al
Level 15

Full Scholarship TAX return

Yes, the new tax law (effective 2018) made scholarship income subject to the "kiddie tax" (form 8615).  "Child with Investment Income" is some what of a misnomer. It's child with unearned income. Although scholarships are earned income for purposes of the standard deduction, it is not for purposes of the kiddie tax )or Earned Income Credit).

 

"I then started new return for my daughter, at this moment turbotax already knew what I put in my return regarding her higher education, and come up with numbers in boxes 1 and 5". No, that's not possible TT  does not have that capability   

 

 

 

Full Scholarship TAX return

1. Yes, the new tax law (effective 2018) made scholarship income subject to the "kiddie tax" (form 8615). "Child with Investment Income" is some what of a misnomer. It's child with unearned income. Although scholarships are earned income for purposes of the standard deduction, it is not for purposes of the kiddie tax )or Earned Income Credit).

 

I understand that room and board and any excess of the box 1 amount is now child unearned income this child has to report in the personal tax return. What I do not understand why this calculation has to depend on my taxable amount from the Line 19 of my 540 form, especially my return includes only non-taxable tuition part of the scholarships. I do not see any logic. My taxable amount does not depend upon her education fees, but in turn, affects her return. It is strange and not straightforward. It is my dilettante's feeling. 🙂

 

2."I then started new return for my daughter, at this moment turbotax already knew what I put in my return regarding her higher education, and come up with numbers in boxes 1 and 5". No, that's not possible TT does not have that capability 

 

But starting her return I never put any college information, but somehow program came up with numbers from 1098-T.

Her return: Federal taxes --->Deductions---->Education---->Did You Pay for Books or Materials to Attend School? ---> Scholarships and Financial Aid ----> Did you receive a Scholarship or Grant in 2019?

 

At this point I answer "yes", but program already shows "Scholarships/Grants/Fellowships listed on 1098-T", exact amount, without asking me any information about the college, only having daughter's personal info.

 

How? 🙂

 

There is one more confusing thing. I include her 1098-T into my return, and going through the turbotax questions put the cost of the books, materials and equipment, it is more then $2000, because the only macbook is $1800, into my return.

Then we are going to her return, to Deductions----> Education----> "Now Let's Gather Your Additional Education Expenses"---->"Did You Pay for Books or Materials to Attend School?". I answered "no", but program at least has to help with making the decision on how to answer. If I answer "Yes", I will double report same money on two returns.

 

Full Scholarship TAX return

So, here is my solution:

I removed the whole education part from my tax return because scholarships cover all tuition fees. Did not mention any expenses related to computers, books, materials and e.t.c. Child income on my return is 0.

Moved all this to daughter's return to make thing clear and straight, moved all numbers spent in the student store and outside, instead of putting it in my return. And instead of putting only housing and food into the field asking what part of scholarships was paid to room and board, I technically subtract number in box 1 from the number in the box 5. May be I added some not related to room and board, but I do not want to torture myself reading all college bills and choose specific items from them.

 

And now it is much simpler. Still not clear why there is Child Investment Income, but it is OK.

Hal_Al
Level 15

Full Scholarship TAX return

It sounds like you're giving up on trying to claim the tuition credit, on your return; which you can do by making more ($4000 more) of the scholarship taxable on her return.

 

There  is "Child Investment Income" simply because the IRS (and Congress) says Scholarship must be classified as investment income for purposes of the "kiddie tax" which must be taxed at the parent's tax rate. 

 

 

If you are eligible and still want to claim the credit, provide the following numbers and I’ll tell you exactly how to enter it all:

 

Box 1 amount on the 1098-T

Box 5 amount on the 1098-T

Amount of other scholarships not shown in box 5

Amount of other qualified expenses (tuition, fees, books and other course materials, including required computers) you paid that were not included in box 1

 

Note that we don’t need amounts for room and board or misc. school supplies (paper &pencils). A printer would not pass muster as required material.

_____________________________________________________________________________

 

FYI, here’s my standard answer, on this issue:

You can both use the 1098-T to enter the expenses. If you claim the tuition credit, you do need to report that you got one (the TurboTax interview will handle this) Your son should use the 1098-T because it makes entering scholarship income go smoother. The 1098-T is only any 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 deduction or possibly your student has taxable scholarship income. You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T

From the 2018 form 1040 instructions (pg 100): “You may be able to increase an education credit if the student chooses to include all or part of a Pell grant or certain other scholarships or fellowships in income. For more information, see Pub. 970, the instructions for Form 1040, line 17c, and IRS.gov/EdCredit

You essentially have to use a work around in TurboTax (TT). Here's how I would do it. Enter the 1098-T, on your return, but only enter $4000 in box 1. No other numbers. You only enter the 1098-T to get TurboTax to check the proper box on form 8863. Lying to TurboTax to get it to do what you want does not constitute lying to the IRS.

Enter the 1098-T, exactly as received, on the student's return, except enter $4000 less than the actual box 1  amount ( or $4000 more in the box 5 amount).

Full Scholarship TAX return

Thank you so much.

1. I have read an article on the IRS forums that if scholarships cover all tuition amount parent do not need to report education in there Tax return because he will not get education tax credit anyways. Said this author did not explain to readers: if this happens do parents need to put 1098-T in there return even they do not claim education, do they need to put all other numbers like how much was spent on the books and materials and in what stores, do they need to mention how much was spent on non-educational needs like travel and e.t.c., do they need to other other scholarships. I selected "no" everywhere in my Education part of Deductions only because:

a) I am not sure if I should to do this when I do not need to claim education in my return at all in the case of the full coverage, and I did not find any specific notes and recommendations. This situation, when student gets full scholarship and everything is covered, is not thoroughly explained.

b) I have a problem with putting any numbers into the boxes, as I said earlier, because Turbotax does not give this opportunity setting property of those box numbers to Read-Only, which means it shows me only preloaded numbers, and I have no control over it in Turbotax, I have to go to hard copy of the 1040 form to put $4000 into box1.

 

So here is the question:

Should I put 1098-T info and all numbers in my return, answer "yes" on higher education question,  even though my daughter will do the same on hers? Wouldn't it to be double reporting? I simply do not know this, sorry.  Now she has to pay to both - Federal and State, I do not pay them. If I put everything to my return are we going to pay together double, or numbers in my return get disregarded as soon as I have no education tax credit?

 

I have noticed one thing - as I already said I did not put any info about 1098-T form into daughter's preparation during Turbotax interview, but Turbotax knew all info and all numbers.

Now I answered "no" on having 1098-T in my return, do not put any data related to this form, but Turbotax still knows about it, there is no magic in the world - all data must be kept somewhere on the cloud, otherwise I do not have any explanation. 🙂

KrisD15
Employee Tax Expert

Full Scholarship TAX return

No, TurboTax does not store or share tax information. 

 

You are correct, expenses cannot be used twice. 

 

IRS Pub 970 explains everything about the 1098-T ans 1099-Q. 

 

IRS Pub 970

 

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Full Scholarship TAX return

This is the huge document. 🙂 It assumes that you do interactive tax return, or agent is doing it for you, and fill 1040 form with your help. In our case Turbotax plays the agent's role, it does not give you the way to work directly to 1040 form, on contrary it is asking certain questions and generates 1040 on a fly, based on your answers. So Turbox is the one who is learning this publication. 🙂

 

Could you tell me, just in simple steps"

 

1. Higher education goes to only daughter's return, ot on our both returns? Still not clear.

2. If I have to put "yes" on the question about Higher Education, should I put 1098-T in my return, or not?

3. If I report 1098-T in my return should I report spending on the books, printer, laptop and so on? And if I am the one who reports those numbers does it mean that daughter answer "no" on the question about how much we spent in the student store, and outside of the dorm?

4. Who is putting part of the scholarship which was not spent on the tuition, basically the difference between box 5 and box 1? If I put, turbotax pops up reminder that daughter has to file own return.

 

I believe all my questions are more about the turbotax usage, than about the law. Because in my case we deal with the rare situation when box 5 is more than box 1, i.e. all costs are covered by scholarships with even excess in cash. This case is not much discussed, in the case of partial coverage I have learned perfectly what to do, and how to distribute charges between the returns. But in my case, if I report spending, she does not report anything, but the excess amount of box 5 over box 1. If she reports all spending on materials and books, I might duplicate it, depending how turbotax is working, I do not know algorithm. Am I correct that in this case it is better for mine and IRS good,  not to even mention higher education and 1098-T in my return?

Or what goes to mine and hers in terms of the turbotax questions?

 

Please clarify this for me. 🙂

 

KrisD15
Employee Tax Expert

Full Scholarship TAX return

1. If the student is your dependent, you enter all the forms (1098-T, 1099-Q) in your program so that TurboTax can do the math.

2. answered above

3. Yes, if you enter  the 1098-T you enter ALL the expenses, books and all, room and board too.  

     Once you're done, your TurboTax program will issue instructions about what the student needs to claim (if anything) 

     The student may  never need to enter the 1098-t on their return even if they need to file

4. Right, again, you enter it (the additional scholarships) so TurboTax can do the math, but if they are taxable, TurboTax will tell YOU in YOUR program that the student needs to file. 

 

Also, be aware that  there is a "Maxamize My Tax Break" button. If you can get more credit by having the student claim more tax, it will do that. 

 

IRS Pub 970 

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Full Scholarship TAX return

Thank you so much!

The last question is - if I report everything in my return, will she only report excess taxable amount, an nothing else?

Because "student needs to file" means going through the same questions that I was going through, and she should reject question about materials spending, putting only excess amount the math calculated in my part. Correct?

 

Thank you again!

 

Full Scholarship TAX return

Sorry, turbotax does not keep any copies of the 1098-T and I apologize. It is not read-only data, I skipped this step of the interview about 10988-T, and that's why it "knew" about numbers.

 

Sorry.

Hal_Al
Level 15

Full Scholarship TAX return

Q.The last question is - if I report everything in my return, will she only report excess taxable amount, an nothing else?

 

You can do it either way. If she enters everything exactly as you did, she should arrive at the same bottom line. But, since you already know the bottom line, you can take a short cut. 

 

 

 

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