I paid tuition and fees for the year of 2016 but it was included in my 2015 1098T form. How do I add this to my taxes? (paid for spring 2016 semester)

[Carl]

Tuition and other qualified education expenses are claimed/reported in the tax year they are paid. It does not matter what year they pay *for*.

Scholarships, grants and 529 funds are claimed/reported in the tax year they are received. It does not matter what tax year they are *for*.

College Education Expenses

Colleges work in academic years, while the IRS works in calendar years. So the reality is, it takes you 5 calendar years to get that 4 year degree. With that said:

 - Scholarships and grants are claimed/reported as taxable income (initially) in the year they are received. It does not matter what year that scholarship or grant is *for*

- Tuition and other qualified education expenses are reported/claimed in the tax year they are paid. It does not matter what year they pay *for*.

Understand that figuring out who claims the student as a dependent, and determining who claims the education expenses & credits, is two different determinations. It depends on the specific situation as outlined below. After you read it, I have also attached a chart at the bottom. You can click on the chart to enlarge it so you can read it. If it’s still to hard to read on your screen then right-click on the enlarged image and elect to save it to your computer. Then you can double-click the saved image file on your computer to open it, and it will be even easier to read.

Here’s the general rules gisted from IRS Publication 970 at http://www.irs.gov/pub/irs-pdf/p970.pdf Some words are in bold, italicized, or capitalized just for emphasis. This is because correct interpretation by the reader is everything. Take the below contents LITERALLY, and do not try to “read between the lines”. If you do, you’ll interpret it incorrectly and risk reporting things wrong on your taxes. For example, there is a vast difference between “can be claimed” and “must be claimed”.  The first one indicates a choice. The second one provides no choice.

If the student:

Is under the age of 24 on Dec 31 of the tax year and:

Is enrolled in an undergraduate program at an accredited institution and:

Is enrolled as a full time student for one academic semester that begins during the tax year, (each institution has their own definition of a half time student) and:

the STUDENT did NOT provide more that 50% of the STUDENT’S support (schollarships/grants received by the student ***do not count*** as the student providing their own support)

Then:

The parents will claim the student as a dependent on the parent's tax return and:

The parents will claim all schollarships, grants, tuition payments, and the student's 1098-T on the parent's tax return and:

The parents will claim all educational tax credits that qualify.

If the student will be filing a tax return and:

The parents qualify to claim the student as a dependent, then:

The student must select the option for "I can be claimed on someone else's return", on the student's tax return. The student must select this option ieven f the parent's qualify to claim the student as a dependent, and the parents do not claim them.

Now here’s some additional information that may or may not affect who files the 1098-T. If the amount of scholarships/grants exceeds the amount of qualified education expenses, the parent will know this when reporting the education on their tax return, because the parent will not qualify for any of the tax credits. (They only qualify for tax credits based on out-of-pocket qualified expenses not covered by scholarships/grants.)  Also, the parent’s will not qualify for the credits depending on their MAGI which is different for each credit, and depends on the marital status of the parent or parents.

In the case where scholarships/grants covers “all” qualified education expenses, the parent’s don’t need to report educational information on their dependent student at all – but they still claim the student as a dependent if they “qualify” to claim the student.

 If the scholarships/grants exceed the qualified education expenses, then the student will report the 1098-T and all other educational expenses and scholarships/grants on the student’s tax return. The student will pay taxes on the amount of scholarships/grants that are not used for qualified education expenses. However, if the student’s earned income reported on a W-2, when added to the excess scholarships/grants does NOT exceed $6200, then the student doesn’t even need to file a tax return, and nothing has to be reported.

If the student has any other taxable income not reported on a W-2, and it exceeds $400, (not including taxable portion of scholarships/grants) then most likely it’s considered self-employment income. That will require a tax return to be filed and the student will have to pay the Self-Employment tax on that income.

Finally, regardless of the student’s W-2 earnings, if any taxes were withheld on those earnings and it was less than $6200, then the student should file a tax return so as to get those withheld taxes refunded.

1099-Q Funds

 First, scholarships & grants are applied to qualified education expenses. The only qualified expenses for scholarships and grants are tuition, books, and lab fees. that's it. If there is any excess, then it's taxable income. It automatically gets transferred to line 21 of the 1040 with an annotation of "SCH" next to it.

Next, 520/Coverdell funds reported on 1099-Q are applied to qualified education expenses. The qualified expenses for 1099-Q funds are tuition, books, lab fees, AND room & board. That's it. If there are any excess 1099-Q funds they are taxable. The amount is transferred to line 21 of the 1040 with an annotation of "SCH" next to it.

Finally, out of pocket money is applied to qualified education expenses. The only qualified expenses for out of pocket money is tuition, books, and lab fees. Room & board is NOT a qualified expense for out of pocket money.

When you have a 1099-Q it is extremely important that you work through the education section of the program in the order it is designed and intended to be used. If you do not, then there is a high probability that you will not be asked for room & board expenses, and you could therefore be TAXED on your 1099-Q funds.

Finally, if "all" qualified expenses are covered by scholarships, grants, 1099-Q funds and there is ANY of those funds left over that are taxable, then while the parent can still claim the student as a dependent, it is the student who will report all the education stuff on the student's tax return. That's because the STUDENT pays the taxes on any excess scholarships, grants and 1099-Q funds.

[Beamhillrd]

My son received a scholarship in January 2019 which also paid all his tuition ( and a bit more) for the spring 2019 semester. The 1098-T shows only the scholarship in box 5 and box 1 is empty. This was his final semester before graduating.  I have all the bills showing the scholarship and tuition were paid in January 2019. (Tuition was billed in 2018.) Can I use the bills as the basis for determining the taxable scholarship income?

[Carl]

Can I use the bills as the basis for determining the taxable scholarship income?

No. Not the bills. What tax year an expense was billed doesn't matter. You need the receipt to show what tax year it was actually paid.

Just enter the 1098-T exactly as printed. Then later screens will ask you for those things not included on the 1098-T. It all "works out in the wash".

One thing that helps is if you have the student log into their online college account and go to their financials section. Then do a "detailed" printout of everything. Some things to keep in mind when reading the printout.

The only date you're interested in is the "paid" date. The date of the class that was paid for doesn't matter. The date the payment was "credited" to a specific class or fee doesn't matter. The date that matters is the "date you paid the college" which is commonly referred to as the "payment received" date. This date should match the date on any receipt you were provided. If it doesn't match, then the date on your receipt is the one and only date that takes precedence for the date you paid the expense.

[Beamhillrd]

My reference to the bills is that they show the account activity as scholarship received and tuition paid in January 2019. The tuition was billed Dec 2019, not paid till January 2019.

[Carl]

The tuition was billed Dec 2019, not paid till January 2019.

Wanna try that again? You go the year wrong somewhere. There's no way you paid a bill 11 months before that bill was issued. 🙂

[Beamhillrd]

Right you are!  Billed December 2018; paid January 2019. But did not show this on 1098-T for 2019. The scholarship covers 100% of tuition and thus when the scholarship is paid so is the tuition.  I appreciate your input!  Thanks!

[Carl]

You need to confirm beyond any doubt, that you did not report/claim it on your 2018 return. If you did, then just leave well enough alone and don't claim it on the 2019 return. I "strongly" suspect you paid in 2018 and the college may have applied the payment in 2018. But they did so after they issued the 1098-T for 2018. This type of scenario is not at all uncommon.  So please double-check this because if you "double dip" I can assure you the IRS *will* catch it about 24-36 months down the road after you file the return that does the "double-dip."

If this will not be a "double-dip" then just enter the 1098-T exactly as printed, and the screens that follow will allow you to enter those scholarships received in 2019, as well as those qualified expenses paid in 2019 that were not included on the 1098-T.

As a reminder:

 - Scholarships, grants and 529 distributions received are reported as taxable income (initially) in the tax year they are received. It does not matter what tax year that scholarship, grant or 529 distribution may be "for".

 - Qualified expenses paid are reported in the tax year they are actually paid. It does not matter what year you may have paid *for*.

The taxability of scholarships, grants and 529 distributions received in a tax year, are offset by the qualified expenses they are used to pay for *in that same tax year*.

This is why it is so important that when the student starts their senior and last year of college as an undergraduate, that you pay for in full for the final semester "BEFORE" the Christmas break. Remember, they start that final semester of their senior year in the *FIFTH* calendar year. So if you've taken the AOTC and other credits the previous 4 calendar years, you lose out on those credits if you wait until the 5th calendar year to pay any qualified expenses due.

[Anonymous]

I'm having the exact same issue. I wonder if we can put the extra amount of "qualified tuition" in the 1098 T form from 2018 as the other expenses for the scholarship reported in the 1098 T form from 2019, and attach the billing statement from school as proof...

[AmyC]

Enter the 1098T as it is. Then the program asks if you paid additional money to the college for required expenses, add any 2019 money paid in addition to the 1098T expenses into the program. You can add books, paper, all necessary and required supplies will be added and counted.

@Anonymous

[Hal_Al]

Do not attach anything.  File your return, claiming what you are allowed.  Save the "proof" for when and if you are audited