Last year I applied my tuition assistance from the military towards my semester. However, I failed/did not finish a few classes and was obligated to reimburse the Air Force for those classes that I did not pass. On my 1098-T from my school, that amount is listed as a scholarship/grant, but since I paid back the Air Force for the tuition assistance that they provided, I should be able to claim this as an education credit, yes?
If so, would I have to contact my school with proof of the payment back to the Air Force in order to make a corrected 1098-T? Or would I skip that process and claim it on my taxes within Turbotax and show proof?
If not, can someone explain why I can't claim them? Especially considering that I basically paid for the classes that I took, by paying back the Air Force the money they paid.
Yes, you are correct, you can claim that, since you are now "out of pocket".
Yes, you just claim it on your taxes with in TurboTax. You do not include any proof. That only comes later, if the IRS questions it.
Hm okay thanks
But when I upload my 1098-T which states the amount in scholarships/grants, and then claim that amount as out of pocket education credits, would it not cause an automatic red flag?
Just a concern I have because I have already been audited once for my wife's education credits we claimed a few years back.
Yes that is a possibility. But, you should be able to explain it away. There's nothing you can do on the tax forms to avoid that. Some people would advise attaching a statement (you wouldn't be able to e-file). I'm of the opinion, the IRS doesn't handle statements well.
Okay got it, thanks a lot.
I think i'll just hold onto my proof of reimbursement to the Air Force for the tuition assistance handy if the IRS comes asking me for proof of that.
Now that I think about it, I don't think there is much the school could do for me regarding this because I didn't specifically make any payments to the school, but to the military.
So it would be best to do what you said earlier.