My scholarship is higher than tuition fees this year because half of the scholarship were used to pay tuition fees last year. How do I file 1098T?

[aa7]

Tuition fees in box 2 is $6000 and scholarship in box 5 is $12000. I found out that the excess scholarship was actually used to pay for last year's tuition fee. It is reflected on this year 1098T only because the scholarship was issued in January this year. So technically, my scholarship is equal to my tuition fees this year. The problem is, that's not how it looks on my 1098T. It looks like I received the leftover money and have to pay tax on that $6000 surplus, which is not right. How should I complete my 1098T without having to pay tax on excess scholarship? 

[KatherineC]

Unfortunately, you cannot.  You will have to pay taxes on the excess scholarships over tuition amounts.

You would have received a credit for 2016 based on the full amount of tuition paid for 2016 without being reduced by the scholarship that should have been received in 2016. If the college had not received the scholarship for 2016 it would not be reported on the 2016 Form 1098-T.

So for 2017, you are having to report that scholarship amount as well as the normal scholarship and tuition for 2017.

If you do not want to report the additional scholarship income on your 2017 income tax return, you could amend your 2016 return to include the additional scholarship amount there.  But this would result in you having to repay the amount of credit that would have been offset by the scholarship.

[JoeBob]

It sounds like the university might have actually incorrectly listed the tuition and fees on the prior year 1098T instead of the current year.  This is what our university seems to have just done for 2018.  They included $4100 of tuition for Spring 2019 on the 2018 1098T seemingly because they listed this charge on the December 2018 bill.  However, they also listed a credit for anticipated scholarships, so the December bill said we did not need to pay the $4100.  The online account summary showed a balance of $4100,  but that this was not due yet because of the pending scholarship.  When all was said and done, there was no listing of a 4100$ credit in 2018 in the account.  I am not sure what to do, but am leaning toward considering Box 1 incorrect and hoping the IRS will accept this explanation should they ask.  All this college expense stuff is very confusing.  We definitely did not pay this expense it 2018, but did we incur it and what is the implication?

[Taxgeek]

Form 1098-T is to be used to determine if the taxpayer or another person who claims the individual as a dependent can claim an education credit.  Whether the IRS is concerned about the fact that scholarships in box 7 exceed expenses in box 1 is not clear.   There can be a mismatching of the scholarship income and the amounts paid for tuition (tuition payment in the fall, scholarship payment in the spring).    Box 7 seems to address this issue by asking if the amount received by the university (Box 1) includes amounts for the spring semester.