Not sure what I am doing wrong but my daughter last year through our tax preparer did not have to declare her scholarship as income - She has a full scholarship but it all goes to expenses for college? It includes a meal plan as well.......

[HelenaC]

Per IRS Publication 970 Tax Benefits for Education Room and board (meals) are taxable income if they are paid with scholarship money.

If you received form 1098-T Tuition and the Box 5 Scholarships are greater than the amount in Box 1 or 2, the difference may be added as income, on your income tax return.

Generally, you pay income taxes on taxable scholarships and grants but not social security or Medicare taxes.

Scholarship, fellowship or grant money, if not used for qualified education expenses (see What are examples of education expenses? ) is taxed as income and belongs on Form 1040 Line 7 with SCH in front of the line number.

Per IRS Publication 970 Tax Benefits for Education : Payment for services. In most cases, you must include in income the part of any scholarship or fellowship that represents payment for past, present, or future teaching, research, or other services. This applies even if all candidates for a degree must perform the services to receive the degree.

To enter scholarships with NO 1098-T:

• Type scholarships in the search box and click search.
• Click on Jump to scholarships.
• Continue with the onscreen interview.

To enter your 1098-T:

Don't enter your 1098-T if your employer reimbursed you for the tuition. Otherwise:

1.    Open (continue) your return in TurboTax, if it's not already open.

2.    In the search box, search for 1098-T or 1098T (lower-case works also) and then click the "Jump to" link in the search results.

3.    Answer Yes to Do you want to enter your higher education expenses?

• If you land on the Let's estimate how much you could get this year, click Skip this.
• If you land on the Your Education Expenses Summary screen, first select Edit next to an existing student or select Add a new one before proceeding.

4.    Answer any questions that follow. After a few screens, you'll be asked if you received a 1098-T. Answer Yes and click Continue.

5.    Enter your Form 1098-T exactly as you see it, even if you think it's wrong. Here are some important tips:

• If any boxes on your 1098-T are blank, leave them blank. Don't enter 0 (this may cause errors later).
• If boxes 1 or 2 on your 1098-T form are wrong, enter those amounts anyway. Then click What if this is not what I paid? right below box 2 and enter the correct amount of tuition paid.
• Don't include grants not already listed in Box 5. We'll ask about those later.

6.    Click Continue when you're done entering the information from your 1098-T. Answer any additional questions on the following screens.

Related information:

• Why is my scholarship taxable?
• Are my scholarships, fellowships, or grants taxable?
• Where do I enter a scholarship, fellowship, grant, or other financial aid I received?

[aargoyal]

My son also has a full-ride. I pulled money from a Coverdell Account in his name last year. I was under the impression that the withdrawal will not incur a penalty. Only the earnings will be taxable at my son's income level. However, I am seeing an additional tax showing up in schedule 2 due to the Coverdell distribution. Is the software missing the fact an ESA withdrawal UP TO the scholarship amount should not show a penalty?

[VictoriaD75]

In general, the designated beneficiary of a Coverdell ESA can receive tax-free distributions to pay qualified education expenses. The distributions are tax-free to the extent the amount of the distributions doesn't exceed the beneficiary's qualified education expenses. If a distribution exceeds the beneficiary's qualified education expenses, a portion of the earnings is taxable to the beneficiary. If all of the qualified education expenses were covered by a scholarship, then the distribution was in excess of the expenses and non-qualified.

There are tax penalties for non-qualified withdrawals from a Coverdell education savings account. Non-qualified withdrawals are those that are not withdrawn for qualified educational expenses. The IRS will consider any non-qualified withdrawal to be taxable income. All such withdrawals are subject to income tax on their earnings as well as the 10 percent penalty on early distributions.

[NCperson]

how much is Box 1 and Box 5 on the 1098t?