On my son's 1098-T it lists only scholarships and no tuition billed. The tuition billed for spring 2016 was included on the 2015 1098T

[datroxell]

So my son who made < 10,000 after dropping out of school is having to pay income tax this scholarship (with no offsetting cost) and his job at 13%.
Is there a way to avoid this.

[MiriamF · Accepted solution]

Yes, there is a way to avoid this.

When the school reports tuition billed for a semester that hasn't yet occurred, it creates a problem for students with scholarships and education expenses that are paid in the year to come.

What you should do depends in part on your other expenses and the education credit you are claiming. For instance, if you are claiming the American Opportunity Credit, and you have $4,000 in 2016 expenses without considering the tuition that was billed in 2015, you don't have to do anything about 2015.

It gets more complicated, though, if you have tuition and fees that you reported in 2015 that exceeded what you needed for the education credit, and you could use those excess fees in 2016. For instance, if you're claiming the Lifetime Learning Credit in 2016 because you've already used up your four years of the AOC, you would like to get as close to $10,000 as you can, because that's what the LLC considers. If you had $6,000 in expenses listed on your 2015 1098-T, and $2,000 of those expenses were for 2016, you might want to apply those expenses to your 2016 return. You wouldn't have to amend 2015 if you claimed the AOC in 2015 and didn't use the extra $2,000 anyway. However, if you claimed the LLC in 2015, you needed all $6,000 of the tuition to get your credit, so nothing is left over for 2016.

This table provides a comparison of education credits and the Tuition and Fees Deduction. It shows how much in education expenses is considered for each credit, plus the qualifications to claim the credit. If you need to adjust your 2015 credit to maximize the credit for 2016, you will need to amend your return. But if you have excess expenses left over after you claimed your credit in 2015, the portion of those expenses that applies to 2016 can be applied to your 2016 return without amending 2015.

If you plan to apply the spring 2016 tuition listed on the 1098-T for 2015, this is how you do it in TurboTax:

1. Open your return and type "1098-T" in the Search box, then select Jump to 1098-T.
2. The program will ask if you received a 1098-T for the year 2016. You can answer No. The program asks whether your student qualified for an exception, and you can check I qualify for an exception. The school wasn't required to send one.
3. Enter the school info, and check the box that your student attended the same school in 2015.
4. Under Enter the tuition [the student] paid, you can enter the spring semester tuition.
5. The program will next ask about the 2015 1098-T, which will make it clear that the form was received reporting the spring tuition.