Question about filing 1098T

[Jxbebee1]

Hello. I attend a public university in Texas and my scholarships exceed my tuition. For 2018, I filed a 1098 T and payed 600$ since I did not work at all. All is good. 

The problem is that everyone I ask about whether I should fill out this form does NOT fill it out themselves. And they are perfectly fine. My sister gets a high amount of taxable scholarships as well(it does not exceed tuition), however, when she went to report her 1098T, her tax filer just set it aside and did not care about it. People I've asked, who indeed receive financial aid marked as 'taxable income', tell me that they don't fill it out because they don't "care" about it(they have not received any notice from the IRS). 

In my view, it seems incredibly unfair that I file this form and have to pay an amount of money, while these people do not file it and they are fine. 

Is there something I am missing here? What merits whether one SHOULD file this form? Thanks.

[Hal_Al · Accepted solution]

You are correct,  scholarship that exceeds  qualified educational expenses (QEE) (tuition, fees, books and other course materials) is taxable income.   However, you would have to have at lest $12,000 of income in order to pay any tax, as everyone gets a $12,000 standard deduction*. But, you do not have to "file the form 1098-T".  The 1098-T is only any informational document. The numbers on it are not required to be entered onto your tax return. You only have to report your income. In TurboTax, entering the 1098-T is the easiest way to do that. 

The IRS also gets a copy of that 1098-T, so those people not reporting it are at risk of getting caught. The IRS  knows they got that income. In your sister's case, none of her scholarship is taxable ("it does not exceed tuition"), so her tax pro was correct in setting it aside (unless she was eligible for a tuition credit).

*Students who can be claimed as dependents don't automatically get a $12000 standard deduction.  But taxable scholarship is treated as "earned income" for purposes of calculating the standard deduction. So, effectively, students don't pay tax on excess scholarship money under $12,000.

[Hal_Al]

On a separate subject,: "My sister gets a high amount of taxable scholarships as well(it does not exceed tuition)." 

Should she (and maybe you),  or your parents, be claiming a tuition tax credit?  Maybe.  Even when you have scholarships, there is a tax “loophole” available. The student  can report all his scholarship, up to the amount needed to claim the American opportunity credit, as income on his return. That way, the parents  (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship.  You cannot do this if the school’s billing statement specifically shows the scholarships being applied to tuition or if the conditions of the grant are that it be used to pay for qualified expenses.

Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 1 or 2. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return, for the tuition credit.

[Jxbebee1]

Thanks so much for clearing this up for me!

[wenarri]

So if my 1098t indicates on box 1 : 3452.15 and on box 5 4198.00, since i Only received about 746 for my own spending (not tuition) and it's less than 12,000 I don't have to report it?

[Hal_Al]

@wenarri  - Simple answer:Yes.

But, it's not that just  that your taxable scholarship ($746) is under $12,200.  It's that you total income is over $12,200.

So, for example, if you have part time job, you may have to file that $746, if all your income is over $12,200.

[wenarri]

I see. My total income was over $12,200 last year. Unfortunately I have Already sent out my taxes. Do you suggest I ammend them to include this 1098t form? Or could I submit it for next years taxes. 

[Hal_Al]

You are not allowed to save it to next year.  To report it, you have to file an amended return. 

That said, I do NOT recommend that you bother with an amended return.  At worst, you owe the IRS  $75.  The difference between box 5 and box 1 is not automatically taxable.  If you spent that $746 on other qualified expenses (books, fees, software or other course materials) it is not taxable.  You are highly unlikely to hear from the IRS about this. 

[wenarri]

Thank you so much for your help! 

I did spend on school books + online access codes  ( but stupidly didn’t report those expenses into my taxes this year ) I’m just scared the IRS will come after me for those $75! Thoughts? Thank you once again 

[Hal_Al]

Ain't gonna happen. That little difference ain't on the IRS radar.  And even if it did, all ya need is your receipts.