1098-T Form

[astorres1221]

Hi!

I recently graduated and my school didn’t send me my 1098-T form. I retrieved it from my records. Box 5 if greater than Box 1. Does this mean I will “owe” money to the IRS? Will I still receive any deductions or credits as I was in school in 2020? How will this effect any refund I receive?

Thank you

[Hal_Al]

Q. Box 5 if greater than Box 1. Does this mean I will “owe” money to the IRS?

A. Yes, unless you own records show you have some offsetting expenses or part of the scholarship was applied to expenses charged in 2019.

Q. Will I still receive any deductions or credits as I was in school in 2020?

A.  No. You don't  get deductions or credits  for "being in school".  You get deductions and credit for paying qualified expenses out of pocket. Furthermore, graduation year is usually the 5th calendar year of college and there is a four time limit for claiming the most generous tuition credit, the American Opportunity Credit. 

Q. How will this effect any refund I receive?

A. If you have additional taxable income, your refund will, most likely,  be reduced. 

The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. However receipt of a 1098-T frequently means you are either eligible for a tuition credit or deduction or possibly your student has taxable scholarship income. 

If you claim the tuition credit, you do need to report that you got one or that you qualify for an exception (the TurboTax interview will handle this)

You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. In the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid. You will also reach a screen that allows you to adjust the scholarship amount for "amounts not awarded for 2020 expenses".

[atorres28]

Okay thank you. 

I was only in school for two and a half years. That still qualifies me for the credit, yes?

[Hal_Al]

Q. I was only in school for two and a half years. That still qualifies me for the credit, yes?

A.  It certainly means that you are not disqualified based on the "maximum 4 times" rule.

You still haven't addressed the box 5 > box 1 issue.  But, the fact that you might be eligible, introduces a new factor.  

There's  a loop hole available to claim the credit, even if you are on scholarship.

.For details, see: https://ttlc.intuit.com/community/college-education/discussion/yes-that-is-a-tax-loophole-available-...

[atorres28]

I apologize. Box 1 is less because I was charged less than my scholarships, grants, and loans. The remainder was refunded to me and used for expenses such as school supplies, transportation, and other personal expenses. The difference was ≈ $1500. I don’t have any receipts for that.

That said, this would be the third time I claim the credit. What would I need to do to reduce my tax burden?

[Hal_Al]

Right now, you have $1500 of taxable scholarship income. 

Did you read the post at the "loop hole" link?  How much qualified expenses (tuition, fees, books) were actually paid by scholarships?  You can claim up to $4000 of that for the AOC, as long as you add $4000 to taxable income ($5500 total taxable scholarship).  This will get you (up to) $2500 credit, while only costing you about $480 (4000 x 12%) in additional tax.

You'll have to use a workaround in TT. For specific instructions, provide the amounts in boxes 1 & 5 and any other qualified costs (books and course materials, including computer bought in 2020).

This all assumes you are not a dependent on someone else's (parent) return.

[atorres28]

4329 was used to pay for education expenses. (Tuition, books, fees. Etc.) 

So I can add that to my taxable income to qualify for AOC?

I just want to make sure I’m understanding.

[Hal_Al]

Q. So I can add that to my taxable income to qualify for AOC?

A.  Yes, but not exactly. You only need $4000 to qualify.  That's in addition to the $1500 you calculated earlier.  So, you'll report $5500 as scholarship income and $4000 as qualified expenses for the AOC.

For specific instructions, provide the amounts in boxes 1 & 5, of the 1098-T,  plus any other qualified costs (separately).

[atorres28]

Yes that is correct. 

Scholarship, grants, etc is 5903.25-4329 in education expenses.

[Hal_Al]

In TurboTax, enter the 1098-T, as received*.  Enter your book expenses at the books screen*. You'll be asked if any of the scholarship was used for room & board. Say yes and enter $5574 (5903-4329+4000=5574).

The result is that TT will add $5574 to line 1 of form 1040, as income, with the notation SCH5574 on the dotted line to the left.  It will add the $1000 refundable credit to line 29 of form 1040 and $1500 credit to line 20  (transferred from line 3 of Schedule 3). The $1500 assumes you have at least that much tax liability. Otherwise, less will be entered, reducing your tax to 0.

*  I assume book cost is the difference  between box 1 and $4329 (so you'll be claiming a total of $4329 in expenses). I also assume box 5 was $5903.

[atorres28]

No my total education expenses was the 4329 including books. 

Box 5 was 5903

Box 1 was 4329

Id be more than happy to send privately if you’d like.