Help with a 1098-T on how to file with a lot of variables to consider

[gogators93]

Hi.  Sorry for the length, but to be clear on what I'm asking, there is a lot of details.  I will use round numbers so it's easier to follow.

In 2022, my daughter attended a different college for Spring Semester and Fall Semester, so she received a 1098-T from both.  Her first college was private and had a lot of grants and scholarships.   Her second was a State and I did the prepay and paid cash for the balance so much less expensive and no scholarships.  

First College has a 1098-T of 15K in collected and 16K in Scholarships.  She lived on campus and when I enter this the program says she owes taxes on $1000.  This is because her Spring tuition was charged on 12/1/2021 so it was included in last year's tuition which is why the Scholarships all posted in 2022 are higher.  Her 2021 1098-T had the Spring 2022 Tuition listed and had like $35k in box 1 with the $16 in scholarships.   I understand that.  She went full time this semester.

Second College has a 1098-T of 3K collected and 0 in Scholarships as it was state prepaid and cash.  For this Semester, she lives off campus in an apartment.  She went more than half time this semester but not full.

I'm guessing it is saying she owes taxes on the $1000 because it was a different school and that can't be counted toward cost of the second school with no scholarships?

Now trying to figure out the best way to file this year.  Some history for 2021 tax filing and this year that matter:

In 2021 for the large tuition on the 1098-T, I included my daughter as a dependent because I fully support her and she did not have any employment or income.  I didn't qualify for the educational credits because I make too much money.  So filing for her in 2021 and I got no credit for anything or deductions and she had no income so no filing for her.

In 2022 for this year, I still can't qualify for the educational credits.  She did work one week last year and made around $400 and paid about $2 in taxes.  

With that said, I know I can claim additional expenses that could cover that extra $1000 but not sure what as she lived on campus with housing and a meal plan.  She did have a car on campus but don't see anything I can claim.

Noting the Tuition charge for Spring 2022 billed and being on the 2021 1098-T, I thought I read that payments made on that tuition posted in 2022 could be counted and added to box 1.  I was on a 10 payment plan for the entire year that ran July 2021 through April 2022 where they collected my payments in Jan thru April of 2022 for the Spring 2022 tuition posted in 2021.  If that counts in someway to add to box 1 or list as an expense, that would more than cover the $1000.  Is this the answer?

If not and I have to pay taxes on that $1000, then with me not qualifying for any educational credits and my daughter only paying $2 in taxes, then how do I file?  It says the tax liability is hers in turbo tax.  I don't think she could get the educational credit because I don't think she would owe any taxes.  If I file, I get the $500 child credit that I lose if she files so better for me to pay the taxes on it.  But, can I do that and does she have to file because the 1098-T is in her name?  

Thanks for any help here and I hope I explained everything clearly as it is a lot of details.

[Hal_Al]

Since she has little or no other income, $1000 of taxable scholarship is not enough to require her to file a tax return. 

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

Since you know neither is true, don't get bogged down trying to get TurboTax to come up with an answer you already know.  

[gogators93]

Thank You but I was under the impression that because it was "income" and the college said that this information will be provided to the IRS, that it had to be accounted for in a tax return.  Either mine or hers and because Turbo Tax said that she was responsible for it, maybe she would have to file even if she wouldn't owe anything just to account for it. That was my thinking that led me to ask the question and the path Turbo Tax led me down.  🙂

[Hal_Al]

Q. Maybe she would have to file even if she wouldn't owe anything just to account for it?

A. No.

You do not report his/her income on your return. If it has to be reported, at all, it goes on his own return.  Your dependent child  must file a tax return for 2022 if he had any of the following:

1.          Total income (wages, salaries, taxable scholarship etc.) of more than $12,950 (2022).
2.          Unearned income (interest, dividends, capital gains, unemployment, taxable portion of 529 distribution) of more than $1150 (2022)
3.          Unearned income over $400 (2022) and gross income of more than $1150 (2022)
4.          Household employee income (e.g. baby sitting, lawn mowing) over $2300 ($12,950 if under age 18)
5.          Other self employment income over $432, including money on a form 1099-NEC

Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $12,950 filing requirement and the dependent standard deduction calculation (earned income + $400).  It is not earned income for the kiddie tax and other purposes (EIC. IRA contributions or additional child tax credit).

[gogators93]

Ok, now I think I understand.  So the education section is really for the student if they are filing and if I can't get any benefit of the educational credit from anything being I support her, I don't account for anything educational on my return.  That was where I errored then.  Thinking I had to enter it and it leading me down that path.  

Thank you!