Tuition Remission and 1098-T

[cb1978]

Hi,

I teach at a university. My daughter, whom I claim as a dependent, is attending this university toward a Bachelors degree, and is receiving tuition remission from my employer. This is the first year she's been in college, so all this is very new to me. I have a couple of questions:

(1) My daughter received a 1098-T. Box 5 provides the figure that includes both the tuition remission benefit and a couple of small scholarships she received (the scholarships total $2,000).  Do I understand correctly that I have to answer "no" when TurboTax asks me whether any portion of the funds in Box 5 were "tax free employer provided assistance"? I get the impression that this expression is meant to refer to a different sort of benefit (e.g., when an non-university employer pays for an employee to take classes somewhere).

(2) On the next screen, TurboTax asks me if any part of my daughter's income reported in Box 5 is already included in her return. Now, on her own return, she will indeed list an amount of $2,000, which she received in scholarships. But the way that TurboTax presents the alternatives here, I am not clear how I should answer. I have to choose either "yes, it has been reported on W-2 or 1099" or "no, it hasn't been reported on W-2 or 1099". The $2000 is not reported on W-2 or 1099, but she is still reporting it on her return. There seems to be a discrepancy between the way TurboTax titles the page and the alternatives it gives me to choose from. So, I am not sure what to write here...

Any other help in navigating the hellish screens yet to come would be most appreciated.

Many thanks in advance to y'all!

[SusanY1]

You are correct that this is not "tax-free employer provided assistance" in the case of your tuition remission.  Although your daughter may not have a 1099 for her scholarship income, to make the rest of the TurboTax interview a little simpler for you, answer "yes" to the question about her scholarship already being reported, though you don't have those specific forms. 

[cb1978]

Thanks @SusanY1  for the very quick response!

So, I filled out the TurboTax questions, wrote what's on Box 1 and Box 5 of the 1098-T form, said "no" to "employer provided assistance", and listed the scholarships of $2000 as income she reports on her return. On a later screen, TurboTax shows the amount of the tuition remission (which it calculated by deducting the $2000 from what the total listed in Box 5 of the 1098-T) as scholarships/grant/fellowships. Is this okay, or did I unwittingly mess something up?

Thanks again!

[Hal_Al]

Yes,  answer "no" when TurboTax asks whether any portion of the funds in Box 5 were "tax free employer provided assistance". You are correct, that's for a different sort of benefit (e.g., when an non-university employer pays for an employee to take classes somewhere).

Answer no, she didn't have any scholarships  reported on W-2 or 1099". The $2000 is reported in box 5 as it should be.   I assume the amount in box 1 of the 1098-T is $2000 less than the amount in box 5.

If the $2000 is her only income, she  does not need to file a tax return.  If she has only  W-2 wage income, in addition and her total income is less than $12,200, she still does not need to file.  Even if she had less, she is allowed to file if she needs to get back income tax withholding. She cannot get back social security or Medicare tax withholding. 

You may claim a tuition credit based on out of pocket payments for books and other course materials 

[cb1978]

Thanks @Hal_Al ,

I am a bit confused because I thought she needed to file a return if her unearned income is over $1,100. Is this not the case? She put the scholarship as "unearned income" in the IRS interactive tool that is supposed to tell you if you need to file, and it determined she needs to file. Was she mistaken in classifying the $2000 as unearned income? (Her only other income was something like $650 on a W-2...)

The difference between Box 1 and Box 5 on the 1098-T is only $795. What happened is that once she received one of the scholarships, the school took it and just reduced the tuition remission amount... 

Thanks,

C.

[Hal_Al]

Scholarship income is a "hybrid". It is unearned income for most purposes, including the "kiddie tax".  But for purposes of a calculating a dependent's standard deduction, it is treated as earned income. This means a student can have as much as $12,200 SCH income and not pay tax, because she gets a $12,200 standard deduction. 

If entered properly,in TurboTax (at the 1098-T screen), scholarship income will go on line 1 (wages) of form 1040 with the notation SCH in the margin.

You are correct, she would need to file if her unearned income (other than scholarships) was more than $1100. 

[cb1978]

Thanks @Hal_Al !

I must have done something wrong in a previous TurboTax screen, then.... Going back and retracing my steps...

So, just to clarify, if all she has is a $2,000 scholarship and a $650 on her W-2, she does not need to file a return?
Huzza!

C.

[Hal_Al]

Q. So, just to clarify, if all she has is a $2,000 scholarship and a $650 on her W-2, she does not need to file a return?

A. Correct. Actually she only has $795  taxable scholarship. 

[cb1978]

Thanks @Hal_Al , 

Sorry for driving you crazy there... The whole thing about how to count scholarship is making my head spin...

C.