Why Is 1098-T Box 4 Adjustment More Than Refunded Amount?

[TheBeaz]

Hi,

I paid for our son's Spring Semester 2021 Tuition & Fees on Dec 29, 2020, to be able to claim AOTC for them in Tax Year 2020.  However, the college changed from remote classes (Covid) after Jan 1st and required students to return to campus for most classes. He wasn't ready to do that yet and he dropped a couple of those classes. So before I filed last year, we received a $734 refund.

In order to simplify things (I thought), I went ahead and subtracted the $734 from the 2020 1098-T Box 1 amount and filed for 2020. Now the 2021 1098-T has a Box 4 adjustment of $1,201.34 (Box 7 is checked). I don't understand this. If he was refunded $734 after dropping the classes, shouldn't the adjustment in Box 4 also be $734? He dropped the classes even before the first day of class if that matters.

Box 1 = $8309, Box 4 = 1201, Box 5 = 3893. I'm unsure what to claim now for AOTC in 2021. Any help will be much appreciated!

[Hal_Al · Accepted solution]

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 possibly your student has taxable scholarship income. 

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.

Or if you find it easier, just change the numbers in boxes 1& 5 to what your records show. The 1098-T that you enter in TT is not sent to the IRS.

[TheBeaz]

Thank you for the quick response! What you say certainly makes sense. I don't want to claim more or less than what we actually paid. So I shouldn't have gotten distracted by the 1098-T. I have complete records and that's what I'll use. Thanks for getting me back on track!