Solved: Turbo Tax Error In Computations Using Form 1098T
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numwhiz
New Member

Turbo Tax Error In Computations Using Form 1098T

It seems that Turbo Tax erroneously deducts scholarships reported on Form 1098T from Box 1 Tuition Paid.  Clearly, Tuition paid is the amount paid after applying Scholarships and Grants, so everyone is underreporting their Education Expenses and either losing deductions or paying taxes on 529c distributions because of Turbo Taxes error.  Of course, try to contact them to tell them and they want you to pay $169.99 for Tax Advice.  This advice will cost them $1,000's for filing amended returns!

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Accepted Solutions
KrisD
Intuit Alumni

Turbo Tax Error In Computations Using Form 1098T

Box 1 should report "What was paid to the school" not what was paid after scholarships. If that were the case, there would be no need for Box 5. 

IRS required schools to report Box 1, although some schools were using Box 2. This change in reporting method may not have been handled correctly by the school. 

We always encourage the Taxpayer to use their school account statement and double check the 1098-T. The entries can be adjusted in the TurboTax programs. 

According to the IRS:

“Box 1. Payments Received for Qualified Tuition and Related Expenses

Enter the total amount of payments received for qualified tuition and related expenses from all sources during the calendar year. The amount reported is the total amount of payments received less any reimbursements or refunds made during the calendar year that relate to the payments received for qualified tuition and related expenses during the same calendar year. The amount reported is not reduced by scholarships and grants reported in box 5. Include in this box the receipt of a payment of past-due qualified tuition or related expenses from a previous calendar year, but only if the educational institution previously billed the student for such amount(s).”

https://www.irs.gov/forms-pubs/about-form-1098-t

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2 Replies
Carl
Level 15

Turbo Tax Error In Computations Using Form 1098T

"Clearly, Tuition paid is the amount paid after applying Scholarships and Grants
That's not right. Box 1 of the 1098-T is the total amount of qualified education expenses received by the school from all sources including scholarships, grants and money paid out of your pocket or your parent's pocket.
Box 5 of the 1098-T is the amount of all 3rd party income received from all 3rd party sources and that does not include money paid out of your pocket or your parent's pocket.
If the amount in box 5 is greater than the amount in box 1, then the student will pay taxes on the difference, and that difference will be taxed at the parent's higher tax rate.
KrisD
Intuit Alumni

Turbo Tax Error In Computations Using Form 1098T

Box 1 should report "What was paid to the school" not what was paid after scholarships. If that were the case, there would be no need for Box 5. 

IRS required schools to report Box 1, although some schools were using Box 2. This change in reporting method may not have been handled correctly by the school. 

We always encourage the Taxpayer to use their school account statement and double check the 1098-T. The entries can be adjusted in the TurboTax programs. 

According to the IRS:

“Box 1. Payments Received for Qualified Tuition and Related Expenses

Enter the total amount of payments received for qualified tuition and related expenses from all sources during the calendar year. The amount reported is the total amount of payments received less any reimbursements or refunds made during the calendar year that relate to the payments received for qualified tuition and related expenses during the same calendar year. The amount reported is not reduced by scholarships and grants reported in box 5. Include in this box the receipt of a payment of past-due qualified tuition or related expenses from a previous calendar year, but only if the educational institution previously billed the student for such amount(s).”

https://www.irs.gov/forms-pubs/about-form-1098-t

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