1098-T Box 2 Blank

[deloriswhat94]

On my husband’s 1098-T, box 1 has the amount he paid for school in 2017 and box 5 has the amount he received in financial aid, but box 2 is completely blank. Do we need to get this corrected before we file our taxes? 

[AnthonyC · Accepted solution]

No, box 2 is supposed to be blank.  In the past, schools were able to report either amounts actually paid or received in box 1 or amounts billed in box 2 (but not in both).  Recently, the IRS has issued new guidance that is requiring schools to use box 1 amounts only.  Schools are no longer even suppose to use box 2 reporting at all.  

[Mike56]

@TurboTaxAnthony  - I am so glad to hear this. The box 2 thing has been driving me nuts these last few years. My school claimed that state legislation forced them to use box 2, though everything I can see, even in the IRS publication states that the school can choose which one to use. Do you have a link to the new IRS guidelines you speak of? And if they are truly just guidelines, I am assuming that schools can continue to use box 2 if they want? What possible reason do they have? Thanks!

[AnthonyC]

@Mike Section 212 of the 2015 PATH Act actually eliminated the option to use box 2 (...is amended by striking ‘‘or the aggregate amount billed’’ [ refers to box 2 ]).  However, a grace period was given in which no penalties would be applied and the option was left on the form so some schools continued to use it.

See <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-drop/a-16-17.pdf">https://www.irs.gov/pub/irs-drop/a-16-17.pdf</a>

The grace period for penalties was supposed to be only for 2016 but the form was left the same for 2017 (it's unclear if educational institutions will actually face the stiff penalties they could receive - I suspect they won't).  However, for 2018, box 2 is going to be greyed out on the Form 1098-T and it will say reserved instead - meaning they won't be able to use it.  You can see the new instructions for Form 1098-T here -

<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/i1098et.pdf">https://www.irs.gov/pub/irs-pdf/i1098et.pdf</a>  (page 4)

[Mike56]

@TurboTaxAnthony - Thank you so much! I actually found the first document you listed on the IRS website, though saw that it was referring to 2016 and could not find anything after that, so appreciate you explaining the gap and pointing me to the 2018 instructions. I'm very glad that schools will no longer have the option to use box 2!

[Mike56]

@TurboTaxAnthony - one last thing...the way I read this was that the grace period was given so school's can update their software that creates and sends the tuition statements out so they can use box 1. I'm not sure why that is really a thing, given it sounds as though there was always an option to choose between them, though assume the software is limited in some way, even if the 2018 form has it grayed out, if a school has not updated their software, then will they be forced to adopt that change? Do they have to download a 2018 template from the IRS to use that will prevent them from entering info into box 2? Sorry for the additional questions. I just want to make sure my school follows through (as like you said, they are probably not penalized for non-compliance). Thanks again!

[AnthonyC]

@Mike My understanding is that they are going to now be forced to use it because the option will be no longer be available on the Form 1098-T.  When the IRS "reserves" a line it means you are no longer able to use that line to add data.  So, there would be no way for them to report that information to the student without using box 1.  Now, that it's been officially implemented, I would suspect the IRS may be more willing to enforce compliance next year.