Q. Is it possible that the 2020 tax return didn't maximize the credits available (since the 1098-T was posted on the student's tax return)?
A. Yes. Based on what little you've already described, that's almost certain.
Q. And it's being perpetuated in 2021?
A. No. Nothing about the the 2020 amounts carries over to 2021. Nor does TT lock you into how you did it the previous year.
For more specific help, you need to explain what you're trying to do. The parent should (almost always) claim the education credit ("claim the 1098-T") on their return, even if the student has to pay some tax on their scholarship and/or the 529 distribution.
There are three things you can do with your Qualified educational expenses (QEE):
- Allocate then to scholarships (so that the scholarship remains tax free)
- Use them to claim an education credit
- Allocate them to the 529 distribution (1099-Q) so that it will not all be taxable
TurboTax usually allocates QEE, in that order, until you tell it otherwise.
Provide the following info for more specific help:
- Are you the student or parent.
- Is the student the parent's dependent.
- Box 1 of the 1098-T
- box 5 of the 1098-T
- Any other scholarships not shown in box 5
- Does box 5 include any of the 529/ESA plan payments (it should not)
- Is any of the Scholarship restricted; i.e. it must be used for tuition
- Box 1 of the 1099-Q
- Box 2 of the 1099-Q
- Who’s name and SS# are on the 1099-Q, parent or student (who’s the “recipient”)?
- Room & board paid. If student lives off campus, what is school's R&B charge. If the student lives at home, only the school's board charge for on campus students.
- Other qualified expenses not included in box 1 of the 1098-T, e.g. books & computers
- How much taxable income does the student have and from what sources (just W-2 or is there other income)?
- Are you trying to claim the tuition credit (are you not eligible because of high income)?
- Is the student an undergrad or grad student?
