Well, for 2018, the school can only use box 1 for amounts actually received in 2018. They aren't allowed to use box 2 for amounts billed. I haven't read the instructions to see what the school is supposed to do if they reported the amount as "billed" in 2017 but it was actually received in 2018. But in this case, what the school has done is to turn a $5000 tuition payment into $15,000 of taxable income to the student, and that is a far greater inequity than simply denying the credit. Something is not right here. Perhaps the accountant needs to review the 2017 and 2018 form 1098-T along with the actual tuition bills and account statements from the school.
Perhaps the student claimed the credit last year on money that was billed but not paid in 2017, and is not entitled to a credit on the same expense twice, but they are certainly not liable for income tax on the scholarship.
