Q. I assume it doesn't matter how much he used for room/board($9000)?
A. Correct. R&B are not qualified expenses for scholarships to be tax free.
If you use the workaround of entering 0 in box 1, on his return, you do not have to answer the question about how much scholarship was used for room &board
Q. He was already getting $5 back from the tax withheld from his part time job, so I assume he'll just pay tax on the extra amount of the scholarship above the standard deduction?
A. Yes, essentially.
Q. The rest was direct deposited back to him. Does that change anything?
A. No.
Q. I thought that the entry from 1098 -T has to match exactly how it issues in one piece since it is sent to irs,(like 1099, w2 etc)
A. 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.
If you claim the tuition credit, you do need to report that you got one.
But, 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. You will then be able to enter the actual amounts paid. You will also reach a screen that allows you to adjust the scholarship amount for "amounts not awarded for 2023 expenses".
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.
