I paid a full year of my graduate program's tuition and then was awarded a full scholarship that back-paid my tuition. The scholarship also includes a hefty award for living expenses. Therefore, this year my 1098-T reported $20,000 paid toward tuition and related expenses, $4,200 adjustments made for a prior year (Box 4), and $81,000 paid in scholarships or grants. This amount includes crediting me for the $20,000 I paid in last year's tuition as well.
I am trying to file appropriately and reduce my tax burden as much as possible. I am confused about the adjustments for the prior year as the scholarship applied this year was directly used to refund my student loans that I had taken out to pay for the first year of the program, refunding the full cost of tuition. I know that I can reduce the amount I have spent on required books/supplies for the program, but am confused how best to approach the Box 4 adjustments and the prior year's tuition. Would it be best to file an amended return for last year showing what amount of the scholarship was applied to last year's tuition, or do I deduct the amount from the scholarship that went to tuition and related expenses manually from my own records and accounting and file it all on this year's return since it is when the funds were awarded? Any advice for handling the Box 4 adjustments?
