NY tax on my 1098-T?

[hchan32]

This year I'm required to file a federal return because I erroneously made 2020 contributions to a Roth when I didn't have any earned income. Therefore, I requested Vanguard to remove my excess plus earnings in February 2021 and will not receive a 1099-R until next year.  Instead of waiting for the 2021 1099-R, I realized that I can file now by selecting that I am inputting a 2021 1099-R and following these instructions for excess Roth contributions. I'm required to file since I will face the 10% additional penalty on my earnings. I know my federal tax liability, but I am unsure of my NYS/NYC tax.

For background, I'm still a student and a dependent of my parents. I have minimal 1099-INT ($40), minimal 1099-DIV ($20), and a loss in 1099-B (-$15). I know my 2021 1099-R will $275 in earnings for 2020. Other than that, I don't have any other income. Now, I received a 1098-T because I am a student, but my Box 5 Scholarships and Grants ($16k) exceeds my Box 1 Qualified Expenses ($10k). Inputted this in TurboTax and now TurboTax is showing this $6k on my Form 1040 Line 1 for Wages so now my AGI is $6k. My federal tax is $28 as I predicted (10% of $275 Roth earnings = $28), but now my NY tax is around $200!! Is this correct? 

I've never filed before and my parents have always brought my 1098-T to their tax preparer. The tax preparer never reported anything for my 1098-T (all had Scholarships exceeding Qualified Expenses by around $5-6k). Why is it showing that I need to pay state taxes when I've never had to report anything before? Am I doing something wrong?

Any insight or help is greatly appreciated!

[SamS1]

Yes it is correct.  Since your 1098T grants, scholarships, fellowships, etc is greater than your educational expenses, the excess flows to the wage line of your 1040.  I might add since you have amounts on wage line, you could qualify for a traditional or Roth IRA deduction.  You have until 4/15 to make that contribution.  I am not sure what is driving the NY tax unless you are paying both NYC and NYS tax.  You should be able to see this in TurboTax by reviewing your return.  You can review your 1040 in the following steps:

1. While in your TurboTax account, select Tax Tools in the left margin
2. Select Tools
3. Select View a Tax Summary
4. In the left margin, select Preview my 1040
5. In the left margin, select Review NYS return
6. When done, select "Back"

The pandemic has affected your taxes in many ways. Including reporting in TurboTax the amount of stimulus money you received. Click Here for more information on how the Pandemic affected your 2020  taxes.

[hchan32]

@SamS1 

Thank you for your response. The $200 NY tax includes both NYS and NYC.

I understand that the excess flows into the wage line because the excess is taxable scholarship. However, my parents have brought my prior year's 1098-T (which also had excess scholarships) to their tax preparer and I don't think the tax preparer reported anything on my behalf. Was this incorrect of them to do, and will I need to file returns for the previous years because of this?

[AmyC · Accepted solution]

The preparer may have figured you were filing your own- so out of their hands. Legally, you can manipulate the money and I always recommend moving it to the student when possible. You have no taxable income for the first $12k for 3 years now. Yes, you should have filed and can still file. The IRS isn't too concerned as it isn't taxable below the standard deduction. Still, the correct thing to avoid any questions or concerns, is  to file a return.

If you want to go back, here is a link for  how to prepare prior year returns. I am going to recommend you look at another of my answers for help with student income, scholarships and expenses.