1098-T

[TaxesR2High]

1098-T calculates erroneous taxable income.  If scholarships are less than qualified education expenses, there should be no tax impact; however Turbo Tax as of 2/21/04 is erroneously calculating tax on the scholarship amount, regardless of qualified education expenses.  Please fix software and advise when complete ASAP.  Thank you!

[AmyC]

One of two things happened:

• f you have a 1099-Q, it has to be entered first with the deductions, otherwise, you end up with a taxable scholarship. If all of your 1099-Q went to qualified expenses, delete it. If not, delete everything, enter the 529 information and then the scholarship information. 
• If you have no 529 information, then a mistake was made entering qualified expenses and you need to revisit that area.

IRS Publication 970, Tax Benefits for Education states:

If the entire 1099-Q went to qualified expenses, room and board, tuition, etc then you do not need to enter the form. Tuition paid for the first 3 months of the next year also qualify, see page 12, What Expenses Qualify, and page 52 for qualified distributions.

Reference: Qualified Education Expenses - Internal Revenue Service