1098-T question

[StingerAlex]

Hello!

Box5 - Box1 amount is taxable. Which means that the part of the scholarships paid is excess of tuition amount.

I thought that this difference covered Room and Board.

But to make sure that everything is right I wrote the letter to University asking to give me Room and Board spending report, and the given numbers surprised me. This invoice is $3,000 less then the difference between Box 1 and Box 5.

Now I am confused - there are only two types of payments in 1098-T - one is for tuition and another for the living in in the residence. But what to do with $3000 which I cannot relate to either one.

[AmyC]

Box 5- box 1 is living expenses, misc supplies, etc. These differences can be quite large. The IRS allows you to choose how to claim the numbers, provided you can back it up. I am going to recommend you look at another of my answers for help.  Eating, laundry, etc all take money and had to come form somewhere.

[StingerAlex]

Thank you!

Still kind of confused. These money will hang somewhere, to my understanding, if I summarize all expenses they have to be more or equal to Box 5, but it my case it is not like that. Doesn't it mean I have to report them on another page?

Turbotax is asking specifically about Room and Board, but I do not see where I can put these $3,000.

I do not want to violate some rules or laws.

[DaveF1006]

The room and board amount is not an educational expense you can claim. However, Room and Board amounts can be used to reduce  taxable income from scholarship. It could be that all your expenses may not be enough to offset the scholarship amount listed on Box 5 of your return.

When you go through the questions, it will ask you how much you paid for Room and Board as you navigate through that section. if you plan on using the $3000 amount, you would place that here. If you answer truthfully and record a lesser amount, then in all likelihood you may end up having taxable income from the excess scholarship amount.  It will show up to the left of  Box 1 in your Form 1040 as SCH xxxx. Your excess short fall will be $3000 - room and board. Hopefully this answers your questions but post you have additional questions. 

[StingerAlex]

I think I cannot explain. 🙂

So :

Box 1 - $16,148

Box 5 - $38,362

Difference is $22,214, This is the taxable amount. Everything but Summer was covered by grants and scholarships, I spent another $2,000 on her summer class, but this number is included into 1098-T as tuition expense, and I do not have to report it separately.

At the same time  according University letter Room and Board is 10 months by $1,947, i.e. $19,147. So difference between $22,214 and actual Room and Board is $3, 067. They were not spent on anything, the are not itemized separately in the TAX form.

What should I do, what I have to answer on the question "How much of scholarship money was spent on the Room and Board?".

I can put $22,214 and pay $983 tax, but it is not true. It is not the problem of how much I should pay, the problem is how to handle this situation.

[KathrynG3]

The difference could be some nondeductible fees the University charges or health insurance related costs that would not be deductible. 

To determine how to treat your daughter's Form 1098-T information, see the resources below:

See Instructions for Forms 1098-E and Form 1098-T:

Qualified tuition and related expenses.

Qualified tuition and related expenses are tuition, fees, and course materials required for a student to be enrolled at or attend an eligible educational institution.

The following are not qualified tuition and related expenses.

• Amounts paid for any course or other education involving sports, games, or hobbies, unless the course or other education is part of the student’s degree program or is taken to acquire or improve job skills.

• Charges and fees for room, board, insurance, medical expenses (including student health fees), transportation, and similar personal, living, or family expenses.

See IRS 2020 Publication 970: Tax Benefits for Education, page 7 for Worksheet 1-1 and a paragraph in the first column about How to Report taxable income.

[StingerAlex]

Medical expenses are paid by me : we had insurance before she was going to college. So all premiums, bills medications, e.t.c. are mine.

Living expenses - food, travel, tickets, equipment, sport, ..., which are not the qualified education expenses also paid by me and University has nothing to do with this. I neither claim them nor correcting return. 

But we talk about tax form 1098-T, everything university spent and gave is in this form. Nothing outside of it is taxable in conjunction to education situation. 

And I do not see how to explain how this could be.

[KrisD15]

Here is how the 1098-T should be reported. 

Box 1) TUITION AND FEES reports what the school received on behalf of the student. Does not matter who paid or where it came from, it's what the school received. 

Box 5) SCHOLRSHIPS report the scholarships that were issued through the school for the benefit of the student. 

Room and Board is not reported on the 1098-T. 

The AMOUNT of scholarship in Box 5 can usually be allocated to tuition and fees, or room and board or a combination of both. 

The amount allocated to room and board is taxable. 

The amount allocated to tuition, fees, books and supplies (such as a required laptop) is not taxable. 

Supplies and books are not normally included in Tuition and Fees, so that cost will also not be reported on a 1098-T. It is up to the student to keep track of expenses and outside financial assistance. 

The amount of tuition, fees, supplies and books left over may be used to apply for an education credit. 

If it wasn't paid to the school, or the scholarship did not go through the school, it won't be on the 1098-T 

[StingerAlex]

Hello Kris!

It is so nice to see you!

I have learned all this from your lessons last year.

Box5 - $38,362 - all amount of grants and scholarships is spent for:

$16, 148 for tuition

$19,147 for room and board.

My question is not about how to interpret 1098-T form, you taught me this so good,  but about $3,000 of scholarships which are hanging in the difference between (16,148 +19,147) and 38,362.

[KrisD15]

Hello StingerAlex

I thought your user name sounded familiar, I hope all is well. 

As far as the 3,067 difference between what the school says was paid and what it shows as scholarships received, you'll need to do a little detective work on your own. 

If you know that you received around 3,000 in your pocket, then you know where that excess went and you'd claim it as taxable income. 

If you did not personally receive the 3,067 excess, look at your school account statements from 2019, 2020 and 2021. Try to match them to your 2020 1098-T.

SOMETIMES scholarship funds cross years. Did any of the scholarship posted on your 2020 1098T pay for tuition that the school billed in 2019? Did it prepay tuition for classes that started in 2021? 

When you find where this "excess" scholarship went, WHERE IT WENT will make a difference. 

If the 3,067 went to the school for 2020 tuition and is not accounted for on the 1098-T, click the selection "This is not what was paid to the school" under Box 1 on the 1098-T input screen and edit the amount. 

If the 3,067 went to the school to pay for classes that started in 2021 and not included in Box 1, select "Some of the scholarship was designated for a different year". You'll find this screen in the TurboTax program as you go through the Education Section Interview. 

If the 3,067 went for classes billed on your 2019 1098-T, you may again use the "Some of the scholarship was designated for a different year" screen. If the excess was used to pay expenses on your 2019 1098-T, make sure that amount was not used for a credit on your 2019 tax return. 

If the excess was used to pre-pay expenses for 2021, make sure that amount is not used next year for a credit on your 2021 tax return. 

If it was used for room and board, or refunded to you, you claim it as income.

Also check with your Student Aid office. They should be able to tell you where the funds went. They have an obligation to account for the funds and make sure you are clear as to what amount is going where. You might have a 3,067 credit hanging in your student account. 

Thank you for using TurboTax and Good luck!

[StingerAlex]

Hello Kris!

Sorry for the delay but I was waiting the school response and it usually takes a lot of time.

Unfortunately this answer is no more than reference to IRS site.

But I investigated myself trying to recover the whole story. This is what I found:

Difference is still unexplainable. I am ready to pay tax for this amount without further investigation. But I recovered some more details.

Box 1 - this is the real amount spent on tuition including summer school.

Box 5 - all scholarships. But because of the covid-19 situation campus was closed earlier and students went home for remote sessions. And school returned prorated part of Room and Board scholarship as a cash - $2,209. And she paid this money for the summer school. This summer school figures are reflected in the  Box1 and student's details on the next page of the 1098-T.

As far as they were spent on tuition they are not taxable, but the problem is I do not know how to report them because this situation does not match either scenario in your answer.

By the way, theoretically speaking, if I take this money out of the room and board, the difference I mentioned at the beginning of this topic is getting much more. 

So I am very confused.

Thanks!

[ReneeM7122]

While it is correct that room, board and meals are considered taxable income, and you may have a discrepancy in your calculation regarding box 5, It is important to record the 1098-T exactly as it appears, because the IRS will receive these numbers as well.  The summer school tuition recorded on the 1098-T is fine because the cash received as a refund went straight to the tuition. 

@StingerAlex

[StingerAlex]

Thanks,

but the whole paradox is that nothing is changing in the 1098-T interpretation. Summer school tuition is in the Box1 and it does not care who paid for it, whether scholarship or me, room and board is also intact because money are paid, and 1098-T does not care that part of it is the refund, I cannot add anything to Box 1 as well I cannot reduce Box 5, because it is against the reality.

So it looks like in this situation money paid for tuition are taxable. ))

I am ready to pay based on the straight calculation, but for me it is very interesting how to resolve this mathematical phenomenon. 🙂

Thanks again!

[StingerAlex]

So the only solution I see is keeping Box 1 and Box 5 intact, keeping that difference, put this $2,209.00 into the Turbotax question about expenses needed for study process, i.e. books, computers, etc. 

[AmyC]

Right, Just remember that if you can move enough to food and other expenses, you can claim the AOTC. That is up to $2,500 right off your tax bill which is worth a lot of regular income.