First time filer with questions re: May college grad with scholarship greater than tuition, new W-2, and how to file

[T4Tax]

My daughter is filing her own tax return for the first time, and we have questions re: a couple of areas.  My husband and I qualify and are claiming her as a dependent on our 2022 tax return.  She was a full time college student, living at home, graduated in May, then moved out of state for a job in late July.  She has a W-2 to enter from her new employer.  I know that she has to answer "yes" to the question "can someone else claim you as a dependent" since we can and are claiming her.  

Regarding education,  she has a 1098-T that shows a higher amount in Box 5 Scholarships ($7,500) than Box 1 ($4,200).  Book expenses were under $200, but were paid by us the parents.  On her tax return, does she go through the Education section and input the 1098-T amounts?  There aren't any expenses to claim since the scholarship is higher.  Or how does she enter the excess scholarship on TurboTax?

My husband and I use TurboTax download on a laptop to do our taxes.  Is it recommended that our daughter do the same and sign up for her own TurboTax/Intuit account?

Does it matter who files their taxes first...parents or daughter?

[MarilynG1]

If your daughter has Scholarships that exceed her Tuition reported on her 1098-T she reports this on her return.  She will be taxed on the Excess Scholarship Income, but as a dependent this is considered 'Earned Income'.  If she does not exceed the $12,950 Earned Income limit (with her W-2) she would not be required to file, but can do so to receive a refund of tax paid.

As a parent, you may still qualify for the American Opportunity Credit if you have other expenses to enter.  TurboTax will tell you after entering the 1098-T that the student needs to report the excess scholarship income on their return (which they will do), but if you have other expenses these may qualify you for the AOC.

Here's some detailed info on 1098-T Entries for Dependent and Parent.

@T4Tax 

[T4Tax]

Thank you for the response.  Since her scholarship exceeds her tuition on the 1098-T, does she report this on her tax return through the Education section and enter the 1098-T?  And, if she does it this way, can she enter the book expenses as well even if the parents paid for the books?

She does exceed the earned income limit with her new W-2, so she has to file.

We don't have any other education expenses for her (except the small book amount), so I did not enter any education information in TurboTax about her on our return.  

Can you advise as well about whether our daughter should purchase TurboTax download and set up her own TurboTax/Intuit account for this first year of filing a tax return?  

[AmyC]

1. Your daughter can set up online account or use your desktop version or purchase her own.

2. The 1098-T plus other education expenses can be used on the parent's return for AOTC or Lifetime Learning. The AOTC is limited to 4 times per person so you may have already used it up. It may not be worth claiming the LLC but would be worth a comparison.

• Box 1 $4200
• Box 5 $7500
• You can claim as much of the scholarship as you want went to living expenses and add it to the income of the student.

For example: 

Books $300 

Tuition $4200

Total expenses $4,500

You can claim any or all of the $4500 on parents return for education expenses.

Scholarship $7500

Any expenses not claimed by parents will be subtracted from the scholarship amount.

Let's say parents claim $3,000 of college expenses. Then student claims $7,500 - $3,000 = $4,500 as income.

Reference:

Available Education Credits

IRS Q & A about education credits

Tax Benefits for Education: Information Center| IRS

[T4Tax]

If I can't or it isn't worth it to use the education expenses on the parents' return, would my daughter report this on her tax return through the Education section and enter the 1098-T?  If so, can she enter the book expenses as well even if the parents paid for the books?  If we do not enter any education info on our return, she would claim less income, correct?  She would then have to claim (7,500-4,200) or (7,500-4,200-books) depending upon whether she can adjust for the books bought by parents.   

Also, we use the TurboTax download.  Can that be downloaded onto more than one computer even if it would be used to prepare and file a separate tax return?

[AmyC]

1. Yes. If you decide that you do qualify and the return to you is greater than the cost to her, she would claim whatever scholarship income is necessary through the education section. The AOTC only requires $4,000 for the full credit. The LLC requires more income for a smaller gain, 20% of the expenses will become the credit.

2. Yes, as your dependent she can claim the expenses you paid to reduce her scholarship income.

3. Yes, if you claim no expenses on your return, her scholarship income will be reduced by tuition, books, and any other qualified expenses.

4. The desktop/ download program can be used for 5 returns.  See how to download your software here.

[T4Tax]

Thank you.  That makes sense.  I did think of another question regarding our situation explained above.   Since our daughter moved to take a job, can moving expenses be claimed?  She's technically a part-time employee (if I'm understanding her job situation correctly).  I thought I read on TurboTax that part time employees are not eligible, but we (parents) did pay for a moving truck and gas and drove her things to the new location.  Could she claim this on her tax return?  

Regarding our TurboTax download, would she be able to use our download next year as well?  We don't plan to claim her as a dependent for our 2023 taxes, so would she have to purchase her own?  I'm just trying to understand who can actually use our downloads.  

[Vanessa A]

No.  Moving expenses are personal expenses and are not deductible under current tax laws for federal.  State laws vary.  However, if you paid for the moving expenses, she would not be able to claim them since she did not pay them generally, even under most state laws. 

You do not have to be in the same household to "share" TurboTax desktop.  It can be a family member living someone else or your friend down the street. Basically, you can file up to 5 returns electronically, it does not matter who they are, you just can't use it as a professional preparer to file for clients. 

[T4Tax]

In the last section of Deductions and Credits on TurboTax (section 11 with the heading "Other Deductions and Credits"), Moving expenses is included in this list.  This is what prompted me to ask.  It looked as though it was a deductible item?

We are claiming our daughter as a dependent for our taxes, but she has to file a return this year.  So I thought she may be able to take this deduction since it related to her new job.

Thanks for explaining the ability to "share" TurboTax desktop.  I assume that's the same as a download.  Would my daughter have to sign in to my TurboTax/Intuit account or can she set up her own?

[DawnC]

The moving expenses still show up despite not being deductible by most taxpayers.   If you lived in a state that still allowed the deduction (very rare), it would be entered there in the federal section.     Yes, the desktop is the same as the download TurboTax.   And no, she would not need to sign in - all she needs to do is open the software and click on Start New Return.   You can prepare as many tax returns as you and your family need and you can e-file 5 federal returns.  

Can I deduct moving expenses?  - -  if you are military...

[T4Tax]

That's helpful information about the TurboTax download.  Will my daughter be assigned a PIN at some point to be able to e-file?  Each year, I have to input the PIN to e-file and I also have to sign in to Intuit to purchase the state e-file.  If she downloads TurboTax and clicks "start a new return", won't she at some point need a PIN and sign-in to be able to e-file?

[AmyC]

1. There are several kinds of pins. 

• If you mean the filing pin from last year, you can use your AGI instead.  For a new filier, the AGI from last year is zero. How do I find last year’s AGI?
• If you mean the IP PIN for identity protection, you would need to contact the IRS if you have lost the letter. How I add my IP pin
• If you mean the IL PIN: 

If you live in IL, you MUST get an IL PIN from the state department.

If you don’t know your Illinois PIN you can:

• look it up on Illinois’ website, IL-PIN Inquiry - Illinois.gov or 
• by calling (800) 732-8866 or (217) 782-3336. 

To get your PIN, you will need your Social Security Number and one of the following:

1. 2021 Adjusted Gross Income (IL-1040, line 1)
2. Drivers’ license number
3. Illinois state ID number

2. Sign in to e-file. She will want her own TurboTax account with her email attached for future communications.

[T4Tax]

I guess I'm referring to the filing pin.  It's the one I have to enter before e-filing.  I've been using the same one for years, so I don't remember how I got it.  It is not the IP pin and I don't live in Illinois, so that leaves the filing pin.  It's good to know that my daughter will use zero (for her AGI, instead of this pin), since she has never filed a tax return.  Maybe TurboTax assigns a pin to new filers?    

It sounds as though she should go ahead and create a new TurboTax/Intuit account for herself.  When she is directed to sign in when purchasing her state e-filing (which is what happens each year for me), maybe she can click to create an account at that point?

[HeatherPLO]

If it's the 4-digit Self Select PIN that acts as your signature, this is something you created previously.  

Yes, she will need to create a new account to file her taxes Online. You can sign up for a new account on the main page of TurboTax.com. 

@T4Tax  

[T4Tax]

It's actually a 5 digit pin.  It's near the end right before I e-file.  I don't believe it's a pin that I created.