My daughter (claimed as dependent on my tax return) received 1098T from her college with two errors - 1) Box 1 and Box 5 amounts do not match the amounts in account statements generated by the college and 2) Box 5 is greater than Box 1 indicating income which is false. The accounting statements show that the total charges were $1850 and total sponsorship was $1850 for the year. Both are equal and hence no income. However, for 1098T, Box 1 shows $2000 and Box 5 is $2200. The college is refusing to even acknowledge the mistake, let alone correct it. Given both amounts are greater than actual charges and actual scholarship, it cannot be because of certain charges do not count. This error will force me to report income for my daughter, and hence she will have to file her own return when she did not have any income. How do I handle this situation?
The 1098-T is an informational form and the amounts on it can be ignored if you have documentation to the contrary. Enter the amounts you believe to be correct.
Thank you. The college says the difference is an Access Fess that the scholarship covered but is not QTRE. Is that considered income?
Yes, that would become income. It must be Qualified tuition and related expenses to not be taxable. QTRE includes book and other supplies needed for class purchased outside of the university. You may have other expenses that qualify.
Honestly, if you qualify for the Lifetime Learning Credit, you would do better to claim the entire scholarship as taxable on her return, she may not even have to file and you claim the credit. The IRS has a great brochure that explains how scholarships and tax credits interact.
Thank you. So if I had other qualified expenses that exceeds the difference in box 5 and box 1 (eg required supplies or fees), then it will not be considered income for her and she wont have to file her own tax return?
Correct. Most schools require students to have internet service for online classes and homework, so part of the internet service could be an education expense as well.
Keep the 1098-T and all receipts with your tax file, but if there is no excess scholarship, there is no taxable income, and if the student has no taxable income, they have no reason to file.