Do I need to file Form 1098-T?

Forum|Forum|5 years ago
February 11, 2021
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Last year, I got a 1098-T and had no income. When my parents brought my 1098-T to their tax preparer, they didn't file anything for federal or NY. My Box 5 Scholarships and Grants were more than my Box 1 Qualified Expenses by about $4k.

This year, I'm required to file a federal return because I incorrectly contributed to my Roth when I had no earned income and will need to pay the 10% penalty on my earnings. Am I required to also file my 1098-T? When I include my 1098-T information on TurboTax, my NY tax shoots up to $200 because my Box 1 Qualified Expenses are more than my Box 1 Qualified Expenses by approximately $6k and therefore my AGI is $6k.

Do I need to include my Form 1098-T? I've read that since my scholarships exceed my tuition expenses, then the $6k excess scholarships is taxable. And because I'm a single dependent, I will have to file a NY return because my $6k AGI is over the $3,100 threshold. But last year, my parent's tax preparer didn't file anything for NY even though I should have been considered to have a $4k AGI for my taxable scholarship.

Any help is greatly appreciated!

MarilynG

Level 15

Depends. If your parents claim you as a Dependent on their return (or are allowed to claim you), they enter your 1098-T in their return.

If not, you would enter it on your return, and yes, you would have Taxable Income if Scholarships/Grants exceeds Tuition Paid (don't forget to enter all other expenses, such as books and fees).

Click this link for detailed info on Who Enters the 1098-T.

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hchan32Author

Level 4

@MarilynG

My parents will claim me as a dependent. Would this mean that I should delete the 1098-T information on my return and have my parents include it in their return instead?

The thing is, I've looked through my parents returns and it doesn't look like their tax preparer included any of my excess scholarships in their income.

RayW7

Level 12

@RayW7

Ok, thank you. I've seen threads stating that if scholarships > expenses, the excess scholarship would be taxable and the child would need to report it as income.

What is to become of this taxable portion if not included by the dependent?

Let me clarify,

If there are no excess funds and the student is a dependent then the parent will claim the Education Expense.

However, if there are excess funds and the amount of scholarships/grants exceeds the amount of qualified education expenses, the parent will know this when reporting the education on their tax return, because the parent will not qualify for any of the tax credits. (They only qualify for tax credits based on out-of-pocket qualified expenses not covered by scholarships/grants.) Also, the parent’s will not qualify for the credits depending on their MAGI which is different for each credit, and depends on the marital status of the parent or parents.

In the case where scholarships/grants covers “all” qualified education expenses, the parent’s don’t need to report educational information on their dependent student at all – but they still claim the student as a dependent if they “qualify” to claim the student.

If the scholarships/grants exceed the qualified education expenses, then the student will report the 1098-T and all other educational expenses and scholarships/grants on the student’s tax return. The student will pay taxes on the amount of scholarships/grants that are not used for qualified education expenses. However, if the student’s earned income reported on a W-2, when added to the excess scholarships/grants does NOT exceed $6200, then the student doesn’t even need to file a tax return, and nothing has to be reported.

If the student has any other taxable income not reported on a W-2, and it exceeds $400, (not including taxable portion of scholarships/grants) then most likely it’s considered self-employment income. That will require a tax return to be filed and the student will have to pay the Self-Employment tax on that income.

Finally, regardless of the student’s W-2 earnings, if any taxes were withheld on those earnings and it was less than $6200, then the student should file a tax return so as to get those withheld taxes refunded.