Tax Year Prior to 2020: Are you required to file your 1098-T form?

[MaryM428]

Yes, it is perfectly fine to not have a 1098-T and use your financial information from your school to complete your taxes.  When you enter your 1098-T it will ask if you qualify for an exception to having a 10989-T and you will answer those questions to file your return.

 

To qualify for the American Opportunity Credit, your 2020 modified adjusted income or MAGI can't exceed $90,000 ($180,000 if filing jointly).

For the Lifetime Learning Credit, your 2020 MAGI can't exceed $69,000 ($138,000 if filing jointly).

[Asant KR]

You cannot a claim education credit if you have paid it all through the grants /Scholarships . 

[CindyKR]

You CAN legally claim an education credit if you shift some of the scholarship funds to pay for ineligible things like room and board and have the student count that portion of the scholarship as taxable to the student (which may or may not require the student to file a tax return). This is a perfectly legal way (and explained in the government tax literature and in the TurboTax software) to get at least some of the credit, if not all. 

Unfortunately, it is not obvious in TT how to do this on both the parent and the student tax returns - and is not exactly easy to juggle both returns to figure it out. It takes trial and error to figure out the exact amount to shift in order to get the highest credit possible and off-set the possible increased tax owed by the student on both the Federal and State returns. Some students will owe nothing if their income does not go above the threshold for filing a return.

[mamazuzu]

Can you link to the tax literature and the TT literature that explains how to juggle the parents and the students tax returns in order to deduct the ineligible expenses from the scholarship portion? Thanks!

[KrisD15]

The best way to understand it is to read IRS Pub 970.

The TurboTax program tries to do the best bang for the buck when the taxpayer clicks "Maximize My Tax break" but it could not possible list all the possibilities. 

There are "Qualifying Education Expenses" such as Tuition, Fees, Books, and Supplies.

Education credits are based on these expenses. 

If there is an education credit, the Taxpayer claiming the student gets the credit.

There are scholarships reported on the 1098-T box 5

There are distributions from 529 plans reported on 1099-Q

Scholarships and Distributions can be used to pay "Qualifying Education Expenses" OR "Non-Qualifying Expenses" such as Room and Board. 

If allocated to room and board, the amount is taxable income that the student needs to report. 

So there you have it, allocate aid to "Qualifying Expenses" and the aid is tax free but expenses can't be used for a credit. 

Allocate to "Non-Qualifying Expenses" and the parents can use the freed-up qualifying expenses for a credit but the student needs to claim the aid as income. 

IRS PUB 970

[Myang3]

Hi,

I have a situation that has been frustrating me. I received a 1098-T from my school and box 5 has a scholarship amount of $9444 that the school awarded me. According to them, this was generated on 12/22/2020. Not sure if this matters, but I did not accept any aid until 12/28/2020 as I didn’t officially decide to attend the school until 12/28/2020. Furthermore, there is no tuition amount in box 1 at all. Basically, the 10980-T form looks like I received a scholarship with no tuition paid. So it looks like I received free money when I literally received nothing. I started the semester in January 2021 (tuition was something like $37,000 including the scholarship I got and loans) and my loans obviously all came through in 2021 and not 2020. So, I am confused by this. Do I need to file the form? If I do, I actually owe money. Just frustrating to me for the school to do when I wasn’t even a student in 2020 at all. Can someone shed some light? Thank you in advance!!

[AmyC]

@Myang3   You will want to keep that form for next year. You will want to be able to show the IRS, if they ask in a few years, that it was used in 2021. You may want to print your bursar account showing your acceptance versus when it was applied and used. That is great proof that this is not taxable income- just poor timing.

You will want to reduce education expenses for 2021 by this amount. The school may well do this again next year. It is a common frustration. Just keep your records straight and a copy of your bursar account. Claim what is actually paid and received  for the year.

[NCperson]

further, if you are a dependent of your parents that form is filed on THEIR tax return - not yours. 

[Myang3]

Thank you for your response!!! So just to clarify.....I don’t have to include the form while filing my taxes for 2020 and can hold onto it and file it in 2021? 

[Critter-3]

Correct ... the info on that form will be used on the 2021 return. 

[mmerlin8491]

I received a 1098-T today. I already e-filed my taxes. Intuit Turbotax said that I can't amend my taxes until March 26, 2022. 

In 2022 I was not employed so I had no income for the year, except my Social Security Disability and I make less than $1,100 per month. Box #5 is more then Box #1 or Box #2. Would I owe money with the little that I get yearly of Social Security Disability? 

[ThomasM125]

It is not likely you will owe taxes or need to file a tax return, but you can use this IRS tool to verify that:

Do I need to file a tax return

[alackey]

Hi! I am a college student who has received a scholarship that covers my entire tuition and related fees. I filed a 1098-T form and it greatly reduced my return due to the fact that my Box 5 was higher than the Box 1. However, on the IRS website it says that there are exceptions to filing a 1098-T for "Students whose qualified tuition and related expenses are entirely waived or paid entirely with scholarships". Therefore, should I remove this document from my taxes/ not file it since I have my tuition and related expenses paid entirely by scholarships? I just want to make sure it is legal for me to not file this form due to my circumstances.

[RobertB4444]

If your scholarship covers "Tuition and related expenses" then you still need to enter your 1098-T into your tax return but after you enter the amounts from the form the system will ask you if you have any other education expenses not included on the 1098-T.  You should include all of the other qualified expenses that the scholarship covers.  That should result in wiping out the gain from the scholarship and keep you from paying taxes on it.  

[alackey]

Would the room and board portion still be apart of “taxable income”. Also, why would I still file the form if the IRS website states that you do not have to for my situation? I’m just very confused on this topic and the rules.