Tax Question - Tuition Reimbursement with Federal Student Loan

[qcjustin]

@Hal_Al 

I was reading your loophole suggestion on this thread, and I am hoping you can give some info based on my situation.

I paid TurboTax last year for full premium CPA advice, and they could not answer this. 

https://ttlc.intuit.com/community/college-education/discussion/how-to-tell-if-employer-provided-tuit...

Can you give me more info on how this might work for my own purposes? I used federal financial aid to pay for the classes up front, and I was reimbursed by my employer. The total for non-taxable is listed on my last paystub as 5250 and an additional 4033 for taxable reimbursement. I paid taxes out of my checks on the $4033.  NEITHER amount is listed on my W2 as income. My 1099 shows $5600 for the year received for tuition. Based on your suggestion, how can I claim the American Opp Credit? Do I use the amount on form 1099 at all, or just figure my own amounts? I definitely paid some out of pocket for expenses. 

[Hal_Al]

What do you mean by "federal financial aid",  loans or grants?  If a grant, how much was it? What is in boxes 1 and 5 of your 1098-T?

If I hear you right, instead of adding the taxable portion of the reimbursement to your W-2 (like they should have), your employer issued a 1099? What kind of 1099, 1099-Misc or 1099-NEC?  What box # is the amount in?  I assume the difference ($1567) between 4033 and 5600 was your tax withholding?

[qcjustin]

I used financial aid upfront for tuition, so all tuition was paid to the school directly from the Financial Aid Loan disbursements by the government. Once classes are completed, assuming you pass, they can be requested for reimbursement on my paychecks. On my final paystub of the year, it shows 5250 for NonTax reimbursement and another $4033 that I was taxed on. Neither of these amounts shows on my W2, but I did get a 1098T from the school showing  $5602.17 received for payments.  After $5250, the amount is taxed, so I need to pay the shortfall for each class. Box 1 of the 1098T is  $5602.17 and box 5 is blank. As above stated, the $5250 and the $4033 received from the employer does not show anywhere on forms. 

[Hal_Al]

So, you paid $9283 (5250 + 4033) in expenses .  But only $5602 shows up in box 1 (tuition and fees) of the 1098-T. What did the other $3681 go for?  If for qualified expenses, you don't need the loop hole.  You only need $4000 of expenses, paid with after tax money,  to claim the AOTC.  And  you paid at least $4033 with after tax money.   Enter your 1098-T normally.  Then enter your remaining expenses.  When asked about employer assistance enter only $5250.  The other $4033 is treated as your money, since you paid tax on it. 

Ignore  the student loan money.  It didn't effectively pay for anything.  

The loop hole only works with scholarships.  You cannot use it with employer reimbursement (unless the reimbursement is in a separate year from the tuition payments).

[qcjustin]

It is simply a timing issue since the student loan pays the class cost BEFORE it starts, and the reimbursement comes on my checks later after class ends. So some of the money I got early 2020 was from classes paid for at end of 2019. The $3681 missing is on last years 1098T since the tuition was applied to the courses at the end of the previous year. Do I need to claim the $4033 as alternate income anywhere, since it's not present on my W2? The taxes paid on box 2 of my W2 include the taxes from it already, so would I claim it as non-taxable income? It is odd to me the taxes paid on my W-2 reflect the correct amount including money taken from tuition, but there is no mention of income from the reimbursement itself.