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Christopher Phelps
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience:  CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
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1099 INT

Customer Question

I have a form 1099 T/ Only line 5 has a dollar amount. I was not a student last year, but was a student from 2000-2003. I believe I probably claimed too many grant payments. Please advise where this needs to go on my 1040
Submitted: 11 years ago.
Category: Tax
Expert:  Christopher Phelps replied 11 years ago.
Take the amount in box 5 and use it to reduce the tuition amounts you used to calculate any education credits you claimed in 2003. The effect of this is to recalculate your 2003 education credit as if you had known this information in 2003. Once you refigure the 2003 credit compare it to the actual credit claimed in 2003.

You add the difference as additional tax on line 43 on your 2004 Form 1040. See the instructions to Form 8863 for an example.
Customer: replied 11 years ago.
Reply to Christopher Phelps's Post: I am still confused. I am filing online. Do I add this as a tuition payment ($900) or as an education credit?
Expert:  Christopher Phelps replied 11 years ago.
Correct me if I am wrong about the facts. I am assuming that from 2000-2003 you went to college during which time qualified tuition was billed/paid and you also received various grants and scholarships. The difference between the qualified tuition billed/paid and the grants/scholarships received was eligible to be considered by you (or the persons who may have claimed you as a dependent during those years) in calculating education tax credits (i.e. Hope and Lifetime Learning credits).

Apparently, the school during 2004 either refunded some tuition to you or otherwise credited back to you some qualified expenses (for the school year ended in 2003) that were eligible for those credits. The amount in box 5 represents this refund or credit back to you.

Consequently, to the extent these refunded qualified tuition expenses provided a refund (or reduced income tax) on your 2003 tax, you have to pay it back.

For example, lets say in 2003 you paid $5,000 in qualified tuition expenses. Since its your senior year you qualify for the Lifetime Learning credit which is equal to 20% of the expenses. Thus, you were eligible to take a credit (i.e. the same as federal tax withholding, dollar for dollar) on your 2003 tax return of $1,000. Now, in 2004 the college issues a 1098-T saying (in box 5) it refunded (or in some way adjusted to your credit) to you $1,000 of the tuition.

Had you known this when you prepared your 2003 tax return you would have calculated a credit of $800 (i.e. $4,000 in tuition times 20%). Since you did not know, you took the $1,000 credit. To correct this, you report the $200 difference (i.e. $1,000-$800) as an additional tax on you 2004 tax return. You add it to your regular tax on line 43 of the 1040.

If you did not claim the credit and no one claimed you as a dependent, you should amend your 2003 return. If you were claimed as a dependent and someone else took the credit, give the 1098-T to them to report on their return.

Otherwise, you need to report and pay the additional tax (i.e. the difference between what the 2003 education credit should have been and what you actually took) in 2004.

How much is in box 5? Did you claim an education credit in 2003? How much? Did someone claim you as a dependent in 2003 (i.e. parents)?

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