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Form 1098-T (tax year 2013) reports $0 in box 2 and

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substantial amount in box 5...
Form 1098-T (tax year 2013) reports $0 in box 2 and substantial amount in box 5. This is due to timing of billing. Billing is done in Dec of previous year for Spring term and scholarships paid in Jan of year. Also included in box 5 amount is some Pell grant money. This is the final semester and first time I realized that amounts in these boxes were "skewed" by timing. (so 4 previous tax years just reported as listed on form-mostly didn't change much except first year which is too far back to amend anyway) At this point, i am unclear as to how to report this money/form properly and not have the almost 20K amount look as though there are no offsetting costs and therefor all taxabe income.
Submitted: 2 years ago.Category: Tax
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8/30/2015
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,017
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi,

...

The 1098-T is not reporting income (reported on a W-2 and various 1099s, depending on the type of income). Schools are required to send the 1098-T to any student who paid "qualified educational expenses" in the preceding tax year by January.

...

So, if the 1098 has the big 2013 up at the top-right, then that's the tax return to which that 1098-T applies.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago

Those qualified expenses reported on the form include tuition, any fees that are required for enrollment, and course materials the student was required to buy from the school.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago

The school can use the form in two different ways (which typically doesn't change from year to year)
...

(1) based on how much the student actually paid during the year, or

(2) based on how much the school billed the student during the year.

...

If the school reports the amount paid, it puts that figure in Box 1 of the form.

If it reports the amount billed, it does so in Box 2.

...

OIC now that you said box 5

...

Box 5 shows the amount of scholarships and grants that were paid directly to the school for the student's expenses. Scholarships and grants may reduce the amount of qualified expenses the student can use when calculating a deduction or credit.

...

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago

Now, a scholarship is tax-free if: You are a full-time or part-time candidate for a degree at a primary, secondary or accredited post-secondary institution. The award covers tuition and fees to enroll in or attend an educational institution

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago

The award is tax-free only as long as you use it for the purposes outlined above. And since these were sent directly TO the school your 1098-T is your documentation that these were not taxable.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago

Finally, you would only need to amend a previous year if there is something in box 6, which shows any adjustments the school has made to scholarships and grants reported on a previous year's 1098-T

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago

Let me know if you have questions

...

Lane

...

If this HAS helped, (and DON’T have further questions on this), … your positive rating … (by clicking or touching the stars or smileys on your screen) … would be appreciated!That’s how we’re credited for the work here.

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Customer reply replied 2 years ago
I think perhaps my question is not clear. I am aware of listed amounts. For this year the 1098t shows zero dollars in box 2. In essence, as though there were NO qualified expenses billed (because they billed in December prior year) therefor the amount in box 5 (almost 20k) is ending up to be added to income because there are no offsetting qualified costs billed listed in box 2. It reads as excess and becomes taxable income. Unless I consider the amount actually spent but this form does not reflect this. Also, the reason I mention that some is pell grant is because that portion can be used toward room board etc which would never be listed in box 2 amount anyway. I how this makes it clearer.
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago

If you're using turbotax, ...

...

You can account for your tuition paid when entering your 1098-T. If you go back into the 1098-T and edit it, you will see just above Box 3 "What if this is not what I paid to the school?" Click this link and an additional dialogue will appear. Enter, here, the full amount of tuition paid.

...

Your 1098-T is found in: Federal Taxes/Deductions and Credits/"I'll Choose What I Work On"/Educations/Scholarships, etc., 1098-T. Visit All and come through to the 1098-T section and click to Edit the 1098-T for your institution. Alternately, you can use the search box at the upper right for 1098-T and Jump to the 1098-T.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago

I see what you're saying now .... What this MAY cause is the need to amend the last three years, so that everything reconciles

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Customer reply replied 2 years ago
I'm glad you now understand better, the problem is that the year that really needs an amendment per chance is the first year which is four years ago and therefor too long for an amendment. Also, the second piece of the question is about some of the money being pell grant so I could include it in income and the offset with room and board expenses but not sure how to adjust that or where to put it.
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago

Actually all of the returns going back TO four years ago need to be amended (for everything to reconcile). But IRS can only re-assess (change things) under the statute of limitations for tax assessments going back three, so that's why I said "the last three years"

...

While tuition was billed in one year, it wasn't actually paid until the scholarship posted the following January.

...

You need to enter the correct amount paid by the scholarship, as follows: (if you're using turbo-tax ... but all of the packages allow you simply to put the actual amounts paid for that year in as a manual override to the 1098-T input)

...

Click the "What if this was not what <name> paid to this school?" link under the 1098-T Box 2 entry in TurboTax, and enter the amount of qualified tuition / fees paid.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago

You can always get this one right ... wait to see if you get a notice (have your tuition-paid receipt for documentation)

...

And send that proof of tuition paid as the response to the notice.

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Another option; send in a statement (essentially a cover letter) that this was billed in 2013 but was for tuition paid in 2014 along with a copy of your tuition statement (will need to send via regular mail).

...

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Customer reply replied 2 years ago
ok, one more clarification. The A/R report I have (for documentation) shows the expenses were "billed" in 2012 but were "paid" in 2013. Does that change anything? This is why it looks as though scholarship money was received but nothing billed. I REALLY just don't want to be audited (does anybody) because these past couple of years were very complicated. Other than the first year ( 2009 -which had "billed" for whole year but only "paid" half because semester starts in sept so they bill July and dec - for next term , so balance was opposite of current problem. Shower large amount in box 2 and much smaller in box 5) I think the changes would be a couple of hundred dollars at most for remaining years except
last 2013. Also, will the manual override you speak of deal with the pell grant part? I ask in reference because of the example
given in Pub 970 (2013) pgs 13 & 14 under American Opp credit.
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago

Again, the billing is irrelevant to the tax year. Expenses PAID in a tax year are what's applicable to that year's return. IRS sees this all the time. Just document your expenses

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The manual override is just that... completely dependent on you to make necessary adjustments to what's reported.

...

What you decide go do with the pell gant piece is up to you.

...

Please rate me positively so that I can be credited for the work here, and if you like to work with ME on additional questions say "For Lane," at the beginning of another question

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Lane
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