My Daughter is a Freshmen so we just received the 1098-T for the first time. The amount in Box 1 (payments received) is not correct. Her account from the University shows that they received more than what they reported on Box 1. Why would this be? Also, is Freshmen Orientation considered an Education Expense that can be included?
The 1098-T is pretty much a worthless document. Go by what was actually billed and actually paid.
Included for what?
Box 1 is only supposed to show payments received for qualified tuition and related expenses. If you made payments to the school for additional expenses, those payments would not be shown in box 1 of the 1098-T, even if they show up on your daughter’s school account.
We also had some fees of about $390 not count towards qualified expenses last year, namely a transportation fee, and medical services fee. They were therefore not included on the 1098-T.
Also the 2016 1098-T would only include payments for qualified tuition and fees paid in that year.
Did you make payments in December that posted to the student account in January?
If the transportation fee and medical services fee are required, then why do they not count as payments received for tuition and expenses. It’s not as if you can choose not to pay those fees, they are billed and have to be paid. Freshmen Orientation was required in order to enroll. Would that cost also be listed on the IRS form for the Opportunity Credit?
Do I need to include a copy of the 1098-T with the return?
https://www.irs.gov/uac/american-opportunity-tax-credit-questions-and-answers
^see question 5
Yes, the fees were mandatory student fees, but apparently according to the above link they don’t qualify as “qualified tuition and related expenses” because of what they pay for (medical, transportation).
I did not include them with the expenses claimed for AOTC, also I did not include the orientation fee.
No.
^no, I think the 1098T is just an informational form. I used the numbers on our 1098T to enter them into tax software, but we efile, and I don’t think that information is sent with the return.
Doubtful. But, you can probably figure out what was included by the school on the 1098-T by adding up tuition and allowable fees that you paid.
I think would can be used for AOTC vs what can be used for qualified 529 withdrawals are not the same thing. Since AOTC will only be $4,000/year, it can easily come from the bucket from tuition. Other expenses, like room and board, should only be considered as qualified for 529 purposes.
One other point, although I agree 1098-T are really informational, I believe they can be used by the IRS to question qualified withdrawals. For example, the 1098-T says $10K and you withdrew $10K, then there’s nothing to question. However, if the 1098-T says $10K and you withdrew $20K, the IRS may question if it’s really a qualified withdrawal. That’s not to say it’s not and can’t be defended, but it’s a data point probably used by the IRS.
I doubt it. Room and board is not a “qualified” expense or payment that’s reported on the 1098-T and yet, as you point out above, it can be a qualified 529 expense. So a mismatch for a particular student between 1098-T numbers and 529 distribution numbers could be quite common, and shouldn’t raise any red flags.
My D’s college sent her 1098T today, on the front they reported the correct billed qualified tuition and related fees and scholarship amounts in box 2 and 5.
On the back they also reported extra information, for example qualified tuition and related fees separated by semester, and nonqualified expenses (for AOTC, such as room/board, nonqualified fees).
BelknapPoint - The IRS does challenge qualified withdrawals from time to time. It happened to me when my daughter went overseas and I have heard of it happening to others. Given that you don’t provide any proof when you submit your tax return, the only piece of information the IRS has are 1098-Ts. I find it hard to believe that they are not using them. Perhaps they realize it’s only a piece and only question when there’s a big disparity.
I understand that; my point is that for those students who use a 529 account to help pay for college expenses, it’s probably fairly common to have 529 distributions for a tax year be greater than 1098-T expenses or payments, because of the different ways that the term “qualified expenses” is defined depending on which tax program is being discussed. Also (and one reason why the 1098-T is problematic for use as a tax document), if the school chooses on the 1098-T to report expenses billed instead of payments received, they can report expenses billed at the end of one tax year for a term beginning in the next tax year, even if the payment isn’t due and/or paid until the following tax year. And for education tax incentives, what matters is when the expense is paid, not when it is billed.
Folks should keep documentation of their college related expenses…themselves. They should keep bills, records of payment, dates of payment and what was paid for.
The 1098T does NOT include all qualified educational expenses. Sorry…no books, for example…and thise DO qualify and can be pretty pricey fro some students.
It is up to the student/family to keep these records…which include, but are not limited to the 1098-T.
One of my many responsibilities is providing the 1098-T information. I have had a lot of students approach me this year because they are being audited for education tax credits in prior years. I give them a printout of their charges and payments in that year - not all schools can easily provide this, though, so keeping records is important. The IRS has become increasingly concerned about education tax credits that were incorrectly claimed. One of the changes they are making is a move to make all school report amounts paid to the school in the year, rather than amounts billed for the year, beginning with the 2017 tax season.
And here’s another wrinkle for you. Not everyone gets a 1098-T. My youngest has aid in excess of billed, qualified expenses, so no 1098-T is ever generated. (And no, we don’t claim the AOTC for this kid.)
Yup - that is one of the rules - no 1098T required in that situation. So many rules! 