1098-T tuition paid in year prior

My son graduated from college last spring. Just received his 1098-T for spring semester. His bill for spring semester '19 was paid 12/31/18. So, his 1098-T shows 0 in box 1 for payments received, and his scholarship in box 5 which was nowhere close to covering his tuition & fees, is now considered 100% taxable income. Is there anything I can do at this point? Otherwise, guess its just an expensive lesson that others will hopefully learn from.

It doesn’t work like that. If all the scholarship money was used for qualified expenses (tuition, certain fees, books and other supplies required for course work), there is no tax owed on that money.

The 1098-T is supposed to help taxpayers determine if they are eligible to claim any education tax credits, but the form does a poor job of that. The form is not meant to be used to determine the tax status of scholarships and grants.

Colleges are required to report amount PAID for the year on the 1098-T (as of the 2018 tax year). If you paid it in 2018, the school reports it in that year.

So, even though the intent of the 1098-T may not be to determine tax status of scholarships, since I paid his bill Dec '18 for Spring '19 semester, the 2019 1098-T shows 0 paid for the year. And he owes tax on the scholarship, even though his actual tuition paid was greater than the scholarship.

What makes you think that even though the spring '19 scholarships were less than the spring '19 tuition, the scholarships are taxable? Just because you paid the balance of the spring '19 bill in December '18? In determing the tax status of the scholarships, it makes absolutely no difference when the balance of the semester expenses were paid.

The 1098-T shows when the college received payments for education tax credit qualified expenses. Just because the college received from you the balance of the spring '19 expenses at the end of 2018 doesn’t mean you paid nothing for the spring semester. Lots of schools have December deadlines for spring semester payments. Do you think that every college senior who receives tuition scholarship money during their last semester but made the balance payment for the semester at the end of the previous year will owe taxes on that last scholarship amount?

Finally, if I haven’t convinced you, please cite the IRS rules or regulations you are relying on to come up with the idea that your son’s scholarships for spring '19 are taxable.

If you used the spring '19 tuition paid in 2018 to offset the scholarships for 2018, then you cannot use those amounts in 2019 taxes. You can only use the paid amounts once.

The amount you paid in 2018 should have been included on the 2018 1098-t.

I’m using turbotax and am not seeing anyplace to override the 0 in box 1 of the 1098-T to reflect that there was indeed tuition for the 2019 year. So, the program is using the amount in box 5 as income.

Searched through turbotax again and found a box to check and fill in amount of tuition actually paid. The scholarship no longer shows up as income. Thanks for the help!

Do you even have to use the 1098T if you are not claiming an education credit?

As long as the scholarship money that was received in 2019 was used for qualified education expenses, it simply shouldn’t be taxable and shouldn’t show up on the student’s tax return at all.

Where are you entering the 1098T? On your return or his return?

I don’t think you would need to use it at all.

On your return it would simply say that you don’t qualify for an education credit.

On his return you shouldn’t need to enter 1098T amounts if his scholarships covered qualified education expenses, therefore being tax-free.

I was entering the 1098T on his return because he had a 1099Q for 529 money paid to the college.

I think the 1099 Q information also only has to be entered on the student return if the earnings portion of distribution was taxable.

I did add it on our return because we claimed an education credit and had to coordinate payments.

But that’s just my opinion. You might want to check with a tax professional.

@BelknapPoint do you agree that 1098T information and 1099Q information doesn’t need to be provided on the student return if none of it is taxable?

If a 529 distribution was made to an account owner who is not the account beneficiary, the 1099-Q will be issued to the account owner under the account owner’s SSN, and the account owner will be responsible for any tax owed.

If a 529 distribution was made to the account beneficiary or the educational institution, the 1099-Q will be issued to the account beneficiary under the account beneficiary’s SSN, and the account beneficiary will be responsible for any tax owed.

Yes, I do agree with that. Remember though, a taxpayer claiming an education tax credit, which could be a student, needs to provide information about the 1098-T on Form 8863 (Education Credits). Regarding the 1099-Q, I’m not sure what you mean by “add it on our return.”

Part of tuition was paid from us and part from 529.
The education credit interview asked about payments from 529.