<p>had a conversation with a head of financial aid office. she say that dd shouldn't have file 2012 taxes for her scholarship(school aid +pell+tap) that cover her room and board.It is not required since she did not have income from work. She had never seen student file taxes for scholarships/grant that award for room and board. and suggest that DD doesn't file taxes next year. now i am totally confused. i thought that any scholarship/grant award exceeding qualified education expense has to report and file taxes on it... Am i missing something here??</p>
<p>Altough financial aid depends on data from your taxes, the two systems (taxes, fin aid) are very different. Don’t ever assume someone is an expert in both. Get your tax advice from a CPA and direct your fin aid questions to the school’s fin aid officer.</p>
<p>Now, Pell (and I’m sorry I don’t know about TAP) is an entitlement grant. You wouldn’t pay taxes on it. So, ask a tax expert if you can “pay” tution with the school’s aid and say you use PELL (and possibly TAP) for r & b.</p>
<p>I am not a tax person so what I am saying will have to be double checked. </p>
<p>Your daughter may not have sufficient income to owe taxes. My son does not have to file taxes, though he works, because he does not make enough money to owe any taxes. You have to make a certain amount before you have to pay taxes. I don’t remember what the exact amount is, but there is a minimum income. You should look that up so that you can see if she exceeds it. </p>
<p>Now if your daughter gets a job and the scholarship amounts plus proceeds from work exceed the threshold for exemption from paying taxes, and she owes taxes, she would have to file taxes and pay that amount. My son, for instance, was close this year, and had he gotten a full ride (don’t I wish!), the amount that is attributable for room and his board in addition to his compensation from his summer job and the few hours he worked spring semester last year, would have put him over and he would have to pay taxes on that portion. </p>
<p>It’s sad that the head of fin aid there has never seen a student file taxes for the award, because it means that none of the kids getting that full award are working enough to have to pay it, or … hopefully not because she’s giving them bad advice.</p>
<p>Here is an IRS site that takes you to where the actual rules are:</p>
<p>" Question: How much does an unmarried dependent student have to make before he or she has to file an income tax return?
Answer:</p>
<p>If you are an unmarried dependent student, you must file a tax return if your earned and/or unearned income exceeds certain limits.</p>
<pre><code>To find these limits refer to Dependents under Who Must File, in Publication 501, Exemptions, Standard Deduction and Filing Information.
Even if you do not have to file, you should file a federal income tax return if you can get money back (for example, you had income tax withheld from your pay; you qualify for the earned income credit; or you qualify for the additional child tax credit). See Who Should File in Publication 501, Exemptions, Standard Deduction and Filing Information, for more examples."
</code></pre>
<p>It does not give dollar amounts mainly because it is not quite that simple as unearned and earned income go into the equation, from what I can see.</p>
<p>* because it means that none of the kids getting that full award are working enough to have to pay it*</p>
<p>Is that so strange? Many students probably don’t earn enough income to owe taxes. How much does a person have to earn in order to be required to file?</p>
<p>Pub 501, concerning kids claimed as dependents, says:
You must file a return if any of the following apply.
Your unearned income was more than $950.
Your earned income was more than $5,950.
Your gross income was more than the larger of—
$950, or
Your earned income (up to $5,650) plus $300.</p>
<p>So $5,950 at the outside.</p>
<p>
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because it means that none of the kids getting that full award are working enough to have to pay it
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</p>
<p>I agree with mom2…I don’t find this unusual at all. My S2 has a work/study job. They don’t take taxes out of his $$ and he has never earned enough to need to file taxes. The only time that any of my boys have triggered the filing of taxes was when they held down jobs other than work/study, had taxes withheld and were working 20-40 hours a week for extended periods of time (like summers where they did not attend college). Even then for the most part they didn’t make enough to HAVE to file, but they wanted to file to get their tax dollars refunded.</p>
<p>So $5,950 at the outside</p>
<p>So, a good number of kids wouldn’t meet this threshold.</p>
<p>Pell is reportable for taxes. Loans are not.</p>
<p>Basically, what you need to do is take your daughter’s total award received in 2012. Subtract out the loans. You will then have work study proceeds and grants/scholarships. Subtract out the tuition, fees, books, any supplies required for a course. If it is more than $5950, then it is reportable for taxes. If your DD has unearned income such as interest, dividends, realized gains then the unearned income rules have to be examined.</p>
<p>If your DD just started this fall unless she had a full ride, it’s unlikely she would have owed anything because she only has gotten a half year award, and one subtracts out tuition, fees, course related supplies like books, and loans don’t count. However, if she got a big award, it could be an issue for 2013 when she will have two semesters worth of award payments.</p>
<p>That’s why I was a bit surprised at the fin aid officer’s comment. If a student works over the summer and gets a full ride, it could easily be over the $5650 threshhold. My kids always had to file until this year because of what they earned over the summer. My son would have definitely been over if he had gotten a full ride since room and board at his school certainly exceed $5650, and he worked as well. In his case, the job alone did not take him up to the taxable threshold, but a full ride or even about $3K over tution, fees, books, supplies would do it. That isn’t that unusual to find, especially with work study in the mix.</p>
<p>Again, loans do not count as they have to be repaid.</p>
<p>DD didn’t work at all last year and she received scholarship/grant from her school to cover her full tuition+room/board.My CPA help DD file her 2012 taxes already and looking at her 1040EZ she owe taxes because her room/board $8370-$5950 dependent exempt= $2420 is taxable scholarship amount and now her school FA officer telling us that we made a mistake and DD should not have file her return at all. FA officer told us that she will fix/re evaluated her Aid this year and told my daughter not to file taxes on the scholarship/grant that cover for room&board in the future.</p>
<p>If your scholarship covers room and board, the portion allotted to room and board is taxable. Here is a link to the IRS document that discusses scholarship income.</p>
<p>[Publication</a> 970 (2012), Tax Benefits for Education](<a href=“Publication 970 (2022), Tax Benefits for Education | Internal Revenue Service”>Publication 970 (2022), Tax Benefits for Education | Internal Revenue Service)</p>
<p>Listen to your CPA. She (or he) knows the tax laws. If CPA said D has to file, she has to file.</p>
<p>It appears your CPA AND your financial aid officer is incorrect.</p>
<p>If your daughter is a freshman, then she only received one semester’s worth of scholarship/grant. What is that total amount? Then subtract out the tuition for one semester, and fees, and whatever she paid for books and supplies for her courses. ANything she needed for a course would go on that list. If that amount exceeded $5950, then she owes taxes on that. </p>
<p>Next year, assuming all of the numbers are the same, she might have that $2420 that she has to report and pay taxes on IF she can’t come up with that much in fees, books, supplies or unless she got money towards that as well. That would be because she would get the money for TWO semesters of college. You don’t pay taxes on money until you get it. But her books and other expenses could bring that down to a piddling amount.</p>
<p>To confuse things even more, the colleges send out 1098s with the wrong amounts on them. They often send out amounts for the whole year at the beginning of each year which may be why your CPA filed the form for your DD, to be consistent with the incorrect form. That is a problem that crops up quite often, in fact all of the time. It’s wrong, because if your daughter did not show up second semester, those payments would not have gone into her account at all, and they generally are deposited right at the start of a term. Do look at the billing statements to see. But you can’t get a dime of PELL money until the semester starts and TAP takes forever to get there as a rule, I’ve heard.</p>
<p>Ordinarylives, when it comes to college financial aid, not all the CPAs are able to best handle the situation. There are many posts where one has to be very careful as to where one attributes ones own payments and that of scholarshp awards to get the best tax credits/deduction. The computer tax programs which is what most CPAs use, just run that baby through the way it’s set without looking at how it can best advantage a person. I won’t go into other issues, which I had to bring to the attention of my own accountant when it comes to college stuff. My guess is that he saw the 1098 which the school incorrectly listed the full tuition and took it from there. It’s an issue I see each year with my kids’ tuitions.</p>
<p>Pell Grant is no different than any other scholarship/grant as far as taxability. And scholarships/grants are considered earned income by the IRS, state may be different.</p>
<p>If you gave the CPA the doc: bills, bursar account statement etc. they probably did it right though I hope they included required books and supplies in the qualified expenses. Though if the terms of the scholarship required a certain amount be applied to R&B then that is what would have to be reported.</p>
<p>In any case, the finaid office is wrong.</p>
<p>CPT, if the scholarships/grants were credited in December and expenses billed in December then they would correctly be reported in 2012 if the OP didn’t pay any qualified expenses out of pocket in January.</p>
<p>My D owes $800 in taxes this year. She’s a freshman who received tuition, board, Pell and $4,000 in outside scholarships. The school disbursed funds in late December for spring semester, so the whole scholarship was received in 2012. The taxable scholarship amount according to the 1098 is $10,000, then she earned few thousand more over the year.</p>
<p>
Most students don’t know how much financial aid they are getting. Let alone whether scholarships are tax-free or not.</p>
<p>DD is a freshmen at her college and we didn’t received 1098T because her school does not provide it for student received full Aid. what my CPA report on my DD tax return was for her fall semester only. she will probably owe twice as much on her 2013 taxes for spring/fall 2013 scholarship. my biggest concern is that i dont know if we should follow the advice from head of FA office whose been working at her college for over 20+years or my CPA for next year taxes… at this point none of my DD friends filed taxes on room&board scholarship. DD college has no loan policy/ 100% need met school.</p>
<p>The finaid office is wrong about not having to file and pay taxes. Ask them if they will pay the interest and penalties if your daughter gets caught not filing.</p>
<p>Your daughter’s friends may not know they have to file, may be getting away with it or may get caught later. It’s up to you what you want to risk.</p>
<p>No, do NOT follow the advice of the head of the FA office, who is not a tax professional. I would venture a guess that plenty of students do not file taxes for scholarships/grants in excess of tuition/fees/mandatory expenses … but that doesn’t make it right as far as the IRS is concerned. You can read up on this on the IRS website yourself. The regulations are quite clear.</p>