Form 1098-T

Paying for College
1

I read that Box 1 minus Box 5 on Form 1098-T should equal what I paid for tuition. However, my 2019 1098-T does not. Here are the specifics:

Box 1 = $27,553

Box 5 = $21,323

Box 7 is checked so the amount in Box 1 includes amounts I paid in 2019 for an academic period beginning in the first three months of 2020.

Box 1 minus Box 5 = $6230

Amount I paid = $12,515

Why is there such a discrepancy between what I actually paid and what the college says I paid?

Is the college wrong, or do I just not understand what is going on with this form? Any help would be greatly appreciated. Thank you very much.

2

Box 1 ist qualified tuition and fees paid during 2019.

Box 5 is scholarships or grants received in 2019.

Depending on when the school received the payments and credited the scholarships, they don’t always show up on the 1098T for the same (tax) year.

You have tuition statements that show what you paid and when.

The 1098T is a form designed to help you figure out if you can claim an education tax credit

The qualified education expenses in box 1 that were paid in a year is adjusted by the tax-free scholarships and grants received in the same year to arrive at the adjusted qualified education expenses (AQEE) that can be used to claim an education tax credit.

In your case since AQEE is over $4,000 you might be able to claim the AOTC American Opportunity Tax Credit.

If the numbers are not correct, you can try to contact the school.

But it looks like some of the scholarship from last school year might have been credited in January of this year.

Is this the first year he has been in college?

3

1098-T forms are notoriously inaccurate and unhelpful. Use the actual expenses and payment dates, and scholarships/grants received and dates applied, and figure things out for yourself.

4

It is the first year of college for my daughter. I paid for Fall 2019 semester in July of 2019. Then the college made the due date for Spring 2020 semester December 31, 2019, so I paid it on December 24, 2019. The Box 1 figure ($27,553) doesn’t make sense because tuition and fees for the whole year is $39,305. Is the college allowed to put only a portion of the tuition and fees in Box 1 even though they were all paid in 2019?

5

In your first post you say that you paid $12,515. Is that what you paid for tuition and qualified expenses/fees (not room and board) for both fall 2019 and spring 2020?

What is the full school cost per semester for tuition? For qualified expenses/fees? How much did the student receive in scholarships and/or grants, from what sources, and when were those amounts applied to the student’s account?

6

Yes, the $12,515 is what I paid out of pocket for the two semesters. The college doesn’t say whether it is was applied to tuition or for room and board. Each semester cost 19,653 in qualified tuition/fees. Each semester was $6465 for non-qualified room and board. Scholarships for the first semester were $21,323 and were all applied in 2019. Scholarships for the second semester are $18,823, all applied or to be applied in 2020. Thank you for your help.

7

Were your payments in July and December last year approximately the same amount? If you paid $6,230 in July and $6,285 in December, my best guess is that the 1098-T is correct except for either 1) your December payment was not actually received by the college until January and Box 7 should not have been checked, or 2) the college did receive your December payment before the end of the year and Box 7 was properly checked, but the Decemebr payment amount was incorrectly not included in Box 1 with the July payment.

You should call the college and ask for an explanation. As I said upthread, 1098-T forms are notoriously inaccurate and unhelpful. I myself have had to point out to a college that they screwed up a 1098-T, and then have a corrected form issued.

8

I never used the 1098-T. I used the actual charges and credits from the bursar’s web page, and I kept all payments in the same tax year as the tuition. You had to pay in Dec, so that is in 2019 tax year. You’ll always have this issue, but it will work out until the final year. In 2024, you won’t have paid anything after Jan 1, so your Box 1 will be about $19.2-$6k (if number remain about the same) and Box 5 will be $21k (half the scholarship for that year).

If you use a tax program like turbotax it will ask you to put in the amount on the 1098 and then it asks if that amount is correct. I always checked ‘no’ and then it would ask for the correct numbers.

Not all fees are QEE for the AOTC. Transportation, some sports and recreation, insurance are not even if they are required by the university. You pay them, they don’t show on the 1098-T.

Your box 5 is showing $21k as the scholarships received in 2019 (correct, as you received $21k for fall scholarships in 2019). The spring semester scholarships are not received until the spring and aren’t posted until they are received so aren’t on the 2019 1098-t form. The tuition box 1 the amount you PAID in 2019 toward Spring 2020. You paid $19.2 in tuition and fees for fall (some by scholarship, some in cash) and paid extra $ in Dec. The school puts the amounts paid in 2019 in that box. That’s what the Box 1 is showing. Box 5 is the amount of scholarships received in 2019. The spring has not yet been received.

I’d go to the billing page and see how they applied the payments and scholarships. For one of my kids, there were 5 things billed (tuition, 2 fees, meals, and insurance). There were 9-10 forms of merit aid, athletic aid, federal and state aid, loans, etc., and they broke them all out as they applied them to each charge. It was very easy to follow what was taxable or what could be used for the AOTC from that. It took two PAGES for the awards to be broken down and applied to the 5 charges. The scholarships used for R&B were easy to see. The amounts were included in box 5 but the charges were not in Box 1 as they weren’t QEE.

My other daughter (different school) did it a different way. Added up all the charges, added up all the aid and loans, subtracted one from the other and I either paid the difference or she got a refund. It was about 1/4 of a page long. Her 1098-T still didn’t work as they billed in Dec., not due until February!

Did your son take any loans? That’s the same as cash if used to pay any of the tuition. Don’t pay taxes on a loan.

9

If you paid the spring bill on December 24th, was it by check? When did the school cash and apply the check to the account?
If the bursar’s office was closed until after New Year, that might be what happened.

That might work out in your favor in the last spring semester (senior year) because then there won’t be just scholarships and grants reported for that last semester of senior year, and you might be able to claim the LLC (lifetime learning credit) for that semester, in addition to 4 years of AOTC (American Opportunity tax credit).

The way the 1098T is now, you have more than $4,000 in AQEE (box 1 plus any book expenses that might not be listed on the 1098T,minus box 5 ).

So if you qualify for AOTC income wise then you can claim it for 2019.

10

It looks like tuition and fees is $39,000 for the year.

And scholarships are also $39,000 for the year (you said $21,000 for fall and $18,000 for spring).

So it seems that tuition and fees are fully covered for your son.

If the scholarships are not required to be used only for tuition, then you can declare some of them taxable (paying for room and board), so that the amount you paid is considered to be paying put of pocket for tuition and fees.

The school only shows part of tuition and fees paid on the 1098T for 2019. Because they probably credited your December payment in January.

And only the fall scholarships show up on the 1098T because the spring semester ones were credited in January.

Like I said, if box 1 minus box 5 leaves enough AQEE, you might be able to claim the AOTC for 2019.

Then you can do the same in 2020,2021, 2022.

You can only claim the AOTC for four years.

But in the last semester of senior year you might only have scholarships and no payment to offset it, so it might be good to make sure your spring semester payment is credited in January 2023, because then you might be able to claim LLC for that last semester.

11

Thank you all for your replies on my question. They have been very helpful. As far as the December 24, 2019 goes, I paid it with a direct debit from my personal checking account. The college shows it as received on December 24, 2019. Does that mean it was credited to my daughter’s account that same day, or is it possible it was credited in 2020? If so, how would I find out (other than calling the school)? Thanks again.

12

Unless your daughter has an online account you have access to that shows how and when various payments were applied to the college charges, you will probably have to get on the phone or start an email conversation with the appropriate college office (don’t be surprised if they need to have your daughter’s permission before they will discuss details with you).

13

I wouldn’t be surprised! Thanks.

14

My S’s school puts a hold on an eCheck or check until it clears.

It’s possible that there wasn’t anyone in the bursar’s office on December 24 to credit your payment to her account.

And with the Christmas holiday, they might have entered all of the payments received during break in January.

Like I said in your situation that might not have been a bad thing.

15

The college told me that they applied all of my Fall 2019 semester payments to room and board. The Spring 2020 semester payments were credited in 2019 and applied to qualified tuition and fees. As you know, if they didn’t tell me that, I probably would not have figured it out. Anyway, it looks like I can claim the AOTC so I’m happy about that. Thank you all again for helping me. You guys are the best!!!

16

If you want to plan for qualifying for the AOTC in this tax year (2020), make sure that when you help pay for fall 2020 expenses later this year enough of your payment is applied to qualifying expenses (i.e. tuiting and qualified fees).

17

Yes, although I don’t know how I can make sure of that if the college decides what monies they apply to what.

18

Scholarships and grants will be applied according to their restrictions or exclusions (e.g. must be used for tuition; cannot be used for room and board; etc.). After that, or if there are no restrictions/exclusions, it’s up to you to allocate where each dollar goes based on your particular financial and tax situation.

Normally you would want scholarships and grants to be used for tuition, qualifying fees and textbooks so that their tax-free characteristic is retained. (Scholarships and grants used for room and board become taxable income for the student.) On the other hand, if 100% of these qualifying expenses is covered by scholarships and grants, you may want to shift $4,000 of a scholarship or grant to room and board expenses (and report the $4,000 as income on the student’s tax return) so that $4,000 paid out-of-pocket can be allocated to tuition and create eligibility to claim the full AOTC. Note that this can become even more complicated if the kiddie tax comes into play.

19

Thanks so much for your help.