How to do Federal Tax Return for a Full Scholarship student?

OP, the weird thing about the 1098T is that each school does it differently (see mom’s comment just above). The easiest thing to do is to follow twoinanddone’s advice and use your own records; and keep the tax year, school year info consistent, and keep all your records. You’ll get fewer grey hairs.

As for the specifics of what the tax returns will be like - the taxable scholarship is reported on the student’s return and will appear with a little ‘SCH’ notation on 1040 line 7 for ‘wages’ - if you use turbotax or something similar it’ll be calculted for you…

^I think the 1098T reporting relates to a school’s academic calendar and billing schedule.

My D’s school has a short Xmas break, so the spring semester starts in the beginning of January. Federal aid cannot be posted earlier than 10 days before term starts, so in our case spring aid gets posted in December, and spring bill is due in December as well. If a school has a different schedule then their 1098T reporting will be different.

My daughter’s school also starts early in Jan, usually the 7th or 8th, but this year it was the 11th, so be careful. D’s school never posted the federal or state aid in the prior tax year, but they could have because it would have been within the 10 days.

Thank you to everyone for all the help. I contacted my college’s financial aid office, and it turns out that they can take care of processing the tax return for me. Btw, the numbers used are rough estimates and not actual!

Are you sure they are going to ‘process’ (do?) your taxes for you? That doesn’t seem right. At all.

Oh I am still doing the return. They have an instruction sheet on how to calculate the income to put on paper 1040ez from 1098T and W2, and I follow it and finish filling out other info and they are just going to put stamps on the envelope and mail it for me. That’s what I meant by “processing.”

If you owe tax on a scholarship overage, you must use a 1040A, not a 1040EZ. Please don’t think the school will know how to do this. Use Turbotax or TaxAct.

Yes, and if kiddie tax is due then parent taxable income needs to be known as well.

Also if the scholarship is from an OOS school with state income tax you have to file in that state too.

Turbotax freedom edition is free for AGI up to $30,000 I believe.

Nope. I’m not sure which form you are reading, but there is an “amount you owe” line on line 14 of 1040ez and on the official IRS instruction pdf for 1040ez they have explanation on including taxable scholarship.

What we learned doing taxes with DD and her scholarship she could use a 1040 (not 1040ez) and we had to use another form that required our tax information (8xx or something) because her scholarships were higher than her actual earned income, 100% of her non QEE scholarship ended up being taxed at our rate and she got dinged a $38 penalty for not paying “estimated taxes” (DH says there might be a way around this by trying to prove scholarships were awarded in the fourth quarter but not all were and he said it wasn’t worth his time to deal with it but we will be paying estimates in the future!)

Dreading next year when we through in a foreign income and bank account from this coming summer’s internship in Germany!

I don’t think the 1040EZ supports the kiddie tax form. If your scholarship is less than $2000 of earned income you might be okay, but if you need to complete the kiddie tax form, you’ll have to use 1040A.

If you use TurboTax or Tax Act, the forms will be filled out for you. It would really surprise me if the school will take the responsibility of even putting a stamp on your returns (and most people file electronically anyway).

It takes me hours to do tax forms for the three of us: me (parent) daughter with scholarships, daughter without but for whom I take the AOTC. You have to go back and forth putting my info on their forms and theirs on mine. No way is a school going to go this work.

Oh, good God!!! Just when I thought this scholarship tax nonsense couldn’t get any worse, DH informs me the “kiddie tax” also impacts our tax rate and it is cumulative so in two years when we have two kids under 24 in college, the second one is likely to have a full ride as well, both their non QEE scholarships will add up to impact our tax rate which will in turn affect the amount the kids owe. My head is about to explode! This was not the intent of the Kiddie Tax!

As I understand it the kiddie tax does not affect your tax rate, only potentially the child’d tax rate. The child may have to pay tax at the parent’s rate rather than their usual lower rate. In our family’s case, it had zero impact, we both had the same tax rate anyway.

I am thankful that we have these automated tax preparer options to do the hard work for us. D had to file state taxes in 2 states and there were many, many forms for the nonresident state (for earnings of $600!) but TaxAct spit it all out beautifully.

But if your parents claim you as a dependent on their tax return, and you have unearned income over a certain amount, you will need to file form 8615 and you cannot file a form 1040EZ if form 8615 is required.

https://www.irs.gov/uac/about-form-8615